<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q SB
-------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 31, 2000
----------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to ________
Commission File No. 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
--------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 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 [X] No [ ]
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court. YES [X] NO [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: as OF JULY 31, 2000, OUTSTANDING
COMMON STOCK SHARES TOTALED 6,055,358 AT A PAR VALUE OF $.01 PER SHARE.
<PAGE> 2
BIO-LOK INTERNATIONAL INC.
AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page #
------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets for July 31,
2000 and October 31, 1999 .................................. 3
Condensed Consolidated Statements of Income Three and
Nine months ended July 31, 2000 and 1999 .................... 4
Condensed Consolidated Statements of Cash Flows Nine
months ended July 31, 2000 and 1999 ......................... 5
Notes to Condensed Consolidated Financial Statements................... 5
Item 2. Management's Discussion and Analysis or Plan of Operations
Results of Operations ................................................. 9
Financial Condition ................................................... 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ............................................. 10
Item 2. Changes in Securities.................................................. 10
Item 3. Defaults Upon Senior Securities ...................................... 10
Item 4. Submission of Matters to a Vote of Security Holders .................. 10
Item 5. Other Information .................................................... 10
Item 6. Exhibits and Reports on Form 8-K ..................................... 10
Signature ............................................................................... 10
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BIO-LOK INTERNATIONAL INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
July 31, 2000 October 31, 1999
------------- ----------------
Unaudited Audited
<S> <C> <C>
ASSETS
Current Assets
Cash $ 72,658 $ 17,079
Accounts Receivable (Net) 687,727 390,008
Inventory 977,004 952,433
Other Current Assets 23,959 21,749
----------- -----------
Total Current Assets 1,761,348 1,381,269
----------- -----------
Net Machinery & Equipment 419,711 185,848
----------- -----------
Other Assets - Inventory 200,373 278,623
- Other 18,409 24,585
----------- -----------
Total Other Assets 218,782 303,208
----------- -----------
TOTAL ASSETS $ 2,399,841 $ 1,870,325
=========== ===========
LIABILITIES & EQUITY
Current Liabilities
Revolving Loan Payable $ 453,589 $ 417,410
Accounts Payable - trade & accrued expenses 115,158 72,338
Accounts Payable - other 5,747 12,279
Due to related parties 18,557 23,551
Current Portion of LTD 237,441 260,474
----------- -----------
Total Current Liabilities 830,492 786,052
----------- -----------
Long Term Debt
A/P Plan Pymts 237,446 275,596
Other Long Term Debt 208,078 54,040
----------- -----------
Total Long Term Debt 445,524 329,636
----------- -----------
Total Liabilities 1,276,016 1,115,688
----------- -----------
Equity
Common Stock - authorized 10,000,000 par value $.01;
outstanding 6,055,358 & 5,642,275 shares respectively; 60,554 56,423
Paid-in Capital 2,218,136 2,172,267
Retained Earnings (1,527,055) (1,474,053)
Retained Earnings - CY 372,190 0
----------- -----------
Total Equity 1,123,825 754,637
----------- -----------
TOTAL LIABILITIES & EQUITY $ 2,399,841 $ 1,870,325
=========== ===========
</TABLE>
3
<PAGE> 4
BIO-LOK INTERNATIONAL INC.
AND SUBSIDIARIES
Condensed Consolidated Operating Results
Unaudited
<TABLE>
<CAPTION>
Three Months Ended July 31, Nine Months Ended July 31,
----------------------------- -----------------------------
2000 1999 2000 1999
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
NET SALES $ 724,927 $ 424,675 $1,842,232 $ 1,066,822
Cost of Goods Sold 192,355 173,095 543,355 374,105
---------- ---------- ---------- -----------
GROSS PROFIT 532,572 251,580 1,298,877 692,717
Selling 72,211 40,090 207,898 140,180
Admin. & General Exp. 246,145 132,258 585,390 419,591
---------- ---------- ---------- -----------
318,356 172,348 793,288 559,771
---------- ---------- ---------- -----------
INCOME FROM OPERATIONS 214,216 79,232 505,589 132,946
Other (Income) & Expense 58,801 38,988 133,399 127,195
---------- ---------- ---------- -----------
Income before Taxes 155,415 40,244 372,190 5,751
Income Taxes 0 0 0 0
---------- ---------- ---------- -----------
NET INCOME (loss) $ 155,415 $ 40,244 $ 372,190 $ 5,751
========== ========== ========== ===========
Net Income Available to
Common Share Owners $ 155,415 $ 40,244 $ 372,190 $ 5,751
========== ========== ========== ===========
Net Income per Common Share $ .03 $ -- $ .06 $ --
========== ========== ========== ===========
Dividends per Common Share $ -0- $ -0- $ -0- $ -0-
========== ========== ========== ===========
Average Common Shares
Outstanding 6,055,358 4,738,461 5.846,127 4,577,142
</TABLE>
4
<PAGE> 5
BIO-LOK INTERNATIONAL INC.
AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flow
Unaudited
<TABLE>
<CAPTION>
Nine Months Ended July 31,
-----------------------------
2000 1999
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income (Loss) $ 372,190 $ 5,751
Adjustment to reconcile:
Depreciation 54,038 46,215
Stock issued for Services 0 71,830
Change in Current assets & liabilities:
(Incr.) decr. in accts. rec (293,974) (15,935)
(Incr.) decr. in inventory 53,679 3,182
(Incr.) decr. in prepaid & other 3,466 (2,601)
(Incr.) decr. in deposits 500 0
Incr. (decr.) in A/P & Accr. Exp 27,461 (87,917)
--------- ---------
Net Cash (Provided) by Operating Activities 217,360 20,525
--------- ---------
FROM INVESTING ACTIVITIES:
Property, Plant & Equipment (35,068) (306)
Cash received in Orthogen Corporation purchase 1,214 0
--------- ---------
Net Cash (used) for Investing Activities (33,854) (306)
--------- ---------
FROM FINANCING ACTIVITIES:
Net Proceeds - revolving loan 36,179 37,996
Repayment of Long Term Debt (164,106) (57,818)
--------- ---------
Net Cash (used) for Financing Activities (127,927) (19,822)
--------- ---------
NET INCREASE (DECREASE) IN CASH $ 55,579 $ 397
Cash - Beginning of Period 17,079 373
--------- ---------
Cash - End of Period $ 72,658 $ 770
========= =========
Interest Paid $ 54,353 $ 50,589
Income Taxes Paid $ -0- $ -0-
</TABLE>
BIO-LOK INTERNATIONAL INC.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Note A - Basis of Presentation. The accompanying unaudited interim condensed
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles and the rules and regulations of the
Securities and Exchange Commission for interim financial information.
Accordingly, they do not include all the information and footnotes necessary for
a comprehensive presentation of financial position and results of operations.
5
<PAGE> 6
BIO-LOK INTERNATIONAL INC.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
- Continued
It is management's opinion however, that all adjustments (consisting of normal
recurring adjustments) have been made which are necessary for a fair financial
statement presentation. The results for the interim period are not necessarily
indicative of the results to be expected for the year.
The financial statement for the third quarter and year-to-date 2000 consist of
all the accounts of Bio-Lok International, Inc. ("BLLI" or "Bio-Lok") and its
wholly owned subsidiaries. Micro-Lok Mexico was reclassified to a wholly owned
subsidiary as of the 2nd quarter and results for the year 2000. Orthogen
Corporation was acquired effective April 2000 and is also being accounted for as
a separate wholly owned subsidiary. The entities are not separately presented
herewith, since currently they represent less than 10% of the corporation's
revenues (see Change in Business Activity for more information).
For further information, refer to the financial statements and footnotes
included in the Company's form 10-K SB filed on February 8, 2000.
Note B - Nature of Business. Bio-Lok is a manufacturer and distributor, both
domestic and internationally, of precision dental implants, related prosthetics,
associated tools, devices and irrigated drills. Domestically product is sold
directly to clinicians and internationally is sold to distributors or JV
entities that, in turn, sell the product to clinicians within their respective
markets.
Bio-Lok's principal product 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 resorbable blasted material - RBM, etc.) which are bonded to the
implant to enhance the 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 25 years and may last a lifetime. Micro-Lok
implants have over a 98.5% success rate as shown in university studies.
The dental products Bio-Lok manufactures and market include the following:
- implants in a 3.45mm, 4.00mm, 5.00mm and 6.50mm platform consisting
from 8.0mm to 18mm long and offered in various body styles and
designs;
- an extensive line of prosthetic abutments, tooling and devices and a
large selection of fluted spade drills, providing a practitioner
ease of identifying options available for completion of any
prosthesis;
Micro-Lok Mexico is a company incorporated in Mexico and is engaged in selling
the Micro-Lok System in Mexico. The company operates out of rented facilities in
Mexico City.
6
<PAGE> 7
BIO-LOK INTERNATIONAL INC.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
- Continued
Orthogen Corporation is a New Jersey corporation engaged in research and
development in bio-materials for the dental, maxiofacial, orthopedic and
specialty medical fields.
Note C - Inventories. Inventories are stated at average cost. Inventories at
April 30, 2000 and October 31, 1999 consisted of the following:
July 31, 2000 October 31, 1999
------------- ----------------
Raw Materials & Supplies $ 26,195 $ 27,977
Consumable Tools -0- 35,000
Work in Process 337,170 343,601
Finished Goods 813,292 824,478
---------- ----------
$1,177,377 $1,231,056
========== ==========
Inventory reflects a net decrease for the period of $54k. The continued decrease
is due to increased sales realized to date. Inventory not anticipated to be sold
within one year is classified as long-term other asset and totaled $200k.
Note D - Line of Credit. The outstanding revolving line of credit, which was to
expire April 25th, has been extended by the lender to the end of September 2000.
Currently, the corporation is negotiating with other lender for a new $1,000,000
line of credit. Bio-Lok International, Inc. expects to have the existing line
replaced by the loan expiration date.
Note E - Change in Business Activity. Effective with the second quarter 2000 and
retroactive to November 1, 1999, Micro-Lok Mexico, S.A. De C.V. has been
reclassified from being accounted for as a distribution sales location to being
accounted for as a wholly owned subsidiary of BLLI. The company is being
accounted for as detailed under Note A and is consolidated on a line by line
basis. The company employs three individuals and covers the greater Mexico City
dental implant market. Operations turned profitable as of the second quarter
2000, generating year-to-date $ 98,869 of revenues and $ 10,834 of net income.
During March 2000, the Company acquired 100% of the issued and outstanding stock
of Orthogen Corporation, a medical research company, in exchange for 400,000
shares of the Company's common stock.
The acquisition was accounted for under the purchase method of accounting, and
accordingly the results of operations of Orthogen Corporation are included in
the accompanying consolidated financial statements from March 15, 2000, the
effective date.
The purchase price of $50,000 was determined based on the average fair market
value of the Company's common stock near the agreement date pursuant to EITF
95-10. The acquired assets and liabilities equaled the fair market value of the
stock exchanged.
7
<PAGE> 8
BIO-LOK INTERNATIONAL INC.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
- Continued
The following unaudited information reflects the fair market values of the
assets acquired and the liabilities assumed:
Cash $ 1,214
Accounts Receivable 3,746
Property & Equipment, net 30,969
Accounts payable and
other liabilities (15,929)
Notes payable (20,000)
-----------
$ -0-
===========
The table below reflects unaudited pro forma combined results of the Company as
if the Orthogen acquisition had taken place on November 1, 1998:
<TABLE>
<CAPTION>
Three Months Ended July 31, Nine Months Ended July 31,
--------------------------- --------------------------
2000 1999 2000 1999
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $724,927 $424,675 $1,842,232 $1,066,822
Costs & expenses 569,512 394,412 1,480,309 1,091,014
Net Income (loss) 155,415 30,263 361,923 (24,192)
Net Income (loss)
Per share - basic & diluted 0.03 -- 0.06 --
</TABLE>
Effective March 15, 2000, Orthogen Corporation was acquired for 400,000 shares
of common stock. With the purchase of all outstanding shares of Orthogen
Corporation, Bio-Lok International, Inc. also acquired two patents and four
pending patents. Finalization of the pending patents and their technology are
being completed by BLLI (prior to the acquisition BLLI had already invested
funds in the finalization of the pending patents) then they have both dental and
orthopedic applications. Management was retained and employment contracts were
entered into with its President and a consulting agreement with another Doctor
who has been working closely with Orthogen in developing new technologies. New
Technologies being and to be developed are in the dental, maxialfacial,
orthopedic and other medical markets.
Authorized common stock shares have been increased to 10,000,000 from 7,000,000
effective 5/11/2000. The stockholders and Board of Directors previously approved
the issuance of up to 30,000,000 common stock shares. The increase in authorized
shares was issued to cover all options outstanding and avail the corporation of
approximately 2,500,000 shares for continued growth and acquisition development.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS FROM OPERATION. Consolidated revenues for the quarter increased by 9% or
$60k from the prior period and results reflected a 71% increase over the
comparable quarter prior year and a 73% increase for the comparable year-to-date
period. This increase in sales achieved continues to be the direct result of new
distribution coming on-line, growth in the overall international market.
Cost of goods sold for the quarter and year-to-date reflected a continued
improvement. This improvement has been achieved due to new and more efficient
machines having been brought on-line - improving productivity.
Gross profit for the quarter totaled $533K, a 15% increase from prior quarter, a
112% increase over same quarter prior year and a 87% increase over the same
period year-to-date. The results achieved are a direct result of increased sales
and improved profit margins.
Consolidated selling expenses increased for the quarter and on a year-to-date
basis due to market development both domestically and internationally, and the
start of hiring, advertising, developing new markets and R&D.
Consolidated administrative and general expenses have also increased for the
period and on a year-to-date basis. The Increased costs incurred are a direct
results of increased sales and continued patent development and filing.
Due to the increased sales achieved, results from operations for the quarter
increased by 13% from prior quarter and 170% over the comparable prior quarter
and 280% comparable period year-to-date.
Other income and expenses increased by $24K for the quarter but reflected a $19K
increase from the comparable period prior year. The increased expenses incurred
are primarily due to increased legal patent costs, royalty costs and interest
expenses incurred.
Net income for the quarter increased by 2% from the prior quarter or $3k.
Year-to-date results totaled $372k and were $366k over prior year's results.
These results are due to the increase in revenues achieved, continued
improvements in productivity and maintenance of cost controls.
Results for the balance of the year are expected to show continued improvement,
particularly as the domestic market is penetrated, existing foreign distributors
increase market coverage and new international distributors are signed-up for
targeted markets.
Financial results for Micro-Lok Mexico have been satisfactory and the company is
slowly penetrating the Mexican dental implant market. YTD the company has
generated $93k of gross revenue and a profit totaling $11k. The company expects
the operation to grow at approximately 15% a year.
Orthogen Corporation's presently does not generate any revenues. Currently, the
company requires continued support of approximately $18,000 per month. Orthogen
is not expected to turn profitable until late next year. The company is
primarily engaged in research and development of dental and related medical
products. Revenues are being developed and will be derived from licensing and
royalty agreements and technology adopted by Bio-Lok for its product line or to
augment the product line.
9
<PAGE> 10
FINANCIAL CONDITION. Cash flow provided from operations for the quarter
continued to improve and year-to-date reflect a $55k improvement which is well
over prior years activity. The increased cash availability is being utilized to
assist in building the domestic market. The improvement of cash flow is expected
to continue as revenue increases are maintained.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - No legal proceedings.
Item 2. Changes in Securities - No change for the quarter.
Item 3. Defaults Upon Senior Securities - none -
Item 4. Submissions of Matters to a Vote of Security Holders - items put to
a vote at the last Annual Stockholders Meeting dated March 22, 2000,
and approved at the meeting was as follows:
(1) Election of Board Member.
(2) Nomination of Weinberg & Company, P.A. as auditors for
2000.
Item 5. Other Information - Effective late April 2000 the company was
registered with NASDQ and placed its stock on the Bulletin Board. The
stock symbol is BLLI.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27. Financial Data Schedule (SEC only)
(b) Reports on Form 8-K - none
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
BIO-LOK INTERNATIONAL INC.
(Registrant)
Date: September 11, 2000 By: /s/ Ingo K. Kozak
---------------------------------------
Ingo K. Kozak, CFO and VP-Finance
Date: September 11, 2000 By: /s/ Bruce L. Hollander
---------------------------------------
Bruce L. Hollander, President & CEO
10
