<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended February 28, 1999
or
[_] 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.
----------------------------------------------------
(Name of Small Business Issuer in its charter)
Delaware 36-3025678
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Bio-logic Plaza, Mundelein, Illinois 60060-3700
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (847) 949-5200
--------------
Securities registered under Section 12(b) of the Act:
Name of each exchange
Title of Each class on which registered
------------------- ---------------------
None None
Securities registered under Section 12(g) of the Act:
Common Stock, $.01 par value
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(Title of Class)
<PAGE>
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 registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes [X] No [_]
Check here if there is no disclosure of delinquent filers pursuant to Item
405 of Regulation S-B contained herein, and will not be contained, to the best
of the registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
State the issuer's revenues for its most recent fiscal year: $17,418,286.
As of May 24, 1999 the issuer had 4,034,934 shares of Common Stock
outstanding. The aggregate market value of the Common Stock held by
nonaffiliates as of May 24, 1999 was approximately $13.6 million.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Part III
Item 9. Directors,
Executive Officers, To be included in the
Promoters and Control Proxy Statement to be
Persons; Compliance with filed pursuant to
Section 16(a) of the Regulation 14A not
Exchange Act later than 120 days
after the end of the
Item 10. Executive Compensation Registrant's fiscal year.
Item 11. Security Ownership
of Certain Beneficial
Owners and Management
Item 12. Certain Relationships
and Related Transactions
PART I
------
Item 1. Business
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(a) General Development of Business
-------------------------------
Bio-logic/R/ Systems Corp. ("Bio-logic" or the "Company") designs,
develops, assembles and markets computer-based electro-diagnostic systems for
use by hospitals, clinics, universities and physicians. The principal electro-
diagnostic procedures performed by the Company's systems include digital
electroencephalography, for routine and long-term monitoring, evoked response
testing, otoacoustic emissions testing, computerized electromyography,
polysomnography, topographic brain mapping, and other quantitative EEG analyses.
These tests are typically used by medical practitioners specializing in fields
such as neurology, otolaryngology, audiology, anesthesiology, pulmonology, and
psychiatry to aid in diagnosis of certain neurological, sensory, and psychiatric
disorders, and to monitor brain function in the intensive care unit and
operating theater.
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The Company was incorporated under the laws of the State of Delaware
in August 1981 as a successor to an Illinois corporation formed in March 1979.
All references herein to the Company include, unless otherwise indicated, the
operations of the Company and its wholly-owned subsidiaries. On July 1, 1994,
the Company acquired certain assets and assumed certain liabilities of Neuro
Diagnostics, Inc. ("NDI"), a wholly-owned subsidiary of Luther Medical Products,
Inc. NDI, now a wholly-owned subsidiary of the Company, develops, manufactures
and distributes high technology human nervous system testing equipment for use
by hospitals, clinics and physicians. The Company's executive offices are
located at One Bio-logic Plaza, Mundelein, Illinois 60060-3700.
(b) Financial Information About Industry Segments
---------------------------------------------
The Company operates in one business segment: the design, development,
assembly and marketing of computerized medical electro-diagnostic systems for
use in the health care field.
(c) Narrative Description of Business
---------------------------------
Bio-logic designs, develops, assembles and markets computer-based
electro-diagnostic systems for use by hospitals, clinics, universities and
physicians. The principal electro-diagnostic procedures performed by the
Company's systems include computerized electroencephalography, for routine and
long-term monitoring, topographic brain mapping, evoked response testing,
otoacoustic emissions testing, polysomnography and computerized
electromyography. These tests are typically used by medical practitioners
specializing in fields such as neurology, psychiatry, audiology, otolaryngology,
anesthesiology and psychology to aid in diagnosis of certain neurological,
psychiatric, sleep and sensory disorders, psychological and learning disorders,
brain disorders and tumors.
Bio-logic's systems are in modular form and consist of IBM* PC
compatible microcomputers purchased from third parties, interfaced with software
and peripheral devices developed and manufactured by the Company. Any
combination of available diagnostic tests can be included in a system depending
on the user's specialty and requirements. The Company has developed software
which enables medical personnel to administer diagnostic tests, to control
various aspects of the testing and to record and process data generated by the
tests. Operation of any of the Company's systems does not require programming
skills on the part of the customer. The Company believes that its systems allow
users to test patients on a cost efficient basis and that cost effectiveness and
ease of operation are important competitive advantages of its systems.
- -----------------------------------
* A trademark of International Business Machines Corp.
-4-
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The majority of the Company's systems perform tests by means of
computer programs which are controlled by flexible software. The monitor screen
displays a menu of instructions prompting the operator to input information,
test parameters or specific hardware setting adjustments. Testing can be
interrupted, continued or aborted at any time. The Company's systems can be
expanded beyond the main system to include remote monitors or "universal review
stations." Data can be collected on the main system and analyzed on universal
review stations placed in convenient locations. Because the Company's system is
compatible with the IBM PC, the user's IBM compatible computer can be converted
into a universal reader for Bio-logic products, and a variety of commercially
available programs, such as word processing and database management, can be
used.
Bio-logic has incorporated remote communications capabilities in its
product lines through both modem communications and computer networks. These new
information capabilities provide (a) the ability to view in real time tests
being conducted on a remote system, which is particularly useful for
consultation during monitoring in the operating room in connection with tests
performed at alternate sites outside the hospital; (b) electronic transfer of
test results, reports and patient information among different systems; (c)
review and analysis of records stored in a remote location; and (d) sharing of
archiving media (such as DVD) and printing devices among several systems. These
enhancements are designed to increase the efficiency and productivity of
operations and minimize duplication of equipment by customers of the Company's
systems.
More recently developed products take advantage of computer component
miniaturization which allows compact devices for ambulatory testings. These
tests can then be reviewed on a reader station.
The Company's systems are sold to hospitals, universities, private
clinics and physicians to test and monitor patients as well as conduct research.
Bio-logic has a continuing program to develop new applications of electro-
diagnostic testing.
Computerized Electroencephalograph (EEG)
- ----------------------------------------
The Company's Ceegraph(TM) line of computerized EEG systems records,
displays, stores, and analyzes the spontaneous brain electrical activity from
various locations on a patient's scalp. Traditional EEG machines provide only
paper tracings of EEG recordings. The Ceegraph stores the information in digital
form and displays it on a color monitor. This allows the user added flexibility
in display and analysis capabilities. Furthermore, digital analysis allows
increased sensitivity to subtle functional abnormalities that may not be
perceived in paper tracings of the raw data. The Ceegraph minimizes the need for
hard copies of all recorded data thereby significantly reducing paper supply and
storage expenses.
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The Ceegraph line includes a series of several products ranging from a
software license which the customer adds to his own IBM-compatible computer to
create a digital EEG review system, to a portable EEG system, an ambulatory
monitor, and/or an advanced laboratory system with multiple capabilities for
EEG, long-term epilepsy monitoring, quantitative EEG analysis, and other
neurological applications. The Ceegraph line also includes a Universal ReaderO
which permits fast and easy review in a graphic display. The Ceegraph line is
priced from approximately $30,000 to $80,000 depending upon the model.
A digital video option allows synchronized video recording of a
patient during EEG acquisition. Computerized control provides synchronous
recording of EEG and video for long-term epilepsy monitoring and other
applications.
SmartPack(TM), a patented software option available with the Ceegraph
line, is an innovative data compression process that saves about 60% in storage
and archiving space. Data compression is performed in real-time with no loss of
information.
The Ceegraph Traveler(R) is a solid-state battery-operated ambulatory
recorder for epilepsy monitoring that records continuous information from 24
channels and saves data on a removable PCMCIA hard disk. Data can immediately be
reviewed and analyzed by the Ceegraph analysis program and subjected to
automatic spike and seizure analysis.
SmartTrack(TM) is another Ceegraph software option used for automatic
analysis of epileptic spikes and seizures. This system was developed through a
collaboration between the Company and Johns Hopkins Epilepsy Center and is used
to assist in the identification of clinical EEG events indicative of epilepsy.
The detection algorithm is based on a neural-network approach and can be used in
real time or off line. The same system is used to analyze long-term records
obtained in the hospital and ambulatory recordings performed with the Ceegraph
Traveler off site.
Quantitative EEG
- ----------------
The Company offers a series of products for advanced analysis of EEG
and evoked potentials, including (i) topographic brain mapping, which is used,
among other things, to evaluate the effects of drug treatments, psychiatric and
other behavioral disorders and field distribution of epileptic spikes and
seizures, (ii) dipole source localization, which is used in modeling and
characterizing the intracranial source of brain electrical activity and as an
aid in noninvasive evaluation of epilepsy, and (iii) compressed spectral array,
a quantitative analysis of EEG spectra, which is used in intensive care and
operating room monitoring. These products are priced from approximately $25,000
to $90,000 depending upon the model.
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Distortion Product Otoacoustic Emissions Testing
- ------------------------------------------------
Distortion Product Otoacoustic Emissions (DPOAE) testing is a non-
invasive, objective technique for evaluating the function of the cochlea, the
sensory organ of the auditory system. The system introduces two pure tones of
known intensity and frequency parameters into the patient's ear canal and
measures the small amplitude acoustic response generated by the outer hair cells
in response to the signal. The measurement of an emission greater in amplitude
than the level of the ambient acoustic noise suggests functional cochlear
structures. The Company offers a series of products for DPOAE measurements,
which are used in clinical practice to diagnose hearing/auditory impairments.
They can also be used in hospital neonatal intensive care units or well-baby
nurseries as a peripheral hearing screening tool.
In fiscal 1999, the Company continued to enhance the functionality of
the AuDX(R) system, a battery-operated, hand-held device designed to detect
hearing impairment. The Company is actively marketing AuDX to hospitals for
universal newborn hearing screening, pediatricians, family practitioners and
schools. The selling price for the Bio-logic DPOAE systems range from $4,000 to
$15,000.
Evoked Response Testing
- -----------------------
Evoked response testing is an accepted, non-invasive and objective
technique for evaluating the peripheral and central nervous systems. An evoked
response test measures the reaction to a stimulus by monitoring the electrical
activity in the patient's brain. By comparing the magnitude and timing of the
response in a particular patient to normal patterns of response, a physician is
aided in his evaluation of the patient's neurological pathways.
Evoked response testing facilitates the diagnosis of a number of
disorders. Evoked response testing provides information that can be used in the
investigation of neurological and sensory disorders, brain tumors, and damage to
the brainstem. The Company provides modular systems which can perform auditory,
visual and somatosensory evoked response tests. The auditory evoked response
testing evaluates the function and disorders of the central and peripheral
auditory system. Visual testing is used to diagnose disorders of the visual
system and somatosensory testing is used to test various segments of the central
nervous system.
The evoked response tests performed by the Company's systems may be
used to test hearing and sight of patients who are unable to communicate
effectively, such as infants and mentally impaired individuals. Evoked response
testing may also be utilized in intensive care units as a method of confirming
brain death and in intraoperative monitoring. Surgical procedures of the back,
head, neck and other areas involving the central nervous system can be monitored
to reduce risks to the patient and improve outcomes. In addition,
pharmacologists are using these measurements to study the interaction of drugs
and their effects on living organisms, and researchers have used the test data
to study the effects of pollution and chemicals on the human body. The
approximate selling price of the evoked response systems, which consist of
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<PAGE>
the Company's Explorer(TM), EP Navigator(R) and Traveler, range from $15,000 to
$70,000 depending upon the number and types of tests included.
Intraoperative Monitoring
- -------------------------
The Company's Explorer(TM) is used to reduce the risk of iatrogenic
injury to the brain, spinal cord, peripheral and cranial nerves during surgery.
Intraoperative monitoring (IOM) employs many specialized neurodiagnostic tests
including: auditory, somatosensory, and visual EP's; neurogenic and myogenic
motor EP's; EMG; EEG and quantitative EEG. Many recent improvements have been
made to the product to further increase utility in the operating room
environment and to reduce the workload of personnel performing monitoring. The
approximate selling price of the Explorer intraoperative monitoring systems
range from $30,000 to $70,000 depending upon the requested configuration.
Computerized Polysomnography
- ----------------------------
Sleepscan II is a Windows based system for sleep scoring and
respiratory analysis. The analysis of sleep and respiratory patterns has proven
useful in the diagnosis and treatment of sleep related diseases, some of them
life threatening, such as apnea, insomnia, and narcolepsy. Other specialities
analyze sleep patterns to study mental disorders like depression, sexual
dysfunction, and more.
A routine sleep study entails whole-night recordings of brain
electrical activity, muscle movement, air flow, respiratory effort, oxygen
levels and EKG. These recordings result in over 1,000 pages of paper traces
which have to be reviewed, analyzed, scored by a specialist, and summarized in a
report. This process is costly and time consuming.
Sleepscan II stores all the information digitally on magnetic and
optical media. A high resolution fast display offers an alternative to costly
and bulky paper. This flexible system enables the user to specify rules to be
used during analysis. This analysis can rapidly be performed by the computer,
and the results are summarized graphically and incorporated in a detailed report
which is readily available. The user has the ability to verify the analysis,
manually override sections as needed, modify parameters and reanalyze data.
Sleepscan offers savings in time and the cost of paper and paper storage.
Sleepscan is interfaced with a Ceegraph EEG System, and is priced from
approximately $25,000 to $60,000 depending on the model.
The Airflow Pressure Transducer is a alternative to the current
airflow monitoring devices which use temperature to produce change as an
indicator. It detects airflow by pressure changes so it can detect shallow
breathing where temperature related transducers remain substantially unchanged.
This method is documented to produce the signature waveform used in identifying
a respiratory disorder known as Upper Airway Resistance Syndrome.
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The Company also offers a portable Sleepscan Express system with 40-
channel recording capability and built-in oximeter. Whereas other portable sleep
analysis systems provide only summary analysis and fewer channels, the Sleepscan
Express is the first truly portable sleep system with full data disclosure of up
to 40 channels. Records can be analyzed on other desktop Sleepscan systems.
The Traveler(R), introduced in spring of 1997, is a solid-state,
battery operated ambulatory recorder for sleep and epilepsy monitoring. It
records continuous information on 8, 19, or 27 channels for sleep and 16, 18, or
24 channels for EEG applications. The data, which is saved on a PCMCIA removable
miniature hard disk for easy access, can be immediately reviewed and analyzed by
the Sleepscan II or Ceegraph analysis program.
Product Development
- -------------------
Bio-logic's development activities consist primarily of developing new
products and adding new features to and enhancing the capabilities of the
existing products. Refinements to the Company's systems are also developed in
response to users' suggestions. During fiscal 1999 and 1998, Bio-logic expended
$2,854,105, and $2,416,774, respectively, for research and development.
Developments in digital EEG include the Ceegraph IV, a Windows-based
digital EEG system; Ceegraph Express, a portable EEG system, a synchronized
digital video option for short and long-term EEG monitoring; spike/seizure
detection for the epilepsy monitoring market and the Traveler, an EEG/Sleep
ambulatory system.
Developments for the sleep market include the Sleepscan II, a system
for computerized polysomnography and the Sleepscan Express, a portable system
with full data disclosure. Additional improvements were added to the Explorer,
an EP/EMG system for measuring neuromuscular function.
The Company is continuing the development of Distortion Product
Otoacoustic Emission (DPOAE) systems for the Audiology market including the
AuDX, a portable hand-held device ideal for universal newborn hearing screening.
Finally, the company is in the initial stages of developing an automated
auditory brainstem evoked response system that will expand the line of products
for newborn hearing screening.
The latest developments in Ceegraph have greatly enhanced the systems
capabilities. The entry level Ceegraph IV is the first Windows based digital EEG
system that expands to integrate all EEG needs - routine tests, long-term
epilepsy monitoring and ambulatory recording. The Ceegraph XL is a system for
short and long-term epilepsy monitoring with up to 128 acquisition channels. The
new digital video option provides synchronized EEG/video
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<PAGE>
recordings with the video record saved digitally on disk. Random access to
selected EEG events and corresponding video is accomplished instantly. A quick-
tilt(TM) (patent-pending) electrode headbox used for surface and intracranial
recordings reduced the labor involved in managing electrode labeling and
placement during long-term epilepsy monitoring sessions. A powerful MS/Office
compatible system for record management and report generation was incorporated
into all Windows applications. Finally, numerous software enhancements were
introduced to increase efficiency and ease of use, save time, and minimize
operator error.
The Company is continuing to port all products to the Windows based
operating system. This transition is concurrent with continuous improvements of
existing products. The migration to the new operating system is designed to give
existing customers an upgrade path and maximize the use and life of their
existing systems.
In fiscal 1999, the Company achieved certification to ISO 9001 and
EN46001. These standards are designed to define and strengthen the company's
quality system to improve quality and increase efficiency. Additional compliance
with the European Medical Device Directive allowed Bio-logic to place the CE
mark on products, as required after June 14, 1998, for sale of products to the
European market. TUV Rheinland was contracted as the Company's Notified Body and
Registrar and issued the relevant certifications.
The Company anticipates that it will continue to incur significant
research and development expenditures in connection with the introduction of new
products and new models and upgrades of existing products. Additionally, from
time to time the Company may seek to license or acquire complementary
technologies from third parties.
The Company is a party to a number of other research and development
agreements under which, as of February 28, 1999, the Company had received an
aggregate of approximately $1,087,000. The Company is required to pay royalties
based on sales of any product developed under such agreements, or in the event
of licensing of such products to a third party. The total payments by the
Company, including royalties and licensing fees, will not exceed 150% of the
amounts received under such agreements. As of February 28, 1999, the Company has
paid royalties of $1,202,518 under such agreements.
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Sales and Marketing
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The Company's marketing efforts are directed at medical practitioners,
hospitals and clinics. Sales are presently conducted by sales representatives
and independent dealer organizations covering the United States and Canada. Some
of these distributors may also represent other companies offering products
competitive with those of the Company. The Company's marketing efforts are
directed and controlled from its corporate headquarters in the Chicago area. The
Company has an overseas office to cover European and Middle Eastern markets and
has arrangements with foreign distributors to sell the Company's products
overseas, including the Far East and Latin America. No one customer or
distributor has accounted for over 10% of the Company's revenues.
To demonstrate, promote and market its systems, Bio-logic attends
seminars and trade shows organized by others and sponsors its own educational
and sales oriented seminars throughout the United States. Selling and marketing
programs include operations of the European sales office and sales and other
product brochures and direct mail programs.
Foreign Sales
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During fiscal 1999, export sales decreased to $2,333,483, or
approximately 13% of net sales, compared to $3,924,059, or approximately 22% of
net sales, in fiscal 1998. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The Company is required to
obtain export licenses for sales of some of its systems to foreign countries.
Political and governmental conditions, import and export restrictions, and
currency fluctuations in the Far East and South America have adversely affected
the Company's foreign business. Also, in fourth quarter of fiscal 1999, some
international orders that were accepted and scheduled for shipment were delayed
until the first quarter fiscal 2000, due to logistical and scheduling concerns.
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Customer Training, Support and Maintenance
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In connection with the installation of a system, the independent
dealer's sales representative or, if the sale was made directly by the Company,
the Company's customer support personnel, train medical and office personnel in
the use of the equipment, assist in the introduction of the data into the system
and provide assistance to the customer during the initial period of operations.
The Company continues to support its technical and customer training staff.
Foreign sales are supported by the foreign distributors. The Company's practice
is to offer without additional charge a one year limited warranty on its
software and equipment for parts and labor. The Company has experienced
satisfactory field operating results and warranty expense has been insignificant
to date. The manufacturers of the microcomputer included in the Company's
systems provide a one year warranty against defects and have service
capabilities throughout the United States. In addition, the Company offers its
customers service and maintenance agreements for an additional fee. Service fees
have been insignificant to date. Software enhancements developed by the Company
are typically distributed to system users for a minimal fee.
Assembly, System Hardware and Sources of Supply
- -----------------------------------------------
The Company assembles its systems by integrating microcomputers,
monitors and printers and certain standard components manufactured by other
manufacturers, with peripherals and other hardware including circuit boards and
certain electronic components manufactured by Bio-logic and software packages
which it has developed. The Company's systems are composed of IBM PC compatible
microcomputers, appropriate printers and mass storage media such as high
capacity hard disks and removable DVD disks for the storage of both operating
programs and data. The Company purchases microcomputers from distributors of
such products for varying discounts depending upon the volume of equipment
purchased. The components used in the Company's systems are available from a
number of suppliers. Finally, the Company performs quality control and testing
procedures on all systems prior to delivery.
Patents and Trademarks
- ----------------------
The Company currently owns six patents covering certain aspects of its
brain mapping system and other technology developed by the Company, including
the most recent patent related to the SmartPack. In fiscal 1999, the Company
continued to expand its' intellectual property by applying for two additional
patents. These applications are currently under review by the U.S. Patent
office. There is no assurance that such patents will afford any commercial
benefits. The Company has registered the trademarks Bio-logic, Brain Atlas, AuDX
Scout, Navigator and Traveler. The Company has developed a number of unpublished
computer software programs which are entitled to unpublished copyright
privileges as confidential proprietary material. The Company believes that
rapidly changing technology makes its continued success dependent primarily upon
the technical competence and creative skill of its personnel rather than on
patents, copyrights or other proprietary rights.
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Competition
- -----------
The Company competes with a number of entities, several of which have
greater resources than the Company, which offer systems performing diagnostic
tests similar to those performed by the Company's systems. The Company's
principal competitors, some of which are substantially larger and have more
marketing personnel and greater technical resources than the Company, are
Nicolet Instrument Corporation, Telefactor Corporation, NCI, Inc., Nihon-Kohden
Corporation, Oxford Instruments, Medical Graphics Corporation, Mallinckrodt,
Inc., and Cadwell Laboratories, Inc. Bio-logic believes that it competes for
customers on the basis of the range and quality of software and hardware
offered, and the cost effectiveness of its integrated system. Another major
competitive factor is its ability to tailor systems to a customer's particular
diagnostic and data processing requirements.
Government Regulation
- ---------------------
The Company's products, to the extent they are deemed medical devices,
are subject to government regulation by the United States Food and Drug
Administration ("FDA") and accordingly, unless determined to be exempt, are
subject to the preclearance procedures of the FDA before reaching the market.
Under FDA regulations, a medical device is classified as either a
Class I device, which is subject only to general control provisions, a Class II
device which, in addition to applicable general controls, will be made subject
to future performance standards developed by the FDA, or a Class III device
which, in addition to applicable general controls, is subject to FDA premarket
approval.
The Company's systems have been classified as Class II medical devices
as such term is defined in the regulations promulgated by the FDA. The Company
has filed 510(K) applications (notifications of intention to market) with the
FDA. The Company continues to advise the FDA as modifications and additions are
made to its systems.
In addition, all manufacturers of medical devices are required to
register with the FDA and to adhere to certain "good manufacturing practices"
and "good laboratory practices," which prescribe recordkeeping procedures and
provide for the unscheduled inspection of facilities.
Employees
- ---------
As of February 28, 1999, the Company employed 103 persons full time.
The Company's business is dependent in part upon its ability to recruit and
retain qualified personnel.
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None of its employees are represented by a labor union and the Company believes
its employee relations are satisfactory.
Executive Officers
- ------------------
The executive officers of the Company are as follows:
Name Age Position
--- --- --------
Gabriel Raviv, Ph.D. 48 President, Chief
Executive Officer,
Director
Thomas S. Lacy 56 Vice
President-Marketing
and Sales
Gabriel Raviv has been a Director of the Company since the Company
commenced operations in March 1979. He was Vice President of the Company from
March 1979 until February 1981, when he became President and Chief Executive
Officer. He is a Adjunct Professor at Northwestern University. From October 1975
until January 1981, Dr. Raviv was the director of the Clinical Research
Instrumentation Laboratory at Evanston Hospital (an affiliate of Northwestern
University). Dr. Raviv received his M.S. and Ph.D. degrees in Electrical
Engineering and Computer Sciences from Northwestern University.
Thomas Lacy has been Vice President-Marketing and Sales of the Company
since January 1994. Prior thereto he was Vice President-International of Packard
Instrument Corporation from July 1992 until July 1993 and Vice President-General
Manager of Packard Instrument Company from September 1988 until July 1992.
Item 2. Properties
----------
The Company's headquarters and manufacturing operations are located in
an approximately 26,000 square foot facility built by the Company on
approximately 20 acres in Mundelein, Illinois. The building and property are
owned by the Company, subject to Industrial Development Bond financing with a
remaining principal balance of approximately $438,000. As collateral for the
Bond, the Company granted the municipality a mortgage on the property.
The Company also leases two offices overseas, both of which are
occupied pursuant to a lease providing for an annual rental of approximately
$14,900 and $35,500, respectively, subject to annual increases.
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Item 3. Legal Proceedings
-----------------
The Company is not a party to any material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not Applicable.
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PART II
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Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
---------------------------------------------------------------------
(a) Price Range of Securities
-------------------------
The Company's Common Stock is listed on the Nasdaq National
Market under the symbol BLSC. The Company's Warrants are listed in the "pink
sheets" but have not been priced since December 1990. The following tables set
forth the high and low sales prices of the Common Stock for the periods
indicated as reported by Nasdaq. These quotations represent prices between
dealers in securities, do not include retail mark-ups, mark-downs or commissions
and do not necessarily represent actual transactions. These quotations are
rounded to the nearest 1/16 through the 3rd quarter 1998 and to the 1/25
beginning in the 4th quarter 1998:
<TABLE>
<CAPTION>
High Low
Sales Price Sales Price
----------- -----------
<S> <C> <C>
Fiscal Year Ended February 28, 1999
- -----------------------------------
1st Quarter $5 17/25 $4 2/5
2nd Quarter 5 000 2 7/8
3rd Quarter 3 4/5 2 1/2
4th Quarter 4 1/4 2 1/2
Fiscal Year Ended February 28, 1998
- -------------------------------------
1st Quarter $ 3 7/8 $2 7/8
2nd Quarter 6 5/8 2 7/8
3rd Quarter 9 3/4 4 5/8
4th Quarter 5 18/25 3 7/8
</TABLE>
(b) Approximate Number of Equity Security Holders
---------------------------------------------
As of May 24, 1999, there were approximately 223 record holders
of the Company's Common Stock. The Company believes that there are in excess of
400 beneficial owners of its Common Stock.
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(c) Dividends
---------
The Company has never paid a cash dividend on its Common Stock
and intends to continue to follow a policy of retaining earnings to finance
future growth. Accordingly, the Company does not anticipate the payment of cash
dividends to holders of Common Stock in the foreseeable future. Under an
agreement with the bank which purchased the Industrial Development Bond issued
to finance construction of the Company's headquarters, the Company may not pay
cash dividends during the term of the Bond without the prior written consent of
the bank.
Item 6. Selected Financial Data
-----------------------
The selected financial data presented below summarizes certain
financial data and should be read in conjunction with the more detailed
financial statements of the Company and the notes thereto included elsewhere in
this Annual Report on Form 10-KSB along with said financial statements.
<TABLE>
<CAPTION>
Fiscal Year Ended Last Day of February,
------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $17,418,286 $18,018,689 $14,856,955 $14,602,000 $12,072,674
Operating income 99,370 1,551,114 811,712 1,204,459 787,150
Net income (1) 289,140 1,148,436 683,845 892,091 740,412
Net income per share (2)(3) 0.07 0.28 0.17 0.21 0.18
Working capital 10,592,510 10,236,421 7,645,040 9,428,915 6,925,542
Total assets 16,038,207 15,801,237 13,924,402 14,379,986 13,499,684
Long-term debt 294,618 427,174 562,879 689,877 808,726
Total liabilities 3,332,874 3,366,444 2,725,000 2,982,675 3,130,431
Shareholders' equity 12,705,333 12,434,793 11,199,402 11,397,311 10,369,253
Shares outstanding (2)(3) 4,095,939 4,117,334 4,140,216 4,329,445 4,220,040
</TABLE>
- --------------------
(1) Includes net interest income of $227,033, $173,505, $170,864, $114,412, and
$137,972 in fiscal 1999, 1998, 1997, 1996 and 1995, respectively.
- 17 -
<PAGE>
(2) Weighted average number of common and dilutive common equivalent
shares calculated using average market prices.
(3) On February 28, 1998, The Company adopted Statement of Financial
Accounting Standards No. 128 - "Earnings per Share" (SFAS 128.) All
current and prior years earnings per share data have been restated to
conform to the provisions of SFAS 128.
Item 7. Managements' Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
-------------
Prospective investors are cautioned that the statements in this Annual
Report on Form 10-KSB that are not descriptions of historical facts may be
forward-looking statements within the meaning of the Private Securities Reform
Act of 1995, 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 Annual Report on Form 10-KSB and from time to
time in the Company's filings with the Securities and Exchange Commission.
Results of Operations
- ---------------------
Fiscal 1999 Compared To Fiscal 1998
-----------------------------------
Net sales for fiscal 1999 were $17,418,286, a 3% decrease from net sales of
$18,018,689 during fiscal 1998. Domestic sales in fiscal 1999 increased by 7%
to $15,084,803 from $14,094,630 in fiscal 1998. Foreign sales in fiscal 1999
decreased by 41% to $2,333,483 compared to $3,924,059 for fiscal 1998. As a
percentage of net sales, domestic and foreign sales for fiscal 1999 were 87% and
13%, respectively, compared to 78% and 22% for fiscal 1998, respectively.
The decrease in net sales internationally was caused by a combination of
currency fluctuations and political unrest that affected many of our Asian and
South American customers. In addition, international orders in the fourth
quarter of 1999 were delayed and not shipped until the 1st quarter 2000 due to
the longer than expected release of our upgraded software packages. System
sales of the Ceegraph and Sleep product lines were slower overall due to some
customers desires to hold off ordering and accepting delivery until the Windows-
based versions were completed. In contrast, the introduction in the fourth
quarter of fiscal 1999 of our 64/128 channel Ceegraph XL, the most advanced
monitoring system for epilepsy, helped increase sales domestically by generating
larger orders that spanned virtually our whole product line. Finally, continued
growth in net sales of the AuDX system domestically during fiscal 1999 partially
offset lower net sales internationally.
Cost of equipment sold decreased to $5,633,758 during fiscal 1999 compared
to $5,703,652 for fiscal 1998, and as a percentage of net sales remained at
approximately 32% for both fiscal 1999 and 1998. This slight decrease in cost of
equipment sold was the result of
- 18 -
<PAGE>
slightly lower net sales.
Selling, general and administrative expenses increased by approximately 6%
to $8,831,053 during fiscal 1999 compared to $8,347,149 for fiscal 1998, and as
a percentage of net sales increased to 51% for fiscal 1999 compared to 46% for
fiscal 1998. Selling, general and administrative expenses for fiscal 1999 were
higher primarily due to increased administrative cost associated with ISO-9000
certification, higher sales expenses related to increases in the number of sales
related positions, and increased dealer sales commissions.
Research and development expenses increased by approximately 18% to
$2,854,105 during fiscal 1999 in contrast to $2,416,774 for fiscal 1998, and as
a percentage of net sales, increased to 16% for fiscal 1999 compared to 13% for
fiscal 1998. The increase in research and development costs were mainly due to
higher individual salaries, increases in outside consulting, plus the Company's
overall efforts to convert all DOS based systems to Window based platforms.
For fiscal 1999, the Company had operating income of $99,370 compared to
operating income of $1,551,114 for fiscal 1998. The decrease in operating
income for fiscal 1999 was due to lower international net sales, higher selling,
general and administrative costs plus higher research and development expenses.
The Company had net interest income of $227,033 for fiscal 1999 compared to
$173,505 for fiscal 1998. The increase of net interest income is primarily due
to higher interest income earned on the Company's money market accounts and
lower interest expense on short and long term debt.
The provision for income taxes during fiscal 1999 was approximately 10% of
income before taxes, compared to 33% of income before taxes in fiscal 1998. The
tax provision as a percentage of net income in fiscal 1999 was lower due to
differences in foreign income and its' corresponding tax rates.
The Company had net income of $289,140 or $.07 per diluted share for fiscal
1999 compared to $1,148,436 or $.28 per diluted share for fiscal 1998. The
decrease in net income was the result of lower gross profit and higher operating
expenses offset by other income and provisions for income taxes.
Liquidity And Capital Resources
- -------------------------------
As of February 28, 1999, the Company had working capital of $10,592,510;
including $5,957,112 of cash and cash equivalents and $3,359,291 of accounts
receivable. The principal sources of working capital are funds generated from
operations. Net cash provided by operating activities during fiscal 1999 was
$1,129,588. 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 of
credit will bear interest at the bank's prime rate.
Bio-logic's headquarters and manufacturing facility were partially financed
with an Industrial Development Bond (the "Bond") in the original principal
amount of $1,600,000.
- 19 -
<PAGE>
Principal and interest on the Bond are payable in monthly installments through
December 1, 2001. The Bond bears interest at 80% of the base lending rate in
effect from time to time. As collateral for the Bond indebtedness, the Company
granted the municipality a mortgage on the property including improvements. The
Company also agreed to maintain a current ratio of not less than 1.5:1 and a
ratio of total liabilities to net worth of not greater than 1:1, and agreed not
to declare or pay cash dividends without the prior written consent of the bank
which purchased the Bond. The Company agreed to maintain at such bank a
compensating balance equal to 10% of the unpaid balance of the loan in a non-
interest bearing account. The outstanding principal amount of the Bond was
approximately $438,000 at February 28, 1999.
The Company is a party to a number of research and development agreements
under which, at February 28, 1999, the Company had received an aggregate of
approximately $1,087,000. The Company is required to pay royalties based on
sales of any product developed under such agreements, or in the event of
licensing of such products to a third party. The total payments by the Company,
including royalties and licensing fees, will not exceed 150% of the amounts
received under such agreements. As of February 28, 1999, the Company has paid
royalties of $1,202,518 under such agreements.
At February 28, 1999, the Company had no material capital commitments.
During fiscal 1999, the Company purchased 31,800 shares of the its' common stock
at an aggregate cost of $88,920.
From time to time, the Company explores various corporate finance
transactions such as business combinations or acquisitions, certain of which may
include the issuance of Company securities. However, the Company has no
agreements or commitments with respect to any particular transaction and there
can be no assurance that any such transaction will be completed.
New Accounting Pronouncements
- -----------------------------
During 1997 the Financial Accounting Standards Board (FASB) issued
Statements of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income" and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," both effective for fiscal years beginning
after December 15, 1997.
SFAS No. 130 requires disclosure of the components of and total
comprehensive income in the period in which they are recognized in the financial
statements. Comprehensive income is defined as the change in equity (net
assets) of a business enterprise arising from transactions and other events and
circumstances from non-owner sources. It includes all changes in shareholders'
equity during the reporting period except those resulting from investments by
owners and distributions to owners. The Company does not have changes in
stockholders' equity other than those resulting from investments by and
distributions to owners. The functional currency for the Company's
international operations is the U.S. dollar.
SFAS No. 131 requires disclosures of certain segment information based on
the way that management evaluates segments for making decisions and assessing
performance. It also requires disclosure of certain information about products
and services, the geographic areas in
- 20 -
<PAGE>
which the Company operates, and major customers. The Company operates in a
single reportable segment: the design, development, assembly and distribution of
computerized medical electrodiagnostic systems for use in the health care field.
Year 2000 Compliance
- --------------------
As a manufacturer of computer based electro-diagnostic medical equipment,
the Company must determine if software and hardware problems will occur when the
year 2000 arrives. During fiscal 1999 and into fiscal 2000, the Company's
engineers and product specialists have tested and will continue to test the
Company's product line under the year 2000 scenario. As of May 1999, our
testing has not revealed any potential problems with year 2000 compliance. The
Company believes that the cost associated with year 2000 compliance will be
insignificant to the overall operations of the business.
Item 7. Financial Statements
--------------------
The response to this item is submitted in a separate section of this
report. See Table of Contents to Consolidated Financial Statements on page F-1.
Item 8. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure
--------------------
None
- 21 -
<PAGE>
PART III
--------
The information called for by Items 9, 10, 11 and 12 of Part III has
been omitted and will be included in the Registrant's proxy statement which will
be filed not later than 120 days after the close of its fiscal year.
- 22 -
<PAGE>
PART IV
-------
Item 13. Exhibits, List and Reports on Form 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)
10.7 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)
- 23 -
<PAGE>
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)
23.1 Consent of Independent Auditors
(b) Reports on Form 8-K
-------------------
During the three months ended February 28, 1999, no reports on Form 8-K
were filed by the Company.
- -------------
(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.
(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.
- 24 -
<PAGE>
(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.
- 25 -
<PAGE>
BIO-LOGIC SYSTEMS CORP. AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS............... F-2
FINANCIAL STATEMENTS:
Consolidated Balance Sheets, February 28, 1999 and 1998....... F-3
Consolidated Statements of Earnings for the Years Ended
February 28, 1999 and 1998................................. F-4
Consolidated Statement of Shareholders' Equity for the Years
Ended February 28, 1999 and 1998........................... F-5
Consolidated Statements of Cash Flows for the Years Ended
February 28, 1999 and 1998................................. F-6
Notes to Consolidated Financial Statements.................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Bio-logic Systems Corp.:
We have audited the accompanying consolidated balance sheets of Bio-logic
Systems Corp. and subsidiaries as of February 28, 1999 and 1998, and the related
consolidated statements of earnings, shareholders' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Bio-logic Systems
Corp. and subsidiaries as of February 28, 1999 and 1998, and the consolidated
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
GRANT THORNTON LLP
Chicago, IL
April 23, 1999
F-2
<PAGE>
BIO-LOGIC SYSTEMS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
FEBRUARY 28, 1999 AND 1998
<TABLE>
<CAPTION>
ASSETS 1999 1998
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 5,957,112 $ 3,624,368
Marketable securities -- 1,500,099
Accounts receivable, less allowance for doubtful accounts
of $249,322 in 1999 and $219,320 in 1998 3,359,291 4,023,324
Inventories 3,533,408 3,277,811
Prepaid expenses 236,865 144,852
Deferred income taxes 299,195 311,689
----------- -----------
Total current assets 13,385,871 12,882,143
PROPERTY, PLANT AND EQUIPMENT - Net 1,906,057 2,000,342
OTHER ASSETS 746,279 918,752
----------- -----------
TOTAL ASSETS $16,038,207 $15,801,237
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 143,467 $ 135,005
Accounts payable 599,228 493,813
Accrued salaries and payroll taxes 876,770 699,671
Accrued interest and other expenses 619,023 355,163
Accrued income taxes 354,735 601,835
Deferred revenue 200,138 360,235
----------- -----------
Total current liabilities 2,793,361 2,645,722
LONG-TERM DEBT -- Less current maturities 294,618 427,174
DEFERRED INCOME TAXES 244,895 293,548
----------- -----------
Total liabilities 3,332,874 3,366,444
----------- -----------
COMMITMENTS -- --
SHAREHOLDERS' EQUITY:
Capital stock, $.01 par value; authorized, 10,000,000 shares;
issued and outstanding; issued 4,034,734 and outstanding
4,002,934 shares in 1999 and 3,983,104 in 1998 40,347 39,831
Additional paid-in capital 4,754,981 4,685,177
Retained earnings 7,998,925 7,709,785
----------- -----------
12,794,253 12,434,793
Less treasury stock, at cost: 31,800 shares in fiscal 1999 88,920 --
----------- -----------
Total Shareholders' equity 12,705,333 12,434,793
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $16,038,207 $15,801,237
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
BIO-LOGIC SYSTEMS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED FEBRUARY 28, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
NET SALES $17,418,286 $18,018,689
COST OF SALES 5,633,758 5,703,652
----------- -----------
Gross profit 11,784,528 12,315,037
OPERATING EXPENSES:
Selling, general, and administrative 8,831,053 8,347,149
Research and development 2,854,105 2,416,774
----------- -----------
Total operating expenses 11,685,158 10,763,923
----------- -----------
OPERATING INCOME 99,370 1,551,114
OTHER INCOME (EXPENSE):
Interest income 258,558 219,285
Interest expense (31,525) (45,780)
Miscellaneous (3,704) (633)
----------- -----------
TOTAL OTHER INCOME 223,329 172,872
----------- -----------
INCOME BEFORE INCOME TAXES 322,699 1,723,986
PROVISION FOR INCOME TAXES 33,559 575,550
----------- -----------
NET INCOME $ 289,140 $ 1,148,436
=========== ===========
NET INCOME PER SHARE:
Basic $0.07 $0.29
=========== ===========
Diluted $0.07 $0.28
=========== ===========
AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic 4,008,201 3,959,864
=========== ===========
Diluted 4,095,939 4,117,334
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
BIO-LOGIC SYSTEMS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
YEARS ENDED FEBRUARY 28, 1998 AND 1999
<TABLE>
<CAPTION>
Capital Stock
------------------- Additional
Number of Paid-in Retained Treasury
Shares Amount Capital Earnings Stock Total
--------- ------ ------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE, March 1, 1997 3,943,209 $ 42,295 $5,478,464 $6,561,349 (882,706) $11,199,402
Retirement of treasury stock (2,863) (879,843) 882,706 --
Exercise of stock options 39,895 399 86,556 86,955
Net income 1,148,436 1,148,436
--------- --------- ---------- ---------- ---------- -----------
BALANCE, FEBRUARY 28, 1998 3,983,104 39,831 4,685,177 7,709,785 0 12,434,793
Purchase of treasury stock (88,920) (88,920)
Exercise of stock options 51,630 516 69,804 70,320
Net income 289,140 289,140
--------- --------- ---------- ---------- ---------- -----------
BALANCE, FEBRUARY 28, 1999 4,034,734 $ 40,347 $4,754,981 $7,998,925 $ (88,920) $12,705,333
========= ========= ========== ========== ========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F - 5
<PAGE>
BIO-LOGIC SYSTEMS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED FEBRUARY 28, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 289,140 $1,148,436
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization 421,007 390,590
Provision for bad debts 30,002 66,971
Provision for inventory valuation 2,567 25,072
Deferred income tax provision (36,159) (94,500)
(Increases) decreases in assets:
Accounts receivable 634,031 (506,622)
Inventories (258,164) (247,454)
Prepaid expenses (92,013) (2,924)
Increases (decreases) in liabilities:
Accounts payable 105,415 9,490
Accrued liabilities and deferred revenue 280,862 250,943
Accrued income taxes (247,100) 552,904
---------- ----------
Net cash flows provided by operating
activities 1,129,588 1,592,906
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (121,430) (348,332)
Other assets (32,819) (7,000)
Proceeds from maturities of investments 1,500,099 1,292,572
---------- ----------
Net cash flows provided by investing activities 1,345,850 937,240
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 70,320 86,955
Purchase of treasury stock (88,920) -----
Payments on long-term debt (124,094) (127,043)
---------- ----------
Net cash flows (used in) financing activities (142,694) (40,088)
---------- ----------
INCREASE IN CASH AND CASH EQUIVALENTS 2,332,744 2,490,058
CASH AND CASH EQUIVALENTS - Beginning of year 3,624,368 1,134,310
---------- ----------
CASH AND CASH EQUIVALENTS - End of year $5,957,112 $3,624,368
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS:
Cash paid during the period for:
Interest $ 31,525 $ 42,840
========== ==========
Income taxes $ 312,500 $ 120,834
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
BIO-LOGIC SYSTEMS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED FEBRUARY 28, 1999 AND 1998
1. BUSINESS
Bio-logic Systems Corp. (the "Company") develops and markets computer-
assisted medical diagnostic equipment. The Company sells primarily to the
Health Care Industry in North America, Europe and the Far East.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation - The consolidated financial statements include the Company
and its wholly owned domestic subsidiaries, Neuro Diagnostics, Inc., Bio-
logic '83 Research Corp. and Bio-logic International Corp., and its wholly
owned foreign subsidiaries, Bio-logic Systems Corp., Ltd. and Bio-logic FSC
International Corp. All significant intercompany balances and transactions
have been eliminated in consolidation.
Cash, and Cash Equivalents - Cash equivalents include all highly liquid
investments purchased with maturities of three months or less.
Marketable Securities - Marketable securities are comprised of US
Government securities with maturities of more than three months.
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.
Property, Plant and Equipment - Property, plant and equipment are stated at
cost. The cost of maintenance and repairs is charged to income as
incurred; significant renewals and betterments are capitalized.
Depreciation is provided using straight-line and accelerated methods over
the estimated useful lives of the assets.
Other Assets - Other assets consist primarily of capitalized research and
development costs, patent cost and the premiums paid on officers' life
insurance policies. On an ongoing basis, management reviews the valuation
of other assets to determine if there has been impairment by comparing the
related assets' carrying value to the undiscounted estimated future cash
flows and/or operating income from related operations.
Revenue Recognition - The Company recognizes revenue at the date products
are shipped or at the date services are completed.
Revenue Recognition for Research and Development Contracts - Revenue from
research and development contracts is recognized as related costs are
incurred.
F-7
<PAGE>
Income Taxes - Deferred tax assets and liabilities are computed annually
for differences between financial statement basis and tax basis of assets
and liabilities using enacted tax rates for the years in which the
differences are expected to become recoverable. A valuation allowance is
established where necessary to reduce deferred tax assets to the amount
expected to be realized.
Deferred federal income taxes are not provided for the undistributed
earnings of the Company's foreign subsidiary. Undistributed foreign
earnings were approximately $1,722,000 and $1,418,000 as of February 28,
1999 and 1998, respectively.
Use of Estimates - In preparing financial statements in conformity with
generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Fair Value of Financial Instruments - The Company's financial instruments
include cash equivalents, marketable securities, accounts receivable,
accounts payable and long-term debt. The carrying value of cash
equivalents, short-term marketable securities, accounts receivable and
accounts payable approximate their fair value because of the short-term
nature of these instruments. The carrying value of long-term debt
approximates fair value based on quoted prices of similar issuances at the
reporting date.
Earnings per Share - The Company has adopted Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings per Share," as of December
31, 1997. 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.
Comprehensive Income - SFAS No. 130 requires disclosure of the components
of and total comprehensive income in the period in which they are
recognized in the financial statements. Comprehensive income is defined as
the change in equity (net assets) of a business enterprise arising from
transactions and other events and circumstances from non-owner sources. It
includes all changes in shareholders' equity during the reporting period
except those resulting from investments by owners and distributions to
owners. The Company does not have changes in stockholders' equity other
than those resulting from investments by and distributions to owners. The
functional currency for the Company's international operations is the U.S.
dollar.
Segment Information - SFAS No. 131 requires disclosures of certain segment
information based on the way that management evaluates segments for making
decisions and assessing performance. It also requires disclosure of
certain information about products and services, the geographic areas in
which the Company operates, and major
F-8
<PAGE>
customers. The Company operates in a single reportable segment: the design,
development, assembly and distribution of computerized medical
electrodiagnostic systems for use in the health care field.
3. MARKETABLE SECURITIES
The Company's entire portfolio of debt securities has been classified as
held-to-maturity and is stated at cost, with premiums amortized and
discounts accreted using the simple-interest method
The amortized cost, unrealized gains, unrealized losses and estimated fair
values of investments securities held-to-maturity are summarized as
follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
February 28, 1999
-----------------
US Government
securities $ 0 $ 0 $ 0 $ 0
========== ========== ========== ==========
February 28, 1998
-----------------
US Government
securities $1,500,099 $ 846 $ 0 $1,500,945
========== ========== ========== ==========
</TABLE>
F-9
<PAGE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment comprise the following at February 28, 1999
and February 28, 1998:
<TABLE>
<CAPTION>
Estimated
Useful Lives
1999 1998 (in Years)
---- ---- ------------
<S> <C> <C> <C>
Land $ 676,534 $ 676,534
Building 1,117,907 1,117,907 40
Test and shop equipment 1,150,117 1,105,103 5
Booths and exhibits 101,531 101,531 5
Office furniture and equipment 1,613,346 1,564,053 7
Transportation equipment 129,824 123,799 3
Building improvements 121,651 121,651 15
---------- ----------
Total 4,910,910 4,810,578
Less accumulated depreciation 3,004,853 2,810,236
----------- ---------
Property, plant and equipment - net $1,906,057 $2,000,342
========== ==========
</TABLE>
Depreciation expense amounted to $215,715 and $175,849 for 1999 and 1998,
respectively.
5. CAPITALIZED RESEARCH AND DEVELOPMENT COSTS
Capitalized research and development expense consists of costs incurred
from when the product is determined to be technologically feasible to the
time the product is available for general release to customers. These costs
consist primarily of internal research and development labor costs and
outside development costs for software and related engineering prototypes
necessary in the final design of new products. Capitalized research and
development costs are amortized over a 5 year period, which approximates
the expected life of the product.
Unamortized research and development costs amounted to $371,534 and
$547,982 at February 28, 1999 and February 28, 1998, respectively.
Amortization expense amounted to $178,449 and $182,985 in 1999 and 1998
respectively.
F-10
<PAGE>
6. OPERATING LEASES
The Company leases office and assembly facilities under long-term operating
leases expiring from 2001 to 2009. Total rental expense amounted to $55,696
and $60,013 for 1999 and 1998, respectively.
Future minimum annual rental commitments under these leases for the years
ending after February 28, 1999 are as follows:
<TABLE>
<S> <C>
2000 50,387
2001 47,430
2002 14,903
2003 14,903
2004 14,903
Thereafter 74,516
</TABLE>
7. LONG-TERM DEBT
Borrowings of $1,600,000 under the Industrial Development Bond, Series 1985
(the "Bond") are due in varying monthly installments through December 2001.
The interest rate on the Bond (6.8%) is 80 percent of the prime rate (8.50
percent at February 28, 1999). The office building and land are pledged as
collateral for the Bond.
The Company has obtained a commitment, renewed annually, for an unsecured
$1,000,000 bank line of credit with interest at the bank's prime rate. No
borrowings have been made under the line of credit as of either February
28, 1999 or February 28, 1998.
Under the terms of the Bond agreement and the line of credit, the Company
is to maintain average available non-interest-bearing deposits in amounts
not less than 10 percent of the unpaid balance of the Bond at the bank
which purchased the Bond. The Company is also required to maintain certain
minimum working capital and net worth ratios. The Bond agreement restricts
the payment or declaration of dividends (other than dividends payable in
stock) without the prior consent of the holder of the Bond.
Annual maturities of the Bond are as follows:
<TABLE>
<S> <C>
2000 $143,467
2001 154,988
2002 139,630
--------
$438,085
========
</TABLE>
F-11
<PAGE>
8. INCOME TAXES
The provision for income taxes is as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Current:
Federal $ 37,850 $527,650
State (6,750) 109,600
Foreign 38,618 32,800
-------- --------
Total current 69,718 670,050
Deferred (36,159) (94,500)
-------- --------
Total $ 33,559 $575,550
======== ========
</TABLE>
The provision for income taxes differs from the U.S. Federal statutory
rate as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
U.S. Federal statutory rate 35.0% 35.0%
Difference in foreign tax rate (24.8) (4.7)
Foreign Sales Corporation (FSC) operations (3.2) (.9)
State income taxes, net of Federal income tax benefit (2.7) 3.5
Other 6.0 0.5
----- -----
Effective income tax rate 10.3% 33.4%
===== =====
</TABLE>
Deferred tax assets and liabilities as of February 28, 1999 and 1998
consist of the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Deferred tax liabilities:
Depreciation $ 97,471 $ 81,715
Research and development 147,424 211,833
-------- --------
Total deferred tax liabilities 244,895 293,548
-------- --------
Deferred tax assets:
Accounts receivable 99,086 84,835
Inventory 93,912 91,635
Vacation 23,368 18,765
Warranty 82,829 116,454
-------- --------
Total deferred tax assets 299,195 311,689
-------- --------
Net deferred tax (asset) liability $(54,300) $(18,141)
======== ========
</TABLE>
F-12
<PAGE>
The net deferred tax (asset) liability is classified in the balance sheet
as follows:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Deferred tax current asset $(299,195) $(311,689)
Deferred tax long-term liability 244,895 293,548
--------- ---------
Net deferred tax (asset) liability $ (54,300) $ (18,141)
========= =========
</TABLE>
9. STOCK OPTIONS AND WARRANTS
The Company's 1994 Incentive Stock Option Plan (the "Plan") permits the
granting of both incentive stock options and nonqualified options for
option periods not to exceed ten years. The Plan provides for the granting
of up to 850,000 shares of incentive stock options at a per share price not
less than 100 percent of the fair market value on the date
determined by the Board of Directors or the Stock Option Committee on the
date of grant, but not less than par value. Currently outstanding options
become exercisable one to five years from the grant date and expire five to
ten years after the grant date.
The Company has adopted the disclosure provisions only of SFAS No. 123,
"Accounting for Stock-Based Compensation." It applies Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for its plans and
does not recognize compensation expense for its stock-based compensation
plans when options are granted at fair value at the date of grant. If the
Company had elected to recognize compensation expense based upon the fair
value at the grant date for awards under these plans consistent with the
methodology prescribed by SFAS No. 123, the Company's net income and
earnings per share would be reduced to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
Fiscal Year Ended Fiscal Year Ended
Feb. 28, 1999 Feb. 28, 1998
----------------- -----------------
<S> <C> <C>
Net Income
As Reported $289,140 $1,148,436
Pro Forma $131,199 $1,047,273
Net Income per share
As Reported - Basic $0.07 $0.29
- Diluted $0.07 $0.28
Pro forma - Basic $0.03 $0.26
- Diluted $0.03 $0.25
</TABLE>
F-13
<PAGE>
These pro forma amounts may not be representative of future disclosures
because they do not take into effect pro forma compensation expense related
to grants made before fiscal 1996. The fair values of these options were
estimated at the date of grant using the Black-Scholes option-pricing model
with the following weighted average assumptions for the years ended
February 28, 1999 and 1998, respectively: no dividends; expected
volatility of 74% and 71%, risk free interest rates of 5.5% and 6.2% and
expected life of 9.4 and 8.6 years. The weighted average exercise price of
options granted during the years ended February 28, 1999 and 1998 for which
the exercise price exceeds the market price on the grant date was $3.37 and
$4.58, respectively, and the weighted average fair value prices were $1.93
and $2.56, respectively. The weighted average exercise price of options
granted during the years ended February 28, 1999 and 1998 for which the
exercise price equals the market price on the grant date was $3.65 and
$3.28, respectively, and the weighted average fair value prices were $2.99
and $2.65, respectively. The weighted average exercise price of options
granted during the year ended February 28, 1999 for which the exercise
price is below the market price on the grant date was $2.41 and the
weighted average fair price was $2.30. There were no options granted
during the year ended February 28, 1998 for which the exercise price is
below the market price on the grant date.
The following tables summarize information concerning outstanding and
exercisable stock options as of February 28, 1999:
<TABLE>
<CAPTION>
Weighted Average
Remaining
Range of Number Contractual Life Weighted Average
Exercise Price Outstanding (years) Exercise Price
- -------------- ----------- ---------------- ----------------
<S> <C> <C> <C>
$1.50-$2.50 97,663 4.98 $2.06
$2.51-$4.50 242,100 6.53 3.01
$4.51-$6.50 76,000 5.49 4.66
-------
415,763
=======
</TABLE>
<TABLE>
<CAPTION>
Range of Number Weighted Average
Exercise Price Exercisable Exercise Price
-------------- ----------- ----------------
<S> <C> <C> <C>
$1.50-$2.50 83,351 $2.01
$2.51-$4.50 122,744 2.91
$4.51-6.50 23,000 4.72
-------
229,095
=======
</TABLE>
F-14
<PAGE>
Additional information with respect to the Company's plan at February 28, 1999
and 1998, are as follows:
<TABLE>
<CAPTION>
FISCAL 1999
-----------
Weighted Average
Shares Exercise Price
------ ----------------
<S> <C> <C>
Shares Under Option:
Outstanding at beginning of year 467,463 $2.99
Granted 35,000 $3.48
Exercised (73,050) $2.22
Forfeited (13,650) $3.12
-------
Outstanding at end of year 415,763 $3.16
=======
Options exercisable at year-end 229,095 $2.76
=======
Weighted average fair value for
stock options granted during 1999 $2.79
FISCAL 1998
-----------
Weighted Average
Shares Exercise Price
------ ----------------
Shares Under Option:
Outstanding at beginning of year 368,508 $2.56
Granted 156,300 $3.65
Exercised (39,595) $2.17
Forfeited (17,750) $2.55
-------
Outstanding at end of year 467,463 $2.99
=======
Options exercisable at year-end 208,850 $2.53
=======
</TABLE>
Weighted average fair value for
stock options granted during 1998 $2.62
In connection with the Company's 1986 stock offering, 258,750 warrants
(including 33,750 to the underwriter) were issued. Each warrant entitles
the holder to purchase one and one-half shares of common stock at an
exercise price of $8.33 per share, subject to adjustment at any time
commencing after the separation date, August 27, 1986, until May 31, 1999.
The warrants are subject to redemption by the Company at $.05 per warrant
on 30 days' prior written notice, provided the closing price of the
Company's common stock exceeds $11.67 per share for 20 consecutive trading
days ending within 30 days of the date of notice.
F-15
<PAGE>
10. RESEARCH AND DEVELOPMENT ARRANGEMENTS
In 1986, 1989, 1991 and 1992, the Company entered into research and
development agreements with a third party under which the Company received
approximately $400,000, $396,000, $126,700 and $164,300 respectively, or an
aggregate of $1,087,000. The Company is required to pay royalties on the
sales of products developed under the grants, as well as a percentage of
any licensing fees for agreements entered into with other companies for the
sales of developed products. Royalties paid under these agreements
amounted to approximately $141,000 and $138,000 in 1999 and 1998,
respectively.
11. EXPORT SALES
Net foreign export sales are summarized as follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Europe $ 957,284 $ 730,483
Far East 951,157 2,252,682
Other 425,042 940,894
---------- ----------
Total $2,333,483 $3,924,059
========== ==========
</TABLE>
No significant sales were made by foreign subsidiaries in 1999 and 1998.
12. EMPLOYEE BENEFIT PLAN
The Company has a retirement plan under Section 401(k) of the Internal
Revenue Code which allows employees to defer a portion of their income on a
pretax basis through contributions to the plan. Employee contributions are
matched by the Company at varying rates. The Company may also make
discretionary contributions to the plan. Total contributions of $129,498
and $78,339 were made by the Company in 1999 and 1998, respectively.
13. EMPLOYMENT AGREEMENTS
The Company has executed an employment agreement with one of its key
officers. Under the terms of the agreement, which extends through May
1999, the Company is obligated to pay contractually specified amounts in
the event of the key officer's termination, disability or death.
F-16
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BIO-LOGIC SYSTEMS CORP.
Date: May 13, 1999
By:
------------------------
Gabriel Raviv, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
- --------------------------- President, Chief Executive May 13, 1999
Gabriel Raviv Officer, Director (Principal
Executive Officer)
- --------------------------- Director May 13, 1999
Charles Z. Weingarten, M.D.
- --------------------------- Controller May 13, 1999
James M. Smearman (Principal Financial Officer)
- --------------------------- Director May 13, 1999
Gil Raviv
- --------------------------- Director May 13, 1999
Irving Kupferberg
- --------------------------- Director May 13, 1999
Albert Milstein
- --------------------------- Director May 13, 1999
Craig W. Moore
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Page
Number Description Number
- ------ ----------- ------
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)
10.7 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
<PAGE>
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)
23.1 Consent of Independent Auditors
- -----------
(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.
(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.
<PAGE>
(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.
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
-----------------------------
We consent to the incorporation by reference in Registration Statement
No. 33-3776 of Bio-logic Systems Corp. on Form S-8 of our report, dated April
23, 1999, appearing in this Annual Report on Form 10K-SB of Bio-logic Systems
Corp. for the year ended February 28, 1999.
GRANT THORNTON LLP
May 28, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-START> MAR-01-1998
<PERIOD-END> FEB-28-1999
<CASH> 5,957,112
<SECURITIES> 0
<RECEIVABLES> 3,359,291
<ALLOWANCES> 249,322
<INVENTORY> 3,533,408
<CURRENT-ASSETS> 13,385,871
<PP&E> 4,910,910
<DEPRECIATION> 3,004,853
<TOTAL-ASSETS> 16,038,207
<CURRENT-LIABILITIES> 2,793,361
<BONDS> 438,085
0
0
<COMMON> 40,347
<OTHER-SE> 12,753,906
<TOTAL-LIABILITY-AND-EQUITY> 16,038,207
<SALES> 17,418,286
<TOTAL-REVENUES> 17,418,286
<CGS> 5,633,758
<TOTAL-COSTS> 5,633,758
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 30,002
<INTEREST-EXPENSE> 31,525
<INCOME-PRETAX> 322,699
<INCOME-TAX> 33,559
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 289,140
<EPS-BASIC> $0.07
<EPS-DILUTED> $0.07
</TABLE>
