<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 May 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>
<CAPTION>
<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 office) (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 July 8, 1997
Common Stock $.01 par value 3,943,509 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, 1997
and February 28, 1997 3
Condensed Consolidated Statements of Operations and
Retained Earnings for the three months ended May 31,
1997 and 1996 4
Condensed Consolidated Statements of Cash Flows for
the three months ended May 31, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 12
2
<PAGE>
Bio-logic Systems Corp.
Form 10Q-SB
Part 1. Financial Information
ITEM 1 FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MAY 31, 1997 FEBRUARY 28, 1997
------------- -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............................... $ 2,216,791 $ 1,134,310
Marketable securities................................... 2,100,575 1,291,384
Accounts receivable, less allowance for doubtful
accounts of $157,154 at May 31, 1997 and $152,068 at
February 28, 1997..................................... 3,463,540 3,583,673
Inventories............................................. 3,137,657 3,055,429
Prepaid expenses........................................ 106,406 141,928
Deferred income taxes................................... 262,039 262,039
------------- ----------------
Total current assets................................ 11,287,008 9,468,763
PROPERTY, PLANT AND EQUIPMENT--Net.......................... 1,808,811 1,827,859
MARKETABLE SECURITIES....................................... 1,501,287
OTHER ASSETS................................................ 1,059,158 1,126,493
------------- ----------------
TOTAL ASSETS........................................ $ 14,154,977 $ 13,924,402
------------- ----------------
------------- ----------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt.................... $ 128,455 $ 126,343
Accounts payable........................................ 414,420 484,323
Accrued salaries & payroll taxes........................ 574,041 560,676
Accrued interest & other expenses....................... 262,005 309,861
Accrued income taxes.................................... 176,139 48,931
Deferred revenue........................................ 307,009 293,589
------------- ----------------
Total current liabilities........................... 1,862,069 1,823,723
LONG-TERM DEBT--Less current maturities..................... 529,792 562,879
COMMITMENTS
DEFERRED INCOME TAXES....................................... 338,398 338,398
------------- ----------------
Total liabilities................................... 2,730,259 2,725,000
------------- ----------------
SHAREHOLDERS' EQUITY:
Capital stock, $.01 par value. authorized 10,000,000 shares,
issued and outstanding 3,943,309 shares at May 31, 1997
and 4,229,519 at February 28, 1997........................ 39,433 42,295
Additional paid-in capital.................................. 4,598,958 5,478,464
Retained Earnings........................................... 6,786,327 6,561,349
------------- ----------------
Total shareholders' equity.......................... 11,424,718 12,082,108
Less treasury stock, at cost: 286,310 shares................ (882,706)
------------- ----------------
Shareholders equity--net............................ 11,424,718 11,199,402
------------- ----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................. $ 14,154,977 $ 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
MAY 31,
--------------------------
<S> <C> <C>
1997 1996
------------ ------------
NET SALES......................................................... $ 4,408,680 $ 2,844,726
COST OF SALES..................................................... 1,462,929 1,060,646
------------ ------------
Gross Profit.................................................... 2,945,751 1,784,080
------------ ------------
OPERATING EXPENSES:
Selling, general & administrative............................... 2,079,240 1,839,313
Research & development.......................................... 571,963 367,467
------------ ------------
Total operating expenses.......................................... 2,651,203 2,206,780
------------ ------------
OPERATING INCOME (LOSS)........................................... 294,548 (422,700)
OTHER INCOME (EXPENSE):
Interest income................................................. 48,644 60,578
Interest expense................................................ (12,166) (13,154)
Miscellaneous................................................... 802 694
------------ ------------
TOTAL OTHER INCOME............................................ 37,280 48,118
------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES................................. 331,828 (374,582)
PROVISION (BENEFIT) FOR INCOME TAXES.............................. 106,850 (92,942)
------------ ------------
NET INCOME (LOSS)................................................. $ 224,978 $ (281,640)
------------ ------------
------------ ------------
RETAINED EARNINGS, BEGINNING OF PERIOD............................ $ 6,561,349 $ 5,877,504
------------ ------------
RETAINED EARNINGS, END OF PERIOD.................................. $ 6,786,327 $ 5,595,864
------------ ------------
------------ ------------
EARNINGS PER SHARE:
Primary and Fully Diluted......................................... $ 0.06 $ (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>
<CAPTION>
THREE MONTHS ENDED
MAY 31,
-------------------------
<S> <C> <C>
1997 1996
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)................................................. $ 224,978 $ (281,640)
Adjustments to reconcile net income to net cash flows from (used
in) operating activities:
Depreciation and amortization................................. 111,216 94,150
Provision for bad debts....................................... 24,000 7,500
Provision for inventory valuation............................. 77,325 77,325
(Increases) decreases in assets:
Accounts receivable......................................... 96,133 1,061,135
Inventories................................................. (159,553) (125,338)
Prepaid expenses............................................ 35,522 22,877
Increases (decreases) in liabilities:
Accounts payable and overdrafts............................. (69,903) (221,566)
Accrued liabilities and deferred revenue.................... (21,071) (204,453)
Accrued income taxes........................................ 127,208 (351,041)
------------ -----------
Net cash flows from (used in) operating activities.......... 445,855 78,949
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.......................................... (22,833) (88,162)
Other assets.................................................. (2,000) (97,610)
Purchases of marketable securities held to maturity........... 0 (1,498,259)
Proceeds from maturities of investments....................... 692,096 0
------------ -----------
Net cash flows from (used in) investing activities.......... 667,263 (1,684,031)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options....................... 338 363
Payments of long-term debt.................................... (30,975) (28,988)
------------ -----------
Net cash flows from (used in) financing activities.......... (30,637) (28,625)
------------ -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.................. 1,082,481 (1,633,707)
CASH AND CASH EQUIVALENTS--Beginning of period.................... 1,134,310 3,249,071
------------ -----------
CASH AND CASH EQUIVALENTS--End of period.......................... $ 2,216,791 $ 1,615,364
------------ -----------
------------ -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS:
Cash paid during the period for:
Interest................................................... $ 11,433 $ 13,154
------------ -----------
------------ -----------
Income Taxes................................................ $ 15,000 $ 243,657
------------ -----------
------------ -----------
</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
months ended May 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
4,016,612 and 4,328,576 for the quarters ended May 31, 1997 and May 31, 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 4,061,638 and 4,328,576 for the quarters ended May 31, 1997 and May
31, 1996, 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.
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 Company's entire 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.
6
<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>
<CAPTION>
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
AMORTIZED COST GAIN LOSSES VALUE
-------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
May 31, 1997
- ------------
U.S. Government securities................................. $ 2,100,575 $ 3,220 $ 0 $ 2,103,795
May 31, 1996
- ------------
U.S. Government securities................................. $ 3,210,019 $ 0 $ 3,456 $ 3,206,563
</TABLE>
At May 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.......................................... $ 2,100,575 $ 2,103,795
Due after one year through five years......................... $ 0 $ 0
-------------- --------------
Total.................................................... $ 2,100,575 $ 2,103,795
-------------- --------------
-------------- --------------
</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 the 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, the Company's fluctuations in sales and operating results, risks
associated with international operations and regulatory, competitive and
contractual risks and product development.
Liquidity and Capital Resources
As of May 31, 1997 the Company had working capital of $9,424,939 including
$4,317,366 in cash, cash equivalents and short-term investments and $3,463,540
of accounts receivable. The principal sources of working capital are funds
generated from operations. 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 three months ended May 31, 1997 increased by $1,082,481
and net cash flow from operations increased by $455,855. Net income for the
quarter ended May 31, 1997 was $224,978 increasing cash flow from operations
while in contrast, a net loss of $281,640 in the quarter ended May 31, 1996
increased cash flow used in operations. In the first quarter ended May 31, 1997,
marketable securities of approximately $692,000 matured and provided net cash
flow from investing activities.
Results of Operations
Net sales for the three month period ended May 31, 1997 ("1997 three
months") increased by approximately 55% to $4,408,680 from $2,844,726 in the
three month period ended May 31, 1996 ("1996 three months."), Domestic sales for
the 1997 three months increased by 39% to $3,095,456 compared to $2,220,594 for
the 1996 three months. Foreign sales of $1,313,224 contributed 30% of net sales
for the 1997 three months, an increase of 110% from $624,132 for the 1996 three
months. The Company's increase in net sales for the 1997 three months compared
to the 1996 three months was due in large part to higher system sales in the
Ceegraph -TM- and Sleepscan-TM- product lines. Net sales during the 1996 three
months were impacted by a comprehensive sales force reorganization aimed at
improving the effectiveness of the sales team. A year later, this restructuring
has contributed favorably to the net sales increase in the 1997 three months, as
Bio-logic has increased its sales representation and improved their overall
productivity. However, Bio-logic's sales are subject to seasonality in that the
summer months are traditionally a slower sales period, therefore, it is not
expected that fiscal 1998 second quarter results will be quite as strong as
fiscal 1998 first quarter results.
8
<PAGE>
Bio-logic Systems Corp.
Form 10Q-SB
Cost of equipment sold increased to $1,462,929 during the 1997 three
months compared to $1,060,646 for the 1996 three months, and as a percentage
of net sales decreased to 33% for the 1997 three months from 37% for the 1996
three months. This increase in gross profit during the 1997 three months was
primarily the result of higher net sales with similar product margins while
fixed manufacturing costs were allocated over higher net sales.
Selling, general and administrative expenses increased by 13% to
$2,079,240 for the 1997 three months compared to $1,839,313 for the 1996
three months. Selling, general and administrative expenses as apercentage of
net sales, decreased to 47% for the 1997 three months from 65% for the 1996
three months. This increase in the three month period reflects additional
employee costs related to the Company's comprehensive sales force
restructure, plus increases in travel and sales commissions as the result of
higher net sales. In addition, the Company incurred higher marketing expenses
for product promotions and exhibitions.
Research and development costs increased by 56% to $571,963 for the 1997
three months, compared to $367,467 for the 1996 three months, As a percentage
of net sales, total research and development costs remained at 13% for both
the 1997 and 1996 three 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 $92,700 during the three months ended May 31, 1997 and
1996, respectively. Finally, the amortization expense of these capitalized
research and development costs increased to $45,244 for the 1997 three months
compared to $7,360 in 1996 three months. Bio-logic continues to place
significant emphasis on research and development.
For the three months ended May 31, 1997, the Company had operating income
of $294,548 compared to an operating loss of $422,700 for the three months
ended May 31, 1996. This increase in operating income for the 1997 three
months is due to higher net sales, partially offset by higher selling,
general and administrative expenses and increased research and development
costs.
Net interest income decreased to $36,478 from $47,424 for the three month
periods ended May 31, 1997 and 1996, respectively. This decrease reflects lower
investment returns on marketable securities offset by lower interest expense on
long term debt.
The provision for income taxes of $106,850 was approximately 32% of income
before income taxes during the 1997 three months and the income tax benefit of
$92,942 was approximately 25% of net loss before taxes for the 1996 three
months. 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 $224,978 or $.06 per share for the 1997 three
months, compared to net loss of $281,640 or $0.07 per share for the 1996 three
months. The Company attributes the higher earnings in the three month period to
significantly higher net sales partially offset by higher selling, general and
administrative expenses, and increased research and development costs as
previously discussed.
9
<PAGE>
Bio-logic Systems Corp.
Form 10Q-SB
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 May 31, 1997.
10
<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 9, 1997 By: /s/ Gabriel Raviv
-------------------------
Gabriel Raviv, President
Date: July 9, 1997 By: /s/ William K. Roenitz
-------------------------
William K. Roenitz,
Controller and Treasurer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> MAY-31-1997
<CASH> 2,216,791
<SECURITIES> 2,100,575
<RECEIVABLES> 3,463,540
<ALLOWANCES> 157,154
<INVENTORY> 3,137,657
<CURRENT-ASSETS> 11,287,008
<PP&E> 4,485,953
<DEPRECIATION> 2,677,142
<TOTAL-ASSETS> 14,154,977
<CURRENT-LIABILITIES> 1,862,069
<BONDS> 658,247
0
0
<COMMON> 39,433
<OTHER-SE> 11,385,285
<TOTAL-LIABILITY-AND-EQUITY> 14,154,977
<SALES> 4,408,680
<TOTAL-REVENUES> 4,408,680
<CGS> 1,462,929
<TOTAL-COSTS> 1,462,929
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 24,000
<INTEREST-EXPENSE> 11,433
<INCOME-PRETAX> 331,828
<INCOME-TAX> 106,850
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 224,978
<EPS-PRIMARY> $0.06
<EPS-DILUTED> $0.06
</TABLE>
