SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10Q-SB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter Ended May 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ to _____
Commission File No. 0-12240
BIO-LOGIC SYSTEMS CORP.
(Exact name of small business issuer as specified in its charter)
Delaware 36-3025678
(State or other jurisdiction of incorporation or (I.R.S. Employer
organization) Identification Number)
One Bio-logic Plaza, Mundelein, Illinois 60060
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (847-949-5200)
(Former address, if changed since last report): not applicable
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the issuer was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
YES X NO ___
State the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at July 12, 1996
Common Stock $.01 par value shares
Traditional Small Business Disclosure Format
Yes X No ___
<PAGE>
BIO-LOGIC SYSTEMS CORP.
FORM 10Q-SB
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Page
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheets at May 31, 1996
and February 29, 1996 3
Condensed Consolidated Statements of Operations and
Retained Earnings for the three months ended May 31,
1996 and 1995 4
Condensed Consolidated Statements of Cash Flows for
the three months ended May 31, 1996 and 1995, 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 10
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURES
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<PAGE>
BIO-LOGIC SYSTEMS CORP.
FORM 10Q-SB
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
MAY 31, 1996 FEBRUARY 29, 1996
---------------- -----------------
Unaudited
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,615,364 $ 3,249,071
Marketable securities 1,707,840 1,711,760
Accounts receivable, less allowance for doubtful accounts
of $135,743 at May 31, 1996 and $128,243 at
February 29, 1996 2,128,860 3,197,495
Inventories 2,935,541 2,887,528
Prepaid expenses 106,167 129,044
Deferred income taxes 239,609 239,609
----------- ------------
Total current assets 8,733,381 11,414,507
PROPERTY, PLANT AND EQUIPMENT - Net 1,897,133 1,863,811
MARKETABLE SECURITIES 1,502,179
OTHER ASSETS 1,159,968 1,101,668
------------ ------------
TOTAL ASSETS $13,292,661 $14,379,986
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 120,212 $ 118,236
Accounts payable 322,780 544,346
Accrued salaries & payroll taxes 380,216 500,412
Accrued interest & other expenses 267,727 380,205
Accrued income taxes (137,306) 213,735
Deferred revenue 256,879 228,658
----------- -----------
Total current liabilities 1,210,508 1,985,592
LONG-TERM DEBT - Less current maturities 658,913 689,877
COMMITMENTS
DEFERRED INCOME TAXES 307,206 307,206
----------- -----------
Total liabilities 2,176,627 2,982,675
---------- ----------
SHAREHOLDERS' EQUITY:
Capital stock, $.01 par value. authorized 10,000,000
shares, issued and outstanding 4,229,219 shares at,
May 31, 1996 and 4,229,119 at February 29, 1996 42,292 42,291
Additional paid-in capital 5,477,878 5,477,516
Retained Earnings 5,595,864 5,877,504
----------- -----------
Total shareholders' equity 11,116,034 11,397,311
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $13,292,661 $14,379,986
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
-3-
<PAGE>
BIO-LOGIC SYSTEMS CORP.
FORM 10Q-SB
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(UNAUDITED)
<TABLE>
Three Months Ended
MAY 31,
1996 1995
-------------- ----------
<S> <C> <C>
NET SALES, $2,844,726 $3,666,987
COST OF SALES 1,060,646 1,313,262
--------- ---------
Gross Profit 1,784,080 2,353,725
--------- ---------
OPERATING EXPENSES:
Selling, general & administrative 1,839,313 1,598,774
Research & development 367,467 375,844
--------- ---------
Total operating expenses 2,206,780 1,974,618
--------- ---------
OPERATING INCOME (LOSS) (422,700) 379,107
OTHER INCOME (EXPENSE):
Interest income 60,578 45,975
Interest expense (13,154) (18,962)
Miscellaneous 694 444
------------- -------------
TOTAL OTHER INCOME 48,118 27,457
---------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (374,582) 406,564
PROVISION (BENEFIT) FOR INCOME TAXES (92,942) 129,000
---------- ----------
NET INCOME (LOSS) $ (281,640) $ 277,564
========= ==========
RETAINED EARNINGS, BEGINNING OF PERIOD 5,877,504 4,985,413
--------- ---------
RETAINED EARNINGS, END OF PERIOD $5,595,864 $5,262,977
========= ---------
EARNINGS PER SHARE:
Primary and Fully Diluted $(0.07) $ 0.07
===== =====
</TABLE>
The accompanying notes are an integral part of these statements.
-4-
<PAGE>
BIO-LOGIC SYSTEMS CORP.
FORM 10Q-SB
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
Three Months Ended
MAY 31,
1996 1995
-------------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (281,640) $ 277,564
Adjustments to reconcile net income (loss) to net cash flows from (used in)
operating activities:
Depreciation and amortization 94,150 84,055
Provision for bad debts 7,500 3,000
Provision for inventory valuation 77,325 77,250
Deferred income taxes (Increases) decreases in assets:
Accounts receivable 1,061,135 (462,575)
Inventories (125,338) (69,190)
Prepaid expenses 22,877 32,876
Increases (decreases) in liabilities:
Accounts payable and overdrafts (221,566) (432,667)
Accrued liabilities and deferred revenue (204,453) 13,162
Accrued income taxes (351,041) (10,850)
----------- ----------
Net cash flows from (used in) operating activities 78,949 (487,375)
------------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (88,162) (25,183)
Other assets (97,610) (78,491)
Purchases of marketable securities held to maturity (1,498,259) (5,787)
---------- -----------
Net cash flows from (used in) investing activities (1,684,031) (109,461)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 363 1,070
Payments of long-term debt (28,988) (27,127)
----------- ----------
Net cash flows from (used in) financing activities (28,625) (26,057)
----------- ----------
INCREASE IN CASH AND CASH EQUIVALENTS (1,633,707) (622,893)
CASH AND CASH EQUIVALENTS - Beginning of quarter 3,249,071 1,187,388
---------- ---------
CASH AND CASH EQUIVALENTS - End of quarter $ 1,615,364 $ 564,495
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS:
Cash paid during the period for:
Interest $ 13,154 $ 19,538
========== ==========
Income Taxes $ 243,657 $ 139,850
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
BIO-LOGIC SYSTEMS CORP.
FORM 10Q-SB
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The information furnished in this report reflects all adjustments which
are, in the opinion of management, necessary to a fair statement of the
results for the interim periods. The results of operations for the three
months ended May 31, 1996 are not necessarily indicative of the results to
be expected for the full year.
2. INVENTORIES
Inventories, consisting principally of components, parts and supplies, are
stated at the lower of cost, determined by the first-in, first-out method
or market.
3. NET INCOME PER SHARE
Primary earnings per share are based on the weighted average number of
common and dilutive common equivalent shares outstanding during each
quarter. The weighted average shares for computing primary earnings per
share were 4,328,576 and 4,214,975 for the quarters ended May 31, 1996 and
May 31, 1995, respectively.
Fully diluted earnings per share are based on the weighted average number
of common and dilutive common equivalent shares calculated at quarter-end
market prices. The weighted average shares for computing fully diluted
earnings per share were 4,328,576 and 4,260,343 for the quarters ended May
31, 1996, and 1995, respectively.
4. ACCOUNTING FOR INCOME TAXES
The Company follows Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes," which requires an asset and liability
approach of accounting for income taxes. Deferred tax assets and
liabilities are computed annually for differences between financial
statement basis and tax basis of assets, liabilities and available general
business tax credit carry-forwards. A valuation allowance is established
when necessary to reduce deferred tax assets to the amount expected to be
realized.
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<PAGE>
BIO-LOGIC SYSTEMS CORP.
FORM 10Q-SB
Deferred tax assets and liabilities as of May 31, 1996 are comprised of the
following:
Deferred tax liabilities:
Property, plant and equipment $ 61,090
Capitalized research and development 246,116
-------
Total deferred tax liabilities 307,206
Deferred tax assets:
Accounts receivable 49,550
Inventory 80,585
Vacation accrual 20,360
Warranty accrual 86,984
Other 2,130
--------
Total deferred current tax assets-net 239,609
Net deferred tax liability $ 67,597
=======
5. MARKETABLE SECURITIES
Effective March 1, 1994, the company adopted Statement of Financial
Accounting Standards No.115, "Accounting for Certain Investments in Debt
and Equity Securities" (SFAS No. 115.)
As required by SFAS 115, securities are classified into three categories:
trading, held-to-maturity, and available for sale. Debt securities that the
Company has the positive intent and ability to hold to maturity are
classified as held-to-maturity debt securities. The entire Company's
portfolio of debt securities has been classified as held-to-maturity and
are stated at cost, with premiums amortized and discounts accredited using
the simple-interest method.
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<PAGE>
BIO-LOGIC SYSTEMS CORP.
FORM 10Q-SB
INVESTMENT SECURITIES HELD-TO-MATURITY
The amortized cost, unrealized gains, unrealized losses and estimated fair
values of investment securities are summarized as follows:
<TABLE>
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
AMORTIZED COST GAIN LOSSES VALUE
-------------- ---- ------ -----
<S> <C> <C> <C> <C>
MAY 31, 1996
US Government securities $3,210,019 $ 0 $3,456 $3,206,563
MAY 31, 1995
US Government securities $3,360,887 $ 0 $13,077 $3,347,810
</TABLE>
At May 31, 1996, the maturities of marketable securities held-to-maturity are as
follows:
ESTIMATED FAIR
AMORTIZED COST VALUE
-------------- -----
TERM TO MATURITY
Due one year or less $1,707,840 $1,707,973
Due after one year through
five years 1,502,179 1,498,590
--------- ---------
Total $3,210,019 $3,206,563
========= =========
6. ACCOUNTING FOR FINANCIAL DERIVATIVES
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
119, "Disclosure About Derivative Financial Instruments and Fair Value of
Financial Instruments," effective March 1, 1996. This standard requires
disclosures about derivative financial instruments-futures, forward, swap
and option contracts, and other financial instruments with similar
characteristics. The impact of adopting SFAS No. 119 upon the Company was
not material.
7. ACCOUNTING FOR THE IMPAIRMENT OF LONG LIVED ASSETS
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," effective March 1, 1996. This standard requires
that carrying values of long-lived assets and certain identifiable,
intangible assets be evaluated based on the future (undiscounted and
without
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<PAGE>
BIO-LOGIC SYSTEMS CORP.
FORM 10Q-SB
interest charges) cash flows expected to be realized from the use of the
asset and its eventual disposition. If the sum of the expected future cash
flows from an asset is less than the carrying value an impairment loss must
be recognized. There is no material impact of adopting SFAS No.
121 upon the Company's financial position or results of operations.
8. ACCOUNTING FOR STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," was issued and became effective March 1, 1996
upon the Company's financial statements. As permitted by the statement, the
Company continues to measure employee compensation cost for stock option
plans in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees."
9. SUBSEQUENT EVENT - STOCK REPURCHASE
On May 16, 1996 the Board of Directors of the Company authorized the
repurchase, from time to time, of shares of the Company's common stock. As
of the date of this report, the Company purchased an aggregate of 18,800
shares of its common stock at a total cost of $66,748.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As of May 31, 1996 the Company had working capital of $7,522,873
including $3,323,204 in cash, cash equivalents and short-term investments. In
addition, as of May 31, 1996, the Company had long-term investments of
$1,502,179 in US Government Treasury Notes. The Company believes its capital and
liquidity requirements for the foreseeable future will be satisfied by available
and internally generated funds. To the extent the Company's capital and
liquidity requirements are not satisfied internally, the Company may utilize a
$1,000,000 unsecured bank line of credit, all of which is currently available.
Borrowings under this line will bear interest at the bank's prime rate.
RESULTS OF OPERATIONS
Net sales for the three months ended May 31, 1996 decreased by
approximately 22% to $2,844,726 from $3,666,987 for the three months ended May
31, 1995. Domestic sales decreased by 17% to $2,220,594 for the three months
ended May 31, 1996 from $2,673,323 for the three months ended May 31, 1995.
Foreign sales of $624,132 contributed 22% of net sales for the three months
ended May 31, 1996, a decrease of 37% from $993,664 for the three months ended
May 31, 1995. The Company's decrease in net sales was a result of lower sales of
Ceegraph, Sleep, and
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<PAGE>
BIO-LOGIC SYSTEMS CORP.
FORM 10Q-SB
Explorer (EMG) product lines than in the previous quarter and the three months
ending May 31, 1995. The Company's U.S. direct sales force, which is responsible
for selling the above product lines is undergoing reorganization and expansion.
The reorganization and expansion plan has negatively impacted sales this
quarter, due in part, to the need to replace some sales personnel and the six to
twelve month lead time needed to effectively train new sales personnel on the
Company's product lines.
Cost of sales as a percentage of net sales increased to 37% from 36%
for the three months ended May 31, 1996 and 1995, respectively. This slight
increase in cost of sales is the direct result of manufacturing fixed costs not
decreasing at the same rate as variable costs associated with the lower net
sales.
Selling, general and administrative expenses increased by 15% to
$1,839,313 from $1,598,774 during the three months ended May 31, 1996, and 1995,
respectively, and as a percentage of net sales, increased to 65% from 44% for
the three months ended May 31, 1996 and May 31, 1995, respectively. This
increase reflects additional employee and travel costs associated with the
Company expanding its direct sales force, as discussed above, plus increases in
marketing expenses for product promotions.
Research and development costs decreased by 2% to $367,467 from
$375,844 for the three months ended May 31, 1996, and 1995, respectively, and as
a percentage of net sales, increased to 13% from 10% for the three months ended
May 31, 1996 and 1995, respectively. This decrease in costs, partially offset by
higher employee expenses, is the result of the capitalization of approximately
$92,700 in certain research and development costs aligned with specific
identifiable future products for the three months ended May 31, 1996, compared
to the capitalization of $58,600 in the three months ended May 31, 1995,
respectively.
For the three months ended May 31, 1996, the Company had an operating
loss of $422,700 compared to an operating profit of $379,107 for the three
months ended May 31, 1995. This operating loss for the three months ended May
31, 1996 is due to lower net sales and higher selling, general and
administrative expenses.
Net interest income increased to $47,424 from $27,013 for the three
month periods ended May 31, 1996 and 1995, respectively. This increase reflects
higher investment returns on marketable securities and lower interest expense on
long term debt.
The income tax benefit of $92,942 or 25% of net loss before taxes for
the three month period ended May 31, 1996 and the income tax expense of
$129,000, or 32% of net income before taxes for the three month period ended May
31, 1995 differ from the federal statutory rate of 35% due to the differences
between financial statement basis and tax basis of assets, liabilities and
available general business tax credit carry-forwards.
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<PAGE>
BIO-LOGIC SYSTEMS CORP.
FORM 10Q-SB
The Company had a net loss of $281,640 or $0.07 per share for the three
month period ended May 31, 1996 compared to net income of $277,564 or $0.07 per
share for the three month period ended May 31, 1995. The lower earnings reflect
a combination of lower net sales and higher selling, general, and administrative
costs offset by the income tax benefit, as previously discussed.
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<PAGE>
BIO-LOGIC SYSTEMS CORP.
FORM 10Q-SB
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON 8-K
(a) Exhibits
3.1 Certificate of Incorporation, Certificate of Amendment to Certificate
of Incorporation, Agreement of Merger and Certificate of Merger and
By-Laws (1)
3.2 Certificate of Amendment to Certificate of Incorporation (7)
10.1 Lease between the Company and Harris Trust & Savings Bank dated August
9, 1983 (2)
10.2 Technology License Agreement between the Company and Neurographic
Technologies dated August 13, 1984 (3)
10.3 Real Estate Sale Contract between the Company and First National Bank
of Lake Forest, as Trustee, dated December 23, 1985 (4)
10.4 Loan Agreement between the Company and Village of Mundelein, Illinois
dated as of December 1, 1985 (4)
10.5 Mortgage and Security Agreement between the Company and Village of
Mundelein, Illinois dated as of December 1, 1985 (4)
10.6 Bond Purchase Agreement between the Company and First American Bank of
Dundee dated as of December 1, 1985 (4)
10.75 Agreement among Gabriel Raviv, Gil Raviv, Charles Z. Weingarten and the
Company (5)
10.8 Employment Agreement between the Company and Gabriel Raviv (5)
10.9 Employment Agreement between the Company and Gil Raviv (5)
10.10 Form of Export Property Sale, Commission and Lease Agreement between
the Company and Bio-logic International Corporation (6)
10.11 Agreement and General Release between the Company and Gil Raviv (9)
10.12 Letter dated May 2, 1994 from First American Bank to the Company (10)
10.13 Letter of Intent dated June 30, 1994 by and among the Company, Luther
Medical Products, Inc. and Neuro Diagnostics, Inc. (11)
10.14 Asset Purchase Agreement dated as of July 1, 1994 by and among the
Company, NDI Acquisition Corp., Luther Medical Products, Inc. and Neuro
Diagnostics, Inc. (12)
21. Subsidiaries of the Company (8)
27. Financial Data Schedule
- -------------------------
(1) Incorporated by reference from the Company's Registration Statement on
Form S-18 filed on August 7, 1981 (File No. 2-73587-C).
(2) Incorporated by reference from the Company's Report on Form 10-Q for
the quarter ended August 31, 1983.
(3) Incorporated by reference from the Company's Annual Report on Form 10-K
for the year ended February 28, 1985.
(4) Incorporated by reference from the Company's Report on Form 10-Q for
the quarter ended November 30, 1985.
-12-
<PAGE>
BIO-LOGIC SYSTEMS CORP.
FORM 10Q-SB
(5) Incorporated by reference from the Company's Registration Statement on
Form S-1 (File No.33-5471).
(6) Incorporated by reference from the Company's Report on Form 10-Q for
the quarter ended May 31, 1986.
(7) Incorporated by reference from the Company's Annual Report on Form 10-K
for the Fiscal Year ended February 28, 1987.
(8) Incorporated by reference from the Company's Annual Report on Form 10-K
for the Fiscal Year ended February 28, 1990.
(9) Incorporated by reference from the Company's Annual Report on Form 10-K
for the Fiscal Year ended February 28, 1993.
(10) Incorporated by reference from the Company's Annual Report on Form 10-K
for the Fiscal Year ended February 28, 1994.
(11) Incorporated by reference from the Company's Report on Form 10-Q for
the quarter ended May 31, 1994.
(12) Incorporated by reference from the Company's Report on Form 10-Q for
the quarter ended August 31, 1994.
(13) Incorporated by reference from the Company's Annual Report on Form
10K-SB for the Fiscal Year ended February 28, 1996.
(b) The Registrant did not file any reports on Form 8-K during the three
months ended May 31, 1996
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<PAGE>
BIO-LOGIC SYSTEMS CORP.
FORM 10Q-SB
Signatures
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Date: July 12, 1996 By: /S/ GABRIEL RAVIV
-----------------
Gabriel Raviv, President
Date: July 12, 1996 By: /S/ WILLIAM K. ROENITZ
----------------------
William K. Roenitz,
Controller and Treasurer
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> MAY-31-1996
<CASH> 1,615,364
<SECURITIES> 3,210,019
<RECEIVABLES> 2,128,860
<ALLOWANCES> 135,743
<INVENTORY> 2,935,541
<CURRENT-ASSETS> 8,733,381
<PP&E> 4,379,505
<DEPRECIATION> 2,482,372
<TOTAL-ASSETS> 13,292,661
<CURRENT-LIABILITIES> 1,210,508
<BONDS> 779,125
0
0
<COMMON> 42,292
<OTHER-SE> 11,073,742
<TOTAL-LIABILITY-AND-EQUITY> 13,292,661
<SALES> 2,844,726
<TOTAL-REVENUES> 2,844,726
<CGS> 1,060,646
<TOTAL-COSTS> 1,060,646
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 7,500
<INTEREST-EXPENSE> 13,154
<INCOME-PRETAX> (374,582)
<INCOME-TAX> (92,942)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (281,640)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
