Business Context and Reporting Period
Biomerica, Inc. develops and sells diagnostic and therapeutic products through clinical laboratories, physician offices, and over-the-counter channels. This 10-Q covers the three months ended August 31, 2023, the company’s fiscal first quarter of FY2024—not calendar Q1 2023.
The company’s strategic focus includes its inFoods IBS diagnostic-guided therapy product. It also sells other diagnostic products internationally. COVID-19 product sales were zero in the quarter; all reported revenue came from non-COVID products.
Financial Results and Liquidity
| Metric | Three months ended Aug. 31, 2023 | Prior-year period |
|---|---|---|
| Net sales | $1.713 million | $1.637 million |
| Gross profit (loss) | $412,000 | $(55,000) |
| Gross margin | 24% | (3%) |
| Operating expenses | $1.644 million | $2.015 million |
| Operating loss | $(1.232) million | $(2.070) million |
| Net loss | $(1.132) million | $(2.072) million |
| Basic and diluted loss per share | $(0.07) | $(0.16) |
| Cash used in operating activities | $1.674 million | $1.573 million |
Cash and cash equivalents were $7.988 million at August 31, 2023, down from $9.719 million at May 31, 2023. Working capital was $9.828 million, versus $10.852 million. Investing activities used $63,000; financing activities provided no cash. The company reported $2.451 million of total liabilities, consisting primarily of operating lease liabilities totaling $1.011 million; the filing reports no debt borrowings.
Material Changes Versus the Prior Comparable Period
- Sales increased 5% year over year. Clinical laboratory revenue rose 12% and over-the-counter revenue rose 42%; physician-office revenue declined 98%, partly reflecting lower COVID-product sales.
- Gross profit improved from a loss as cost of sales fell to 76% of revenue from 107%, primarily due to lower COVID-product volume and related inventory write-offs.
- SG&A declined 29%, primarily due to lower bad-debt expense, share-based compensation, and legal expense. R&D increased 31%, mainly from higher R&D wages.
- Net loss narrowed by about 45%, aided by improved gross profit, lower SG&A, and $123,000 of interest and dividend income. Operating cash use nevertheless increased from $1.573 million to $1.674 million.
Outlook, Risks, and Other Items
- Management expects material revenue growth from the inFoods IBS launch in coming quarters, following launch with a large GI physician group and the hiring of an internal sales force. This is a forward-looking expectation, not a reported result.
- Management stated that existing cash and the ability to raise additional equity funding were expected to fund operations through at least November 2024. A new shelf registration statement, effective September 29, 2023, permits sales of up to $20 million of equity securities through September 2026; future issuance could dilute shareholders.
- After quarter-end, Biomerica submitted additional H. pylori test data requested by the FDA for its 510(k) review. Clearance was not yet reported; the company said it intended to market the product in the U.S. once cleared and anticipated potential revenue in 2024.
- Revenue and collections are concentrated: one foreign customer accounted for 59% of quarterly sales and 67% of gross receivables at August 31. One vendor represented 47% of accounts payable. International sales and reliance on suppliers also expose the company to geopolitical, supply-chain, shipping, and economic disruptions.
- The company continues to incur losses and negative operating cash flow and has an accumulated deficit of $43.3 million. It cautioned that quarterly results may not indicate full-year results. There were no legal proceedings pending at August 31, 2023, and no material changes to the risk factors in its FY2023 10-K.
Important Facts for Investors to Verify
- Whether inFoods IBS adoption by additional GI practices converts into sustained, material revenue.
- The FDA’s decision and timing on the H. pylori 510(k), and any resulting U.S. commercialization or sales.
- Cash burn, collections from the concentrated foreign customer base, and the company’s ability to fund operations beyond management’s stated runway.
- Whether future equity financing is used and its potential effect on share count and shareholder dilution.
- Sales mix and gross margin trends, including the effect of lumpy orders and the absence of COVID-related revenue.