<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended November 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ to _____
Commission File No. 0-12240
BIO-LOGIC SYSTEMS CORP.
(Exact name of small business issuer as specified in its charter)
Delaware 36-3025678
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
One Bio-logic Plaza, Mundelein, Illinois 60060
(Address of principal executive offices) (zip code)
Issuer's telephone number, including area code (847-949-5200)
(Former name, address and former fiscal year, if changed since last report):
not applicable
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
YES X NO __
State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at January 12, 2000
Common Stock $.01 par value 4,064,496 shares
Transitional Small Business Disclosure Format
Yes X No _
--
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Part I. Financial Information Page
<S> <C>
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at November 30, 1999
and February 28, 1999. 3
Condensed Consolidated Statements of Operations and
Retained Earnings for the three and nine months ended
November 30, 1999 and 1998. 4
Condensed Consolidated Statements of Cash Flows for
the nine months ended November 30, 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
</TABLE>
Signatures
<PAGE>
Bio-logic Systems Corp.
Form 10Q-SB
Part 1. Financial Information
Item 1 Financial Statements
Condensed Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
November 30, 1999 February 28, 1999
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,581,248 $ 5,957,112
Accounts receivable, less allowance for doubtful accounts
of $337,767 at Nov. 30, 1999 and $249,322 at Feb. 28, 1999 5,714,500 3,359,291
Inventories 4,458,039 3,533,408
Prepaid expenses 238,276 236,865
Deferred income taxes 299,195 299,195
---------- ----------
Total current assets 16,291,258 13,385,871
PROPERTY, PLANT AND EQUIPMENT - Net 2,113,879 1,906,057
OTHER ASSETS 579,200 746,279
---------- ----------
TOTAL ASSETS $18,984,337 $16,038,207
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 151,619 $ 143,467
Accounts payable 691,385 599,228
Accrued salaries & payroll taxes 1,209,295 876,770
Accrued interest & other expenses 808,496 619,023
Accrued income taxes 621,845 354,735
Deferred revenue 458,535 200,138
---------- ----------
Total current liabilities 3,941,175 2,793,361
LONG-TERM DEBT - Less current maturities 179,172 294,618
DEFERRED INCOME TAXES 244,895 244,895
---------- ----------
Total liabilities 4,365,242 3,332,874
---------- ----------
COMMITMENTS ---------- ----------
SHAREHOLDERS' EQUITY:
Capital stock, $.01 par value. authorized 10,000,000 shares;
Issued and outstanding; issued 4,063,896 and outstanding
4,016,096 at November 30, 1999; issued 4,034,734 and
outstanding 4,002,934 at February 28,1999 40,639 40,347
Additional paid-in capital 4,832,282 4,754,981
Retained Earnings 9,878,154 7,998,925
---------- ----------
Total shareholders' equity 14,751,075 12,794,253
Less treasury stock, at cost: 47,800 shares at Nov. 30, 1999
And 31,800 shares at February 28, 1999 131,980 88,920
---------- ----------
Shareholders equity - net 14,619,095 12,705,333
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $18,984,337 $16,038,207
========== ==========
</TABLE>
The accompanying notes are an integral part of these
statements.
3
<PAGE>
Bio-logic Systems Corp.
Form 10-SB
Condensed Consolidated Statements of Operations and Retained Earnings
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
November 30, November 30,
-----------------------------------------------------------------
1999 1998 1999 1998
--------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
NET SALES $ 6,720,744 $ 4,380,800 $19,589,513 $12,449,281
COST OF SALES 2,214,163 1,357,619 6,128,978 3,949,753
----------- ------------ ---------- -----------
Gross Profit 4,506,581 3,023,181 13,460,535 8,499,528
----------- ------------ ---------- -----------
OPERATING EXPENSES:
Selling, general & administrative 3,068,905 2,259,874 8,630,079 6,582,739
Research & development 870,549 785,339 2,384,011 2,241,061
----------- ------------ ---------- -----------
Total operating expenses 3,939,454 3,045,213 11,014,090 8,823,800
----------- ------------ ---------- -----------
OPERATING INCOME (LOSS) 567,127 (22,032) 2,446,445 (324,272)
OTHER INCOME (EXPENSE):
Interest income 58,765 69,959 178,253 198,316
Interest expense (5,203) (5,468) (17,309) (23,657)
Miscellaneous 4,110 (1,240) 2,665 (1,644)
----------- ------------ ---------- -----------
TOTAL OTHER INCOME 57,672 63,251 163,609 173,015
----------- ------------ ---------- -----------
INCOME (LOSS) BEFORE INCOME TAXES 624,799 41,219 2,610,054 (151,257)
PROVISION (BENEFIT) FOR INCOME TAXES 174,950 13,675 730,825 (50,525)
----------- ------------ ---------- -----------
NET INCOME (LOSS) $ 449,849 $ 27,544 $1,879,229 $ (100,732)
=========== ============ ========== ===========
RETAINED EARNINGS,
BEGINNING OF PERIOD 9,428,305 7,581,509 7,998,925 7,709,785
----------- ------------ ---------- -----------
RETAINED EARNINGS,
END OF PERIOD $ 9,878,154 $ 7,609,053 $9,878,154 $ 7,609,053
=========== ============ ========== ===========
EARNINGS (LOSS) PER SHARE:
Basic $ 0.11 $ 0.01 $ 0.47 $ (0.03)
=========== ============ ========== ===========
Diluted $ 0.11 $ 0.01 $ 0.46 $ (0.03)
=========== ============ ========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
Bio-Logic Systems Corp.
Form 10-QSB
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
November 30,
---------------------------------------
1999 1998
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 1,879,229 $(100,732)
Adjustments to reconcile net (loss) income to net cash flows
from (used in) operating activities:
Depreciation and amortization 350,734 343,361
Provision for bad debts 86,400 86,400
Provision for inventory valuation 253,750 231,695
Deferred income taxes ----------- ----------
(Increases) decreases in assets:
Accounts receivable (2,441,609) 844,918
Inventories (1,178,381) (252,567)
Prepaid expenses (1,411) 38,528
Increases (decreases) in liabilities:
Accounts payable and overdrafts 92,157 (113,030)
Accrued liabilities and deferred revenue 780,395 438,845
Accrued income taxes 267,110 (353,809)
----------- -------------
Net cash flows from operating activities 88,374 1,163,609
----------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (383,923) (122,739)
Other assets (7,554) (34,368)
Proceeds from maturities of investments ---------- 1,500,099
----------- ------------
Net cash flows from (used in) investing activities (391,477) 1,342,992
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options 77,593 57,695
Purchase of treasury stock (43,060) (49,168)
Payments of long-term debt (107,294) (90,066)
----------- -----------
Net cash flows used in financing activities (72,761) (81,539)
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (375,864) 2,425,062
CASH AND CASH EQUIVALENTS - Beginning of period 5,957,112 3,624,368
----------- ---------
CASH AND CASH EQUIVALENTS - End of period $ 5,581,248 $ 6,049,430
=========== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS:
Cash paid during the period for:
Interest $ 18,553 $ 23,657
=========== ============
Income Taxes $ 429,415 $ 299,500
=========== ============
</TABLE>
The accompanying notes are an integral part
of these statements.
5
<PAGE>
Bio-logic Systems Corps.
Form 10Q-SB
Notes to Condensed Consolidated Financial Statements
1. The information furnished in this report reflects all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion
of management, necessary to a fair statement of the results for the interim
periods. The results of operations for the three and nine months ended
November 30, 1999 are not necessarily indicative of the results to be
expected for the full year.
2. Inventories
Inventories, consisting principally of components, parts and supplies, are
stated at the lower of cost, determined by the first-in, first-out method
or market.
3. Net Income Per Share
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 4,007,120 and 4,015,536 for the quarters
ended November 30, 1999 and 1998, respectively, and 3,996,435 and 4,009,103
for the nine months ended November 30, 1999 and 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 4,235,239 and 4,050,893 for the quarters ended November 30, 1999
and 1998, respectively, and 4,099,125 and 4,009,103 for the nine months
ended November 30, 1999 and 1998, respectively.
Because of the net loss for the nine months ended November 30, 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 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. Treasury Stock Repurchase
As of November 30, 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 Corps.
Form 10Q-SB
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Prospective investors are cautioned that the statements in this Quarterly
Report on Form 10Q-SB 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 condition, the passage and implementation of legislation, 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 10Q-SB and from time to time in the Company's filings with the
Securities and Exchange Commission.
Liquidity and Capital Resources
As of November 30, 1999 the Company had working capital of $12,350,084
including $5,581,248 in cash and other cash equivalents. 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.
For the nine months ended November 30, 1999, cash flow decreased by
$375,864 and net cash flow from operations increased by $88,374. Net income for
the nine months ended November 30, 1999 increased net cash flow from operating
activities by $1,879,229 compared to a net loss of $100,732 for the nine months
ended November 30, 1998 that decreased net cash flow from operating activities.
In the nine months ended November 30, 1999, the Company used cash flows in
operating activities to increase inventory by $1,178,381 that supported the
increase in net sales and a corresponding $2,441,609 increase in account
receivable. Finally, the Company used net cash from investing activities to
purchase $383,923 in capital equipment.
Results of Operations
Net sales for the three month period ended November 30, 1999 (the "1999
three months") increased by 53% to $6,720,744 from $4,380,800 in the three month
period ended November 30, 1998 (the "1998 three months."), while net sales for
the nine month period ended November 30, 1999 (the "1999 nine months") increased
by 57% to $19,589,513 compared to $12,449,281 in the nine month period ended
November 30, 1998 (the "1998 nine months.") Domestic sales increased
significantly by 71% and 68% to $6,289,307 and $17,621,465 for the 1999 three
and nine months, respectively, compared to $3,674,202 and $10,509,498 for the
1998 three and nine months, respectively. Foreign sales of $431,437 and
$1,968,048 contributed 6% and 10% of net sales for the 1999 three and nine
months, respectively, a decrease of 39% from $706,598 in 1998 three months and a
slight increase of 2% compared to $1,939,783 for the 1998 nine months. The
Company's Ceegraph XL long-term epilepsy-monitoring device drove the significant
increase in net sales domestically for the 1999 three and nine months. In
addition, the sleep and audiology product lines also showed significant
increases in the 1999 three and nine months over similar periods last year.
Although foreign sales in the 1999 nine months were similar to last year, the
Company believes it has not fully recovered from the impact of the Asian and
South American economic monetary crisis as reflected by foreign sales' continued
reduced contribution to total sales.
7
<PAGE>
Bio-logic Systems Corps.
Form 10Q-SB
Cost of sales increased to $2,214,163 and $6,128,978 for the 1999 three and
nine months, respectively, compared to $1,357,619 and $3,949,753 for the 1998
three and nine months, respectively. Cost of sales as a percentage of net sales
increased to 33% and remained at approximately 31% for the 1999 three and nine
months, respectively, compared to approximately 31% for both 1998 three and nine
months. The Company attributes the increase in 1999 three months cost of sales
to improving the manufacturing and maintenance of its newly released Ceegraph XL
long-term epilepsy-monitoring device by adding production and service personnel
towards this objective.
Selling, general and administrative expenses increased by 36% and 31% to
$3,068,905 and $8,630,079 during the 1999 three and nine months, respectively,
compared to $2,259,874 and $6,582,739 for the 1998 three and nine months,
respectively. Selling, general and administrative expenses as a percentage of
net sales decreased to 46% and 44% during the 1999 three and nine months,
respectively, compared to 52% and 53% for the 1998 three and nine months. The
increases in the 1999 periods reflect additional investment in new employees
with a particular emphasis on adding salespersons to the Company's sales team,
plus increases in travel costs and sales commissions directly due to higher net
sales.
Research and development costs increased by 11% and 6% to $870,549 and
$2,384,011 for the 1999 three and nine months, respectively, from $785,339 and
$2,241,061 for the 1998 three and nine months, respectively. As a percentage of
net sales, total research and development costs decreased to approximately 13%
and 12% for the 1999 three and nine months, respectively, compared to 18% for
both the 1998 three and nine months. The slight increase in costs for the 1999
periods was the result of both higher individual salaries and increased outside
development costs, and higher consulting expenses associated with the Company's
continued emphasis on new product development and feature enhancements on
existing products.
The Company had operating income of $567,127 and $2,446,445 for the 1999
three and nine months, respectively, compared to an operating loss of $22,032
and $324,272 for 1998 three and nine months, respectively. The increase in
operating income for the 1999 three and nine months was the result of
significantly higher net sales resulting in high gross profit offset by both
higher selling, general and administrative costs and research and development
expenses.
Net interest income decreased to $160,944 for the 1999 nine months compared
to $174,659 for the 1998 nine months. This slight decrease reflects lower
investment returns on money market accounts offset by lower interest expense on
long term debt.
The Company had income tax expense of $174,950 and $730,825 for 1999 three
and nine months, respectively, compared to income tax expense of $13,675 for
1998 three months and a income tax benefit of $50,525 for the 1998 nine months.
The Company's income tax rate differs from the federal statutory rate of 35% due
to the differences in foreign income and its corresponding tax rates.
The Company had net income of $449,849 and $1,879,229 or $0.11 and $0.46
per diluted shares for 1999 three and nine months, respectively, compared to net
income of $27,544 and a net loss of $100,732, or $.01 and $(0.03) per diluted
share, for the 1998 three and nine months, respectively. The Company attributes
the higher earnings in the 1999 periods to increased net sales and its
corresponding gross profit offset by higher variable selling cost, increase
fixed cost associated with an expanded sales network, plus continued investment
in research and development costs.
8
<PAGE>
Bio-logic Systems Corps.
Form 10Q-SB
Part II. Other Information
Item 6. Exhibits and Reports on 8-K
(a) Exhibits
27. Financial Data Schedule
- --------------------
(b) The Registrant did not file any reports on Form 8-K during the three months
ended November 30, 1999
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: January 13, 2000 By: /s/ Gabriel Raviv
-----------------------------
Gabriel Raviv, Chairman, CEO
Date: January 13, 2000 By: /s/ James M. Smearman
-----------------------------
James M. Smearman,
Controller
<PAGE>
Bio-logic Systems Corp.
Form 10-QSB
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: January 13, 2000 By: __________________________________
Gabriel Raviv, Chairman, CEO
Date: January 13, 2000 By: __________________________________
James M. Smearman,
Controller
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-29-2000
<PERIOD-START> MAR-01-1999
<PERIOD-END> NOV-30-1999
<CASH> 5,581,248
<SECURITIES> 0
<RECEIVABLES> 5,714,500
<ALLOWANCES> 337,767
<INVENTORY> 4,458,039
<CURRENT-ASSETS> 16,291,259
<PP&E> 5,294,300
<DEPRECIATION> 3,180,421
<TOTAL-ASSETS> 18,984,337
<CURRENT-LIABILITIES> 3,941,175
<BONDS> 330,791
0
0
<COMMON> 40,639
<OTHER-SE> 14,710,436
<TOTAL-LIABILITY-AND-EQUITY> 18,984,337
<SALES> 19,589,513
<TOTAL-REVENUES> 19,589,513
<CGS> 6,128,978
<TOTAL-COSTS> 6,128,978
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 86,400
<INTEREST-EXPENSE> 17,309
<INCOME-PRETAX> 2,610,054
<INCOME-TAX> 730,825
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,879,229
<EPS-BASIC> 0.47
<EPS-DILUTED> 0.46
</TABLE>
