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 28, 1997 Commission File No. 0-8765
----------------- ------
BIOMERICA, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-2645573
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1533 Monrovia Avenue, Newport Beach, California 92663
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (714) 645-2111
- -------------------------------------------------------------------------------
(Not applicable)
- -------------------------------------------------------------------------------
(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: 3,882,902 shares of common
Stock as of April 14, 1997.
<PAGE>
BIOMERICA, INC.
INDEX
PART I Financial Statements:
Statements of Operations - Nine Months and Three Months
Ended February 28, 1997 and February 29, 1996 ......................2
Balance Sheet - February 28, 1997 .............................3 & 4
Statements of Cash Flows
Nine Months Ended February 28, 1997 and February 29, 1996 ..........5
Statements of Changes in Shareholders' Equity -
Nine Months Ended February 28, 1997 ................................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>
PART I - FINANCIAL INFORMATION
SUMMARIZED FINANCIAL INFORMATION
BIOMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
February February
1997 1996 1997 1996
------------ -------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Sales............................... $ 6,856,378 $ 6,668,909 $ 2,303,353 $ 2,066,334
Cost of sales ......................... 4,015,712 3,783,121 1,419,736 1,302,359
------------ -------------- ------------- -------------
Gross profit .......................... 2,840,666 2,885,788 883,617 763,975
------------ -------------- ------------- -------------
Operating Expenses:
Selling, general and administrative ... 2,266,394 2,347,990 715,307 690,480
Research and development .............. 196,952 209,666 71,957 60,784
------------ -------------- ------------- -------------
2,463,346 2,557,656 787,264 751,264
------------ -------------- ------------- -------------
Other Expense (income):
Interest expense ...................... 45,227 75,701 13,348 18,554
Other (income), net ................... (46,774) (31,739) (21,195) (4,051)
------------ -------------- ------------- -------------
Income (loss) before minority
interest in net profits of consoli-
dated subsidiaries and income taxes... 378,867 284,170 104,200 (1,792)
Minority interest in net (profits)
losses of consolidated subsidiaries ... (19,250) (56,148) 6,685 71,922
------------ -------------- ------------- -------------
Income before taxes ................... 359,617 228,022 110,885 70,130
Income taxes .......................... 28,875 2,400 11,028 0
------------ -------------- ------------- --------------
NET INCOME ........................... $ 330,742 $ 225,622 $ 99,857 $ 70,130
------------ -------------- ------------- --------------
------------ -------------- ------------- --------------
Net income per share.................... $ .09 $ .07 $ .03 $ .02
------------ -------------- ------------- --------------
------------ -------------- ------------- --------------
Weighted average
shares outstanding .................... 3,608,299 3,445,861 3,771,624 3,455,569
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
BIOMERICA, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
February 28,
1997
--------------
<S> <C>
Assets
Current Assets
Cash and cash equivalents .......................................... $ 1,886,482
Available for-sale securities ...................................... 343,112
Accounts receivable, less allowance for doubtful accounts .......... 1,891,535
Inventory .......................................................... 2,263,693
Notes receivable ................................................... 7,985
Prepaid expenses and other ......................................... 63,809
--------------
Total Current Assets............................................. 6,456,616
Inventory, non-current................................................. 37,000
Land held for investment............................................... 46,000
Property and Equipment, less accumulated depreciation and amortization. 427,170
Intangible assets, net of accumulated amortization..................... 509,197
Other Assets........................................................... 9,796
--------------
$ 7,485,779
--------------
--------------
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
BIOMERICA, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
February 28,
1997
---------------
<S> <C>
Liabilities and Shareholders' Equity
Current Liabilities
Current portion of note payable to bank ............................ $ 260,000
Accounts payable and accrued liabilities ........................... 831,327
Long-term debt and capital lease obligations (current portion) ..... 21,490
Accrued compensation ............................................... 554,664
Line of credit ..................................................... 248,000
---------------
Total Current Liabilities ....................................... 1,915,481
Minority interest..................................................... 2,133,173
Shareholders' Equity
Common stock ....................................................... 310,632
Additional paid-in-capital ......................................... 12,405,250
Unrealized holding gain on available for sale securities ........... 110,905
Accumulated deficit ................................................ (9,389,662)
---------------
Total Shareholders' Equity............................................ 3,437,125
---------------
Total Liabilities and Equity.......................................... $ 7,485,779
---------------
---------------
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
BIOMERICA, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED FEBRUARY 28, 1997 AND FEBRUARY 29, 1996
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income....................................................... 330,742 225,622
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ................................. 187,800 234,280
Realized loss (gain) on sale of marketable securities ......... 6,758 (357)
Minority interest in net profits of consolidated subsidiaries . 19,250 56,148
Changes in current assets and liabilities:
Provision for losses on accounts receivable .................. 0 30,000
Accounts Receivable ......................................... (103,483) (84,985)
Inventories ................................................. (228,142) (365,281)
Prepaid expenses and other current assets ................... 41,015 35,945
Accounts payable and other accrued liabilities .............. 128,926 161,797
Accrued compensation ........................................ 28,150 36,536
------------- -------------
Net cash provided by operating activities........................ 411,017 499,675
------------- -------------
Cash flows from investing activities:
Purchases of property and equipment ........................... (95,078) (119,857)
Sales of marketable securities, net ........................... 25,946 0
Other assets .................................................. 10,272 36,878
Purchases of intangible assets ................................ (450) (3,140)
Note receivable ............................................... 20,000 8,681
------------- ------------
Net cash used in investing activities............................ (39,310) (77,438)
------------- ------------
Cash flows from financing activities:
Issuance of stock ............................................. 55,000 0
Proceeds from sale of stock ................................... 978,022 20,250
Net payments under line of credit agreement ................... (2,000) (226,000)
Principal payments on note payable to bank .................... (180,000) (285,000)
Payments of long-term debt and capital lease obligations ...... (16,005) (20,366)
Exercise of stock options ..................................... 56,930 19,400
------------- ------------
Net cash provided by (used in) financing activities.............. 891,947 (491,716)
------------- ------------
Net increase (decrease) in cash and cash equivalents............. 1,263,654 (69,479)
------------- ------------
Cash at beginning of year........................................ 622,828 694,564
------------- ------------
Cash at end of Nine Months....................................... $ 1,886,482 $ 625,085
------------- ------------
------------- ------------
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
BIOMERICA, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED FEBRUARY 28, 1997
<TABLE>
<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 20,218 20,218
Issuance of stock 27,500 2,200 52,800 55,000
Exercise of employee
stock options 56,250 4,500 52,430 56,930
Private placement 333,333 26,666 951,356 978,022
Net income 330,742 330,742
------------- ------------- ----------- -------------- ------------- ------------
Balance at
February 28, 1997 3,882,902 $ 310,632 $12,405,250 $ 110,905 $(9,389,662) $ 3,437,125
------------- ------------- ----------- -------------- ------------- ------------
------------- ------------- ----------- -------------- ------------- ------------
Note: The authorized capital stock consists of 10,000,000 shares of common stock, par value $.08 per share.
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
February 28, 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, 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 $110,905 at February 28, 1997.
(7) On December 20, 1996, Biomerica, Inc. sold 333,333 shares of its common
stock for one million dollars to two affiliated investment funds that are
accredited investors. The sale is exempt from registration under Section
4(2) of the Securities Act of 1933 (the `Act'') and/or Rule 506 of
Regulation D promulgated under the Act.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND SELECTED FINANCIAL DATA
RESULTS OF OPERATIONS
Consolidated net sales for Biomerica were $6,856,378 for the nine months ended
February 28, 1997 as compared to $6,668,909 for the same period in the previous
year. This represents an increase of $187,469 (3%). For the quarter then
ended, sales were $2,303,353 as compared to $2,066,334 in the previous year.
This represents an increase of $237,019 (11%). Lancer Orthodontics (Lancer) had
decreased sales in the first six months of the year, however in the third
quarter Lancer realized an increase over the previous year. The increased
Lancer sales were due to an increase in the manufacturing output. For the nine
months Biomerica also had increased sales over the previous year.
Cost of sales increased for the nine months $232,591 (6%) and from $1,302,359
to $1,419,736 ($117,377 or 9%) for the quarter. Lancer had higher cost of sales
due to manufacturing problems for which corrective actions have been taken. For
the nine months Biomerica had higher cost of goods due to higher sales.
Selling, general and administrative expenses decreased for the nine months by
$81,596 (3%) and increased for the three months by $24,827 (4%). Lancer had
decreased expenses of $52,831 for the nine months due to a decrease in wage
costs and catalog costs, partially offset by an increase in postage and
advertising. Biomerica had reduced costs due to lower wages.
Research and development for the nine months decreased by $12,714 (6%) and
for the three months increased by $11,173 (18%). Although Lancer has decreased
research and development expenses for the three and nine month periods,
Biomerica has been increasing expenditures in order to accelerate the release of
new products.
Interest expense decreased for the nine months by $30,474 (40%) and by $5,206
(28%) for the quarter due to reduced debt and interest rates at Lancer.
Minority interest in net losses of consolidated subsidiaries represents
minority interests in the gain or loss 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 February 28, 1997, the Company had cash and available-for-sale
securities in the amount of $2,229,594. Biomerica is currently able to meet its
costs of operations, development and expansion 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. Lancer has a note payable
to the bank which is due May 1, 1998 and requires 13 monthly principal payments
of $18,889 plus interest and one final principal payment of $14,444 plus
interest. Lancer also has a $500,000 line of credit with the bank. The unused
portion at February 28, 1997 was $192,000.
On December 20, 1996, Biomerica, Inc. sold 333,333 shares of its common
stock for one million dollars to two affiliated investment funds that are
accredited investors. The sale is exempt from registration under Section 4(2)
of the Securities Act of 1933 (the `Act'') and/or Rule 506 of Regulation D
promulgated under the Act.
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS. Inapplicable.
Item 2. CHANGES IN SECURITIES. On December 20, 1996, Biomerica, Inc. sold
333,333 shares of its common stock for one million dollars to two
affiliated investment funds that are accredited investors. The sale is
exempt from registration under Section 4(2) of the Securities Act of
1933 (the `Act'') and/or Rule 506 of Regulation D promulgated under the
Act.
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 14, 1997
BIOMERICA, INC.
By: /S/ Joseph H. Irani
----------------------
Joseph H. Irani, President
Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> FEB-28-1997
<CASH> 1,886,482
<SECURITIES> 343,112
<RECEIVABLES> 2,027,453
<ALLOWANCES> 135,918
<INVENTORY> 2,263,693
<CURRENT-ASSETS> 6,456,616
<PP&E> 3,019,230
<DEPRECIATION> 2,592,060
<TOTAL-ASSETS> 7,485,779
<CURRENT-LIABILITIES> 1,915,481
<BONDS> 0
0
0
<COMMON> 310,632
<OTHER-SE> 3,126,493
<TOTAL-LIABILITY-AND-EQUITY> 7,485,779
<SALES> 6,856,378
<TOTAL-REVENUES> 6,856,378
<CGS> 4,015,712
<TOTAL-COSTS> 4,015,712
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45,227
<INCOME-PRETAX> 359,617
<INCOME-TAX> 28,875
<INCOME-CONTINUING> 330,742
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 330,742
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
