Biomerica, Inc. — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended November 30, 2023; filed January 16, 2024. Biomerica develops and sells diagnostic products, with a strategic focus on its inFoods IBS diagnostic-guided therapy platform.
Financial performance
| Metric | Three months ended Nov. 30, 2023 | Prior-year quarter | Six months ended Nov. 30, 2023 | Prior-year six months |
|---|---|---|---|---|
| Net sales | $1.567 million | $1.482 million | $3.281 million | $3.119 million |
| Gross profit | $325,000 | $352,000 | $740,000 | $297,000 |
| Gross margin | 20.7% | 23.8% | 22.6% | 9.5% |
| Operating loss | $1.608 million | $1.666 million | $2.839 million | $3.736 million |
| Net loss | $1.507 million | $1.626 million | $2.639 million | $3.698 million |
| Basic and diluted loss per share | $0.09 | $0.12 | $0.16 | $0.28 |
| Cash used in operating activities | Not presented quarterly | $2.516 million | $2.786 million |
At November 30, cash and cash equivalents were $7.134 million, working capital was $8.443 million, and current assets were $10.265 million versus current liabilities of $1.822 million. Total liabilities were $2.448 million, including $937,000 of operating lease liabilities; the filing reports no other borrowings. Cash declined $2.585 million from May 31. Investing activities used $75,000 and financing activities provided no cash during the six-month period.
Changes versus comparable periods
- Quarterly sales rose 6% year over year; six-month sales rose 5%. Growth reflected food-intolerance products and contract manufacturing, partly offset over six months by lower physician-office sales associated with COVID products.
- Quarterly gross profit fell $27,000 and gross margin declined about 3.1 percentage points, as cost of sales grew faster than sales. Six-month gross profit increased $443,000 and gross margin improved about 13.1 points, largely because COVID-related product costs were lower.
- Operating expenses declined 4% for the quarter and 11% for six months. Lower bad-debt expense, share-based compensation and legal expense were important contributors; marketing and sales costs increased.
- There were no COVID-19 product sales in the six months ended November 30, 2023. The prior-period comparison includes COVID-related sales and costs.
Outlook, risks and other notable items
- Management expects inFoods IBS revenue to grow in coming quarters as it adds gastroenterology physician groups. The test is offered as a laboratory-developed test through a CLIA-certified, CAP-accredited laboratory. A possible final pivotal trial has no start date set; FDA clearance for inFoods IBS was not reported.
- On December 18, 2023, after quarter-end, the FDA cleared the company’s H. pylori stool antigen test for U.S. sale. The company began marketing it domestically and expects to pursue international distribution.
- Management stated cash resources and potential equity financing should support operations through at least February 2025. The company continues to incur losses and negative operating cash flow and may seek additional debt or equity financing to fund operations beyond the near term. A $20 million shelf registration became effective in September 2023; no shares were sold under it in the six months reported.
- Revenue and receivables are concentrated: one Asian customer accounted for 49% of six-month sales, and two foreign customers represented 64% of gross receivables at period-end. Five vendors supplied 76% of raw-material purchases during the six-month period.
- The filing cites potential exposure to supply-chain disruption, inflation, geopolitical events, customer and international-market risks. Management reported no material change to the risk factors in its 2023 Form 10-K, no material legal proceedings, and no off-balance-sheet arrangements. Disclosure controls were considered effective.
Important facts for investors to verify
- Whether inFoods IBS adoption, physician-group onboarding and resulting revenue develop as management expects.
- Commercial uptake and revenue contribution from the newly FDA-cleared H. pylori test, including timing of international sales.
- Cash burn, financing needs and the assumptions supporting management’s stated runway through February 2025.
- Customer and supplier concentration, collection of receivables, and the effect of fluctuating or infrequent orders on sales.
- Whether improved six-month gross margin is sustainable given the prior-period impact of COVID-related products and costs.