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, 1998 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: 3,966,802 shares of common
Stock as of October 8, 1998.
<PAGE>
BIOMERICA, INC.
INDEX
Part I Financial Statements:
Statement of Operations - Three Months
Ended August 31, 1998 and 1997.....................................2
Balance Sheet - August 31, 1998................................3 & 4
Statement of Cash Flows
Three Months Ended August 31, 1998 and 1997........................5
Statement of Changes in Shareholders' Equity -
Three Months Ended August 31, 1998.................................6
Notes to Financial Statements....................................7-9
Management's Discussion and Analysis of Financial Condition
and Selected Financial Data..................................10 & 11
Part II Other Information.................................................12
Signatures........................................................12
<PAGE>
PART I - FINANCIAL INFORMATION
SUMMARIZED FINANCIAL INFORMATION
BIOMERICA, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
August 31,
1998 1997
---------------- ---------------
<S> <C> <C>
Net sales.............................................. $2,156,005 $ 2,304,027
Cost of sales ....................................... 1,311,476 1,326,682
--------------- ---------------
Gross profit ........................................ 844,529 977,345
Operating Expenses:
Selling, general and administrative ................. 774,435 759,427
Research and development ............................ 115,452 103,372
-------------- --------------
889,887 862,799
Other Expense (income):
Interest expense .................................... 1,979 9,473
Other (income) expense, net ......................... (61,244) (48,325)
-------------- --------------
Income before minority interest in net profits of
consolidated subsidiaries and income taxes .......... 13,907 153,398
Minority interest in net (profits) of
consolidated subsidiaries ........................... (28,196) (1,734)
-------------- --------------
(Loss) income before taxes............................. (14,289) 151,664
Income Taxes........................................... 2,400 14,378
-------------- --------------
NET (LOSS) INCOME...................................... ($16,689) $ 137,286
============== ==============
Per share data:
Net income (basic) ..................................$ .00 $ .04
============== ==============
Net income (diluted) ................................$ .00 $ .03
============== ==============
Weighted average number of common and common
equivalent shares outstanding:
Basic ............................................... 3,974,909 3,896,802
============== ==============
Diluted ............................................. 4,009,578 4,056,618
============== ==============
</TABLE>
<PAGE>
BIOMERICA, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
August 31,
1998
-------------
<S> <C>
Assets
Current Assets
Cash and cash equivalents ................................................. $ 1,802,009
Available for-sale securities ............................................. 240,911
Accounts receivable, less allowance for doubtful accounts ................. 1,648,132
Inventory ................................................................. 2,840,740
Notes receivable .......................................................... 40,885
Prepaid expenses and other ................................................ 107,930
--------------
Total Current Assets ............................................. 6,680,607
Inventory, non-current...................................................... 24,000
Land held for investment.................................................... 46,000
Property and Equipment, less accumulated depreciation and amortization...... 447,815
Intangible assets, net of accumulated amortization.......................... 461,900
Other Assets................................................................ 6,756
--------------
$ 7,667,078
==============
<FN>
The accompanying notes are an integral part of these statements
</TABLE>
<PAGE>
BIOMERICA, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
August 31,
1998
---------------
<S> <C>
Liabilities and Shareholders' Equity
Current Liabilities
Line of credit $ 100,000
Accounts payable and accrued liabilities.............................. 1,013,355
Accrued compensation ................................................. 420,779
----------------
Total Current Liabilities ......................................... 1,534,134
Minority interest....................................................... 2,480,133
Shareholders' Equity
Shareholder loan ..................................................... (57,000)
Unrealized holding gain on available for-sale securities ............. 37,059
Common stock, $.08 par value authorized 10,000,000 shares,
issued and outstanding 3,970,352 in 1998 and 3,896,802 in 1997 ..... 317,628
Additional paid-in-capital ........................................... 12,503,940
Accumulated deficit .................................................. (9,148,816)
----------------
Total Shareholders' Equity.............................................. 3,652,811
----------------
Total Liabilities and Equity............................................$ 7,667,078
================
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
BIOMERICA, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended August 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
--------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income.................................................$ (16,689) $ 137,286
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization .................................. 58,860 80,978
Realized gain on sale of available for-sale securities ......... (39,936) (28,156)
Minority interest in net profits of consolidated subsidiaries .. 28,196 2,765
Options issued for services rendered ........................... 2,619 0
Changes in current assets and liabilities:
Accounts Receivable .......................................... (41,444) (15,201)
Inventories .................................................. (306,188) (132,739)
Prepaid expenses and other current assets .................... 16,567 4,511
Accounts payable and other accrued liabilities ............... 206,871 68,330
Accrued compensation ......................................... (24,267) (9,085)
-------------- --------------
Net cash (used by) provided by operating activities............... (115,411) 108,689
-------------- --------------
Cash flows from investing activities:
Sale of available for-sale securities .......................... 113,041 99,389
Increase in notes receivable ................................... (12,400) (9,100)
Purchases of property and equipment ............................ (10,473) (37,198)
Other assets ................................................... 17,158 11,178
Purchases of intangible assets ................................. (26,675) (860)
Shareholder loan repayment ..................................... 14,000 0
-------------- --------------
Net cash provided by investing activities......................... 94,651 63,409
-------------- --------------
Cash flows from financing activities:
Principal payments on line of credit ........................... 0 (25,000)
Payments of long-term debt and capital lease obligations ....... 0 (50,804)
Investments by minority interests .............................. (5,491) 0
Exercise of stock options ...................................... 0 8,254
Stock repurchase ............................................... (12,315) 0
-------------- --------------
Net cash used in financing activities............................. (17,806) (67,550)
-------------- --------------
Net increase (decrease) in cash and cash equivalents.............. (38,566) 104,548
-------------- --------------
Cash at beginning of quarter...................................... 1,840,575 1,706,151
-------------- -------------
Cash at end of quarter............................................ $ 1,802,009 $ 1,810,699
============== ==============
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
BIOMERICA, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED AUGUST 31, 1998
<TABLE>
<CAPTION>
Unrealized
Gain on
Common Stock Additional Available- Accumu-
--------------------------
Number of Paid-In For-Sale Shareholder Lated
Shares Amount Capital Securities Loan (Deficit) Total
------------ ----------- ------------ ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
May 31, 1998 3,978,302 $ 318,264 $12,513,000 $ 57,902 (71,000) $(9,132,127) $ 3,686,039
Compensation espense 2,619 2,619
Change in unrealized
gain on available
for sale securities (20,843) (20,843)
Stock repurchase (7,950) (636) (11,679) (12,315)
Repayment of
Shareholder loan 14,000 14,000
Net loss (16,689) (16,689)
------------ ----------- ------------ ----------- ----------- ------------ ------------
Balance at
August 31, 1998 3,896,802 $ 317,628 $12,503,940 $ 37,059 $ (57,000) $(9,148,816) $ 3,652,811
============= =========== ============ =========== =========== ============ ============
<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, 1998
(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, 1998, 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 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, 1998, for a description of the investments in affiliates and
consolidated subsidiaries.
(5) Reference is made to Notes 5 & 10 of the Notes to Financial Statements
contained in the Company's Annual Report on Form 10-KSB for the fiscal year
ended May 31, 1998, for information on commitments and litigation.
(6) Aggregate market value of available-for-sale securities exceeded aggregate
cost by approximately $37,059 at August 31, 1998.
(7) Earnings Per Share
------------------
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per
Share ("EPS"). SFAS No. 128 requires dual presentation of basic EPS and
diluted EPS on the face of all income statements issued after December 15,
1997 for all entities with complex capital structures. Basic EPS is
computed as net income divided by the weighted average number of common
shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur from common shares issuable through stock options,
warrants and other convertible securities. All periods presented have been
restated to adopt the provisions of SFAS No. 128.
The following table illustrates the required disclosure of the
reconciliation of the numerators and denominators of the basic and diluted
EPS computations.
<PAGE>
<TABLE>
<CAPTION>
For the Three Months Ended August 31, 1998
----------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
------------- -------------- --------------
<S> <C> <C> <C>
Basic EPS -
Loss available to common
Shareholders .......................... $ (16,689) 3,974,909 $ (.00)
===============
Effect of dilutive securities - Options... - 34,669
-------------- ---------------
Diluted EPS -
Loss available to common share-
holders plus assumed conversions ...... $ (16,689) 4,009,578 $ (.00)
============== =============== ===============
<CAPTION>
For the Three Months Ended August 31 , 1997
----------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
-------------- -------------- ---------------
<S> <C> <C> <C>
Basic EPS -
Income available to common
shareholders .......................... $ 137,286 3,896,802 $ 0.04
===============
Effect of dilutive securities - Options... - 159,816
--------------- --------------
Diluted EPS -
Income available to common share-
holders plus assumed conversions ...... $ 137,286 4,056,618 $ 0.03
=============== =============== ===============
</TABLE>
<PAGE>
(8) New Disclosure Standards
In June 1997, SFAS No. 130 ("SFAS 130"), "Comprehensive Income" was issued
which is effective for fiscal years beginning after December 15, 1997 and
requires reclassification of earlier financial statements for comparative
purposes. SFAS 130 requires that changes in the amounts of certain items,
including foreign currency translation adjustments and gains and losses on
certain securities, be shown in the financial statements. SFAS 130 does not
require a specific format for the financial statement in which comprehensive
income is reported, but does require that an amount representing total
comprehensive income be reported in that statement. The Company does not
expect that the implementation of SFAS 130 will have a material effect upon
the Company's financial statements. The effect of adopting SFAS 130 has not
yet been determined by the Company.
In June 1997, SFAS No. 131 ("SFAS 131"), "Disclosures about Segments of an
Enterprise and Related Information" was issued. This statement will change
the way public companies report information about segments of their business
in their annual financial statements and requires them to report selected
segment information in their quarterly reports issued to shareholders. It
also requires entity-wide disclosures about the product, services an entity
provides, the material countries in which it holds assets and reports
revenues, and its major customers. SFAS 131 is effective for fiscal years
beginning after December 15, 1997. The Company does not expect that the
implementation of SFAS 131 will have a material effect upon the Company's
financial statements. The effect of adopting SFAS 131 has not yet been
determined by management of the Company.
<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 $2,156,005 for the first quarter
of fiscal 1999 as compared to $2,304,027 for the same period in the previous
year. This represents a decrease of $148,022, or 6%. Lancer sales increased by
$92,519 over the previous fiscal year. Lancer's management continues to search
for and add new distributors, private label customers, and sales
representatives, as well as investigate new products that could contribute to
its product line. Biomerica sales decreased by $239,729 primarily due to a slow
down of foreign sales. AIT had a sales decline of $812.
Cost of sales decreased by $15,206, or 1%. Lancer's cost of sales increased
$51,548 due to their higher sales. Biomerica's cost of goods decreased $57,722
and AIT's cost of goods decreased $9,032. Biomerica's cost of goods decreased
as a result of lower sales, which was offset in part by higher wages. AIT's cost
of goods decreased primarily due to better efficiency and lower payroll costs.
Selling, general and administrative costs increased by $15,008, or 2%.
Lancer had increased selling, general and administrative costs of $19,003 due to
an expansion of sales territories and costs related to increased sales.
Biomerica had an increase of $16,940 primarily due to increased payroll and
related expenses. AIT had a decrease of $20,935 due to decreased personnel and
other related costs.
Research and development increased by $12,080, or 12%. Lancer had a
decrease in research and development costs of $7,320 due to a reclassification
of wage costs to cost of sales. Biomerica had increased costs of $19,250 due to
higher wages and related costs. AIT had an increase of $150.
Interest expense decreased by $7,494 compared to the previous year due to
lower debt at Lancer. Other income increased due primarily to increased gain on
sales of marketable securities at Biomerica.
Please refer to Note 3 in the Notes to the Consolidated Financial Statements
in the report on Form 10-KSB for the year ended May 31, 1998, for a more in-
depth discussion of subsidiaries.
<PAGE>
Liquidity and Capital Resources
As of August 31, 1998, the Company had cash and available-for-sale securities
in the amount of $2,042,920 and working capital of $5,146,473. 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, 1998, Lancer had a $300,000 line of credit with a bank.
Borrowings are made at prime plus 1% (9.5% at August 31, 1998) and are limited
to specified percentages of eligible accounts receivable. The unused portion
available under the line of credit at August 31, 1998 was $153,318. The line of
credit expires on December 1, 1998. Lancer is not required to maintain
compensating balances in connection with this borrowing arrangement.
<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, 1998
BIOMERICA, INC.
By: /S/ Zackary S. Irani
-----------------------------
Zackary Irani
President, Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-END> AUG-31-1998
<CASH> 1,802,009
<SECURITIES> 240,911
<RECEIVABLES> 1,772,055
<ALLOWANCES> 123,923
<INVENTORY> 2,840,740
<CURRENT-ASSETS> 6,680,607
<PP&E> 3,135,328
<DEPRECIATION> 2,687,513
<TOTAL-ASSETS> 7,667,078
<CURRENT-LIABILITIES> 1,534,134
<BONDS> 0
0
0
<COMMON> 317,628
<OTHER-SE> 3,335,183
<TOTAL-LIABILITY-AND-EQUITY> 7,667,078
<SALES> 2,156,005
<TOTAL-REVENUES> 2,156,005
<CGS> 1,311,476
<TOTAL-COSTS> 1,311,476
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,979
<INCOME-PRETAX> (14,289)
<INCOME-TAX> 2,400
<INCOME-CONTINUING> (16,689)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,689)
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
