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, 1997 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: 3,896,802 shares of common
Stock as of October 11, 1997.
<PAGE>
BIOMERICA, INC.
INDEX
Part I Financial Statements:
Statement of Operations - Three Months
Ended August 31, 1997 and 1996 ......................................2
Balance Sheets - August 31, 1997 ................................3 & 4
Statement of Cash Flows
Three Months Ended August 31, 1997 and 1996 .........................5
Statement of Changes in Shareholders' Equity -
Three Months Ended August 31, 1997 ..................................6
Notes to Financial Statements .......................................7
Management's Discussion and Analysis of Financial Condition
and Selected Financial Data .....................................8 & 9
Part IIOther Information ..................................................10
Signatures .........................................................10
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<TABLE>
PART I - FINANCIAL INFORMATION
SUMMARIZED FINANCIAL INFORMATION
BIOMERICA, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
Three Months Ended
August 31,
1997 1996
---------------- ----------------
<S> <C> <C>
Net sales.............................................. $ 2,304,027 $ 2,273,387
Cost of sales ...................................... 1,326,682 1,314,388
---------------- ----------------
Gross profit ....................................... 977,345 958,999
Operating Expenses:
Selling, general and administrative ................ 759,427 746,390
Research and development ........................... 103,372 62,574
----------------- ---------------
862,799 808,964
Other Expense (income):
Interest expense ................................... 9,473 16,803
Other (income) expense, net ........................ (48,325) (12,176)
----------------- ---------------
Income before minority interest in net profits of
consolidated subsidiaries and income taxes ......... 153,398 145,408
Minority interest in net (profits) of
consolidated subsidiaries .......................... (1,734) (4,339)
----------------- ---------------
INCOME BEFORE TAXES ................................... 151,664 141,069
Income Taxes........................................... 14,378 13,865
----------------- ---------------
Net Income............................................. $ 137,286 $ 127,204
================= ===============
Net earnings per share................................. $ .04 $ .04
================= ===============
Weighted average common shares outstanding............. 3,896,802 3,508,777
</TABLE>
<PAGE>
<TABLE>
BIOMERICA, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
August 31,
1997
-------------
<S> <C>
Assets
Current Assets
Cash and cash equivalents ............................................ $ 1,810,699
Available for-sale securities ........................................ 447,327
Accounts receivable, less allowance for doubtful accounts ............ 1,470,848
Inventory ............................................................ 2,572,788
Notes receivable ..................................................... 18,685
Prepaid expenses and other ........................................... 124,648
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Total Current Assets ............................................. 6,444,995
Inventory, non-current................................................. 27,000
Land held for investment............................................... 46,000
Property and Equipment, less accumulated depreciation and amortization. 523,398
Intangible assets, net of accumulated amortization..................... 469,019
Other Assets........................................................... 4,596
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$ 7,515,008
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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,
1997
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<S> <C>
Liabilities and Shareholders' Equity
Current Liabilities
Line of credit $ 175,000
Note payable to bank ................................................ 155,000
Accounts payable and accrued liabilities ............................ 734,523
Accrued compensation ................................................ 458,703
Long-term debt and capital lease obligations (current portion) ...... 10,044
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Total Current Liabilities ........................................ 1,533,270
Minority interest...................................................... 2,266,793
Shareholders' Equity
Unrealized holding gain on available for-sale securities ............ 102,107
Common stock, $.08 par value authorized 10,000,000 shares,
issued and outstanding 3,896,802 in 1997 and 3,520,569 in 1996 .... 311,744
Additional paid-in-capital .......................................... 12,437,367
Accumulated deficit ................................................. (9,136,273)
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Total Shareholders' Equity............................................. 3,714,945
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Total Liabilities and Equity...........................................$ 7,515,008
=============
<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, 1997 and 1996
<CAPTION>
1997 1996
--------------- --------------
Cash flows from operating activities:
<S> <C> <C>
Net income............................................................... $ 137,286 $ 127,204
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization ......................................... 80,978 61,830
Realized gain on sale of available for-sale securities ................ (28,156) 0
Minority interest in net profits of consolidated subsidiaries ......... 2,765 4,339
Changes in current assets and liabilities:
Accounts Receivable ................................................. (15,201) 148,697
Inventories ......................................................... (132,739) (127,593)
Prepaid expenses and other current assets ........................... 4,511 24,333
Accounts payable and other accrued liabilities ...................... 68,330 5,542
Accrued compensation ................................................ (9,085) 116,921
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Net cash provided by operating activities................................ 108,689 361,273
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Cash flows from investing activities:
Sale of available for-sale securities ................................. 99,389 0
Increase in notes receivable .......................................... (9,100) 8,480
Purchases of property and equipment ................................... (37,198) (27,184)
Other assets .......................................................... 11,178 9,303
Purchases of intangible assets ........................................ (860) 0
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Net cash provided by investing activities................................ 63,409 (9,401)
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Cash flows from financing activities:
Principal payments on line of credit .................................. (25,000) (60,000)
Payments of long-term debt and capital lease obligations .............. (50,804) (5,185)
Exercise of stock options ............................................. 8,254 55,030
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Net cash used in financing activities.................................... (67,550) (10,155)
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Net increase (decrease) in cash and cash equivalents..................... 104,548 341,717
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Cash at beginning of quarter............................................. 1,706,151 622,828
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Cash at end of quarter................................................... 1,810,699 $ 964,545
=============== ===============
<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, 1997
<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, 1997 3,889,802 $ 311,184 $12,429,673 $ 97,924 $(9,273,559) $ 3,565,222
Change in unrealized gain
on available-for-sale
securities 4,183 4,183
Exercise of stock options 7,000 560 7,694 8,254
Net gain 137,286 137,286
---------- ----------- ------------ ----------- ------------ ------------
Balance at
August 31, 1997 3,896,802 $ 311,744 $12,437,367 $ 102,107 $(9,136,273) $ 3,714,945
========= =========== =========== =========== ============= ============
<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, 1997
(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, 1997, 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 Note 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, 1997, for a description of the investments in affiliates and
consolidated subsidiaries.
(5) Reference is made to Notes 6, 7 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, 1997, for information on commitments and litigation.
(6) Aggregate market value of available-for-sale securities exceeded aggregate
cost by approximately $102,107 at August 31, 1997.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND SELECTED FINANCIAL DATA
The statements in this Report on Form 10-QSB and other statements made by
Biomerica, Inc. that relate to future plans, events or performance are forward-
looking statements which involve risks and uncertainties. Actual results,
events or performance may differ materially from those anticipated in any
forward-looking statements as a result of a variety of factors, including those
set forth in this Report on Form 10-QSB.
Results of Operations
Consolidated net sales for Biomerica were $2,304,027 for the first quarter
of fiscal 1998 as compared to $2,273,387 for the same period in the previous
year. This represents an increase of $30,640 (1%). Lancer sales decreased by
$37,499 over the previous fiscal year due to competition pressures and lower
prices in the industry. Biomerica sales increased by $80,211 due to greater
foreign sales. AIT had a sales decline of $12,072 due to the loss of a research
account.
Cost of sales increased by $12,294 (1%). The percentage increase in cost of
sales approximated the percentage increase in sales. Lancer and Biomerica
maintained consistent percentages of cost of sales to sales, however AIT's cost
of sales as a percentage of sales increased due to lower sales volumes without a
comparable decrease in cost of goods.
Selling, general and administrative costs increased by $13,037 (2%). Lancer
had lower selling, general and administrative costs of $11,366 due to a decrease
in travel and postage charges, partially offset by an increase in samples and
collection costs. Biomerica had an increase of $12,033 and AIT had an increase
of $12,370 due to increased personnel and other related costs.
Research and development increased by $40,798 (65%). The increase was
primarily attributable to higher costs at Biomerica and Lancer. Both companies
have been investing in new product research.
Interest expense decreased by $7,330 (44%) compared to the previous year due
to lower 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 Note 3 in the Notes to the Consolidated Financial St atements
in the report on Form 10-KSB for the year ended May 31, 1997, for a more in-
depth discussion of subsidiaries.
<PAGE>
Liquidity and Capital Resources
As of August 31, 1997, the Company had cash and available-for-sale
securities in the amount of $2,258,026. 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.
At August 31, 1997, Lancer had a $500,000 line of credit with a bank.
Borrowings are made at prime plus 1% (9.5% at August 31, 1997) and are limited
to specified percentages of eligible accounts receivable. The unused
portion available under the line of credit at August 31, 1997 was $176,000.
The line of credit expires on March 1, 1998. The Company is not required
to maintain compensating balances in connection with this borrowing
arrangement.
At August 31, 1997, Lancer had a note payable to a bank requiring monthly
principal payments of $18,889, plus interest at prime plus 1% (9.5% at August
31, 1997). The note expires on May 1, 1998, at which time all unpaid principal
and accrued interest is due and payable.
<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, 1997
BIOMERICA, INC.
By: /S/ ZACKARY IRANI
-----------------------------
Zackary Irani
President, Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> AUG-31-1997
<CASH> 1,810,699
<SECURITIES> 447,327
<RECEIVABLES> 1,607,508
<ALLOWANCES> 136,660
<INVENTORY> 2,572,788
<CURRENT-ASSETS> 6,444,995
<PP&E> 3,145,896
<DEPRECIATION> 2,622,498
<TOTAL-ASSETS> 7,515,008
<CURRENT-LIABILITIES> 1,533,270
<BONDS> 0
0
0
<COMMON> 311,744
<OTHER-SE> 3,403,201
<TOTAL-LIABILITY-AND-EQUITY> 7,515,008
<SALES> 2,304,027
<TOTAL-REVENUES> 2,304,027
<CGS> 1,326,682
<TOTAL-COSTS> 1,326,682
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,473
<INCOME-PRETAX> 151,664
<INCOME-TAX> 14,378
<INCOME-CONTINUING> 137,286
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 137,286
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
