<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K SB
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) MARCH 29, 1998
-------------------------
BIO-LOK INTERNATIONAL INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
DELAWARE 33-24566-A 63-0317138
---------------------------- ------------ -------------
<S> <C> <C>
(State or other jurisdiction (Commission (IRS Employer
of incorporation) file Number) Identification No.)
</TABLE>
312 S. MILITARY TRAIL, DEERFIELD BEACH, FLORIDA 33442
-----------------------------------------------------
(Address of Principal executive offices)
Registrant's telephone number, including area code (954) 698 - 9998
---------------------------
- -------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
(Amended report filed herewith to include letter to the SEC by former
accountant)
Effective September 29, 1998, the accounting firm of M.A. Cabrera & Company P.A.
resigned from the position of being the company's auditor. The reason for the
decision was that the company stopped servicing public companies. Over the past
two months Bio-Lok has been unable to get in tough with the accountants, hence
the company is providing the information submitted herewith. Per Regulation S-B,
Item 304 (a) (1) the following is submitted:
(i) the former accountant resigned;
(ii) the accountant's report on the financial statements for either
of the past two years contained no adverse opinions or
disclaimers of opinions, or was modified as to uncertainty,
audit scope, or accounting principles;
(iii) the change of accountant was not recommended by anyone but
precipitated due to the resignation of the firm - left public
accounting work;
(iv) (a) there were no disagreements with the former accountant; see
copy of accountants letter attached as Exhibit 16 (of item 304);
(b) no added requirements or requests where made by the
accountant;
Additionally, Exhibit 16 (of item 304) is attached hereto.
Effective 10/28/98 Bio-Lok International Inc. has retained the accounting firm
of Durland & Company of Palm Beach, Florida as it new accountant.
<PAGE> 2
FORM 8-K SB
March 29, 1999
page 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Forwarded herewith are the following reports:
10-K SB for October 31, 1998
Annual Report as of October 31, 1998
10-Q SB for the Quarter ended January 31, 1999
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BIO-LOK INTERNATIONAL INC.
(Registrant)
Date March 30, 1999 /s/ Ingo K. Kozak
------------------------------ ------------------------------
(Signature)
<PAGE> 3
m.a. cabrera & company p.a.
- -------------------------------------------------------------------------------
Certified Public Accountants & Consultants
8751 West Broward Blvd., Suite 207
Plantation, Florida 33324
954/476-2008
Fax 954/424-4401
February 2, 1999
Office of the Chief Accountant
Securities and Exchange Commission
450 5th Street, N.W.
Washington, D.C. 20549
Gentlemen:
We have read the comments in Item 4 of Form 8-K of Bio-Lok International, Inc.
dated November 6, 1998. There are certain comments that we make concerning that
filing:
1. It was provided to us for the first time on February 1, 1999, via fax
transmission from Mr. Ingo Kozak, Bio-Lok International's Chief Financial
Officer.
2. The flowing comment include in Item 4 of Form 8-K is not accurate: "Over
the past two months Bio-Lok has been unable to get in TOUGH (touch) with
the accountants..." The Company never made an attempt to get in touch with
us. Since the Company never paid us for the 1997 audit and is indebted to
us in the amount of $13,000, it seems obvious why the Company did not
contact us.
We agree with the remaining comments in Item 4 of Form 8-K of Bio-Lok
International, Inc.
M.A. Cabrera & Company, P.A.
Plantation, Florida
February 2, 1999
EXHIBIT 16 (OF ITEM 304)
<PAGE> 4
FORM 10-K SB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------
REPORT PURSUANT TO SECTION 12 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the fiscal Year ending OCTOBER 31, 1998
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 NUMBER 33-24566-A
-------------------------
BIO-LOK INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
DELAWARE 63-0317138
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
312 S. MILITARY TRAIL, DEERFIELD BEACH, FLORIDA 33442
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (954) 698-9998
----------------------------
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
Common Stock, $.01 par value Traded on the Over-the-
Counter market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (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 XX NO .
---- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
YES XX NO .
---- -----
<PAGE> 5
Continued
Aggregate market value of the Registrant's voting stock held by non-affiliates,
based upon the closing price of said stock per the Over-the-Counter supplemental
Pink Sheets on October 31, 1998 (par value is $0.01 per share) was $ 482,164.
As of October 31, 1998, the Registrant had 4,131,275 Common Stock shares
outstanding, at a $.01 par value per share.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Minutes of Shareholders Meeting of Annual Meeting dated April
22, 1998, are incorporated by reference into Part I of this Report.
Portions of the Annual Report for fiscal year ended October 31, 1998, are
incorporated by reference into Part II, III, and IV of this Report.
2
<PAGE> 6
PART I
ITEM 1. BUSINESS
(A) GENERAL DEVELOPMENT OF BUSINESS
Bio-Lok International Inc. was originally organized on October 6, 1987 as
Colfax, Inc., a Delaware corporation. The company had changed its name in 1988
to Minimatic Implant Technology, Inc.; in 1995 to American BioDental
Corporation; and, again in August 1996 to Bio-Lok International Inc. The
corporation was originally established for the purpose of acquiring companies
with long-term growth potential. In 1988 Colfax Inc. via a reverse merger
acquired Minimatic, Inc. Minimatic, Inc. was a Florida corporation which began
doing business in February 1987, was incorporated June 9, 1987, assumed and
purchased all operating and manufacturing activities of Minimatic Components,
Inc., was established to manufacture dental implant parts and other products as
a subcontractor, and to develop its own line of dental implants with the intent
to market same. Additionally, Minimatic, Inc.'s name was changed to Minimatic
Implant Technology, Inc. (hereinafter "Minimatic") in 1995, and merged into
Bio-Lok International Inc. on March 1, 1997.
From 1987 to 1991 Bio-Lok via Minimatic developed its dental implant product
line while still acting as a subcontractor for numerous entities manufacturing
dental implants and blade implant products, industrial parts, etc.. Since 1991
the dominant portion of Bio-Lok and its subsidiary company's business has been
directed towards its own proprietary dental implant product line and
specifically the development, improvement of, and marketing/distribution of the
dental implant product line.
On April 2, 1996, the Board of Directors voted and directed its officers to
place the company under the protection of a Chapter XI Bankruptcy -
Reorganization. Prior to this date Bio-Lok (parent company) had directed and
placed its wholly owned subsidiary Minimatic Implant Technology, Inc. effective
January 10, 1996 under the protection of a Chapter XI Bankruptcy. A Plan of
Reorganization was approved by the Court on February 12, 1997, and was closed
and discharged on January 23, 1998.
At the August 1996 Board of Directors meeting and per Proxy issued to
stockholders reference the Annual Meeting held on 7/30/96, both stockholders and
the Board approved the combining of Bio-Lok and its wholly owned subsidiary
Minimatic Implant Technology, Inc. The corporations merged 3/1/97 with the
surviving entity being Bio-Lok International Inc. (hereinafter either or both
entities are referred to as "Bio-Lok" or the "Company").
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
No segmentation of business activity is completed on a financial reporting
basis. Domestic and international market activity for Bio-Lok is maintained on a
segregated basis only for sales results.
(C) NARRATIVE DESCRIPTION OF BUSINESS
Bio-Lok is a manufacturer and distributor of precision dental implants, related
prosthetics and devices, associated tools, and irrigation drills for the dental
market and the product line is marketed as the "Micro-Lok Precision Dental
Implant System.". Bio-Lok via predecessor entities and management has been
involved in the design, development and manufacture of dental products for over
21 years. The Company manufactures its own product line and has received 510(k)
registrations from the FDA for required products.
The Company has completed and obtained its ISO 9001 / EN 46001 and Annex II (CE
mark) certification on June 10, 1998. ISO certification permits the Company to
import and market its product within the EEC.
3
<PAGE> 7
BIO-LOK INTERNATIONAL INC.
PRINCIPAL PRODUCTS, MARKETS AND DISTRIBUTION
Bio-Lok's principal products consists of a line of dental implants, their
prosthetic components, tools, devices and irrigated spade drills. The dental
implants are the foundation upon which natural looking teeth are placed via a
sound and lasting prosthesis. Dental implants are small anchor (root form)
shaped like screws or cylinders which when placed become an artificial
replacement of the natural roots, are made out of bio-compatible titanium, and
are placed into the maxilla and mandible of a patient. Many of the implants have
various coatings or treatments (Hydroxylapatite, Titanium Plasma Sprayed, or are
treated via a remedial blasted material - RBM, etc.) which are bonded to the
implant to enhance the bonding and bone growth process - improve
osseointegration.
Dental implant systems are placed by trained dentists, oral surgeons,
periodontists, implantologists, etc.. Implants can have a high success rate if
placed properly and expertly, and with proper oral care and regular dental
visits have lasted as long as 20 years and may last a lifetime.
The dental products Bio-Lok manufactures and markets are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
- 3.45mm Platform - Micro-Lok Screw Implant 3.45mm body to head;
- Micro-Lok Cylinder Implant 3.45mm body to 4.00mm head;
- 4.00 mm Platform - Micro-Lok Screw Implant 3.75mm body to 4.00mm head;
- Micro-Lok Screw Implant 4.00mm body to 4.00mm head;
- Micro-Lok Cylinder Implant 3.3mm body to 4.00mm head;
- Micro-Lok Cylinder Implant 4.0mm body to 4.00mm head;
- Classic Cylinder Implant 3.3mm body to 4.00mm head;
- Classic Cylinder Implant 4.0mm body to 4.00mm head;
- Silhouette Screw Implant with a tapered body 4.5mm to 2.5mm
- 5.00 mm Platform - Micro-Lok Screw Implant 4.75mm body to 5.0mm head then cuff back to 4.0mm;
- Micro-Lok Screw Implant 4.75mm body to 5.0mm head;
- Micro-Lok Cylinder Implant 5.0mm body to 5.0mm head;
- Classic Cylinder Implant 5.00mm body to 5.0mm head then cuff back to 4.0mm;
- Classic Cylinder Implant 5.0mm body to 5.0mm head.
- Silhouette Screw Implant with a tapered body 5.5mm to 3.3mm
</TABLE>
- an extensive line of prosthetic abutments providing a practitioner
ease of identifying options available for completion of any
prosthesis;
- all necessary tooling and devices for both placement of the
implants and for completion of a prosthesis;
- a large selection of four(4) fluted (longitudinal cutting
surfaces) spade drills, pilot drills, fissure bur, countersinks
and counterbores;
- and, a select number of products utilized in implantology and
purchased for re-sale.
RAW MATERIALS
The material used in manufacturing the dental products is titanium alloy
(ASTMB348 Grade 5 [Ti 6AL4V]), which is inert to body tissue and bone, and is an
alloy which has the unique ability to form a permanent biological bond with
living tissue after being placed.
FACILITIES
Bio-Lok located and operates out of a 7,690 sq. ft. plant and office facility
located in Deerfield Beach, Florida.
COMPETITION
The corporation's competition consists of a number of entities - approximately
10 major and numerous minor competitors. The major competitors are Nobel Biocare
/ Steri-Oss, Paragon Implant Co., Sulza-Calcitek, Implant Innovations Inc. (3I),
Lifecore Biomedical, and etc.
To compete and overcome the competitor(s) advantages in the marketplace Bio-Lok
offers to the market a product line designed and manufactured in-house; a
product line which represents "State of the Art" based on today's technology by
having incorporated into the system unique and patented designs consisting of
journals, thread design, seals and etc. which provide strength and fit to the
product line. Due to these factors Bio-Lok anticipates to be able to penetrate
the existing dental implant marketplace and gain market share as it completes
the development and implementation of its marketing objectives.
4
<PAGE> 8
OTHER INFORMATION RELATING TO THE BUSINESS
TRADEMARKS AND PATENTS.
The Company has filed trademarks on the company name and logo, and its dental
implant product line name and logo.
The Company owns a number of patents. These patents were obtained have been
transferred and assigned to the Company. Many of these inventions had been
proto-typed by company during their development. Patents filed to date are as
follows:
(1) Utility Patent Application, for the dental implant system
detailing the journal means;
(2) Utility Patent Application, for the Multi-fluted (four fluted)
Dental Irrigation Drill;
(3) Design Application for Patent, for the Multi-fluted (four fluted)
Dental Irrigation Drill;
(4) A patent application for the thread design incorporated into the
screw type implants;
(5) A patent application filed for the Analog Torque Wrench;
(6) A patent application filed for a Dental Implant - knurled.
(7) Analog Dental Torque Wrench (pending)
(8) Dental Implant - Improved Lateral Surface (pending)
(9) Multi-Threaded Dental Implant (pending)
RESEARCH AND DEVELOPMENT.
Product research is being completed continually on the existing product line,
new ideas and concepts relating to dental implantology and the development of
new implant, prosthetic and tooling designs. New products will be and are being
brought to market as clinical evaluations, studies and testing are completed. In
1998 the Silhouette Screw Implant with associated spade drills was finally
brought to market in a 5.0mm platform design.
ENVIRONMENTAL LAWS.
Environmental laws do not impact the company except for waste products/materials
created and/or generated by manufacturing processes. These waste products are
being recycled according to and in compliance with federal, state, and local
environmental protection laws. Compliance by the Registrant with federal, state
and local environmental protection laws has not in the past and is not expected
in the future to have an effect on capital expenditures, liquidity, earnings or
its competitive position.
EMPLOYEES.
At fiscal year ended October 31, 1998 the Registrant employed 13 individuals.
None of the employees are affiliated with unions and the Registrant considers
its relations with its employees to be good.
PROPERTIES.
Registrant owns no properties. The principal executive offices and manufacturing
facility of the Registrant are located in Florida and are leased. The facilities
are considered to be in good condition, fully utilized, and capacity is adequate
for the needs of the business.
MISCELLANEOUS.
At the Annual Stockholders Meeting held on April 22, 1998, the Board of
Directors proposed, authorized and had approved by a majority of stockholders
the reverse split of the common stock share outstanding on a 10 to 1 basis and
re-setting the authorized shares at 30,000,000 with a $0.01 par value per share.
To date, the Board has authorized and registered only 7,000,000 shares.
EXECUTIVE OFFICERS OF THE REGISTRANT.
Following is a list of the names and ages of all the Executive Officers of the
Registrant, indicating all positions and offices with the Registrant held by
each such person, and each such person's principal occupations or employment's
during the past five years. Each such person has been elected to serve until the
next annual election of officers of the Registrant scheduled for April 28, 1999.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES HELD AND PRINCIPAL OCCUPATIONS OR EMPLOYMENT DURING
NAME AND AGE FIVE YEARS
- ---------------------------------------- --------------------------------
<S> <C>
Bruce L. Hollander (60) Chief Executive Officer, and President effective 12/13/95;
positions held outside of the company - President & CEO
Lion Wines & Spirits, Inc., 1992 - 1995.
</TABLE>
5
<PAGE> 9
<TABLE>
<CAPTION>
<S> <C>
Ingo K. Kozak (57) Director, CFO, Secretary and Vice President - Finance effective
8/95; previously Director and Vice President - Finance effective
2/94 to 7/95; prior positions held outside of the company - Director
and President of KM Consulting, Inc. from 1987 - 1993.
Neil Smith (57) Director; Past Co-Chairman and CFO of Express Shade,
Inc. of Greensboro, NC; past President and CEO of Florida
Orthopedics, Inc. of Miami Lakes, FL and Partner &
Director of Consulting Operations of Deloitte & Touche.
</TABLE>
At the Annual Meeting held 4/22/98 the following Directors were re-elected to
the Board of Directors of the company:
<TABLE>
<CAPTION>
<S> <C>
Bruno Pletscher (50) Director; past and presently Managing Director of PDS
International Inc. of Nassau, Bahamas; past Director of Pro-
Health Limited of Nassau, Bahamas; past Financial Controller
from 10/94 to 5/95 of Corona Holiday Ltd. (elected for one
year)
Harold H. Weisman, Esq. (64) Director; Attorney at Law - specializing in contract law;
former Assistant U.S. Attorney for Mass.; former Staff Attorney
for New England Power Systems. (elected for two years)
Peter Baronoff (40) Director and past Chairman; Chairman and CEO of Sun Capital,
Inc.; past Chairman of Omni International, Inc. (elected for two
years)
Carl Sadowsky (52) Director and Vice-Chairman; Doctor of Medicine. (elected for
two years)
Howard Koslow (53) Director; past and present position is President, COO & CFO
of Sun Capital, Inc. (elected for two years)
</TABLE>
ITEM 2. PROPERTIES
For information concerning material properties of the Registrant and its
subsidiaries, see the information under the sub-caption "Properties" under the
caption "Other Information Relating to the Business" in Section (c) of Item I
above.
ITEM 3. LEGAL PROCEEDINGS
(1) On February 12, 1997, the Plan of Reorganization for the Company was
approved by its creditors and accepted by the Court. Under the settlement
all law suits and counter law suits where closed and included in the final
Plan of Reorganization structure. On January , 1998 the filing was closed.
(2) No other new or significant legal proceedings exist.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Only matters put to a vote of Security Holders for 1998 where voted on and are
detailed in minutes of the Annual Meeting held at Bio-Lok's offices on April 22,
1998.
6
<PAGE> 10
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Registered Common Stock is traded on the Bulletin Board and on the
Over-the-Counter market. The stock is listed at times in the Supplemental Pink
Sheets as trades are reported.
ITEM 6. SELECTED FINANCIAL DATA
The information is provided under the section titled "Annual Report" for the
year ended October 31, 1998 and is incorporated by reference into this Report
and attached hereto.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's discussion and analysis of financial condition and results of
operation is included and detailed in the Annual Report for fiscal year ending
October 31, 1998, attached hereto and as detailed in the section titled
"Management's Discussion and Analysis."
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) Annual Report to Shareholders for the year ended October 31, 1998, is
incorporated by reference into this Report:
Internal Prepared Financial Review Report Letter for year ended October
31, 1998
Balance Sheets - October 31, 1998 and October 31, 1997
Statement of Operations, Shareholders' Equity and Cash Flows - October
31, 1998, October 31, 1997, and October 31, 1996
Statement of Cash Flow for years 1998, 1997, 1996
Notes to the Financial Statements
(b) No supplementary data is being reported.
7
<PAGE> 11
<TABLE>
<CAPTION>
BIO-LOK INTERNATIONAL INC.
(in thousands of dollars)
October 31, October 31,
1998 1997
----------- -----------
<S> <C> <C>
BALANCE SHEET:
Current assets...................... $ 1,669 $ 1,677
Noncurrent assets................... 331 335
Current liabilities................. 790 573
Noncurrent liabilities.............. 481 643
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------------------
Oct. 31, Oct. 31, Oct. 31,
1998 1997 1996
------------- ------------- ------------
<S> <C> <C> <C>
INCOME STATEMENT:
Net Sales....................................... $ 1,464 $ 1,406 $1,583
Gross Profit.................................... 1,000 950 980
Sales Expense............................. 304 310 360
General & Admin. Exp............................ 655 636 530
Income from Operations.......................... 42 5 89
Other Inc./Exp.................................. (109) (47) (83)
Gain ref. XI Proceedings........................ -- 777 --
Net income....................................... (68) 734 6
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
The firm of Durland & Company of Palm Beach, Florida has been retained as
corporate auditors for the completion of the certified annual audits of 1998 and
the quarterly reviews for 1999.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information as to the Directors of the Registrant set forth under the
sub-caption "Board of Directors" appearing under the caption "Election of
Directors" on page 1 through 5 of the Proxy Statement relating to the Annual
Meeting of Shareholders held on April 9, 1997, is incorporated by reference into
this Report. The information as to the Executive Officers of the Registrant is
included in Part I hereof under the caption "Executive Officers of the
Registrant" in reliance upon General Instruction G to Form 10-K and Instruction
3 to Item 401(b) of Regulation S-K.
ITEM 11. EXECUTIVE COMPENSATION
The information relating to director and executive officers' compensation, is
incorporated by reference, and is set forth under the caption "Compensation of
Directors" and "Summary Compensation Table" on page 3 of the Proxy Statement
relating to the Annual Meeting of Shareholders held on April 22, 1998.
8
<PAGE> 12
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information relating to executive officers' compensation, is incorporated by
reference, and is set forth under the caption "Secured Ownership of Certain
Management" and reflected on page 4 of the Proxy Statement relating to the
Annual Meeting of Shareholders held on April 22, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CONSULTING SERVICES
Bio-Lok has and continually is negotiating with a number of clinicians to
provide continued consulting, collaboration, clinical services and advise to the
Company.
CONTRACTS
The Company, on a continual basis, enters into distribution agreements with
select domestic and international (Country by Country) entities for the sale of
its product line. No other contracts exist at present.
RE-ORGANIZATION AND RE-STRUCTURING
On January 10, 1996 the Board of Directors voted and placed the wholly owned
subsidiary Minimatic under protection of Chapter XI Bankruptcy Re-organization.
This was completed to protect the company from creditors and attempt to settle
lawsuits outstanding.
On April 2, 1996 the Board of Directs voted and placed Bio-Lok (p/k/a American
BioDental Corporation) also under the protection of a Chapter XI Bankruptcy
Re-organization. It was completed to also protect the entity from its creditors
and the lawsuits outstanding.
On February 12, 1997, the Plan of Reorganization for both companies was approved
by creditors and accepted by the Court. The File was subsequently closed on
January 23, 1998.
On March 1, 1997, the two companies (Bio-Lok International Inc. and Minimatic
Implant Technology, Inc.) were merged and the surviving entity was Bio-Lok
International Inc.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A)(1) LIST OF FINANCIAL STATEMENTS
Bio-Lok International Inc. Annual Report of Shareholders for year ended October
31, 1998, along with the Certified Independent Auditor Report, are incorporated
by reference into this Report by Item 8 hereof.
Internal Prepared Financial Audit Review Report Letter for year ended
October 31, 1998
Consolidated Balance Sheets - October 31, 1998 and October 31, 1997
Statement of Operations, Shareholders' Equity and Cash Flows - October
31, 1998, October 31, 1997, and October 31, 1996
Statement of Cash Flow for years 1998, 1997, 1996
Notes to the Financial Statements
9
<PAGE> 13
(A)(2) LIST OF FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statement schedules (numbered in accordance
with Regulation S-X) of Bio-Lok International Inc.
are included in this Report:
Schedule V - Property, Plant and Equipment for three years ended
October 31, 1998, page 12 of this Report.
Schedule VI - Accumulated Depreciation of Property, Plant and Equipment
for three years ended October 31, 1998, page 13 of this
Report.
Schedule VII - Guarantees of Securities of Other Issuers as of October
31, 1998, page 13 of this Report.
Schedule VIII - Valuation and Qualifying Accounts for three years ended
October 31, 1998, page 13 of this Report.
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions, or are inapplicable, or the information called for therein
is included elsewhere in the financial statements or related notes thereto
contained or incorporated by reference herein.
(A)(3) LIST OF EXHIBITS: (NUMBERED IN ACCORDANCE WITH ITEM 601 OF
REGULATION S-K)
Exhibit
NUMBERS DESCRIPTION
- ------- -----------
-- NONE --
COMPENSATORY PLANS OR ARRANGEMENTS
13 Annual Report to Shareholders which includes the Independent
Auditors' Report for the Registrant for the year ended October 31,
1998. Except for those portions of such Annual Report to
Shareholders expressly incorporated by reference into this Report,
such Annual Report to Shareholders is furnished solely for the
information of the Securities and Exchange Commission and shall not
be deemed a "filed" document.
- --------
* Document has heretofore been filed with the Commission and is incorporated by
reference and made a part hereof.
The Registrant agrees to furnish, upon request of the Commission, a copy of all
constituent instruments defining the rights of holders of long-term debt of the
Registrant and its consolidated subsidiary.
(B) REPORTS ON FORM 8-K
May 30, 1998 10-K SB for October 31, 1997, along with Annual Report of
Shareholders' which included the Certified Independent
Auditor Report for the year ended October 31, 1997 10-Q SB
for the Quarter ended January 31, 1998
October 16, 1998 Change in Registrant's Certifying Accountant.
10
<PAGE> 14
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
FOR THE THREE YEARS ENDED
(in thousands)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E Col. F
- ------------------------- ---------- ---------- ----------- ------------ -------
Other
Balance at Changes- Balance
Beginning Additions Retirements Add (Deduct) at End
Classification of Period at Cost or Sale Describe(1) of Period
- ------------------------- ----------- --------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Year ended Oct. 31, 1998
Equip. Cap. Leases $ -0- $ -0- $ $ $ -0-
Tooling Equipment 72,153 72,153
Office Equipment 38,017 4,818 42,835
Machinery & Equip. 670,669 670,669
Vehicle 15,408 15,408
Computer Equipment 147,512 4,306 151,818
Leasehold Improv. 56,213 451 56,664
-------- -------- -------- -------- ----------
Total $999,972 $ 9,575 $ -0- $ -0- $1,009,547
======== ======== ======== ======== ==========
Year ended Oct. 31, 1997
Equip. Cap. Leases $ -0- $ -0- $ $ $ -0-
Tooling Equipment 70,793 1,360 72,153
Office Equipment 30,121 7,896 38,017
Machinery & Equip. 578,426 92,243 670,669
Vehicle -0- 15,408 15,408
Computer Equipment 137,353 10,159 147,512
Leasehold Improv. 52,937 3,276 56,213
======== ======== ======== ======== ==========
Total $869,630 $130,342 $ -0- $ -0- $ 999,972
======== ======== ======== ======== ==========
Year ended Oct. 31, 1996
Equip. Cap. Leases $ 5,450 $ $ $ 5,450 $ -0-
Tooling Equipment 70,793 -0- 70,793
Office Equipment 33,609 -0- 3,488 30,121
Machinery & Equip. 583,737 -0- 5,311 578,426
Computer Equipment 136,470 883 137,353
Leasehold Improve. -0- 52,937 52,937
-------- -------- -------- -------- ----------
Total $824,609 $ 53,820 $ 8,799 $ -0- $ 869,630
======== ======== ======== ======== ==========
</TABLE>
11
<PAGE> 15
SCHEDULE VII - ACCUMULATED DEPRECIATION OF PROPERTY, PLANT
AND EQUIPMENT
For the three years ended
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E Col. F
- ------------------------- ---------- ---------- ----------- ------------ -------
Other
Balance at Changes- Balance
Beginning Additions Retirements Add (Deduct) at End
Classification of Period at Cost or Sale Describe(1) of Period
- ------------------------- ----------- --------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Year ended Oct. 31, 1998 $678,619 $ 84,674 $ -0- $ -0- $ 763,293
All Machinery & Equip.
Year ended Oct. 31, 1997 639,486 39,133 -0- 678,619
All Machinery & Equip.
Year ended Oct. 31, 1996 558,818 89,237 -0- (8,569) 639,486
All Machinery & Equip.
</TABLE>
(1) Adjustments to depreciation due to scrapped and sold equipment.
SCHEDULE VII - GUARANTEES OF SECURITIES OF OTHER ISSUERS
October 31, 1998
- ---- NONE TO REPORT ----
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
For the three years ended
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- ----------------------- ----------- ---------- ------------ ----------------------------
Additions
----------------------------
Charged to
Balance at Charged to Other Balance
Beginning Cost and Accounts Deductions at End
Classification of Period Expenses - Describe - Describe of Period
- ------------------------- ----------- ---------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts, current and long-term:
Year ended Oct. 31, 1998 $ 22,397 $ 50,273 $ -0- $ $ 72,670
Year ended Oct. 31, 1997 $ 30,741 $ 12,940 $ -0- $21,073(1) $ 22,397
Year ended Oct. 31, 1996 32,335 -0- -0- 1,594 (1) 30,741
</TABLE>
- -----------------
(1) Write off against reserve account.
12
<PAGE> 16
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-LOK INTERNATIONAL INC.
(Registrant)
By /s/ Bruce L. Hollander
-----------------------------
Bruce L. Hollander
Chief Executive Officer
and President
February 28, 1999
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 date indicated.
SIGNATURE TITLE
--------- -----
/s/ Bruce L. Hollander Chief Executive Officer and
- -------------------------------------- President
Bruce L. Hollander
/s/ Ingo K. Kozak Director, CFO and VP - Finance
- --------------------------------------
Ingo K. Kozak
By /s/ Ingo K. Kozak
-----------------------------------
Ingo K. Kozak
Secretary of Bio-Lok International Inc.
Attachment: 1998 Annual Report
13
<PAGE> 17
BIO-LOK INTERNATIONAL INC.
ANNUAL REPORT
AS OF OCTOBER 31, 1998
<PAGE> 18
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Financial Highlights 3
Letter to Shareholders from the President 4
Business Review 6
Financial Review 9
Financial Statements
Internal Audit Report Letter F-11
Consolidated Balance Sheets F-12
Consolidated Statements of Operations F-13
Consolidated Statement of Stockholders' Equity F-14
Consolidated Statements of Cash Flows F-15
Notes to Consolidated Financial Statements F-16 to F22
Management Information
Select Financial Data 23
Market Information for Common Stock 24
Office of the Chairman, Board of Directors and Corporate Officers 25
Corporate Information 26
</TABLE>
Page 2
<PAGE> 19
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
($ in thousands, except % Increase
per share amounts) 1998 1997 (Decrease)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales............................................ $ 1,464 $ 1,406 4%
Income from Operations............................... 42 5 --
Income before income taxes & extraordinary items..... (68) (28) --
Net Income (loss).................................... (68) 734 --
Cash provided from operations........................ (3) 3 --
Capital expenditures................................. (9) (193) --
Working capital ratio................................ 2.1:1 2.9:1 20
Shareholders' equity................................. 729 796 (8)
Per share:
Net income (loss)............................... $ (.02) $ .02 --
Book value...................................... .18 .23 --
Dividends declared.............................. -0- -0- --
Return on average equity............................. -0- .04 --
</TABLE>
Page 3
<PAGE> 20
LETTER TO SHAREHOLDERS FROM THE PRESIDENT
To: Shareholders of Bio-Lok International Inc.
On January 23, 1998, the Federal Bankruptcy Court issued its Final Decree to
allow BioLok International Inc. to close the Chapter 11. That means since
January 10, 1996, two full years, your company has had the bankruptcy reported
in every credit report issued; a mighty large burden when trying to establish
ourselves as a company that is in business to stay. This problem remains with us
and will continue, until we recapitalize the company and exhibit financial
stability. This month, your company issued a private placement memorandum to
raise $1,500,000 for working capital.
Profit from operations for the year was a little better than break-even, at
$45,000, but after reserving for various receivable accounts, we ended with a
loss of $68,000. One of the major problems we experienced occurred in July when
we discontinued our relationship the existing Distributor in Argentina (Dialom).
Dialom and its owner, owes Bio-Lok $87,000 and we are currently in litigation
both here in the US and in Argentina. We expect most of this money to be paid
back to the company over the ensuing year. In turn, a new Distributor
(BioDental, SA) was engaged in late 1998. The development of the Distributor and
its attempt in regaining market share in Argentina will positively effect sales
and profit this year.
A number of improvements were made to the product line and the addition of the
"Silhouette" self-tapping tapered screw implant appears to be very well
accepted. This is a tapered profile implant which is excellent for immediate
replacement of an extracted tooth, as well as, for specific locations in the
mouth. BioLok offers the largest selection of implants available from any one
supplier, to meet every surgical challenge.
On the brighter side, BioLok did not stand still this year. ISO 9001 and our CE
mark were issued to the company, allowing us to continue to meet international
requirements for sale of our products within the EEC. Also, domestic sales
appear to be in an up-swing and are expected to grow for 1998 by over 20%.
Overall, sales increased slightly to $1,464,000, with US sales remaining, as
anticipated, very quiet. With only one sales representative in the market, all
of our attention was focused on finding distributors to represent and sell our
products. On January 4,1999, the company signed-up its first domestic
distributor, who became our exclusive sales organization in New England and Long
Island, New York. By April we expect another distributor to come board and as we
continue to build. By year end we could be represented by over 40 salespeople in
the US. It is our belief that selling through distributors, rather than
directly, is very cost effective and will build momentum in 1999/2000.
Additionally, during the year, planned acquisitions will also add to this
increase our market share in markets were we are currently not active.
In 1999 we are planning to make significant strides in technical acceptance of
the product line. Our goal is to add technical superiority to our marketing
strategy by providing a way to increase the rate and density of bone growth to
our implants. R&D activities appear to have found an opportunity to make this
happen in 1999 through acquisition. This will cut the patient's average time
between surgery and the final restoration, by two thirds. The money received
from the private placement will be required to develop and market this new
patented technology. To back up this strategy, we are also looking to replace
our credit line with a larger, more favorable line. Other events planned in 1999
are:
o the publishing of at least three major articles in dental periodicals
on the Micro-Lok System;
o podium time at the Annual International Periodontal and other meetings
on Micro-Lok;
Page 4
<PAGE> 21
o introduction of more efficient products like; a new surgical tray, new
countersink tools and an abutment holding tool for laboratories and
chair-side use;
o the reduction of material cost by 20%, due to negotiated new titanium
price;
o parts cost decrease by 10% due to the effect of two new machines on
line;
o new Distributor in Argentina coming on-line;
o Micro-Lok Mexico and Chile coming on-line as wholly owned distributor
subsidiaries.
This is the turnaround year for Bio-Lok. Internal sales increases will make us
profitable. Acquisitions will also add to our sales and profitability.
Technological advances will separate us from our competition. Our most important
effort will be to raise the working capital to market, advertise and continue
our research studies.
Bio-Lok is poised to take its place in the international marketplace.
Sincerely,
/s/ Bruce L. Hollander
Bruce L. Hollander
President & CEO
Page 5
<PAGE> 22
BUSINESS REVIEW
Bio-Lok International Inc. ( "BioLok" or the "Company") is a manufacturer,
distributor and marketer of medical devise products. Bio-Lok's product line
consists of its proprietary Dental Implant Product Line which is comprised of
dental implants (screws and cylinders), their prosthetics, tools, devices, kits
and irrigated spade drills. The Company is the manufacturer and distributor of
the "MICRO-LOK PRECISION DENTAL IMPLANT SYSTEM."
Bio-Lok has positioned itself to be a major manufacturer, marketer, and
distributor to the implant marketplace. The Company has obtained the requisite
FDA 510(k)'s, ISO 9001 / EN 46001 and CE Mark to market its product line both
domestically and internationally. Domestically the Company markets its the
product line directly to the end-user and via select distributors.
Internationally marketing is accomplished primarily via select Distributors on a
country by country basis, or via joint ventures and/or wholly owned
subsidiaries.
Dental implants are the foundation upon which natural looking teeth are placed
via a sound and lasting prosthesis. Implants (small anchor shaped like screws or
cylinders) are the artificial substitutes for the natural roots of teeth, are
made out of bio-compatible titanium alloy and are placed into the jawbone. The
titanium alloy utilized is of clinical grade, is inert to the body, represents a
space age material which has the unique ability to form a permanent biological
bond (bio-lok) with living tissue.
The merits of having implants instead of the conventional bridge and denture
plates are as follows:
- dental implants can provide support for a full denture, making it
more secure and comfortable;
- dental implants support a fixed bridge eliminating the need for a
removable partial denture;
- implants can assist in the replacement of a single tooth without the
need to alter adjacent teeth;
- advantages are that they can support replacement teeth in much the
same way as tooth roots support natural teeth. Many dentures wobble,
click or cause pain, and dental implants provide a sound
alternative;
- dental implants can prevent embarrassment about spaces from missing
teeth, instead you can enjoy foods again, smile, and speak with
confidence.
Dental implants are placed by trained dentists. Implants can have a high success
rate (Micro-Lok Implant have a 98.5% success rate - highest in the industry) if
placed properly and expertly, and with proper oral care and regular dental
visits, dental implants have lasted over 20 years and can last a lifetime.
The dental implant and related products manufactures and distributes are as
follows:
- 3.45mm, 4.00mm, 5.00mm platform screw and cylinder type implant;
both implant styles have external hex tops, and are coated either HA
or TPS or RBM treated (uncoated);
- NEW PRODUCT introduced late summer 1998 was the 5.00mm platform
"Silhouette" screw (tapered) implant; a 4.00mm platform version was
introduced in December 1998;
- an extensive line of prosthetic armamentarium to avail a
practitioner a number of options in completing a prosthesis;
- having incorporated a unique "journal" design concept (patented)
into the implant and prosthetic product parts which provides a more
secure and problem free fit (eliminated potential thread damage).
The Company along with its primary clinicians constantly review current designs,
evaluate new concepts, and develop improved and new product to augment the
Micro-Lok Implant System.
The company's marketing and sales effort are segregated into two distinct
functions to enable management to properly evaluate, monitor, and provide
direction and guidance. The two distinct operations are DOMESTIC and
INTERNATIONAL. The domestic and international market are to be covered by the
promotion of seminars and meetings; association with Universities, dental
laboratories, clinics, and practitioners; attending select dental
Page 6
<PAGE> 23
conventions with exhibit space (booth); space advertising, article publication,
flyer distribution to promote the company and its products; and, direct support
internationally via local distributors and clinics. To accomplish this feat the
Company has been developing promotional literature, direct marketing material,
catalogs, manuals, and etc.
DOMESTIC. The domestic marketplace covers the 50 states and territories. The
current marketplace is estimated at over $200 million in sales and real growth
at about 8%. Bio-Lok's domestic market is in the process of being rebuilt. Over
the past years, the Company's inconsistent financial status and past management
have affected its acceptance in the domestic (US) marketplace. With the name
change to Bio-Lok International Inc., consolidation of operations in early 1997,
advertising, and new promotional literature and catalog the Company has
re-presented itself to the dental market.
Presently, the Company is developing markets penetration via the hire of
salespersons, independent contractors and/or local/regional distributors. These
marketers are anticipated to be located in large metropolitan areas and areas
with high concentration of an over 45 population. To this extent, salespersons
have already been located in the Greater New York/New England area, Chicago and
Los Angeles. We anticipate that with the mix of individual salespersons to
distributors that the Company is anticipating to have up to 75 sales persons
selling the Micro-Lok Implant System in the US.
Overall, Bio-Lok has made the decision to support a hybrid sales and marketing
effort; to have direct sales and distributor sales serve the needs of individual
geographic areas, and via mail order cover less dense markets.
INTERNATIONAL. Presently, Bio-Lok is engaged in sales activity in ten (10)
countries - Argentina, Chile, Colombia, Italy, Mexico, Spain/Portugal, S. Korea,
Taiwan, Romania and Venezuela. In these markets agreements with local
Distributor's have been entered into for three to five years. These markets have
grown in gross sales with limited support to over $1.2 million.
Other markets that are in the process of being developed are Brazil, Costa Rica,
England, France and Germany. Attempt in entering these markets have, in the past
and will in the future, be accomplished via personal contact of qualified
entities, representation at dental trade shows, and word of mouth by clinicians,
business associates and general contacts. Initially any of the markets will be
entered into via Distributors and if results are not forth-coming alternate
methods in gaining a foothold in a country will be utilized - i.e. joint
ventures and/or wholly owned subsidiary.
PATENTS AND TRADEMARKS. Patent and pre-patents are filed and granted/assigned to
the Company continually as new and unique product development is completed. As
of September, 1998 the Company holds six (6) US Patents, has three (3)
pre-patents pending finalization, and is presently completing for submission two
(2) new patents. Trademarks have been filed on the Bio-Lok and Micro-Lok Implant
System name. Additionally, the logo utilized in conjunction with the Micro-Lok
Implant System name has been registered.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL RESULTS OF OPERATIONS AND
CONDITION.
The company, since emerging from the Chapter XI filing and adoption of its Plan
of Reorganization, has achieved a profit from operations. The Plan of
Reorganization was approved by the creditors and by the Court on February 13,
1997, subsequently, in January 1998, the file was closed. The Company has met
the Plan of Reorganization and is moving forward in the development of both the
domestic and international marketplace.
Page 7
<PAGE> 24
SALES AND PROFITS. [1998 VS. 1997] Net Revenue for 1998 totaled $1,463,794 and
represented a modest 4% increase over prior year. The increase is primarily
attributable to the continued increase of the international market. The domestic
market continues to be impacted from the company's past but has shown an
improvement in the past months.
Gross Profit for the year totaled $1,000,242 and reflected a 5% increase over
prior year. The increase is solely due to improved margins, maintaining cost
controls, and due to continued and improved inventory control procedures during
the year even with the development of the new "Silhouette" implant.
Selling expenses for the year decreased slightly to $304,038, a 2% decrease. The
lower costs incurred resulted from the restructuring of the sales staff and
investing in advertising, new catalogs and promotional literature.
General and administrative expenses increased from prior by year $18,934 to
$654,613 or 3%. The increased costs incurred are the direct result of obtaining
the ISO and CE mark certification and reserve for losses totaling $48,000 having
to be established for a number accounts - both domestic and international. The
Company anticipates that some of the money will be recovered in future years.
Other income and expenses increased by $61,619 to $109,070 or an increase of
130%. This increase in expenses now reflects a full years impact of interest on
the plan payments and the revolving loan financing arrangement. The
extraordinary items reflected in 1997 represented a one time occurrence and
resulted from the Chapter XI, the Plan of Reorganization adopted in February
1997, and the related present valuing of the unsecured debtors at a current
market.
Net Income for the period was a loss of $67,925 for the year. The loss is a
direct result from the adoption of the Plan of Reorganization and related
discounted market rate being booked on the unsecured debt outstanding. A better
measurement of the results of the Company is the results obtained at Income from
Operations. Income from operations totaled $41,591 and was $36,933 over prior
years result. The result reflected the increase in sales achieved, cost controls
maintained and improved inventory controls having been implemented even with the
development of new product.
SALES AND PROFITS. [1997 VS. 1996] Net Revenues for 1997 decreased by 11% or
$177,036. The reduction in sales is due to the continued loss of sales realized
for the domestic market. The domestic market decrease was due to the
re-structuring of the marketing/sales operations in late 1996 and the extended
time the company had to operate under the Chapter XI.
Gross Profit for the year was $950,206 and reflected a decrease of $29,322 from
1996. The decrease is solely attributable to the decrease in sales and the
development of the Micro-Lok 3.45mm platform.
Selling expenses totaled $309,869 for the year and reflected a 14% decrease or
$50,578 of lower costs incurred. The decrease was primarily due to the
restructuring of the sales operations initiated in 1996. As of the 4th fiscal
quarter these costs have been increasing as new staffing and directions where
implemented.
General and administrative expenses increased for the period by $105,868 an
increase of 20%. The increase in expenses was attributable to costs incurred for
obtaining ISO 9001 and the CE Mark certification, higher insurance costs, and
service costs incurred under a revolving credit financing arrangement. The ISO
9001 and CE Mark certification had to be completed to insure that the company
could continue to sell its products in the EEC.
Other income and extraordinary items in total affected the results of the
company dramatically. The impact for the current year was solely attributable to
the Chapter XI and subsequent adoption of the Plan of Reorganization. Under the
restructuring and Plan of Reorganization the Company realized over $729,000 of
forgiveness of creditor debt.
Page 8
<PAGE> 25
Net Income for the period was $734,169. The increase over prior year was
primarily due to the gains realized from recording the impact of the Plan or
Reorganization approved by the Court for the Chapter XI filing. Adjusting for
the extraordinary gain net income for the period would have totaled
approximately $10,000, basically a break-even.
MANAGEMENT'S REVIEW.
Bio-Lok's products are sold through out the United States and internationally in
a number of countries. The engineering and technical aspects of the implant
system, the patented features, along with the extensiveness of its prosthetics,
tools, devices and drills are its strengths and provide the Company a
competitive advantage in the marketplace.
The Company emerged from the Chapter XI in February 1997 and the file was
finally closed by January 1998. Due to this extended time before the file was
closed credit relationships and sales growth activity did not significantly
improve during 1998. Regardless, improved results at income from operations
where achieved even with the introduction of the new 5.0mm platform "Silhouette"
implant and related tapered spade drills along with improvements to prosthetic
parts and tooling.
The Company has installed on the INTERNET its own website home page, product
information, catalog, marketing and sales information and method of ordering
product.
OUTLOOK FOR THE FISCAL YEAR 1999.
The Company's "MICRO-LOK PRECISION DENTAL IMPLANT SYSTEM" presents an excellent
product line which is technically superior and better engineered than most other
systems in the marketplace. The product line offers the broadest selection of
dental implants and prosthetic armamentarium, and by its patented designs
presents to the market a better "product." The items patented and incorporated
into the product line provide strength, fit and a better engineered product to
the market.
The Company, with the planned aggressive marketing effort utilizing direct sales
and local/regional distributors for the domestic market, coupled with an sound
advertising strategy should achieve market penetration. Internationally the
Company is aggressively soliciting new markets by attending selective trade
shows in other countries, mailings and interest obtained from its website.
FINANCIAL REVIEW
- -------------------------------------------------------------------------------
The information contained in this financial review should be read in conjunction
with the consolidated financial information provided on pages F12 to F21 of this
Annual Report.
- -------------------------------------------------------------------------------
RESULTS OF OPERATIONS
SALES. Net sales increased to $1.5 million for 1998. The increase was primarily
due to continued international market penetration. The domestic was flat, but is
expected to grow significantly in 1999, then the Chapter XI is closed,
regional/local distributors are being contracted, and a new sales and support
staff is being brought on board, primarily due to the company being in the
Chapter XI. Domestic market growth should be achieved once money for sales and
marketing is obtained.
Page 9
<PAGE> 26
COSTS AND EXPENSES. Costs and expenses continued to be controlled for the year.
Adjusting results for non-recurring expenses incurred for the ISO certification,
overall expenses would have been 3% below prior years results. Expenses are
continuing to be monitored and controlled today, but will increase going forward
as market penetration is achieved.
NET INCOME. Results for the year was basically a break-even. Net income was a
loss of $68,000 but income from operations totaled $42,000. Income for the year
was affected by the implementation of the Plan of Reorganization and the related
capitalization of all unsecured debt pre-petition and the one time expense for
the implementation and certification of ISO and the CE Mark.
TAX RATE. No tax provision was recorded for 1998 then the business had an
operating loss. (See also Note J Income Taxes of Notes to Financial Statements
included herewith).
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES. At October 31, 1998, Bio-Lok had limited funds
on-hand and working capital totaled $878,000. The Company currently is operating
at a break-even basis and will require either new capital or financing to
achieve added market penetration. To this extent, management and the company's
Board is continually looking for and developing capital and financing sources.
OPERATING ACTIVITIES. For the year operating activities generated a profit of
$42,000 on sales of $1,464,000. The ISO and CE mark certification was completed
to enable the Company to continue to sell into the EEC - one time costs of
approximately $40,000.
INVESTING ACTIVITIES. Capital expenditures for 1998 totaled only $9,576. The
expenditures where for office furniture and system upgrades.
DIVIDEND. No dividends were declared or paid for the year 1998 to any
shareholder.
NEW ACCOUNTING STANDARDS. See Note A of the Notes to Financial Statements for
any accounting standards adopted..
IMPACT OF INFLATION AND FOREIGN EXCHANGE. None, primary raw materials utilized
in manufacturing have not fluctuated greatly in the past and are not expected in
the future.
All foreign sales are conducted in US dollars; and, all domestic or
international payments are remitted in US dollars.
Page 10
<PAGE> 27
INTERNAL PREPARED FINANCIAL AUDIT REVIEW REPORT LETTER
To the Board of Directors
Bio-Lok International Inc.
The Financial Statements and accompanying noted prepared and issued herewith
have been completed internally by the Company. The audit of the financial
results for 1998 has been contracted for and is being completed by Durland & Co.
(new accountant). It is expected that the audit will be completed by the end of
March or early April; hence, do to the delay, SEC reporting requirements, Annual
Meeting scheduled for April 28, 1999, the Company has completed and issued this
report. A follow up report, in summary, will be issued once the audit has been
completed and the books and records have been certified.
The Company states herewith that the books and records of the company are
maintained in accordance with generally accepted accounting standards and that
no material changes are anticipated upon completion of the audit.
Ingo K. Kozak
Chief Financial Officer
Bio-Lok International Inc.
Page 11
<PAGE> 28
Bio-Lok International Inc.
BALANCE SHEET
October 31, 1998 and 1997
Unaudited
ASSETS
1998 1997
---------- -----------
CURRENT ASSETS
Cash $ 373 $ 3,642
Net Accounts Receivable - trade 470,033 489,941
Inventory 1,167,493 1,163,045
Prepaid expenses and other 31,523 20,676
----------- -----------
Total Current Assets 1,669,422 1,677,304
PROPERTY, PLANT AND EQUIPMENT - NET 246,254 321,353
INVESTMENT IN SUBSIDIARIES 74,101 0
DEPOSITS 10,747 14,122
----------- -----------
$ 2,000,524 $ 2,012,779
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving Loan $ 365,444 $ 246,738
Trade Accounts Payable 124,260 112,650
Accounts Payable other 28,111 28,111
Note Payables 3,839 0
Accrued Expenses 57,619 15,092
Current portion of long-term debt 211,563 170,699
----------- -----------
790,836 573,290
----------- -----------
LONG-TERM DEBT
Notes 109,301 174,852
Pre-petition accounts payable 371,814 468,585
----------- -----------
481,115 643,437
----------- -----------
TOTAL LIABILITIES 1,271,951 1,216,727
----------- -----------
STOCKHOLDERS' EQUITY
Common Stock; 7,000,000 shares authorized;
$0.01 par value; 4,131,275 shares issued and
outstanding in 1998 and 34,742,870 shares
issued and outstanding in 1997. 41,313 347,429
Additional paid in capital 1,956,058 1,649,497
Accumulated deficit -1,268,798 -1,200,874
----------- -----------
728,573 796,052
----------- -----------
$ 2,000,524 $ 2,012,779
=========== ===========
Page 12
<PAGE> 29
Bio-Lok International Inc.
STATEMENTS OF OPERATIONS
For the years ended October 31, 1998, 1997, 1996
Unaudited
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
SALES - net $1,463,794 $1,405,582 $1,582,618
COST OF SALES 463,552 455,376 603,090
---------- ---------- ----------
GROSS PROFIT 1,000,242 950,206 979,528
---------- ---------- ----------
EXPENSES
General and Administrative 654,613 635,679 529,811
Selling 304,038 309,869 360,447
---------- ---------- ----------
958,651 945,548 890,258
---------- ---------- ----------
INCOME FROM OPERATIONS (Loss) 41,591 4,658 89,270
---------- ---------- ----------
OTHER INCOME (EXPENSES)
Other Income 7,808 5,226 10,912
Interest -103,841 -52,677 -6,582
Non-operating expense -13,482 0 -87,230
---------- ---------- ----------
-109,515 -47,451 -82,900
---------- ---------- ----------
Earnings (Loss) before income
taxes & extraordinary items -67,924 -42,893 6,370
Income taxes (benefit) 0 -14,500 0
---------- ---------- ----------
Earnings (Loss) before
extraordinary items -67,924 -28,293 6,370
Extraordinary items
Gain on debt forgiveness in connection
with Chapter XI proceedings (less
applicable income taxes of $264,000) 0 512,962 0
Utilization of net operating loss
carryforward to offset income taxes 0 249,500 0
---------- ---------- ----------
NET EARNINGS (LOSS) $ -67,924 $ 734,169 $ 6,370
========== ========== ==========
Earnings (Loss) per share
Earnings (Loss) before extraordinary
items $ 0 $ 0 $ 0
Extraordinary items 0 0.04 0
---------- ---------- ----------
Net earnings (Loss) per share $ 0 $ 0.04 $ 0
========== ========== ==========
Weighted average shares outstanding 3,926,464 1,731,635* 1,240,349*
(recast to give effect for reverse split)
</TABLE>
Page 13
<PAGE> 30
BIO-LOK INTERNATIONAL INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED OCTOBER 31, 1998, 1997, 1996
<TABLE>
<CAPTION> PREFERRED STOCK PREFERRED STOCK
----------------- -------------------
CLASS A CLASS B COMMON STOCK ADDITIONAL
---------------- ------------------- ---------------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
------- ------- -------- -------- ----------- -------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE -- OCTOBER 31, 1995 50,000 50,000 500,000 500,000 10,453,913 104,539 1,066,997 -1,941,413 -219,877
Shares issued to PDS, Intl.
for exchange of Preferred
Stock to Common Stock on
11/29/95 -500,000 -500,000 1,000,000 10,000 490,000 0
Reclassified per Chapter XI
as a Subordinate Debt -50,000 -50,000 -50,000
Shares issued to BLH for
joining company 2/5/96 500,000 5,000 5,000
Shares issued on 6/25/96
to Employees 1,000,000 10,000 10,000
to Minimatic Implant 1,000,000 10,000 10,000
Net Income (total impact
for the year -- 1996) 6,370 6,370
BALANCE -- OCTOBER 31, 1996 0 0 0 0 13,953,913 139,539 1,556,997 -1,935,043 -238,507
Net issuance of stock
1,388-957 -- 1,200,000 in
connection with the
Chapter XI settlement 188,957 1,890 1,890
Issuance in settlement of
a law suit & approved
by court 1,000,000 10,000 10,000
Sale of Common Stock 15,750,000 157,500 92,500 250,000
Issuance of Common Stock
to Directors, Clinicians
and Employees 3,850,000 38,500 38,500
Net Income (total impact
for the year -- 1997) 734,169 734,169
BALANCE -- OCTOBER 31,1997 0 0 0 0 34,742,860 347,429 1,649,497 -1,200,874 796,052
Issuance of Stock to Directors,
Officers and Employees 2/23/98 6,255,150 62,552
Cancellation of Stock 10/31/98 -130,830 -1,308
Reverse Split of Stock 10 to 1/3/98 -36,780,415 -367,804 306,561
Issuance of Stock shares to
Clinicians 10/12/98 20,500 205 205
Issuance of Stock shares to
Directors 10/20/98 24,000 240 240
Net Income (total impact
for the year -- 1998) -67,924 -67,924
BALANCE -- OCTOBER 31, 1998 0 0 0 0 4,131,275 41,313 1,956,068 -1,268,798 738,573
</TABLE>
Page 14
<PAGE> 31
Bio-Lok International Inc.
STATEMENTS OF CASH FLOWS
For the years ended October 31, 1998, 1997 and 1996
Unaudited
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Earnings (Loss) before extraordinary items $ -67,924 $ -28,293 $ 6,370
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation 84,674 102,183 89,018
Valuation of shares for services at $0.01 par value 25,000
Change in current assets and liabilities:
(increase) decrease in accounts receivable 19,908 82,945 -177,760
(Increase) decrease in inventories -4,448 -217,045 16,993
(increase) decrease in prepaid and other -10,847 1,450 -17,126
(increase) decrease in deposit 3,375 -1,550 -10,670
Increase (decrease) in accounts payable and
accruals 54,137 -343,545 89,640
---------- ---------- ----------
Subtotal 78,875 -403,855 21,465
Extraordinary Items 0 762,462 0
Adjustment to reconcile cash provided by
extraordinary items 0 -762,462 0
---------- ---------- ----------
Net cash (used) by operations 78,875 -403,855 21,465
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITES:
Purchases of property, plant and equipment -9,575 -193,392 -53,371
Investment in Subsidiaries -74,101 0 -45,398
---------- ---------- ----------
Net cash (used) by Investing activities -83,676 -193,392 -98,769
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of stock 0 250,000 0
Net proceeds - revolving note payable 118,706 246,738 0
Proceeds from note payable and capital leases 3,839 150,748 0
Repayments of long-term obligations -121,458 -47,257 -18,676
Proceeds - other 445 0 94,498
---------- ---------- ----------
Net cash provided by financing activities 1,532 600,229 75,822
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH -3,269 2,982 -1,482
Cash - beginning of year 3,642 660 2,142
---------- ---------- ----------
Cash - end of year $ 373 $ 3,642 $ 660
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW OPERATIONS:
Cash paid during the year for interest $ 103,841 $ 52,677 $ 6,582
========= ========== ==========
Effects of Chapter XI proceedings having no cash effect:
Issuance of stock without cash considerations $ 50,390
==========
Investment in OGD eliminated in bankruptcy $ 188,648
==========
Increase in Long-term debt $ 595,368
==========
</TABLE>
Page 15
<PAGE> 32
Bio-Lok International Inc.
NOTES TO FINANCIAL STATEMENTS
October 31, 1998 and 1997
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REORGANIZATION AND BANKRUPTCY PROCEEDINGS
The Company and its former subsidiary filed petitions under Chapter II
of the Bankruptcy laws in January 1996. On February 12, 1997, the
Company's plan of reorganization was approved by its creditors and
accepted by the Court. Liabilities were restructured for 30% (except
priority claims) of the original debt to be paid over a twelve to
seventy-two month period. The unsecured liabilities due in over a
twelve month period were discounted at a market rate of 9.0% in
accordance with generally accepted accounting principles. Creditors
also received common stock shares in the Company for all debt not
repaid at one share per dollar. Effective January 1998, the Chapter II
proceedings had been closed and discharged.
ORGANIZATION
The Company represents a State of Delaware corporation which was
originally incorporated on October 6, 1987 as Colfax, Inc. The
Company's name was changed from Colfax, Inc. to Minimatic Implant
Technology, Inc. in June 1988, to American BioDental Corporation in
April 1995, and again in April 1997, to Bio-Lok International Inc. -
its current name. Prior to the name change in June 1988, the
corporation was acquired through a reverse acquisition by the
shareholders of Minimatic, Inc. a Florida corporation. The acquisition
was accounted for as a purchase and as a results of the reverse
acquisition the former Minimatic Inc. shareholders became the
controlling shareholders of Bio-Lok International Inc..
Until 1997, Bio-Lok International Inc. conducted its business through
its wholly-owned subsidiary Minimatic Inc.. Effective March 1, 1997,
the Articles and Plan of Merger of Minimatic Inc. (then known as
Minimatic Implant Technology Inc. reference a name change effective
June 30, 1995) was approved and implemented by the Board of Directors
and the Officers of the Company respectively. The merger of the
subsidiary into its parent was accomplished to reduce costs and
reporting requirements.
In May 1995, Bio-Lok International Inc. established a wholly-owned
subsidiary OGD, Inc. ("OGD"). OGD was established to acquire the assets
of the operating division of OmniGene Diagnostics, Inc. The investment
in the subsidiary was accounted for on an investment basis and was
divested by year-end. OGD was spun-out and divested by new management
retroactive back to the date of acquisition due to its cash requirement
to operate and grow.
Effective May 29, 1998, Micro-Lok Mexico S.A DE C.V. was established on
a JV basis by the Company with an individual for the development of the
Mexican dental market. Investment in the corporation is accounted for
on an investment basis.
Effective December 4, 1998, Micro-Lok Chile S.A. was established on a
JV basis by the Company an individual for the development of the
Chilean dental market. Investment in the corporation is accounted for
on an investment basis.
Page 16
<PAGE> 33
Bio-Lok International Inc.
NOTES TO FINANCIAL STATEMENTS
October 31, 1998 and 1997
NOTE A - continued
PRINCIPLES OF CONSOLIDATION
In 1996, the financial statements consist of the consolidation of the
accounts of Bio-Lok International Inc. and Minimatic Implant Technology
Inc. (p/k/a Minimatic Inc.), and OGD is recorded on an investment basis
only. All significant inter-company accounts and transactions have been
eliminated. All subsequent financial statements are not consolidated
and all investments in subsidiaries (Mexican and Chilean JV) are
recorded on an investment basis.
REVENUE RECOGNITION
Revenue attributable to the manufacturing and subsequent distribution
operation of the Company is recorded when goods are shipped and/or
invoice is printed.
ACCOUNTS RECEIVABLES
Accounts receivables are stated on a net basis (net of reserve for
losses). Reserve for losses for 1998 and 1997 were $72,670 and $22,397
respectively.
INVENTORIES
Inventories are stated at the lower of average cost or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is charged to
operations over the estimated useful lives of the related assets and is
computed using the straight-line method for financial statement
purposes and various accelerated methods for income tax purposes.
Repairs and maintenance are charged to operations when incurred.
Betterment's and purchases are capitalized if over $300 in cost. When
fixed assets are sold or otherwise disposed of, the asset accounts and
related accumulated depreciation accounts are relieved accordingly, and
any gain or loss is included in non-operating activity.
The estimated useful lives of property and equipment are as follows:
Years
-----
Tooling Equipment 5
Office Equipment 5
Machinery and Equipment 5 - 10
Computer Equipment 5
Vehicles 5
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimated
and assumptions that affect the reporting amounts of assets and
liabilities and 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.
Page 17
<PAGE> 34
Bio-Lok International Inc.
NOTES TO FINANCIAL STATEMENTS
October 31, 1998 and 1997
NOTE A - continued
NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed by dividing the net income
(loss) by the weighted average number of common stock shares
outstanding during the period.
INCOME TAXES
Effective November 1, 1994, the Company adopted Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes". Under
Statement No. 109, the liability method is used in accounting for
income taxes. Under this method, deferred tax assets and liabilities
are determined based on the differences between financial reporting and
tax basis of assets and liabilities. The effect of this adoption was to
reclassify the fiscal 1994 extraordinary tax benefit resulting from the
utilization of operating loss carryforwards to operating income.
NOTE B - INVENTORIES
Inventories consisted of the following at October 31, 1998 and 1997:
1998 1997
---------- ----------
Raw Materials $ 19,036 $ 31,748
Work in Process 378,108 445,340
Finished Goods 735,349 650,957
Consumable Tools 35,000 35,000
---------- ----------
$1,167,493 $1,163,045
========== ==========
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at October 31, 1998
and 1997:
1998 1997
------------ ---------
Tooling Equipment $ 72,153 $ 72,153
Office Equipment 42,836 38,017
Machinery and Equipment 670,669 670,669
Computer Equipment 151,818 147,512
Vehicles 15,408 15,408
Leasehold Improvements 56,664 56,213
---------- ----------
1,009,548 999,972
Less: Accumulated Depreciation 763,293 678,619
----------- ----------
$ 246,255 $ 321,353
=========== ========
NOTE D - REVOLVING LOAN
On April 28, 1997, the Company entered into a Revolving Loan and
Security Agreement with Capital Business Credit, a division of Capital
Factors which today is a part of United Planters Bank. The Company
pledged all its assets as security for the revolving loan arrangement.
The line of credit was for
Page 18
<PAGE> 35
Bio-Lok International Inc.
NOTES TO FINANCIAL STATEMENTS
October 31, 1998 and 1997
NOTE D - continued
a maximum loan of $500,000 and as of October 31, 1998 and 1996, the
outstanding loan balance totaled $365,444 and $246,738 respectively.
NOTE E - LONG-TERM LIABILITIES
Long-term liabilities at October 31, 1998 and 1997 consist of the
following:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Principal balance o/s on an equipment lease
payable at $2,826.84 to 7/98 and $2,720.11
thereafter per month including interest at
9.0% -fully secured by computer equipment $ 47,272 $ 75,689
Equipment note payable at $2,245 per month
with interest at 9.75% - fully secured by
manufacturing equipment 108,976 128,601
Obligation to creditors under the plan of
reorganization dated Feb. 12. 1997, payable
at approximately $12,725 per month for one
year and approximately $14,000 thereafter;
includes interest and imputed interest at 9%;
Priority creditors are secured by the assets of
the corporation 525,635 591,816
Other 10,795 18,030
-------- -------
$642,678 $814,136
======== ========
Amounts due within one year $211,563 $170,699
======== ========
</TABLE>
The maturities of long-term liabilities as of October 31, 1998 are as
follows:
Due Year Ended
October 31, Amount
-------------- ---------
1999 $211,563
2000 180,804
2001 178,099
2002 103,379
2003 18,833
--------
$692,678
========
Page 19
<PAGE> 36
Bio-Lok International Inc.
NOTES TO FINANCIAL STATEMENTS
October 31, 1998 and 1997
NOTE F - ACCRUED EXPENSES
At October 31, 1998, accrued expenses totaled $57,619 and consisted of
the following:
Accrued Expenses $ 2,720
Accrued Payroll 21,761
Accrued Payroll Taxes 16,739
Accrued 401K Plan Pymts. 15,794
Other 605
-------
$57,619
=======
NOTE G - STOCKHOLDERS' EQUITY
Current Stockholders' Equity outstanding is as follows:
COMMON STOCK
The Company after approval by its stockholders and Board of Directors
at the Annual Meeting held on April 22, 1998, completed on July 20,
1998 a reverse split of 10 to 1 of its Common Stock shares of
50,000,000 authorized. With the reverse split the authorized Common
Stock shares of 50,000,000 became 5,000,000 authorized.
Effective at the Annual Meeting held on April 22, 1998, the
stockholders unanimously approved that the Board of Directors can
increase of the authorized Common Stock to 30,000,000 as needed. To
this extent, the Board increased the authorized Common Stock shares to
7,000,000 effective July 20, 1998. The Board will increase the
authorized shares as and when needed or required to 30,000,000 common
stock shares.
OTHER (The number of Common Stock shares for all comments below have
been adjusted to reflect the effect of the reverse split detailed
above.)
On March 21, 1997, the Board of Directors had issued 138,896 shares of
common stock to creditors under the settlement agreement of the Chapter
XI. In turn, 120,000 shares of common stock were turned in by a
stockholder as specified in a lawsuit settlement agreement as an offset
to the shares issued to creditors. All unsecured creditors received one
(1) share of common stock for each $10 dollar not repaid under the
settlement agreement. The Chapter XI Plan of Reorganization called for
a pay-out of 30% on each unsecured debtors claim.
On March 21, 1997, the Board of Directors had issued 100,000 shares of
common stock in settlement of two (2) lawsuits which settlements had
been approved by the Court as a part of the Chapter XI Plan of
Reorganization.
Page 20
<PAGE> 37
Bio-Lok International Inc.
NOTES TO FINANCIAL STATEMENTS
October 31, 1998 and 1997
NOTE G - continued
The Board of Directors had authorized on March 11, 1997, and finally
issued on June 6, 1997, 365,000 shares of common stock to Directors,
officers, employees and outside individuals for support of the Company
over the past; and on September 4, 1997, the Board of Directors
approved and had issued on October 1, 1997, 10,000 shares each to two
clinicians for support and service provided to the Company over the
past two years.
On April 9, 1997, the Board of Directors approved a Purchase Agreement
with BioLok Partners, Inc., a Florida corporation. Under the agreement
BioLok Partners, Inc. was to provide to the Company an equity infusion
of $250,000, obtain a $500,00 line of credit and provide the services
of Mr. Bruce L Hollander as its President and CEO for the ensuing five
(5) years via an employment agreement, a line of credit for $500,000
and a field sales staff of some 40 sales people to sell dental
implants, in exchange the Company provided to BioLok Partners, Inc. 51%
or 1,575,000 shares of Common Stock shares as of the signing of the
agreement. The purchase agreement was finally entered into May 30,
1997, and the Board of Directors issued on October 1, 1997, 1,575,000
(15,750,000 pre reverse split) shares of Common Stock after all
requirements under the agreement had been met.
The Board of Directors had authorized on February 11, 1998, and issued
on February 23, 1998, the issue of 625,515 shares of Common Stock to
Directors, officers and employees for services and support of the
Company for the year 1997.
The Board of Directors authorized and approved per the suggestion of
the officers of the Company that the Common Stock shares held by Mr.
Dominic Scacci be canceled. The cancellation of the shares was
authorized in 1995. Total shares canceled after taking effect for the
reverse split was 13,083 shares.
In March 1998, the Board of Directors through its officers effected the
10 to 1 reverse split of the Common Stock shares of the Company.
Authorized shares went from 50,000,000 to 5,000,000 and then re-set at
7,000,000 as approved by the Stockholders and the Board of Directors.
In April 1998, the Board of Directors had authorized and issued in
October 1998 Common Stock shares to two (2) clinicians totaling 20,500
shares for services rendered to the Company over the year.
In August 1998, the Board of Directors had authorized and issued in
October 1998 Common Stock shares to four (4) Board members totaling
24,000 shares for payment in lieu of interest for lending funds to the
Company for short-term cash requirements.
In November 1998, the Board of Directors had authorized and approved
the issuance of 485,000 shares of Common Stock to officers and an
employee for services rendered during 1997.
March 2, 1999, the Compensation Committee recommended and the Board of
Directors approved and authorized the issuance of 100,000 shares of
common stock to Board and the Executive Committee Members of the
Company for services and support rendered for 1998.
NOTE H - COMMITMENTS
The Company leases office space pursuant to an operating lease which
expires August 30, 2001. the lease generally provides for fixed monthly
rental payments of $5,142.18 which includes operating
Page 21
<PAGE> 38
Bio-Lok International Inc.
NOTES TO FINANCIAL STATEMENTS
October 31, 1998 and 1997
NOTE H - continued
expenses and sales tax (base rental is $3,780.92). Rent expense for the
year ending October 31, 1998, 1997 and 1996 amounted to $62,015, $60,131 and
$51,106 respectively. At October 31, 1998, the future minimum rental payments
under the current operating lease were as follows:
Minimum Lease
October 31, Rental
----------- ------------
1999 $ 45,371
2000 45,371
2001 37,809
--------
$128,551
========
NOTE I - INCOME TAXES (estimated - pre-audit)
The components of the net deferred tax asset are as follows:
OCTOBER 31,
-----------------------
1998 1997
-------- ---------
Deferred Tax Liability:
Depreciation $ -0- $ (2,500)
Deferred Tax Assets:
Net Operating Loss Carryforward 68,000 345,000
------- ---------
68,000 342,500
Valuation allowance -0- (342,500)
------- ---------
Net Deferred Tax $68,000 $ -0-
======= =========
At October 31, 1998, the Company has elected to carryforward net
operating losses for federal and state income tax purposes of approximately
$1,0083,000 which are available to reduce future taxable income. the following
details the net operating loss carryforwards at October 31, 1998 and expiration
dates:
Years Amount
----- ----------
2009 $ 251,000
2010 764,000
2011 68,000
----------
$1,083,000
==========
NOTE J - COMMITMENTS AND CONTINGENT LIABILITIES
With the settlement of the Chapter XI, all past commitments and
contingent liabilities where settled and included as a part of the Plan
of Reorganization. No commitments and contingent liabilities are
outstanding since the adoption of the Plan of Reorganization on
February 12, 1996.
Page 22
<PAGE> 39
MANAGEMENT INFORMATION
==============================================================================
SELECT FINANCIAL DATA
==============================================================================
The following represents selected consolidated financial data regarding Bio-Lok
International Inc. and Subsidiary operating results and financial position as of
October 31, for financial comparison.
HISTORICAL RESULTS
<TABLE>
<CAPTION>
as of October 31,
($ in thousands except -----------------------------------------------------------------------------------
per share amounts) 1998 1997 1996 1995 1994 1993 1992 1991 1990
------ ------ ------ ------ ------ ------ ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Operating Results
NET SALES.......................... $1,464 $1,405 $1,583 $1,373 $1,089 $1,351 $1,271 $ 771 $1,166
Cost of Goods Sold................. 464 455 603 784 128 544 518 799 919
GROSS PROFIT....................... 1,000 950 98 589 961 807 753 (28) 247
Selling Expenses................... 304 310 360 760 483
General & Administrative........... 655 636 530 663 693 491 510 400 506
Other Income & Extraordinary
Items (loss)............. 109 730 (84) (79) 14 13 45 24 0
NET INCOME......................... (68) 734 6 (913) (234) 303 288 (452) (261)
Net Income per share(1)............ $ (.02) $ .21 $ -- $ (.87) $(.38) $ .47 $ .44 $ (.78) $ --
PROFITABILITY RATIOS
As a percent of sales:
Gross Profit.................. 68.3% 67.6% 61.9% 42.9% 88.2% 59.7% 59.2% -- 21.2%
Net Income (loss)............. (4.6) 52.2 (5.2) (66.5) (21.5) 22.4 22.7 (58.6) (22.4)
Return on average equity........... -- -- -- -- 64.0 180.0 -- -- --
Return on average invested
capital(2)................ -- -- -- -- 45.0 125.3 -- -- --
FINANCIAL CONDITION
Current Assets..................... $1,669 $1,677 $1,542 $1,365 $1,468 $ 970 $ 699 $ 356
Net Fixed Assets................... 246 321 230 266 198 266 243 337
Assets............................. 2,001 2,013 1,973 1,776 1,666 1,236 948 696
Current Liabilities................ 791 573 2,136 1,866 1,357 563 521 662
Long Term Debt..................... 481 643 76 130 39 48 106 34
Shareholders' Equity............... 729 796 (239) (220) 270 625 321 0
Current Ratio...................... 2.1 2.9 .7 .7 1.1 1.7 1.3 .5
Long-term debt to equity........... .7% .8% (31.8)% (60.1)% 14.5% 7.7% 33.0% --%
OTHER DATA
Working Capital.................... $ 878 $1,104 $ (594) $ (501) $ 111 $ 406 $ 178 $ 307
Cash flow from operations.......... 79 (404) 21 (589) (217) 176 150 n/a
Capital expenditures............... 84 193 97 290 (19) (103) (8) 0
Depreciation and amortization...... 85 102 89 79 87 80 77 75
Number of employees............... 13 16 17 25 26 13 13 18
</TABLE>
- --------------------------
(1) Recast to reflect impact of reverse split of 10 to 1 recorded March 1998.
(2) Net income plus after-tax interest expense divided by average long-term debt
and equity.
Page 23
<PAGE> 40
COMPARATIVE QUARTERLY RESULTS FOR 1998 TO 1997.
<TABLE>
<CAPTION>
1998 1997
-------- ---------
($ 000's) ($ 000's)
<S> <C> <C>
Fourth Quarter Ending October 31,
Net Sales........................................... $ 350 $ 304
Gross Profit........................................ 238 206
Income from Operations.............................. (37) (57)
Net Income.......................................... (63) (59)
Total Assets........................................ 2,001 2,013
Third Quarter Ending July 31,
Net Sales........................................... $ 342 $ 404
Gross Profit........................................ 225 256
Income from Operations.............................. 19 1
Net Income.......................................... (3) 103
Total Assets........................................ 2,062 1,972
Second Quarter Ending April 30,
Net Sales........................................... $ 407 $ 395
Gross Profit........................................ 280 268
Income from Operations.............................. 41 37
Net Income.......................................... 12 688
Total Assets........................................ 2,165 1,941
First Quarter Ending January 31,
Net Sales........................................... $ 365 $ 304
Gross Profit........................................ 257 220
Income from Operations.............................. 19 24
Net Income.......................................... (4) 2
Total Assets........................................ 2,067 1,923
</TABLE>
MARKET INFORMATION FOR COMMON STOCK
COMMON STOCK DATA
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993
------ ------ ----- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Dividends declares per share............. -0- -0- -0- -0- -0- -0-
Average shares o/s (thousands) (a)....... 3,926 1,738 1,240 974 666 649
Year-end book value per share (b)........ $ .18 $ .23 $ (.17) $ (.21) $ .44 $ .96
Number of shareholders at year-end (b)... 562 562 480 456 418 420
</TABLE>
- -------------------------
(a) Recast to reflect the impact of the reverse split of 10 to 1
recorded 3/98.
(b) Does not include shareholders who's stock is held in a Brokerage
Firms' name.
The Company's common stock is listed on the over-the-counter supplemental Pink
Sheets. Very little stock trading activity was registered during 1998; hence, no
composite stock price range can be reported.
Page 24
<PAGE> 41
OFFICE OF THE CHAIRMAN
<TABLE>
<CAPTION>
<S> <C> <C>
Peter Baronoff - Chairman of the Board
Carl Sadowsky - Vice-Chairman of the Board
Bruce L. Hollander - Chief Executive Officer
Ingo K. Kozak - Chief Financial Officer and Secretary
BOARD OF DIRECTORS
Peter Baronoff(1) Chairman of the Board and Chief Executive Officer
Sun Capital Inc.
Carl H. Sadowsky(1) Doctor of Medicine.
Bruce L. Hollander(1*)(2*)(3) Director
Bio-Lok International Inc.
Ingo K. Kozak(1)(3*) Director
Bio-Lok International Inc.
Bruno Pletscher(2) Managing Director - PDS International Ltd.
Director - Pro-Health Ltd.
Executive Partner - Caribo Management Group Ltd.
Neil Smith(2) Retired. Past Co-Chairman and Chief Financial Officer
Express Shade, Inc.
Harold Weisman Attorney at Law
Howard B. Koslow(3) President, Chief Operating Officer and Chief Financial Officer
Sun Capital, Inc.
</TABLE>
- -------------
Number denotes committee membership: (1) Executive Committee, (2) Compensation
and Employee Benefits Committee, (3) Finance Committee, and * Chairperson for
each committee.
OPERATING OFFICERS AND CORPORATE STAFF
Bruce L. Hollander - President
Ingo K. Kozak - Vice President
Patricio Nilo - Director International Sales
Page 25
<PAGE> 42
CORPORATE INFORMATION
HEADQUARTERS AND OFFICES
<TABLE>
<CAPTION>
<C> <C>
312 S. Military Trail, Deerfield Beach, Florida 33442; Telephone (954) 698 - 9998; Fax (954)698-9925;
E-mail address: [email protected]
</TABLE>
TRANSFER AGENT AND REGISTRAR
Interwest Transfer Company, P.O. Box 17136, Salt Lake City, Utah 84117; tele.
(801) 272 - 9294. Notices regarding changes of address and inquiries regarding
lost dividend checks, lost or stolen stock certificates and transfer of stock
should be directed to the transfer agent.
COMMON STOCK
The common stock of Bio-Lok International Inc. is traded under the symbol BLII
on the over-the-counter market. The stock is quoted periodically in the
supplemental Pink Sheets.
INDEPENDENT ACCOUNTANTS
Durland & Company, CPA, 340 Royal Palm Way, Suite 201, Palm Beach, Florida
33480.
SEC FORM 10-K
A copy of the company's Annual Report on Form 10-K SB may be obtained free of
charge by contacting Mr. Ingo K. Kozak, Corporate Secretary, at Bio-Lok
International Inc., 312 S. Military Trail, Deerfield Beach, Florida 33442 (tele.
(954) 698 - 9998).
SHAREHOLDERS RELATIONS
For shareholders information please contact the Secretary or President of the
corporation at (954) 698 - 9998.
FINANCIAL RELATIONS
For financial information please contact the Treasurer or President of the
corporation at (954) 698-9998.
ANNUAL MEETING
The Annual Meeting of Shareholders will be held at 4:00 PM on Wednesday, April
28, 1999, at the headquarters of the corporation at 312 S. Military Trail,
Deerfield Beach, Florida 33442; unless otherwise notified via PROXY Statement to
be mailed.
AFFIRMATIVE ACTION
Bio-Lok International Inc. is an equal opportunity employer. Bio-Lok also
supports affirmative action programs for minorities and women, including the
economic development of business, education and training, and recruiting.
Page 26
<PAGE> 43
FORM 10-Q SB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JANUARY 31, 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. 33-245-66-A
BIO-LOK INTERNATIONAL INC.
(Exact name of Registrant as specified in its Charter)
DELAWARE 65-0317138
(State or other jurisdiction of (IRS Employee
incorporation or organization) Identification No.)
312 S. MILITARY TRAIL
DEERFIELD BEACH, FLORIDA 33442
(Address of principal executive offices) (Zip Code)
Registrant's Telephone number, including area code (954) 698-9998
----------------------
Indicate by check mark whether the Registrant (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 and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the Registrant's classes of
Common Stock as of the latest practicable date.
CLASS OF COMMON STOCK OUTSTANDING AT JANUARY 31, 1999
$.01 par value 4,131,275 shares
<PAGE> 44
BIO-LOK INTERNATIONAL INC.
Index
PART I. FINANCIAL INFORMATION
Page #
------
Item 1. Financial Statements (Unaudited)
Condensed Statements of Income for
Three months ended January 31, 1999 and 1998 3
Condensed Balance Sheets for
January 31, 1999 and October 31, 1998 4
Condensed Statements of Cash Flows for
Three months ended January 31, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statement 6
Item 2. Management's Discussion and Analysis of Financial 6
Results of Operations 6
Financial Condition 7
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 8
2
<PAGE> 45
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BIO-LOK INTERNATIONAL INC.
Condensed Statement of Income
(Unaudited)
Three Months Ended
January 31,
---------------------------------
1999 1998
-------- --------
('000's) ('000's)
Net Sales $ 262 $ 365
Cost of Goods Sold 90 108
------- -------
GROSS PROFIT 172 257
Selling 49 87
Admin. & General Exp. 145 151
------- -------
194 238
------- -------
Operating Income (22) 19
Interest Expense 26 24
Other Income/Expenses 3 (3)
------- -------
29 21
------- -------
Income before Taxes (51) (4)
Income Taxes 0 0
------- -------
NET INCOME $ (51) $ (4)
======= =======
Net Income Available to
Common Share Owners $ -0- $ 2
======= =======
Net Income per Common Share $ -0- $ -0-
======= =======
Dividends per Common Share $ -0- $ -0-
======= =======
Average Common Shares
Outstanding 4,131,275 3,474,287
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE> 46
BIO-LOK INTERNATIONAL INC.
Condensed Balance Sheets
(Unaudited)
January 31, October 31,
1999 1998
----------- -----------
('000's) ('000's)
-------- --------
ASSETS
Current Assets
Cash $ 1 $ 0
Accounts Receivable (Net) 457 470
Inventory 1,192 1,167
Other Current Assets 43 32
------- -------
Total Current Assets 1,693 1,669
Net Machinery & Equipment 230 246
Investment in Subsidiaries 79 74
Other Assets 12 11
------- -------
TOTAL ASSETS $ 2,014 $ 2,001
======= =======
LIABILITIES & EQUITY
Current Liabilities
Revolving Loan $ 378 $ 365
Accounts Payable 146 124
Accounts Payable - Other 57 28
Accrued Expenses 88 58
Current Portion of LTD 211 212
Other Current Payable 3 4
------- -------
Total Current Liabilities 883 791
------- -------
Long Term Debt 454 481
------- -------
1,337 1,272
Equity
Common Stock - authorized
7,000,000, par value $.01;
outstanding 4,131,275 and
4,131,275 shares respectively; 41 41
Paid-in Capital 1,956 1,956
Retained Earnings (1,269) (1,269)
Retained Earnings - CY (51) 0
------- --------
Total Equity 677 729
------- --------
TOTAL LIABILITIES & EQUITY $ 2,014 $ 2,001
======= ========
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE> 47
BIO-LOK INTERNATIONAL INC.
Condensed Statement of Cash Flows
(Unaudited)
Three Months Ended
January 31,
--------------------------
1999 1998
------- -------
(000,s) (000's)
OPERATING ACTIVITIES:
Net Income (Loss) $(51) $ (4)
Adjustments to reconcile:
Depreciation 16 21
Valuation of shares
Change in Current assets & liabilities:
(Incr.) decr. in accts. rec. 13 (34)
(Incr.) decr. in inventories (25) (34)
(Incr.) decr. in prepaid & other (12) (5)
(Incr.) decr. in deposits 0 0
Incr. (decr.) in A/P & Accr. exp. 71 62
---- ----
Net Cash (used) by Operating 12 6
---- ----
FROM INVESTING ACTIVITIES:
Property, Plant & Equipment 0 (4)
Investment in Subsidiaries 5 0
---- ----
Net Cash (used) by Investing Activities 5 (4)
---- ----
FROM FINANCING ACTIVITIES:
Net proceeds - revolving loan 13 41
Increase in Long Term Debt (29) (45)
Proceeds - other
---- ----
Net Cash Used for Financing Activities (16) (4)
---- ----
NET INCREASE (DECREASE) IN CASH $ 1 $ (2)
Cash - Beginning of Period 0 4
---- ----
Cash - End of Period $ 1 $ 2
==== ====
Interest Paid $ 26 $ 24
Income Taxes Paid $-0- $-0-
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE> 48
BIO-LOK INTERNATIONAL INC.
Notes to Condensed Financial Statement
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The financial statements represent the accounts of Bio-Lok
International Inc. ("Bio-Lok").
NOTE B - NATURE OF BUSINESS
Bio-Lok is a manufacturer and distributor, both domestically and
internationally, of precision dental implants, related prosthetics and
devices, associated tools, and irrigated drills and reamers to the
dental market. The Company markets its product line direct to the end
user, via distributors and independent representatives.
Revenues are attributable to the distribution operation of its
manufactured or purchased for resale products. Products are distributed
directly to clinicians and based on negotiated agreements with
distributors and/or independent representatives. Revenues are recorded
as a receivable due is generated and the product is shipped.
NOTE C - INVENTORIES
Inventories are stated at the lower of average or market cost.
Inventories at January 31, 1999 and October 31, 1998 consisted of the
following:
JANUARY 31, 1999 OCTOBER 31, 1998
------------------ -----------------
Raw Materials & Supplies $ 17,265 $ 19,036
Consumable Tools 35,000 35,000
Work in Process 357,706 378,108
Finished Goods 782,631 735,349
---------- ----------
$1,192,602 $1,167,493
=========== ==========
The inventory increase for the quarter was $25,109 and reflected the
increased build up of new products for the Micro-Lok Implant System -
i.e. new Silhouette screw implant and related drills and taps.
NOTE D - SUMMARIZED INCOME STATEMENT DATA OF BIO-LOK INTERNATIONAL INC.
At January 31, 1999, the income statement represents Bio-Lok
International Inc. and the distribution joint ventures entered into in
Mexico and Chile accounted for on an invested (equity) basis.
NOTE E - CHANGE IN BUSINESS ACTIVITY
Effective February 12, 1997, the Plan of Reorganization filed by the
Companies was approved by the Court and the plan was implemented as
March 1997. The Company has operated successfully under the Plan of
Reorganization. On January 23, 1998, the XI filing was closed.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
VOLUME
Net volume (sales/revenues) for the quarter decreased by 28% over the
comparable quarter prior year. The decrease was due to the continued
delay in bringing a new distributor for Argentine market on-line and
the slow development of the US market since emerging from the XI
filing.
COST OF GOODS SOLD AND GROSS PROFIT
Cost of goods sold and gross profit margins as related to net sales
increased by 4% over the comparable quarter prior year. The increase
was a direct result of added costs incurred in the development of the
new products.
SELLING, ADMINISTRATIVE & GENERAL EXPENSES
Selling expenses decreased by 5% over the comparable period prior year
due to staff reductions. Domestic marketing activity continues to be
impacted from the XI filing and development of a marketing and sales
force has been slow in developing due lack of adequate working capital.
6
<PAGE> 49
Administrative and General expenses reflected a change of only $6,000
which relating to percent (%) of sales reflects an increase of costs of
14% over the same period prior year. This increase in cost is a direct
result of the Company obtaining its ISO and CE mark certification.
OPERATING INCOME
Results from operations totaled a loss of $22,000 over a profit of
$19,000 for the comparable period prior year. The decrease in results
for the period is a direct result of lower sales achieved. The reduced
results where anticipated and budgeted and are expected to turn around
as market penetration is regained in Argentina and the domestic market.
OTHER INCOME/EXPENSES
Other income/expenses increased by $8,000 the period over the
comparable period prior year. The increase is attributed to higher
interest expenses incurred due to the increase in the revolving loan
balance and legal expenses incurred.
NET INCOME
Net income for the quarter was a loss of $51K compared to a loss of $4K
for the comparable period prior year. The lower net income is
attributable to lower sales results realized for the period and the
development of new products.
FINANCIAL CONDITION
NET CASH FLOW PROVIDED BY OPERATIONS
Cash flow provided increased slightly for the period. Cash flow is
continually effected by the slow growth in domestic sales and the costs
incurred for the marketing efforts spent. To alleviate the cash flow
shortage Bio-Lok has issued a private placement memorandum. Under the
memorandum the Company anticipated to raise a maximum of $1.5 million
for 2,000,000 shares of common stock shares or for 28.9% of the
Company.
FINANCING
No new financing activities have been entered into for the quarter.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: NONE
(b) Reports on Form 8-K: Form 8-K SB amendment filed November
8, 1998 reference Changes in Registrant's Certifying Accountant.
SIGNATURE
Pursuant to the requirements 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-LOK INTERNATIONAL INC.
(Registrant)
/s/ Ingo K. Kozak
Date : March 15, 1999 By: /s/ Ingo K. Kozak
-------------------------------------
Ingo K. Kozak
Chief Financial Officer and
Vice President - Finance
7
