BIO-LOGIC REPORTS NEARLY 24% SALES INCREASE FOR FISCAL 2002.

Bio-logic Systems Corp. (Nasdaq: BLSC), Mundelein, Ill., a designer and marketer of computerized medical electro-diagnostic equipment and disposables, has reported financial results for the fourth quarter and year ended February 28, 2002. The company benefited from record sales from the Sleepscan(TM) product line, strong growth in infant hearing screening and diagnostic systems and a substantial increase in hearing supplies.

Fourth Quarter Results

Net sales for the fourth quarter ended February 28, 2002 increased 20.6 percent to $7.6 million compared with $6.3 million for the same quarter a year ago. Gross profit margin increased 5.7 percentage points to 62.4 percent from 56.7 percent, primarily due to the sale of higher margin products. The favorable sales mix was partially offset by higher obsolescence charges of $545,000 (a 7.2 percentage point negative impact on gross margin) related to the introduction of new technologies launched in the Neurology/Sleep business during the year. Total selling, general and administrative expense (SG&A) for the quarter increased $683,230 to $3.5 million, or 46.3 percent of sales, compared to the $2.8 million, or 45.0 percent of sales, reported for the fourth quarter of fiscal 2001. This increase was due primarily to higher commissions associated with the higher sales and higher bonuses.

Operating income for the quarter was $292,727 compared to an operating loss of $307,211 for the same quarter last year. This improvement was caused primarily by higher sales and gross margins, as well as by the capitalization of $230,015 of research and development (R&D) costs as part of a $910,000 capitalization recorded in the fourth quarter related to significant software upgrades in neurology and sleep systems during the year. As a result, first, second and third quarter pre-tax income will be restated upward by $221,891, $231,776 and $226,318, respectively. The company will amend the 10-Q filings for each of the first three quarters to reflect the capitalization of these R&D software projects, which will also include an updated estimated tax rate of 39.2 percent.

Net income for the quarter decreased 13.1 percent to $196,703 or $0.04 per diluted share, compared to $226,282 or $0.06 per share in the fourth quarter of fiscal 2001, which included a tax benefit of $464,502.

Year-end Results

For the year ended February 28, 2002, net sales increased 23.8 percent to $29.9 million compared with $24.1 million for the prior year. The company reported gross margins of 63.4 percent for the year, representing a 0.9 percentage point decline from 64.3 percent for the year ended February 28, 2001. A one-time charge of approximately $1.0 million for inventory obsolescence taken during the year had a negative 3.5 percentage point impact on gross margins. SG&A increased by $1.2 million or 10 percent while the percent to sales declined from 49.9 percent in fiscal 2001 to 44.3 percent due to higher sales volume.

For fiscal 2002, the company had operating income of $2.4 million compared with an operating loss of $0.2 million for fiscal 2001. The significant increase in operating income was due primarily to the strong sales increase and the R&D expense capitalization, partially offset by the inventory obsolescence provision and increase in SG&A. The effective tax rate increased from 28.0 percent to 39.2 percent primarily due to the ending of a favorable tax treatment for an overseas subsidiary. Net income increased 235 percent to $1.5 million or $0.35 per share on a diluted basis, compared with $0.4 million or $0.11 per share for the prior fiscal year.

The year was highlighted by several significant accomplishments including the following:

-- Launch of the Ear Muffin(TM) for the ABaer(TM) infant screener and FDA clearance for use with Natus(R) hearing screening units.

-- Expansion of our marketing program with Premier, a major group purchasing organization (GPO).

-- Selection by the Special Olympics as the exclusive hearing screening and diagnostic sponsor for events around the world.

-- Signing of an exclusive licensing agreement for new diagnostic technology developed by researchers at the Institute of Medical Science, University of Toronto. Patents have been applied for and this product will be incorporated into the Navigator(R) Pro system and used for hearing threshold testing for infants that fail screening.

-- Receipt of a $1 million NIH SBIR grant for stacked ABR.

-- Introduction of major software enhancements for the neurology product line including:

-- Spike & Seizure analysis

-- Sleepscan(TM) patient database management

-- Ceegraph(TM) patient data collection

-- Addition of Lawrence Damron to the board of directors.

"The upgrading of our systems in our Neurology/Sleep business resulted in a total one-time charge of $1.0 million due to provisions for inventory obsolescence recorded throughout the year," noted Gabriel Raviv, chairman and CEO. "We updated our systems and software, launching new products with state-of-the-art technology in our neurology and sleep business. The older systems became obsolete sooner than expected due to the rapid acceptance of the new products in the marketplace.

"Related to the significant enhancement in systems and software, the company also capitalized $0.9 million of research and development costs for the year, which will be amortized over a five-year period. During the development and testing of the new products the company spent significant resources to develop the software necessary to interface with the systems."

Commenting on the business trends and the year's results, Roderick G. Johnson, president and chief operating officer stated, "Supplies are becoming a larger part of our business, offering a steady flow of recurring revenue with solid margins. The 78 percent increase in hearing supplies sales in fiscal 2002 is indicative of the success of our aggressive marketing approach and dedication to supplying hospitals and medical facilities with high quality disposables at a budget friendly price.

"In fiscal 2002, sales of supplies across all lines accounted for 10 percent of revenue versus approximately 8 percent in fiscal 2001. With a continued focus on infant hearing screening, both domestically and internationally, Bio-logic is well positioned as the supplier of choice to many hospitals and medical facilities affiliated with top GPOs and others looking for high quality, cost-effective disposables."

Looking Forward

Johnson continued, "The outlook for fiscal 2003 remains positive. The supplies business is expected to continue to grow based on the sales of proprietary hearing products and the Ear Muffin(TM). Even with these positive trends, the year-to-year comparison for the first quarter will be unfavorable due to the $3.4 million of shipments made to the Province of Ontario during the first quarter of fiscal 2002. However, excluding the effect of the Ontario sale, we are projecting positive growth for the quarter. With $6.4 million in cash and no debt, we continue to be well-positioned to take advantage of opportunities to enhance shareholder value."

About the Company

Bio-logic Systems Corp., headquartered in Mundelein, IL, designs, develops, assembles and markets computer-based electro-diagnostic systems for use by hospitals, clinics, universities and physicians. The systems conduct tests that are typically used by medical practitioners to aid in the diagnosis of certain neurological disorders, brain disorders and tumors, and sensory disorders, including audiological and hearing screening and diagnosis.

For more information, call 847/949-5200.