Business context and reporting period
Biomerica, Inc. is a diagnostics and biomedical technology company focused on clinical laboratory, point-of-care and over-the-counter products. This Form 10-Q covers the fiscal second quarter and six months ended November 30, 2022; comparisons are with the corresponding 2021 periods.
The company is developing its InFoods IBS diagnostic-guided therapy product and other diagnostic tests. COVID-19 test sales declined sharply and accounted for approximately 13% of six-month revenue, versus 57% a year earlier.
Financial results and position
| Metric | Three months ended Nov. 30, 2022 | Six months ended Nov. 30, 2022 |
|---|---|---|
| Revenue | $1.482 million | $3.119 million |
| Gross profit / margin | $352,000 / 23.7% | $297,000 / 9.5% |
| Operating loss | $1.666 million | $3.736 million |
| Net loss | $1.626 million; $0.12 per share | $3.698 million; $0.28 per share |
| Operating cash flow | Cash used: $2.787 million |
Six-month revenue fell 47% year over year, while revenue excluding COVID-19 products increased 15% to $2.709 million. Cash and equivalents were $5.067 million at November 30, down from $5.917 million at May 31. Working capital was $6.335 million. Current assets were $8.099 million and current liabilities $1.763 million.
No conventional borrowings are reported. Lease liabilities totaled $1.248 million, including $347,000 current and $901,000 noncurrent. Shareholders’ equity was $7.243 million; accumulated deficit was $38.775 million.
Material changes versus prior periods
- Quarterly revenue fell 68%, mainly due to lower demand for physician’s-office COVID-19 products in Asia; six-month revenue fell 47% for the same reason.
- Clinical laboratory sales increased 34% for the six months, and over-the-counter sales increased 11%; physician’s-office sales declined 93%.
- Six-month gross margin declined to 9.5% from 11.6%; quarterly gross margin improved to 23.7% from 16.6%.
- Six-month SG&A increased 32% to $3.210 million, including higher bad-debt expense, patent-related legal expense and consulting costs. R&D declined 11% to $823,000, primarily from reduced COVID-19 research.
- Accounts receivable allowance rose to $522,000 from $153,000, with bad-debt expense linked particularly to a Vietnam customer. The company raised $1.936 million net through its at-the-market (ATM) stock offering and option exercises; common shares outstanding increased to 13,479,413 from 12,867,924.
Outlook, risks and other matters
- Management expected to begin generating InFoods IBS revenue in fiscal Q3 ending February 28, 2023, initially through a CLIA-certified laboratory as a laboratory-developed test while preparing a pivotal trial and pursuing FDA clearance. Timing and commercial adoption remain uncertain.
- The company was responding to FDA follow-up requests for its H. pylori test 510(k) submission; U.S. marketing depends on clearance.
- Management stated existing cash and potential ATM proceeds should fund operations through at least February 2024. Approximately $9.4 million remained available under the ATM prospectus supplement. The company had an accumulated deficit and negative operating cash flow and may need future financing.
- Management cited continuing pandemic- and Ukraine war-related risks, including supply-chain disruption, inflation, shipping challenges and customer credit risk. Sales and receivables were concentrated: key customers accounted for 44% of six-month sales, and two foreign customers represented 75% of gross receivables at period-end. Approximately $4.825 million of cash was uninsured.
- There were no legal proceedings pending at November 30, 2022 and no off-balance-sheet arrangements. Management reported disclosure controls effective at the reasonable-assurance level and no material changes in internal control over financial reporting.
Important facts for investors to verify
- Whether InFoods IBS launches as planned, generates meaningful revenue, and progresses through pivotal-trial and FDA-clearance steps.
- Whether revenue excluding COVID-19 products continues growing and can support improved gross margins and lower operating losses.
- Collectability of the Vietnam-related receivables and the adequacy of the allowance for doubtful accounts.
- Operating cash burn, available ATM capacity, potential share dilution, and the assumptions behind management’s funding runway.
- Customer and geographic concentration, uninsured cash exposure, and continuing supply-chain and geopolitical risks.