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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, 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 Identification Number)
incorporation or organization)
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 10, 2001
Common Stock $.01 par value 4,213,934 shares
Transitional Small Business Disclosure Format
Yes ____ No X
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
Part I. Financial Information
Page
<S> <C>
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at November 30, 2000
and February 29, 2000. 3
Condensed Consolidated Statements of Operations and
Retained Earnings for the three and nine months ended
November 30, 2000 and 1999. 4
Condensed Consolidated Statements of Cash Flows for
the nine months ended November 30, 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 6. Exhibits and Reports on Form 8-K 9
Signatures
</TABLE>
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BIO-LOGIC SYSTEMS CORP.
FORM 10Q-SB
Part 1. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
ASSETS Nov. 30, 2000 Feb. 29, 2000
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<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 5,293,725 $ 4,959,902
Accounts receivable, less allowance for doubtful accounts
of $356,966 at November 30, 2000 and $360,554 at Feb. 29, 2000 5,915,256 6,323,513
Inventories 4,738,659 4,408,557
Prepaid expenses 209,738 150,435
Deferred income taxes 400,286 400,286
----------- -----------
Total current assets 16,557,664 16,242,693
PROPERTY, PLANT AND EQUIPMENT - Net 2,540,786 2,381,425
OTHER ASSETS 586,027 544,029
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TOTAL ASSETS $19,684,477 $19,168,147
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 162,014 $ 154,153
Accounts payable 1,366,328 1,029,175
Accrued salaries and payroll taxes 508,837 1,366,129
Accrued interest and other expenses 1,075,615 438,208
Accrued income taxes 459,472 469,257
Deferred revenue 522,929 355,189
----------- -----------
Total current liabilities 4,095,195 3,812,111
LONG-TERM DEBT - Less current maturities 13,993 139,670
DEFERRED INCOME TAXES 175,799 175,799
----------- -----------
Total liabilities 4,284,987 4,127,580
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COMMITMENTS ------ ------
SHAREHOLDERS' EQUITY:
Capital stock, $.01 par value; authorized, 10,000,000 shares;
issued and outstanding; issued 4,213,934 and outstanding
4,166,134 at November 30, 2000; issued 4,161,309 and
outstanding 4,113,509 at February 29, 2000 42,139 41,613
Additional paid-in capital 5,105,164 4,969,417
Retained earnings 10,384,167 10,161,517
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15,531,470 15,172,547
Less treasury stock, at cost: 47,800 shares at November 30, 2000
and February 29, 2000 131,980 131,980
----------- -----------
Total shareholders' equity 15,399,490 15,040,567
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $19,684,477 $19,168,147
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
3
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Condensed Consolidated Statements of Operations and Retained Earnings
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
November 30, November 30,
-------------------------------------------------------
2000 1999 2000 1999
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $ 6,622,632 $6,720,744 $17,806,031 $19,589,513
COST OF SALES 2,061,774 2,214,163 5,865,341 6,128,978
----------- ---------- ----------- -----------
Gross Profit 4,560,858 4,506,581 11,940,690 13,460,535
----------- ---------- ----------- -----------
OPERATING EXPENSES:
Selling, general & administrative 3,163,571 3,068,905 9,194,321 8,630,079
Research & development 930,405 870,549 2,660,457 2,384,011
----------- ---------- ----------- -----------
Total operating expenses 4,093,976 3,939,454 11,854,778 11,014,090
----------- ---------- ----------- -----------
OPERATING INCOME 466,882 567,127 85,912 2,446,445
OTHER INCOME (EXPENSE):
Interest income 85,772 58,765 258,592 178,253
Interest expense (4,193) (5,203) (23,023) (17,309)
Miscellaneous (4,139) 4,110 (12,246) 2,665
----------- ---------- ----------- -----------
TOTAL OTHER INCOME 77,440 57,672 223,323 163,609
----------- ---------- ----------- -----------
INCOME BEFORE INCOME TAXES 544,322 624,799 309,235 2,610,054
PROVISION FOR INCOME TAXES 152,410 174,950 86,585 730,825
----------- ---------- ----------- -----------
NET INCOME $ 391,912 $ 449,849 $ 222,650 $ 1,879,229
=========== ========== =========== ===========
RETAINED EARNINGS,
BEGINNING OF PERIOD 9,992,255 9,428,305 10,161,517 7,998,925
----------- ---------- ----------- -----------
RETAINED EARNINGS,
END OF PERIOD $10,384,167 $9,878,154 $10,384,167 $ 9,878,154
=========== ========== =========== ===========
EARNINGS (LOSS) PER SHARE:
Basic $ 0.09 $ 0.11 $ 0.05 $ 0.47
=========== ========== =========== ===========
Diluted $ 0.09 $ 0.11 $ 0.05 $ 0.46
=========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
Bio-logic Systems Corp.
Form 10-QBS
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
November 30,
----------------------------------
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 222,650 $ 1,879,229
Adjustments to reconcile net income to net cash flows
from operating activities:
Depreciation and amortization 384,536 350,734
Provision for bad debts 86,400 86,400
Provision for inventory valuation 360,000 253,750
(Increases) decreases in assets:
Accounts receivable 321,857 (2,441,609)
Inventories (690,102) (1,178,381)
Prepaid expenses (59,303) (1,411)
Increases (decreases) in liabilities:
Accounts payable and overdrafts 337,153 92,157
Accrued liabilities and deferred revenue (52,145) 780,395
Accrued income taxes (9.785) 267,110
----------- ------------
Net cash flows from operating activities 901,261 88,374
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (438,133) (383,923)
Other assets (147,762) -(7,554)
----------- ------------
Net cash flows used in investing activities (585,895) (391,477)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options 136,273 77,593
Purchase of treasury stock ---- (43,060)
Payments of long-term debt (117,816) (107,294)
----------- ------------
Net cash flows from (used in) financing activities 18,457 (72,761)
----------- ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 333,823 (375,864)
CASH AND CASH EQUIVALENTS - Beginning of period 4,959,902 5,957,112
----------- ------------
CASH AND CASH EQUIVALENTS - End of period $ 5,293,725 $ 5,581,248
=========== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS:
Cash paid during the period for:
Interest $ 10,311 $ 18,553
=========== ============
Income Taxes $ 209,113 $ 429,415
=========== ============
</TABLE>
The accompanying notes are an integral part of these
statements.
5
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Bio-logic Systems Corp.
Form 10-QBS
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, 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 4,146,696 and 4,007,120 for the quarters
ended November 30, 2000 and 1999, respectively, and 4,129,649 and 3,996,435
for the nine months ended November 30, 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 4,237,523 and 4,235,239 for the quarters ended November 30, 2000
and 1999, respectively, and 4,278,705 and 4,099,125 for the nine months
ended November 30, 2000 and 1999, respectively.
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, 2000, the Company purchased an aggregate of 47,800
shares of its common stock at a total cost of $131,980.
6
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Bio-logic Systems Corp.
Form 10-QBS
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, 2000 the Company had working capital of $12,462,469
including $5,293,725 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, 2000, cash flow increased by
$333,823 and net cash flow from operations increased by $901,261. Net income for
the nine months ended November 30, 2000 increased net cash flow from operating
activities by $222,650 compared to net income of $1,879,229 for the nine months
ended November 30, 1999. In the nine months ended November 30, 2000, the Company
used $690,102 in cash to increase inventory for primarily the hearing business.
In contrast, the Company increased cash flow by $321,857 by reducing accounts
receivable. Finally, the Company used net cash from investing activities to
purchase $438,133 in capital equipment.
Results of Operations
Net sales for the three month period ended November 30, 2000 (the "2000
three months") decreased by 1% to $6,622,632 from $6,720,744 in the three month
period ended November 30, 1999 (the "1999 three months."), while net sales for
the nine month period ended November 30, 2000 (the "2000 nine months") decreased
by 9% to $17,806,031 compared to $19,589,513 in the nine month period ended
November 30, 1999 (the "1999 nine months.") Domestic sales decreased
significantly by 14% and 17% to $5,392,992 and $14,583,572 for the 2000 three
and nine months, respectively, compared to $6,289,307 and $17,621,465 for the
1999 three and nine months, respectively. Foreign sales of $1,229,640 and
$3,222,459 contributed 19% and 18% of net sales for the 2000 three and nine
months, respectively, an increase of 185% and 64% compared to $431,437 and
$1,968,048 for the 1999 three and nine months, respectively. The increase in
foreign sales in the 2000 three and nine months was due to continuing demand,
especially in the Far East, of the Company's new AuDX, Abaer and Navigator Pro
products. The Company continued to record lower net sales in the domestic market
for the 2000 three and nine months due in part to increased competition and
lower demand for its' high-end Ceegraph products resulting in fewer large
multiple system orders. Finally, the Company believes its net sales have been
negatively impacted by the decisions of hospital purchasing managers to delay
buying hospital equipment until 2001 because of high capital outlay caused by
the Y2K concern.
7
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Bio-logic Systems Corp.
Form 10-QBS
Cost of sales decreased to $2,061,774 and $5,865,341 for the 2000 three
and nine months, respectively, compared to $2,214,163 and $6,128,978 for the
1999 three and nine months, respectively. Cost of sales as a percentage of net
sales decreased to 31% during the 2000 three months from 33% during the 1999
three months and increased to 33% for the 2000 nine months compared to 31% for
the 1999 nine months. The Company attributes the differences in the cost of
sales as a percentage of net sales for the 2000 three and nine months to a
combination of sales mix, continued higher inventory reserve and higher service
costs.
Selling, general and administrative expenses increased by 3% and 7% to
$3,163,571 and $9,194,321 during the 2000 three and nine months, respectively,
compared to $3,068,905 and $8,630,079 for the 1999 three and nine months,
respectively. Selling, general and administrative expenses as a percentage of
net sales increased to 48% and 52% during the 2000 three and nine months,
respectively, compared to 46% and 44% for the 1999 three and nine months. The
increases in the 2000 three and nine months continue to reflect the cost of
investing in additional sales, customer support and executive personnel to
better serve the Company's new and existing customers. In addition, the Company
experienced high costs in travel, freight and office services offset by lower
sales commissions.
Research and development costs increased by 7% and 12% to $930,405 and
$2,660,457 for the 2000 three and nine months, respectively, from $870,549 and
$2,384,011 for the 1999 three and nine months, respectively. As a percentage of
net sales, total research and development costs increased to approximately 14%
and 15% for the 2000 three and nine months, respectively, compared to 13% and
12% for the 1999 three and nine months, respectively. The increase in research
and development costs for the 2000 three and nine months resulted from a
decision by Bio-logic to recruit and retain the best available software
programmers, engineers and tester both in the U.S. and in Israel and Poland. The
Company believes this will enable it to continually emphasize new product
development along with feature enhancements on existing products.
The Company had operating income of $466,882 and $85,912 for the 2000
three and nine months, respectively, compared to $567,127 and $2,446,445 for the
1999 three and nine months, respectively. The decrease in operating income for
the 2000 three and nine months was the result of lower net sales together with
higher selling, general and administrative costs and research and development
expenses.
Net interest income increased to $235,569 for the 2000 nine months
compared to $160,944 for the 1999 nine months. This increase reflects higher
investment returns on money market accounts partially offset by higher overall
interest expense.
The Company had income tax expense of $152,410 and $86,585 for the 2000
three and nine months, respectively, compared to $174,950 and $730,825 for the
1999 three and nine 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 $391,912 and $222,650 or $0.09 and $0.05
per diluted share for the 2000 three and nine months, respectively, compared to
net income of $449,849 and $1,879,229 or $0.11 and $0.46 per diluted share for
the 1999 three and nine months, respectively. The Company attributes the lower
earnings in the 2000 periods to decreased net sales plus higher variable selling
cost, increase fixed costs associated with an expanded sales and customer
support network, plus continued investment in research and development costs.
8
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Bio-logic Systems Corp.
Form 10-QBS
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, 2000
9
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Bio-logic Systems Corp.
Form 10-QBS
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 16, 2001 By: /s/ Roderick G. Johnson
-----------------------------
Roderick G. Johnson,
President & Chief
Operating Officer
Date: January 16, 2001 By: /s/ James M. Smearman
------------------------------
James M. Smearman,
Controller
(Principal Financial Officer)
10
