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 August 31, 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: 3,520,569 shares of common
Stock as of October 11, 1996.
<PAGE>
BIOMERICA, INC.
INDEX
PART I Financial Statements:
Statement of Operations - Three Months
Ended August 31, 1996 and 1995 ....................................2
Balance Sheets - August 31, 1996 ..............................3 & 4
Statement of Cash Flows
Three Months Ended August 31, 1996 and 1995 .......................5
Statement of Changes in Shareholders' Equity -
Three Months Ended August 31, 1996 ................................6
Notes to Financial Statements .....................................7
Management's Discussion and Analysis of Financial Condition
and Selected Financial Data .......................................8
PART II Other Information .................................................9
Signatures ........................................................9
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
SUMMARIZED FINANCIAL INFORMATION
BIOMERICA, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
Three Months Ended
August 31,
1996 1995
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<S> <C> <C>
Net sales.................................................$2,273,387 $2,329,288
Cost of sales ......................................... 1,314,388 1,282,968
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Gross profit .......................................... 958,999 1,046,320
Operating Expenses:
Selling, general and administrative ................... 746,390 835,185
Research and development .............................. 62,574 73,992
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808,964 909,177
Other Expense (income):
Interest expense ...................................... 16,803 25,475
Other (income) expense, net ........................... (12,176) (24,354)
Gain before minority interest in net profits of
consolidated subsidiaries and income taxes ............ 145,408 136,022
Minority interest in net (profits) of
consolidated subsidiaries ............................. (4,339) (73,317)
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INCOME BEFORE TAXES ...................................... 141,069 62,705
Income Taxes.............................................. 13,865 2,400
Net Income................................................$ 127,204 $ 60,305
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Net earnings per share....................................$ .04 $ .02
============ ============
Weighted average common shares outstanding................ 3,508,777 3,438,569
</TABLE>
<PAGE>
<TABLE>
BIOMERICA, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
August 31,
1996
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<S> <C>
Assets
Current Assets
Cash and cash equivalents ............................................... $ 964,545
Available for-sale securities ........................................... 385,039
Accounts receivable, less allowance for doubtful accounts ............... 1,639,355
Inventory ............................................................... 2,163,144
Notes receivable ........................................................ 19,505
Prepaid expenses and other .............................................. 80,492
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Total Current Assets ................................................ 5,252,080
Inventory, non-current.................................................... 37,000
Land held for investment.................................................. 46,000
Property and Equipment, less accumulated depreciation and amortization.... 448,149
Intangible assets, net of accumulated amortization........................ 545,845
Other Assets.............................................................. 10,765
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$ 6,339,839
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<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
BIOMERICA, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
August 31,
1996
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<S> <C>
Liabilities and Shareholders' Equity
Current Liabilities
Line of credit $ 250,000
Note payable to bank ................................................ 182,482
Accounts payable and accrued liabilities ............................ 707,944
Accrued compensation ................................................ 643,435
Long-term debt and capital lease obligations (current portion) ...... 22,266
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Total Current Liabilities ........................................ 1,806,127
Note Payable to bank, net of current maturities........................ 197,518
Long-term debt and capital lease obligations........................... 10,044
Minority interest...................................................... 2,118,262
Shareholders' Equity
Unrealized holding gain on available for-sale securities ............ 120,128
Common stock, $.08 par value authorized 10,000,000 shares,
issued and outstanding 3,520,569 in 1996 and 3,444,569 in 1995 .... 281,646
Additional paid-in-capital .......................................... 11,399,314
Accumulated deficit ................................................. (9,593,200)
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Total Shareholders' Equity............................................. 2,207,888
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Total Liabilities and Equity........................................... $ 6,339,839
=============
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
BIOMERICA, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED AUGUST 31, 1996 AND 1995
<CAPTION>
1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net income............................................................ $ 127,204 $ 60,305
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization ...................................... 61,830 82,795
Minority interest in net profits of consolidated subsidiaries ...... 4,339 73,317
Changes in current assets and liabilities:
Accounts Receivable .............................................. 148,697 (106,242)
Inventories ...................................................... (127,593) (210,980)
Prepaid expenses and other current assets ........................ 24,333 39,726
Accounts payable and other accrued liabilities ................... 5,542 (124,116)
Accrued compensation ............................................. 116,921 11,328
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Net cash provided by operating activities............................. 361,273 (173,867)
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Cash flows from investing activities:
Payments of notes receivable ....................................... 8,480 0
Purchases of property and equipment ................................ (27,184) (50,075)
Other assets ....................................................... 9,303 196
Purchases of intangible assets ..................................... 0 (3,140)
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Net cash provided by investing activities............................. (9,401) (53,019)
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Cash flows from financing activities:
Principal payments on note payable to bank ......................... (60,000) (105,000)
Payments of long-term debt and capital lease obligations ........... (5,185) (6,699)
Exercise of stock options .......................................... 55,030 10,600
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Net cash used in financing activities................................. (10,155) (101,099)
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Net increase (decrease) in cash and cash equivalents.................. 341,717 (327,985)
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Cash at beginning of quarter.......................................... 622,828 694,564
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Cash at end of quarter................................................ $ 964,545 $ 366,579
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<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
BIOMERICA, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED AUGUST 31, 1996
<CAPTION>
Unrealized
Gain on
Common Stock Additional Available-
-------------------------
Number of Paid-In For-Sale Earnings
Shares Amount Capital Securities (Deficit) Total
----------- ----------- ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
May 31, 1996 3,465,819 $ 277,266 $11,348,664 $ 90,687 $(9,720,404) $ 1,996,213
Change in unrealized gain
on available-for-sale
securities 29,441 29,441
Amortization of
prepaid expenses
Exercise of stock options 54,750 4,380 50,650 55,030
Net gain 127,204 127,204
------------ ----------- ------------- ------------ ------------- -------------
Balance at
August 31, 1996 3,520,569 $ 281,646 $11,399,314 $ 120,128 $(9,593,200) $ 2,207,888
============ =========== ============= ============ ============ ============
<FN>
Note: The authorized capital stock consists of 10,000,000 shares of common stock, par
value $.08 per share.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
August 31, 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, 1996, 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, however 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, 1996, 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, 1996, for information on commitments and
litigation.
(6)Aggregate market value of available-for-sale securities exceeded aggregate
cost by approximately $120,128 at August 31, 1996.
(7)The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 123 ``Accounting for Stock Based Compensation''
(``Statement No. 123''). Statement No. 123 is primarily a disclosure
standard for the Company because it will continue to account for employee
stock options under Accounting Principal Board Opinion No. 25. The
disclosure requirements for the Company required by Statement No. 123 are
effective for financial statements issued after fiscal year 1996.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND SELECTED FINANCIAL DATA
RESULTS OF OPERATIONS
Consolidated net sales for Biomerica were $2,273,387 for the first quarter
of fiscal 1997 as compared to $2,329,288 for the same period in the previous
year. This represents a decrease of $55,901 (2%). Biomerica's sales went up by
$248,552, while sales at the Lancer subsidiary declined by $311,320 compared to
the previous year. The increase at Biomerica was mainly due to increased
international sales. Lancer's decrease was attributable to manufacturing
processing problems which have resulted in lost sales and delayed deliveries.
The manufacturing processing problem has been identified and is being corrected.
The subsidiary, Allergy Immuno Technologies (AIT) had an increase in sales for
the quarter of $6,867.
Cost of sales increased by $31,420 or 2%. This increase was due to higher
cost of sales at Lancer. Cost of sales there as a percentage of sales increased
from 56% to 62% due to the manufacturing processing and mold problems
experienced in the first quarter. Biomerica had a decrease in cost of sales as
a percentage of sales, whereas AIT had an increase due to higher wages.
Selling, general and administrative expenses decreased from $835,185 to
$746,390 or $88,795 (11%). Lancer had a decrease of $92,687 due to a decrease
in wage costs, professional fees, sample and catalog costs, partially offset by
an increase in postage and advertising. Biomerica had a decrease of $3,502.
AIT had an increase of $7,394 also due to higher wages. Research and
development costs decreased by $11,418 (15%), primarily due to a decrease of
$13,354 at Lancer due to a decrease in wage costs.
Interest expense decreased by $8,672 (34%) due primarily to reduced debt
and interest rates at Lancer.
Minority interest in net losses of consolidated subsidiaries represents
minority interests in the gain of Lancer's and AIT's other shareholders.
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, 1996, for a
more in-depth discussion of subsidiaries.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of August 31, 1996, the Company had cash and available-for-sale securities
in the amount of $1,349,584. Biomerica is currently able to meet its costs of
operations through both collection of trade accounts receivable and its working
capital position. Lancer is currently able to meet its costs of operations
through collection of trade accounts receivable, its working capital position
and its line of credit. Biomerica alone has no material capital commitments.
Effective October 10, 1995, Lancer arranged for a restructuring of its note
payable. The note was divided into a new term note, with an original balance of
$645,000 and a line of credit with an original balance of $400,000. The new
note payable is for a term of two years and requires monthly principal and
interest payments of $18,889. Interest is at prime plus 1% (9.25% at August 31,
1996). All unpaid principal and accrued interest are due and payable on
November 1, 1997.
<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: October 9, 1996
BIOMERICA, INC.
By: /S/ JOSEPH H. IRANI
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Joseph H. Irani, President
President, Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> AUG-31-1996
<CASH> 964,545
<SECURITIES> 385,039
<RECEIVABLES> 1,791,109
<ALLOWANCES> 151,754
<INVENTORY> 2,163,144
<CURRENT-ASSETS> 5,252,080
<PP&E> 3,190,702
<DEPRECIATION> 2,742,552
<TOTAL-ASSETS> 6,339,839
<CURRENT-LIABILITIES> 1,806,127
<BONDS> 0
0
0
<COMMON> 281,646
<OTHER-SE> 1,926,242
<TOTAL-LIABILITY-AND-EQUITY> 6,339,839
<SALES> 2,273,387
<TOTAL-REVENUES> 2,273,387
<CGS> 1,314,388
<TOTAL-COSTS> 1,314,388
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,803
<INCOME-PRETAX> 141,069
<INCOME-TAX> 13,865
<INCOME-CONTINUING> 127,204
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 127,204
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
