UNITED STATES

SECURITIES ANDEXCHANGE COMMISSION

Washington, D.C. 20549

 

**FORM 10-K**

 

[X] Annual ReportPursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

**For the FiscalYear Ended September 30, 2008**

or

[   ]Transition Report Pursuant to Section 13 or 15(d) of the Securities ExchangeAct of 1934

For the TransitionPeriod ______ to ______

 

Commission FileNumber

**0-17187**

 

**LOGIC DEVICESINCORPORATED**

(Exact name of registrant as specified in its charter)

 
| **California**          | **94-2893789**                       |
|-------------------------|--------------------------------------|
| (State of Incorporation | (I.R.S. Employer Identification No,) |

 

**1375 Geneva Drive, Sunnyvale, CA 94089**

(Address of principal executive offices, including ZipCode)

 

**(408) 542-5400**

(Registrant’s telephone number, including Area Code)

 

Securities registeredpursuant to Section 12(b) of the Act : **NONE**

 

Securities registeredpursuant to Section 12(g) of the Act: **Common Stock, no par value**

 

Indicate by check mark if the registrant is a well-knownseasoned issuer, as defined in Rule 405 of the Securities Act. Yes[   ]  No [X]

 

Indicate by check mark if the registrant is not required tofile report pursuant to Section 13 or Section 15(d) of the Act. 

Yes [   ]  No [X]

 

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

 

Indicate by check mark if disclosure of delinquent filerspursuant to Item 405 of Regulation S-K is not contained herein, and will not becontained, to the best of registrant’s knowledge, in definitive proxy orinformation statements incorporated by reference in Part III of this Form 10-Kor any amendment to this Form 10-K. [   ]

 

Indicate by check mark whether the registrant is a largeaccelerated filer, an accelerated filer, a non-accelerated filer, or a smallerreporting company. See definitions of “large accelerated filer,” “acceleratedfiler,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 
| Large accelerated filer [   ]                            | Accelerated filer [   ]

  |
|-------------------------------------------------------------------------|------------------------------------------------|
| Non-accelerated filer [X] (Do not check if a smaller  reporting company | Smaller reporting company [   ] |

 

Indicate by check whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act). Yes [   ]  No[X]

 

The aggregate market value of the voting and non-votingcommon stock held by non-affiliates computed by reference to the closing priceof the common stock as of March 31, 2008, the last day of the registrant’s mostrecently completed second quarter was $5,055,500.

 

As of December 18, 2008, the Registrant had 6,814,438 sharesof its common stock issued and outstanding.

 

 

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**LOGIC DEVICESINCORPORATED**

** **

**ANNUAL REPORT ONFORM 10-K**

** **

**INDEX**

 
| **PART I**      |                                                                                                                       |   |
|-----------------|----------------------------------------------------------------------------------------------------------------------------|--------|
| Item 1.         | Business                                                                                                                   | 2      |
| Item 1A.        | Risk Factors                                                                                                               | 6      |
| Item 1B.        | Unresolved Staff Comments                                                                                                  | 10     |
| Item 2.         | Properties                                                                                                                 | 10     |
| Item 3.         | Legal Proceedings                                                                                                          | 10     |
| Item 4.         | Submission of Matters to a Vote of  Security Holders                                                                       | 10     |
| **PART II**     |                                                                                                                       |   |
| Item 5.

  |  

Market for Registrant’s Common Equity,  Related Stockholder Matters and Issuer Purchases of Equity Securities | 11     |
| Item 6.         | Selected Financial Data                                                                                                    | 12     |
| Item 7.         | Management’s Discussion and Analysis of  Financial Condition and Results of Operations                                | 12     |
| Item 7A.        | Quantitative and Qualitative Disclosures  About Market Risk                                                                | 18     |
| Item 8.         | Financial Statements and Supplementary  Data                                                                               | 19     |
| Item 9.         | Changes in and Disagreements With  Accountants on Accounting and Financial Disclosure                                      | 36     |
| Item 9A.        | Controls and Procedures                                                                                                    | 36     |
| Item 9B.        | Other Information                                                                                                          | 37     |
| **PART III**    |                                                                                                                       |   |
| Item 10.        | Directors, Executive Officers and  Corporate Governance                                                                    | 37     |
| Item 11.        | Executive Compensation                                                                                                     | 37     |
| Item 12.        | Security Ownership of Certain Beneficial  Owners and Management and Related Stockholder Matters                            | 37     |
| Item 13.        | Certain Relationships and Related  Transactions, and Director Independence                                                 | 37     |
| Item 14.        | Principal Accounting Fees and Services                                                                                     | 37     |
| **PART IV**     |                                                                                                                       |   |
| Item 15.        | Exhibits, Financial Statement Schedules                                                                                    | 37     |
| **Signatures**  | 39                                                                                                                         |

 

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***CAUTIONARY STATEMENT***

* *

*This Annual Report on Form 10-K containsforward-looking statements which include, but are not limited to, statementsconcerning projected revenues, expenses, gross margin, net income, marketacceptance of our products, the competitive nature of and anticipated growth inour markets, our ability to achieve further product integration, the status ofevolving technologies and their growth potential, the timing and acceptance ofnew product introductions, the adoption of future industry standards, ourproduction capacity, our ability to migrate to smaller process geometries, andthe need for additional capital. These forward-looking statements are based onour current expectations, estimates, and projections about our industry,management’s beliefs, and certain assumptions made by it. Words such as“anticipates, appears, expects, intends, plans, believes, seeks, estimates,may, will,” and variations of these words or similar expressions are intendedto identify forward-looking statements. In addition, any statements that referto expectations, projections, or other characterizations of future events orcircumstances, including any underlying assumptions, are forward-lookingstatements. These statements are not guarantees of future performance and aresubject to risks, uncertainties, and assumptions that are difficult to predict.Therefore, actual results could differ materially and adversely from thoseresults expressed in any forward-looking statements, as a result of variousfactors, some of which are listed under the section, “Item 1A - Risk Factors,”of this Annual Report on Form 10-K. We undertake no obligation to revise orupdate publicly any forward-looking statements for any reason.*

 

 

**PART I**

 

Item 1. BUSINESS

 

***General Development of the Business***

 

LOGIC Devices Incorporated, an ISO 9001:2000 registeredcompany, develops and markets high-performance, low power digital integratedcircuits an integrated modules that perform high-density storage andsignal/image processing functions. Our products enable high definition videodisplay, transport, editing, composition, and special effects. We also providesolutions for digital filtering in television broadcast stations and imageenhancement in medical diagnostic scanning and imaging equipment.

 

Our products are used in the broadcast, medical imaging,military, industrial, embedded, telecommunications, and consumer electronicsmarkets. Our products address main-system (core) memory, bulk storage,multi-port arrays, and digital signal processing (DSP) requirements thatinvolve high-performance arithmetic computation. We focus on developingproprietary, silicon IP, and integrated modular, standard catalog products toaddress specific functional application needs or performance levels that arenot otherwise commercially available. We seek to provide related groups ofcircuits that original equipment manufacturers (OEMs) incorporate intohigh-performance electronic systems.

 

We rely on third-party silicon foundries to process siliconwafers, each wafer having up to several hundred integrated circuits of a givenLOGIC design, from which finished products are then assembled. Our strategy isto avoid the substantial investment in capital equipment required to establisha wafer fabrication facility, by outsourcing wafer processing to third-partyfoundry specialists to take advantage of their expertise. See "Business –Background." We currently have two primary wafer suppliers. We continue toexplore additional foundry relationships to reduce our dependence on any singlewafer foundry.

 

We market our products worldwide through a combination of adirect sales, one domestic distributor, and 21 international distributorsand/or representatives. In fiscal 2008, approximately 31 percent of netrevenues were from distributors. We adjust our sales structure to addressappropriate market requirements. We include the following as some of ourcustomers: Texas Instruments, BAE Systems, Harmonic, GE Medical, NorthrupGrumman, Qualcomm, and Raytheon. Fiscal 2008 net revenues derived from foreignsales approximate 30 percent.

 

LOGIC Devices was incorporated under the laws of the Stateof California in April 1983. Our headquarters are located at 1375 Geneva Dr  ive, Sunnyvale, California 94089, and our telephone number is 408-542-5400.

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***Available Information***

 

Our annual report on Form 10-K, quarterly reports on Form10-Q, current reports on Form 8-K, and amendments to those reports filed orfurnished pursuant to Section 13(a) or Section 15(d) of the Securities ExchangeAct of 1934 are available free of charge on our website, www.logicdevices.com,as soon as reasonably practicable after we electronically file such materialwith or furnish such material to the Securities and Exchange Commission.

 

***Background***

 

Continuing advances in fabricating semiconductors aredriving a global revolution in electronics. With these ongoing advances, theability to economically compute, communicate, and control seems to be limitedonly by the creativity required to implement ever more complex electronicsystems. It is increasingly common to implement entire electronic systems on asingle small sliver of silicon. The challenges to the industry haveincreasingly turned toward innovative product definition, timely productdevelopment, technical customer support, and heavy capital investments inadvanced semiconductor wafer fabrication facilities. The rapid advances in chipfabrication technology have resulted in a specialization of skills within theindustry. In addition to the specialization of materials processing skillsrequired to fabricate semiconductor wafers, the industry increasingly requiresand values system architecture development, interoperability standards, signalprocessing algorithms, and circuit design expertise as essential skills fordeveloping financially successful products. Many opportunities have thusemerged for semiconductor companies that focus on product definition, advanceddesign techniques, and technical application support, and that rely on thirdparties for wafer fabrication. We focus our resources on defining anddeveloping high-performance integrated circuit components and integratedmulti-chip modular products to growing markets, which require demanding computationalthroughput.

 

The semiconductor industry is intensely competitive, highlycyclical, and characterized by rapid technological change, productobsolescence, wide fluctuations in both demand and capacity, and steep priceerosion. These factors can obsolete processes and products currently utilizedor produced by us. In such cases, we are required to develop products utilizingnew processes and to either integrate such products into our existing foundryprocesses, or seek new foundry sources.

 

***Markets and Product Development Strategies***

 

We have historically derived a significant portion of ourrevenues from sales to television broadcast equipment manufacturers and todefense contractors providing systems that perform computationally intensiveimage processing. Our products were among the first to provide economical,high-speed, yet low power, computational solutions for common imagemanipulation and storage problems encountered in implementing these systems.Applications of our products also overlap into medical diagnostic imagingequipment, digital cinema systems, and in-flight entertainment systems. Wejointly defined with our customers, a family of digital image filteringapplications that address the filtering requirements of HDTV studio productionsystems. Sales of these systems lagged market forecasts as a result of repeateddelays in the conversion to HDTV. As a result, the magnitude of our sales ofthese products was affected. Sales that we had expected to generate over afive-year period have extended at a slower rate for over a ten-year period.

 

As a result of our work on high-speed, low power imageprocessing circuits that are very computationally demanding, we have developedexpertise in circuit design and implementation that is not readily available tomany OEMs, and within the semiconductor industry, only available within some ofthe very largest companies which, due to their size, are compelled to pursuevery large markets. Our capabilities and size provide opportunities to servicetechnically-demanding industrial and military markets that are not serviced bythose larger companies.

 

In addition to, as well as a result of our work onhigh-performance, low power silicon developments for the markets, applications,and platforms we serve, we have introduced a product family enabling us toprovide advanced, multi-chip, integrated modular products. This productpackaging medium facilitates the integration of LOGIC silicon IP as well assilicon IP from other semiconductor manufacturers providing high-density,wide-word memory arrays, sub-systems, and systems in packages.

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The same advances in semiconductor technology that haveenabled the advancements in high definition broadcast video production anddistribution have driven a rapid increase in the ability to transmit vastamounts of data. Communications in all forms with increasing portability andbandwidth are proliferating worldwide. Much of this new communicationcapability will be utilized to transport video streams. We believe that manyopportunities exist to utilize our capabilities in low power, high speedcomputation and storage to address the requirements of these communications andvideo systems. The convergence of communications and ubiquitous imageprocessing is an opportunity that is well suited to our capabilities and farexceeds our abilities to address completely.

 

We seek to identify additional markets that require theapplication our silicon design and multi-chip packaging expertise; that arestable, long-lived markets that are not extremely cost-sensitive; that offerpotential for substantial revenue growth; and that are not served by largercompetitors with substantially more resources. Currently the semiconductorindustry is challenged by several factors. First, the cost of developing highcomplexity products is escalating nearly as fast as the capability of thetechnology itself is increasing. Second, the disciplines required to developcomplex, systems-on-chips (SOCs) requires a rapidly increasing breadth oftechnical skills. Consumer-related products are experiencing ever shrinkinglife cycles as new products are quickly supplanted by even newer products.

 

***Wafer Fabrication Technology***

 

LOGIC Devices is a fabless manufacturer. We rely uponthird-party foundry suppliers to produce processed wafers from mask patternsdesigned by us. Through these wafer suppliers, we have access to advancedhigh-speed, high-density complimentary metal oxide semiconductor (CMOS) processtechnology, without the significant investment in capital equipment andfacilities required to establish a wafer fabrication factory. Coupled with ourstructured custom design methodology and experience with high-speed circuitdesign, this CMOS technology has allowed us to produce products that offer highcomputational speeds, high reliability, high levels of circuit integration(complexity), and low power consumption.

 

We are primarily dependent upon two wafer suppliers and donot have a guarantee of minimum supplies. Therefore, there can be no assurancethat such relationships will continue to be on terms satisfactory to us. Theinability to obtain adequate quantities of processed wafers could limit ourrevenues. As a result of this risk, we carry a large inventory of unassembledwafers that can be packaged into a variety of carrier styles to supportcustomer requirements.

 

***Production, Assembly, and Test***

 

Our production operations consist of functional andparametric testing, hot and cold testing, final inspection, quality inspection,and shipment. As is customary in the industry, high-volume assemblysubcontractors assemble our devices. Thereafter, the assembled devices arereturned to us for final testing and shipment to customers. We continue to testmaterials and products at various stages in the manufacturing process, utilizingautomated test equipment.

 

We have historically maintained, and expect to continue tomaintain, high levels of inventory for newer products. For some product types,we must purchase all of our anticipated inventory needs for the life of theproduct (often ten or more years) in a short period of time. Our high inventorylevels heighten the risk of inventory obsolescence and write-offs.

 

***Marketing, Sales, and Customers***

 

We market our products worldwide to a broad range ofcustomers through our own direct sales force, one domestic electronicsdistributor, and 21 international electronics distributors and/orrepresentatives. We concentrate our direct marketing efforts onhigh-performance segments of the broadcast, medical imaging, industrial,embedded telecommunications and consumer markets, in applications where highspeed is critical. Among our OEM customers are Texas Instruments, BAE Systems,Harmonic, GE Medical, Northrup Grumman, Qualcomm, and Raytheon.

 

Distributors purchase our products for resale, generally toa broad base of small- to medium-sized customers. As is customary in theindustry, our distributors receive certain price protection and limited stockrotation rights. However, our distributors are required to simultaneously orderan amount equal to or greater than any rotation items returned. During fiscal2008, 2007, and 2006, sales through distributors accounted for approximately31%, 27%, and 38% of net revenues, respectively.

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In fiscal 2008, 2007, and 2006, no distributors generatedmore than 10% of net revenues; however, Benchmark Electronics (manufacturer forTexas Instruments) comprised 26%, 43% and 23% of net revenues in fiscal 2008,2007, and 2006, respectively. In addition, BAE Systems comprised 19% and 12% ofnet revenues in fiscal 2008 and 2006, respectively.

 

Our distributors are not exclusive and they may also marketproducts competitive with our products. We warrant our products against defectsin materials and workmanship for a period of 12 months from the date ofshipment. Warranty expenses to date have been nominal.

 

International sales are conducted by sales representativesand distributors located throughout Europe and Asia. During fiscal 2008, 2007,and 2006, our export sales were approximately 30%, 33%, and 40% of net revenues,respectively (see Note 7 in "Notes to Financial Statements" containedin Item 8). Our international sales are billed in United States dollars, andtherefore, settlements are not directly subject to currency exchangefluctuations. However, changes in the relative value of the dollar may createpricing pressures for our products. Although our international sales aresubject to certain export restrictions, including the Export AdministrationAmendments Act of 1985 and the regulations promulgated thereunder, we have notexperienced any material difficulties resulting from these restrictions todate.

 

***Backlog***

 

As of December 2, 2008 and 2007, our backlog wasapproximately$357,200 and $147,000, respectively. This backlog includes allreleased purchase orders shippable within the following 12 months, includingorders from distributors. Our backlog, although useful for schedulingproduction, does not represent actual sales and should not be used as a measureof future sales or revenues at any particular time. In accordance with acceptedindustry practice, all orders on the backlog that are not "last-timebuys" of obsolete products are subject to cancellation without penalty atthe option of the purchaser at any time prior to shipment. In addition, thebacklog does not reflect changes in delivery schedules and price adjustmentsthat may be passed on to distributors and credits for returned products. Weproduce catalog products that may be shipped from inventory within a short timeafter receipt of a purchase order. The business for our catalog products, likethe businesses of other companies in the semiconductor industry, ischaracterized by short-term orders and shipment schedules rather than by volumepurchase contracts. Our shipments are generally concentrated toward the end ofthe third month of each quarter, making it difficult to predict our revenuesand results of operations for any fiscal period. For these reasons, our backlogas of any particular date is not representative of actual sales for anysucceeding period and we believe that our backlog is not a good indicator offuture revenues.

 

***Research and Development***

 

As we have not introduced sufficient new silicon IP productsin the past few years, we view all new product development as the mostimportant factor affecting revenue growth; therefore, we continue ourcommitment to research and development of silicon IP. In addition, we bolsterour position with the addition of our multi-chip packaged products,facilitating the integration of our silicon IP with the silicon IP of others toprovide packaged solutions to our current and prospective expansion customers.Research and development expenditures were 47%, 38%, 21% of net revenues infiscal 2008, 2007, and 2006, respectively. However, the fiscal 2007 figure includesa write-off of $400,200 of capitalized software development costs. Thesepercentages are also affected by the declining revenues. See "SelectedFinancial Data," "Management's Discussion and Analysis of FinancialCondition and Results of Operations," and "Statements ofOperations," contained in Items 6, 7, and 8, respectively.

 

***Competition***

 

The semiconductor industry is intensely competitive andcharacterized by rapid technological change and rates of product obsolescence,price erosion, periodic shortage of materials, variations in manufacturingyields and efficiencies, and increasing foreign competition. The industryincludes many major domestic and international companies that havesubstantially greater financial, technical, manufacturing, and marketingresources than LOGIC. We face competition from other manufacturers ofhigh-performance integrated circuits, many of which have advanced technologicalcapabilities and internal wafer production capabilities. Our ability to competein this rapidly evolving environment depends on elements both in and outsideour control. These elements include our ability to develop new products in atimely manner, the cost effectiveness of our manufacturing, the acceptance ofnew products by customers, the speed at which customers incorporate ourproducts into their systems, the continued access to advanced semiconductorfoundries, the number and capabilities of our competitors, and general economicconditions.

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***Patents and Copyrights***

 

Because of the rapidly changing technology in thesemiconductor industry, we rely primarily upon our design know-how, rather thanpatents and copyrights, to develop and maintain our competitive position. Weattempt to protect our trade secrets and other proprietary information throughconfidentiality agreements with employees, consultants, suppliers, andcustomers, but there can be no assurance that those measures will be adequateto protect our interests.

 

We are of the opinion that patent and maskwork protection isof less significance in our business than other factors, such as the experienceand innovative skill of our personnel and the abilities of our management.There can be no assurance that others will not develop or patent technologysimilar to our technology, or copy or otherwise duplicate our products. We ownfive patents awarded by the United States Patent and Trademark Office.

 

Sinceothers have obtained patents covering various semiconductor designs andprocesses, certain of our present or future designs or processes may be claimedto infringe upon the patents of third parties. We have previously received, andmay in the future receive, claims that one or more aspects or uses of ourproducts infringe on patent or other intellectual property rights of thirdparties. See Item 3 – “Legal Proceedings.” We do not believe that we infringeupon any known patents at this time. If any such infringements exist or arisein the future, we may be liable for damages and may, like many companies in thesemiconductor industry, find it necessary or desirable to obtain licensesrelating to one or more of our current or future products. Based on industrypractice, we expect that any necessary licenses or rights under patents couldbe obtained on conditions that would not have a material adverse effect. Therecan be no assurance, however, that licenses could, in fact, be obtained oncommercially reasonable terms, or at all, or that litigation would not occur.Our inability to obtain such licenses on economically reasonable terms or theoccurrence of litigation could adversely affect us.

 

***Employees***

 

As ofSeptember 30, 2008, we had 15 full-time employees. We have been careful toretain employees that are important to maintain our ongoing developmentefforts. Our ability to attract and retain qualified personnel is an importantfactor in our continued success. None of our employees are represented by acollective bargaining agreement, and we have never experienced any workstoppage. We believe that our employee relations are good.

 

***Regulations***

 

Federal, state,and local regulations impose various environmental controls on the discharge ofchemicals and gases in connection with the wafer manufacturing process. Sincewe rely on third party manufacturers and our activities do not involveutilization of hazardous substances generally associated with semiconductorprocessing, we believe such regulations are unlikely to have a material affecton our business or operations.

 

Item 1A. RISK FACTORS

 

Set forth below are some of the risks and uncertaintiesthat, if they were to occur, could materially adversely affect our business orthat could cause our actual results to differ materially from the resultscontemplated by the forward-looking statements contained in this report andother public statements we make.

 

*We have a history of losses and our future operatingresults could be harmed due to semiconductor industry business cycles.*

 

We have sustained substantial net losses during the pastfive fiscal years, other than fiscal 2006. These net losses are attributable principallyto delays in the television broadcast industry’s transition to high definitiondigital broadcasting from current analog standards, a downturn in thesemiconductor industry, and lack of new product introductions. Many factorswill affect our ability to become profitable or sustain profitability, such ascontinued demand for our products by our customers, lack of price erosion,efficiency of our manufacturing subcontractors, continued product innovationand design wins, and our continued ability to manage operating expenses.

 

We produceand sell semiconductors and our operations are therefore impacted by therepeated and severe business cycles that have historically been experienced bythe semiconductor industry. Our financial performance has been negativelyimpacted by significant downturns in the semiconductor industry as a result of:

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    - general reductions in inventory levels by customers;
    - excess production capacity;
    - the cyclical nature of the demand for products of     semiconductor customers; and
    - accelerated declines in average product selling prices.

 

When these or other conditions in the industry occur, ouroperating results could be adversely impacted.

 

*We are a small company with very limited resourcescompared to our current and potential competitors and we may not be able tocompete effectively in our highly competitive industry.*

 

Thesemiconductor industry is highly competitive and many of our direct andindirect competitors and potential competitors have substantially greaterfinancial, technological, manufacturing, and sales resources. If we are unableto compete successfully in this environment, our operating results could beharmed.

 

Thecurrent level of competition is high and may increase as our market expands. Wecompete directly with companies that have developed similar products. We alsocompete indirectly with numerous semiconductor companies that offer productsand solutions based on alternative technologies. These direct and indirectcompetitors are established multinational semiconductor companies, as well asemerging companies. In addition, we may experience additional competition fromforeign companies in the future.

 

*We depend on a limited number of customers for a majorityof our sales and our sales orders are typically concentrated in the last monthof every quarter, making our financial results particularly susceptible to theloss of a key customer and making sales in a quarter difficult to predict.*

 

We anticipate that the concentration of our sales amongrelatively few customers will continue in the future. We do not have long-termpurchase commitments from any of our customers. Therefore, these customerscould cease purchasing our products with limited notice and with no penalty.

 

Our dependence on a small number of customers increases therisks associated with the potential loss of customers resulting from businesscombinations or consolidations. If a customer were acquired or combined withanother company, the resulting company could cancel purchase orders as part ofthe integration process.

 

In addition, we ship more products during the third month ofeach quarter than in the first two months of the quarter. Moreover, shipmentsin the third month are generally higher toward the end of the month. Our salesare therefore concentrated in the latter part of each quarter, making itdifficult to predict our revenues and results of operations for any fiscalquarter or other fiscal period.

 

We*depend on third parties to fabricate silicon wafers and to assemble and testour products, which exposes us to a risk of production disruption oruncontrolled price changes.*

 

We do not manufacture silicon wafers. We rely upon two wafersuppliers, each of which is the sole source for certain of our products, andtwo assembly/test subcontractors. These suppliers do not have a contractualobligation or commitment to supply such wafers or services in the future. Ifthe suppliers are unable or unwilling to supply wafers or services, ouroperating results could be harmed. We may not be able to find sufficientsuppliers at a reasonable price or at all if such disruptions occur. As aresult of our reliance on third parties, we face significant risks, including:

 
    -  reducedcontrol over delivery schedules and quality;
    - longer lead times;
    - the potential lack of adequate capacity during periods of     excess industry demand;
    - difficulties selecting and integrating new subcontractors;
    - limited warranties on products supplied to us;
    - potential increases in prices due to capacity shortages;     and
    - potential misappropriation of our intellectual property.

 

If we fail to deliver our products on time or ifthe costs of our products increase, then our profitability and customerrelationships could be harmed.

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*Our international operations subject us to risks notpresent in solely domestic operations.*

 

Our primary silicon wafer supplier and assemblysubcontractors are located outside the United States. Financial difficulties,government actions or restrictions, prolonged work stoppages, or any otherdifficulties experienced by our suppliers could harm future operating results.

 

We also have many overseas customers. Our exportsales are affected by unique risks frequently associated with foreigneconomics, including:

 
    - governmental controls and trade restrictions;
    - export license requirements and restrictions on the export     of technology;
    - changes in local economic conditions;
    - political instability;
    - changes in tax rates, tariffs, or freight rates;
    - interruptions in air traffic; and
    - difficulties in staffing and managing foreign sales     offices.

 

Significant changes in the economic climate in the foreigncountries from which we derive our export sales could harm future operatingresults.

 

*The complex nature of semiconductors makes us highlysusceptible to manufacturing problems and these problems could have a negativeimpact on future operating results.*

 

Making semiconductors is a highly complex and preciseprocess, requiring production in a tightly controlled, clean environment. Evenminute imperfections in its materials, difficulties in the wafer fabricationprocess, defects in the masks used to print circuits on a wafer or otherfactors can cause a substantial percentage of wafers to be rejected or numerouschips on each wafer to be nonfunctional. We may experience problems inachieving an acceptable quality and yield rate in the manufacture of wafers.The interruption of wafer fabrication or the failure to achieve acceptableyields could harm future operating results. We may also experiencemanufacturing problems in our assembly and test operations, and in theintroduction of new packaging materials.

 

*Wedepend on third parties to deliver our products.*

 

We rely on independent carriers and freight haulers totransport our products between manufacturing locations and to deliver productsto our customers. Any transport or delivery problems because of their errors,or because of unforeseen interruptions, such as strikes, political instability,terrorism, natural disasters and accidents, could harm future operatingresults.

 

*Earthquakes, other natural disasters, and power shortagesmay damage our business.*

 

Our California facility and some of our suppliers are located near earthquake faults that haveexperienced major earthquakes in the past. In the event of a major earthquakeor other natural disaster near our facility or a sustained loss of power at ourfacility, our operations could be harmed. Similarly, a major earthquake orother natural disaster near one or more of our suppliers could disrupt theoperations of these suppliers, which could limit the supply of our products andharm our business.

 

*We maintain high levels of inventory that decrease ourliquidity and substantially increase the risk of write-offs.*

 

We havehistorically maintained and expect to continue to maintain high levels ofinventory of processed silicon wafers, packaging materials, and finished goods.For some product types, we must purchase all of our anticipated inventory needsfor the life of the product in a short period of time. We commit capital tomaintain these high inventory levels, which prevents us from using that capitalfor other purposes, such as research and development, and requires us toutilize more capital than might otherwise be required. Our high inventorylevels also heighten the risk of inventory obsolescence and write-offs.Further, we may forecast demand incorrectly and produce insufficient inventory,resulting in supply shortages.

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*Wecurrently have no bank credit facility and must rely solely upon existing cashreserves and funds from existing operations to finance future operations.*

 

We rely upon cash reserves andavailable-for-sale securities to fund our operations. If these resources shouldbe insufficient, we would be forced to obtain additional funding through debtor equity financing. If we are able to obtain debt financing, which is notassured, the terms of such financing are unknown, since we do not presentlyhave a credit facility, and may be unfavorable to us. Similarly, there can beno assurance that we would be able to sell capital stock on favorable terms orat all and any such sales may adversely affect our existing shareholders.

 

Since May 2006, we have had approximately $1million of auction rate securities (ARS) classified as a short-term investmentin available-for-sale securities, which paid a monthly average of $3,500 ofdividends and interest. Historically, these securities were considered cashalternatives that were risk averse and highly liquid. Beginning in February2008, the auctions began to fail and through June 2008 no secondary market has developed.Accordingly, ARS are no longer considered cash alternatives and currently lackliquidity. While there is no current market for the ARS, the underlying issuersmust continue to pay the interest and dividends when due. On October 16, 2008,we elected to accept an offer from UBS Financial Services Inc. (UBS) for ARSRights to sell our ARS to UBS at par value at any time during a two-yearperiod, beginning January 2, 2009. In addition, on November 10, 2008, weobtained a no net-cost line of credit from UBS Bank USA for the par value ofour ARS. We drew down the entire $975,000 available balance on November 21,2008. This loan is considered no net-cost as the interest charged is the lesserof the LIBOR rate plus an established percentage rate or the interest and/ordividends earned on our ARS. Therefore, our interest paid can be no more thanthe interest and/or dividends we earn on the ARS. When we exercise the ARSRights, we will pay back the no net-cost loan and the line will be closed.

 

*Ouroperating success depends upon our ability to develop new products and accessnew technologies.*

 

The semiconductor industry is a dynamicenvironment marked by rapid product obsolescence. Our future success depends onour ability to introduce new or improved products that meet critical customerneeds, while achieving acceptable profit margins. If we fail to introduce thesenew products in a timely manner or these products fail to achieve marketacceptance, operating results would be harmed. The introduction of new productsin a dynamic market environment presents significant business challenges.Product development commitments and expenditures must be made well in advanceof product sales, while the success of new products depends on accurateforecasts of long-term market demand and future technology developments.

 

Future revenue growth is dependent on marketacceptance of new products and the continued market acceptance of existingproducts. The success of these products is dependent on a variety of specifictechnical factors, including:

 
    - successful product definition;
    - timely and efficient completion of product design;
    - timely design into customers' future products and     maintenance of close working relationships with customers;
    - timely and efficient access to wafer manufacturing and     assembly processes; and
    - product performance, quality and reliability.

 

If, due to these or other factors, new productsdo not achieve market acceptance, our operating results would be harmed.Furthermore, to develop new products and maintain the competitiveness ofexisting products, we need to migrate to more advanced wafer manufacturingprocesses that use larger wafer sizes and smaller geometries.

 

*The loss of key personnel or failure to hire and retainadditional qualified personnel could impair our ability to develop and marketour products.*

 

Our future success greatly depends on theability to attract and retain highly qualified technical and managementpersonnel. As a small company, we are particularly dependent on a relativelysmall group of employees. Competition for skilled technical and managementemployees is intense in the semiconductor industry. As a result, we may beunable to retain our existing key technical and management employees, orattract additional qualified personnel, which could harm operating results. Wedo not have employment agreements with any of our employees.

----

*Our failure to protect our proprietary rights, or thecosts of protecting these rights, may harm our ability to compete.*

 

We own several patents but rely primarily on our designknow-how and continued access to advanced wafer process technology to developand maintain our competitive position. We attempt to protect our trade secretsand other proprietary information through confidentiality agreements withemployees, consultants, suppliers and customers. However, competitors maydevelop, patent or gain access to similar know-how and technology, or reverseengineer our products. Our inability to adequately protect these proprietaryrights could result in our competitors offering similar products, potentiallycausing us to lose a competitive advantage and leading to decreased revenue. Wemay not obtain an adequate remedy in the event our confidentiality agreementsare breached or any remedy if our trade secrets are independently developed byothers. Despite our efforts to protect our proprietary rights, existingintellectual property laws afford only limited protection, especially under thelaws of some foreign countries. Litigation may be necessary in the future to enforceour intellectual property rights, to protect our trade secrets or to determinethe validity and scope of the proprietary rights of others. This litigationcould result in substantial costs and diversion of resources.

 

*We could be harmed by litigation involving patents andother intellectual property rights.*

 

As a general matter, the semiconductor and relatedindustries are characterized by substantial litigation regarding patent andother intellectual property rights. We have been and in the future may beaccused of infringing the intellectual property rights of third parties.Furthermore, we may have certain indemnification obligations to customers withrespect to the infringement of third-party intellectual property rights by ourproducts. Infringement claims by third parties or claims for indemnification bycustomers or end-users of our products resulting from infringement claims maybe asserted in the future and such assertions, if proven to be true, may harmour business.

 

Any litigation relating to the intellectual property rightsof third parties, whether or not determined in our favor or settled by us,could be costly and could divert the efforts and attention of management andengineering personnel. In the event of any adverse ruling in any such litigation,we could be required to pay substantial damages, cease the manufacturing, useand sale of infringing products, discontinue the use of certain processes orobtain a license under the intellectual property rights of the third partyclaiming infringement. A license might not be available on reasonable terms, ifat all.

 

*The price of our common stock may continue to be volatileand our trading volume may continue to be relatively low.*

 

The market price of our common stock has fluctuatedsignificantly to date. In the future, the market price of the common stockcould be subject to significant fluctuations due to general market conditionsand in response to quarter-to-quarter variations in:

 
    - our anticipated or actual operating results;
    - announcements or introductions of new products;
    - technological innovations or setbacks by us or our     competitors;
    - conditions in the semiconductor markets;
    - the commencement of litigation; and
    - general economic and market conditions.

 

Item 1B. UNRESOLVED STAFF COMMENTS

 

This itemsis not applicable as we are not an accelerated filer as defined in Exchange ActRule 12b-2.

 

Item 2. PROPERTIES

 

Ourexecutive offices, as well as our inventories and research and developmentfacilities, are located in approximately 17,200 square feet, in Sunnyvale, California, with a lease expiring August 31, 2014. We believe our facilitieswill be adequate to meet our reasonably foreseeable needs and, if necessary,alternative facilities will be available on acceptable terms, so as to meet ourrequirements.

----

Item 3. LEGAL PROCEEDINGS

 

From timeto time, we receive demands from various parties asserting patent or otherclaims in the ordinary course of business. These demands are often not based onany specific knowledge of our products or operations. Because of theuncertainties inherent in litigation, the outcome of any such claim, includingsimply the cost of a successful defense against such a claim, could have amaterial adverse impact on us.

 

Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

 

No matterswere submitted to a vote of our security holders during the last quarter offiscal 2008.

 

 

**PART II**

 

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATEDSHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Our CommonStock trades under the ticker symbol, LOGC, on The Nasdaq Capital Market. Thefollowing tables sets forth, for the period indicated, the high and low closingsales prices for our Common Stock, as reported by Nasdaq during the followingcalendar quarters:

 
| Calendar  Year                          | High   | Low    |
|-----------------------------------------|--------|--------|
|                                    |   |   |
| 2006                                    |   |   |
|     Fourth  quarter | $3.02  | $2.12  |
|                                    |   |   |
| 2007                                    |   |   |
|     First quarter   | $2.77  | $1.85  |
|     Second  quarter | $2.34  | $1.76  |
|     Third  quarter  | $3.18  | $1.92  |
|     Fourth  quarter | $2.07  | $1.03  |
|                                    |   |   |
| 2008                                    |   |   |
|     First  quarter  | $2.50  | $1.00  |
|     Second  quarter | $1.18  | $0.88  |
|     Third  quarter  | $1.52  | $0.90  |

 

*Holders*

 

As ofDecember 18, 2008, there were approximately 1,500 holders of record of ourCommon Stock.

 

*Dividends*

 

We havenot paid any dividends on our Common Stock since our incorporation.

 

*PerformanceGraph*

 

Thefollowing graph, which is furnished rather than filed, compares the five-yearcumulative total return on our Common Stock to the total returns on the S&P500 Index and the NASDAQ Electronic Components Stock Index. This comparisonassumes, in each case, that $100 was invested on or about September 30, 2003and all dividends were reinvested. Our fiscal year ends on September 30 eachyear.

----

* $100invested on 09/30/03 in stock or index – including reinvestment of dividends.

 

*SecuritiesAuthorized for Issuance Under Equity Compensation Plans*

 

Thefollowing table sets forth the position of our equity compensation plans as ofSeptember 30, 2008:

 
| Plan Category                                |   | Number of securities to be issued upon exercise of  outstanding options, warrants, and rights |   | Weighted-average exercise price of outstanding  options, warrants, and rights |   | Number of securities remaining available for  future issuance under equity compensation plans (excluding securities  reflected in column a) |
|----------------------------------------------|--------|-----------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|
|                                         |   |                                                                                          |   |                                                                          |   |                                                                                                                                        |
| Equity  compensation plans approved by       |   |                                                                                          |   |                                                                          |   |                                                                                                                                        |
|     security  holders    |   | 337,500                                                                                       |   | $1.595                                                                        |   | 1,015,000                                                                                                                                   |
|                                         |   |                                                                                          |   |                                                                          |   |                                                                                                                                        |
| Equity  compensation plans not approved      |   |                                                                                          |   |                                                                          |   |                                                                                                                                        |
|     by  security holders |   | –                                                                                        |   |                                                                          |   | –                                                                                                                                      |
|     Total                |   | 337,500                                                                                       |   | $1.595                                                                        |   | 1,015,000                                                                                                                                   |

 

Item 6. SELECTED FINANCIAL DATA

 

Thefollowing table sets forth selected financial data for our last five fiscalyears. This information is derived from our audited financial statements,unless otherwise stated. This data should be read in conjunction with thefinancial statements, related notes, and other financial information includedelsewhere in this report.

 

----

 
| (In thousands, except per share amounts) |                       |               |                          |               |
|-------------------------------------------------------------------|----------------------------|--------------------|-------------------------------|--------------------|
|                                                              |                       |               |                          |               |   |   |
|                                                              |                       |               | Fiscal Years Ended: |               |
|                                                              |                       | September 30, | September 30,            | September 30, | September 30, | September 28, |
|                                                              |                       | 2008               | 2007                          | 2006               | 2005 | 2004 |
|                                                              |                       |               |                          |               |   |   |
| Net revenues                                                 | $3,352                | $4,686        | $4,641                   | $3,509        | $4,415  |
|                                                              |                       |               |                          |               |   |   |
| Research and development                                | $1,563                | $1,812        | $982                     | $730          | $1,364  |
|                                                              |                       |               |                          |               |   |   |
| Net (loss) income                                       | $(3,965)                   | $(1,488)           | $129                     | $(1,363)           | $(1,472) |
|                                                              |                       |               |                          |               |   |   |
| Basic (loss) earnings per                          |                       |               |                          |               |   |
|                                                              | common share          | $(0.58)            | $(0.22)                       | $0.02         | $(0.20) | $(0.22) |
|                                                              |                       |               |                          |               |   |   |
| Basic weighted-average                                       |                       |               |                          |               |   |
|                                                              | common shares  outstanding | 6,814         | 6,797                    | 6,754         | 6,750  | 6,715  |
|                                                              |                       |               |                          |               |   |   |
| Working capital                                              | $3,162                | $6,957        | $7,897                   | $7,589        | $9,583  |
|                                                              |                       |               |                          |               |   |   |
| Inventory                                                         | $1,425                | $4,389        | $5,240                   | $5,626        | $7,079  |
|                                                              |                       |               |                          |               |   |   |
| Total assets                                                 | $4,376                | $8,263        | $9,717                   | $9,547        | $10,836  |
|                                                              |                       |               |                          |               |   |   |
| Shareholders' equity                                         | $4,035                | $8,016        | $9,397                   | $9,238        | $10,590  |

 

 

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS

 

Reportedfinancial results may not be indicative of the financial results of futureperiods. All non-historical information contained in the following discussionconstitutes forward-looking statements within the meaning of Section 27A of theSecurities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.These statements are not guarantees of future performance and involve a numberof risks and uncertainties, including those identified in “Item 1A – RiskFactors” of this Annual Report on Form 10-K. We undertake no obligation torevise or update these forward-looking statements to reflect events orcircumstances after the date of this report.

 

***Overview***

 

LOGIC Devices Incorporated develops and markets high-speeddigital integrated circuits that perform high-density storage and signal/imageprocessing functions. Our products enable high definition video display,transport, editing, composition, and special effects. We also provide solutionsfor digital filtering in television broadcast stations and image enhancement inmedical diagnostic scanning and imaging equipment.

 

Our products are used in the broadcast, medical, militaryand consumer electronics markets. Our products address storage and digitalsignal processing (DSP) requirements that involve high-performance arithmeticcomputation. We focus on developing proprietary catalog products to addressspecific functional application needs or performance levels that are nototherwise commercially available. We seek to provide related groups of circuitsthat original equipment manufacturers (OEMs) incorporate into high-performanceelectronic systems.

----

***Liquidityand Capital Resources***

 

Ouroperations used net cash of $386,300, despite a large net loss of $3,965,000for fiscal 2008. Inventory write-downs totaling $2,059,700 and a write-off ofproperty and equipment no longer in use totaling $129,900 increased our netloss but did not affect cash flows. Sales of existing inventories produced$904,700 of cash for operations, while timing of invoices resulted in anincrease in accounts payable of $126,200. Prior to the collapse of the auctionrate securities market, we liquidated $112,000 of our investment. Capitalexpenditures of $274,200 included mask tooling and production tooling for newproducts.

 

Despitehaving a net loss of $1,487,700 for fiscal 2007, our operations produced netcash of $272,600. During fiscal 2007, we wrote-off $555,600 of inventories,$400,200 of capitalized test software, and $142,600 of property and equipmentno longer in use, all of which increased the net loss but did not affect cashflows from operations. During the year, we also increased our inventoryvaluation allowance by $402,700, while writing off $1,551,000 of inventoriesagainst this valuation allowance. We also continue to purchase additionalavailable-for-sale securities as a means to increase the return on our cash andcash equivalents balances, with purchases of $554,900 in fiscal 2007. Capitalexpenditures of $391,100 included leasehold improvements for our new facilitiesinto which we moved on September 1, 2007.

 

While producinga net income of $129,400 during fiscal 2006, our operations produced net cashof $977,700. During the year, we increased the inventory valuation allowance by$1,036,900 and wrote-off $200,000 of capitalized test software, both of whichreduced net income but not cash flows. In addition, LOGIC collected $45,000from a property tax refund and had increases in its accrued payroll andvacation and other accrued expenses totaling $81,200 due to the timing of theseexpenses. Capital expenditures of $196,700 for fiscal 2006 were substantiallyless than fiscal 2005, which totaled $540,700.

 

*WorkingCapital*

 

Ourinvestment in inventories has been significant and will continue to besignificant in the future. However, during the past few years, we have been ableto reduce our levels of inventories as we shift from more competitive secondsource products to proprietary sole source products. We seek to furtherstreamline our inventories as we continue to shift to sole source proprietaryproducts. 

 

We rely onthird party suppliers for our raw materials, particularly our processed wafers,for which we currently rely primarily on two suppliers, and as a result,maintain substantial inventory levels to protect against disruption insupplies. We have periodically experienced disruptions in obtaining wafers. Aswe continue to shift towards higher margin proprietary products, we expect tobe able to reduce inventory levels by streamlining our product offerings.

 

Periodically, we review inventory to determine recoverabilityof items on-hand using the lower-of-cost-or-market (LOCOM) and excess methods.We group and evaluate our products based on their underlying die or wafer type(our raw materials, silicon wafers, can generally be used to make multipleproducts), to determine the total quantity on-hand and average unit costs.Management uses judgment in comparing historical sales quantities to thequantity on-hand at the end of the fiscal year. If the quantity on-hand exceedsthe sales quantities, we provide a valuation allowance for the potentiallyobsolete or slow-moving items. For the LOCOM analysis, we compare the averagehistorical sales price to the average unit cost of inventories at the end ofthe fiscal year. If the average unit cost exceeds the average sales price, weprovide a valuation allowance.

 

With continuing low revenue levels, management felt itnecessary to also review our raw materials and work-in-process. Our productsgenerally exhibit an active sales product life cycle of ten or more years.However, due to rapid changes in process technology, we are generally unable toobtain wafers for our products for as long a period as their life cycles. As aresult, early in a product's life, we are often required to estimate the salesexpectations for the entire life cycle and purchase materials upfront. On someoccasions, our expectations become lower and we provide a reserve for potentialexcess materials. In fiscal 2008, we wrote down inventory against our inventoryvaluation allowance of $1,573,700 and additional inventory totaling $2,059,300.In fiscal 2007, we increased our inventory valuation allowance by $402,700 forpotential excess materials, while writing down $1,551,000 of inventory againstthis previously established allowance. In addition, during fiscal 2007, wescrapped other inventory of $555,600. We believe our current inventoryvaluation provides a reasonable estimate of the recoverability of inventoriesat the end of fiscal 2008.

----

Althoughcurrent levels of inventory impact our liquidity, we believe that this is aless costly alternative to owning a wafer fabrication facility or continuouslyredesigning our products to newer process technologies, which would divertlimited engineering resources from new product development. We continue toevaluate alternative suppliers to diversify our risk of supply disruption.However, this requires a significant investment in product development to toolmasks with new suppliers. Such efforts compete for our limited productdevelopment resources. We seek to achieve on-going reductions in inventory,although there can be no assurance we will be successful. In the event economicconditions remain slow, we may consider identifying additional portions ofinventory to write-off at a future date.

 

Historically,due to customer order scheduling, up to 70% of our quarterly revenues wereoften shipped in the last month of the quarter, so a large portion of theshipments included in year-end accounts receivable were not yet due per our net30-day terms. This results in year-end accounts receivable balances being attheir highest point for the respective period. 

 

*Financing*

 

OnNovember 10, 2008, we obtained a no net-cost line of credit from UBS Bank USAfor the $975,000 par value of our Auction Rate Securities (ARS). We drew downthe entire $975,000 available balance on November 21, 2008 so we would have thecash readily available rather than held in the illiquid ARS at UBS FinancialServices Inc. (UBS). This loan is considered no net-cost as the interestcharged is the lesser of the LIBOR rate plus an established percentage rate orthe interest and/or dividends earned on our ARS. Therefore, our interest paidcan be no more than the interest and/or dividends we earn on the ARS. Inaddition, on October 16, 2008, we signed an agreement with UBS for ARS Rightsto sell our ARS to UBS at par value within a two-year period beginning January2, 2009. At the time we exercise these ARS Rights, we will pay back the nonet-cost loan from UBS Bank USA and the line will be closed.

 

We believethe cost reductions we have undertaken in the past few years will allow us touse this cash, along with cash from future revenues, to fund current operationsand future capital needs. However, we continue to evaluate our debt and equityfinancing opportunities.

 

*ContractualObligations*

 

Our onlycontractual obligation is our facility operating lease. The following tablesummarizes the future fixed payments under this lease as of September 30, 2008.Payment timing may be subject to change.

 
|     |             |   | Payments due by period: |   |           |
|----------|------------------|--------|----------------------------------------|--------|----------------|
|     | Total            |   | Within 1 year                |   | 1-3 years |   | After 3 years |
|     |             |   |                                   |   |           |   |   |
| Building | $1,442,500  |   | $223,200                          |   | $719,200       |   | $500,100 |

 

*Off-BalanceSheet Arrangements*

 

We have nooff-balance sheet arrangements.

 

***Resultsof Operations***

 

*Comparisonof Fiscal Years Ended September 30, 2008 and 2007*

 

Netrevenues for fiscal 2008 decreased 28 percent from $4,686,400 in fiscal 2007 to$3,352,100. This decrease was the result of the older products, including thedigital cinema project, dropping off with no new product revenues replacingthem during fiscal 2008.

 

Cost ofrevenues for fiscal 2008 increased 47 percent from $2,846,700 in fiscal 2007 to$4,196,600, mainly the result of write-downs of inventory totaling $2,059,300.Sales of products previously written down to zero were 27% of revenues infiscal 2008 compared to 15% in fiscal 2007.

 

Researchand development expenses decreased 14 percent from $1,811,800 in fiscal 2007 to$1,563,400 in fiscal 2008. This decrease is primarily the result of theone-time $400,200 write-off of capitalized test software done in fiscal 2007.During the last quarter of fiscal 2008, we made a few minor staffing cuts butbelieve the current team can complete the new products we currently have indevelopment.

----

Selling,general, and administrative expenses decreased four percent from $1,546,400 infiscal 2007 to $1,483,200. This decrease was mainly the result of general costcutting in fiscal 2008 and the expensing of certain prepaids in fiscal 2007that did not recur in fiscal 2008.

 

Interestincome decreased 25 percent from $75,900 in fiscal 2007 to $56,700, primarilyas a result of a smaller balance in available-for-sale securities and a lowercash balance in fiscal 2008. Other expense in fiscal 2008 consisted of thewrite-off of property and equipment no longer in use.

 

As aresult of the decreased revenues and large write-down of inventory, we had anet loss of $3,965,000 in fiscal 2008, compared to a net loss of $1,487,700 infiscal 2007.

 

*Comparison of Fiscal Years EndedSeptember 30, 2007 and 2006*

 

Netrevenues for fiscal 2007 increased one percent from $4,640,600 in fiscal 2006to $4,686,400. This slight increase is the result of one customer increasingits order rate to an amount that offset decreases in older product sales.

 

Cost ofrevenues for fiscal 2007 increased 32 percent from $2,153,700 in fiscal 2006 to$2,846,700, mainly the result of write-offs of inventory totaling $555,600 anda decrease in sales of products previously written down to zero-value (15% infiscal 2007 compared to 26% in fiscal 2006).

 

Researchand development expenses increased 85 percent from $981,700 in fiscal 2006 to$1,811,800. While this increase includes the write-off of $400,200 ofcapitalized test software development costs, the remaining increase is theresult of our continued commitment to expand our product development team, inboth numbers and expertise. While the expenses, net of the write-off ofcapitalized test software development costs, are outside our goal of 20 to 25percent of net revenues (30%), we believe we must continue at this currentlevel as new product development is the key to our future growth and success.Future new product introductions will result in future revenue increases thatwill begin to offset these expenditures down to our goal level.

 

Selling,general, and administrative expenses increased nine percent from $1,421,900 infiscal 2006 to $1,546,400. While we attempted to identify areas forcost-cutting during the fiscal year, the need for outside consultants and theexpensing of certain prepaid expenses whose useful life had expired early inthe normal course of business resulted in the total increase.

 

Interestincome increased 101 percent from $37,800 in fiscal 2006 to $75,900. Theincrease is the result of more funds being invested in available-for-salessecurities during fiscal 2007 and from the fact that the investments existedfor the full fiscal year compared to only four months of fiscal 2006.

 

As aresult of the foregoing, we had a net loss of $1,487,700 for fiscal 2007, comparedto net income of $129,400 in fiscal 2006.

 

***CriticalAccounting Policies***

 

Management'sdiscussion and analysis of our financial condition and the results ofoperations are based upon the financial statements included in this report andthe data used to prepare them. The financial statements have been prepared inaccordance with the accounting principles generally accepted in the United States of America and we are required to make judgments, estimates, and assumptionsin the course of such preparation. The Summary of Accounting Policies includedwith the financial statements describes the significant accounting policies andmethods used in the preparation of the financial statements. On an ongoingbasis, we reevaluate our judgments, estimates, and assumptions, including thoserelated to revenue recognition, allowance for doubtful accounts, valuation ofinventories, and valuation of long-lived assets. We base our judgments andestimates on historical experience, knowledge of current conditions, and our beliefsof what could occur in the future considering available information. Actualresults may differ from these estimates under different assumptions orconditions. The following are the critical accounting policies we believe areaffected by significant judgments, estimates, and assumptions used in thepreparation of the financial statements.

----

*RevenueRecognition*

 

Revenue isgenerally recognized upon shipment of product. Sales to distributors are madepursuant to agreements that provide the distributors certain rights of returnand price protection on unsold merchandise. Revenues from such sales arerecognized upon shipment, with a provision for estimated returns and allowancesrecorded at that time, if applicable. While distributors are allowed to returnitems for stock rotation, they are required to place an order of equal orgreater value at the same time. Therefore, no allowance for returns isrecorded. Because we generally do not change the pricing of our products morethan once a year, there have not been any pricing issues in the past severalyears; therefore, there is no allowance for price protection recorded.

 

*Allowancefor Doubtful Accounts*

 

Weestablish a general allowance for doubtful accounts based on analyzinghistorical bad debts, specific customer creditworthiness, and current economicconditions. Historically, we have not experienced significant losses related toreceivables.

 

*Inventories*

 

We writedown our inventories for lower of cost or market reserves, aged inventoryreserves, and obsolescence reserves. As a result of production requirements andconstraints, we are often required to estimate the sales expectations for theentire life cycle of a product (which can be ten or more years) and purchasematerials upfront. If actual product demand or selling prices are lessfavorable than estimated, additional inventory write-downs may be required inthe future. Conversely, if demand increases for product types that have beenfully reserved, future margins may be higher.

 

*Long-LivedAssets*

 

Long-livedassets, including property and equipment, goodwill, and other intangibleassets, are assessed for possible impairment whenever events or changes incircumstances indicate that the carrying amounts may not be recoverable, orwhenever management has committed to a plan to dispose of the assets. Suchassets are carried at the lower of book value or fair value as estimated bymanagement based on appraisals, current market value, and comparable salesvalue, as appropriate. Assets to be held and used affected by such impairmentloss are depreciated or amortized at their new carrying amounts over theremaining estimated life; assets to be sold or otherwise disposed of are notsubject to further depreciation or amortization. In determining whether animpairment exists, we use undiscounted future cash flows without interestcharges compared to the carrying value of the assets.

 

*DeferredIncome Taxes*

 

Income taxes are accounted forusing the asset and liability method. Deferred income tax assets andliabilities are recognized for the future tax consequences attributable todifferences between the financial statement carrying amounts of existing assetsand liabilities and their respective tax bases and operating loss and taxcredit carryforwards. Deferred income tax assets and liabilities are measuredusing enacted tax rates expected to apply to taxable income in the years inwhich those temporary differences are expected to be recovered or settled. Theeffect on deferred income tax assets and liabilities of a change in tax ratesis recognized in income in the period that includes the enactment date. Futuretax benefits are subject to a valuation allowance when we are unable toconclude that our deferred income tax assets will more likely than not berealized from the results of operations. We have recorded a valuation allowanceto reflect the estimated amount of deferred income tax assets that may not berealized. The ultimate realization of deferred income tax assets is dependentupon generation of future taxable income during the periods in which thosetemporary differences become deductible. We consider projected future taxableincome and tax planning strategies in making this assessment.

 

Based on the historical taxableincome and projections for future taxable income over the periods in which thedeferred tax assets become deductible, management believes it more likely thannot that we will not realize benefits of these deductible differences as ofSeptember 30, 2008. Accordingly, we have established a valuation allowanceagainst our net deferred income tax assets as of September 30, 2008.

----

*Impactof New Financial Accounting Standards*

 

InSeptember 2006, the FASB issued SFAS No. 157, *Fair Value Measurements*,which provides guidance for using fair value to measure assets and liabilities.The pronouncement clarifies (1) the extent to which companies measure assetsand liabilities at fair value; (2) the information used to measure fair value;and (3) the effect that fair value measurements have on earnings. SFAS No. 157will apply whenever another standard requires (or permits) assets orliabilities to be measured at fair value. SFAS No. 157 is effective for fiscalyears beginning after November 15, 2007. We are currently evaluating the impactthis statement will have on our financial statements, if any.

 

InFebruary 2007, the FASB issued SFAS No. 159, *The Fair Value Option forFinancial Assets and Financial Liabilities Including an Amendment of FASBStatement No. 115*. SFAS No. 159 permits entities to choose to measure manyfinancial instruments and certain other items at fair value that are notcurrently required to be measured at fair value. This statement alsoestablishes presentation and disclosure requirements designed to facilitatecomparisons between entities that choose different measurement attributes forsimilar types of assets and liabilities. SFAS No. 159 is effective for fiscalyears beginning after November 15, 2007. We are currently evaluating the impactthis statement will have on our financial statements, if any.

 

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK

 

TheCompany conducts all of its transactions, including those with foreignsuppliers and customers, in U.S. dollars. It is therefore not directly subjectto the risks of foreign currency fluctuations and does not hedge or otherwisedeal in currency instruments in an attempt to minimize such risks. Demand fromforeign customers and the ability or willingness of foreign suppliers toperform their obligations to the Company may be affected by the relative changein value of such customer or supplier's domestic currency to the value of theU.S. dollar. Furthermore, changes in the relative value of the U.S. dollar maychange the price of the Company's prices relative to the prices of its foreigncompetitors.

 

----

Item 8. FINANCIAL STATEMENTS ANDSUPPLEMENTARY DATA

 

***Index to Financial Statements and Financial StatementSchedules***

 
| *FINANCIAL STATEMENTS:*                                                                             | Page   |
|-----------------------------------------------------------------------------------------------------|--------|
|                                                                                                |   |
| Report of Independent Registered  Public Accounting Firm                                            | 20     |
| Report of Independent Registered  Public Accounting Firm                                            | 21     |
| Balance Sheets, September 30, 2008  and 2007                                                        | 22     |
| Statements of Operations, fiscal  years ended September 30, 2008, 2007, and 2006                    | 23     |
| Statement of Shareholders’ Equity,  fiscal years ended September 30, 2008, 2007,and  2006 | 24     |
| Statements of Cash Flows, fiscal  years ended September 30, 2008, 2007, and 2006                    | 25     |
| Summary of Accounting Policies                                                                      | 26     |
| Notes to Financial Statements                                                                       | 30     |
| Quarterly Financial Data  (unaudited), fiscal years ended September 30, 2008 and 2007               | 36     |
|                                                                                                |   |
| *FINANCIAL STATEMENT SCHEDULE*                                                                      |   |
|                                                                                                |   |
| Schedule II – Valuation and  Qualifying Accounts                                               | 38     |

 

----

### REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM

 

 

 

The Shareholders and Board of Directors

LOGIC Devices Incorporated

Sunnyvale, California

 

We have audited the accompanyingbalance sheets of LOGIC Devices Incorporated (the "Company") as ofSeptember 30, 2008 and 2007 and the related statements of operations,shareholders' equity, and cash flows for each of the fiscal years then ended.Our audits also included the financial statement schedule of the Company listedin Item 15. These financial statements and the financial statement schedule arethe responsibility of the Company's management. Our responsibility is toexpress an opinion on these financial statements based on our audit.

 

We conducted our audits inaccordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. An auditalso includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financialstatement presentation. We believe that our audits provided a reasonable basisfor our opinion.

 

In our opinion, the financialstatements referred to above present fairly, in all material respects, thefinancial position of LOGIC Devices Incorporated as of September 30, 2008 and2007 and the results of their operations and their cash flows for each of thetwo fiscal years in the period ended September 30, 2008, in conformity withaccounting principles generally accepted in the United States of America. Also,in our opinion, the related financial statement schedule, when considered inrelation to the basic financial statements taken as a whole, presents fairly,in all material respects, the information set forth therein.

 

We were not engaged to examinemanagement’s assertion about the effectiveness of LOGIC Devices Incorporated’sinternal control over financial reporting as of September 30, 2008 included inthe accompanying Form 10-K and, accordingly, we do not express an opinionthereon.

 

 

/s/ Hein & Associates LLP

 

 

 

Irvine, California

December 17, 2008

----

### REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM

 

 

 

The Shareholders

   and Board of Directors

LOGIC Devices Incorporated

Sunnyvale, California

 

We have audited the accompanyingLOGIC Devices Incorporated (the "Company") statements of operations,shareholders' equity, and cash flows for the fiscal year ended September 30,2006. Our audit also included the financial statement schedule of the Companylisted in Item 15 for the fiscal year ended September 30, 2006. These financialstatements and the financial statement schedule are the responsibility of theCompany's management. Our responsibility is to express an opinion on thesefinancial statements based on our audit.

 

We conducted our audit inaccordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. An auditalso includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financialstatement presentation. We believe that our audit provided a reasonable basisfor our opinion.

 

In our opinion, the financialstatements referred to above present fairly, in all material respects, the resultsof its operations and cash flows of LOGIC Devices Incorporated for the fiscal yearended September 30, 2006, in conformity with accounting principles generallyaccepted in the United States of America. Also, in our opinion, the relatedfinancial statement schedule, when considered in relation to the basicfinancial statements taken as a whole, presents fairly, in all materialrespects, the information set forth therein.

 

 

 

/s/ Perry-Smith LLP

 

 

 

Sacramento, California

November 29, 2006

 

----

|                                                |                                                                                           |                                                                                                        |                                                                                                                                   | **LOGIC Devices Incorporated** |
|-----------------------------------------------------|------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------|
|                                                |                                                                                           |                                                                                                        |                                                                                                                                   |                                     |   |   |
|                                                |                                                                                           |                                                                                                        |                                                                                                                                   |                                     |   | **Balance Sheets** |
|                                                |                                                                                           |                                                                                                        |                                                                                                                                   |                                     |   |   |
|                                                |                                                                                           |                                                                                                        |                                                                                                                                   | September 30,                       |   | September 30, |
|                                                |                                                                                           |                                                                                                        |                                                                                                                                   | 2008                                     |   | 2007 |
|                                                |                                                                                           |                                                                                                        |                                                                                                                                   |                                     |   |   |
| ASSETS                                              |                                                                                           |                                                                                                        |                                                                                                                                   |                                     |
|                                                |                                                                                           |                                                                                                        |                                                                                                                                   |                                     |   |   |
| Current assets:                                |                                                                                           |                                                                                                        |                                                                                                                                   |
|                                                | Cash and cash equivalents                                                       | $                                                                                                           | 312,400                                                                                                                           |                                     | $ | 884,000  |
|                                                | Investment in available-for-sale securities                                     | 944,400                                                                                                |                                                                                                                                   | 1,061,900                           |
|                                                | Accounts receivable                                                                       | 658,200                                                                                                |                                                                                                                                   | 681,300                             |
|                                                | Inventories                                                                                    | 1,424,700                                                                                              |                                                                                                                                   | 4,388,700                           |
|                                                | Prepaid expenses and other current assets                             | 136,800                                                                                                |                                                                                                                                   | 186,500                             |
|                                                |                                                                                           |                                                                                                        | Total current assets                                                                                                         | 3,476,500                           |   | 7,202,400  |
|                                                |                                                                                           |                                                                                                        |                                                                                                                                   |                                     |   |   |
| Property and equipment, net          | 877,800                                                                                   |                                                                                                        | 1,038,800                                                                                                                         |
| Other assets, net                         | 22,100                                                                                    |                                                                                                        | 22,100                                                                                                                            |
|                                                |                                                                                           |                                                                                                        |                                                                                                                                   | $                                        | 4,376,400  |   | $ | 8,263,300  |
|                                                |                                                                                           |                                                                                                        |                                                                                                                                   |                                     |   |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY |                                                                                           |                                                                                                        |                                                                                                                                   |
|                                                |                                                                                           |                                                                                                        |                                                                                                                                   |                                     |   |   |
| Current liabilities:                           |                                                                                           |                                                                                                        |                                                                                                                                   |
|                                                | Accounts payable                                                                          | $                                                                                                           | 156,300                                                                                                                           |                                     | $ | 30,100  |
|                                                | Accrued payroll, vacation and bonuses                                      | 126,200                                                                                                |                                                                                                                                   | 119,900                             |
|                                                | Accrued commissions                                                                       | 16,000                                                                                                 |                                                                                                                                   | 25,000                              |
|                                                | Other accrued expenses                                                               | 16,000                                                                                                 |                                                                                                                                   | 70,500                              |
|                                                |                                                                                           |                                                                                                        | Total current liabilities                                                                                                    | 314,500                             |   | 245,500  |
|                                                |                                                                                           |                                                                                                        |                                                                                                                                   |                                     |   |   |
| Deferred rent                                  | 26,500                                                                                    |                                                                                                        | 2,100                                                                                                                             |
|                                                |                                                                                           |                                                                                                        | Total liabilities                                                                                                                 | 341,000                             |   | 247,600  |
|                                                |                                                                                           |                                                                                                        |                                                                                                                                   |                                     |   |   |
| Commitments and contingencies             |                                                                                           |                                                                                                        |                                                                                                                                   |
|                                                |                                                                                           |                                                                                                        |                                                                                                                                   |                                     |   |   |
| Shareholders' equity:                          |                                                                                           |                                                                                                        |                                                                                                                                   |
|                                                | Preferred stock, no par value; 1,000,000 shares authorized; |                                                                                                        |                                                                                                                                   |                                     |
|                                                |                                                                                           | 5,000 designated as Series A, 0 shares issued and outstanding  | -                                                                                                                                 |                                     | -  |
|                                                |                                                                                           | 70,000 designated as Series B, 0 shares issued and outstanding | -                                                                                                                                 |                                     | -  |
|                                                | Common stock, no par value; 10,000,000 shares authorized;   |                                                                                                        |                                                                                                                                   |                                     |
|                                                |                                                                                           | 6,814,438 and 6,812,938 shares issued and outstanding                                   | 18,543,200                                                                                                                        |                                     | 18,541,300  |
|                                                | Additional paid-in capital                                                           | 155,600                                                                                                |                                                                                                                                   | 142,200                             |
|                                                | Other comprehensive loss                                                             | (30,600)                                                                                                    |                                                                                                                                   | -                                   |
|                                                | Accumulated deficit                                                                       | (14,632,800)                                                                                                |                                                                                                                                   | (10,667,800)                             |
|                                                |                                                                                           |                                                                                                        | Total shareholders' equity                                                                                                   | 4,035,400                           |   | 8,015,700  |
|                                                |                                                                                           |                                                                                                        |                                                                                                                                   | $                                        | 4,376,400  |   | $ | 8,263,300  |
|                                                |                                                                                           |                                                                                                        |                                                                                                                                   |                                     |   |   |
|                                                |                                                                                           |                                                                                                        | *See accompanying Summary of Accounting Policies and Notes to Financial Statements.* |

----

 
|                                                                        |                                               |                                                  |                                                                                                                                   |                                                                   |            | **LOGIC Devices Incorporated** |
|-----------------------------------------------------------------------------|----------------------------------------------------|-------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------|-----------------|------------------------------------------|
|                                                                        |                                               |                                                  |                                                                                                                                   |                                                                   |            |                                     |   |   |
|                                                                        |                                               |                                                  |                                                                                                                                   |                                                                   |            | **Statements of Operations**   |
|                                                                        |                                               |                                                  |                                                                                                                                   |                                                                   |            |                                     |   |   |
|                                                                        |                                               |                                                  |                                                                                                                                   | For the fiscal years ended September 30, |
|                                                                        |                                               |                                                  |                                                                                                                                   | 2008                                                                   |            | 2007                                     |   | 2006 |
|                                                                        |                                               |                                                  |                                                                                                                                   |                                                                   |            |                                     |   |   |
| Net revenues                                                           | $                                                  | 3,352,100                                        |                                                                                                                                   | $                                                                      | 4,686,400  |                                     | $ | 4,640,600  |
| Cost of revenues                                                  | 4,196,600                                     |                                                  | 2,846,700                                                                                                                         |                                                                   | 2,153,700  |
|                                                                        |                                               |                                                  | Gross margin                                                                                                                      | (844,500)                                                              |            | 1,839,700                           |   | 2,486,900  |
|                                                                        |                                               |                                                  |                                                                                                                                   |                                                                   |            |                                     |   |   |
| Operating expenses:                                                    |                                               |                                                  |                                                                                                                                   |                                                                   |            |
|                                                                        | Research and development                 | 1,563,400                                        |                                                                                                                                   | 1,811,800                                                         |            | 981,700                             |
|                                                                        | Selling, general and administrative | 1,483,200                                        |                                                                                                                                   | 1,546,400                                                         |            | 1,421,900                           |
|                                                                        |                                               | Total operating expenses                    | 3,046,600                                                                                                                         |                                                                   | 3,358,200  |                                     | 2,403,600  |
|                                                                        |                                               |                                                  | Operating (loss) income                                                                                                      | (3,891,100)                                                            |            | (1,518,500)                              |   | 83,300  |
|                                                                        |                                               |                                                  |                                                                                                                                   |                                                                   |            |                                     |   |   |
| Other expense (income), net:                                 |                                               |                                                  |                                                                                                                                   |                                                                   |            |
|                                                                        | Interest income                               | (56,700)                                              |                                                                                                                                   | (75,900)                                                               |            | (37,800)                                 |
|                                                                        | Other expense (income), net         | 129,800                                          |                                                                                                                                   | (100)                                                                  |            | (9,100)                                  |
|                                                                        |                                               | Total other expense (income), net | 73,100                                                                                                                            |                                                                   | (76,000)        |                                     | (46,900) |
|                                                                        |                                               |                                                  | (Loss) income before provision for income taxes                                                          | (3,964,200)                                                            |            | (1,442,500)                              |   | 130,200  |
| Provision for income taxes                                   | 800                                           |                                                  | 45,200                                                                                                                            |                                                                   | 800        |
|                                                                        |                                               |                                                  | Net (loss) income                                                                                                            | $                                                                      | (3,965,000)     |                                     | $ | (1,487,700) |   | $ | 129,400  |
| Basic (loss) earnings per common share             | $                                                  | (0.58)                                                |                                                                                                                                   | $                                                                      | (0.22)          |                                     | $ | 0.02  |
| Basic weighted average common shares outstanding   | 6,814,313                                     |                                                  | 6,797,480                                                                                                                         |                                                                   | 6,754,021  |
| Diluted (loss) earnings per common share           | $                                                  | (0.58)                                                |                                                                                                                                   | $                                                                      | (0.22)          |                                     | $ | 0.02  |
| Diluted weighted average common shares outstanding | 6,814,313                                     |                                                  | 6,797,480                                                                                                                         |                                                                   | 6,794,789  |
|                                                                        |                                               |                                                  |                                                                                                                                   |                                                                   |            |                                     |   |   |
|                                                                        |                                               |                                                  | *See accompanying Summary of Accounting Policies and Notes to Financial Statements.* |

 

----

|                                                                                                                                   |                           |         |              |             |                |             |                 |         |                                                 |         | **LOGIC Devices Incorporated** |
|----------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|--------------|-------------------|------------------|---------------------|------------------|----------------------|--------------|------------------------------------------------------|--------------|------------------------------------------|
|                                                                                                                                   |                           |         |              |             |                |             |                 |         |                                                 |         |                                     |   |   |
|                                                                                                                                   |                           |         |              |             |                |             |                 |         | **Statement of Shareholders' Equity** |
|                                                                                                                                   |                           |         |              |             |                |             |                 |         |                                                 |         |                                     |   |   |
|                                                                                                                                   |                           |         | Common Stock |             | Additional

Paid-In |             | Other

Comprehensive | Accumulated  |                                                 |         |
|                                                                                                                                   |                           |         | Shares            |             | Amount              |             | Capital              |         | Loss                                                 |         | Deficit                                  |   | Total |
| Balances, September 30, 2005                                                                                            | 6,753,188                 |         | $                 | 18,447,500  |                | $                | 100,000         |         | $                                                    | –  |                                     | $ | (9,309,500) |   | $ | 9,238,000  |
|                                                                                                                                   |                           |         |              |             |                |             |                 |         |                                                 |         |                                     |   |   |
| Grants of director common                                                                                               |                           |         |              |             |                |             |                 |         |                                                 |         |                                     |
|                                                                                                                                   | stock options             | –  |              | –      |                | 14,000      |                 | –  |                                                 | –  |                                     | 14,000  |
|                                                                                                                                   |                           |         |              |             |                |             |                 |         |                                                 |         |                                     |   |   |
| Vested grants of employee                                                                                               |                           |         |              |             |                |             |                 |         |                                                 |         |                                     |
|                                                                                                                                   | common stock options | –  |              | –      |                | 4,700       |                 | –  |                                                 | –  |                                     | 4,700  |
|                                                                                                                                   |                           |         |              |             |                |             |                 |         |                                                 |         |                                     |   |   |
| Exercise of director                                                                                                         |                           |         |              |             |                |             |                 |         |                                                 |         |                                     |
|                                                                                                                                   | common stock options | 10,000  |              | 11,000      |                | -           |                 | –  |                                                 | -       |                                     | 11,000  |
|                                                                                                                                   |                           |         |              |             |                |             |                 |         |                                                 |         |                                     |   |   |
| Net income                                                                                                                        | –                    |         | –       |             | –         |             | –          |         | 129,400                                         |         | 129,400                             |
| Balances, September 30, 2006                                                                                            | 6,763,188                 |         | 18,458,500   |             | 118,700        |             | –          |         | (9,180,100)                                          |         | 9,397,100                           |
|                                                                                                                                   |                           |         |              |             |                |             |                 |         |                                                 |         |                                     |   |   |
| Grants of director common                                                                                               |                           |         |              |             |                |             |                 |         |                                                 |         |                                     |
|                                                                                                                                   | stock options             | –  |              | –      |                | 18,800      |                 | –  |                                                 | –  |                                     | 18,800  |
|                                                                                                                                   |                           |         |              |             |                |             |                 |         |                                                 |         |                                     |   |   |
| Vesting of employee                                                                                                          |                           |         |              |             |                |             |                 |         |                                                 |         |                                     |
|                                                                                                                                   | common stock options | –  |              | –      |                | 4,700       |                 | –  |                                                 | –  |                                     | 4,700  |
|                                                                                                                                   |                           |         |              |             |                |             |                 |         |                                                 |         |                                     |   |   |
| Exercise of director                                                                                                         |                           |         |              |             |                |             |                 |         |                                                 |         |                                     |
|                                                                                                                                   | common stock options | 30,000  |              | 47,400      |                | –      |                 | –  |                                                 | –  |                                     | 47,400  |
|                                                                                                                                   |                           |         |              |             |                |             |                 |         |                                                 |         |                                     |   |   |
| Exercise of employee                                                                                                         |                           |         |              |             |                |             |                 |         |                                                 |         |                                     |
|                                                                                                                                   | common stock options | 19,750  |              | 35,400      |                | –      |                 | –  |                                                 | –  |                                     | 35,400  |
|                                                                                                                                   |                           |         |              |             |                |             |                 |         |                                                 |         |                                     |   |   |
| Net loss                                                                                                                          | –                    |         | –       |             | –         |             | –          |         | (1,487,700)                                          |         | (1,487,700)                              |
| Balances, September 30, 2007                                                                                            | 6,812,938                 |         | 18,541,300   |             | 142,200        |             | –          |         | (10,667,800)                                         |         | 8,015,700                           |
|                                                                                                                                   |                           |         |              |             |                |             |                 |         |                                                 |         |                                     |   |   |
| Grants of director common                                                                                               |                           |         |              |             |                |             |                 |         |                                                 |         |                                     |
|                                                                                                                                   | stock options             | –  |              | –      |                | 8,700       |                 | –  |                                                 | –  |                                     | 8,700  |
|                                                                                                                                   |                           |         |              |             |                |             |                 |         |                                                 |         |                                     |   |   |
| Vesting of employee                                                                                                          |                           |         |              |             |                |             |                 |         |                                                 |         |                                     |
|                                                                                                                                   | common stock options | –  |              | –      |                | 4,700       |                 | –  |                                                 | –  |                                     | 4,700  |
|                                                                                                                                   |                           |         |              |             |                |             |                 |         |                                                 |         |                                     |   |   |
| Exercise of employee                                                                                                         |                           |         |              |             |                |             |                 |         |                                                 |         |                                     |
|                                                                                                                                   | common stock options | 1,500   |              | 1,900       |                | –      |                 | –  |                                                 | –  |                                     | 1,900  |
|                                                                                                                                   |                           |         |              |             |                |             |                 |         |                                                 |         |                                     |   |   |
| Unrealized loss on  available-                                                                                               |                           |         |              |             |                |             |                 |         |                                                 |         |                                     |
|                                                                                                                                   | for-sale securities            | –  |              | –      |                | –      |                 | (30,600)     |                                                 | –  |                                     | (30,600) |
|                                                                                                                                   |                           |         |              |             |                |             |                 |         |                                                 |         |                                     |   |   |
| Net loss                                                                                                                          | –                    |         | –       |             | –         |             | –          |         | (3,965,000)                                          |         | (3,965,000)                              |
|                                                                                                                                   |                           |         | 6,814,438    |             | $                   | 18,543,200  |                 | $            | 155,600                                         |         | $                                        | (30,600) |   | $ | (14,632,800) |   | $ | 4,035,400  |
|                                                                                                                                   |                           |         |              |             |                |             |                 |         |                                                 |         |                                     |   |   |
| *See accompanying Summary of Accounting Policies and Notes to Financial Statements.* |
|                                                                                                                                        |                                |              |                   |                  |                     |                  |                      |              |                                                      |              |                                          |  |  |  |  |  |  |  |  |  |  |  |

 

----

|                                                                                    |                                                                                           |                                                                 |                                                                         |                                                               |                                                                                                                                   |                                                                     |          | **LOGIC Devices Incorporated**    |
|-----------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------|----------------------------------------------------------------------|------------------------------------------------------------------------------|--------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------|---------------|---------------------------------------------|
|                                                                                    |                                                                                           |                                                                 |                                                                         |                                                               |                                                                                                                                   |                                                                     |          |                                        |   |   |
|                                                                                    |                                                                                           |                                                                 |                                                                         |                                                               |                                                                                                                                   |                                                                     |          | **Statements of Cash Flows** |
|                                                                                    |                                                                                           |                                                                 |                                                                         |                                                               |                                                                                                                                   |                                                                     |          |                                        |   |   |
|                                                                                    |                                                                                           |                                                                 |                                                                         |                                                               |                                                                                                                                   | *For the fiscal years ended September 30,* |
|                                                                                    |                                                                                           |                                                                 |                                                                         |                                                               |                                                                                                                                   | *2008*                                                                   |          | *2007*                                      |   | *2006* |
|                                                                                    |                                                                                           |                                                                 |                                                                         |                                                               |                                                                                                                                   |                                                                     |          |                                        |   |   |
| Cash flows from operating activities:                               |                                                                                           |                                                                 |                                                                         |                                                               |                                                                                                                                   |
|                                                                                    | Net (loss) income                                                                    | $                                                                    | (3,965,000)                                                                  |                                                               | $                                                                                                                                      | (1,487,700)                                                              |          | $                                           | 129,400  |
|                                                                                    | Adjustments to reconcile net (loss) income to net cash |                                                                 |                                                                         |                                                               |                                                                                                                                   |                                                                     |
|                                                                                    |                                                                                           | (used in) provided by operating activities: |                                                                         |                                                               |                                                                                                                                   |                                                                     |          |
|                                                                                    |                                                                                           |                                                                 | Depreciation                                                                 | 305,200                                                       |                                                                                                                                   | 307,800                                                             |          | 256,000                                |
|                                                                                    |                                                                                           |                                                                 | Issuance of common stock options                         | 13,400                                                        |                                                                                                                                   | 23,500                                                              |          | 18,700                                 |
|                                                                                    |                                                                                           |                                                                 | Write-down of inventory                                            | 2,059,300                                                     |                                                                                                                                   | 555,600                                                             |          | -                                      |
|                                                                                    |                                                                                           |                                                                 | Inventory valuation allowance adjustment                      | -                                                             |                                                                                                                                   | 402,700                                                             |          | 1,036,900                              |
|                                                                                    |                                                                                           |                                                                 | Loss on disposal of capital equipment               | 129,900                                                       |                                                                                                                                   | 145,200                                                             |          | 3,500                                  |
|                                                                                    |                                                                                           |                                                                 | Write-off of capitalized software development costs | -                                                             |                                                                                                                                   | 400,200                                                             |          | 200,000                                |
|                                                                                    |                                                                                           |                                                                 | Deferred rent                                                           | 24,400                                                        |                                                                                                                                   | (17,600)                                                                 |          | (14,100)                                    |
|                                                                                    |                                                                                           |                                                                 | Change in operating assets and liabilities:         |                                                               |                                                                                                                                   |                                                                     |          |                                        |
|                                                                                    |                                                                                           |                                                                 |                                                                         | Accounts receivable                                           | 23,100                                                                                                                            |                                                                     | 149,600  |                                        | (96,000) |
|                                                                                    |                                                                                           |                                                                 |                                                                         | Inventories                                                        | 904,700                                                                                                                           |                                                                     | (107,300)     |                                        | (650,200) |
|                                                                                    |                                                                                           |                                                                 |                                                                         | Prepaid expenses and other current assets | 49,700                                                                                                                            |                                                                     | (44,900)      |                                        | 24,100  |
|                                                                                    |                                                                                           |                                                                 |                                                                         | Property tax refund receivable                      | -                                                                                                                                 |                                                                     | -        |                                        | 45,000  |
|                                                                                    |                                                                                           |                                                                 |                                                                         | Accounts payable                                              | 126,200                                                                                                                           |                                                                     | (116,800)     |                                        | (60,100) |
|                                                                                    |                                                                                           |                                                                 |                                                                         | Accrued payroll and vacation                        | 6,300                                                                                                                             |                                                                     | 20,200   |                                        | 38,200  |
|                                                                                    |                                                                                           |                                                                 |                                                                         | Accrued commissions                                           | (9,000)                                                                                                                                |                                                                     | 14,600   |                                        | 3,300  |
|                                                                                    |                                                                                           |                                                                 |                                                                         | Other accrued expenses                                   | (54,500)                                                                                                                               |                                                                     | 27,500   |                                        | 43,000  |
|                                                                                    |                                                                                           |                                                                 |                                                                         |                                                               | Net cash (used in) provided by operating activities                                                 | (386,300)                                                                |          | 272,600                                |   | 977,700  |
| Cash flows from investing activities:                               |                                                                                           |                                                                 |                                                                         |                                                               |                                                                                                                                   |
|                                                                                    | Purchases of available-for-sale securities                                      | (25,000)                                                             |                                                                         | (554,900)                                                          |                                                                                                                                   | (507,000)                                                                |
|                                                                                    | Sales of available-for-sale securities                                          | 112,000                                                         |                                                                         | -                                                             |                                                                                                                                   | -                                                                   |
|                                                                                    | Capital expenditures                                                                      | (274,200)                                                            |                                                                         | (391,100)                                                          |                                                                                                                                   | (196,700)                                                                |
|                                                                                    | Other assets                                                                              | -                                                               |                                                                         | (3,500)                                                            |                                                                                                                                   | (99,800)                                                                 |
|                                                                                    |                                                                                           |                                                                 |                                                                         |                                                               | Net cash used in investing activities                                                                         | (187,200)                                                                |          | (949,500)                                   |   | (803,500) |
| Cash flows from financing activities:                               |                                                                                           |                                                                 |                                                                         |                                                               |                                                                                                                                   |
|                                                                                    | Exercise of director stock options                                         | -                                                               |                                                                         | 47,400                                                        |                                                                                                                                   | 11,000                                                              |
|                                                                                    | Exercise of employee stock options                                         | 1,900                                                           |                                                                         | 35,400                                                        |                                                                                                                                   | -                                                                   |
|                                                                                    |                                                                                           |                                                                 |                                                                         |                                                               | Net cash provided by financing activities                                                                     | 1,900                                                               |          | 82,800                                 |   | 11,000  |
| Net (decrease) increase in cash and cash equivalents | (571,600)                                                                                      |                                                                 | (594,100)                                                                    |                                                               | 185,200                                                                                                                           |
| Cash and cash equivalents, beginning                                | 884,000                                                                                   |                                                                 | 1,478,100                                                               |                                                               | 1,292,900                                                                                                                         |
| Cash and cash equivalents, ending                                   | $                                                                                              | 312,400                                                         |                                                                         | $                                                                  | 884,000                                                                                                                           |                                                                     | $             | 1,478,100                              |
|                                                                                    |                                                                                           |                                                                 |                                                                         |                                                               |                                                                                                                                   |                                                                     |          |                                        |   |   |
|                                                                                    |                                                                                           |                                                                 |                                                                         |                                                               | *See accompanying Summary of Accounting Policies and Notes to Financial Statements.* |

 

----

*The Company and Nature of Business*

 

LOGICDevices Incorporated (the Company) develops and markets high-performanceintegrated circuits. The Company’s products include chips that are used indigital communications, broadcast and medical imaging processing applications,instrumentation, and smart weapons systems. The Company markets its productsworldwide, such that 69 percent of the Company's net revenues in fiscal 2008were derived from original equipment manufacturers, while sales throughdistributors accounted for approximately 31 percent of net revenues.Approximately 70 percent of the Company's fiscal 2008 net revenues were fromdomestic sales and approximately 30 percent from foreign sales.

 

*Use ofEstimates*

 

Thepreparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities, disclosure of contingent assets and liabilities at the date of thefinancial statements, and the reported amounts of revenues and expenses duringthe reporting period. Actual results could differ from those estimates.

 

*FairValue of Financial Instruments*

* *

Thecarrying amounts of cash and cash equivalents, available-for-sale securities,accounts receivable, and accounts payable approximate fair value because of theshort maturity of these items. 

 

*Cash,Cash Equivalents, and Investments in Available-for-Sale Securities*

 

TheCompany considers all highly liquid investments with original maturities ofthree months or less to be cash equivalents. Investments that do not meet thedefinition of cash equivalents are classified as available-for-sale inaccordance with the provisions of Financial Accounting Standards Board("FASB") Statement No. 115, *Accounting for Certain Investments inDebt and Equity Securities*. The Company’s available-for-sale securitiesconsist of auction rate municipal notes with expiration dates through 2028. Theinterest is settled and the rate is reset every seven days.

 

*AccountsReceivable*

 

TheCompany establishes a general allowance for doubtful accounts based on itsanalysis of historical bad debts, specific customer creditworthiness, andcurrent economic conditions. Historically, the Company has not experiencedsignificant losses related to receivables. At September 30, 2008 and 2007, theCompany determined that no allowance for doubtful accounts was necessary.

 

*Inventories*

 

Inventoriesof raw materials, work-in-process, and finished goods are stated at the lowerof cost (first-in, first-out) or market. Cost includes the purchase price ofparts, assembly costs, and overhead.

 

*Propertyand Equipment*

 

Propertyand equipment are stated at cost. Depreciation on equipment is calculated onthe straight-line method over the estimated useful lives of the assets,generally three to seven years. Leasehold improvements and assets held undercapital lease are amortized on a straight-line basis over the shorter of thelease terms or the estimated lives of the assets. Certain tooling costs arecapitalized by the Company and are amortized on a straight-line basis over theshorter of the related product life cycle or five years. Upon disposition, thecost and related accumulated depreciation or accumulated amortization isremoved from the accounts and the resulting gain or loss is reflected in incomefor the period.

----

*RevenueRecognition*

 

Revenue isgenerally recognized upon shipment of product. Sales to distributors are madepursuant to agreements that provide the distributors certain rights of returnand price protection on unsold merchandise. Revenues from such sales arerecognized upon shipment, with a provision for estimated returns and allowancesrecorded at that time, if applicable. While distributors are allowed to returnitems for stock rotation, they are required to place an order of equal orgreater value at the same time. As the Company historically does not havematerial returns, there is no allowance for returns recorded. Because theCompany does not change its pricing of products more than once a year, therehave not been any pricing issues in the past several years; therefore, there isno allowance for price protection recorded.

 

*Researchand Development Costs*

 

Researchand development costs are expensed to operations as incurred.

 

*IncomeTaxes*

 

Deferredincome tax assets and liabilities are recognized based on the temporarydifferences between the financial statement and income tax basis of assets,liabilities, and net operating loss and tax credit carryforwards using enactedtax rates. Valuation allowances are established for deferred tax assets to theextent of the likelihood that the deferred tax assets may not be realized.

 

*Income(Loss) Per Common Share*

 

Basicincome (loss) per share is calculated by dividing net income or loss by theweighted average common shares outstanding during the period. Diluted income(loss) per share reflects the net incremental shares that would be issued ifdilutive outstanding stock options were exercised, using the treasury stockmethod. In the case of a net loss, no incremental shares would be issuedbecause they are antidilutive. Stock options with exercise prices above theaverage market price during the period are also antidilutive.

 

There were337,500 and 335,500 common stock options outstanding at September 30, 2008 and2007, respectively. These options were not considered in calculating dilutednet loss per common share as their effect would have been antidilutive. As aresult, for fiscal 2008 and 2007, the Company’s basic and diluted net loss percommon share are the same. For the fiscal year ended September 30, 2006, theCompany had 40,767 dilutive shares as the weighted average market price for theCompany’s common stock during the fiscal year was $1.447.

 

*Long-livedAssets*

 

Long-livedassets, including property and equipment and intangible assets, are assessedfor possible impairment whenever events or changes in circumstances indicatethat the carrying amounts may not be recoverable, or whenever management hascommitted to a plan to dispose of the assets. Such assets are carried at thelower of book value or fair value as estimated by management based onappraisals, current market value, and comparable sales value, as appropriate.Assets to be held and used affected by such impairment loss are depreciated oramortized at their new carrying amounts over the remaining estimated lives;assets to be sold or otherwise disposed of are not subject to furtherdepreciation or amortization. In determining whether an impairment exists, theCompany uses undiscounted future cash flows without interest charges comparedto the carrying value of the assets.

----

*Share-basedPayments*

 

TheCompany issues common stock options to its employees, certain consultants, andcertain of its board members. Effective January 1, 2006, the Company adoptedthe provisions of FAS 123R, which requires the measurement of the cost ofservices received in exchange for an award of equity instruments based on thegrant-date fair value of the award. That cost is recognized over the periodduring which services are provided in exchange for the award, known as therequisite service period (usually the vesting period). We have made thetransition to FAS 123R using the modified prospective method. Under themodified prospective method, FAS 123R is applied to new awards and to awards modified,repurchased, or cancelled after January 1, 2006. Additionally, compensationcost for the portion of awards for which the requisite service has not beenrendered (such as unvested options) that are outstanding as of January 1, 2006are being recognized over the period that the remaining requisite services arerendered. There were no unvested options as of January 1, 2006. Under thismethod of implementation, no restatement of prior periods has been made.

 

Incalculating compensation related to stock option grants, the fair value of eachstock option is estimated on the date of grant using the Black-Scholesoption-pricing model and the following weighted average assumptions:

 
|                     | *2008* | * * | *2007* | * * | *2006* |
|--------------------------|--------|----------|--------|----------|--------|
|                     |   |     |   |     |   |
| Dividend  yield          | None   |     | None   |     | None   |
| Expected  volatility     | 49.8%  |     | 49.8%  |     | 61.3%  |
| Risk-free  interest rate | 2.2%   |     | 4.5%   |     | 4.9%   |
| Expected  term (years)   | 4.0    |     | 4.0    |     | 4.0    |

 

Thecomputation of expected volatility used in the Black-Scholes option-pricingmodel is based on the historical volatility of our share price. The expectedterm is estimated based on a review of historical exercise behavior withrespect to option grants.

 

*SegmentReporting*

 

TheCompany is organized in a single operating segment for purposes of makingoperating decisions and assessing performance. The president (the chiefoperating decision maker) evaluates performance, makes operating decisions, andallocates resources based on financial data consistent with the presentation inthe accompanying financial statements.

 

*Impactof New Financial Accounting Pronouncements*

 

InSeptember 2006, the FASB issued SFAS No. 157, *Fair Value Measurements*,which provides guidance for using fair value to measure assets and liabilities.The pronouncement clarifies (1) the extent to which companies measure assetsand liabilities at fair value; (2) the information used to measure fair value;and (3) the effect that fair value measurements have on earnings. SFAS No. 157will apply whenever another standard requires (or permits) assets orliabilities to be measured at fair value. SFAS No. 157 is effective for fiscalyears beginning after November 15, 2007. We are currently evaluating the impactthis statement will have on our financial statements, if any.

 

InFebruary 2007, the FASB issued SFAS No. 159, *The Fair Value Option for FinancialAssets and Financial Liabilities Including an Amendment of FASB Statement No.115*. SFAS No. 159 permits entities to choose to measure many financialinstruments and certain other items at fair value that are not currentlyrequired to be measured at fair value. This statement also establishespresentation and disclosure requirements designed to facilitate comparisonsbetween entities that choose different measurement attributes for similar typesof assets and liabilities. SFAS No. 159 is effective for fiscal years beginningafter November 15, 2007. We are currently evaluating the impact this statementwill have on our financial statements, if any.

 

 

----

**1.             Inventories**

 

A summary of inventories follows:

 

|                |            |          | *September 30,* |            | *September 30,* |
|---------------------|-----------------|---------------|----------------------|-----------------|----------------------|
|                |            |          | *2008*               |            | *2007*               |
|                |            |          |                 |            |                 |
| Raw materials  | $               | 156,500  |                 | $               | 636,700         |
| Work-in-process     | 149,400    |          | 889,000         |
| Finished goods | 1,118,800  |          | 2,863,000       |
|                |            |          | $                    | 1,424,700  |                 | $ | 4,388,700  |

 

**2.             Property and Equipment**

 

A summary of property and equipmentfollows:

 

|                                    |            |            | *September 30,* |          | *September 30,* |
|-----------------------------------------|-----------------|-----------------|----------------------|---------------|----------------------|
|                                    |            |            | *2008*               |          | *2007*               |
|                                    |            |            |                 |          |                 |
| Equipment                               | $               | 3,299,400  |                 | $             | 3,247,100       |
| Tooling costs                      | 549,600    |            | 483,700         |
| Leasehold improvements             | 179,500    |            | 154,100         |
|                                    |            |            | 4,028,500       |          | 3,884,900       |
| Less accumulated depreciation | 3,150,700  |            | 2,846,100       |
|                                    |            |            | $                    | 877,800  |                 | $ | 1,038,800  |

 

**3.             Provisions for Income Taxes**

 

The provision for income taxes forfiscal 2007 includes a current state expense of $800, federal alternativeminimum taxes of $37,100, and state alternative minimum taxes of $6,500. Theprovision for income taxes for fiscal 2008 and 2006 includes a current stateexpense of $800 only for each year.

 

The following summarizes thedifference between the income tax expense and the amount computed by applyingthe Federal income tax rate of 34 percent in fiscal 2008, 2007,and  2006, tothe income (loss) before taxes:

 

|                                                                                            |                                                    |        | *2008*        |      | *2007*          |      | *2006*       |
|-------------------------------------------------------------------------------------------------|---------------------------------------------------------|-------------|---------------|-----------|-----------------|-----------|--------------|
|                                                                                            |                                                    |        |          |      |            |      |         |
| Federal income tax expense (benefit) at statutory rate       | $                                                       | (1,347,800) |          | $         | (490,400)  |      | $            | 44,000  |
| Tax credit carryforwards originated in current year               | (46,700)                                                |        | (41,000)      |      | (29,900)        |
| State tax expense (benefit), net of federal tax benefit | (223,700)                                               |        | (85,700)      |      | 7,000      |
| Adjustment of prior year net operating loss                       |                                                    |        |          |      |            |
|                                                                                            | carryforwards before valuation allowance | (9,700)     |          | (28,200)  |            | (258,900) |
| Valuation allowance                                                                        | 1,633,000                                               |        | 765,800  |      | (38,400)        |
| Other, net                                                                                 | (4,300)                                                 |        | (75,300)      |      | 277,000    |
|                                                                                            |                                                    |        | $             | 800  |            | $         | 45,200  |   | $ | 800  |

 

Deferred tax assets and liabilitiescomprise the following:

 

|                                |                                             |                                     | *September 30,* |          | *September 30,* |
|-------------------------------------|--------------------------------------------------|------------------------------------------|----------------------|---------------|----------------------|
|                                |                                             |                                     | *2008*               |          | *2007*               |
|                                |                                             |                                     |                 |          |                 |
| Deferred tax assets:      |                                             |                                     |                 |
|                                | Net operating loss carryforwards  | $                                        | 8,113,200       |          | $                    | 5,681,000  |
|                                | Reserves not currently deductible | –                              |                 | 673,900  |
|                                | Tax credit carryforwards               | 602,900                             |                 | 442,900  |
|                                | Other                                            | –                              |                 | 53,400   |
|                                |                                             | Gross deferred tax assets | 8,716,100       |          | 6,851,200       |
|                                |                                             |                                     |                 |          |                 |
| Deferred tax liabilities: |                                             |                                     |                 |
|                                | State tax benefit                      | (553,500)                                |                 | (396,900)     |
|                                | Depreciation                                     | (75,300)                                 |                 | –   |
|                                |                                             | Net deferred tax assets   | 8,087,300       |          | 6,454,300       |
| Valuation allowance            | (8,087,300)                                      |                                     | (6,454,300)          |
| Net deferred taxes        | $                                                | –                              |                 | $             | –          |

 

The valuation allowance increased $1,633,000from fiscal 2007 to fiscal 2008. This was the result of an increase in the netdeferred tax assets, primarily net operating loss carryforwards (NOLs),partially offset by the decrease in reserves not currently deductible. Becausethe Company's management is unable to determine whether it is more likely thannot that the net deferred tax assets will be realized, the Company continues torecord a 100 percent valuation against the net deferred tax assets.

 

As of September 30, 2008, the Companyhas Federal and State NOLs totaling approximately $20,121,300 and $14,389,000respectively, available to offset future taxable income. These NOLs expire atvarious times through 2027 and 2017, respectively. The Company also has Federaland State research and development credit carryforwards totaling approximately$230,700 and $82,500, respectively, expiring at various times through 2027. TheCompany has state manufacturing tax credit carryforwards totaling approximately$289,600, which expire at various times through 2011.

 

Utilization of the Company’s netoperating loss and tax credit carryforwards may be subject to a substantialannual limitation due to ownership change limitations provided by the InternalRevenue Code and similar state provisions. Such an annual limitation couldresult in the expiration or elimination of the net operating loss and taxcredit carryforwards before utilization.

 

**4.             Commitments and Contingencies**

 

*Leases*

 

The Company leases its facilitiesunder an operating lease, which requires the Company to pay certain maintenanceand operating expenses, such as taxes, insurance, and utilities. During fiscal2006, the Company also leased certain equipment under operating leases. Rentexpense under the various leases was $239,300, $214,900, and $381,800 forfiscal 2008, 2007, and 2006, respectively.

----

A summary of future minimum payments requiredunder non-cancelable operating leases with terms in excess of one year,follows:

 

|                             |                         |   |   |          | *Amount*      |
|----------------------------------|------------------------------|--------|--------|---------------|---------------|
|                             |                         |   |   |          |          |
| *Fiscal years ending:* |                         |   |   |
|                             | September 30, 2009 |   |   | $             | 223,100  |
|                             | September 30, 2010 |   |   | 231,400  |
|                             | September 30, 2011 |   |   | 239,700  |
|                             | September 30, 2012           |   |   | 248,100  |
|                             | Thereafter                   |   |   | 500,200  |
|                             |                         |   |   |          | $             | 1,442,500  |

 

*Contingencies*

 

The Company is subject to legalproceedings and claims that arise in the ordinary course of business. In theopinion of management, the amount of ultimate liability with respect to such actionswill not materially affect the financial position or results of operations ofthe Company.

 

**5.              Share-Based Compensation**

 

The Company issues options topurchase common stock to its employees, certain consultants, and certain of itsboard members. Options are generally granted with an exercise price equal tothe closing market value of a common share at the date of grant, have five- toten-year terms and typically vest over periods ranging from immediately tothree years from the date of grant. There are 1,015,000 authorized sharesremaining for granting of future options.

 

Per FAS 123R, the estimated fairvalue of equity-based awards, less expected forfeitures, is amortized over theawards’ vesting period on a straight-line basis. Share-based compensationexpense recognized in the statements of operations for fiscal years endedSeptember 30, 2008, 2007 and 2006 related to common stock options was $13,400($0.30 per share), $23,500 ($0.58 per share) and $18,700 ($0.00 per share),respectively. The Company did not record income tax benefits related to theequity-based compensation expense as deferred tax assets are fully offset by avaluation allowance. There was no significant impact from the implementation ofFAS 123R on the cash flows from operations during fiscal 2008, 2007 and 2006.

 

A summary of nonvested shares atSeptember 30, 2008 and changes during the fiscal year then ended follows:

 

|                                                            |              | *Shares*     |   | *Weighted*

*Average*

*Grant Date*

*Fair Value* |
|-----------------------------------------------------------------|-------------------|--------------|--------|-------------------------------------------------------------|
|                                                            |              |         |   |                                                        |
| Nonvested shares at October 1, 2007    | 25,250       |         | $      | 0.47                                                   |
|                                                            |              |         |   |                                                        |
|                                                            | Granted           | 45,000  |   | $                                                           | 0.28  |
|                                                            | Vested            | (50,875)     |   | $                                                           | 0.30  |
|                                                            | Forfeited/Expired | (16,500)     |   | $                                                           | 0.47  |
| Nonvested shares at September 30, 2008 | 2,875        |         | $      | 0.47                                                   |

 

----

As September 30, 2008, there was$4,800 of total unrecognized compensation cost related to nonvested optionsgranted under the plans. That cost is expected to be recognized in one year.The total fair value of options vested during the fiscal year ended September30, 2008 was $13,400. Cash received from exercises of common stock optionsduring fiscal 2008 was $1,900.

 

A summary of changes in common stockoptions outstanding under the equity-based compensation plans for the fiscalyears ended September 30, 2008 and 2007 follows:

 

|                                                  |              | *Common*

*Stock*

*Options* |   | *Weighted*

*Average*

*Exercise*

*Price* |        | *Weighted*

*Average*

*Remaining*

*Contractual*

*Term (Years)* |   | *Aggregate*

*Intrinsic*

*Value* |
|-------------------------------------------------------|-------------------|------------------------------|--------|--------------------------------------------|-------------|------------------------------------------------------------------------|--------|-----------------------------------|
|                                                  |              |                         |   |                                       |        |                                                                   |   |                              |
| Outstanding at September  30, 2006     | 465,500      |                         | $      | 1.509                                 |        | 3.56                                                              |   | $                                 | 551,000  |
|                                                  |              |                         |   |                                       |        |                                                                   |   |                              |
|                                                  | Granted           | 45,000                  |   | $                                          | 2.240  |                                                                   |   |                              |   |
|                                                  | Exercised         | (49,750)                     |   | $                                          | 1.663  |                                                                   |   |                              | $ | 82,800  |
|                                                  | Forfeited/Expired | (125,250)                    |   | $                                          | 1.157  |                                                                   |   |                              |   |
| Outstanding at September  30, 2007     | 335,500      |                         | $      | 1.405                                 |        | 4.23                                                              |   | $                                 | 249,400  |
|                                                  |              |                         |   |                                       |        |                                                                   |   |                              |
|                                                  | Granted           | 45,000                  |   | $                                          | 1.210  |                                                                   |   |                              |   |
|                                                  | Exercised         | (1,500)                      |   | $                                          | 1.270  |                                                                   |   |                              | $ | 1,900  |
|                                                  | Forfeited/Expired | (41,500)                     |   | $                                          | 2.087  |                                                                   |   |                              |   |
| Outstanding at September 30, 2008 | 337,500      |                         | $      | 1.595                                 |        | 2.57                                                              |   | $                                 | –  |
| Exercisable at September 30, 2008 | 334,625      |                         | $      | 1.598                                 |        | 2.52                                                              |   |                              | –  |
| Exercisable at September 30, 2007 | 310,250      |                         | $      | 1.741                                 |        | 3.85                                                              |   | $                                 | 128,900  |

 

The weighted average fair value ofoptions granted during the fiscal year ended September 30, 2008 was $0.28.

 

**6.              Major Customers, Major Suppliers, and Export Sales**

 

*Major Customers and Suppliers*

 

For fiscal 2008, two customersaccounted for approximately 26 and 19 percent of net revenues, with accountsreceivable of $188,600 and $76,900 as of September 30, 2008, respectively. Forfiscal 2007, one customer accounted for approximately 43 percent of netrevenues, with accounts receivable of $334,900 as of September 30, 2007. Forfiscal 2006, two customers accounted for approximately 23 and 12 percent of netrevenues, with accounts receivable of $59,900 and $359,400, respectively, as ofSeptember 30, 2006.

 

For fiscal 2008, three supplierscomprised 10 or more percent of the total inventory purchases (31, 29, and 14percent). During fiscal 2007, one supplier comprised 62 percent of the totalinventory purchases (no others comprised more than 10 percent). Five supplierscomprised 10 or more percent of the total inventory purchases in fiscal 2006(42, 15, 15, 13, and 11 percent). 

----

*Export Sales*

 

The following table summarizes exportsales information:

 

|   |                | *2008*        |            | *2007*        |   | *2006*          |
|--------|---------------------|---------------|-----------------|---------------|--------|-----------------|
|   |                |          |            |          |   |            |
|   | Western Europe | $             | 524,500    |          | $      | 1,132,700  |   | $ | 1,170,200  |
|   | Far East       | 497,500  |            | 393,400  |   | 622,700    |
|   | Other               | –   |            | 37,800   |   | 50,900     |
|   |                | $             | 1,022,000  |          | $      | 1,563,900  |   | $ | 1,843,800  |

 

In fiscal 2008, 2007 and 2006, no onecountry accounted for more than 10 percent of net revenues.

 

**7.              Use of Estimates and Concentrations of Credit Risks**

 

The Company’s financial statementsare prepared in accordance with accounting principles generally accepted in the  United States of America, which require the use of management estimates.These estimates are impacted, in part, by the following risks anduncertainties:

 

Financial instruments, whichpotentially subject the Company to concentration of credit risk, consist principallyof cash and cash equivalents and trade receivables. The Company places its cashand cash equivalents and available-for-sale securities with high qualityfinancial institutions, and, by policy, limits the amounts of credit exposureto any one financial institution as much as practicable.

 

A significant portion of theCompany’s accounts receivable have historically been derived from one majorclass of customer (distributors) with the remainder being spread across manyother customers in various electronic industries. The Company believes any riskof accounting loss is significantly reduced due to the diversity of itsproducts, end-customers, and geographic sales areas. The Company performscredit evaluations of its customers’ financial condition whenever necessary.The Company generally does not require cash collateral or other security tosupport customer receivables.

 

The Company currently is dependent ontwo suppliers as its wafer-processing sources. If this supply was to beinterrupted or the terms were to become unfavorable to the Company, this couldhave a material adverse impact on the Company’s operations.

 

The Company produces inventory basedon orders received and forecasted demand. The Company must order wafers andbuild inventory well in advance of product shipments. Due to the Company'sreliance upon a limited number of suppliers, high levels of inventory are alsomaintained to protect against a disruption in supply. Because the Company’smarkets are volatile and subject to rapid technology and price changes, thereis a risk that the Company will forecast incorrectly and produce excess orinsufficient inventories of particular products. This inventory risk isheightened because many of the Company’s customers place orders with short leadtimes. Demand will differ from forecasts and such differences may have amaterial effect on actual operations.

** **

**8.              Statements of Cash Flows**

 

There was no interest paid duringfiscal 2008, 2007, and 2006. The Company paid $80,000 ($77,200 for estimatedalternative minimum taxes) for income tax in fiscal 2007. In fiscal 2008 and2006, the Company paid $800 each for income taxes. There were no non-cashinvesting and financing activities during fiscal 2008, 2007, and 2006.

----

**9.              401(k) Savings Plan**

 

The Company adopted a 401(k) SavingsPlan (the Plan) in September 2005. Employees are able to make voluntarycontributions and the Company has the discretion to make matchingcontributions. The Plan covers all employees meeting certain age and servicerequirements. The Company funds expenses incurred in connection with the Plan.The Company made no matching contributions in fiscal 2008 and 2007.

 

**10.           Subsequent Event**

 

On November 10, 2008, we obtained ano net-cost line of credit from UBS Bank USA for the $975,000 par value of ourAuction Rate Securities (ARS). We drew down the entire $975,000 availablebalance on November 21, 2008 so we would have the cash readily available ratherthan held in the illiquid ARS at UBS Financial Services Inc. (UBS). This loanis considered no net-cost as the interest charged is the lesser of the LIBORrate plus an established percentage rate or the interest and/or dividendsearned on our ARS. Therefore, our interest paid can be no more than theinterest and/or dividends we earn on the ARS. In addition, on October 16, 2008,we signed an agreement with UBS for ARS Rights to sell our ARS to UBS at parvalue within a two-year period beginning January 2, 2009. At the time weexercise these ARS Rights, we will pay back the no net-cost loan from UBS BankUSA and the line will be closed.

 

 

----

*Quarterly Financial Data (Unaudited)*

 

The following is an unaudited summary of quarterly resultsof operations for the fiscal years ended September 30, 2008 and 2007 (inthousands, except per share data):

 
|                                                  |          |   | Fiscal Quarters Ended: |   |          |   | Fiscal      |
|-------------------------------------------------------|---------------|--------|----------------------------------|--------|---------------|--------|-------------|
|                                                  | 12/31/07      |   | 03/31/08                         |   | 06/30/08      |   | 09/30/08    |   | Year |
|                                                  |          |   |                             |   |          |   |        |   |   |
| Net revenues                                     | $ 869    |   | $ 965                       |   | $ 729    |   | $ 789  |   | $ 3,352  |
|                                                  |          |   |                             |   |          |   |        |   |   |
| Gross margin                                     | $ 128    |   | $ (50)                           |   | $ (423)       |   | $ (499)     |   | $ (844) |
|                                                  |          |   |                             |   |          |   |        |   |   |
| Loss from operations                        | $ (649)       |   | $ (809)                          |   | $ (1,128)     |   | $ (1,305)   |   | $ (3,891) |
|                                                  |          |   |                             |   |          |   |        |   |   |
| Loss before income taxes               | $ (763)       |   | $ (791)                          |   | $ (1,116)     |   | $ (1,294)   |   | $ (3,964) |
|                                                  |          |   |                             |   |          |   |        |   |   |
| Net loss                                         | $ (763)       |   | $ (791)                          |   | $ (1,117)     |   | $ (1,294)   |   | $ (3,965) |
|                                                  |          |   |                             |   |          |   |        |   |   |
| Basic loss per share                   | $ (0.11)      |   | $ (0.12)                         |   | $ (0.16)      |   | $ (0.19)    |   | $ (0.58) |
|                                                  |          |   |                             |   |          |   |        |   |   |
| Basic wtd-avg common shares            | 6,814    |   | 6,814                       |   | 6,814    |   | 6,814  |   | 6,814  |
|                                                  |          |   |                             |   |          |   |        |   |   |
|                                                  |          |   | Fiscal Quarters Ended: |   |          |   | Fiscal      |
|                                                  | 12/31/06      |   | 03/31/07                         |   | 06/30/07      |   | 09/30/07    |   | Year |
|                                                  |          |   |                             |   |          |   |        |   |   |
| Net revenues                                     | $ 1,362  |   | $ 1,258                     |   | $ 1,107  |   | $ 959  |   | $ 4,686  |
|                                                  |          |   |                             |   |          |   |        |   |   |
| Gross margin                                     | $ 705    |   | $ 778                       |   | $ (303)       |   | $ 659  |   | $ 1,839  |
|                                                  |          |   |                             |   |          |   |        |   |   |
| Income (loss) from operations          | $ 35     |   | $ 24                        |   | $ (1,447)     |   | $ (131)     |   | $ (1,519) |
|                                                  |          |   |                             |   |          |   |        |   |   |
| Income (loss) before income taxes | $ 55     |   | $ 42                        |   | $ (1,428)     |   | $ (111)     |   | $ (1,442) |
|                                                  |          |   |                             |   |          |   |        |   |   |
| Net income (loss)                           | $ 55     |   | $ 41                        |   | $ (1,428)     |   | $ (155)     |   | $ (1,487) |
|                                                  |          |   |                             |   |          |   |        |   |   |
| Basic income (loss) per share     | $ 0.01   |   | $ 0.01                      |   | $ (0.21)      |   | $ (0.03)    |   | $ (0.22) |
|                                                  |          |   |                             |   |          |   |        |   |   |
| Basic wtd-avg common shares            | 6,773    |   | 6,795                       |   | 6,798    |   | 6,808  |   | 6,797  |

 

Item 9. CHANGES IN AND DISAGREEMENTSWITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

Not applicable.

----

Item 9A. CONTROLS AND PROCEDURES

 

*(a) Evaluation of Disclosure Controls and Procedures*

 

We maintain disclosure controls and procedures (as definedin Rule 13a15(e) and 15d-15(e) under the Securities Exchange Act of 1934)designed to ensure that information we are required to disclose in reports thatwe file or submit under the Securities Exchange Act of 1934 is accumulated andcommunicated to our management, including our principal executive and principalfinancial officers, as appropriate to allow timely decisions regarding requireddisclosures, and that such information is recorded, processed, summarized, andreporting within the time periods specified in Securities and ExchangeCommission rules and forms. Our management evaluated, with the participation ofour Chief Executive Officer and Chief Financial Officer, the effectiveness ofour disclosure controls and procedures as of the end of the period covered bythis Annual Report on Form 10-K. Based on this evaluation, our Chief ExecutiveOfficer and our Chief Financial Officer have concluded that our disclosurecontrols and procedures were effective as of September 30, 2008.

 

*(b) Management’s Annual Report on Internal Control Over FinancialReporting*

 

Our management is responsible for establishing andmaintaining adequate internal control over financial reporting as defined inRules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Ourinternal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. Internal control over financialreporting includes those policies and procedures that:

 
    - Pertain to the maintenance of records that, in reasonable     detail, accurately and fairly reflect the transactions and dispositions of     the assets of the Company;
    - Provide reasonable assurance that transactions as     necessary to permit preparation of financial statements in accordance with     generally accepted accounting principles, and that receipts and     expenditures of the Company are being made only in accordance with     authorizations of management and directors of the Company, and
    - Provide reasonable assurance regarding prevention or     timely detection of unauthorized acquisition, use, or disposition of the     Company’s assets that could have a material effect on the financial     statements.

 

Because of its inherent limitations, internal control overfinancial reporting may not prevent or detect misstatements. In addition,projections of any evaluation of effectiveness to future periods are subject tothe risk that controls may become ineffective because of changes in conditionsand that the degree of compliance with the policies or procedures maydeteriorate.

 

Management assessed the effectiveness of the Company’sinternal control over financial reporting as of September 30, 2008. In makingthis assessment, management used the criteria set forth in the *InternalControl-Integrated Framework* issued by the Committee of SponsoringOrganizations of the Treadway Commission (COSO).

 

As a result of its assessment of internal control overfinancial reporting, management has concluded that, as of September 30, 2008,the Company’s internal control over financial reporting was effective toprovide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordancewith accounting principles generally accepted in the United States.

 

This Annual Report on Form 10-K does not include anattestation report of our registered public accounting firm regarding internalcontrol over financial reporting. Management’s report was not subject toattestation by our registered public accounting firm pursuant to temporaryrules of the SEC that permit us to provide only management’s report in thisAnnual Report.

 

*(c) Changes in Internal Control Over Financial Reporting*

 

There was no change in our internal control over financialreporting that occurred during the fourth quarter of fiscal 2008 that hasmaterial affected, or is reasonably likely to materially affect, our internalcontrol over financial reporting.

 

Item 9B. OTHER INFORMATION

 

Not applicable.

----

**PART III**

 

Item 10. DIRECTORS AND EXECUTIVEOFFICERS OF THE REGISTRANT.

 

Information required by this Item is incorporated byreference from our proxy statement for our 2009 Annual Meeting, expected to befiled with the SEC no later than January 28, 2009.

 

Item 11. EXECUTIVE COMPENSATION

 

Information required by this Item is incorporated byreference from our proxy statement for our 2009 Annual Meeting, expected to befiled with the SEC no later than January 28, 2009.

 

Item 12.                 SECURITYOWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDERMATTERS.

 

Informationrequired by this Item is incorporated by reference from our proxy statement forour 2009 Annual Meeting, expected to be filed with the SEC no later thanJanuary 28, 2009.

 

Item 13. CERTAIN RELATIONSHIPS ANDRELATED TRANSACTIONS

 

Information required by this Item is incorporated byreference from our proxy statement for our 2009 Annual Meeting, expected to befiled with the SEC no later than January 28, 2009.

 

Item 14. PRINCIPAL ACCOUNTANT FEES ANDSERVICES

 

Information required by this Item is incorporated byreference from our proxy statement for our 2009 Annual Meeting, expected to befiled with the SEC no later than January 28, 2009.

 

 

**PART IV**

 

Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

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

  |
|--------|--------------------------------------------------------------------|
|   | (1)                                                                | Our  Financial Statements, Summary of Accounting Policies, and Notes to Financial  Statements appear at pages 20 to 34 of this report; see Index to Financial  Statements and Financial Statement Schedules at page 19 of this report.

  |
|   | (2)                                                                | Our  Financial Statement Schedule (Schedule II) appears on page 38.

  |
|   | (3)                                                                | Our  Index to Exhibits appears at page 40 of this report.

  |

 

----

***Schedule II – Valuation and Qualifying Accounts***

 
|                                             |                                                                                                                                                 | Beginning

Balance |            | Charged to

expense |   | Write-offs      |   | Ending

Balance |
|--------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------|-----------------|--------------------------|--------|-----------------|--------|-----------------|
|                                             |                                                                                                                                                 |               |            |                     |   |            |   |            |
| *Allowance for doubtful accounts* |                                                                                                                                                 |               |            |                     |   |            |   |
|                                             | There was no allowance for doubtful accounts needed in fiscal 2008, 2007, and 2006. |               |            |
|                                             |                                                                                                                                                 |               |            |                     |   |            |   |            |
| *Inventory*                                      |                                                                                                                                                 |               |            |                     |   |            |   |
|                                             |                                                                                                                                                 |               |            |                     |   |            |   |            |
|                                             | 2008                                                                                                                                                 | $                  | 1,573,700       |                     | $      | –     |   | $               | (1,573,700) |   | $ | –  |
|                                             |                                                                                                                                                 |               |            |                     |   |            |   |            |
|                                             | 2007                                                                                                                                                 | $                  | 2,722,000  |                     | $      | 402,700    |   | $               | (1,551,000) |   | $ | 1,573,700  |
|                                             |                                                                                                                                                 |               |            |                     |   |            |   |            |
|                                             | 2006                                                                                                                                                 | $                  | 1,685,100  |                     | $      | 1,036,900  |   | $               | –  |   | $ | 2,722,000  |

 

 

----

**SIGNATURES**

 

Pursuant to the requirements of Section 13 or 15(d) of theSecurities Exchange Act of 1934, as amended, the registrant has duly causedthis report to be signed on its behalf by the undersigned, thereunto dulyauthorized.

 

LOGIC DEVICES INCORPORATED

 
| Dated:  December 18, 2008 | By:   /s/  William  J.  Volz                         |
|---------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                      |                                                                                                                                                                                             | William  J. Volz, President and

Principal  Executive Officer |

 

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

 
| Signature                                                                                                                                                   |   | Title                                                                           |   | Dated

       |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------|--------|--------------------|
|   /s/  William  J. Volz          

    William  J. Volz           |   | President  and Director

(Principal  Executive Officer)

                  |   | December  18, 2008 |
|   /s/  Kimiko  Milheim        

    Kimiko  Milheim                         |   | Chief  Financial Officer

(Principal  Financial and Accounting Officer)

  |   | December  18, 2008 |
|   /s/  Howard  L. Farkas       

    Howard  L. Farkas

                    |   | Chairman  of the Board of Directors

                                      |   | December  18, 2008 |
|   /s/  Brian P. Cardozo          

    Brian P. Cardozo

    |   | Director                                                                        |   | December  18, 2008 |
|   /s/  Steven  R. Settles           

    Steven  R. Settles |   | Director                                                                        |   | December  18, 2008 |

 

----

**INDEX TO EXHIBITS**

 
| Exhibit No.     |   | Description                                                                                                                                                                                                                                                                                                                                                                                                        |
|----------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                               |
| 3.1                  |   | Articles of Incorporation, as amended. [3.1] (1)                                                                                                                                                                                                                                                                                                                                     |
| 3.2                  |   | Bylaws, as amended. [3.2] (2)                                                                                                                                                                                                                                                                                                                                                                  |
| 10.1                 |   | Real estate lease regarding our Sunnyvale, CA facilities. [99.1] (3)                                                                                                                                                                                                                                                                                                  |
| 10.2                 |   | Amended and Restated LOGIC Devices Incorporated 1998  Director Stock Incentive Plan, as amended. [10.2] (4)                                                                                                                                                                                                                                                                                                        |
| 10.3                 |   | LOGIC Devices Incorporated 2007 Employee Stock Incentive  Plan. [10.3] (4)                                                                                                                                                                                                                                                                                                                                         |
| 10.4                 |   | Registration Rights Agreement dated October 3, 1998 between William J. Volz, BRT  Partnership, and Registrant. [10.19] (5)                                                                                                                                                                                                              |
| 23.1                 |   | Consent letter of Hein & Associates LLP.                                                                                                                                                                                                                                                                                                                                         |
| 23.2                 |   | Consent letter of Perry-Smith LLP.                                                                                                                                                                                                                                                                                                                                                             |
| 31.1                 |   | Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14 and 15d-14.                                                                                                                                                                                                                                                             |
| 31.2                 |   | Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14 and 15d-14.                                                                                                                                                                                                                                                             |
| 32.1                 |   | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.  Section 1350.                                                                                                                                                                                                                                        |
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                               |
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                               |
| [   ] |   | Exhibits so marked have been previously filed with the Securities Exchange Commission  (SEC) as  exhibits to the filings shown below under the exhibit numbers indicated following  the respective document description and are incorporated herein by reference. |
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                               |
| (1)                  |   | Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2004, as filed with  the SEC on January 26, 2005.                                                                                                                                                                                                     |
| (2)                  |   | Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2007, as filed with the  SEC on May 15, 2007.                                                                                                                                                                                                       |
| (3)                  |   | Current Report on Form 8-K, as filed with the SEC on August 7, 2007.                                                                                                                                                                                                                                                                              |
| (4)                  |   | Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2008, as filed with the  SEC on May 6, 2008.                                                                                                                                                                                                                  |
| (5)                  |   | Annual Report on Form 10-K for the transition period January 1, 1998 to October 3, 1999, as  filed with the SEC on January 13, 1999.                                                                                                                                                                      |