<PAGE>
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 February 29, 1996 Commission File No. 0-8765
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BIOMERICA, INC.
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(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: 3,455,569 shares of common
Stock as of April 14, 1996.
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BIOMERICA, INC.
INDEX
PART I Financial Statements:
Consolidated Statements of Operations - Nine Months and Three Months
Ended February 29, 1996 and February 28, 1995 ........................2
Consolidated Balance Sheet - February 29, 1996 ...................3 & 4
Statements of Cash Flows
Nine Months Ended February 29, 1996 and February 28, 1995 ............5
Statement of Changes in Shareholders' Equity -
Nine Months Ended February 29, 1996 ..................................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
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<TABLE>
PART I - FINANCIAL INFORMATION
SUMMARIZED FINANCIAL INFORMATION
BIOMERICA, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
Nine Months Ended Three Months Ended
February 29, February 28, February 29, February 28,
1996 1995 1996 1995
--------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Net sales................................... $ 6,668,909 $ 6,940,288 $ 2,066,334 $ 2,309,860
Cost of sales............................... 3,783,121 3,877,315 1,302,359 1,315,221
--------------- ------------- ------------ -------------
Gross profit................................ 2,885,788 3,062,973 763,975 994,639
Operating Expenses:
Selling, general and administrative ....... 2,347,990 2,589,039 690,480 823,445
Research and development .................. 209,666 210,210 60,784 69,391
--------------- ------------- ------------ -------------
2,557,656 2,799,249 751,264 892,836
Other Expense (income):
Interest expense .......................... 75,701 134,917 18,554 51,120
Other (income) expense, net ............... (31,739) (35,054) (4,051) (8,269)
Gain (loss) before minority
interest in net profits of
of consolidated subsidiaries .............. 284,170 163,861 (1,792) 58,952
Minority interest in net (profits) losses
of consolidated subsidiaries .............. (56,148) (98,198) 71,922 (25,681)
Income before taxes......................... 228,022 0 70,130 0
Income taxes................................ 2,400 0 0 0
NET INCOME ............................... $ 225,622 $ 65,663 $ 70,130 $ 33,271
=============== ============= ============ =============
Net earnings per share...................... $ .07 $ .02 $ .02 $ .01
=============== ============= ============ =============
Weighted average
shares outstanding ........................ 3,445,861 3,392,861 3,455,569 3,394,944
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
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<TABLE>
BIOMERICA, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
February 29,
1996
--------------
<S> <C>
Assets
Current Assets
Available for-sale securities......................................... 401,401
Accounts receivable, less allowance for doubtful accounts............. 1,431,626
Inventory............................................................. 2,128,660
Notes receivable...................................................... 27,985
Prepaid expenses and other............................................ 77,951
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Total Current Assets ................................................. 4,692,708
Inventory, non-current..................................................... 87,000
Land held for investment................................................... 46,000
Property and Equipment, less accumulated depreciation and amortization..... 463,389
Intangible assets, net of accumulated amortization......................... 582,942
Other Assets............................................................... 4,596
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$ 5,876,635
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<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
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<TABLE>
BIOMERICA, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
February 29,
1996
--------------
<S> <C>
Liabilities and Shareholders' Equity
Current Liabilities
Current portion of note payable to bank............................... $ 188,266
Accounts payable and accrued liabilities.............................. 602,661
Long-term debt and capital lease obligations (current portion)........ 21,046
Other liabilities..................................................... 228,189
Line of Credit........................................................ 174,000
Accrued compensation.................................................. 601,611
--------------
Total Current Liabilities........................................ 1,815,773
Long term portion of note payable to bank.................................. 311,734
Long term portion of capital leases........................................ 21,490
Minority interest.......................................................... 1,936,487
Shareholders' Equity
Unrealized holding gain on available for sale securities.............. 101,392
Common stock, $.08 par value authorized 10,000,000 shares,
issued and outstanding 3,455,569 in 1996............................ 276,446
Additional paid-in-capital............................................ 11,341,284
Prepaid expenses...................................................... (462)
Accumulated deficit................................................... (9,927,509)
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Total Shareholders' Equity............................................ 1,791,151
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Total Liabilities and Equity............................................... $ 5,876,635
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<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
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<TABLE>
BIOMERICA, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)................................................... $ 225,622 $ 65,663
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation and amortization.................................. 234,280 281,088
Realized gain on sale of marketable securities................. (357) (20,697)
Minority interest in net profits of consolidated subsidiaries.. 56,148 123,141
Provision for losses on accounts receivable.................... 30,000 28,716
Stock issued to employees...................................... 0 21,263
Accounts Receivable.......................................... 84,985 (108,888)
Inventories.................................................. (365,281) 151,903
Prepaid expenses and other current assets.................... 35,945 76,752
Accounts payable and other accrued liabilities............... 161,797 (205,917)
Accrued compensation......................................... 36,536 11,908
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Net cash provided by operating activities........................... 499,675 424,932
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Cash flows from investing activities:
Additions to fixed assets...................................... (119,857) (175,616)
Sales of marketable securities, net............................ 36,878 186,138
Note Receivable................................................ 8,681 (14,804)
Purchases of intangible assets................................. (3,140) (816)
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Net cash used in investing activities............................... (77,438) (5,098)
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Cash flows from financing activities:
Net payments under line of credit.............................. (226,000) 0
Exercise of stock options...................................... 19,400 600
Proceeds from sale of stock.................................... 20,250 0
Payments of short-term borrowings and long-term debt........... 0 (161,248)
Principal payments on note payable to bank..................... (285,000) (295,000)
Payments of long-term debt and capital lease obligations....... (20,366) (17,328)
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Net cash used in financing activities............................... (491,716) (472,976)
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Net increase (decrease) in cash and cash equivalents................ (69,479) (53,142)
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Cash at beginning of year........................................... 694,564 804,029
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Cash at end of nine months.......................................... $ 625,085 $ 750,887
============= =============
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
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<TABLE>
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED FEBRUARY 29, 1996
<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
Exercise of employee
stock options..... 24,250 1,940 17,460 19,400
Unrealized holding
gain on available-
for-sale securities. 99,070 99,070
Prepaid expenses.... 4,680 4,680
Net gain (loss)..... 225,622 225,622
----------- ------------- -------------- -------------- ------------ -------------- -------------
Balance at
February 29, 1996. 3,455,569 $ 276,446 $ 11,341,284 $ 101,392 $ (462) $ (9,927,509) $ 1,791,151
========== =========== ============ ============ =========== ============= ===========
<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
February 29, 1996
(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
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 $101,392 at February 29, 1996.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND SELECTED FINANCIAL DATA
RESULTS OF OPERATIONS
Consolidated net sales for Biomerica were $6,668,909 for the nine months
ended February 29, 1996 as compared to $6,940,288 for the same period last
year. This represents a decrease of $271,379 (4%). Although Biomerica had
increased sales however, Lancer realized a decrease in sales of $483,669.
Lancer's decrease in sales was primarily a result of manufacturing problems
which are being corrected. For the quarter then ended, sales decreased by
$243,526 from the previous year, again as a result of decreased sales at
Lancer (of $342,855) due to manufacturing problems. Cost of sales for the
nine months ended February 29, 1996 were $3,783,121 as compared to $3,877,315
(a decrease of $94,194) and for the three months then ended decreased by
$12,862. Part of the decrease was attributable to the decrease in sales.
This was offset by higher cost of goods at Lancer, as well as higher cost of
goods at Biomerica due to some large introductory orders.
Selling, general and administrative expenses decreased for the nine months
by $241,049 and for the three months by $132,765. These decreases were
primarily due to decreases at Lancer ($187,523 for the nine months and $91,012
for the three months), which were attributable to organizational changes, a
decrease in professional fees, samples and shipping costs, partially offset by
an increase in trade show costs. Biomerica also realized decreases due to
lower wages.
Interest expense decreased for the nine months by $59,216 and for the three
months by $32,566 primarily as a result of reduced debt and interest rates at
Lancer.
Minority interest in net gains or losses of consolidated subsidiaries
represents minority interests in gains or losses of Lancers and AIT's other
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 February 29, 1996, the Company had cash and available-for-sale
securities in the amount of $1,026,486. 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 1, 1995, Lancer arranged for a restructuring of its
$1,045,000 bank debt. The debt 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 restructuring Lancer paid down the line
of credit by $225,000. The new bank loan requires 24 monthly payments of
principal and interest of $18,870. 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 February 29, 1996, the unused portion
available under the line of credit was $180,000.
<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: April 7, 1996
BIOMERICA, INC.
By: /S/ Joseph H. Irani, President
-------------------------------
President, Chief Executive Officer
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> FEB-29-1996
<CASH> 625,085
<SECURITIES> 401,401
<RECEIVABLES> 1,568,142
<ALLOWANCES> 136,516
<INVENTORY> 2,128,660
<CURRENT-ASSETS> 4,692,708
<PP&E> 3,147,900
<DEPRECIATION> 2,684,511
<TOTAL-ASSETS> 5,876,635
<CURRENT-LIABILITIES> 1,815,773
<BONDS> 0
0
0
<COMMON> 276,446
<OTHER-SE> 1,514,705
<TOTAL-LIABILITY-AND-EQUITY> 5,876,635
<SALES> 6,668,909
<TOTAL-REVENUES> 6,668,909
<CGS> 3,783,121
<TOTAL-COSTS> 3,783,121
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75,701
<INCOME-PRETAX> 228,022
<INCOME-TAX> 2,400
<INCOME-CONTINUING> 225,622
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 225,622
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
