================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the Quarterly Period Ended May 31, 1998
[ ] 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 (I.R.S. Employer
incorporation or organization) Identification Number)
ONE BIO-LOGIC PLAZA, MUNDELEIN, ILLINOIS 60060
- ---------------------------------------- ----------
(Address of principal executive offices) (zip code)
Issuer's telephone number, including area code (847-949-5200)
(Former name, former address and former fiscal year,
if changed since last report): not applicable
Check whether the issuer (1) 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 equity, as of the latest practicable date.
Class Outstanding at July 13, 1998
--------------------------- ----------------------------
Common Stock $.01 par value 4,022,334 shares
Transitional Small Business Disclosure Format
Yes No X
--- ---
================================================================================
<PAGE>
BIO-LOGIC SYSTEMS CORP.
FORM 10Q-SB
----------
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at May 31, 1998
and February 28, 1998 .................................... 3
Condensed Consolidated Statements of Operations and
Retained Earnings for the three months ended
May 31, 1998 and 1997 .................................... 4
Condensed Consolidated Statements of Cash Flows for
the three months ended May 31, 1998 and 1997 ............. 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 .............................................................. 11
2
<PAGE>
<TABLE>
BIO-LOGIC SYSTEMS CORP.
FORM 10Q-SB
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
May 31, 1998 February 28, 1998
------------ -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents .............................. $ 5,170,002 $ 3,624,368
Marketable securities .................................. -- 1,500,099
Accounts receivable, less allowance for doubtful
accounts of $251,726 at May 31, 1998
and $219,039 at February 28, 1998 .................... 3,046,083 4,023,324
Inventories ............................................ 3,422,355 3,277,811
Prepaid expenses ....................................... 122,541 144,852
Deferred income taxes .................................. 311,689 311,689
----------- -----------
Total current assets .......................... 12,072,670 12,882,143
PROPERTY, PLANT AND EQUIPMENT -- Net ..................... 1,983,522 2,000,342
OTHER ASSETS ........................................... 890,807 918,752
----------- -----------
TOTAL ASSETS .................................. $14,946,999 $15,801,237
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt ................... $ 137,262 $ 135,005
Accounts payable ....................................... 440,694 493,813
Accrued salaries & payroll taxes ....................... 562,994 699,671
Accrued interest & other expenses ...................... 387,368 355,163
Accrued income taxes ................................... 189,251 601,835
Deferred revenue ....................................... 306,158 360,235
----------- -----------
Total current liabilities ..................... 2,023,727 2,645,722
LONG-TERM DEBT -- Less current maturities ................ 391,818 427,174
COMMITMENTS
DEFERRED INCOME TAXES .................................. 293,548 293,548
----------- -----------
Total liabilities ............................. 2,709,093 3,366,444
----------- -----------
SHAREHOLDERS' EQUITY:
Capital stock, $.01 par value. authorized 10,000,000
shares, issued and outstanding 4,011,984 shares at
May 31, 1998 and 3,983,104 at February 28, 1998 ...... 40,120 39,831
Additional paid-in capital ............................. 4,705,964 4,685,177
Retained Earnings ...................................... 7,491,822 7,709,785
----------- -----------
Total shareholders' equity .................... 12,237,906 12,434,793
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ................. $14,946,999 $15,801,237
=========== ===========
The accompanying notes are an integral part of these statements.
</TABLE>
3
<PAGE>
BIO-LOGIC SYSTEMS CORP.
FORM 10Q-SB
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(Unaudited)
Three Months Ended
May 31,
-----------------------------
1998 1997
----------- -----------
NET SALES .................................... $ 3,707,314 $ 4,408,680
COST OF SALES ................................ 1,227,154 1,462,929
----------- -----------
Gross Profit ........................... 2,480,160 2,945,751
----------- -----------
OPERATING EXPENSES:
Selling, general & administrative ........ 2,114,661 2,079,240
Research & development ................... 747,203 571,963
----------- -----------
Total operating expenses ..................... 2,861,864 2,651,203
----------- -----------
OPERATING INCOME (LOSS) ...................... (381,704) 294,548
OTHER INCOME (EXPENSE):
Interest income .......................... 64,652 48,644
Interest expense ......................... (9,350) (12,166)
Miscellaneous ............................ (861) 802
----------- -----------
TOTAL OTHER INCOME ................... 54,441 37,280
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES ............ (327,263) 331,828
PROVISION (BENEFIT) FOR INCOME TAXES ......... (109,300) 106,850
----------- -----------
NET INCOME (LOSS) ............................ (217,963) 224,978
RETAINED EARNINGS, BEGINNING OF PERIOD ....... 7,709,785 6,561,349
----------- -----------
RETAINED EARNINGS, END OF PERIOD ............. $ 7,491,822 6,786,327
=========== ===========
EARNINGS (LOSS) PER SHARE:
Basic and Diluted .......................... $ (0.05) $ 0.06
=========== ===========
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)
Three Months Ended
May 31,
-------------------------
1998 1997
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) .................................. $ (217,963) $ 224,978
Adjustments to reconcile net income to net
cash flows from (used in) operating activities:
Depreciation and amortization .................. 117,937 111,216
Provision for bad debts ........................ 28,800 24,000
Provision for inventory valuation .............. 77,325 77,325
(Increases) decreases in assets:
Accounts receivable .......................... 948,441 96,133
Inventories .................................. (221,869) (159,553)
Prepaid expenses ............................. 22,311 35,522
Increases (decreases) in liabilities:
Accounts payable and overdrafts .............. (53,119) (69,903)
Accrued liabilities and deferred revenue ..... (158,549) (21,071)
Accrued income taxes ......................... (412,584) 127,208
---------- ----------
Net cash flows from (used in)
operating activities ..................... 130,730 445,855
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ............................. (38,803) (22,833)
Other assets ..................................... (34,369) (2,000)
Proceeds from maturities of investments .......... 1,500,099 692,096
---------- ----------
Net cash flows from (used in)
investing activities ..................... 1,426,927 667,263
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options .......... 21,076 338
Payments of long-term debt ....................... (33,099) (30,975)
---------- ----------
Net cash flows from (used in)
financing activities ..................... (12,023) (30,637)
---------- ----------
INCREASE IN CASH AND CASH EQUIVALENTS .............. 1,545,634 1,082,481
CASH AND CASH EQUIVALENTS -- Beginning of period ... 3,624,368 1,134,310
---------- ----------
CASH AND CASH EQUIVALENTS -- End of period ......... $5,170,002 $2,216,791
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS:
Cash paid during the period for:
Interest ....................................... $ 9,350 $ 11,433
========== ==========
Income Taxes ................................... $ 99,500 $ 15,000
========== ==========
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, 1998 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 (Loss) Per Share
Basic earnings per share are based on the weighted average number of shares
outstanding during each quarter. The weighted average shares for computing
basic earnings per share were 3,988,592 and 3,943,224 for the quarters
ended May 31, 1998 and May 31, 1997, respectively.
Diluted earnings per share are based on the weighted average number of
common and dilutive common equivalent shares calculated at average market
prices. The weighted average shares for computing diluted earnings per
share were 3,988,592 and 4,061,612 for the quarters ended May 31, 1998 and
May 31, 1997, respectively.
Because of the net loss for the quarter ended May 31, 1998, common
equivalent shares were not included in the calculation of diluted earnings
per share as their inclusion would be anti-dilutive.
4. 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
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:
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gain Losses Value
---------- ---------- ---------- ----------
May 31, 1998
- ------------
U.S. Government securities .... $ 0 $ 0 $0 $ 0
May 31, 1997
- ------------
U.S. Government securities .... $2,100,575 $3,220 $0 $2,103,795
6. Earnings per Share Presentation
Earnings per Share -- The Company has adopted Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings per Share," as of February
28, 1998. This statement established new standards for computing and
disclosing earnings per share. In accordance with SFAS No. 128, all
earnings per share amounts for prior periods have been restated to conform
with the new standard.
7. Treasury Stock Retirement
During May 1998, the Company was authorized by its' Board of Directors to
repurchase up to 100,000 shares of its' common stock from time to time.
7
<PAGE>
BIO-LOGIC SYSTEMS CORP.
FORM 10Q-SB
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Prospective investors are cautioned that the statements in this Quarterly
Report on Form 10-QSB that are not descriptions of historical facts may be
forward-looking statements within the meaning of the Private Securities Reform
Act of 1955, including statements concerning the Company's future products,
results of operations and prospects. These forward-looking statements are
subject to risks and uncertainties. Actual results could differ materially from
those currently anticipated, including those relating to general economic and
business conditions, the results of research and development efforts,
technological changes and competition, potential changes in regulation by the
FDA, costs relating to manufacturing of products and the timing of customer
orders detailed elsewhere in this Quarterly Report on Form 10-QSB and from time
to time in the Company's filings with the Securities and Exchange Commission.
LIQUIDITY AND CAPITAL RESOURCES
As of May 31, 1998, the Company had working capital of $10,048,943
including $5,170,002 in cash, cash equivalents and $3,046,083 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, 1998 was $1,545,634 and net
cash flow from operations was $130,730. The loss for the quarter ended May 31,
1998 was $217,963 decreasing cash flow from operations while in contrast, net
income of $224,978 in the quarter ended May 31, 1997 increased cash flow from
operations. In the first quarter ended May 31, 1998, marketable securities of
approximately $1,500,000 matured and provided cash flow from investing
activities.
RESULTS OF OPERATIONS
Net sales for the three month period ended May 31, 1998 (the "1998 three
months") decreased by approximately 16% to $3,707,314 from $4,408,680 in the
three month period ended May 31, 1997 (the "1997 three months"). Domestic sales
for the 1998 three months increased by 2% to $3,152,554 compared to $3,095,456
for the 1997 three months but did not offset an 88% decrease in foreign sales
from $1,313,224 during the 1997 three months to $554,760 during the 1998 three
months. Foreign sales contributed 15% of net sales for the 1998 three months, a
decrease from 30% for the 1997 three months. The decrease in foreign sales was
due to the continuing unfavorable economic conditions in southeast Asia.
Cost of equipment sold decreased to $1,227,154 during the 1998 three months
compared to $1,462,929 for the 1997 three months, but as a percentage of net
sales remained at 33% for both the 1998 and 1997 three months. This decrease in
gross profit during the 1998 three months was primarily the result of lower
foreign net sales.
Selling, general and administrative expenses decreased by 2% to $2,114,661
for the 1998 three months compared to $2,079,240 for the 1997 three months. This
slight increase in selling, general and selling expenses for the 1998 three
months reflect increased expenditures on the Company's ongoing ISO 9000
certification and European CE Mark approval process partially offset by lower
sales commissions. Selling, general and administrative expenses as a percentage
of net sales, increased to 57% for the 1998 three months from 47% for the 1997
three months.
Research and development costs increased by 31% to $747,203 for the 1998
three months, compared to $571,963 for the 1997 three months, as a result of
higher individual salaries, increased outside development costs, and higher
consulting expenses associated with the Company's conversion of its DOS based
systems to Windows 95 and Windows NT platforms. As a percentage of net sales,
research and development costs increased to 20% for the 1998 three months
compared to 13% for the 1997 three months.
8
<PAGE>
BIO-LOGIC SYSTEMS CORP.
FORM 10Q-SB
For the three months ended May 31, 1998, the Company' had an operating loss
of $381,704 compared to operating profit of $294,548 for the three months ended
May 31, 1997. This decrease in operating income for the 1998 three months is due
to lower net sales, and increased research and development costs.
Net interest income increased to $55,302 from $36,478 for the three month
periods ended May 31, 1998 and 1997, respectively. This increase reflects higher
returns on money market accounts and lower interest expense on long term debt.
The income tax benefit of $109,300 was approximately 33% of net loss before
taxes during the 1998 three months and the provision for income taxes of
$106,850 was approximately 32% of income before income taxes during the 1997
three months. The Company's income tax rate differs from the federal statutory
rate of 35% due to differences in foreign income and its corresponding tax
rates.
The Company had a net loss of $217,963 or $.05 per basic and diluted share
for the 1998 three months, compared to net income of $224,978 or $0.06 per basic
and diluted share for the 1997 three months. The Company attributes the loss in
the three month period to lower international net sales 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, 1998.
10
<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: July 14, 1998 By: /s/ GABRIEL RAVIV
----------------------------------
Gabriel Raviv, President
Date: July 14, 1998 By: /s/ JAMES M. SMEARMAN
----------------------------------
James M. Smearman,
Controller
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-END> MAY-31-1998
<CASH> 5,170,002
<SECURITIES> 0
<RECEIVABLES> 3,046,083
<ALLOWANCES> 251,726
<INVENTORY> 3,422,355
<CURRENT-ASSETS> 12,072,670
<PP&E> 4,847,185
<DEPRECIATION> 2,863,663
<TOTAL-ASSETS> 14,946,999
<CURRENT-LIABILITIES> 2,023,727
<BONDS> 529,080
0
0
<COMMON> 40,120
<OTHER-SE> 12,197,786
<TOTAL-LIABILITY-AND-EQUITY> 14,946,999
<SALES> 3,707,314
<TOTAL-REVENUES> 3,707,314
<CGS> 1,227,154
<TOTAL-COSTS> 1,227,154
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 28,800
<INTEREST-EXPENSE> 9,350
<INCOME-PRETAX> (327,263)
<INCOME-TAX> (109,300)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (217,963)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
