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FORM 10-Q SB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JULY 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.
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(Exact name of Registrant as specified in its Charter)
DELAWARE 65-0317138
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(State or other jurisdiction of (IRS Employee
incorporation or organization) Identification No.)
312 S. MILITARY TRAIL
DEERFIELD BEACH, FLORIDA 33442
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone number, including area code (954) 698-9998
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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.
CLASS OF COMMON STOCK OUTSTANDING AT JULY 31, 1999
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$.01 par value 5,422,275 shares
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BIO-LOK INTERNATIONAL INC.
Index
<TABLE>
<CAPTION>
Page #
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PART I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Balance Sheets for
July 31, 1999 and October 31, 1998 3
Condensed Statements of Income
Three and Nine months ended July 31, 1999 and 1998 4
Condensed Statements of Cash Flows
Nine months ended July 31, 1999 and 1998 4
Notes to Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Operating Results
and Financial Condition
Results of Operations 6
Financial Condition 7
Item 3. Disclosures about Market Risk 7
PART II. Other Information
Item 6. a. Exhibit Index 7
b. Reports on Form 8-K 7
SIGNATURE
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BIO-LOK INTERNATIONAL INC.
Condensed Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
July 31, October 31,
1999 1998
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('000's) ('000's)
<S> <C> <C>
ASSETS
Current Assets
Cash $ 1 $ 0
Accounts Receivable (Net) 407 391
Inventory 768 660
Other Current Assets 39 37
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Total Current Assets 1,215 1,089
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Net Machinery & Equipment 198 242
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Other Assets - Inventory 450 561
- Other 11 11
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Total Other Assets 461 572
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TOTAL ASSETS $1,874 $1,903
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ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<S> <C> <C>
LIABILITIES & EQUITY
Current Liabilities
Revolving Loan Payable $ 403 $ 365
Accounts Payable 60 124
Other Payables 45 35
Accrued Expenses 83 113
Current Portion of LTD 210 212
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Total Current Liabilities 801 850
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A/P Plan Pymts 354 373
Other Long Term Debt 73 111
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Long Term Debt 427 484
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Total Liabilities 1,228 1,334
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Equity
Common Stock - authorized
7,000,000 par value $.01;
outstanding 4,099,802 and
3,474,287 shares respectively; 52 41
Paid-in Capital 2,143 2,082
Retained Earnings (1,554) (1,554)
Retained Earnings - CY 6 0
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Total Equity 646 568
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TOTAL LIABILITIES & EQUITY $ 1,874 $ 1,903
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</TABLE>
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BIO-LOK INTERNATIONAL INC.
Condensed Operating Results (Unaudited)
<TABLE>
<CAPTION>
($ in `000) Three Months Ended July 31, Nine Months Ended July 31,
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1999 1998 1999 1998
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<S> <C> <C> <C> <C>
NET SALES $ 425 $ 342 $ 1,067 $ 1,114
Cost of Goods Sold 173 117 374 351
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GROSS PROFIT 252 225 693 763
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Selling 40 62 140 238
Admin. & General Exp 132 144 420 446
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177 206 550 684
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INCOME FROM OPERATIONS 80 19 133 79
Other (Income) & Expense 39 22 127 71
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Income before Taxes 41 (3) 6 8
Income Taxes 0 0 0 1
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NET INCOME (loss) $ 41 $ (3) $ 6 $ 7
=========== =========== =========== ===========
Net Income Available to
Common Share Owners $ 41 $ -- $ 6 $ 7
Net Income per Common Share $ -- $ -- $ -- $ --
Dividends per Common Share $ -0- $ -0- $ -0- $ -0-
Average Common Shares Outstanding
(re-cast for 10 to 1 reverse split) 4,738,461 4,099,802 4,577,142 3,849,596
</TABLE>
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BIO-LOK INTERNATIONAL INC.
CONDENSED STATEMENT OF CASH FLOW (Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended July 31,
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1999 1998*
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<S> <C> <C>
OPERATING ACTIVITIES:
Net Income (Loss) $ 6 $ 7
Adjustment to reconcile:
Depreciation 44 62
Change in Current assets & liabilities: (104) (98)
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Net Cash (used) by Operating (54) (25)
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FROM INVESTING ACTIVITIES:
Property, Plant & Equipment 0 (6)
Decrease in Long Term Debt (57) (79)
Proceeds from Issue of Common Stock 72 0
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Net Cash (used) for Investing Activities 15 (85)
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FROM FINANCING ACTIVITIES:
Net Proceeds - revolving loan 38 119
Increase in Long Term Debt 0 0
Proceeds - other 0 0
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Net Cash (used) for Financing Activities 38 119
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NET INCREASE (DECREASE) IN CASH $ 1 $ 5
Cash - Beginning of Period 0 4
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Cash - End of Period $ 1 $ 9
========= =========
Interest Paid $ 48 $ 71
</TABLE>
* Note: reflects corrected prior year numbers.
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BIO-LOK INTERNATIONAL INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
NOTE A - BASIS OF PRESENTATION
The financial statement for 1999 consists of all the accounts of Bio-Lok
International Inc. ("BLII").
BLII is a manufacturer and distributor both domestic and internationally of
precision dental implants, related prosthetics, associated tools, devices,
irrigated drills, and purchased equipment for resale to the dental market.
Revenues are attributable to the manufacturing operation, distribution
agreements negotiated and marketing efforts of the Company. Revenues are
recorded as goods are shipped.
NOTE B - INVENTORIES
Inventories are stated at average cost. Inventories at July 31, 1999 and October
31, 1998 consisted of the following:
<TABLE>
<CAPTION>
JULY 31, 1999 OCTOBER 31, 1998
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<S> <C> <C>
Raw Materials & Supplies $ 10,428 $ 19,036
Consumable Tools 35,000 35,000
Work in Process 358,842 378,108
Finished Goods 813,723 789,031
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$1,217,993 $1,221,175
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</TABLE>
Inventory not expected to be sold within one year is classified as a long-term
other asset.
NOTE D - AGREEMENTS
A letter of intent has been signed for the acquisition of Orthogen Corporation
for common stock. Orthogen is a research and development entity located in New
Jersey. The acquisition will bring new technology via patents and a research
operation to Bio-Lok. The company anticipates to consummate the transaction by
year-end.
NOTE E - LINE OF CREDIT
The company's $500,000 line of credit with a financial institution represents a
revolving line of credit secured by the assets of the corporation. Under the
agreement advances under the line are made against eligible accounts receivables
and inventory. To this extent, the company has entered into a credit insurance
agreement with an insurance company to insure select foreign receivable accounts
and said policy has been assigned to the financial institution to guarantee the
advances against international accounts.
For the quarter interest was accrued at 11.25% for 2 month and 11.5% for August
along with a monthly service fee of $500.00 for a combined interest rate of
13.0% for the quarter. At July 31, 1999, the outstanding loan balance was
$403,440.36.
NOTE F - CHANGE IN BUSINESS ACTIVITY
Effective February 12, 1997, the Plan of Reorganization filed by the Company was
approved by the Court. The plan was fully adopted as of March 14, 1997 when all
initial payments to debtors where issued and disbursed. The Chapter XI was
finalized and closed effective January 23, 1998.
NOTE G - NEW ACCOUNTING PRONOUNCEMENTS
SFAS No. 131 "Disclosures about Segments of an Enterprise and Related
Information" was issued by the Financial Accounting Standards Board. Full
segment accounting will be provided and with its October 31, 1999, Annual
Report.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
VOLUME
Net sales revenue for the quarter increased by $83K or 24% from the comparable
period prior year and was $50K or 13% over prior quarter results. The increased
results are due to the Argentine distributor being on-line. Year-to-date sales
continued to be lower from the comparable period prior year. The continued lower
YTD result is primarily attributable to the termination of the Argentine
distributor mid 1998 and the new distributor not coming fully on-line until the
second quarter 1999.
COST OF GOODS SOLD
Cost of goods sold for the quarter reflected an increase of 29% over the same
period prior quarter and a 17% increase for the quarter over the prior years
quarter. The increased cost of goods for the period is attributable to new
product development and the addition to staff for maintaining manufacturing
capacity requirements. Year-to-date results also reflected an increase over the
same period prior year or an increase of 14%. This increase in cost of goods is
due to product development of the new "Silhouette" implant and the 3.45 and 6.5
platform product line. Cost of goods sold on a normal basis, excluding
development, should total approximately 30% and reflect a lower result as
production levels increase.
GROSS PROFIT
Gross Profit for the quarter increased by $27K or 12% over the same quarter
prior year, and reflected no material change from prior quarter. Year-to-date
the Company continues to show lower result over same period prior year. This
lower result is again due primarily to the change-over of distributors in
Argentina.
SELLING, ADMINISTRATIVE & GENERAL EXPENSES
Selling expenses for the period continues to reflect expenses incurred due to
the rebuilding and continued delay in the implementation of staffing the
domestic market. To this extent, selling expenses were $22K or 35% below same
quarter prior year, $11K or 22% below prior quarter, and $98K or 41% below YTD
same period prior year results.
Administrative and general expenses similarly resulted for the period in a
decrease over the prior quarter of $3K or 2%. Results for the period to the same
period prior year also totaled a decrease of $12K or 8%. For the nine months
year-to-date results where $26k or 6% lower. The lower expenses incurred are
attributable to select lower costs incurred for 1999 due to non-recurring
expenses associated with obtaining ISO certification.
8
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RESULTS FROM OPERATIONS
Results from operation for the quarter increased by $9K or 13% from prior
quarter and reflected higher results over the comparable period prior year of
$61K. The higher result is directly attributable to higher sales achieved for
the quarter and the continued lower operating expenses incurred. Year-to-date
results where up by $54K or 68% for the comparable period prior year and was due
to the continued lower operating expenses incurred YTD.
OTHER (INCOME) & EXPENSES
The costs incurred continue to be attributable to interest expense incurred for
the increase in the revolving loan outstanding (see Note E - Line of Credit),
the interest recorded as a part of the Plan payments resulting from the
reorganization recorded in early 1997 and royalty payments made effective March
1999 as a part of a lawsuit settlement in 1996. Royalty payments are made at 2%
of net net sales for product manufactured by Bio-Lok and marketed as the
Micro-Lok Precision Dental Implant System.
NET INCOME
Net income for the quarter totaled $41k, was $29k over prior quarter and
reflected a year-to-date gain of $6k which was a direct result of changing
distributor in Argentina. Management anticipates that profits will continue to
improve in the over the next quarter anf thereafter.
FINANCIAL CONDITION
NET CASH FLOW PROVIDED BY OPERATIONS AND LIQUIDITY Cash flow provided from
operations reflected no material change year-to-date and compared to prior years
results to date.
FINANCING
No new financing arrangements have been entered into during the past quarter,
but the company is actively soliciting a new and improved line of credit and
attempting to obtain an equity infusion to enable the Company to develop the
domestic US market.
YEAR 2000 COMPLIANCE
The company has completed all its assessment of Year 2000 compliance of its
system operations and expects to be fully compliant by December 15, 1999. The
project remaining is the up-date of the computer system to a later software
release version and all other systems and operations are already in compliance.
Cost for the Year 2000 compliance project will total approximately $12,000.
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ITEM 3. DISCLOSURES ABOUT MARKET RISK
The company has no investments of cash. All receivables from foreign accounts
are denominated and remitted in US Dollars.
PART III. OTHER INFORMATION
ITEM 6. a. EXHIBIT 27 Financial Data Schedule (SEC only)
b. REPORTS ON FORM 8-K - none
10
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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)
Date: October 14, 1999 By: /s/ Ingo K. Kozak
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Ingo K. Kozak
Chief Financial Officer and
on behalf of the Registrant
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BIO-LOK INTERNATIONAL INC. FOR THE 3 MONTH PERIOD ENDED
JULY 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-2000
<PERIOD-START> MAY-01-1999
<PERIOD-END> JUL-30-1999
<CASH> 770
<SECURITIES> 0
<RECEIVABLES> 542,181
<ALLOWANCES> 135,015
<INVENTORY> 1,217,992
<CURRENT-ASSETS> 1,625,928
<PP&E> 991,551
<DEPRECIATION> 793,508
<TOTAL-ASSETS> 1,874,330
<CURRENT-LIABILITIES> 801,363
<BONDS> 426,894
0
0
<COMMON> 51,523
<OTHER-SE> 594,550
<TOTAL-LIABILITY-AND-EQUITY> 1,874,330
<SALES> 424,675
<TOTAL-REVENUES> 425,425
<CGS> 173,095
<TOTAL-COSTS> 172,348
<OTHER-EXPENSES> 14,834
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,154
<INCOME-PRETAX> 40,994
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,994
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
