<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] Quarterly Report pursuant to Section 13 or 15 (d) of the Securites Exchange
Act of 1934
For the Quarterly period ended May 31, 1999
[_] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the
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 Identification Number)
incorporation or organization)
One Bio-logic Plaza, Mundelein, Illinois 60060
(Address of principal executive offices) (zip code)
Issuers 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 ___
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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, 1999
Common Stock $.01 par value 4,034,934
Transitional Small Business Disclosure Format
Yes ____ No X
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Bio-Logic Systems Corp.
Form 10-QSB
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Part I. Financial Information
Page
<S> <C>
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at May 31, 1999
and February 28, 1999 3
Condensed Consolidated Statements of Operations and
Retained Earnings for the three months ended
May 31, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flows for
the three months ended May 31, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 9
Signatures
</TABLE>
2
<PAGE>
Bio-logic Systems Corp.
Form 10-QSB
Part 1. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
ASSETS May 31, 1999 Feb. 28, 1999
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<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 5,900,183 $ 5,957,112
Accounts receivable, less allowance for doubtful accounts
of $278,539 at May 31, 1999 and $249,322 at Feb. 28, 1999 4,028,804 3,359,291
Inventories 3,813,694 3,533,408
Prepaid expenses 85,777 236,865
Deferred income taxes 299,195 299,195
----------- -----------
Total current assets 14,127,653 13,385,871
PROPERTY, PLANT AND EQUIPMENT - Net 1,902,535 1,906,057
OTHER ASSETS 691,367 746,279
----------- -----------
TOTAL ASSETS $16,721,555 $16,038,207
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 145,865 $ 143,467
Accounts payable 594,142 599,228
Accrued salaries and payroll taxes 869,151 876,770
Accrued interest and other expenses 414,130 619,023
Accrued income taxes 565,420 354,735
Deferred revenue 261,563 200,138
----------- -----------
Total current liabilities 2,850,271 2,793,361
LONG-TERM DEBT - Less current maturities 257,987 294,618
DEFERRED INCOME TAXES 244,895 244,895
----------- -----------
Total liabilities 3,353,153 3,332,874
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COMMITMENTS -- --
SHAREHOLDERS' EQUITY:
Capital stock, $.01 par value; authorized, 10,000,000 shares;
issued and outstanding; issued 4,034,934 and outstanding
3,987,134 at May 31, 1999; issued 4,034,734 and
outstanding 4,002,934 at February 28, 1999 40,349 40,347
Additional paid-in capital 4,755,479 4,754,981
Retained earnings 8,704,554 7,998,925
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13,500,382 12,794,253
Less treasury stock, at cost: 47,800 shares at May 31, 1999
and 31,800 shares at February 28, 1999 131,980 88,920
----------- -----------
Total Shareholders' equity 13,368,402 12,705,333
----------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $16,721,555 $16,038,207
=========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
Condensed Consolidated Statements of Operations and Retained Earnings
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
May 31,
----------------------------------
1999 1998
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<S> <C> <C>
NET SALES $6,278,284 $3,707,314
COST OF SALES 1,996,924 1,227,154
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Gross Profit 4,281,360 2,480,160
OPERATING EXPENSES:
Selling, general & administrative 2,668,385 2,114,661
Research & development 683,520 747,203
---------- ----------
Total operating expenses 3,351,905 2,861,864
---------- ----------
OPERATING INCOME (LOSS) 929,455 (381,704)
OTHER INCOME (EXPENSE):
Interest income 58,527 64,652
Interest expense ( 7,424) (9,350)
Miscellaneous (529) (861)
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TOTAL OTHER INCOME 50,574 54,441
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INCOME (LOSS) BEFORE INCOME TAXES 980,029 (327,263)
PROVISION (BENEFIT) FOR INCOME TAXES 274,400 (109,300)
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NET INCOME (LOSS) $ 705,629 $ (217,963)
========== ==========
RETAINED EARNINGS,
BEGINNING OF PERIOD 7,998,925 7,709,785
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RETAINED EARNINGS,
END OF PERIOD $8,704,554 $7,491,822
========== ==========
EARNINGS (LOSS) PER SHARE:
Basic and Diluted $0.18 $(0.05)
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
3
4
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Bio-logic Systems Corp.
Form 10-QSB
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
May 31,
------------------
1999 1998
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 705,629 $ (217,963)
Adjustments to reconcile net income (loss) to net cash flows
provided by (used in) operating activities:
Depreciation and amortization 115,046 117,937
Provision for bad debts 28,800 28,800
Provision for inventory valuation 78,750 77,325
(Increases) decreases in assets:
Accounts receivable (698,313) 948,441
Inventories (359,036) (221,869)
Prepaid expenses 151,088 22,311
Increases (decreases) in liabilities:
Accounts payable and overdrafts (5,086) (53,119)
Accrued liabilities and deferred revenue (151,087) (158,549)
Accrued income taxes 210,685 (412,584)
---------- ----------
Net cash flows provided by operating activities 76,476 130,730
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (49,570) (38,803)
Other assets (7,042) (34,369)
Proceeds from maturities of investments -- 1,500,099
---------- ----------
Net cash flows provided by (used in) investing activities (56,612) 1,426,927
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options 500 21,076
Purchase of treasury stock (43,060) --
Payments of long-term debt (34,233) (33,099)
---------- ----------
Net cash flows (used in) financing activities (76,793) (12,023)
---------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (56,929) 1,545,634
CASH AND CASH EQUIVALENTS - Beginning of period 5,957,112 3,624,368
---------- ----------
CASH AND CASH EQUIVALENTS - End of period $5,900,183 $5,170,002
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS:
Cash paid during the period for:
Interest $ 7,550 $ 9,350
========== ==========
Income Taxes $ 29,415 $ 99,500
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
Bio-logic Systems Corp.
Form 10-QSB
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, 1999 are not necessarily indicative of the results to be expected for
the full year.
2. Inventories
Inventories consist principally of components, parts and supplies and are
stated at the lower of cost. Cost is 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 3,995,036 and 3,988,592 for the quarters ended
May 31, 1999 and May 31, 1998, 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
4,025,180 and 3,988,592 for the quarters ended May 31, 1999 and May 31, 1998,
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. 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.
6. Treasury Stock Repurchase
As of May 31, 1999, the Company purchased an aggregate of 47,800 shares of
its' common stock at a total cost of $131,980.
6
<PAGE>
Bio-logic Systems Corp.
Form 10-QSB
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 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 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, 1999, the Company had working capital of $11,277,382 including
$5,900,183 in cash and cash equivalents and $4,028,804 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.
The decrease in cash flow for the three months ended May 31, 1999 was $56,929
and net cash flow provided by operations was $76,476. Net income for the quarter
ended May 31, 1999 was $705,629 increasing cash flow from operations while in
contrast, a net loss of $217,963 in the quarter ended May 31, 1998 decreased
cash flow from operations. In the first quarter ended May 31, 1999, cash flow
was used to fund increases in accounts receivable and inventories of $698,313
and $359,036, respectively, due to higher net sales.
Results of Operations
Net sales for the three month period ended May 31, 1999 (the "1999 three
months") increased by approximately 69% to $6,278,284 from $3,707,314 in the
three month period ended May 31, 1998 (the "1998 three months"). Domestic sales
for the 1999 three months increased by 64% to $5,171,257 compared to $3,152,554
for the 1998 three months representing 82% of net sales while foreign sales
increased approximately 100% to $1,107,027 for the 1999 three months from
$554,760 during the 1998 three months. The strong increase in domestic sales was
the result of across the board increases in our neurology, audiology and sleep
product lines. In particular, the demand for our new higher quality, digital,
64/128-channel epilepsy monitoring system, Ceegraph XL, has increased demand for
all our products while maintaining our overall product margins. The 100%
increase in the Company's foreign sales for the 1999 three months was partially
the result of two large orders from the Far East that were booked in the fourth
quarter of last year and shipped in the first quarter of this year. The Company
is encouraged by these two shipments, but is cautious about a rebound in foreign
sales and is unsure if this buying activity is a start of trend or simply an
isolated action.
Cost of equipment sold increased to $1,996,924 during the 1999 three months
compared to $1,227,154 for the 1998 three months, but as a percentage of net
sales declined to 32% for the 1999 three months compared to 33% for the 1998
three months. This decrease in cost of sales as a percentage of net sales was
partially the result of higher gross profit on some of our new Windows-based
platforms, in particular, our new 64/128 channel epilepsy monitoring system, the
Ceegraph XL.
Selling, general and administrative expenses increased by 26% to $2,668,385
for the 1999 three months compared to $2,114,661 for the 1998 three months. This
increase in selling, general and selling expenses for the 1999 three months
reflect increased sales expenses such as overall salaries, commissions, training
and freight expenses. As a percentage of net sales, selling, general and
administrative expenses declined to 43% in 1999 three months compared to 57% in
the 1998 three months.
7
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Bio-logic Systems Corp.
Form 10-QSB
Research and development costs declined by 9% to $683,520 or 11% of net sales
in the 1999 three months, compared to $747,203 or 20% of net sales in the 1998
three months. The decrease in research and development costs in the 1999 first
quarter was caused by the absence of a one time outside development expense of
approximately $81,000 experienced in the 1998 first quarter offset by a slight
increase in overall employee compensation and outside software services.
For the three months ended May 31, 1999, the Company had an operating profit
of $929,455 compared to a operating loss of $381,704 for the three months ended
May 31, 1998. This increase in operating income for the 1999 three months is
mainly due to higher gross profit offset by higher selling, general and
administrative expenses.
Net interest income decreased to $51,103 from $55,302 for the three month
periods ended May 31, 1999 and 1998, respectively. This slight decrease reflects
lower returns on the money market accounts offset by lower interest expense on
long term debt.
The provision for income taxes of $274,400 was 28% of income before income
taxes during the 1999 three months compared to a income tax benefit of $109,300
or approximately 33% of net loss before taxes during the 1998 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 net income of $705,629 or $.18 per basic and diluted share
for the 1999 three months, compared to a net loss of $217,963 or $0.05 per basic
and diluted share for the 1998 three months. The Company attributes the gain in
the 1999 three month period to higher net sales worldwide offset by increases in
selling, general and administrative expenses as previously discussed.
Year 2000 Issue
The Year 2000 issue (i.e., the ability of computer systems to accurately
identify and process dates beginning with Year 2000 and beyond) affects
virtually all companies and organizations. The Company recognizes that
information systems are integral to its operations. As all of the Company's
software is either developed internally or acquired from third party vendors to
be included in the Company's product line for subsequent sale, the Company's
efforts to limit problems associated with Year 2000 software failures are
focused on investigating, testing and ensuring that all such software is Year
2000 compliant. As a result of these efforts, the Company believes that the Year
2000 issue will not pose significant internal problems for the Company's
business. The Company is also communicating with its suppliers, financial
institutions and third-party payors to determine their plans to limit problems
associated with the Year 2000 issue problems. The Company does not anticipate
that there will be a material cost associated with addressing its potential
exposure to Year 2000 problems. Despite these efforts, the Year 2000 issue is
complex and may present unforeseen problems in the Company's systems and from
third parties with which the Company deals, such as third-party vendors and
payors. Failure of the Company's or third parties' computer systems could
materially and adversely impact the Company's operations.
8
<PAGE>
Bio-logic Systems Corp.
Form 10-QSB
Part II. Other Information
Item 6. Exhibits and Reports on 8-K
(a) Exhibits
3.1 Certificate of Incorporation, Certificate of Amendment to Certificate
of Incorporation, Agreement of Merger and Certificate of Merger and
By-Laws(1)
3.2 Certificate of Amendment to Certificate of Incorporation(7)
27. Financial Data Schedule
(b) The Registrant did not file any reports on Form 8-K during the three months
ended May 31, 1999.
- --------------------------------------
(1) Incorporated by reference from the Company's Registration Statement on
Form S-18 filed on August 7, 1981 (File No. 2-73587-C).
(7) Incorporated by reference from the Company's Annual Report on Form 10-
K for the Fiscal Year ended February 28, 1987.
9
<PAGE>
Bio-logic Systems Corp.
Form 10-QSB
Signatures
Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: July 13, 1999 By: /s/ Gabriel Raviv
-----------------------------
Gabriel Raviv, President
Date: July 13, 1999 By: /s/ James M. Smearman
-----------------------------
James M. Smearman,
Controller
(Principal Financial Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-29-2000
<PERIOD-END> MAY-31-1999
<CASH> 5,900,183
<SECURITIES> 0
<RECEIVABLES> 4,028,804
<ALLOWANCES> 278,539
<INVENTORY> 3,813,694
<CURRENT-ASSETS> 14,127,653
<PP&E> 4,960,480
<DEPRECIATION> 3,057,945
<TOTAL-ASSETS> 16,721,555
<CURRENT-LIABILITIES> 2,850,271
<BONDS> 403,852
0
0
<COMMON> 40,349
<OTHER-SE> 13,328,053
<TOTAL-LIABILITY-AND-EQUITY> 16,721,555
<SALES> 6,278,284
<TOTAL-REVENUES> 6,278,284
<CGS> 1,996,924
<TOTAL-COSTS> 1,996,924
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 28,800
<INTEREST-EXPENSE> 7,550
<INCOME-PRETAX> 980,029
<INCOME-TAX> 274,400
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 705,629
<EPS-BASIC> 0.18
<EPS-DILUTED> 0.18
</TABLE>
