Biomerica(BMRA) - 2019 Q2 - Quarterly Report

PART I: Financial Information Financial Statements The company reported increased net losses for both periods, with total assets slightly up and cash used in operations significantly higher Condensed Consolidated Statements of Operations and Comprehensive Loss Net sales decreased and net loss widened for both periods, with the six-month net loss nearly doubling Consolidated Statement of Operations Highlights (Unaudited) | Metric | Three Months Ended Nov 30, 2018 | Three Months Ended Nov 30, 2017 | Six Months Ended Nov 30, 2018 | Six Months Ended Nov 30, 2017 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $1,500,791 | $1,613,636 | $2,773,661 | $3,058,119 | | Gross Profit | $408,060 | $506,191 | $745,283 | $1,020,762 | | Loss from Operations | ($485,937) | ($288,738) | ($940,723) | ($514,766) | | Net Loss | ($477,244) | ($268,661) | ($928,984) | ($475,720) | | Basic & Diluted Net Loss per Share | ($0.05) | ($0.03) | ($0.10) | ($0.06) | Condensed Consolidated Balance Sheets Total assets slightly increased to $5.43 million, driven by higher accounts receivable, while cash decreased and equity modestly rose Consolidated Balance Sheet Highlights | Metric | Nov 30, 2018 (Unaudited) | May 31, 2018 (Audited) | | :--- | :--- | :--- | | Cash and cash equivalents | $1,124,914 | $1,204,903 | | Accounts receivable, net | $1,260,547 | $799,940 | | Inventories, net | $2,115,041 | $2,178,777 | | Total current assets | $4,687,511 | $4,484,029 | | Total Assets | $5,428,762 | $5,222,582 | | Total current liabilities | $1,016,750 | $896,808 | | Total Shareholders' Equity | $4,412,012 | $4,325,774 | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities significantly increased, largely offset by financing activities, leading to an overall cash decrease Consolidated Statement of Cash Flows Highlights (Unaudited) | Metric | Six Months Ended Nov 30, 2018 | Six Months Ended Nov 30, 2017 | | :--- | :--- | :--- | | Net cash used in operating activities | ($1,001,068) | ($363,350) | | Net cash used in investing activities | ($85,017) | ($52,923) | | Net cash provided by financing activities | $1,011,902 | $13,789 | | Net decrease in cash and cash equivalents | ($79,989) | ($407,652) | | Cash and cash equivalents at end of period | $1,124,914 | $817,810 | Notes to Condensed Consolidated Financial Statements The notes detail accounting policies, customer and vendor concentrations, recent equity financing, geographic sales, and subsequent stock option grants - The company faces significant customer and vendor concentration risk, with one customer accounting for 44.7% of sales and two vendors for 33.8% of raw material purchases for the six months ended November 30, 2018[14] - The company raised approximately $927,600 in net proceeds from its At Market Issuance Sales Agreement to fund research and development and operations[32] Revenues by Geographic Region (Six Months Ended Nov 30) | Region | 2018 | 2017 | | :--- | :--- | :--- | | United States | $282,000 | $325,000 | | Asia | $1,320,000 | $1,494,000 | | Europe | $914,000 | $1,069,000 | | South America | $127,000 | $103,000 | | Middle East | $131,000 | $61,000 | | Total | $2,774,000 | $3,058,000 | - Subsequent to quarter end, the company granted 385,000 stock options, sold 33,390 common shares for $87,332 net proceeds, and saw 2,000 option exercises[35] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 9.3% net sales decrease, increased cost of sales, higher R&D expenses, and plans for continued equity financing - Net sales for the six months ended November 30, 2018, decreased by 9.3% to $2.77 million from $3.06 million, primarily due to lower contract manufacturing and reduced sales to China and Europe[39] - As of November 30, 2018, the company had a sales order backlog of approximately $798,000, expected to be shipped in the third fiscal quarter[39] - Cost of sales as a percentage of sales increased from 66.6% to 73.1% for the six-month period, driven by higher material costs, scrap, and fixed costs relative to lower sales[39] - Research and development expenses for the six-month period increased by 37.8% ($212,164), primarily due to higher legal expenses for intellectual property filings[41] - The company's working capital was $3.67 million as of November 30, 2018, with management planning to raise additional funds via its At Market Issuance Agreement for operations and R&D[42] Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, the company is not required to provide market risk disclosures - As a smaller reporting company, Biomerica is not required to provide quantitative and qualitative disclosures about market risk[44] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes in internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at the 'reasonable assurance' level[45] - No material changes in internal control over financial reporting occurred during the last fiscal quarter[45] PART II: Other Information Legal Proceedings The company reported no legal proceedings during the period - No legal proceedings are reported[46] Risk Factors The company highlights risks including competitive pressures, regulatory dependency, supply chain interruptions, and financial risks from sales concentration - Key business risks include the ability to remain competitive, develop new products, and obtain necessary funding for development[46] - The business is subject to significant regulation, where delays or failures in obtaining approvals could negatively impact operations[46] - Operational risks include interruptions in raw material supply, loss of key personnel, and competition from larger companies with greater financial resources[46][47] - Financial risks include concentration of sales with certain distributors, potentially leading to reduced sales if lost, and high accounts receivable balances from these customers[47] Unregistered Sales of Equity Securities & Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - No unregistered sales of equity securities or use of proceeds were reported[48] Other Information The Annual Meeting of Stockholders was held on December 12, 2018, with results detailed in a Form 8-K filing - The Annual Meeting of Stockholders was held on December 12, 2018[48] Exhibits This section lists exhibits filed with the report, including Sarbanes-Oxley certifications and interactive data files - Exhibits filed include CEO and CFO certifications under Sarbanes-Oxley Act sections and XBRL interactive data files[49]