SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark one)
X Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
- --- Exchange Act of 1934
For the Quarter Period Ended November 30, 1999
-----------------
- --- Transition Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from _______ to _______.
Commission File No. 0-8765
------
BIOMERICA, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer 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: (949) 645-2111
- --------------------------------------------------------------------------------
(Not applicable)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Check whether the Registrant (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the past 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: 4,536,070 shares of Common
Stock as of January 10, 2000.
<PAGE>
<TABLE>
BIOMERICA, INC.
INDEX
PART I - FINANCIAL INFORMATION
<CAPTION>
<S> <C> <C>
ITEM I Financial Statements:
Statements of Operations and Comprehensive Loss (unaudited) - Six Months
And Three Months Ended November 30, 1999 and 1998..............................................2 & 3
Balance Sheets (unaudited) - November 30, 1999 ................................................4 & 5
Statements of Cash Flows (unaudited)
Six Months Ended November 30, 1999 and 1998........................................................6
Statement of Changes in Shareholders' Equity (unaudited)
Six Months Ended November 30, 1999.................................................................7
Notes to Financial Statements...................................................................8-12
ITEM 2 Management's Discussion and Analysis of Financial Condition
and Selected Financial Data....................................................................13-15
PART II - OTHER INFORMATION
Other Information..............................................................................16-17
Signatures........................................................................................18
</TABLE>
i
<PAGE>
PART I - FINANCIAL INFORMATION
SUMMARIZED FINANCIAL INFORMATION
<TABLE>
BIOMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
(UNAUDITED)
<CAPTION>
Six Months Ended Three Months Ended
November 30 November 30
1999 1998 1999 1998
------------------ ------------------ ------------------ -------------------
<S> <C> <C> <C> <C>
Net Sales................................... $ 3,770,328 $ 4,356,323 $ 1,945,744 $ 2,200,318
Cost of sales........................... 2,517,158 2,741,175 1,241,184 1,429,700
------------------ ------------------ ------------------ -------------------
Gross profit............................ 1,253,170 1,615,148 704,560 770,618
------------------ ------------------ ------------------ -------------------
Operating Expenses:
Selling, general and administrative..... 2,900,772 1,585,395 1,277,416 809,360
Research and development................ 331,209 229,634 180,701 114,182
------------------ ------------------ ------------------ -------------------
3,231,981 1,815,029 1,458,117 923,542
Other Expense (income):
Interest expense........................ 8,171 4,608 4,466 2,629
Other (income), net..................... (230,853) (155,405) (27,244) (94,161)
------------------ ------------------ ------------------ -------------------
(Loss) before minority interest
in net (loss) of consolidated
subsidiaries and income taxes......... (1,756,129) (49,084) (730,779) (61,392)
Minority interest in net losses
of consolidated subsidiaries............ 96,616 27,855 56,066 56,052
------------------ ------------------ ------------------ -------------------
Loss before taxes....................... (1,659,513) (21,229) (674,713) (5,340)
Income taxes............................ 2,400 1,600 0 800
------------------ ------------------ ------------------ -------------------
NET LOSS............................... $ (1,661,913) $ (22,829) $ (674,713) $ (6,140)
Other comprehensive gain (loss),
net of tax
Unrealized (loss) gain on available
for sale securities................... (2,735) 21,772 (4,954) 18,406
------------------ ------------------ ------------------ -------------------
Comprehensive (loss) income............. $ (1,664,648) $ (1,057) $ (679,667) $ 12,266
================== ================== ================== ===================
Per share data:
Net loss, basic......................... $ (.37) $ (.01) $ (.15) $ (.00)
Net loss, diluted....................... $ (.37) $ (.01) $ (.15) $ (.00)
================== ================== ================== ===================
</TABLE>
2
<PAGE>
<TABLE>
BIOMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
(UNAUDITED)
(CONTINUED)
<CAPTION>
Six Months Ended Three Months Ended
November 30 November 30
1999 1998 1999 1998
------------------ ------------------ ------------------ -------------------
<S> <C> <C> <C> <C>
Weighted average number of common
and common equivalent shares:
Basic and diluted.................... 4,501,766 3,969,513 4,534,522 3,971,552
================== ================== ================== ===================
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
<TABLE>
BIOMERICA, INC.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
<CAPTION>
November 30,
1999
-----------------
Assets
<S> <C>
Current Assets
Cash and cash equivalents...................................................$ 2,600,509
Available for-sale securities............................................... 103,711
Accounts receivable, less allowance for doubtful accounts................... 1,491,090
Inventory................................................................... 3,116,759
Notes receivable............................................................ 30,994
Prepaid expenses and other.................................................. 450,265
-----------------
Total Current Assets .................................................. 7,793,328
Inventory, non-current.......................................................... 25,000
Land held for investment........................................................ 46,000
Property and Equipment, less accumulated depreciation and amortization.......... 477,683
Intangible assets, net of accumulated amortization.............................. 409,588
Other Assets.................................................................... 6,756
-----------------
$ 8,758,355
=================
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
<TABLE>
BIOMERICA, INC.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
<CAPTION>
November 30,
1999
-------------------
Liabilities and Shareholders' Equity
<S> <C>
Current Liabilities
Line of credit............................................................. $ 220,000
Accounts payable and accrued liabilities................................... 1,142,971
Accrued compensation....................................................... 279,340
-------------------
Total Current Liabilities............................................. 1,642,311
Minority interest............................................................... 2,246,244
Shareholders' Equity
Common stock............................................................... 362,885
Additional paid-in-capital................................................. 15,385,017
Accumulated other comprehensive loss....................................... (11,514)
Accumulated deficit........................................................ (10,866,588)
-------------------
Total Shareholders' Equity...................................................... 4,869,800
-------------------
Total Liabilities and Equity....................................................$ 8,758,355
===================
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
<TABLE>
BIOMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
Six Months
Ended November 30
1999 1998
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................................. $ (1,661,913) $ (22,829)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization........................................ 125,763 117,805
Realized gain on sale of marketable securities....................... (1,113) (111,885)
Minority interest in net loss of consolidated subsidiaries........... (96,616) (27,855)
Common stock issued for services rendered............................ 16,000 0
Options and warrants issued for services rendered.................... 715,230 3,274
Changes in current assets and liabilities:
Accounts Receivable................................................ 112,167 89,666
Inventories........................................................ (61,664) (401,906)
Prepaid expenses and other current assets.......................... (153,525) 21,204
Accounts payable and other accrued liabilities..................... 128,120 57,290
Accrued compensation............................................... (119,996) (60,933)
---------------- ----------------
Net cash used in operating activities..................................... (997,547) (336,169)
---------------- ----------------
Net cash flows (used in) provided by investing activities:
Disposal of fixed assets............................................. 0 2,309
Purchases of property and equipment.................................. (159,828) (48,977)
Sale of available-for-sale securities................................ 20,417 254,314
Other assets......................................................... 124,073 17,158
Purchases of intangible assets....................................... 0 (76,675)
Decrease (increase) in note receivable............................... 13,491 (12,650)
---------------- ----------------
Net cash (used in) provided by investing activities...................... (1,847) 135,479
---------------- ----------------
Cash flows from financing activities:
Shareholder loan repayment.......................................... 1,000 35,000
Stock repurchase..................................................... 0 (25,064)
Private placement, net of offering costs............................. 1,965,557 0
Net borrowings on line of credit agreement........................... 40,000 100,000
Exercise of stock options............................................ 18,941 1,020
Repurchase of minority interest...................................... (94,800) 737
---------------- ----------------
Net cash provided by financing activities................................. 1,930,698 111,693
---------------- ----------------
Net increase (decrease) in cash and cash equivalents...................... 931,304 (88,997)
---------------- ----------------
Cash at beginning of period............................................... 1,669,205 1,840,575
---------------- ----------------
Cash at end of period..................................................... $ 2,600,509 $ 1,751,578
================ ================
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE>
<TABLE>
BIOMERICA, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1999
Accumulated
Common Stock Other Com-
------------------------- Additional Prehensive Accumu-
Number of Paid-In Income Shareholder Lated
Shares Amount Capital (Loss) Loan (Deficit) Total
----------- ----------- ------------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
May 31, 1999 4,110,445 $ 328,835 $ 12,703,339 $ (8,779) $ (1,000) $ (9,204,675) $ 3,817,720
Private placement, net of
offering costs of $34,443 400,000 32,000 1,933,557 1,965,557
Compensation expense in
connection with options
and warrants granted 715,230 715,230
Change in unrealized
gain (loss) on available (2,735) (2,735)
for sale securities
Shares issued for
Services rendered 8,000 640 15,360 16,000
Exercise of employee
Stock options 17,625 1,410 17,531 18,941
Repayment of
shareholder loan 1,000 1,000
Net loss (1,661,913) (1,661,913)
----------- ----------- ------------- ----------- ----------- ------------- ------------
Balance at
November 30, 1999 4,536,070 $ 362,885 $ 15,385,017 $ (11,514) $ 0 $(10,866,588) $ 4,869,800
=========== =========== ============= =========== =========== ============= ============
Note: The authorized capital stock consists of 10,000,000 shares of common stock, par value $.08 per share.
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS
November 30, 1999
(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, 1999, for a summary of significant accounting policies
utilized by the Company.
(2) 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, 1999, for a description of the investments in
affiliates and consolidated subsidiaries.
(5) Reference is made to Note 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, 1999, for information on commitments and litigation.
(6) Aggregate cost of available-for-sale securities exceeded market value by
approximately $11,514 at November 30, 1999.
(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.
The following table illustrates the required disclosure of the
reconciliation of the numerators and denominators of the basic and
diluted EPS computations.
8
<PAGE>
<TABLE>
<CAPTION>
For the Six Months Ended November 30, 1999
---------------------------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
---------------------- ------------------- --------------------
<S> <C> <C> <C>
Basic EPS -
Loss attributable to common
Shareholders.................................. $ (1,661,913) 4,501,766 $ (.37)
====================
Effect of dilutive securities - Options............. 0
---------------------- -------------------
Diluted EPS -
Loss attributable to common share-
Holders plus assumed conversions.............. $ (1,661,913) 4,501,766 $ (.37)
====================== =================== ====================
For the Six Months Ended November 30, 1998
---------------------------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
---------------------- ------------------- --------------------
Basic EPS -
Loss attributable to common
Shareholders.................................. $ (22,829) 3,969,513 $ (.01)
====================
Effect of dilutive securities - Options............. 0
---------------------- -------------------
Diluted EPS -
Loss attributable to common share-
Holders plus assumed conversions.............. $ (22,829) 3,969,513 $ (.01)
====================== =================== ====================
For the Three Months Ended November 30, 1999
---------------------------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
---------------------- ------------------- --------------------
Basic EPS -
Loss attributable to common
Shareholders.................................. $ (674,713) 4,534,522 $ (.15)
====================
Effect of dilutive securities - Options............. 0
---------------------- -------------------
Diluted EPS -
Loss attributable to common share-
holders plus assumed conversions.............. $ (674,713) 4,534,522 $ (.15)
====================== =================== ====================
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
For the Three Months Ended November 30, 1999
---------------------------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
---------------------- ------------------- --------------------
<S> <C> <C> <C>
Basic EPS -
Loss attributable to common
Shareholders.................................. $ (6,140) 3,971,552 $ (.00)
====================
Effect of dilutive securities - Options............. 0
---------------------- -------------------
Diluted EPS -
Loss attributable to common share-
holders plus assumed conversions.............. $ (6,140) 3,971,552 $ (.00)
====================== =================== ====================
</TABLE>
(8) Financial information about foreign and domestic operations and export sales
is as follows:
<TABLE>
<CAPTION>
For the Six Months Ended
11/30/99 11/30/98
----------- -----------
Revenues from sales to unaffiliated customers:
<S> <C> <C>
United States $2,184,000 $2,369,000
Asia 140,000 243,000
Europe 741,000 880,000
South America 205,000 322,000
Other 500,000 542,000
----------- -----------
$3,770,000 $4,356,000
No other geographic concentrations exist where net sales exceed 10% of total net
sales.
Operating (loss) profit:
United States $(1,739,000) $ (170,000)
Asia (31,000) (15,000)
Europe (108,000) (2,000)
South America (25,000) 2,000
Other (76,000) (15,000)
------------ ------------
$(1,979,000) $ (200,000)
</TABLE>
(9) On June 11, 1999, the Company completed two private placement agreements
to sell and issue a total of 400,000 (50,000 of which were sold to
related parties) shares of the Company'common stock at $5.00 per share.
The Company also issued 8,000 shares of common stock to a consultant for
services rendered.
10
<PAGE>
On June 11, 1999, the Company issued 1,200,000 options to purchase shares
of the Company's common stock to employees and non-employees. The
purchase price of the options is $3.00 per share. The options are
exercisable for a period of ten years. The Company recorded $58,806
related to the fair value of options granted to non-employees.
On June 11, 1999, the Company issued 1,000,000 stock purchase warrants to
an unaffiliated entity for consulting and fund raising services rendered.
The holder was granted the right to purchase common stock at an exercise
price of $3.00 per share through the year 2005. The Company valued these
warrants at $1,362,880. Of this, $588,063 was expensed for consulting
services and $588,063 was recorded as reduction of paid in capital.
On June 11, 1999, the Company entered into a five year Back-End
Processing Agreement with an unaffiliated entity. The unaffiliated entity
will develop customized back-end processing to enable the Company to
process customer prescription orders on-line and insurance claims and
payments. In addition, the unaffiliated entity transferred and assigned
to the Company the right, title and interest in and to the internet
domain name "TheBigRx.com" and all rights to any trademark relating
thereto. The Company issued 410,000 stock purchase warrants for these
services. The holder is granted the right to purchase common stock at an
exercise price of $5.00. The Company valued these warrants at $333,000
and will be expensing them over sixty months. During the six months ended
November 30, 1999, $33,300 of this was expensed.
On June 11, 1999, the Company entered into a Five Year Strategic
Marketing Agreement with TheBigHub.com whereby the BigHub.com will
provide strategic placement of advertising and marketing for Biomerica's
BigRX.com on its website. The Company issued 250,000 stock purchase
warrants for these services. The holder is granted the right to purchase
common stock at an exercise price of $5.00. The Company valued these
warrants at $203,000 and will be expensing them over sixty months. During
the six months ended November 30, 1999, $20,300 of this was expensed.
During the six months ended November 30, 1999, the Company recorded
additional compensation expense of $14,761 related to the amortization of
the fair value of options to purchase common stock previously issued.
Between July 1, 1999 and December 31, 1999, the Company granted 424,000
Options to purchase shares of the Company's common stock to employees.
The purchase price of the options ranges from $2.06 to $3.50 per share.
On June 16, 1999, the Company entered into a Letter of Intent with an
underwriter with respect to a secondary public offering. It is
anticipated the offering will consist of approximately 1,500,000 to
1,700,000 shares of the Company's previously unissued common stock. The
offering price per share will be subject to market and other conditions
at the time of the offering. The Company is currently determining the
best method and timing to access additional funding.
11
<PAGE>
(10) The Year 2000 problem is the result of computer programs being written to
recognize two digits rather than four to define the applicable year. This
causes computer programs to interpret a date using "00" as the year 1900
rather than the year 2000, which could result in computer failures and
miscalculations. The effects of this issue will vary from system to
system and may adversely affect an entity's operations and its ability to
prepare financial statements. The Company has undertaken certain
corrective actions to ensure that our hardware and software systems used
to manage out business are Year 2000 compliant and will continue to
function properly in the year 2000. However, there can be no assurance
that Year 2000 problems will not be encountered or that the costs
incurred to resolve such problems will not be material. Additionally,
there can be no assurance that the Year 2000 problem will not affect the
Company by causing disruptions in the business operations of persons with
whom the Company does business, such as customers or suppliers. Year 2000
problems could have a material adverse effect on the Company.
The Company currently operates a Microsoft-based LAN system upgraded in
1999. Biomerica and AIT have upgraded all accounting related hardware,
the server and the accounting software. Year 2000 costs to date have been
immaterial and are not expected to be material in the future. The
accounting and record-keeping software that is employed is actively
supported by the developer vendor and is in wide use.
Historically the Company has not placed orders electronically, nor does
the Company make disbursements to vendors or employees in that medium.
However, the Company anticipates establishing such orders with vendors in
the future. The Company has no way of knowing how the Year 2000 may
affect its various vendors in their ability to ship products or its
customers in their ability to purchase products. The Company believes
that the Year 2000 issue will not have a material impact on our internal
data records.
The Company has conducted a vendor and service provider compliance survey
to determine which of the companies we deal with are addressing the Year
2000 issue and the progress they are making on it. No responses received
by the Company's vendors and-or service providers indicate that their
Year 2000 issues will adversely affect the Company.
However, if the necessary providers of power, communications and other
such providers of important services are not fully prepared for the Year
2000, the Year 2000 could have a material impact on the Company. The
Company has no way of knowing how the Year 2000 will affect Internet
functions and if Internet functions are interrupted, there could be a
material impact on the Company.
AIT outsources its computer needs to Biomerica. Lancer has upgraded its
accounting and MRP software for its main frame computer system to be Year
2000 compliant. This software is actively supported by the developer.
Lancer does not anticipate incurring significant additional costs to be
completely Year 2000 compliant.
As of January 11, 2000, the Company has not experienced any Year 2000
related problems internally and is not aware of any Year 2000 problems
with vendors, customers or external Internet functions. However, the
Company has no way of knowing whether there will be any future problems
related to the Year 2000 issue and cannot guarantee that these would not
have an adverse affect on the Company.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND SELECTED FINANCIAL DATA
EXCEPT FOR HISTORICAL INFORMATION CONTAINED HEREIN, THE STATEMENTS IN THIS
DISCUSSION AND ANALYSIS ARE FORWARD-LOOKING STATEMENTS THAT ARE MADE PURSUANT TO
THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995. FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS AND
UNCERTAINTIES WHICH MAY CAUSE THE COMPANY'S ACTUAL RESULTS IN FUTURE PERIODS TO
DIFFER MATERIALLY FROM FORECASTED RESULTS. THESE RISKS AND UNCERTAINTIES
INCLUDE, AMONG OTHER THINGS, THE CONTINUED DEMAND FOR THE COMPANY'S PRODUCTS,
THE ABILITY OF THE COMPANY TO DEVELOP AND MARKET NEW PRODUCTS, AVAILABILITY OF
RAW MATERIALS, YEAR 2000 ISSUES AND THE STATE OF THE ECONOMY. THESE AND OTHER
RISKS ARE DESCRIBED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB AND IN THE
COMPANY'S OTHER FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.
RESULTS OF OPERATIONS
The quarter ending November 30, 1999 and subsequent month and a half period
to the release of this Form 10-QSB included the following accomplishments:
o We completed a clearly defined plan and strategy for our
business-to-business e-healthcare division. We plan to be the
first company to combine a proprietary point-of-care medication
management system (ReadyScript(R)) with an online drugstore
(TheBigRX.com(R)) designed to meet the needs of the physician,
patient, health plan and pharmacy. As part of drafting that
business plan, we completed and filed a Registration Statement as
the first step of our efforts to raise additional funds for the
development and marketing of our medication management system.
o We completed hiring a capable and experienced core management
team and staff for our new e-healthcare division.
o We strengthened and expanded our board of directors.
o We made significant strides in the development and marketing of
our ReadyScript medication management system. The ReadyScript
system will allow physicians to generate and electronically send
prescriptions via the Internet to retail, mail order and Internet
pharmacies and managed care organizations. We have completed a
demonstration version and are actively using it to market our
prescription automation solution to medical groups. The product
is still in development and is expected to be ready for beta
deployment in the first half of calendar year 2000.
o We launched a retail online drugstore (www.thebigrx.com) in
December 1999. The launch occurred within the timeframe we had
previously announced and was achieved at a cost significantly
below that spent by any other public company launching an online
drugstore. We initiated a "soft" launch of TheBigRX.com without
any special promotion in order to obtain feedback on light
traffic volumes in preparation for heavier volumes. We expect
that a greater level of traffic and promotion originating from
our business-to-business strategy, including affiliations with
medical groups, will begin to have an effect as early as March
2000.
13
<PAGE>
o We launched the TheBigRX.com without the prescription component.
We are in the process of obtaining all necessary regulatory
approvals to provide prescription medication in all fifty states.
We expect to have that process complete and launch the
prescription portion of the store at approximately the same time
as the implementation of the beta release of ReadyScript.
o We redesigned our corporate website at www.biomerica.com. This
site includes a summary of our e-commerce strategy.
o We made strides in marketing EZ Detect in conjunction with the
upcoming March 2000 National Colorectal Cancer Awareness Month.
We expect significant increases in EZ Detect sales will result
during the Company's fourth quarter.
Consolidated net sales for Biomerica were $3,770,328 for the six months
ended November 30, 1999 as compared to $4,356,323 for the same period in the
previous year. This represents a decrease of $585,995 (13%). For the quarter
then ended, sales were $1,945,744 as compared to $2,200,318 in the previous
year. This represents a decrease of $254,574 (12%). Lancer Orthodontics (Lancer)
had decreased sales of $415,606 for the six months and $146,848 for the quarter
compared to the previous year. The sales decrease at Lancer was primarily
attributable to decreased foreign sales due to decreased sales in Europe and
South America. Within the U.S., sales were lower due to increased discounting as
a result of competitive pressures. Biomerica sales decreased for the six months
ended by $175,785 as compared to the six month period of the previous fiscal
year and by $109,478 for the three month period. This decrease was primarily due
to decreases in foreign sales. Allergy Immuno Technologies had a increase in
sales of $5,396 for the six months and of $1,752 for the three month period.
Cost of sales decreased for the six months by $224,017 (8%) and decreased
by $188,516 (13%) for the quarter. Lancer had cost of sales as a percentage of
sales of 66% for the six months and 62% for the quarter. At Lancer the six
months increase was primarily attributable to fixed production costs not being
absorbed into inventory due to decreased demand and the three months decrease
was attributable to a decrease in production labor costs. Biomerica had cost of
goods as a percentage of sales of 66% for the six months of fiscal 2000 as
compared to 63% for the six months of fiscal 1999. Cost of sales as a percentage
of sales for the three months of fiscal 2000 compared to fiscal 1999 were 67%
and 63%, respectively. The increases were attributable to lower sales in
relation to fixed costs.
Selling, general and administrative expenses increased for the six months
by $1,315,377 (83%) and increased for the three months by $468,056 (58%).
Lancer's expenses increased $10,097 and decreased by $4,882 for the six and
three month periods, respectively. Expenses at Biomerica increased by $1,240,200
and $453,182 for the six and three month periods due to expenses related to
theBigRx division. Included in this are non-cash expenses in connection with
issuance of options and warrants to strategical partners of $715,230 and $27,450
for the six and three months, respectively. AIT had increased expenses of
$65,080 and $19,756 for the six and three month periods due to increased legal
and accounting costs associated with new filings required by the Securities and
Exchange Commission for bulletin board companies. In addition, AIT had higher
payroll costs associated with business development.
14
<PAGE>
Research and development for the six months increased from $229,634 to
$331,209 or $101,575 (44%) and for the three months from $114,182 to $180,701,
or $66,519 (58%). For the six months, Lancer had increased product development
costs of $37,783 and for the three months of $13,440 due to the development of a
dental amalgam. Biomerica had increased expenses of $63,792 for the six months
and $53,079 for the quarter primarily due to development costs for the
ReadyScript software.
Interest expense increased by $3,563 (77%) for the six months and by $1,837
(70%) for the three months due to increased debt and interest rates at Lancer.
LIQUIDITY AND CAPITAL RESOURCES
As of November 30, 1999, the Company had cash and available-for-sale
securities in the amount of $2,704,220, and working capital of $6,151,017.
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.
At November 30, 1999, Lancer had a $800,000 line of credit with a bank.
Borrowings are made at prime plus 1.25% (9.5% at November 30, 1999) and are
limited to specified percentages of eligible accounts receivable. The unused
portion available under the line of credit at November 30, 1999 was $121,464.
The line of credit is collateralized by substantially all the assets of
Lancer, including inventories, receivables, and equipment. The lending agreement
for the line of credit requires, among other things, that Lancer maintain a
tangible net worth of $2,800,000 and a debt to tangible net worth ratio of no
more than 1 to 1. Lancer is not required to maintain compensating balances in
connection with this lending agreement.
15
<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
October 25, 1999. The matters voted on were set forth in the
proxy statement dated September 15, 1999, as filed with the
Securities and Exchange Commission pursuant to Rule 14 under the
Securities Exchange Act of 1934. The following summarizes the
voting on each matter:
Proposal No. 1: Election of Directors
Name Yes Vote Withheld
---- --- -------------
Dr. Carlos St. Aubyn Beharie 3,519,651 295,977
David Burrows 3,602,093 213,535
Dr. Francis Cano 3,602,493 213,135
Zackary S. Irani 3,614,200 201,428
Dr. Philip Kaplan* 3,604,700 210,928
Janet Moore 3,614,475 201,153
Dr. Robert Orlando 3,606,400 209,228
*Dr. Philip Kaplan passed away in October, 1999, prior to the Annual Meeting.
Accordingly, as explained in the proxy statement, the proxy was voted for a
nominee designated by the Board of Directors. This nominee was Allen Barbieri.
Proposal No. 2: Approval of Amendment to the Company's Certificate of
Incorporation To Change the Company's Name to TheBigRX.com, Inc.
Yes No Abstain
--- -- -------
3,573,087 178,147 64,394
16
<PAGE>
Proposal No. 3: Approval of Amendment to the Company's Certificate of
Incorporation To Increase the Authorized Common Stock of the Company
Yes No Abstain
--- -- -------
3,421,017 329,937 64,674
<TABLE>
<CAPTION>
Proposal No. 4: Approval of Amendment to the Company's Certificate of
Incorporation To Authorize Issuance of Preferred Stock
Yes No Abstain Broker Non-Votes
--- -- ------- ----------------
<S> <C> <C> <C>
1,242,902 367,916 134,686 2,085,124
</TABLE>
Proposal No. 5: Approval of Restatement of the Company's Certificate of
Incorporation
Yes No Abstain
--- -- -------
3,530,561 228,262 56,805
<TABLE>
<CAPTION>
Proposal No. 6: Approval of 1999 Stock Incentive Plan
Yes No Abstain Broker Non-Votes
--- -- ------- ----------------
<S> <C> <C> <C>
1,368,517 253,916 123,071 2,085,124
</TABLE>
According to the provisions indicated in the Proxy Statement, all proposals were
adopted.
Item 5. OTHER INFORMATION. Inapplicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K. None.
17
<PAGE>
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 14, 2000
BIOMERICA, INC.
By: /S/ Zackary S. Irani
------------------------
Zackary S. Irani, President
and Chief Executive Officer
18
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-START> JUN-01-1999
<PERIOD-END> NOV-30-1999
<CASH> 2,600,509
<SECURITIES> 103,711
<RECEIVABLES> 1,685,484
<ALLOWANCES> 194,394
<INVENTORY> 3,116,759
<CURRENT-ASSETS> 7,793,328
<PP&E> 3,316,451
<DEPRECIATION> 2,838,768
<TOTAL-ASSETS> 8,758,355
<CURRENT-LIABILITIES> 1,642,311
<BONDS> 0
0
0
<COMMON> 362,885
<OTHER-SE> 4,506,915
<TOTAL-LIABILITY-AND-EQUITY> 8,758,355
<SALES> 3,770,328
<TOTAL-REVENUES> 3,770,328
<CGS> 2,517,158
<TOTAL-COSTS> 2,517,158
<OTHER-EXPENSES> 3,231,981
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,171
<INCOME-PRETAX> (1,659,513)
<INCOME-TAX> 2,400
<INCOME-CONTINUING> (1,661,913)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,661,913)
<EPS-BASIC> (.37)
<EPS-DILUTED> (.37)
</TABLE>
