Biomerica, Inc. — FY2023 Form 10-K Summary
Reporting period: Fiscal year ended May 31, 2023, compared with fiscal 2022. This is an annual report, not a calendar-year 2022 or standalone fourth-quarter filing. The consolidated financial statements received an unqualified audit opinion.
Business context
Biomerica develops and sells diagnostic tests for clinical laboratories, physician offices and over-the-counter markets. Its strategic focus is InFoods, a diagnostic-guided therapy platform intended to identify foods that may aggravate IBS symptoms. In fiscal Q4 2023, the company began offering InFoods IBS as a laboratory-developed test through a CAP-accredited, high-complexity CLIA laboratory; it was initially cash-pay, without insurance reimbursement. The company is also developing an H. pylori test and awaiting FDA review following requested additional testing.
Financial performance and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Net sales | $5.339 million | $18.871 million |
| Gross profit (gross margin) | $0.446 million (8.4%) | $2.977 million (15.8%) |
| Operating expenses | $7.669 million | $7.511 million |
| Operating loss | $7.223 million | $4.534 million |
| Net loss | $7.140 million | $4.531 million |
| Net loss per share | $0.50 | $0.36 |
| Cash used in operating activities | $5.474 million | $0.479 million |
| Cash and cash equivalents at year-end | $9.719 million | $5.917 million |
| Working capital at year-end | $10.852 million | $7.416 million |
Cash provided by financing activities was $9.390 million, primarily from equity sales. The company had $1.082 million of operating lease liabilities at year-end; the filing reports no off-balance-sheet arrangements. Accumulated deficit was $42.217 million. Management stated that available cash was expected to fund operations and strategic objectives through at least August 2024; it may seek further debt or equity financing thereafter.
Changes versus FY2022
- Revenue fell 72%, principally as COVID-19 test sales declined by $13.950 million. COVID-related tests represented about 4% of FY2023 sales versus 75% in FY2022; none were sold in FY2023’s fourth quarter.
- Non-COVID sales were comparatively steadier: clinical-laboratory revenue rose 8% to $3.310 million, OTC revenue rose 7% to $1.169 million, and contract-manufacturing revenue rose 33% to $0.610 million. Physician-office revenue fell from $14.259 million to $0.250 million, reflecting the prior-year COVID-related sales concentration.
- Cost of sales declined 69% but remained 92% of revenue, compared with 84% in FY2022; the resulting gross margin compressed to 8.4% from 15.8%.
- SG&A increased 7% to $6.085 million, including $350,000 of legal expense and a $290,000 non-recurring bad-debt write-off related to COVID-19 sales. R&D decreased 13% to $1.584 million, primarily due to lower COVID-19 product development costs.
- Operating cash use increased to $5.474 million from $0.479 million. Equity financing increased cash balances, but also expanded shares outstanding: the March 2023 offering sold 3,333,333 shares at $2.40 per share and generated approximately $7.3 million net; ATM sales also raised approximately $1.961 million net during FY2023.
Outlook, risks and notable items
- Management expects R&D spending to remain consistent in upcoming quarters. InFoods IBS’s FDA pivotal-trial protocol was still being developed; the company had not yet obtained FDA clearance. The LDT launch is distinct from FDA clearance, and management was pursuing reimbursement discussions.
- The company reported statistically significant improvements across multiple endpoints in its earlier InFoods IBS endpoint study. The filing describes these as top-line findings; a pivotal trial and FDA review remain important milestones.
- The H. pylori test’s 510(k) application remained under FDA review, pending an additional set of in-house validation tests requested by the FDA. The company anticipated international-channel revenue during 2024, subject to execution and demand.
- On August 3, 2023, after fiscal year-end, Biomerica announced a CVS Pharmacy agreement to offer its EZ Detect colorectal screening test at approximately 7,000 stores, with store availability projected for September. Sales contribution was not quantified.
- Revenue and credit exposure are concentrated: one distributor accounted for 35% of FY2023 sales and 36% of year-end gross receivables; the receivables concentration was owed by an Asian distributor. Asia generated 38% of FY2023 revenue.
- Key risks include recurring losses and operating cash burn, reliance on future financing and potential shareholder dilution, product acceptance and reimbursement, clinical-trial and regulatory uncertainty, EU IVDR compliance deadlines, international and China-related exposure, inflation and supply-chain costs, and inventory demand/obsolescence estimates. Inventory reserves were $672,000, approximately 25% of gross inventory; COVID-19 antibody inventory was fully reserved.
- No legal proceedings were pending at May 31, 2023. Management assessed disclosure controls and internal control over financial reporting as effective; the auditor did not provide an internal-control attestation.
Important facts for investors to verify
- Progress, cost, timing and FDA feedback for the InFoods IBS pivotal trial, and whether the LDT offering achieves meaningful physician adoption and reimbursement.
- FDA clearance timing and commercial prospects for the H. pylori test, including whether the anticipated 2024 international sales materialize.
- CVS launch timing, distribution coverage, sell-through and revenue contribution for EZ Detect.
- Cash burn and cash runway relative to management’s August 2024 estimate, including any additional financing, dilution or changes in spending.
- Distributor concentration, collectability of the Asian receivable, gross-margin recovery and the adequacy of inventory and bad-debt reserves.