<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 August 31, 2000
[_] 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 Identifica-
incorporation or organization) tion 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 ___
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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 October 13, 2000
Common Stock $.01 par value 4,178,259 shares
Transitional Small Business Disclosure Format
Yes ___ No X
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Part I. Financial Information
Page
<S> <C>
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at August 31, 2000
and February 29,2000. 3
Condensed Consolidated Statements of Operations and Retained
Earnings for the three and six months ended August 31, 2000 and
1999. 4
Condensed Consolidated Statements of Cash Flows for the six
months ended August 31, 2000 and 1999. 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 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
</TABLE>
Signatures
<PAGE>
Bio-logic Systems Corp.
Form 10-QSB
Part 1. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
ASSETS August 31, 2000 Feb. 29, 2000
--------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 5,080,994 $ 4,959,902
Accounts receivable, less allowance for doubtful accounts
of $328,098 at August 31, 2000 and $360,554 at Feb. 29, 2000 4,900,308 6,323,513
Inventories 4,882,891 4,408,557
Prepaid expenses 247,850 150,435
Deferred income taxes 400,286 400,286
----------- -----------
Total current assets 15,512,329 16,242,693
PROPERTY, PLANT AND EQUIPMENT - Net 2,564,990 2,381,425
OTHER ASSETS 603,968 544,029
----------- -----------
TOTAL ASSETS $18,681,287 $19,168,147
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 159,350 $ 154,153
Accounts payable 710,233 1,029,175
Accrued salaries and payroll taxes 1,516,505 1,366,129
Accrued interest and other expenses 477,778 438,208
Accrued income taxes 307,061 469,257
Deferred revenue 375,654 355,189
----------- -----------
Total current liabilities 3,546,581 3,812,111
LONG-TERM DEBT - Less current maturities 55,510 139,670
DEFERRED INCOME TAXES 175,799 175,799
----------- -----------
Total liabilities 3,777,890 4,127,580
----------- -----------
COMMITMENTS ---- ----
SHAREHOLDERS' EQUITY:
Capital stock, $.01 par value; authorized, 10,000,000 shares;
issued and outstanding; issued 4,172,709 and outstanding
4,124,909 at August 31, 2000; issued 4,161,309 and
outstanding 4,113,509 at February 29, 2000 41,727 41,613
Additional paid-in capital 5,001,395 4,969,417
Retained earnings 9,992,255 10,161,517
----------- -----------
15,035,377 15,172,547
Less treasury stock, at cost: 47,800 shares at August 31, 2000
and February 29, 2000 131,980 131,980
----------- -----------
Total shareholders' equity 14,903,397 15,040,567
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $18,681,287 $19,168,147
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
Bio-logic Systems Corp.
Form 10-QSB
Condensed Consolidated Statements of Operations and Retained Earnings
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
August 31, August 31,
---------------------------------------------------------------------
2000 1999 2000 1999
------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
NET SALES $ 5,864,022 $ 6,590,484 $11,183,399 $ 12,868,768
COST OF SALES 1,942,321 1,917,890 3,803,568 3,914,814
------------ ------------- ----------- -------------
Gross Profit 3,921,701 4,672,594 7,379,831 8,953,954
------------ ------------- ----------- -------------
OPERATING EXPENSES:
Selling, general & administrative 3,077,389 2,892,790 6,030,750 5,561,174
Research & development 883,585 829,942 1,730,051 1,513,462
------------ ------------- ----------- -------------
Total operating expenses 3,960,974 3,722,732 7,760,801 7,074,636
------------ ------------- ----------- -------------
OPERATING INCOME (LOSS) (39,273) 949,862 (380,970) 1,879,318
OTHER INCOME (EXPENSE):
Interest income 86,051 60,961 172,820 119,488
Interest expense (15,799) (4,682) (18,830) (12,106)
Miscellaneous (5,391) (916) (8,107) (1,445)
------------ ------------- ----------- -------------
TOTAL OTHER INCOME 64,861 55,363 145,883 105,937
------------ ------------- ----------- -------------
INCOME (LOSS) BEFORE INCOME TAXES 25,588 1,005,225 (235,087) 1,985,255
PROVISION (BENEFIT) FOR INCOME TAXES 7,175 281,475 (65,825) 555,875
------------ ------------- ----------- -------------
NET INCOME (LOSS) $ 18,413 $ 723,750 $ (169,262) $ 1,429,380
============ ============= =========== =============
RETAINED EARNINGS, BEGINNING OF PERIOD 9,973,842 8,704,555 10,161,517 7,998,925
------------ ------------- ----------- -------------
RETAINED EARNINGS, END OF PERIOD $ 9,992,255 $ 9,428,305 $ 9,992,255 $ 9,428,305
============ ============= =========== =============
EARNINGS (LOSS) PER SHARE:
Basic $ 0.01 $ 0.18 $ (0.04) $ 0.36
============ ============= =========== =============
Diluted $ 0.01 $ 0.17 $ (0.04) $ 0.35
============ ============= =========== =============
</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> Six Months Ended
August 31,
--------------------------------
2000 1999
-------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (169,262) $ 1,429,380
Adjustments to reconcile net income (loss) to net cash flows
provided by operating activities:
Depreciation and amortization 241,969 225,470
Provision for bad debts 57,600 57,600
Provision for inventory valuation 240,000 158,750
(Increases) decreases in assets:
Accounts receivable 1,365,605 (1,499,511)
Inventories (714,334) (720,520)
Prepaid expenses (97,415) 151,757
Increases (decreases) in liabilities:
Accounts payable and overdrafts (318,942) 114,769
Accrued liabilities and deferred revenue 210,411 485,786
Accrued income taxes (net of refunds) (162,196) 182,160
----------- -----------
Net cash flows provided by operating activities 653,436 585,641
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (353,337) (54,359)
Other assets (132,136) (7,555)
----------- -----------
Net cash flows (used in) investing activities (485,473) (61,914)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 32,092 963
Purchase of treasury stock ---- (43,060)
Payments of long-term debt (78,963) (68,268)
----------- -----------
Net cash flows (used in) financing activities (46,871) (110,365)
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 121,092 413,362
CASH AND CASH EQUIVALENTS - Beginning of period 4,959,902 5,957,112
----------- -----------
CASH AND CASH EQUIVALENTS - End of period $ 5,080,994 $ 6,370,474
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS:
Cash paid during the period for:
Interest $ 6,411 $ 15,410
=========== ===========
Income taxes - (net of refunds) $ 209,113 $ 339,415
=========== ===========
</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
(consisting of only 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 six months ended
August 31, 2000 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 4,124,208 and 3,987,152 for the quarters
ended August 31, 2000 and 1999, respectively, and 4,121,126 and 3,991,092
for the six months ended August 31, 2000 and 1999, 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 4,260,723 and 4,139,531 for the quarters ended August 31, 2000
and 1999, respectively, and 4,121,126 and 4,082,413 for the six months
ended August 31, 2000 and 1999, respectively.
Because of the net loss for the six months ended August 31, 2000, 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. Treasury Stock Repurchase
As of August 31, 2000, 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 August 31, 2000, the Company had working capital of $11,965,748
including $5,080,994 in cash, short-term investments 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 six months ended August 31, 2000, cash flow increased by $121,092
and net cash flow from operations increased by $653,436. A net loss for the six
months ended August 31, 2000 decreased net cash flow from operating activities
by $169,262 compared to net income of 1,429,380 that increased net cash flow
from operating activities for the six months ended August 31, 1999. In the six
months ended August 31, 2000, the Company invested in inventory to support the
new hearing products resulting in a decrease of net cash flow of $714,334. The
collection of customer payments reduced the Company's accounts receivable
resulting in an increase of net cash flow of $1,365,605.
Results of Operations
Net sales for the three and six month periods ended August 31, 2000 (the
"2000 three and six months") decreased to $5,864,022 and $11,183,399,
respectively, compared to $6,590,484 and $12,868,768 in the three and six month
periods ended August 31, 1999 (the "1999 three and six months.") Domestic sales
which represented 79% and 82% of net sales for the 2000 three and six months,
respectively, decreased by 25% and 19% to $4,623,998 and $9,190,580 for the 2000
three and six months, respectively, compared to $6,160,900 and $11,332,157 for
the 1999 three and six months, respectively. Foreign sales of $1,240,024 and
$1,992,819 contributed 21% and 18% of net sales for the 2000 three and six
months, respectively, an increase of 189% and 30% from $429,584 and $1,536,611
for the 1999 three and six months, respectively. The increase in foreign sales
in the 2000 three and six months was due to strong initial demand, especially
from Japan, of the Company's Audx, Abaer and Navigator Pro products. The
Company's domestic and overall decrease in net sales for the 2000 three and six
months was due to the delayed debut of new products for its line of hearing
screening devices for infants, and lower unit sales in the Ceegraph and Sleep
product lines caused, in part, by hospital purchasing managers delaying buying
decisions after many of their Y2K concerns were addressed last year as well as
increased competition.
7
<PAGE>
Bio-logic Systems Corp.
Form 10-QSP
Cost of sales increased to $1,942,321 and decreased to $3,803,568 in the
2000 three and six months, respectively, compared to $1,917,890 and $3,914,814
for the 1999 three and six months, respectively. Cost of sales as a percentage
of net sales increased to 33% and 34% for the 2000 three and six months,
respectively, from 29% and 30% for the 1999 three and six months, respectively.
This increase in cost of sales as a percentage of net sales in the 2000 three
and six months was the result of unfavorable sales mix change, higher inventory
reserve and higher service costs.
Selling, general and administrative expenses increased by 6% and 8% to
$3,077,389 and $6,030,750 during the 2000 three and six months, respectively,
compared to $2,892,790 and $5,561,174 for the 1999 three and six months,
respectively. Selling, general and administrative expenses as a percentage of
net sales, increased to 52% and 54% during the 2000 three and six months,
respectively, compared to 44% and 43%, respectively, for the 1999 three and six
months. The increases in the 2000 three and six months reflects the cost of
additional sales, customer support and executive personnel to better serve our
current and future customers, plus increases in travel and office service costs
offset by a decrease in sales commissions associated with lower net sales.
Research and development costs increased by 6% and 14% to $883,585 and
$1,730,051 for the 2000 three and six months, respectively, from $829,942 and
$1,513,462 for the 1999 three and six months, respectively. As a percentage of
net sales, total research and development costs increased to approximately 15%
for both the 2000 three and six months, compared to 13% and 12% for the 1999
three and six months, respectively. The increase in research and development
costs for the 2000 three and six months was the result of higher individual
salaries and benefits plus increased development activity in Israel and Poland.
The Company had operating losses of $39,273 and $380,970 for the 2000 three
and six months, respectively, compared to operating income of $949,862 and
$1,879,318 for the 1999 three and six months, respectively. The operating losses
for the 2000 three and six months were a result of lower net sales at decreased
gross margins combined with higher selling, general and administrative expenses
and research and development costs.
Net interest income increased to $153,990 for the 2000 six months compared
to $107,382 for the 1999 six months. This increase reflects higher investment
returns on the Company's cash investments offset by higher interest expense.
The Company had income tax expense of $7,175 and a income tax benefit of
$65,825 for the 2000 three and six months, respectively, compared to income tax
expense of $281,475 and $555,875 for the 1999 three and six months,
respectively. The Company's income tax rate differs from the federal statutory
rate of 34% due to the differences in foreign income and its corresponding tax
rates.
The Company had net income of $18,413 and a net loss of $169,262 or $0.01
and $(0.04) per diluted share respectively, compared to net income of $723,750
and $1,429,380 or $0.17 and $0.35 per diluted share, for the 1999 three and six
months, respectively. The Company attributes the small earnings and the net loss
for 2000 three and six months to a combination of lower net sales particularly
in the Ceegraph and Sleep product lines, lower gross margins and higher selling,
general and administrative and research and development costs.
8
<PAGE>
Bio-logic Systems Corp.
Form 10-QSP
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
1. (a) The Company's 2000 Annual Meeting of Shareholders (the "2000 Annual
Meeting") was held on August 17, 2000
(b) The following directors were elected at the 2000 Annual Meeting:
Gil Raviv
Irving Kupferberg
Roderick G. Johnson
The following are the other directors of the Company whose term of
office continued after the 2000 Annual Meeting:
Gabriel Raviv, Ph.D.
Craig W. Moore
Albert Milstein
Charles Z. Weingarten
The following votes were cast in connection with the election of
directors at the 2000 Annual Meeting:
FOR AGAINST
Gil Raviv 3,807,090 152,920
Irving Kupferberg 3,807,090 152,920
Roderick G. Johnson 3,807,090 152,920
2. The following votes were cast with respect to the adoption of an
amendment to the Company's 1994 Stock Option plan, which increased the
number of the Company's Common Stock authorized for issuance thereunder
from 850,000 to 1,600,000.
For Against Abstain
2,246,943 269,335 20,787
9
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Bio-logic Systems Corp.
Form 10-QSP
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 August 31, 2000
10
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Bio-logic Systems Corp.
Form 10-QSP
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: October 16, 2000 By: /s/ Roderick G. Johnson
-------------------------------
Roderick G. Johnson,
President & Chief
Operating Officer
Date: October 16, 2000 By: /s/ James M. Smearman
-------------------------------
James M. Smearman,
Controller
(Principal Financial Officer)
<PAGE>
Bio-logic Systems Corp.
Form 10-QSP
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: October 16, 2000 By: /s/ Roderick G. Johnson
-----------------------
Roderick G. Johnson,
President & Chief
Operating Officer
Date: October 16, 2000 By: /s/ James M. Smearman
-----------------------
James M. Smearman,
Controller
(Principal Financial Officer)
