FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended November 30, 1995 Commission File No. 0-8765
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BIOMERICA, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-2645573
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1533 Monrovia Avenue, Newport Beach, California 92663
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (714) 645-2111
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(Not applicable)
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(Former name, former address and former fiscal year, if changed since last
report.)
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
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 3,448,319 shares of common
Stock as of January 14, 1996.
<PAGE>
BIOMERICA, INC.
INDEX
PART I Financial Statements:
Statements of Operations - Three Months and Six Months
Ended November 30, 1995 and 1994 ..................................2
Balance Sheet - November 30, 1995 ............................3 & 4
Statements of Cash Flows
Six Months Ended November 30, 1995 and 1994 .......................5
Statements of Changes in Shareholders' Equity -
Six Months Ended November 30, 1995 ................................6
Notes to Financial Statements .....................................7
Management's Discussion and Analysis of Financial Condition
and Selected Financial Data ...................................8 & 9
PART II Other Information ................................................10
Signatures .......................................................10
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
SUMMARIZED FINANCIAL INFORMATION
BIOMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Six Months Ended Three Months Ended
November 30, November 30,
1995 1994 1995 1994
---------- --------- --------- ----------
<S> <C> <C> <C> <C>
Net Sales........................... $4,602,576 $4,630,428 $2,273,288 $ 2,440,014
Cost of sales .................... 2,480,762 2,562,094 1,197,794 1,311,043
---------- ---------- ---------- -----------
Gross profit ..................... 2,121,814 2,068,334 1,075,494 1,128,971
----------- ----------- ---------- -----------
Operating Expenses:
Selling, general and
administrative...................... 1,657,510 1,765,594 822,325 951,175
Research and development ......... 148,882 140,819 74,890 76,412
----------- ----------- ----------- ------------
1,806,392 1,906,413 897,215 1,027,587
----------- ----------- ----------- -----------
Other Expense (income):
Interest expense ................. 57,147 83,797 31,672 41,210
Other (income) expense, net ...... (27,688) (26,785) (3,334) (12,990)
----------- ----------- ----------- -----------
Income before minority
interest in net profits of
of consolidated subsidiaries ..... 285,963 104,909 149,941 73,164
Minority interest in net profits
of consolidated subsidiaries ..... (128,070) (72,517) (54,753) (42,061)
------------ ------------ ----------- -----------
Income before taxes .............. 157,893 0 95,188 0
Income taxes ..................... 2,400 0 0 0
----------- ----------- ----------- ------------
NET INCOME ...................... $ 155,493 $ 32,392 $ 95,188 $ 31,103
=========== =========== =========== ============
Net income per share................ $ .05 $ .01 $ .03 $ .01
=========== =========== =========== ============
Weighted average
shares outstanding ............... 3,441,007 3,392,069 3,441,819 3,392,069
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
BIOMERICA, INC.
CONSOLIDATED BALANCE SHEET
<CAPTION>
November 30,
1995
--------------
<S> <C>
Assets
Current Assets
Cash and cash equivalents .................................. $ 370,523
Available for-sale securities .............................. 421,397
Accounts receivable, less allowance for doubtful accounts .. 1,505,713
Inventory .................................................. 2,080,294
Notes receivable ........................................... 27,985
Prepaid expenses and other ................................. 111,546
-----------
Total Current Assets ................................... 4,517,458
Inventory, non-current........................................ 87,000
Land held for investment...................................... 46,000
Property and Equipment, less accumulated depreciation and
amortization............................................... 461,769
Intangible assets, net of accumulated amortization............ 602,191
Other Assets.................................................. 4,596
-----------
$5,719,014
===========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
BIOMERICA, INC.
CONSOLIDATED BALANCE SHEET
<CAPTION>
November 30,
1995
------------
<S> <C>
Liabilities and Shareholders' Equity
Current Liabilities
Current portion of note payable to bank ................... $ 178,438
Accounts payable and accrued liabilities .................. 654,878
Long-term debt and capital lease obligations (current
portion)................................................. 20,462
Other liabilities ......................................... 4,000
Accrued compensation ...................................... 568,977
Line of credit ............................................ 175,000
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Total Current Liabilities .............................. 1,601,755
Long term portion of note payable to bank.................... 396,562
Long term portion of capital leases.......................... 26,976
Minority interest............................................ 1,996,583
Shareholders' Equity
Common stock .............................................. 275,866
Additional paid-in-capital ................................ 11,336,064
Unrealized holding gain on available for sale securities .. 84,868
Prepaid expenses .......................................... (2,022)
Accumulated deficit ....................................... (9,997,638)
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Total Shareholders' Equity................................... 1,697,138
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Total Liabilities and Equity................................. $5,719,014
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<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
BIOMERICA, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED NOVEMBER 30, 1995 AND 1994
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income.......................................................... $ 155,493 $ 32,392
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................................... 158,071 184,871
Realized gain on sale of marketable securities................... 0 (20,697)
Minority interest in net profits of consolidated subsidiaries.... 128,070 82,005
Provision for losses on accounts receivable...................... 0 40,216
Stock issued to employees........................................ 0 21,263
Changes in current assets and liabilities:
Accounts Receivable............................................ 40,898 (121,123)
Inventories.................................................... (316,915) 62,030
Prepaid expenses and other current assets...................... 9,275 21,957
Accounts payable and other accrued liabilities................. (26,000) (125,094)
Accrued compensation........................................... 3,902 (2,411)
------------ -----------
Net cash provided by operating activities........................... 152,794 175,409
------------ -----------
Cash flows from investing activities:
Sales of marketable securities, net.............................. 0 186,138
Purchases of property and equipment.............................. (60,578) (130,996)
Other assets..................................................... 196 0
Purchases of intangible assets................................... (3,839) (816)
------------ ------------
Net cash provided by investing activities........................... (64,221) 54,326
------------ ------------
Cash flows from financing activities:
Net payments under line of credit agreement...................... (225,000) 0
Investments by minoriry interests................................ 20,250 0
Payments of short-term borrowings and long-term debt............. (11,464) (161,248)
Principal payments on note payable to bank....................... (210,000) (216,000)
Payments of long-term debt and capital lease obligations......... 0 (16,844)
Exercise of stock options........................................ 13,600 600
------------ ------------
Net cash used in financing activities............................... (412,614) (393,492)
------------ ------------
Net (decrease) in cash and cash equivalents......................... (324,041) (163,757)
------------ ------------
Cash at beginning of year........................................... 694,564 804,029
------------ ------------
Cash at end of quarter.............................................. $ 370,523 $ 640,272
============ ============
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
BIOMERICA, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1995
<CAPTION>
Unrealized
Gain on
Common Stock Additional Available- Retained
-------------------------
Number of Paid-In For-Sale Prepaid Earnings
Shares Amount Capital Securities Expenses (Deficit) Total
------------ ----------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
May 31, 1995 3,431,319 $ 274,506 $11,323,824 $ 2,322 $ (5,142) $(10,153,131) $1,442,379
Change in
unrealized
gain on available
for sale securities 82,546 82,546
Amortization of
pre-paid expenses 3,120 3,120
Exercise of employee
stock options 17,000 1,360 12,240 13,600
Net gain 155,493 155,493
------------ ------------- ------------ ----------- ----------- -------------- -----------
Balance at
November 30, 1995 3,448,319 $ 275,866 $11,336,064 $ 84,868 $ (2,022) $(9,997,638) $1,697,138
=========== ============= ============ =========== =========== ============== ===========
<FN>
Note: The authorized capital stock consists of 10,000,000 shares of common stock, par value $.08 per share.
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
November 30, 1995
(1)Reference is made to Note 1 of the Notes to Financial Statements contained
in the Company's Annual Report on Form 10-KSB for the fiscal year ended May
31, 1995, for a summary of significant accounting policies utilized by the
Company.
(2)The information set forth in these statements is unaudited and may be
subject to normal year-end adjustments. The information reflects all
adjustments which, in the opinion of management, are necessary to present a
fair statement of results of operations of Biomerica, Inc., for the periods
indicated. It does not include all information and footnotes necessary for
a fair presentation of financial position, results of operations, and cash
flow in conformity with generally accepted accounting principles.
(3)Results of operations for the interim periods covered by this Report may not
necessarily be indicative of results of operations for the full fiscal year.
(4)Reference is made to Notes 2 & 3 of the Notes to Financial Statements
contained in the Company's Annual Report on Form 10-KSB for the fiscal year
ended May 31, 1995, for a description of the investments in affiliates and
consolidated subsidiaries.
(5)Reference is made to Note 5, 6, 11 and 12 of the Notes to Financial
Statements contained in the Company's Annual Report on Form 10-KSB for the
fiscal year ended May 31, 1995, for information on commitments and
litigation.
(6)Aggregate market value of available-for-sale securities exceeded aggregate
cost by approximately $84,868 at November 30, 1995.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND SELECTED FINANCIAL DATA
RESULTS OF OPERATIONS
Consolidated net sales for Biomerica were $4,602,576 for the six months
ended November 30, 1995 as compared to $4,630,428 for the same period in the
last fiscal year. This represents a decrease of $27,852 (.6%). Net sales for
the three months then ended were $2,273,288 as compared to $2,440,014 for the
same period last year, resulting in a decrease of $166,726 (7%). Most of the
decrease was attributable to the Lancer subsidiary which had a soft domestic
market and changes in the manufacturing process in this quarter. Cost of sales
decreased by $81,332 (3%) for the six month period and by $113,249 for the three
month period (9%). The decreases were primarily due to lower sales as well as a
lower cost of sales as a percentage of sales, particularly at Lancer.
Selling, general and administrative expenses decreased by $108,084 (6%) for
the six month period and by $128,850 (14%) for the three month period. Most of
the decreases were attributable to decreases at Lancer as a result of lower
professional fees, samples and shipping costs.
Research and development costs increased for the six month period by $8,063
(6%) and decreased for the three month period by $1,522 (2%). Both Lancer and
Biomerica had slight increases for the six month period. For the three month
period Lancer also had a slight increase, while Biomerica had a slight decrease.
Interest expense decreased for the six months by $26,650 (32%) and by $9,538
(23%) for the three month period. These decreases reflect reduced debt and
interest rates at Lancer. Biomerica had lower debt as well as reduction of
certain interests totaling $11,254.
Minority interest in net profits of consolidated subsidiaries represents
minority interests in the gain of Lancer and AIT. Please refer to Notes 2 and 3
in the Notes to the Consolidated Financial Statements in the report on Form 10-
KSB for the year ended May 31, 1995, for a more in-depth discussion on
subsidiaries.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of November 30, 1995, the Company had cash and available-for-sale
securities in the amount of $791,920. Biomerica is currently able to meet its
costs of operations through both collection of trade accounts receivable and its
working capital position. Biomerica alone has no capital commitments.
Effective October 10, 1995, Lancer arranged for a restructuring of its
$1,045,000 bank debt which was divided into a term loan, with an original
balance of $645,000 and a line of credit with an original balance of $400,000.
Lancer also arranged for a reduction in interest rate from prime plus 3% to
prime plus 1%. Immediately after the debt restructuring, Lancer paid down the
line of credit by $225,000. The new bank term loan requires 24 monthly
principal and interest payments of $18,890. All unpaid principal and accrued
interest is due and payable on November 1, 1997. Under the line of credit,
Lancer can borrow up to $500,000. Borrowings are secured by specific
percentages of eligible accounts receivable. At November 30, 1995, the unused
portion available under the line of credit was $275,000.
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS. Inapplicable.
Item 2. CHANGES IN SECURITIES. Inapplicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES. Inapplicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Inapplicable.
Item 5. OTHER INFORMATION. Inapplicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K. None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has fully caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: January 8, 1996
BIOMERICA, INC.
By: /S/ JOSEPH H. IRANI
-----------------
Joseph H. Irani, President
President, Chief Executive Officer
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> NOV-30-1995
<CASH> 370,523
<SECURITIES> 421,397
<RECEIVABLES> 1,673,546
<ALLOWANCES> 167,833
<INVENTORY> 2,080,294
<CURRENT-ASSETS> 4,517,458
<PP&E> 3,090,605
<DEPRECIATION> 2,628,836
<TOTAL-ASSETS> 5,719,014
<CURRENT-LIABILITIES> 1,601,755
<BONDS> 0
0
0
<COMMON> 275,866
<OTHER-SE> 1,421,272
<TOTAL-LIABILITY-AND-EQUITY> 5,719,014
<SALES> 4,602,576
<TOTAL-REVENUES> 4,602,576
<CGS> 2,480,762
<TOTAL-COSTS> 2,480,762
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57,147
<INCOME-PRETAX> 157,893
<INCOME-TAX> 2,400
<INCOME-CONTINUING> 155,493
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 155,493
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
