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, 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
----- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 3,882,402 shares of common
Stock as of January 14, 1997.
<PAGE>
BIOMERICA, INC.
INDEX
PART I Financial Statements:
Statements of Operations - Three Months and Six Months
Ended November 30, 1996 and 1995 ..................................2
Balance Sheet - November 30, 1996 ............................3 & 4
Statements of Cash Flows
Six Months Ended November 30, 1996 and 1995 .......................5
Statements of Changes in Shareholders' Equity -
Six Months Ended November 30, 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
<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,
1996 1995 1996 1995
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net Sales............................... $ 4,553,025 $4,602,576 $2,279,638 $ 2,273,288
Cost of sales......................... 2,595,976 2,480,762 1,281,588 1,197,794
------------ ----------- ----------- ------------
Gross profit.......................... 1,957,049 2,121,814 998,050 1,075,494
------------ ----------- ----------- ------------
Operating Expenses:
Selling, general and administrative... 1,551,104 1,657,510 804,714 822,325
Research and development.............. 124,995 148,882 62,421 74,890
------------ ----------- ----------- ------------
1,676,099 1,806,392 867,135 897,215
------------ ----------- ----------- ------------
Other Expense (income):
Interest expense...................... 31,879 57,147 15,076 31,672
Other (income), net................... (25,579) (27,688) (13,403) (3,334)
------------ ----------- ----------- ------------
Gain before minority interest in
net profits of consolidated
subsidiaries and income taxes......... 274,650 285,963 129,242 149,941
Minority interest in net (profits)
of consolidated subsidiaries (25,918) (128,070) (21,579) (54,753)
----------- ----------- ----------- ------------
Income before taxes................... 248,732 157,893 107,663 95,188
Income taxes.......................... 17,847 2,400 3,982 0
----------- ----------- ----------- ------------
NET INCOME........................... $ 230,885 $ 155,493 $ 103,681 $ 95,188
=========== =========== =========== ============
Net income per share.................... $ .07 $ .05 $ .03 $ .03
=========== =========== =========== =============
Weighted average
shares outstanding.................... 3,526,469 3,441,007 3,538,602 3,441,819
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
BIOMERICA, INC.
CONSOLIDATED BALANCE SHEET
<CAPTION>
November 30,
1996
------------
<S> <C>
Assets
Current Assets
Cash and cash equivalents................................................$ 911,419
Available for-sale securities............................................ 273,768
Accounts receivable, less allowance for doubtful accounts................ 1,674,879
Inventory................................................................ 2,271,619
Notes receivable......................................................... 19,505
Prepaid expenses and other............................................... 106,863
------------
Total Current Assets .................................................... 5,258,053
Inventory, non-current..................................................... 37,000
Land held for investment................................................... 46,000
Property and Equipment, less accumulated depreciation and amortization..... 440,499
Intangible assets, net of accumulated amortization......................... 527,296
Other Assets............................................................... 9,796
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$ 6,318,644
============
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
BIOMERICA, INC.
CONSOLIDATED BALANCE SHEET
<CAPTION>
November 30,
1996
-------------
<S> <C>
Liabilities and Shareholders' Equity
Current Liabilities
Current portion of note payable to bank ........................ $ 320,000
Accounts payable and accrued liabilities ....................... 575,471
Long-term debt and capital lease obligations (current portion) . 22,902
Other liabilities .............................................. 150,581
Accrued compensation ........................................... 599,526
Line of credit ................................................. 250,000
-------------
Total Current Liabilities ................................... 1,918,480
Long term portion of capital lease obligations.................... 4,074
Minority interest................................................. 2,139,842
Shareholders' Equity
Common stock ................................................... 283,926
Additional paid-in-capital ..................................... 11,452,984
Unrealized holding gain on available for sale securities ....... 8,857
Accumulated deficit ............................................ (9,489,519)
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Total Shareholders' Equity........................................ 2,256,248
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Total Liabilities and Equity...................................... $ 6,318,644
=============
<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, 1996 AND 1995
<CAPTION>
1996 1995
-------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income......................................................... $ 230,885 $ 155,493
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ................................... 124,571 158,071
Minority interest in net profits of consolidated subsidiaries ... 25,918 128,070
Changes in current assets and liabilities:
Accounts Receivable ........................................... 113,175 40,898
Inventories ................................................... (236,068) (316,915)
Prepaid expenses and other current assets ..................... 6,443 9,275
Accounts payable and other accrued liabilities ................ 23,649 (26,000)
Accrued compensation .......................................... 73,012 3,902
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Net cash provided by operating activities.......................... 361,585 152,794
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Cash flows from investing activities:
Purchases of property and equipment ............................. (63,727) (60,578)
Other assets .................................................... 10,272 196
Purchases of intangible assets .................................. 0 (3,839)
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Net cash used in investing activities.............................. (53,455) (64,221)
-------------- ------------
Cash flows from financing activities:
Issuance of stock ............................................... 55,000 0
Net payments under line of credit agreement ..................... 0 (225,000)
Investments by minority interests ............................... 0 20,250
Payments of short-term borrowings and long-term debt ............ 0 (11,464)
Principal payments on note payable to bank ...................... (120,000) (210,000)
Payments of long-term debt and capital lease obligations ........ (10,519) 0
Exercise of stock options ....................................... 55,980 13,600
-------------- ------------
Net cash used in financing activities.............................. (19,539) (412,614)
-------------- ------------
Net increase (decrease) in cash and cash equivalents............... 288,591 (324,041)
-------------- ------------
Cash at beginning of year.......................................... 622,828 694,564
-------------- ------------
Cash at end of six months.......................................... $ 911,419 $ 370,523
============== ============
<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, 1996
<CAPTION>
Unrealized
Gain on
Common Stock Additional Available- Retained
--------------------------
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 (81,830) (81,830)
Issuance of stock 27,500 2,200 52,800 55,000
Exercise of employee
stock options 55,750 4,460 51,520 55,980
Net gain 230,885 230,885
----------- ------------ ------------ ------------ ------------ ------------
Balance at
November 30, 1996 3,549,069 $ 283,926 $11,452,984 $ 8,857 $(9,489,519) $ 2,256,248
=========== ============ ============ ============ ============ ============
<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, 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. 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, 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 $8,857 at November 30, 1996.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND SELECTED FINANCIAL DATA
RESULTS OF OPERATIONS
Consolidated net sales for Biomerica were $4,553,025 for the six months
ended November 30, 1996 as compared to $4,602,576 for the same period in the
previous fiscal year. This represents a decrease of $49,551 (1%). For the
quarter then ended November 30, 1996, sales were $2,279,638 as compared to
$2,273,288. This represents an increase of $6,350. Biomerica's sales for the
six months reflected an increase of $316,771 and for the quarter an increase of
$68,219. AIT had increases of $21,302 and $14,435 for the six months and
quarter, respectively. However, these increases were offset by decreases at
Lancer of $387,624 for the six months and $76,304 for the quarter. The
decreases at Lancer were attributable to manufacturing processing and mold
problems, which have resulted in lost sales and delayed deliveries. The
manufacturing problems have been identified and corrected. As part of the
correction process, the Company is reworking a substantial portion of its
inventory. To vitalize Lancer operations, Lancer has hired Mr. Robert Bothamley
as Executive Vice President of Lancer. In his capacity, he will be in charge of
the Mexicali manufacturing operation, acquisition and corporate finance. Mr.
Bothamley previously was the Chief Financial Officer for Coldwell Banker,
responsible for all aspects of planning and financial arrangements. Mr.
Bothamley is a Certified Public Accountant and holds the MBA degree from UCLA
and a BA degree in Economics from Occidental College. In addition, Mr.
Bothamley's fluency in Spanish will facilitate communication with the
manufacturing staff at Mexicali, Mexico. Sales at Biomerica increased primarily
due to increased international sales. No sales have as yet been generated from
the development of `rapid tests'' such as the 10 minute ulcer test (H. pylori).
Cost of sales increased from $2,480,762 to $2,595,976 for the six months
and from $1,197,794 to $1,281,588 for the three months. These represent
increases of $115,214 (5%) and $83,794 (7%) for the six months and three months,
respectively. Lancer realized higher cost of sales as a percentage of sales due
to the manufacturing processing problems and the cost to rework the inventory.
Biomerica also recognized higher cost of sales due in part to higher sales of
some items with lower margins.
Selling, general and administrative expenses decreased from $1,657,510 to
$1,551,104, or $106,406 (6%) for the six months and from $822,325 to $804,714,
or $17,611 (2%) for the three months. The decrease was attributable to
decreased expenses at Lancer due to lower wages, professional fees and catalog
costs. These were due to management's decision to lower costs to offset the
manufacturing problems that caused lower sales.
Research and development decreased for the six months from $148,882 to
$124,995, or $23,887 (16%) and for the three months from $74,890 to $62,421, or
$12,469 (17%). Lancer had decreased expenses of $35,059 for the six months
which were offset by increases at Biomerica. For the three months Lancer had
decreases of $21,076, again offset by increases at Biomerica. The decreases at
Lancer were attributable to lower wages. Biomerica's increases were due to work
on new products.
Interest expense was lower for the six months by $25,268 and by $16,596 for
the three months. This was due 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 10KSB for the year ended May 31, 1996, for a more in-depth
discussion on affiliates and subsidiaries.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of November 30, 1996, the Company had cash and available-for-sale
securities in the amount of $1,185,187. 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 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. The annual meeting
of the Company's stockholders was held on November 12, 1996. The only
matter voted upon at the meeting was the election of directors. This
matter was set forth in the proxy statement dated September 4, 1996, as
filed with the Securities and Exchange Commission pursuant to Regulation
14 under the Securities Act of 1934. All directors for election
indicated in the proxy were elected. The number of votes cast were as
follows:
Name For Against
---- --- -------
Joseph H. Irani 3,074,140 27,744
Dr. Philip B. Kaplan 3,074,434 27,450
Dr. Robert A. Orlando 3,074,434 27,450
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 12, 1997
BIOMERICA, INC.
By: /S/ Joseph H. Irani
-----------------------
Joseph H. Irani, President
Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> NOV-30-1996
<CASH> 911,419
<SECURITIES> 273,768
<RECEIVABLES> 1,815,818
<ALLOWANCES> 140,939
<INVENTORY> 2,271,619
<CURRENT-ASSETS> 5,258,053
<PP&E> 2,987,879
<DEPRECIATION> 2,547,380
<TOTAL-ASSETS> 6,318,644
<CURRENT-LIABILITIES> 1,918,480
<BONDS> 0
0
0
<COMMON> 283,926
<OTHER-SE> 1,972,322
<TOTAL-LIABILITY-AND-EQUITY> 6,318,644
<SALES> 4,553,025
<TOTAL-REVENUES> 4,553,025
<CGS> 2,595,976
<TOTAL-COSTS> 2,595,976
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,879
<INCOME-PRETAX> 248,732
<INCOME-TAX> 17,847
<INCOME-CONTINUING> 230,885
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 230,885
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
