<PAGE>
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 August 31, 1997
[ ] 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)
<TABLE>
<S> <C>
Delaware 36-3025678
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification Number)
organization)
One Bio-logic Plaza, Mundelein, Illinois 60060
(Address of principal executive offices) (zip code)
</TABLE>
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 October 13, 1997
Common Stock $.01 par value 3,982,354 shares
TRADITIONAL SMALL BUSINESS DISCLOSURE FORMAT
Yes /X/ No_________
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
PAGE
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheets at August 31, 1997
and February 28, 1997 3
Condensed Consolidated Statements of Operations and
Retained Earnings for the three and six months ended
August 31, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows for
the six months ended August 31, 1997 and 1996, 5
Notes to Condensed Consolidated FinancialStatements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 8
PART II. OTHER INFORMATION
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 11
SIGNATURES
<PAGE>
BIO-LOGIC SYSTEMS CORP.
FORM 10Q-SB
Part 1. Financial Information
Item 1 Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AUGUST 31, 1997 FEBRUARY 28, 1997
----------------- ------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............ $ 2,962,885 $ 1,134,310
Marketable securities............... 1,500,693 1,291,384
Accounts receivable, less allowance
for doubtful accounts of $180,533
at August 31, 1997 and $152,068 at
February 28, 1997.................. 3,839,045 3,583,673
Inventories ......................... 3,253,170 3,055,429
Prepaid expenses .................... 111,099 141,928
Deferred income taxes................ 262,039 262,039
------------- -----------------
Total current assets.... 11,928,931 9,468,763
PROPERTY, PLANT AND EQUIPMENT--Net....... 1,828,170 1,827,859
MARKETABLE SECURITIES.................... -- 1,501,287
OTHER ASSETS............................. 1,003,561 1,126,493
-------------- -----------------
TOTAL ASSETS............ $ 14,760,662 $ 13,924,402
============== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term
debt............................... $ 137,855 $ 126,343
Accounts payable .................. 481,957 484,323
Accrued salaries & payroll taxes... 675,552 560,676
Accrued interest & other expenses.. 446,162 309,861
Accrued income taxes............... 245,675 48,931
Deferred revenue................... 291,878 293,589
-------------- ---------------
Total current liabilities.. 2,279,079 1,823,723
LONG-TERM DEBT--Less current
maturities........................... 496,152 562,879
COMMITMENTS
DEFERRED INCOME TAXES.................. 338,398 338,398
-------------- ----------------
Total liabilities.......... 3,113,629 2,725,000
-------------- ----------------
SHAREHOLDERS' EQUITY:
Capital stock, $.01 par value.
authorized 10,000,000 shares, issued
and outstanding 3,949,229 shares at,
August 31, 1997 and 4,229,519 at
February 28, 1997..................... 39,492 42,295
Additional paid-in capital.............. 4,612,734 5,478,464
Retained Earnings....................... 6,994,807 6,561,349
-------------- ----------------
Total shareholders' equity... 11,647,033 12,082,108
Less treasury stock, at cost: 286,310
shares................................ -- (882,706)
-------------- ----------------
Shareholders equity--net..... 11,647,033 11,199,402
-------------- ----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $14,760,662 $13,924,402
============== ================
</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>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
AUGUST 31, AUGUST 31,
-------------------------- --------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES................................................ $ 4,346,349 $ 3,574,920 $ 8,755,030 $ 6,419,646
COST OF SALES............................................ 1,404,592 1,185,065 2,867,522 2,245,711
------------ ------------ ------------ ------------
Gross Profit......................................... 2,941,757 2,389,855 5,887,508 4,173,935
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Selling, general & administrative.................... 2,047,330 1,563,070 4,126,570 3,402,383
Research & development 629,122 465,876 1,201,085 833,343
------------ ------------ ------------ ------------
Total operating expenses................................. 2,676,452 2,028,946 5,327,655 4,235,726
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS).................................. 265,305 360,909 559,853 (61,791)
OTHER INCOME (EXPENSE):
Interest income...................................... 51,643 54,301 100,287 114,879
Interest expense..................................... (9,440) (14,857) (21,605) (28,011)
Miscellaneous (15) 50 787 744
------------ ------------ ------------ ------------
TOTAL OTHER INCOME................................. 42,188 39,494 79,469 87,612
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES............................... 307,493 400,403 639,322 25,821
PROVISION FOR INCOME TAXES............................... 99,013 117,400 205,863 24,458
------------ ------------ ------------ ------------
NET INCOME............................................... $ 208,480 $ 283,003 $ 433,459 $ 1,363
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
RETAINED EARNINGS, BEGINNING OF PERIOD................... 6,786,327 5,595,864 6,561,348 5,877,504
------------ ------------ ------------ ------------
RETAINED EARNINGS, END OF PERIOD......................... $ 6,994,807 $ 5,878,867 $ 6,994,807 $ 5,878,867
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
EARNINGS PER SHARE:
Primary and Fully Diluted................................ $ 0.05 $ 0.07 $ 0.11 $ 0.00
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</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>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31,
-------------------------
1997 1996
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income............................................................................ $ 433,459 $ 1,363
Adjustments to reconcile net income to net cash flows from (used in) operating
activities:
Depreciation and amortization..................................................... 213,523 180,254
Provision for bad debts........................................................... 48,000 15,150
Provision for inventory valuation 154,650 124,650
Deferred income taxes
(Increases) decreases in assets:
Accounts receivable............................................................. (303,372) 494,551
Inventories..................................................................... (352,391) (164,958)
Prepaid expenses................................................................ 30,829 (23,803)
Increases (decreases) in liabilities:
Accounts payable and overdrafts................................................. (2,366) (32,197)
Accrued liabilities and deferred revenue........................................ 249,466 (7,912)
Accrued income taxes............................................................ 196,744 (228,994)
------------ -----------
Net cash flows from (used in) operating activities.............................. 668,542 358,104
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................................................ (83,902) (122,028)
Other assets........................................................................ (7,000) (167,675)
Proceeds from maturities of investments............................................. 1,291,978 --
Purchases of marketable securities held to maturity -- (1,494,041)
------------ -----------
Net cash flows from (used in) investing activities............................ 1,201,076 (1,783,744)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options............................................. 14,172 951
Purchase of treasury stock........................................................ -- (525,791)
Payments of long-term debt........................................................ (55,215) (55,909)
------------ -----------
Net cash flows from (used in) financing activities............................ (41,043) (580,749)
------------ -----------
INCREASE IN CASH AND CASH EQUIVALENTS................................................. 1,828,575 (2,006,389)
CASH AND CASH EQUIVALENTS--Beginning of period........................................ 1,134,310 3,249,071
------------ -----------
CASH AND CASH EQUIVALENTS--End of period.............................................. $ 2,962,885 $ 1,242,682
------------ -----------
------------ -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS:
Cash paid during the period for:
Interest........................................................................ $ 22,423 $ 28,011
------------ -----------
------------ -----------
Income Taxes.................................................................... $ 45,000 $ 246,657
------------ -----------
------------ -----------
</TABLE>
- ------------------------
The accompanying notes are an integral part of these statements.
5
<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 and six
months ended August 31, 1997 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
4,109,990 and 4,212,626 for the quarters ended August 31, 1997 and 1996,
respectively, and 4,062,143 and 4,270,602 for the six months ended August
31, 1997 and 1996, 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 4,169,598 and 4,212,626 for the quarters ended August 31, 1997,
and 1996, respectively, and 4,114,164 and 4,270,602 for the six months ended
August 31, 1997 and 1996.
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.
6
<PAGE>
Bio-logic Systems Corp.
Form 10Q-SB
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.
INVESTMENT SECURITIES HELD-TO-MATURITY
The amortized cost, unrealized gains, unrealized losses and estimated fair
values of investment securities are summarized as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
AMORTIZED COST GAIN LOSSES VALUE
-------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
August 31, 1997
US Government securities............... $ 1,500,693 $ 4,002 $ 0 $ 1,504,695
August 31, 1996
US Government securities............... $ 3,205,801 $ 0 $ 3,364 $ 3,202,437
</TABLE>
At August 31, 1997, the maturities of marketable securities held-to-maturity
are as follows:
<TABLE>
<CAPTION>
ESTIMATED FAIR
TERM TO MATURITY AMORTIZED COST VALUE
-------------- --------------
<S> <C> <C>
Due one year or less.................................. $ 1,500,693 $ 1,504,695
Due after one year through five years
Total........................ $ 1,500,693 $ 1,504,695
------------ ------------
------------ ------------
</TABLE>
6. EARNINGS PER SHARE PRESENTATION
In February 1997, the Financial Accountings Standards Board issued SFAS No.
128, "Earnings per Share," which requires presentation of basic and diluted
earnings per share together with disclosure of how the per share amounts
were computed. The adoption of SFAS No. 128 is effective for financial
statements issued after December 15, 1997. Early adoption of the new
standard is not permitted. The adoption of SFAS No. 128 is not expected to
have a material impact on the disclosure of earnings per share in the
Company's financial statements.
7. TREASURY STOCK RETIREMENT
During 1997, 286,310 shares of the Corporation's common stock purchased in
1996 for a total cost of $882,706, and held in treasury at February 28,
1997, were retired.
7
<PAGE>
Bio-logic Systems Corp.
Form 10Q-SB
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Except for the description of historical facts contained herein, this Form
10Q-SB contains certain forward looking statements that involve risks and
uncertainties as detailed herein and from time to time in the Company's filings
with Securities and Exchange Commission and elsewhere. Such statements are based
on management's current expectations and are subject to a number of factors and
uncertainties which could cause actual results to differ materially from those
described in the forward-looking statements. These factors include, among
others, fluctuations in sales and operating results, risks associated with
international operations; regulatory, competitive, and contractual risks; the
effects of economic conditions; any delays or additional costs associated with
the introduction of the AUDX product, and the availability of capital to finance
planned growth, as well as other risks detailed from time to time in the
company's filings with the Securities and Exchange Commission.
LIQUIDITY AND CAPITAL RESOURCES
As of August 31, 1997 the Company had working capital of $9,649,852
including $4,463,578 in cash, cash equivalents and short-term investments. 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.
Cash flow for the six months ended August 31, 1997 increased by $1,828,575
and net cash flow from operations increased by $668,542. Net income for the six
months ended August 31, 1997 increased net cash flow from operating activities
by $433,459 compared to only $1,363 for the six months ended August 31, 1996. In
the six months ended August 31, 1997, marketable securities of approximately
$1,292,000 matured and provided net cash flow from investing activities.
RESULTS OF OPERATIONS
Net sales for the three month period ended August 31, 1997 ("1997 three
months") increased by approximately 22% to $4,346,349 from $3,574,920 in the
three month period ended August 31, 1996 ("1996 three months."), while net sales
for the six month period ended August 31, 1997 ("1997 six months") increased by
36% to $8,755,030 compared to $6,419,646 in the six month period ended August
31, 1996 ("1996 six months.") Domestic sales increased by 43% and 41% to
$3,816,105 and $6,911,563 for the 1997 three and six months, respectively,
compared to $2,676,452 and $4,897,046 for the 1996 three and six months,
respectively. Foreign sales of $530,244 and $1,843,467 contributed 12% and 21%
of net sales for the 1997 three and six months, respectively, a decrease of 41%
from $898,468 for 1996 three months, while an increase of 21% from $1,522,600
for the 1996 six months. The Company's increase in net sales for both the 1997
three and six months was the result of higher unit sales of the Ceegraph, Sleep,
and OAE product lines.
Cost of equipment sold increased to $1,404,592 and $2,867,522 for the 1997
three and six months, respectively, compared to $1,185,065 and $2,245,711 for
the 1996 three and six months, respectively. Cost of sales as a percentage of
net sales decreased to 32% and 33% for the 1997 three and six months,
respectively, from 33% and 35% for the 1996 three and six months, respectively.
This slight decrease in cost of sales as a percentage of net sales in the 1997
three and six months was the partial result of sales of higher margins products
and similar levels of fixed manufacturing costs allocated over higher net sales.
8
<PAGE>
Selling, general and administrative expenses increased by 31% and 21% to
$2,047,330 and $4,126,570 during the 1997 three and six months, respectively,
compared to $1,563,070 and $3,402,383 for the 1996 three and six months,
respectively. Selling, general and administrative expenses as a percentage of
net sales, increased to 47% from 44% for the 1997 and 1996 three months,
respectively, and decreased to 47% from 53% for the 1997 and 1996 six months,
respectively. The increase in the six month period reflects additional employee
and travel costs, higher sales commissions, plus increased marketing expenses
for product promotions and trade show exhibitions, including expenses for the
AuDX-TM-introduction. Higher marketing expenses are expected to continue until
expanded coverage of AuDX is achieved.
Research and development costs increased by 35% and 44% to $629,122 and
$1,201,085 for the 1997 three and six months, respectively, from $465,876 and
$833,343 for the 1996 three and six months, respectively. As a percentage of net
sales, total research and development costs increased to 14% for both the 1997
three and six months compared to 13% for both the 1996 three and six months. The
increase in costs were partially due to higher individual salaries plus the
reduction in the capitalization of certain research and development costs
aligned with specific identifiable future products. The capitalization of
products under development amounted to approximately $0 and $144,400 during the
six months ended August 31, 1997 and 1996, respectively. Amortization expense of
these capitalized research and development costs increased to $91,905 for the
1997 six months compared to $26,884 in 1996 six months. Bio-logic will continue
to invest in research and development, including AuDX, regularly upgrading its
core neurology, audiology and sleep product lines to second and third generation
technologies, and adding enchanced features..
The Company had operating income of $265,305 and $559,853 for the 1997 three
and six months, respectively, compared to operating income of $360,909 and
operating loss of $61,791 for 1996 three and six months, respectively. The
decrease in operating income for the 1997 three months was the result of higher
selling, general and administrative expenses plus increases in research and
development costs offset by higher net sales. Conversely, operating income for
the 1997 six months is due to higher net sales with higher gross margins
partially offset by higher selling, general and administrative expenses and
research and development costs.
Net interest income decreased to $78,682 for 1997 six months compared to
$86,868 for 1996 six months. This decrease reflects lower investment returns on
marketable securities offset by lower interest expense on long term debt.
The Company had income tax of $99,013 and $205,863 or 32% of net income
before taxes for the 1997 three and six months, respectively compared to
$117,400 and $24,458 or 29% and 95% of net income before taxes for both the 1996
three and six months, respectively. The company's income tax rate differs from
the federal statutory rate of 34% due to the differences between financial
statement basis and tax basis of assets, liabilities and available general
business tax credit carry-forwards.
The Company had net income of $208,480 and $433,459 or $.05 and $0.11 per
share for the 1997 three and six months, respectively, compared to net income of
$283,003 and $1,363 or $0.07 and $0.00 per share for the 1996 three and six
months, respectively. The Company attributes the higher earnings in the six
month period to higher net sales partially offset by higher selling, general and
administrative and research and development costs as previously discussed.
9
<PAGE>
Bio-logic Systems Corp.
Form 10Q-SB
PART II. Other Information
ITEM 4. Submission Of Matters To a Vote Of Security Holders
(a) The Company's 1997 Annual Meeting of Shareholders (the "1997 Annual
Meeting") was held on August 12, 1997
(b) The following directors were elected at the 1997 Annual Meeting:
Gil Raviv
Irving Kupferberg
The following are the other directors of the Company whose term of office
continued after the 1997 Annual Meeting:
Charles Z. Weingarten
Albert Milstein
Gabriel Raviv, Ph.D.
Craig W. Moore
1. The following votes were cast in connection with the election of directors at
the 1997 Annual Meeting:
FOR AGAINST
Gil Raviv 3,632,561 147,680
Irving Kupferberg 3,634,911 145,330
2. The following votes were cast with respect to the adoption of an amendment to
the Company's 1994 Stock Option plan (the "Plan"), to increase the authorized
number of shares available for option grants pursuant to the Plan from
450,000 to 850,000 (the "Plan Amendment").
For Against Abstain
2,426,441 294,803 32,349
10
<PAGE>
Bio-logic Systems Corp.
Form 10Q-SE
ITEM 6. EXHIBITS AND REPORTS ON 8-K
(a) Exhibits
27. Financial Data Schedule
______________________
(b) The Registrant did not file any reports on Form 8-K during the three
months ended August 31, 1997
11
<PAGE>
Bio-logic Systems Corp.
Form 10Q-SB
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: October 09, 1997 By: /s/ Gabriel Raviv
-----------------
Gabriel Raviv, President
Date: October 09, 1997 By: /s/ William K. Roenitz
----------------------
William K. Roenitz,
Controller and Treasurer
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-END> AUG-31-1997
<CASH> 2,962,885
<SECURITIES> 1,500,693
<RECEIVABLES> 3,839,045
<ALLOWANCES> 180,533
<INVENTORY> 3,253,170
<CURRENT-ASSETS> 11,928,931
<PP&E> 4,547,066
<DEPRECIATION> 2,718,896
<TOTAL-ASSETS> 14,760,662
<CURRENT-LIABILITIES> 2,279,079
<BONDS> 634,007
0
0
<COMMON> 39,492
<OTHER-SE> 11,647,033
<TOTAL-LIABILITY-AND-EQUITY> 14,760,662
<SALES> 8,755,030
<TOTAL-REVENUES> 8,755,030
<CGS> 2,867,522
<TOTAL-COSTS> 2,867,522
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 48,000
<INTEREST-EXPENSE> 22,423
<INCOME-PRETAX> 639,322
<INCOME-TAX> 205,863
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 433,459
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
</TABLE>
