<PAGE> 1
FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------
REPORT PURSUANT TO SECTION 12 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal Year ending OCTOBER 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 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 (IRS 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 [X] 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 [X] NO [ ].
<PAGE> 2
Continued
Aggregate market value (book value utilized) 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, 1999 (par value is
$0.01 per share) was $177,110.
As of October 31, 1999, the Registrant had 5,642,275 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
28, 1999, are incorporated by reference into Part I of this Report.
Portions of the Annual Report for fiscal year ended October 31, 1999, are
incorporated by reference into Part II, III, and IV of this Report.
2
<PAGE> 3
PART I
ITEM 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
Bio-Lok International Inc. was organized on October 6, 1987 under the name of
Colfax, Inc., a Delaware corporation. The corporation was established for the
purpose of acquiring companies with long-term growth potential. In 1988 Colfax
Inc. via a reverse merger was acquired by Minimatic, Inc., a Florida
corporation. Minimatic, Inc. began doing business in February 1987, was
incorporated June 9, 1987, was established to manufacture dental implant parts
and other products as a subcontractor, and began the development of its own
proprietary dental implant line in 1989. Colfax, Inc. changed its name in 1988
to Minimatic Implant Technology, Inc.; in 1995, to American BioDental
Corporation; and, finally in August 1996 to Bio-Lok International Inc.
Additionally, Minimatic, Inc.'s name in 1995 was changed to Minimatic Implant
Technology, Inc. and merged into Bio-Lok International Inc. on March 1, 1997.
From 1987 to 1991 the Company via its subsidiary 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's business was directed towards
its own proprietary product line and specifically the development, improvement,
marketing and distribution of a dental implant system with all related and
associated parts.
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.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
No segmentation of business activity is completed on a financial reporting
basis. The company markets one product line the "Micro-Lok Precision Dental
Implant System" both domestically and internationally.
(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. The Company has been re-certified in 1999
- - an annual process. ISO certification permits the Company to import and market
its product within the EEC.
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<PAGE> 4
BIO-LOK INTERNATIONAL INC.
PRINCIPAL PRODUCTS, MARKETS AND DISTRIBUTION
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 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>
- 3.45mm Platform - Micro-Lok Screw Implant 3.45mm body to head;
- Micro-Lok Cylinder Implant 3.45mm body to 4.00mm head;
- Silhouette Screw Implant with a tapered body from 4.0mm to 2.8mm;
- 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;
- Silhouette Screw Implant with a tapered body from 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;
- Silhouette Screw Implant with a tapered body from 5.5mm to 3.3mm
- 6.50 mm Platform - Silhouette Screw Implant with a tapered body from 7.0mm to 4.0mm
- 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.
</TABLE>
RAW MATERIALS
The material used in manufacturing the dental products is titanium alloy
(ASTMB348 Grade 5 [Ti 6AL4V]), gold alloy and stainless steel. Titanium 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. Research in the
use of ceramic and other materials are underway, particularly for ceramic for
use as an abutment. Select ceramic abutments are already being marketed but as
of today have not yet received brought acceptance.
4
<PAGE> 5
FACILITIES
Bio-Lok is located in Deerfield Beach, Florida and operates out of a 7,690 sq.
ft. leased plant and office facility.
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.
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 or have been
transferred and assigned to the Company. The Company has been granted a total of
eight (8) patents, has four (4) patent pending and three (3) filings 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
early 1998 the Micro-Lok Cylinder (knurled body type) implant was introduced to
the market; in late 1998 the "Silhouette" screw implant with associated spade
drills was brought to market in a 5.0mm platform design; and, in 1999 a 4.00mm
and 6.50mm platform "Silhouette" screw implant was introduced along with a new
style abutment - the "Custom Abutment".
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, 1999 the Registrant employed 12 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.
5
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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 registered only 7,000,000 of the authorized 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 March 22, 2000.
<TABLE>
<CAPTION>
Positions and Offices Held and Principal Occupations or Employment During
Name and Age Past Five Years
- ---------------------------------------- -------------------------------------------------------------
<S> <C>
Peter Baronoff (41) Director and past Chairman; Chairman and CEO of Sun Capital,
Inc.; past Chairman of Omni International, Inc.
Carl Sadowsky (53) Director and Vice-Chairman; Doctor of Medicine.
Howard Koslow (54) Director; past and present position is President, COO & CFO
of Sun Capital, Inc.
</TABLE>
At the Annual Stockholders Meeting held 4/28/99 the following Directors were
re-elected to the Board of Directors of the company:
<TABLE>
<CAPTION>
<S> <C>
Bruce L. Hollander (61) Chief Executive Officer, and President effective 12/13/95;
positions held outside of the company - President & CEO
Lion Wines & Spirits, Inc.,1992 - 1995. (elected for 2 yrs.)
Ingo K. Kozak (58) Director, CFO, Secretary and Vice President - Finance effective
8/95; previously Director and Vice President - Finance effective
2/94 to 7/95. (elected for 2 yrs.)
Neil Smith (58) 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. (elected for 2 yrs.)
Harold H. Weisman, Esq. (64) Director; Attorney at Law - specializing in contract law;
former Assistant US Attorney for Mass.; former Staff Attorney
for New England Power Systems. (elected for 1 yr.)
</TABLE>
Newly elected to the Board at the Annual Stockholders Meeting held 4/28/99 was:
<TABLE>
<CAPTION>
<S> <C>
Harold Alexander (60) Director; present position is President of Orthogen Corporation.
(elected for 2 yrs.)
</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.
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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 23, 1998 the filing was closed.
(2) No other legal proceedings exist.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Only matters put to a vote of Security Holders for 1999 was the election of
Directors and the appointment of an independent Auditor. Details of the Annual
Meeting held are contained in the minutes of the Annual meeting held on April
28, 1999.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Registered Common Stock is traded on the Over-the-Counter market and is listed
when from time to time 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, 1999 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, analysis of financial condition and results of
operation are included and detailed in the Annual Report for fiscal year ending
October 31, 1999, 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, 1999, is
incorporated by reference into this Report:
Independent Auditors' Report for year ended October 31, 1999
Balance Sheet for year ended October 31, 1999
7
<PAGE> 8
Statement of Operations for years ended October 31, 1999 and 1998
Statement of Changes in Stockholders' Equity for years ended
October 31, 1999 and 1998
Statements of Cash Flows for years ended October 31, 1999 and 1998
Notes to the Financial Statements
(b) No supplementary data is being reported.
BIO-LOK INTERNATIONAL INC.
(in thousands of dollars)
<TABLE>
<CAPTION>
October 31,
1999
-----------
<S> <C>
BALANCE SHEET:
Current assets..................................... $1,381
Non-current assets................................. 489
Total Assets....................................... 1,870
Current liabilities................................ 786
Non-current liabilities............................ 330
Stockholders' Equity............................... 755
</TABLE>
<TABLE>
<CAPTION>
Year Ended
--------------------------
Oct. 31, Oct. 31,
1999 1998
-------- --------
<S> <C> <C>
INCOME STATEMENT:
Net Sales.......................................... $1,512 $1,436
Gross Profit....................................... 1,057 968
Sales Expense...................................... 193 305
General & Admin. Exp............................... 689 912
Income from Operations............................. 175 (249)
Other Inc./Exp..................................... (95) (105)
Net income......................................... 80 (354)
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
- NONE -
8
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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 4 of the Proxy Statement
relating to the Annual Meeting of Shareholders held on April 28, 1999.
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 3 of the Proxy Statement relating to the
Annual Meeting of Shareholders held on April 28, 1999.
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 continually enters into distribution agreements with select domestic
and international entities for the sale of its product line.
The Company has employment agreements outstanding since 1997 with its President,
Vice President and a Marketing Executive. These contracts are automatically
renewed annually on October 31 for five, four and two years respectively.
No other contracts exist at present.
RE-ORGANIZATION AND RE-STRUCTURING
On January 10, 1996 the Board of Directors voted and placed its wholly owned
subsidiary (then known as Minimatic, Inc., today merged into its parent) under
protection of Chapter XI Bankruptcy Re-organization to protect the Company from
creditors and attempt to settle lawsuits outstanding.
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On April 2, 1996 the Board of Directs voted and placed American BioDental
Corporation (today known as Bio-Lok International Inc.) also under the
protection of a Chapter XI Bankruptcy Re-organization. The filing was completed
to 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 Files were 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.'s. Annual Report to Shareholders' for year ended
October 31, 1999, along with the Certified Independent Auditors' Report, are
incorporated by reference into this Report by Item 8 hereof.
Independent Auditors' Report for year ended October 31, 1999
Balance Sheet for year ended October 31, 1999
Statement of Operations for years ended October 31, 1999 and 1998
Statement of Changes in Stockholders' Equity for years ended
October 31, 1999 and 1998
Statements of Cash Flows for years ended October 31, 1999 and 1998
Notes to the Financial Statements
(a)(2) LIST OF FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statement schedules of Bio-Lok
International Inc. are included in this Report numbered in accordance with
Regulation S-X:
Schedule V - Property, Plant and Equipment for three years ended
October 31, 1999, page 11 of this Report.
Schedule VI - Accumulated Depreciation of Property, Plant and
Equipment for three years ended October 31, 1999, page
12 of this Report.
Schedule VII - Guarantees of Securities of Other Issuers as of October
31, 1999, page 12 of this Report.
Schedule VIII - Valuation and Qualifying Accounts for three years
ended October 31, 1999, page 12 of this Report.
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(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
Auditor's Report for the Registrant for the year ended October
31, 1999. 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.
27 Financial Data Schedule (for SEC use only).
- --------
* 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
March 29, 1999 Item 4. Change in Registrant's Certifying Accountant.
Item 7. Financial Statements and Exhibits
10-K SB for October 31, 1998 Annual Report
as of October 31, 1998 10-Q SB for the
Quarter ended January 31, 1999
11
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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, 1999
Equip. Cap. Leases ................ $ -0- $ -0- $ $ $ -0-
Tooling Equipment ................. 72,153 949 73,102
Office Equipment .................. 42,836 306 43,142
Machinery & Equip ................. 670,669 1,297 29,514 642,452
Vehicle ........................... 15,408 -0- 15,408
Computer Equipment ................ 131,818 4,379 136,196
Leasehold Improve ................. 56,664 -0- 56,664
-------- -------- -------- ------- --------
Total ........................... $989,548 $ 6,931 $ 29,514 $ -0- $966,964
======== ======== ======== ======= ========
Year ended Oct. 31, 1998
Equip. Cap. Leases ................ $ -0- $ -0- $ $ $ -0-
Tooling Equipment ................. 72,153 72,153
Office Equipment .................. 38,017 4,819 42,836
Machinery & Equip ................. 670,669 670,669
Vehicle ........................... 15,408 15,408
Computer Equipment ................ 147,512 4,306 20,000 131,818
Leasehold Improve ................. 56,213 451 56,664
-------- -------- -------- ------- --------
Total ........................... $999,972 $ 9,576 $ -0- $20,000 $989,548
======== ======== ======== ======= ========
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 Improve ................. 52,937 3,276 56,213
-------- -------- -------- ------- --------
Total ........................... $869,630 $130,342 $ -0- $ -0- $999,972
======== ======== ======== ======= ========
</TABLE>
(1) Loss and write down of scraped Lap-top computers.
12
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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
--------------- ---------- --------- ----------- ------------ ---------
Additions
Charged Other
Balance at to Costs Changes- Balance
Beginning and Retirements Add (Deduct) at End
Classification of Period Expenses or Sales Describe(1) of Period
--------------- ---------- --------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Year ended Oct. 31, 1999 $763,293 $ 63,337 $29,514 $ 16,000 $781,116
All Machinery & Equip.
Year ended Oct. 31, 1998 $678,619 $ 84,674 $ -0- $ -0- $763,293
All Machinery & Equip.
Year ended Oct. 31, 1997 639,486 102,183 -0- (63,050) 678,619
All Machinery & Equip.
</TABLE>
(1) Adjustments to accumulated depreciation due to scrapped, lost or
sold equipment.
SCHEDULE VII - GUARANTEES OF SECURITIES OF OTHER ISSUERS
October 31, 1999
- ---- 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, 1999 $140,170 $ -0- $ -0- $29,914(1) $115,256
Year ended Oct. 31, 1998 $ 22,397 $117,773 $ -0- $ -0- $140,170
Year ended Oct. 31, 1997 $ 30,741 $ 12,940 $ -0- $21,073(2) $ 22,397
</TABLE>
- -----------
(1) Write off against reserve and adjustment to reserve balance
(2) Write off against reserve account
13
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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
January 31, 2000
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 per the final audit report issued by
accountants.
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.
14
<PAGE> 1
Exhibit 13
ANNUAL REPORT 1999
OF
BIO-LOK INTERNATIONAL INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Financial Highlights............................................................ 1
Letter to Shareholders from the President....................................... 2
Business Review................................................................. 3
Financial Review................................................................ 6
Financial Statements - Prepared by Auditors
Independent Auditors' Report........................................... F-1
Balance Sheets......................................................... F-2
Statements of Operations............................................... F-3
Statements of Changes in Stockholders' Equity.......................... F-4
Statements of Cash Flows............................................... F-5
Notes to Financial Statements.......................................... F-6 to F-18
Management Information
Select Financial Data.................................................. 8
Market Information for Common Stock.................................... 9
Office of the Chairman, Board of Directors and Corporate Officers...... 10
Corporate Information........................................................... 11
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
($ in thousands, except October 31, October 31, % Increase
per share amounts) 1999 1998 (Decrease)
- ----------------------- ------------ ----------- -----------
<S> <C> <C> <C>
Net Sales........................................................... $1,511,975 $1,436,492 5%
Income from Operations.............................................. 174,965 (248,649) --
Income before income taxes & extraordinary items.................... 80,374 (353,553) --
Net Income (loss)................................................... 80,374 (353,553) --
Cash provided from operations....................................... 108,231 (18,553) --
Capital expenditures................................................ 6,930 9,575 --
Working capital ratio............................................... 1.7:1 1.4:1
Total Assets ....................................................... 1,870,325 1,902,791
Shareholders' equity................................................ 754,637 568,493
Per share:
Net income (loss) - Diluted.................................... $ .01 $ (.09)
Book value..................................................... .13 .14
Dividends declared............................................. -0- -0-
</TABLE>
Page 1
<PAGE> 2
LETTER TO SHAREHOLDERS FROM THE PRESIDENT
To: Shareholders of Bio-Lok International Inc.
Fiscal Year 1999, our turnaround year, ended with our first profit since the
Chapter XI was declared in 1996. Fiscal Year 1999 sales were $1,512,000 with a
profit after tax of $80,000, compared to the 1998 loss of $354,000, on sales of
$1,436,000. Sales are forecasted to increase by 50% in fiscal year 2000 with a
related profit increase of 250%.
This year the "Silhouette" tapered implant line was introduced and was received
very well by the industry. It will become a major product line of the company
and the focal point for marketing over the next year.
Our international distribution network was strengthened with the addition of
BioDental S.A. in Argentina. BioDental has regained all our lost business and is
adding quickly to its customer base.
R&D activities were initiated on a laser machined surface that we believe will
revolutionize dental implantology. This patented process, owned by Orthogen
Corporation, enhances bone growth to the implant surface. It is expected that
99% of all bone die-back (cupping) which is an industry wide problem today would
be eliminated after the prosthesis is installed. The company is committed to
successfully bringing this product to market by FY2001. Currently, the
acquisition of Orthogen Corporation is being finalized, and development and
approval of the test protocol for "Laser-Lok" is being completed.
This year our efforts are on sales and profit growth, updating manufacturing
equipment and completion of the development of the "Laser-Lok" technology. The
company plans on opening additional distribution in Europe, Brazil, Australia,
New Zealand and South Africa. In January, with the hire of an industry trained
and experienced salesperson, domestic sales operations are in the process of
being rebuilt. Our intention is to have salespeople servicing all the major
metropolitan and high density areas of the country.
Last year we said that 1999 was going to be our "turnaround year" - and it was.
This year is our growth year. New machinery is replacing old. New, experienced
employees are being added. We again have planned podium time in upcoming
industry shows. Our growth strategy is on a sound foundation with planned 50%
per year growth forecasted for the next three years.
Sincerely,
/s/ Bruce L. Hollander
- ----------------------
Bruce L. Hollander
Chairman & CEO
Page 2
<PAGE> 3
BUSINESS REVIEW
Bio-Lok International Inc. ("Bio-Lok" or the "Company") is a manufacturer,
distributor and marketer of medical devise products. Presently, Bio-Lok's
primary 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 "MICRO-LOK PRECISION
DENTAL IMPLANT SYSTEM."
The Company has registered it products with the FDA and has obtained its
requisite FDA 510(k)'s. Domestically the Company markets its product line
directly to the end-user. Internationally, marketing is accomplished via select
Distributors on a country by country basis, joint ventures or wholly owned
subsidiary. To this extent, the Company has obtained and is maintaining its
certification of ISO 9001 / EN 46001 and CE Mark to enable it to market the
product line in Europe or specifically the EEC.
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, and placed in the
maxilla or mandible bone, 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 can last a lifetime.
The dental implants and related products manufactured and distributed are as
follows:
- 3.45mm, 4.00mm, 5.00mm and 6.50mm 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 was the "Silhouette" tapered screw implant; a
5.00mm platform implant was introduced in late summer 1998; a 4.00mm
platform version was introduced in December 1998; and a 6.50mm
platform implant was introduced in October 1999;
- an extensive line of prosthetic armamentarium to avail a practitioner
of a number of options in completing a prosthesis.
The Company, along with its primary clinicians, constantly reviews its designs,
evaluates new concepts, and develops improved and new products to augment the
Micro-Lok Precision Implant System.
Overall, in the process of developing the product line the Company has filed for
fourteen patents. Eight patents have been granted to date and cover many unique
aspects and designs incorporated into the Micro-Lok Precision Implant System.
Patent documents include the (1) internal journal design, (2) implant to
abutment fit, (3) irrigated four fluted drills (burr), (4) thread and surface
designs, (5) buttress thread design, (6) system screw security, etc.
Page 3
<PAGE> 4
The Company's marketing and sales effort is segregated into two distinct
functions to enable management to properly evaluate, monitor, and provide
direction and guidance. The two marketing operations are identified as DOMESTIC
and INTERNATIONAL. The domestic and international market are covered by the
promotion of seminars and meetings; association with Universities, dental
laboratories, clinics, and practitioners; attending select dental conventions;
space advertising, article publication and flyer distribution to promote the
company and its products; and, by direct support of international. To accomplish
this feat the Company has developed promotional literature, direct marketing
material, catalogs, manuals, and etc.
DOMESTIC. The domestic marketplace covers the 50 states and territories. The
current market is estimated at over $250 million in sales with a real growth at
about 8%. Bio-Lok is in the process of rebuilding its domestic market.
Presently, the Company is developing the domestic market by hiring salespersons,
independent contractors or local and regional distributors. These marketers are
anticipated to be located in large metropolitan areas and areas with high
populations. It is anticipated that the Company will have, by year end, 5
salespersons selling the Micro-Lok Implant System in the US with added
salespersons to be hired in the following years.
INTERNATIONAL. Presently, Bio-Lok is engaged in sales activity in eleven (11)
countries - Argentina, Chile, Colombia, Italy, Mexico, Spain and Portugal, S.
Korea, Taiwan, Romania and Venezuela. Product is sold into the markets to
individual Distributor entities. For each country, a distribution agreement is
entered into with a Distributor for the right to sell the product line. In turn,
the Distributor is expected to promote, market and sell the products as the
Micro-Lok Dental Implant System direct to practitioners.
Other markets that are in the process of being developed are Brazil, Australia,
New Zealand, England, France, Germany, Austria and the Scandinavian Countries.
Attempts 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL RESULTS OF OPERATIONS AND
CONDITION.
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. Since
emerging from the Chapter XI filing the company has evolved into a profitable
entity, expanded and introduced new products to the Micro-Lok Precision Implant
System, and improved manufacturing capacity and efficiency by the addition of
new machinery.
SALES AND PROFITS. [1999 VS. 1998] Net Revenue for 1999 totaled $1,511,975
which represented a 5% increase over prior year. The increase was primarily
attributable to the continued increase of the international market.
Gross Profit for the year totaled $1,056,638 and reflected a 9% increase over
prior year. The increase is solely due to continued improved margins being
achieved, maintaining cost controls, and continued improvements in inventory
control.
Selling expenses for the year continued to decrease due to the restructuring of
the domestic sales operation. Selling expense for the year totaled $192,626,
was $112,538 lower than prior year or reflected a 37% decrease. With 2000 the
costs will begin increasing as the domestic sales operation is re-staffed.
General and administrative expenses also decreased $222,958 from prior year to
$689,047, a 24% decrease. The decreased costs incurred are the direct result of
a number of non-recurring costs incurred in the prior year - ISO and CE mark
certification and increasing the reserve for losses by over $120,000. Adjusting
for non-recurring costs expenses incurred would be comparable to prior year
results.
Page 4
<PAGE> 5
Other income and expenses decreased to $94,591, and reflected a 10% decrease
from prior year. The decrease is solely attributable to lower interest expenses
incurred.
Net Income for the period totaled $80,374 and represented a $433,927 increase
from prior year results. The profits where achieved from increased sales,
increase in efficiency and continued cost controls.
SALES AND PROFITS. [1998 VS. 1997] Net Revenue for 1998 totaled $1,436,492 and
represented a modest 2% 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 $968,520 and reflected a 2% 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 $305,164 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 year by $276,326 to
$912,005 or 44%. The increased costs incurred are the direct result of obtaining
the ISO and CE mark certification, reserve for losses totaling $118,000 having
to be established for a number accounts - both domestic and international, stock
issued to officers in lieu of salary and bonuses, and stock issued to Board
Members and clinicians for services rendered.
Other income and expenses increased by $57,453 to $104,904. This increase in
expenses 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's Plan of
Reorganization being adopted in February 1997.
Net Income for the period was a loss of $353,553 for the year. Adjusting for
the increase in the reserve for losses booked and stocks issued, net income
would have totaled only a loss of $45,651. A better measurement of the results
of the Company is Income from Operations. Income from Operations after adjusting
for the increase in the reserve for losses and stocks issued totaled a loss of
$85,859 and was $14,938 over prior years result. The result reflected an
increase achieved due to increases in sales and cost controls maintained.
MANAGEMENT'S REVIEW.
Bio-Lok's products are sold through out the United States and internationally in
over ten 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 strength and provide the Company a competitive
advantage in the marketplace.
Improved results achieved at income from operations were realized even with the
introduction of the new 5.0mm and 6.50mm platform "Silhouette" and related
tapered spade drills along with improvements to prosthetic parts and tooling.
The Company is featured on the INTERNET via its own web site home page -
[email protected]. The web site details product information, the catalog,
marketing and sales information, and provides a method for ordering product.
Page 5
<PAGE> 6
OUTLOOK FOR THE FISCAL YEAR 2000.
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 "state of the art" product.
Management anticipates continued growth of its international markets and with
the re-staffing of the domestic market expects sales to accelerate rapidly.
FINANCIAL REVIEW
- --------------------------------------------------------------------------------
The information contained in this financial review should be read in conjunction
with the consolidated financial information provided on pages F1 to F18 of this
Annual Report.
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
SALES. Net sales increased by $75,483 for 1999. The increase was due to the
continued growth of the international markets. The domestic market growth
remained flat, but is expected to grow in 2000. To achieve the domestic growth
goals a direct sales staff is being hired.
COSTS AND EXPENSES. Costs and expenses continued to be controlled for the year.
Overall expenses continued to decrease for the year due to the continued
re-alignment of the domestic market and non-recurring one time expenses incurred
in the prior year. Expenses are continuing to be monitored and controlled, but
will increase going forward as market penetration is achieved.
INCOME FROM OPERATIONS. Results totaled $174,965 and represented an 11.6%
return on sales. The results achieved represented a considerable improvement
over prior year and will continue to improve as sales increase.
NET INCOME. Results for the year was $80,374. The result represents an increase
from prior year even after adjusting for the non-recurring expenses. As sales
continue to increase the results at net income will improve.
TAX RATE. No tax provision was recorded for 1999 then the business had an
operating loss carry forward. (See Note 7 - Income Taxes of the Notes to the
Financial Statements included herewith).
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES. At October 31, 1999, Bio-Lok had limited funds
on-hand and working capital totaled $595,000. The Company's revolving line of
credit is expiring and must be replace by May 2000. Currently, the outstanding
balance totals $417,410. To this extent, the company's management and Board are
continually looking for and soliciting new capital and financing sources.
OPERATING ACTIVITIES. For the year operating activities generated a profit of
$174,965, a turn-a-round from the loss generated the prior year. The improved
results are directly attributable to increased sales, manufacturing efficiency
and lower costs incurred for 1999.
INVESTING ACTIVITIES. Capital expenditures for 1999 totaled only $6,930. The
expenditures where primarily for systems upgrades to be fully 2000 compatible.
Page 6
<PAGE> 7
DIVIDEND. No dividends were declared or paid for the year 1999 to any
shareholder.
NEW ACCOUNTING STANDARDS. See Note 1 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 activities are conducted in US dollars. All domestic and
international payments are remitted to the Company in dollars.
Page 7
<PAGE> 8
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of:
Bio-Lok International, Inc.
We have audited the accompanying balance sheet of Bio-Lok International, Inc. as
of October 31, 1999 and the related statements of operations, changes in
stockholders' equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of Bio-Lok International, Inc. as of October
31, 1998 where audited by other auditors whose report dated August 15, 1999,
expressed an unqualified opinion on those statements and included an explanatory
paragraph describing conditions that raised substantial doubt about its ability
to continue as a going concern.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the financial position of Bio-Lok International, Inc. as
of October 31, 1999 and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Notes 5 and 12 to the
financial statements, the Company's line of credit will not be renewed and the
Company is seeking a new financing source. This condition raises substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to this matter is also described in Note 12. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
December 9, 1999
F-1
<PAGE> 9
Bio-Lok International, Inc.
BALANCE SHEET
OCTOBER 31, 1999
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 17,079
Accounts receivable, net 390,008
Inventory 952,433
Prepaid expenses 21,749
-----------
Total Current Assets 1,381,269
-----------
PROPERTY AND EQUIPMENT, NET 185,848
-----------
OTHER ASSETS
Deposits 10,747
Inventory 278,623
Other assets 13,838
-----------
Total Other Assets 303,208
-----------
TOTAL ASSETS $ 1,870,325
- ------------ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving loan payable $ 417,410
Accounts payable - trade and accrued expenses 72,338
Accounts payable - other 12,279
Notes and loans payable - current portion 242,790
Liabilities under capital lease 17,684
Due to related parties 23,551
-----------
Total Current Liabilities 786,052
-----------
LONG-TERM LIABILITIES
Notes and loans payable - noncurrent portion 329,636
-----------
Total Long-term Liabilities 329,636
-----------
TOTAL LIABILITIES 1,115,688
-----------
STOCKHOLDERS' EQUITY
Common stock $0.01 par value, 7,000,000 shares
authorized, 5,642,275 issued and outstanding 56,423
Additional paid-in capital 2,172,267
Accumulated deficit (1,474,053)
------------
Total Stockholders' Equity 754,637
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,870,325
============
See accompanying notes to financial statements.
F-2
<PAGE> 10
BIO-LOK INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED OCTOBER 31, 1999 AND 1998
1999 1998
---------- ----------
SALES REVENUES - NET $ 1,511,975 $1,436,492
COST OF SALES 455,337 467,972
----------- ----------
GROSS PROFIT 1,056,638 968,520
----------- ----------
OPERATING EXPENSES
Selling expenses 192,626 305,164
General and administrative expenses 689,047 912,005
----------- ----------
TOTAL OPERATING EXPENSES 881,673 1,217,169
----------- ----------
INCOME (LOSS) FROM OPERATIONS 174,965 (248,649)
----------- ----------
OTHER INCOME (EXPENSES)
Other income 2,250 7,500
Interest expense (96,841) (107,437)
Other expenses -- (4,967)
----------- ----------
NET OTHER INCOME (EXPENSES) (94,591) (104,904)
----------- ----------
NET INCOME (LOSS) $ 80,374 $ (353,553)
- ----------------- =========== ==========
Net income (loss) per common
share and equivalents -
Basic $ .02 $ (.09)
=========== ==========
Diluted $ .01 $ --
=========== ==========
Weighted average number of shares
outstanding during period -
Basic 4,986,765 3,926,464
=========== ==========
Diluted 5,151,765 4,091,464
=========== ==========
See accompanying notes to financial statements.
F-3
<PAGE> 11
BIO-LOCK INTERNATIONAL, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED OCTOBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Common Stock
--------------------- Additional
Number Paid-in Accumulated
of Shares Amount Capital Deficit Total
---------- -------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balance, October 31, 1997 34,742,870 $347,429 $ 1,649,497 $ (1,200,874) $ 796,052
Issuance of stock to
directors, officers and
employees 6,255,150 62,552 62,552 -- 125,104
Reverse stock split 1 share
for 10 (36,898,162) (368,982) 368,982 -- --
Issuance of common stock
to clinicians 20,500 205 205 -- 410
Issuance of common stock
to directors 24,000 240 240 -- 480
Cancellation of common
stock (13,083) (131) 131 -- --
Net loss -- -- -- (353,553) (353,553)
---------- -------- ----------- ------------ -----------
Balance, October 31, 1998 4,131,275 41,313 2,081,607 (1,554,427) 568,493
Issuance of common stock
to directors, officers
and employees 1,467,000 14,670 88,020 -- 102,690
Issuance of common stock
to clinicians 44,000 440 2,640 -- 3,080
Net Income 1999 -- -- -- 80,374 80,374
---------- -------- ----------- ------------ -----------
Balance October 31, 1999 5,642,275 $ 56,423 $ 2,172,267 $ (1,474,053) $ 754,637
========== ======== =========== ============ ===========
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE> 12
BIO-LOK INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31, 1999 AND 1998
1999 1998
---------- ----------
Cash flows from operating activities:
Net income (loss) $ 80,374 $ (353,553)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation 63,337 84,674
Loss on disposal of property -- 4,000
Provision for doubtful accounts,
net of recoveries (24,914) 117,773
Issuance of common stock for services 105,770 125,994
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable 26,137 (19,062)
Employee receivable -- --
Inventories (9,881) (58,130)
Prepaid expenses and other assets 1,424 (16,334)
Deposits -- 3,375
Increase (decrease) in:
Accounts payable and accrued expenses (134,016) 92,710
---------- ----------
Net cash provided by (used in)
operating activities 108,231 (18,553)
---------- ----------
Cash flows from investing activities:
Purchase of property and equipment (6,930) (9,575)
---------- ----------
Net cash used in investing activities (6,930) (9,575)
---------- ----------
Cash flows from financing activities:
Increase (decrease) in bank overdraft (26,557) 20,175
Payment of capital lease obligation (29,588) (28,416)
Payment of notes and loans payable (89,396) (89,445)
Proceeds from notes and loans payable 8,980 3,839
Proceeds - net from revolving note payable 51,966 118,706
---------- ----------
Net cash provided by (used in)
financing activities (84,595) 24,859
---------- ----------
Net increase (decrease) in cash 16,706 (3,269)
Cash and cash equivalents at
beginning of year 373 3,642
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 17,079 $ 373
- ---------------------------------------- ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID DURING THE YEAR FOR INTEREST $ 96,841 $ 103,841
========== ==========
See accompanying notes to financial statements.
F-5
<PAGE> 13
BIO-LOK INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF OCTOBER 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) ORGANIZATION AND DESCRIPTION OF BUSINESS
Bio-Lok International, Inc. (Bio-Lok) (the "Company") was incorporated
in the State of Delaware in October 1987 under the name of Colfax, Inc.
The Company changed its name to Minimatic Implant Technology, Inc. in
June 1988, to American BioDental Corporation in April 1995 and to
Bio-Lok International, Inc., its current name, in September 1996. In
April 1997, the Company merged with its wholly owned subsidiary,
Minimatic Implant Technology, Inc., incorporated in the State of
Florida, and the latter Company was dissolved.
The Company manufactures and distributes the "Micro-Lok Precision
Implant System". The Company holds several patents and its products are
primarily sold to international distributors. The Company's products
are subject to various United States and international federal
regulatory laws that restrict their sale to licensed medical
practitioners in the United States and authorize import of product into
the European Economic Community, respectively. The Company guarantees
and warrants its products subject to certain restrictions and
requirements and as a result of minimal returns, does not maintain any
reserve for product warranties. The Company manufactures its products
in a Federal Drug Administration and United States Military registered
facility. The products are ISO 9001 Certified. The Company has
determined that it operates in one reportable segment and it is
impractical to report information by select parts of a product line and
geographic area. The Company sells only one product line which consist
of over 600 items and part numbers.
The Company and its former subsidiary filed petitions under Chapter XI
of the Bankruptcy laws in January 1996. On February 12, 1997, the
Company's amended plan of reorganization was approved by its creditors
and accepted by the Court. Liabilities were restructured to 30% of the
original debts, except priority claims. The restructured debts were to
be repaid over a 12 to 72 month period. The unsecured liabilities were
discounted at a market rate of 9% in accordance with generally accepted
accounting principles. Creditors also received common stock shares in
the Company at one share per dollar for all debt not repaid
(subsequently reverse split 1 share for 10). The Company was discharged
from bankruptcy in January 1998 (See Note 6).
(B) USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at the date of
the financial statements and revenues and expenses during the reported
period. Actual results could differ from those estimates.
F-6
<PAGE> 14
BIO-LOK INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF OCTOBER 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONT'D)
(C) CASH AND CASH EQUIVALENTS
For purposes of the cash flow statements, the Company considers all
highly liquid investments with original maturities of three months or
less at time of purchase to be cash equivalents.
(D) INVENTORIES
Inventory is stated at the lower of average cost or market. Inventory,
which is not expected to be sold in one year is classified as long
term.
(E) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, less accumulated
depreciation. Expenditures for maintenance and repairs are charged to
expense as incurred. Depreciation is provided using the straight-line
method over the estimated useful life's of the assets from five to ten
years.
(F) INCOME TAXES
The Company accounts for income taxes under the Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 109.
"Accounting for Income Taxes" ("Statement No. 109"). Under Statement
No. 109, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities
and their respective tax basis. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be
recovered or settled. Under Statement 109, the effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date.
(G) STOCK OPTIONS
In accordance with Statement of Financial Accounting Standards No. 123
("SFAS 123") the Company has elected to account for Stock Options
issued to employees under Accounting Principles Board Opinion No. 25
("APB Opinion No. 25") and related interpretations.
(H) REVENUE RECOGNITION
The Company recognizes revenues when goods are shipped.
F-7
<PAGE> 15
BIO-LOK INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF OCTOBER 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONT'D)
(I) PER SHARE DATA
Basic net income (loss) per common share is computed based on the
weighted average common shares outstanding during the year as defined
by Statement of Financial Accounting Standards, No. 128, "Earnings Per
Share" ("SFAS 128"). Diluted net income per common share is computed
based on the weighted average common shares and common stock
equivalents outstanding during the year as defined by SFAS 128.
The following represents a reconciliation from basic to diluted
earnings (loss) per share:
1999 1998
---- -----
Income (loss) to common shareholders $ 80,374 $ (353,553)
=========== ===========
Weighted average common shares
outstanding 4,986,765 3,926,464
Assumed exercise of common options 30,000 30,000
Assumed exercise of stock warrants 135,000 135,000
----------- -----------
Diluted weighted average common
shares outstanding 5,151,765 4,091,464
=========== ===========
Basic earnings (loss) per common
share $ 0.02 $ (0.09)
=========== ===========
Diluted earnings per common share $ 0.01 $ --
=========== ===========
For 1998, the effect of the assumed exercise of 165,000 stock options
and warrants was not utilized in the computation of diluted earnings
per share since the effect was anti-dilutive.
(J) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments", requires disclosures of
information about the fair value of certain financial instruments for
which it is practicable to estimate that value. For purposes of this
disclosure, the fair value of a financial instrument is the amount at
which the instrument could be exchanged in a current transaction
between willing parties other than in a forced sale or liquidation.
The carrying amounts of the Company's financial instruments, including
accounts receivable, accounts payable, accrued liabilities, and notes
and loans payable approximates fair value due to the relatively short
period to maturity for these instruments.
F-8
<PAGE> 16
BIO-LOK INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF OCTOBER 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONT'D)
(K) RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has recently issued several
new accounting pronouncements. Statement No 133, "Accounting for
Derivative Instruments and Hedging Activities", as amended by statement
No 137, establishes accounting and reporting standards for derivative
instruments and related contracts and hedging activities. This
statement is effective for all fiscal quarters and fiscal years
beginning after June 15, 2000. The Company believes that its adoption
of these pronouncements will not have a material effect on the
Company's financial position or results of operations.
NOTE 2 - ACCOUNTS RECEIVABLE
Accounts receivable were as follows at October 31, 1999:
Accounts receivable $ 505,264
Allowance for doubtful accounts (115,256)
----------
$ 390,008
==========
The Company maintains an allowance for doubtful accounts based on
management analysis of historical customer collections and risk. (See
Note 11)
NOTE 3 - INVENTORY
Inventory at October 31, 1999 consisted of the following:
Raw materials $ 27,977
Work in process 343,601
Finished goods 824,478
Consumable tools 35,000
----------
$1,231,056
==========
Inventory is stated at the lower of cost (first in, first out) or
market. Finished goods inventory consist of a wide variety of products
for sale to satisfy a market that requires specific types and sizes of
products for specialized surgical applications and immediate order
fulfillment. All inventory not expected to be sold within one year is
classified as non-current. As of October 31, 1999, the non-current
amount included in finished goods inventory was $278,623.
F-9
<PAGE> 17
BIO-LOK INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF OCTOBER 31, 1999
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment at October 31, 1999 consisted of the following:
Tooling equipment $ 73,102
Office equipment 43,142
Machinery and equipment 642,452
Computer equipment 136,196
Vehicles 15,408
Leasehold improvements 56,664
----------
966,964
Less accumulated depreciation (781,116)
----------
$ 185,848
==========
Depreciation expense for the year ended October 31, 1999 and 1998 was
$63,337 and $84,674, respectively.
NOTE 5 - REVOLVING LOAN PAYABLE
On April 25, 1997, the Company executed a revolving loan agreement with
Capital Business Credit, a subsidiary of Union Planters Bank for a
maximum loan amount of $500,000. The Company pledged all its assets as
collateral to secure the loan arrangement. This revolving loan was in
default with respect to the fixed charge coverage covenant at October
31, 1998 and was cured in October 1999. Capital Business Credit has
indicated it will not renew the line of credit at its maturity on April
24, 2000, or provide additional funds except for advancing interest
expense of approximately $5,000 per month. Capital Business Credit has
stated it does not intend to call the loan early as a result of the
prior default, however, the total balance is due payable at the
maturity date of April 24, 2000. The interest rate is the prime rate in
effect from time to time plus 3.5%. At October 31, 1999, the effective
rate was 11.75% and the balance was $417,410. The Company is seeking to
replace this line of credit with another lender, other debt, or equity
capital. (See Note 10(B))
NOTE 6 - NOTES AND LOANS PAYABLE
The following schedule reflects notes and loans payable at October 31,
1999:
Note payable in monthly installments of $787
including interest at 9.5% until December 1999,
unsecured. $ 1,575
Loan payable is minimum monthly payments of $100,
including interest at 17.88%, due on demand,
unsecured. 3,448
F-10
<PAGE> 18
BIO-LOK INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF OCTOBER 31, 1999
NOTE 6 - NOTES AND LOANS PAYABLE - (CONT'D)
Note payable in monthly installments of $2,245
including interest at 9.5%, secured by manufact-
uring equipment. 84,282
Chapter XI bankruptcy settlement obligations under
the plan of reorganization dated February 12, 1997,
with aggregate monthly payments due to the creditors
as determined by the payment schedules incorp-
orated into the agreement, including interest at
9%. The IRS is a priority creditor and is secured
by the assets of the Company. The Company is in
arrears on payments due to general unsecured creditors
under the plan of reorganization primarily relating
to the inability to locate and forward payments to
those creditors. As of the date of this report no
legal actions have been presented to the Company
relating to non-payment of the creditors under
the plan of reorganization. 475,601
Note payable in monthly installments of $344
including interest at 9.15% until November 2001,
secured by vehicle. 7,520
---------
572,426
Less: Current portion 242,790
---------
$ 329,636
=========
Required payments of principal on notes and loan payable at October 31,
1999, including current maturities, are summarized as follows:
2000 $ 242,790
2001 171,200
2002 124,143
2003 34,293
2004 --
---------
$ 572,426
=========
Interest expense for the year ended October 31, 1999 and 1998 was
$96,841 and $107,437, respectively.
NOTE 7 - INCOME TAXES
Income tax expense (benefit) for the years ended October 31, 1999 and
1998 is summarized as follows:
1999 1998
---- ----
Current:
Federal $ -- $ --
State -- --
F-11
<PAGE> 19
BIO-LOK INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF OCTOBER 31, 1999
NOTE 7 - INCOME TAXES - (CONT'D)
Deferred:
Federal 26,988 56,373
State 4,619 9,649
Change in valuation allowance (31,607) (66,022)
-------- --------
Income tax expense (benefit) $ -- $ --
======== ========
The Company's tax expense differs from the "expected" tax expense for
the years ended October 31 1999 and 1998 (computed by applying the
Federal Corporate tax rate of 34 percent to income (loss) before
taxes), as follows:
1999 1998
-------- ------
Computed "expected" tax expense $ 27,327 $ --
State income tax - net of federal
tax benefit 3,136 --
Non-deductible expenses 2,052 --
Effect of net operating loss
carryforwards (32,515) --
-------- -----
$ -- $ --
======== =====
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities at October 31, are as
follows:
1999 1998
--------- ---------
Deferred tax liabilities:
Stock based compensation $ -- $ (63,269)
Depreciation: (14,685) (8,278)
--------- ---------
Total deferred tax liabilities (14,685) (71,547)
Deferred tax assets:
Net operating loss carryforward 339,411 521,007
Stock based compensation 93,127 --
--------- ---------
Total gross deferred tax assets 432,538 521,007
Less valuation allowance (417,853) 449,460
--------- ---------
Net deferred tax assets 14,685 71,547
--------- ---------
Net deferred tax asset (liability) $ -- $ --
========= =========
At October 31, 1999, the Company had net operating loss carryforwards
of approximately $998,270 for income tax purposes, available to offset
future taxable income expiring on various dates through 2020.
F-12
<PAGE> 20
BIO-LOK INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF OCTOBER 31, 1999
NOTE 7 - INCOME TAXES - (CONT'D)
The valuation allowance at November 1, 1998 was approximately $449,460.
The net change in the valuation allowance during the year ended October
31, 1999 was a decrease of approximately $31,607.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
(A) YEAR 2000 ISSUES
The Company is aware of the issues associated with the programming code
in existing computer systems as the millennium (Year 2000) approaches.
The "Year 2000" problem is pervasive and complex as virtually every
computer operation will be affected in some way by the roll over of the
two-digit year value to 00. The issue is whether computer systems will
properly recognize date-sensitive information when the year changes to
2000. Systems that do not properly recognize such information could
generate erroneous data or cause a system to fail.
Effective November 30, 1999, the Company was fully Year 2000 compliant.
To accomplish the task the Company upgraded its hardware and software,
and fully tested the system to insure no problems would be encountered.
The total cost to be compliant totaled approximately $10,000.
(B) CONSULTING AGREEMENT
On May 13, 1999 the Company entered into a consulting agreement (the
"Agreement") with a Financial Services Company (the "Consultant"). The
Agreement does not specify any termination date. The services provided
by the Consultant comprise assisting the Company in strategic planning,
structuring the Company's debt/equity strategy, and on a best efforts
basis, helping the Company to obtain financing. As consideration for
the services provided, the Company agreed to pay the Consultant a
non-refundable consulting fee of $1,500 upon the signing of the
Agreement. In addition, the Company agreed to compensate the Consultant
for obtaining equity funding or facilitating a merger/acquisition or
reorganization. The compensation will be based upon a percentage of
funds raised or a percentage of equity or other consideration
transferred in a fund raising or merger/acquisition, respectively, as
stipulated in the Agreement.
(C) EMPLOYMENT AGREEMENTS
On November 1, 1997 (the "Effective Date"), the Company entered into
three employment agreements (the "Agreements") with executives of the
Company (the "Employees"). The Employees were engaged as the President
and Chief Executive Officer ("CEO"), as the Vice President - Finance
and Chief Financial Officer ("CFO") and as the Director International
Sales & Marketing (Director) of the Company. The Agreements were
established for terms of five years, four years, and two years,
respectively from the Effective Date for the CEO, CFO and Director,
respectively. These agreements automatically renew annually on October
31 for a term of five
F-13
<PAGE> 21
BIO-LOK INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF OCTOBER 31, 1999
NOTE 8 - COMMITMENTS AND CONTINGENCIES - (CONT'D)
(C) EMPLOYMENT AGREEMENTS - (CONT'D)
years, four years, and two years, respectively. The Agreements contain
a confidentiality clause and a non-competition clause. As consideration
for the Employees' performances, the Company agreed to pay as of the
original contract date an annual base salary of $150,000 to the CEO, of
$95,000 to the CFO, and of $65,000 to the Director, respectively. In
addition, the Company agreed to award the Employees an annual bonus of
not less than 10% of their respective base salaries. At the discretion
of the Employees, the portion of the Employees' salaries and bonuses
that are not taken during a given employment year will be paid in
shares of the Company's common stock at a value equal to the Company's
net worth divided by the number of shares issued and outstanding. For
the years ended October 31, 1999 and 1998 the Employees permanently
waived aggregate salaries of $130,000 and $131,000, respectively. In
connection with these waivers, the Company issued 1,250,000 shares of
common stock during the year ended October 31, 1999 and 625,515 shares
(post-split See Note 9(A)) during the year ended October 31, 1998.
(D) DISTRIBUTOR AGREEMENTS
The Company enters into distributor agreements (the "Agreements") with
all its foreign distributors (the "Distributors"). The Agreements are
established for a term of three to five years and will automatically
renew annually after the initial term, unless canceled in writing by
either party at least 120 days prior to the anniversary of the
Agreements. The Agreements may be terminated earlier by the
Distributors with or without cause upon ninety days' written notice and
by the Company upon sixty days notice in case the Distributors did not
meet the specific requirements stipulated in the Agreements. Under the
terms of the Agreements, the Company grants to the Distributors the
exclusive right to sell to customers the Company's product line for a
specific territory. As of December 31, 1999 all domestic distributor
agreements have been cancelled.
(E) CAPITAL LEASE AGREEMENT
The Company leases computer equipment under a non-cancelable capital
lease agreement dated April 30, 1995. The capitalized cost and
accumulated amortization of such equipment was approximately $118,000
and $111,000, respectively.
Future minimum lease payments under the capital lease are as follows at
October 31, 1999:
2000 $ 18,314
Less: interest (630)
-----------
Obligation under capital
lease - current $ 17,684
===========
F-14
<PAGE> 22
BIO-LOK INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF OCTOBER 31, 1999
NOTE 8 - COMMITMENTS AND CONTINGENCIES - (CONT'D)
(F) OPERATING LEASE AGREEMENTS
The Company leases corporate office space and office equipment under
operating leases. The leases have remaining terms varying from the
years 2000 through 2001.
Future minimum lease payments for the operating leases are as follows
at October 31, 1999:
Years
Ending Amount
------ --------
2000 64,548
2001 51,645
---------
$ 116,193
=========
Rent expense under these operating leases for the years ended October
31, 1999 and 1998, aggregated $62,856 and $66,399, respectively.
(G) ROYALTY AGREEMENT
Pursuant to a settlement agreement incorporated by reference in the
Company's Amended Plan of Reorganization (See Note 1(A)), the Company
is obligated to make royalty payments to a general creditor, in
addition to payments on his general unsecured claim, for the Company's
continued sale of certain dental implant products. These payments are
to continue for a period of ten years following confirmation of the
Company's Amended Plan of Reorganization in February 1997. Payments
will be made based upon a schedule as stipulated in the settlement
agreement, up to a maximum of 2% of the total net sales of certain
products, as defined in the settlement agreement. In 1999, the Company
expensed $20,985 for royalties under this agreement. No royalties were
expensed in 1998 because sales did not exceed the scheduled minimum.
NOTE 9 - STOCKHOLDERS' EQUITY
(A) AUTHORIZED COMMON AND PREFERRED STOCK
On April 22, 1998, the Company effected a one for ten reverse stock
split and cancelled and eliminated all classes of preferred stock. The
Company also amended its certificate of incorporation so that it
currently has 7,000,000 authorized shares of $.01 par value common
stock. All share and per share information in the 1999 and 1998
financial statements give effect to these capital stock transactions.
F-15
<PAGE> 23
BIO-LOK INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF OCTOBER 31, 1999
NOTE 9 - STOCKHOLDERS' EQUITY - (CONT'D)
(B) STOCK ISSUED AS COMPENSATION
Although the Company has not established any formal stock compensation
plans, during 1999 and 1998 Bio-Lok issued what would be considered
non-variable compensatory stock. The Company issued 1,511,000 shares in
1999 and 670,015 shares in 1998 (Post-Split) of common stock to certain
officers, employees, directors and clinicians. In 1999 the fair market
value of the stock was considered to be equal to one-half the book
value price of $.14 or $.07 per share, and accordingly $105,770 was
recorded as expense in 1999. In 1998 the fair market value of the stock
was considered to be equal to $.02 per share at its issuance date, and
accordingly $125,994 was recorded as expense in 1998.
NOTE 10 - STOCK OPTIONS AND WARRANTS
(A) STOCK OPTIONS GRANTED UNDER EMPLOYMENT AND
CONSULTING AGREEMENTS
During prior years the Company has granted stock options to certain
consultants and employees.
In accordance with SFAS 123, for options granted to employees, the
Company applies APB Opinion No. 25 and related interpretations in
accounting for the options issued. Accordingly, no compensation cost
has been recognized for options issued under the employment agreement.
Had compensation cost been determined based on the fair market value at
the grant date, consistent with SFAS 123, the Company's net income
(loss) and earnings (loss) per share amounts would not have changed in
1999 and 1998.
For options issued to consultants, the Company applies SFAS 123. For
financial statement disclosure purposes and for purposes of valuing
stock options issued to consultants, the fair market value of each
stock option granted was estimated on the date of grant using the
Black-Scholes Option-Pricing Model in accordance with SFAS 123. There
was no resulting Black-Scholes value for the stock options, as the
exercise price of the options as stipulated in the option agreements
exceeded the fair market value of the stock on the grant date.
Accordingly, no compensation cost has been recognized for options
issued under the consulting agreements.
A summary of the stock options issued under the employment and
consulting agreements as of October 31, 1999 is presented below:
F-16
<PAGE> 24
BIO-LOK INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF OCTOBER 31, 1999
NOTE 10 - STOCK OPTIONS AND WARRANTS - (CONT'D)
(A) STOCK OPTIONS GRANTED UNDER EMPLOYMENT AND
CONSULTING AGREEMENTS - (CONT'D)
Number of Weighted Average
Options Exercise Price
--------- -----------------
STOCK OPTIONS
Balance at beginning of period 40,000 $ 1.30
Granted -- --
Exercised -- --
Forfeited 10,000 2.50
--------- -------
Balance at end of period 30,000 $ 0.90
========= =======
Options exercisable at end of period 30,000 $ 0.90
Weighted average fair value of options
granted during the period -- $ --
The following table summarizes information about stock options
outstanding at October 31, 1999:
Options Outstanding Options Exercisable
------------------------------------------ ---------------------
Weighted
Number Average Weighted Number Weighted
Range of Outstanding Remaining Average Exercisable Average
Exercise at Oct.31, Contractual Exercise at Oct.31, Exercise
Price 1999 Life Price 1999 Price
--------- -------- -------- ------- -------- --------
$0.10 20,000 4.00 Years $ 0.10 20,000 $ 0.10
$2.50 10,000 0.33 Years $ 2.50 10,000 $ 2.50
-------- ---------- ------- -------- -------
30,000 2.78 Years $ 0.90 30,000 $ 0.90
======== ========
(B) STOCK PURCHASE WARRANTS
In connection with the revolving loan obtained from Capital Business
Credit in April 1997 (see Note 5), the Company issued warrants to
Capital Business Credit to purchase 135,000 shares of the Company's
common stock. The warrants are exercisable between April 29, 1999 and
April 28, 2002 at an exercise price of $0.50 per share. As of October
31, 1999, none of the warrants were exercised.
NOTE 11 - CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS
During fiscal 1999, 55% of the Company's total revenues were derived
from sales to three customers. The Company's international sales
represent 83 percent of the total sales. At October 31, 1999, 57% of
accounts receivable were due from three customers. (See Note 2).
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist of accounts receivable. The
F-17
<PAGE> 25
BIO-LOK INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF OCTOBER 31, 1999
NOTE 11 - CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS - (CONT'D)
Company's allowance for doubtful accounts is based upon management's
estimates and historical experience. The Company performs ongoing
credit evaluations of its customers.
NOTE 12 - GOING CONCERN
As reflected in the accompanying financial statements, the Company has
minimal cash resources, and its revolving line of credit will not be
renewed. The total balance on the revolving line which aggregated
$417,410 at October 31, 1999 is due and payable on April 24, 2000. The
ability of the Company to continue as a going concern is dependent on
the Company's ability to raise additional capital or obtain debt
financing. The financial statements do not include any adjustments that
might be necessary if the Company is unable to continue as a going
concern.
The Company plans to mitigate those risk by maintaining a low overhead,
actively soliciting business partners and developing and implementing
an aggressive marketing plan to new customers on both the national and
international levels. In addition, the Company is currently seeking
proposals for a new financing agreement to replace the Company's
revolving loan when it expires in April 2000.
NOTE 13 - SUBSEQUENT EVENTS
On March 2, 1999, the Company entered into a letter of agreement with
Orthogen, Inc. the agreement calls for the Company to purchase all the
assets of Orthogen, Inc. including patents, property and equipment and
employee agreements with key employees for 400,000 shares of restricted
common stock and for key employees to earn an additional 600,000 shares
of restricted common stock by completing certain milestone events. The
agreement has not closed as of December 31, 1999.
F-18
<PAGE> 26
MANAGEMENT INFORMATION
================================================================================
SELECT FINANCIAL DATA
================================================================================
The following represents selected consolidated financial data regarding Bio-Lok
International Inc. and Subsidiary operating results and financial position as of
October 31, for financial comparison.
HISTORICAL RESULTS
<TABLE>
<CAPTION>
as of October 31,
($ in thousands except --------------------------------------------------------------------------------------
per share amounts) 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
------ ------ ------ ------ ------ ------ ------ ------ ----- ------
INCOME STATEMENT DATA
Operating Results
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET SALES............................... $1,512 $1,436 $1,405 $1,583 $1,373 $1,089 $1,351 $1,271 $ 771 $1,166
Cost of Goods Sold...................... 455 468 455 603 784 128 544 518 799 919
GROSS PROFIT............................ 1,057 968 950 980 589 961 807 753 (28) 247
Selling Expenses........................ 193 305 310 360 760 483
General & Administrative................ 689 912 636 530 663 693 491 510 400 506
Other Income & Extraordinary
Items (loss).................. (95) (105) 687 (84) (79) 14 13 45 24 0
NET INCOME.............................. 80 (354) 734 6 (913) (234) 303 288 (452) (261)
Net Income per share - diluted (1) $ .01 $ (.09) $ .42 $ -- $ (.87) $ (.38) $ .47 $ .44 $ (.78) $ --
PROFITABILITY RATIOS
As a percent of sales:
Gross Profit....................... 69.9% 67.0 % 67.6 % 61.9 % 42.9 % 88.2 % 59.7 % 59.2% -- 21.2 %
Net Income (loss).................. 5.3 (24.7) 52.2 (5.2) (66.5) (21.5) 22.4 22.7 (58.6) (22.4)
Return on average equity................ 11.9 (51.9) 141.9 (-) (-) 64.0 180.0 (-) (-) (-)
FINANCIAL CONDITION
Current Assets.......................... $1,381 $1,089 $1,677 $1,542 $1,365 $1,468 $ 970 $ 699 $ 356
Net Fixed Assets........................ 186 242 321 230 266 198 266 243 337
Assets.................................. 1,870 1,903 2,013 1,973 1,776 1,666 1,236 948 696
Current Liabilities..................... 786 850 573 2,136 1,866 1,357 563 521 662
Long Term Debt.......................... 330 485 643 76 130 39 48 106 34
Shareholders' Equity.................... 755 568 796 (239) (220) 270 625 321 0
Current Ratio........................... 1.6 1.3 2.9 .7 .7 1.1 1.7 1.3 .5
Long-term debt to equity................ 43.7% 85.4 % 80.8 % (31.8) % (60.1) % 14.5 % 7.7 % 33.0 % (-) %
OTHER DATA
Working Capital....................... $ 595 $ 239 $1,104 $ (594) $ (501) $ 111 $ 406 $ 178 $ 307
Cash flow from operations............. 108 (18) (404) 21 (589) (217) 176 150 n/a
Capital expenditures.................. 7 10 193 97 290 (19) (103) (8) 0
Depreciation and amortization......... 63 85 102 89 79 87 80 77 75
Number of employees................... 12 13 16 17 25 26 13 13 18
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Recast to reflect impact of reverse split of 10 to 1 recorded March 1998.
Page 8
<PAGE> 27
QUARTERLY RESULTS FOR 1999 TO 1998.
<TABLE>
<CAPTION>
1999 1998 .
--------- ---------
($ 000's) ($ 000's)
<S> <C> <C>
Fourth Quarter Ending October 31,
Net Sales.......................................... $ 456 $ 322
Gross Profit....................................... 385 207
Income from Operations............................. 163 (328)
Net Income......................................... 85 (359)
Total Assets....................................... 1,871 1,903
Third Quarter Ending July 31,
Net Sales.......................................... $ 425 $ 342
Gross Profit....................................... 252 225
Income from Operations............................. 80 19
Net Income......................................... 41 (3)
Total Assets....................................... 1,874 2,062
Second Quarter Ending April 30,
Net Sales.......................................... $ 375 $ 407
Gross Profit....................................... 257 280
Income from Operations............................. 69 41
Net Income......................................... 12 12
Total Assets....................................... 1,958 2,165
First Quarter Ending January 31,
Net Sales.......................................... $ 255 $ 365
Gross Profit....................................... 165 257
Income from Operations............................. (29) 19
Net Income......................................... (58) (4)
Total Assets....................................... 1,931 2,067
</TABLE>
MARKET INFORMATION FOR COMMON STOCK
COMMON STOCK DATA
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993
------- ------- ------ ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Dividends declares per share.................. -0- -0- -0- -0- -0- -0- -0-
Average shares o/s (thousands)(a)............ 4,987 3,926 1,738 1,240 974 666 649
Year-end book value per share................. $ .13 $ .14 $ .23 $ (.17) $(.21) $.44 $.96
Number of shareholders at
year-end (b)......................... 577 562 562 480 456 418 420
</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 Firm's name.
The Company's common stock is listed on the over-the-counter supplemental Pink
Sheets. Limited stock trading activity was registered during 1999; hence, no
composite stock price range can be reported.
Page 9
<PAGE> 28
<TABLE>
<CAPTION>
OFFICE OF THE CHAIRMAN
<S> <C>
Bruce L. Hollander - Chairman of the Board and Chief Executive Officer
Peter Baronoff - Vice-Chairman of the Board
Ingo K. Kozak - Chief Financial Officer and Secretary
BOARD OF DIRECTORS
Alexander, Harold - President of Orthogen Corporation
Baronoff, Peter(1) - Chairman of the Board and Chief Executive Officer
Sun Capital Inc.
Hollander, Bruce L.(1*)(2*)(3) Director
(4) Bio-Lok International Inc.
Koslow, Howard B.(3) President, Chief Operating Officer and Chief Financial
Officer Sun Capital, Inc.
Kozak, Ingo K.(1)(3*)(4*) Director
Bio-Lok International Inc.
Sadowsky, Carl H.(1) Doctor of Medicine.
Smith, Neil(2)(4) Retired. Past Co-Chairman and Chief Financial Officer
Express Shade, Inc.
Weisman, Harold Attorney at Law
</TABLE>
- -------------
Number denotes committee membership: (1) Executive Committee, (2) Compensation
and Employee Benefits Committee, (3) Finance Committee, (4) Executive Audit and
Accounting 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 10
<PAGE> 29
CORPORATE INFORMATION
HEADQUARTERS AND OFFICES
312 S. Military Trail, Deerfield Beach, Florida 33442; Telephone
(954) 698-9998; Fax (954)698-9925; E-mail address: [email protected]
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
Weinberg & Company, P.A., Town Executive Center, 6100 Glades Road, Suite 314,
Boca Raton, Florida 33434.
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 for 1999 was held at 4:00 PM on Wednesday,
March 22, 2000, at the headquarters of the corporation at 312 S. Military Trail,
Deerfield Beach, Florida 33442.
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 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 12 MONTH PERIOD ENDED
OCTOBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> OCT-31-1999
<CASH> 17,079
<SECURITIES> 0
<RECEIVABLES> 505,264
<ALLOWANCES> 115,256
<INVENTORY> 1,231,056
<CURRENT-ASSETS> 1,381,269
<PP&E> 966,694
<DEPRECIATION> 781,116
<TOTAL-ASSETS> 1,870,325
<CURRENT-LIABILITIES> 786,052
<BONDS> 329,636
0
0
<COMMON> 56,423
<OTHER-SE> 698,214
<TOTAL-LIABILITY-AND-EQUITY> 1,870,325
<SALES> 1,511,975
<TOTAL-REVENUES> 1,511,975
<CGS> 455,337
<TOTAL-COSTS> 881,673
<OTHER-EXPENSES> (2,250)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 96,841
<INCOME-PRETAX> 80,374
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 80,374
<EPS-BASIC> 0.02
<EPS-DILUTED> 0.01
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