What changed in this filing

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Item 9A. Controls and Procedures

2023-08-25 compared with 2022-08-29 · 823 added, 637 removed, 205 unchanged (88% of the section changed)

CONTROLS AND PROCEDURES

Attached as exhibits to this Form 10-K are certifications of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) that are required in accordance with Rule 13a-14 of the Exchange Act.

This “Disclosure Controls and Procedures” section includes information concerning the controls and controls evaluation referred to in the certifications.

EVALUATION OF DISCLOSURE CONTROLS

Our management evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act as of the end of the period covered by this report.

Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

The disclosure controls and procedures have been designed to provide reasonable assurance of achieving their objectives and the CEO and CFO have concluded that our disclosure controls and procedures are effective at the “reasonable assurance” level.

Based on that evaluation the CEO and CFO concluded that information required to be disclosed in the reports that we file and submit under the Exchange Act is (1) recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms;

and (2) accumulated and communicated to the Company’s management, including its CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Company management, including the CEO and CFO concluded that, as of May 31, 2022, the Company's internal control over financial reporting was effective.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There have been no changes in our internal control over financial reporting identified in connection with the evaluation that occurred during the quarter ended May 31, 2022, that have materially affected, or that are reasonably likely to affect, our internal control over financial reporting.

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Company management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934.

The Company's internal control over financial reporting is designed to provide reasonable assurance to the Company's management and Board of Directors regarding the reliability of financial reporting and the preparation and fair presentation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

A Company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the consolidated financial statements.

The effectiveness of any system of internal control over financial reporting is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures.

Because of these inherent limitations, internal control over financial reporting cannot provide absolute assurance regarding the reliability of financial reporting and may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Company management, with the participation of the CEO and the CFO, evaluated the effectiveness of the Company's disclosure controls and procedures as defined in Rules 13(a)-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of the end of the period covered by this report.

In making this assessment, Management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework (2013).

Based on this assessment, management, with the participation of the CEO and CFO, believes that, as of May 31, 2022, the Company's internal control over financial reporting was effective based on those criteria.

Company management will continue to monitor and evaluate the effectiveness of its disclosure controls and procedures and its internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing improvements, as necessary and as funds allow.

This 10-K does not include an attestation report of the Company's independent registered public accounting firm regarding internal control over financial reporting.

Management's report was not subject to attestation by the Company's independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this 10-K.

as exhibits to this Form 10-K are certifications of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”)

that are required in accordance with Rule 13a-14 of the Exchange Act.

This “Disclosure Controls and Procedures” section includes

information concerning the controls and controls evaluation referred to in the certifications.

OF DISCLOSURE CONTROLS

management evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the

Securities Exchange Act of 1934, as amended, or the Exchange Act as of the end of the period covered by this report.

Our management recognizes

that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their

objectives and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

The disclosure controls and procedures have been designed to provide reasonable assurance of achieving their objectives.

CFO concluded that our disclosure controls and procedures are effective at a reasonable assurance level as of May 31, 2023.

that evaluation the CEO and CFO concluded that information required to be disclosed in the reports that we file and submit under the

Exchange Act is (1) recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and

and (2) accumulated and communicated to the Company’s management, including its CEO and CFO, as appropriate, to allow timely

decisions regarding required disclosure.

management, including the CEO and CFO concluded that, as of May 31, 2023, the Company’s internal control over financial reporting

was effective.

IN INTERNAL CONTROL OVER FINANCIAL REPORTING

have been no changes in our internal control over financial reporting identified in connection with the evaluation that occurred during

the quarter ended May 31, 2023, that have materially affected, or that are reasonably likely to affect, our internal control over financial

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f)

under the Securities Exchange Act of 1934.

The Company’s internal control over financial reporting is designed to provide reasonable

assurance to the Company’s management and Board of Directors regarding the reliability of financial reporting and the preparation

and fair presentation of financial statements for external purposes in accordance with accounting principles generally accepted in the

United States of America.

company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance

of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance

with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the company are

being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance

regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have

a material effect on the consolidated financial statements.

effectiveness of any system of internal control over financial reporting is subject to inherent limitations, including the exercise of

judgment in designing, implementing, operating, and evaluating the controls and procedures.

Because of these inherent limitations, internal

control over financial reporting cannot provide absolute assurance regarding the reliability of financial reporting and may not prevent

or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls

may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

management, with the participation of the CEO and the CFO, evaluated the effectiveness of the Company’s disclosure controls and

procedures as defined in Rules 13(a)-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act,

as of the end of the period covered by this report.

In making this assessment, Management used the criteria set forth by the Committee

of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework (2013).

on this assessment, management, with the participation of the CEO and CFO, believes that, as of May 31, 2023, the Company’s internal

control over financial reporting was effective based on those criteria.

management will continue to monitor and evaluate the effectiveness of its disclosure controls and procedures and its internal controls

over financial reporting on an ongoing basis and are committed to taking further action and implementing improvements, as necessary and

as funds allow.

This 10-K does not include an attestation report of the Company’s independent registered public accounting firm regarding internal

control over financial reporting.

Management’s report was not subject to attestation by the Company’s independent registered

public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only

management’s report in this 10-K.

OTHER INFORMATION.

DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

This information is incorporated by reference to the Company's proxy statement for its 2022 Annual Meeting of Stockholders, which will be filed not later than 120 days after the end of the Company's fiscal year ended May 31, 2022.

information required by this item will be disclosed in our definitive proxy statement on Schedule 14A (the “Proxy Statement”)

for our 2023 Annual Meeting of Stockholders and is incorporated by reference herein.

Our Proxy Statement will be filed with the SEC within

120 days after the end of the Company’s fiscal year ended May 31, 2023, pursuant to Regulation 14A under the Exchange Act.

EXECUTIVE COMPENSATION

information required by this item will be disclosed in the Proxy Statement and is incorporated herein by reference.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

information required by this item will be disclosed in the Proxy Statement and is incorporated herein by reference.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Other information regarding related transactions is incorporated by reference to the Company's proxy statement for its 2022 Annual Meeting of Stockholders, which will be filed not later than 120 days after the end of the Company's fiscal year ended May 31, 2022.

information required by this item will be disclosed in the Proxy Statement and is incorporated herein by reference.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Please refer to the Company’s proxy statement for its 2022 Annual Meeting of Stockholders, which will be filed not later than 120 days after the end of the Company’s fiscal year ended May 31, 2022.

information required by this item will be disclosed in the Proxy Statement and is incorporated herein by reference.

EXHIBITS LIST AND FINANCIAL SCHEDULES

The following documents are filed as part of this Annual Report on Form 10-K:

following documents are filed as part of this Annual Report on Form 10-K:

Consolidated Financial Statements

Reference is made to the Index to the consolidated financial statements as set forth on page FS-1 of this Annual

Report on Form 10-K.

is made to the Index to the consolidated financial statements as set forth on page FS-1 of this Annual Report on Form

Consolidated Financial Statement Schedules

All schedules have been omitted as the pertinent information is either not required, not applicable, or otherwise

included in the financial statements and notes thereto.

schedules have been omitted as the pertinent information is either not required, not applicable, or otherwise included in the financial

statements and notes thereto.

First Amended and Restated Certificate of Incorporation of Registrant filed with the Secretary of State of Delaware on August 1, 2000 (incorporated by reference to Exhibit 3.8 filed with the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended May 31, 2000).

Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 filed with Amendment No.

1 to Registration Statement on Form S-1, Commission File No.

Amended and Restated Bylaws, as adopted on July 24, 2023 (incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K filed July 26, 2023).

Specimen Stock Certificate of Common Stock of Registrant (incorporated by reference to Exhibit 4.1 filed with Registrant’s Registration Statement on Form SB-2, Commission No.

333-87231 filed on September 16, 1999).

Description of Capital Stock.

Standard Industrial/Commercial Single-Tenant Lease, dated June 18, 2009, by and between Registrant and CNH, LLC for 17571 Von Karman Avenue, Irvine, CA 92614 (incorporated by reference to Exhibit 10.1 of the Company’s August 31, 2009 Form 10-Q filed October 16, 2009).

2014 Stock Incentive Plan of Registrant (incorporated by reference to Exhibit 10.1 to Registration Statement on Form S-8 filed with the Securities and Exchange Commission on May 22, 2015).

2017 Stock Incentive Plan of Registrant (incorporated by reference to Exhibit 10.1 to Registration Statement on Form S-8 filed with the Securities and Exchange Commission on May 10, 2018).

2020 Stock Incentive Plan of Registrant (incorporated by reference to Exhibit 10.1 to Registration Statement on Form S-8 filed with the Securities and Exchange Commission on May 21, 2021).

2014 Stock Incentive Plan of Registrant (incorporated by reference to Exhibit A of the Company’s Definitive Proxy Statement filed with the Securities and Exchange Commission on September 29, 2014).

2017 Stock Incentive Plan of Registrant (incorporated by reference to Exhibit A of the Company’s Definitive Proxy Statement filed with the Securities and Exchange Commission on September 28, 2017).

2020 Stock Incentive Plan of Registrant (incorporated by reference to Exhibit A of the Company’s Definitive Proxy Statement filed with the Securities and Exchange Commission on September 25, 2020).

Form of Executive Stock Option Agreement (attached herein).

Listing of Subsidiaries (attached herein).

Employment Agreement, dated March 1, 2023, by and between Biomerica, Inc.

List of Subsidiaries (attached herein).

Consent of Independent Registered Public Accounting Firm (Haskell & White LLP).

Consent of Independent Registered Public Accounting Firm (PKF San Diego, LLP).

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Exchange Act, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended.

10 unchanged sentences

XBRL Taxonomy Extension Presentation Linkbase Document.

Cover Page Interactive Data File.

The certifications attached as Exhibits 32.1 and 32.2 accompany this Annual Report pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended, and shall not be deemed “filed” by the registrant for purposes of Section 18 of the Exchange Act and are not to be incorporated by reference into any of the registrant’s filings under the Securities Act or the Exchange Act, irrespective of any general incorporation language contained in any such filing.

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

certifications attached as Exhibits 32.1 and 32.2 accompany this Annual Report pursuant to 18 U.S.C.

Section 1350, as adopted pursuant

to Section 906 of the Sarbanes-Oxley Act of 2002, as amended, and shall not be deemed “filed” by the registrant for purposes

of Section 18 of the Exchange Act and are not to be incorporated by reference into any of the registrant’s filings under the Securities

Act or the Exchange Act, irrespective of any general incorporation language contained in any such filing.

accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf

by the undersigned, thereunto duly authorized.

BIOMERICA, INC.

By /s/ Zackary S.

Chief Executive Officer

August 29, 2022

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Signature and Capacity

/s/ Zackary S.

Executive Officer

August 25, 2023

Director, Chief Executive Officer

/s/ Steve Sloan

accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities

and on the dates indicated:

August 25, 2023

Chief Financial Officer

/s/ Allen Barbieri

Chief Executive Officer

August 25, 2023

Financial Officer

Allen Barbieri

Director, Vice-Chairman

/s/ Jane Emerson, M.D., Ph.D.

August 25, 2023

Vice-Chairman

Jane Emerson, M.D., Ph.D.

/s/ Mark Sirgo, Pharm.D.

August 25, 2023

Mark Sirgo, Pharm.D.

/s/ Catherine Coste, CPA

Emerson, M.D., Ph.D.

David Moatazedi

August 25, 2023

Catherine Coste, CPA

BIOMERICA, INC.

August 25, 2023

AND SUBSIDIARIES

Reports of Independent Registered Public Accounting Firm

CONSOLIDATED FINANCIAL STATEMENTS

of Independent Registered Public Accounting Firm (PCAOB ID 0200 )

FINANCIAL STATEMENTS

Consolidated Balance Sheets as of May 31, 2023 and 2022

3 unchanged sentences

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors

Biomerica, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Biomerica, Inc.

(the “Company”) as of May 31, 2022, the related consolidated statements of operations and comprehensive loss, shareholders’ equity, and cash flows for the year then ended, and the related notes (collectively, the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of May 31, 2022, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with U.S.

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Shareholders and Board of Directors

on the Consolidated Financial Statements

have audited the accompanying consolidated balance sheets of Biomerica, Inc.

(the “Company”) as of May 31,

2023 and 2022, the related consolidated statements of operations and comprehensive loss, shareholders’ equity, and cash flows

for each of the years then ended, and the related notes (collectively, the “consolidated financial statements”).

opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the

Company as of May 31, 2023 and 2022, and the consolidated results of its operations and its cash flows for each of the years then

ended, in conformity with U.S.

generally accepted accounting principles.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion

on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public

Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company

in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission

and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain

reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing

an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.

Evaluation of Inventory Reserves

Critical Audit Matter Description

As of May 31, 2022, the Company recorded reserves for slow-moving and obsolete inventories of approximately $846,000.

As described in Note 2 to the consolidated financial statements, management periodically reviews inventories for excess quantities and obsolescence by evaluating quantities on hand and the physical condition and technical functionality of inventories, as these characteristics may be impacted by anticipated customer demand for current products and new product introductions.

Auditing the Company’s estimates for slow-moving and obsolete inventories was challenging due to the inherently judgmental nature of forecasting future sales and usage of a significant number of diverse inventory components.

How the Critical Audit Matter Was Addressed in the Audit

To test the valuation and accuracy of the Company’s inventory reserve estimates, our audit procedures included :

Obtaining an understanding of the Company’s inventory reserve estimation processes and key internal controls and assessing their appropriateness;

Observing and testing the Company’s year-end physical inventory counts;

Testing the accuracy of key data inputs that are the primary drivers for determining the quantitative inventory reserves;

these inputs included inventory quantities on hand, historical and expected sales and usage of inventory components, and estimated inventory reserve percentages;

Inquiring of any qualitative adjustments to inventory reserves deemed necessary by management and assessing their appropriateness.

/s/ Haskell & White LLP

audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due

to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

critical audit matter communicated below is a matter arising from the current-period audit of the consolidated financial statements that

was communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material

to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical

audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating

the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which

Audit Matter Description

As described in Note 2 to the Company’s consolidated financial

statements, the Company values inventory at the lower of cost or net realizable value with cost inclusive of estimates for reasonable

allocations of labor and overhead costs.

Also, management periodically reviews inventory for excess quantities and obsolescence.

evaluates quantities on hand, physical condition, and technical functionality as these characteristics may be impacted by anticipated

customer demand for current products and new product introductions.

Auditing the Company’s estimates for capitalized labor and overhead

was challenging due to the extensive use of estimates throughout this process, including the quantity of labor time allocable to each

inventory item.

Auditing the Company’s estimates for slow-moving and obsolete inventories was challenging due to the inherently

judgmental nature of forecasting future sales and usage of a significant number of diverse inventory items.

the Critical Audit Matter Was Addressed in the Audit

To test the valuation of the Company’s inventory, we performed

the following audit procedures:

● Obtained an understanding of the methodologies and policies used by

management to estimate capitalized labor and overhead and inventory reserves;

we obtained an understanding of key internal controls and

assessed their overall appropriateness;

● Tested the reasonableness of the production labor and overhead cost

pools and the quantities produced and recalculated the allocable labor and overhead rate per unit;

we recalculated the amount of capitalized

labor and overhead based on quantities on hand at the end of the fiscal year;

the accuracy of key data inputs that are the primary drivers for determining the quantitative inventory reserves;

these inputs included

inventory quantities on hand, approximate age of the inventory quantities, and estimated inventory reserve percentages.

HASKELL & WHITE LLP

We have served as the Company’s auditor since 2022.

Irvine, California

August 29, 2022

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Biomerica, Inc.

and Subsidiaries

Irvine, California

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Biomerica, Inc.

(a Delaware Corporation) and Subsidiaries (the “Company”) as of May 31, 2021, the related consolidated statements of operations and comprehensive loss, shareholders’ equity, and cash flows for the year ended May 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of May 31, 2021, and the results of its operations and its cash flows for the year ended May 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the May 31, 2021 audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Evaluation of Inventory and Accounts Receivable Allowances

The Company recorded allowances for inventory and accounts receivable of approximately $1,600,000 and $840,000, respectively, as of May 31, 2021, primarily related to COVID-19 inventory items that have been slow moving and accounts receivable from foreign customers where collectability is questionable.

As described in Note 2, these allowances are adjusted based on management’s ongoing evaluations and assessments based on current conditions.

Auditing the Company’s estimates for inventory and accounts receivable allowances was challenging due to the assumptions made by management based on anticipated future results of customers and marketplace developments.

We obtained an understanding and evaluated the assumptions, criteria and process used by management to determine the allowances for inventory items and accounts receivable.

To test the valuation and accuracy of allowances for inventory and accounts receivable, our audit procedures included, among others, observation and testing of the cost and the valuation allowance for inventory items on hand, examining recent sales of items, testing of aging of accounts receivable balances, confirmation, and testing of subsequent cash receipts on accounts receivable, and discussions with management.

/s/PKF San Diego, LLP

(formerly PKF, LLP)

We served as the Company’s auditor from 2004 to 2021.

San Diego, California

August 27, 2021, except for the effect of the restatement disclosed in Note 11 of the May 31, 2021 consolidated financial statements, as to which the date is October 14, 2021

BIOMERICA, INC.

have served as the Company’s auditor since 2022.

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

BALANCE SHEETS

Current Assets:

Cash and cash equivalents

Accounts receivable, less allowance for doubtful accounts

of $ 153,231 and $ 837,415 as of May 31, 2022 and 2021, respectively

Cash and cash

Accounts receivable, net

Inventories, net

Prepaid expenses and other

expenses and other

Total current assets

Property and equipment, net of accumulated depreciation and amortization

of $ 1,305,360 and $ 1,972,357 as of May 31, 2022 and 2021, respectively

Right of use assets, net of accumulated amortization

of $ 724,802 and $ 469,077 as of May 31, 2022 and 2021, respectively

Intangible assets, net of accumulated amortization

of $ 18,994 and $ 126,769 as of May 31, 2022 and 2021, respectively

Liabilities and Shareholders' Equity

Property and equipment,

net of accumulated depreciation and amortization

Right-of-use assets, net

of accumulated amortization of $ 617,000 and $ 725,000 as of May 31, 2023 and 2022, respectively

Intangible assets, net

of accumulated amortization

Liabilities and Shareholders’

Current Liabilities:

Accounts payable and accrued expenses

Accounts payable and accrued

Accrued compensation

Advance from customers

Lease liability, current portion

liabilities, current portion

Total current liabilities

Lease liability, net of current portion

liabilities, net of current portion

Total Liabilities

Commitments and contingencies (Notes 6 and 9)

Commitments and contingencies

Shareholders’ Equity:

Preferred stock, Series A 5% convertible, $ 0.08 par value,

571,429 shares authorized, none issued and outstanding as of May 31, 2022 and 2021

Preferred stock, undesignated, no par value,

4,428,571 shares authorized, none issued and outstanding as of May 31, 2022 and 2021

Preferred stock, Series

A 5% convertible, $ 0.08 par value, 571,429 shares authorized, none issued and outstanding as of May 31, 2023 and 2022

Preferred stock, undesignated,

no par value, 4,428,571 shares authorized, none issued and outstanding as of May 31, 2023 and 2022

Preferred stock, value

Common stock, $ 0.08 par value, 25,000,000

25,000,000 shares authorized, 12,867,924 and 12,307,157 issued and outstanding at

May 31, 2022 and 2021, respectively

shares authorized, 16,821,646 and 12,867,924 issued and outstanding at May 31, 2023 and 2022, respectively

Additional paid-in-capital

Accumulated other comprehensive loss

Accumulated deficit

Accumulated other comprehensive

( 42,217,000 )

( 35,077,000 )

Total Shareholders' Equity

Total Liabilities and Shareholders' Equity

See accompanying notes to consolidated financial statements

BIOMERICA, INC.

Total Shareholders’

Total Liabilities and

Shareholders’ Equity

accompanying notes to consolidated financial statements

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

For the year ended May 31,

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

the Year Ended May 31,

Cost of sales

3 unchanged sentences

Selling, general and administrative

Research and development

Total operating expense

and development

operating expense

Loss from operations

3 unchanged sentences

Dividend and interest income

Interest expense

Total other income

Loss before income taxes

1 unchanged sentence

( 4,507,000 )

Provision for income taxes

Provision for income

$ ( 7,140,000 )

$ ( 4,531,000 )

Basic net loss per common share

Diluted net loss per common share

Basic net loss per common

Diluted net loss per

Weighted average number of common and

7 unchanged sentences

$ ( 4,557,000 )

See accompanying notes to consolidated financial statements

BIOMERICA, INC.

accompanying notes to consolidated financial statements

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED MAY 31, 2022 AND 2021

Series A 5% Convertible

Preferred Stock

STATEMENTS OF SHAREHOLDERS’ EQUITY

THE YEARS ENDED MAY 31, 2023 AND 2022

Paid-in-Capital

Accumulated Other

Comprehensive

Balances, May 31, 2020, restated

Other Comprehensive Loss

Stockholder’s Equity

Balances at May 31, 2021

$ ( 30,546,000 )

2 unchanged sentences

Foreign currency translation

Conversion of preferred to common stock

Compensation expense in connection with options granted

Share-based compensation

( 4,531,000 )

Balances, May 31, 2021, restated

Balances at May 31, 2022

( 35,077,000 )

Exercise of stock options

Net proceeds from ATM

Shares issued in connection

with public offering, net of offering costs

Foreign currency translation

Compensation expense in connection with options granted

Share-based compensation

( 7,140,000 )

Balances, May 31, 2022

Balances at May 31,

$ ( 110,000 )

See accompanying notes to consolidated financial statements.

BIOMERICA, INC.

$ ( 42,217,000 )

$ ( 110,000 )

$ ( 42,217,000 )

accompanying notes to consolidated financial statements.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended May 31,

Cash flows from operating activities:

STATEMENTS OF CASH FLOWS

the Year Ended May 31,

Cash flows from operating

$ ( 7,140,000 )

$ ( 4,531,000 )

Adjustments to reconcile net loss to net cash used in operating activities:

Adjustments to reconcile

net loss to net cash used in operating activities:

Depreciation and amortization

2 unchanged sentences

Inventory reserve

Stock option expense

Share-based compensation

Amortization of right-of-use asset

1 unchanged sentence

Accounts receivable

( 1,906,013 )

Prepaid expenses and other

Reduction in lease liability

Accounts payable and accrued expenses

1 unchanged sentence

Advance from customers

Net cash used in operating activities

Reduction in lease liabilities

Net cash used in operating

( 5,474,000 )

Cash flows from investing activities:

Cash flows from investing

Expenditure related to intangibles

Purchases of property and equipment

Net cash used in investing activities

Cash flows from financing activities:

Purchases of property

and equipment

Net cash used in investing

Cash flows from financing

Gross proceeds from sale of common stock

Costs from sale of common stock

Proceeds from exercise of stock options

Net cash provided by financing activities

Effect of exchange rate changes in cash

Net increase (decrease) in cash and cash equivalents

( 4,441,716 )

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Proceeds from exercise

of stock options

Net cash provided by

financing activities

Effect of exchange rate

changes in cash

Net increase in cash and cash equivalents

Cash and cash equivalents

at beginning of year

Cash and cash equivalents

at end of year

Supplemental Disclosure of Cash Flow Information:

Cash paid during the year for:

Non-cash investing and financing activities:

Increase in right-of-use asset due to lease extension or establishment

Increase in lease liability due to lease extension or establishment

Write off of fixed assets, cost

Write off of fixed assets, accumulated depreciation

Write off of intangible assets, cost

Write off of intangible assets, accumulated amortization

See accompanying notes to consolidated financial statements

BIOMERICA, INC.

Cash paid during the year

Non-cash investing and financing

Increase in right-of-use

asset due to lease extension or establishment

Increase in lease liability

due to lease extension or establishment

Write off of fixed assets,

accumulated depreciation

Write off of intangible

assets, accumulated amortization

accompanying notes to consolidated financial statements

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED MAY 31, 2022 AND 2021

Biomerica, Inc.

and its subsidiaries (which includes wholly-owned subsidiaries, Biomerica de Mexico and BioEurope GmbH) is a biomedical technology company that develops, patents, manufactures and markets advanced diagnostic and therapeutic products used at the point-of-care (physicians' offices and over-the-counter through drugstores and online) and in hospital/clinical laboratories for detection and/or treatment of medical conditions and diseases .

Our diagnostic test kits are used to analyze blood, urine, nasal or fecal material from patients in the diagnosis of various diseases, food intolerances and other medical complications, or to measure the level of specific hormones, antibodies, antigens or other substances, which may exist in the human body in extremely small concentrations.

The Company's products are designed to enhance the health and well-being of people, while reducing total healthcare costs.

Our primary focus is the research, development, commercialization and in certain cases regulatory approval, of patented, diagnostic-guided therapy (“DGT”) products to treat gastrointestinal diseases, such as irritable bowel syndrome, and other inflammatory diseases.

These products are directed at chronic inflammatory illnesses that are widespread and common, and as such address very large markets.

Our InFoods® IBS product uses a simple blood sample and is designed to identify patient-specific foods that, when removed from the diet, may alleviate IBS symptoms such as pain, bloating, diarrhea and constipation.

Instead of broad and difficult to manage dietary restrictions, the InFoods® IBS product works by identifying a patient’s above normal immunoreactivity to specific foods.

A food identified as positive and causing an abnormal immune response in the patient is simply removed from the diet to help alleviate IBS symptoms.

Our existing medical diagnostic products are sold worldwide primarily in two markets:

1) clinical laboratories and 2) point-of-care (physicians' offices and over-the-counter drugstores like Walmart and Walgreens).

The diagnostic test kits are used to analyze blood, urine, nasal or fecal specimens from patients in the diagnosis of various diseases, food intolerances and other medical complications, by measuring or detecting the existence and/or level of specific bacteria, hormones, antibodies, antigens, or other substances, which may exist in a patient’s body, stools, or blood, often in extremely small concentrations.

Due to the global 2019 SARS-CoV-2 novel coronavirus pandemic , in March 2020 we began developing COVID-19 products to indicate if a person has been infected by COVID-19 or is currently infected.

While we offer a COVID-19 antibody diagnostic test to determine if a person has previously been infected by the COVID-19 virus, all of our COVID-19 revenues in fiscal 2022 have come from international sales of our COVID-19 antigen tests that use a patient’s nasal fluid sample to detect if the patient is currently infected with the virus.

The other existing products that contributed to our 2022 revenues are primarily focused on gastrointestinal diseases, food intolerances, and certain esoteric tests.

TO CONSOLIDATED FINANCIAL STATEMENTS

ENDED MAY 31, 2023 AND 2022

and its subsidiaries (which includes wholly-owned subsidiaries, Biomerica de Mexico and BioEurope GmbH) is a biomedical technology

company that develops, patents, manufactures and markets advanced diagnostic and therapeutic products used at the point-of-care (physicians’

offices and over-the-counter through drugstores and online) and in hospital/clinical laboratories for detection and/or treatment of medical

conditions and diseases.

Our diagnostic test kits are used to analyze blood, urine, nasal, or fecal material from patients in the diagnosis

of various diseases, food intolerances and other medical complications, or to measure the level of specific hormones, antibodies, antigens,

or other substances, which may exist in the human body in extremely small concentrations.

The Company’s products are designed to

enhance the health and well-being of people, while reducing total healthcare costs.

primary focus is the research, development, commercialization and in certain cases regulatory approval, of patented, diagnostic-guided

therapy (“DGT”) products to treat gastrointestinal diseases, such as irritable bowel syndrome (“IBS”), and other

inflammatory diseases.

These products are directed at chronic inflammatory illnesses that are widespread and common, and as such address

very large markets.

Our InFoods® IBS product uses a simple blood sample and is designed to identify patient-specific foods that,

when removed from the diet, may alleviate IBS symptoms such as pain, bloating, diarrhea, and constipation.

Instead of broad and difficult

to manage dietary restrictions, the InFoods® IBS product works by identifying specific foods that may be causing an abnormally high

immune response in the patient.

A food identified as positive, which is causing the abnormal immune response in the patient,

is simply removed from the diet to help alleviate IBS symptoms.

Our existing medical diagnostic products are sold worldwide primarily in

1) clinical laboratories and 2) point-of-care (physicians’ offices and over-the-counter drugstores like Walmart and

CVS Pharmacy).

The diagnostic test kits are used to analyze blood, urine, nasal, or fecal specimens from patients in the diagnosis of

various diseases, food intolerances, and other medical complications, by measuring or detecting the existence and/or level of specific

bacteria, hormones, antibodies, antigens, or other substances, which may exist in a patient’s body, stools, or blood, often in extremely

small concentrations.

to the global COVID-19 pandemic, in March 2020, we began developing COVID-19 products to indicate if a person has been infected by COVID-19

or is currently infected.

In fiscal 2022, we generated revenues from the international sale of our COVID-19 antigen tests.

fiscal 2023, due to the decline in severity of COVID-19 and the corresponding lower sales volumes, we no longer sell these products.

Due to the relatively high volume of sales from these products in fiscal 2021 and fiscal 2022, we have seen significant fluctuations

in quarterly revenues over the past twelve quarters.

other existing products that contributed to our 2023 revenues are primarily focused on gastrointestinal diseases, food intolerances,

and certain esoteric tests.

These diagnostic test products utilize immunoassay technology.

Most of our products are CE marked and/or sold for diagnostic use where they are registered by each country’s regulatory agency.

In addition, some products are cleared for sale in the United States by the FDA.

Most of our products are CE marked and/or

sold for diagnostic use where they are registered by each country’s regulatory agency.

In addition, some products are cleared for

sale in the United States by the FDA.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements for the years ended May 31, 2022 and 2021, include the accounts of Biomerica, Inc.

("Biomerica") as well as its wholly-owned German subsidiary (BioEurope GmbH) and Mexican subsidiary (Biomerica de Mexico).

OF CONSOLIDATION

consolidated financial statements for the years ended May 31, 2023 and 2022, include the accounts of Biomerica, Inc.

(“Biomerica”)

as well as its wholly-owned German subsidiary (“BioEurope GmbH”) and Mexican subsidiary (“Biomerica de Mexico”).

All significant intercompany accounts and transactions have been eliminated in consolidation.

ACCOUNTING ESTIMATES

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reported period.

Estimates that are made include the allowance for doubtful accounts, which is estimated based on current as well as historical past practices with a customer;

stock option forfeiture rates, which are calculated based on historical data;

inventory obsolescence, which is based on projected and historical usage of materials;

and lease liability and right-of-use assets, which are calculated based on certain assumptions such as borrowing rate, the likelihood of lease extensions to occur, asset valuation, among other things;

and other items that may be necessary to estimate using current, historical and judgment based information.

Actual results could materially differ from those estimates.

Due to the Coronavirus global pandemic, the Company’s operations have been negatively impacted.

The Company has faced disruptions in the following areas, (and may face further challenges):

supply chain disruptions, loss of contracts and/or customers, closure of the Company’s manufacturing or distribution facilities or of the facilities of the Company’s suppliers, partners and customers, travel, shipping and logistical disruptions, government responses of all types, international business risks in countries where the Company makes and/or sells its products, loss of human capital or personnel at the Company, its partners and its customers, interruptions of production, customer credit risk, and general economic calamities.

These ongoing pandemic related disruptions can materially negatively impact the Company’s operations and financial performance and may continue to have significant material negative impacts on the Company.

The Company has incurred net losses and negative cash flows from operations and has an accumulated deficit of approximately $ 35.3 million as of May 31, 2022.

preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United

States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of

assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and

the reported amounts of revenues and expenses during the reported period.

Estimates that are made include the allowance for doubtful

accounts, which is estimated based on current as well as historical past practices with a customer;

stock option forfeiture rates,

which are calculated based on historical data;

inventory obsolescence, which is based on projected and historical usage of

and lease liabilities and right-of-use assets, which are calculated based on certain assumptions such as the borrowing

rate on the lease commencement date and, the likelihood of lease extensions to occur, asset valuations, among other things;

and other items that may be necessary to

estimate using current, historical and judgment based information.

Actual results could materially differ from those

to the global COVID-19 pandemic, the Company’s operations have been negatively impacted.

The Company has faced disruptions in the

following areas, (and may face further challenges):

supply chain disruptions, loss of contracts and/or customers, closure of the Company’s

manufacturing or distribution facilities or of the facilities of the Company’s suppliers, partners and customers, travel, shipping

and logistical disruptions, government responses of all types, international business risks in countries where the Company makes and/or

sells its products, loss of human capital or personnel at the Company, its partners and its customers, interruptions of production, customer

credit risk, and general economic calamities.

These pandemic related disruptions can materially negatively impact the Company’s

operations and financial performance and may continue to have significant material negative impacts on the Company.

Company has incurred net losses and negative cash flows from operations and has an accumulated deficit of approximately $ 42 million as

of May 31, 2023.

Management expects to continue to incur significant costs as it advances its trials and development activities.

As of May 31, 2022, the Company had cash and cash equivalents of approximately $ 5,917,000 and working capital of approximately $ 7,416,000 .

On January 22, 2021, the Company filed a Prospectus Supplement for purposes of raising up to $ 15,000,000 to the base prospectus filed with the SEC on July 21, 2020, and was declared effective by the SEC on September 30, 2020, and an ATM “at the market offering” Agreement.

The Company intends to use the net proceeds from such offering for general corporate purposes, including, without limitation, sales and marketing activities, clinical studies, and product development, making acquisitions of assets, businesses, companies or securities, capital expenditures, and for working capital needs.

Under an ATM Agreement, sales of the Placement Shares are deemed to be “at the market offering” as defined in Rule 415 promulgated under the Securities Act.

The agent acts as sales agent under the ATM and uses commercially reasonable efforts to sell on the Company’s behalf all the Placement Shares requested to be sold from time to time by the Company, consistent with its normal trading and sales practices, on mutually agreed terms between the agent and the Company.

The Company has no obligation to sell any of the Placement Shares under the ATM Agreement, and may at any time suspend offers under, or terminate the ATM Agreement.

During the year ended May 31, 2022, the Company sold 521,267 shares of its common stock at prices ranging from $ 4.02 to $ 5.63 under its Form S-3 Registration Statement ( File No.

333-239980) and ATM Agreement which resulted in gross proceeds of approximately $ 2,402,000 and net proceeds to the Company of $ 2,317,000 after deducting commissions for each sale and legal, accounting, and other fees related to the filing of the Form S-3.

As a result of cash and cash equivalents on hand on May 31, 2022, and the ability to raise additional funds through the ATM noted above, management believes the Company has sufficient funds to operate through at least August 2023.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company has financial instruments whereby the fair market value of the financial instruments could be different than that recorded on a historical basis.

The Company's financial instruments consist of its cash and cash equivalents, accounts receivable, and accounts payable.

May 31, 2023, the Company had cash and cash equivalents of approximately $ 9,719,000 and working capital of approximately $ 10,852,000 .

January 22, 2021, the Company filed a prospectus supplement to the base prospectus included in a registration statement filed with the

SEC on July 21, 2020, and declared effective by the SEC on September 30, 2020, for purposes of selling up to $ 15,000,000 in “at-the-market”

offerings, as defined in Rule 415 promulgated under the Securities Act (the “ATM Offering”).

the ATM Offering, the sales agent uses commercially reasonable efforts to sell on the Company’s behalf all the shares requested

to be sold from time to time by the Company, consistent with its normal trading and sales practices, on mutually agreed terms between

the agent and the Company.

The Company has no obligation to sell any shares under the ATM Offering, and may at any time suspend offers

under, or terminate the ATM Offering.

the year ended May 31, 2023, the Company sold 573,889 shares of its common stock at prices ranging from $ 3.15 to $ 4.26 pursuant to the

ATM Agreement, which resulted in gross proceeds of approximately $ 2,014,000 and net proceeds to the Company of $ 1,961,000 , after deducting

commissions for each sale and legal, accounting, and other fees related to offering in the amount of $ 53,000 .

the year ended May 31, 2022, the Company sold 521,267 shares of its common stock at prices ranging from $ 4.02 to $ 5.63 pursuant to the

ATM Offering, which resulted in gross proceeds of approximately $ 2,402,000 and net proceeds to the Company of $ 2,317,000 , after deducting

commissions for each sale and legal, accounting, and other fees related to the offering in the amount of $ 85,000 .

March 7, 2023, the Company sold 3,333,333 shares of common stock in a firm commitment public offering at a gross sales price of $ 2.40

per share, with net total proceeds, after deducting issuance fees and expenses of $ 700,000 , of approximately $ 7,300,000 .

Since the closing

of the March 7, 2023 offering, the ATM has been withdrawn and is not active.

Company intends to use the net proceeds from such offerings for general corporate purposes, including, without limitation, sales and

marketing activities, clinical studies, product development, making acquisitions of assets, businesses, companies or securities,

capital expenditures, and for working capital needs.

has analyzed the cash requirements of the Company’s business through at least August 2024.

As a result of cash and cash

equivalents on hand on May 31, 2023, largely from the public offering, and the ability to raise additional funds through another new

ATM agreement, management believes the Company has sufficient funds to operate through at least August 2024.

VALUE OF FINANCIAL INSTRUMENTS

Company has financial instruments whereby the fair market value of the financial instruments could be different than that recorded on

a historical basis.

The Company’s consolidated financial instruments consist of its cash and cash equivalents, accounts receivable,

and accounts payable.

The carrying amounts of the Company’s financial instruments approximate their fair values.

The Company also maintains an investment in privately held company (see below).

CONCENTRATION OF CREDIT RISK

The Company maintains cash balances at certain financial institutions in excess of amounts insured by federal agencies.

As of May 31, 2022, the Company had approximately $ 5,702,000 of uninsured cash.

The Company also

maintains an investment in privately held company (see below).

CONCENTRATION

OF CREDIT RISK

Company maintains cash balances at certain financial institutions in excess of amounts insured by federal agencies.

From time to time,

the Company has uninsured balances.

The Company does not believe it is exposed to any significant credit risks.

The Company provides credit in the normal course of business to customers throughout the United States and in foreign markets.

The Company performs ongoing credit evaluations of its customers and requires accelerated prepayment in some circumstances.

Our net sales were approximately $ 18,871,000 for fiscal 2022 compared to $ 7,199,000 for fiscal 2021.

For the fiscal years ended May 31, 2022 and 2021, the Company had two distributors, which accounted for a total of 65 % and 60 % of our net sales, respectively.

Of this, for the fiscal years ended May 31, 2022 and 2021, the largest of the distributors mentioned above accounted for 55 % and 33 %, respectively, of net sales.

Total gross receivables on May 31, 2022 and 2021 were approximately $ 927,000 and $ 2,292,000 , respectively.

On May 31, 2022 and 2021, the Company had one distributor and two distributors, respectively, which accounted for a total of 50 % and 73 %, respectively, of gross accounts receivable.

Of the 50% as of May 31, 2022, 50 % was owed by a distributor in Asia.

For the fiscal years ended May 31, 2022 and 2021, the Company had one vendor, which accounted for 84 % and 58 %, respectively, of our purchases of raw materials.

GEOGRAPHIC CONCENTRATION

As of May 31, 2022 and 2021, a pproximately $ 621,000 and $ 803,000 , respectively of Biomerica’s gross inventory was located in Mexicali, Mexico, respectively.

As of May 31, 2022 and 2021, approximately $ 17,000 and $ 25,000 , respectively of Biomerica’s property and equipment, net of accumulated depreciation and amortization, was located in Mexicali, Mexico, respectively.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of demand deposits and money market accounts with original maturities of less than three months.

ACCOUNTS RECEIVABLE

The Company extends unsecured credit to its customers on a regular basis.

International accounts are usually required to prepay until they establish a history with the Company and at that time, they are extended credit at levels based on a number of criteria.

Company provides credit in the normal course of business to customers throughout the United States and in foreign markets.

performs ongoing credit evaluations of its customers and requires accelerated prepayment in some circumstances.

net sales were approximately $ 5,339,000

for fiscal 2023 compared to $ 18,871,000

for fiscal 2022.

For the fiscal years ended May 31, 2023 and 2022, the Company had one and two distributors, respectively, which

accounted for a total of 35 %

of our net sales, respectively.

Of this, for the fiscal years ended May 31, 2023 and 2022, the largest of the distributors mentioned

above accounted for 35 %

respectively, of net sales.

gross receivables on May 31, 2023 and 2022 were approximately $ 751,000 and $ 927,000 , respectively.

On May 31, 2023 and 2022, the Company

had one distributor which accounted for a total of 36 % and 50 %, respectively, of gross accounts receivable.

Of the 36 % as of May 31,

2023, 100 % was owed by a distributor in Asia.

the fiscal year ended May 31, 2023, the Company did not have any significant concentration of vendor spend for raw materials.

fiscal year ended May 31, 2022, the Company had one vendor, which accounted for 84 % of our purchases of raw materials largely related

to COVID-19 products.

CONCENTRATION

of May 31, 2023 and 2022, approximately $ 626,000 and $ 621,000 , respectively, of Biomerica’s gross inventory was located in Mexicali,

Mexico, respectively.

As of May 31, 2023 and 2022, approximately $ 17,000 of Biomerica’s property and equipment, net of accumulated

depreciation and amortization, was located in Mexicali, Mexico.

AND CASH EQUIVALENTS

and cash equivalents consist of demand deposits and money market accounts with original maturities of less than three months.

RECEIVABLE, NET

Company extends unsecured credit to its customers on a regular basis.

International accounts are usually required to prepay until

they establish a history with the Company and at that time, they are extended credit at levels based on a number of criteria.

Initial credit levels for individual distributors are approved by designated officers and managers of the Company.

All increases in credit limits are also approved by designated upper-level management.

Management evaluates receivables on a quarterly basis and adjusts the allowance for doubtful accounts accordingly.

Balances over ninety days old are usually reserved for unless collection is reasonably assured.

Occasionally certain long-standing customers, who routinely place large orders, will have unusually large receivables balances relative to the total gross receivables.

Management monitors the payments for these large balances closely and very often requires payment of existing invoices before shipping new sales orders.

As of May 31, 2022 and 2021, the Company has established a reserve of approximately $ 153,000 and $ 837,000 , respectively, for doubtful accounts.

The Company occasionally prepays for items such as inventory, insurance, and other items.

These items are reported as prepaids, until either the inventory is physically received or the insurance and other items are utilized.

As of May 31, 2022 and 2021, the prepaids were approximately $ 320,000 and $ 370,000 , respectively, composed of prepayments to insurance and various other suppliers.

INVENTORIES, NET

The Company values inventory at the lower of cost (determined using a combination of specific lot identification and the first-in, first-out methods) or net realizable value.

All increases in

credit limits are also approved by designated upper-level management.

Management evaluates receivables on a quarterly basis and

adjusts the allowance for doubtful accounts accordingly.

Balances over ninety days

old are usually reserved for unless collection is reasonably assured.

certain long-standing customers, who routinely place large orders, will have unusually large receivables balances relative to the total

gross receivables.

Management monitors the payments for these large balances closely and very often requires payment of existing invoices

before shipping new sales orders.

of May 31, 2023 and 2022, the Company has established a reserve of approximately $ 29,000 and $ 153,000 , respectively, for doubtful accounts.

EXPENSES AND OTHER

Company occasionally prepays for items such as inventory, insurance, and other items.

These items are reported as prepaids, until either

the inventory is physically received or the insurance and other items are utilized.

of May 31, 2023 and 2022, the prepaids were approximately $ 300,000 and $ 320,000 , respectively, composed of prepayments to insurance and

various other suppliers.

Company values inventory at the lower of cost (determined using a combination of specific lot identification and the first-in, first-out

methods) or net realizable value.

Management periodically reviews inventory for excess quantities and obsolescence.

Management evaluates quantities on hand, physical condition, and technical functionality as these characteristics may be impacted by anticipated customer demand for current products and new product introductions.

The reserve is adjusted based on such evaluation, with a corresponding provision included in cost of sales.

Abnormal amounts of idle facility expenses, freight, handling costs and wasted material are recognized as current period charges and the allocation of fixed production overhead is based on the normal capacity of the production facilities.

The following is a summary of approximate net inventories:

Management evaluates

quantities on hand, physical condition, and technical functionality as these characteristics may be impacted by anticipated customer

demand for current products and new product introductions.

The reserve is adjusted based on such evaluation, with a corresponding provision

included in cost of sales.

Abnormal amounts of idle facility expenses, freight, handling costs, and wasted material are recognized as

current period charges and the allocation of fixed production overhead is based on the normal capacity of the production facilities.

following is a summary of approximate net inventories:

OF NET INVENTORIES

Raw materials

3 unchanged sentences

Inventory reserve

( 1,617,000 )

Net inventory

Reserves for inventory obsolescence are recorded as necessary to reduce obsolete inventory to estimated net realizable value or to specifically reserve for obsolete inventory.

for inventory obsolescence are recorded as necessary to reduce obsolete inventory to estimated net realizable value or to specifically

reserve for obsolete inventory.

As of May 31, 2023 and 2022, inventory reserves were approximately $ 672,000 and $ 846,000 , respectively.

During the fiscal 2022 the Company disposed of COVID-19 antibody inventory that wasn’t sellable, this has been partially reserved for in fiscal 2021.

The reduction in our inventory reserve relates to the COVID-19 antibody disposal.

The Company continues to sell COVID-19 antigen tests.

PROPERTY AND EQUIPMENT, NET

Property and equipment are stated at cost.

The Company has fully reserved COVID-19 antibody inventory in fiscal 2023.

AND EQUIPMENT, NET

and equipment are stated at cost.

Expenditures for additions and major improvements are capitalized.

Repairs and maintenance costs are charged to operations as incurred.

When property and equipment are sold, retired or otherwise disposed of, the related cost and accumulated depreciation or amortization are removed from the accounts, and gains or losses from sales, retirements and dispositions are credited or charged to income.

Depreciation and amortization are provided over the estimated useful lives of the related assets, ranging from 5 to 10 years, using the straight-line method.

Repairs and maintenance costs are

charged to operations as incurred.

When property and equipment are sold, retired, or otherwise disposed of, the related cost and accumulated

depreciation or amortization are removed from the accounts, and gains or losses from sales, retirements, and dispositions are credited

or charged to income.

and amortization are provided over the estimated useful lives of the related assets, ranging from 5 to 10 years, using the straight-line

Leasehold improvements are amortized over the lesser of the estimated useful life of the asset or the term of the lease.

Depreciation and amortization expense on property and equipment amounted to approximately $ 100,000 and $ 105,000 for the years ended May 31, 2022 and 2021, respectively.

INTANGIBLE ASSETS, NET

Intangible assets include trademarks, product rights, technology rights and patents, and are accounted for based on Accounting Standards Codification (“ASC”), ASC 350 Intangibles – Goodwill and Other (“ASC 350”).

In that regard, intangible assets that have indefinite useful lives are not amortized but are tested at least annually for impairment or more frequently if events or changes in circumstances indicate that the asset might be impaired.

Intangible assets are being amortized using the straight-line method over the useful life, not to exceed 18 years for marketing and distribution rights, 10 years for purchased technology use rights, and 20 years for patents.

Amortization amounted to approximately $ 239,000 and $ 34,000 for the years ended May 31, 2022 and 2021, respectively.

The Company assesses the recoverability of these intangible assets by determining whether the amortization of the asset's balance over its remaining life can be recovered through projected undiscounted future cash flows.

The Company uses a qualitative assessment to determine whether there was any impairment.

As of May 31, 2022 and 2021, an impairment adjustment was made of $ 210,000 and $ 0 , respectively.

From time-to-time, the Company makes investments in privately held companies.

Investments represent the Company’s investment in a Polish distributor, which is primarily engaged in distributing medical products and devices.

The Company owns approximately 6 % of the investee and, accordingly, applies the cost method holdings to account for the investment.

The Company invested approximately $ 165,000 into the Polish distributor.

Equity holdings in nonmarketable unconsolidated entities in which the Company is not able to exercise significant influence ("Cost Method Holdings") are accounted for at the Company's initial cost, minus any impairment (if any), plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar holding or security of the same issuer.

Dividends received are recorded as other income.

The Company assesses its equity holdings for impairment whenever events or changes in circumstances indicate that the carrying value of an equity holding may not be recoverable.

Management reviewed the underlying net assets of the Company's equity method holding as of May 31, 2022 and determined that the Company's proportionate economic interest in the entity indicates that the equity holding was not impaired.

There were no observable price changes in orderly transactions for identical or a similar holding or security of the Company’s Cost Method Holding during the year ended May 31, 2022.

SHARE-BASED COMPENSATION

The Company follows the guidance of ASC 718, Share-based Compensation (“ASC 718”), which requires the use of the fair-value based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments (options).

The fair value of each option award is estimated on the date of grant using the Black-Scholes options-pricing model that uses assumptions for expected volatility, expected dividends, expected forfeiture rate, expected term, and the risk-free interest rate.

The Company has not paid dividends historically and does not expect to pay them in the foreseeable future.

Expected volatilities are based on weighted averages of the historical volatility of the Company’s common stock estimated over the expected term of the options.

and amortization expense on property and equipment amounted to approximately $ 66,000 and $ 100,000 for the years ended May 31, 2023 and

2022, respectively.

assets include trademarks, product rights, technology rights, and patents, and are accounted for based on Accounting Standards Codification

(“ASC”), ASC 350 Intangibles – Goodwill and Other (“ASC 350”).

In that regard, intangible assets that have

indefinite useful lives are not amortized but are tested at least annually for impairment or more frequently if events or changes in

circumstances indicate that the asset might be impaired.

assets are being amortized using the straight-line method over the useful life, not to exceed 18 years for marketing and distribution

rights, 10 years for purchased technology use rights, and 20 years for patents.

Amortization amounted to approximately $ 18,000 and $ 239,000

for the years ended May 31, 2023 and 2022, respectively.

Company assesses the recoverability of these intangible assets by determining whether the amortization of the asset’s balance over

its remaining life can be recovered through projected undiscounted future cash flows.

The Company uses a qualitative assessment to determine

whether there was any impairment.

During the year ended May 31, 2023, there was no impairment of intangible assets.

During the year ended May 31, 2022, an impairment

adjustment was made of $ 210,000 .

Company has made investments in a privately held Polish

distributor, which is primarily engaged in distributing medical products and devices, including the distribution of the products

sold by the Company.

The Company invested approximately $ 165,000

into the Polish distributor and owns approximately 6 %

of the investee.

holdings in nonmarketable unconsolidated entities in which the Company is not able to exercise significant influence (“Cost Method

Holdings”) are accounted for at the Company’s initial cost, minus any impairment (if any), plus or minus changes resulting

from observable price changes in orderly transactions for the identical or a similar holding or security of the same issuer.

received are recorded as other income.

Company assesses its equity holdings for impairment whenever events or changes in circumstances indicate that the carrying value of an

equity holding may not be recoverable.

Management reviewed the underlying net assets of the Company’s equity method holding as

of May 31, 2023 and determined that the Company’s proportionate economic interest in the entity indicates that the equity holding

was not impaired.

There were no observable price changes in orderly transactions for identical or a similar holding or security of the

Company’s Cost Method Holding during the year ended May 31, 2023.

Company follows the guidance of ASC 718, Share-based Compensation (“ASC 718”), which requires the use of the fair-value based

method to determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model that uses

assumptions for expected volatility, expected dividends, expected forfeiture rate, expected term, and the risk-free interest rate.

Company has not paid dividends historically and does not expect to pay them in the foreseeable future.

Expected volatilities are based

on weighted averages of the historical volatility of the Company’s common stock estimated over the expected term of the options.

The expected forfeiture rate is based on historical forfeitures experienced.

The expected term of options granted is derived using the “simplified method” which computes expected term as the average of the sum of the vesting term plus the contract term as historically the Company had limited exercise activity surrounding its options.

The expected term of options granted is derived using the

“simplified method” which computes expected term as the average of the sum of the vesting term plus the contract term as

historically the Company had limited exercise activity surrounding its options.

The risk-free rate is based on the U.S.

Treasury yield curve in effect at the time of grant for the period of the expected term.

The grant date fair value of the award is recognized under the straight-line attribution method.

The Company expensed approximately $ 1,260,000 and $ 1,355,000 of stock-based compensation during the years ended May 31, 2022 and 2021, respectively.

In applying the Black-Scholes options-pricing model, assumptions used were as follows:

For the year ended May 31,

Treasury yield

curve in effect at the time of grant for the period of the expected term.

The grant date fair value of the award is recognized under

the straight-line attribution method.

Company expensed approximately $ 1,185,000 and $ 1,260,000 of share-based compensation during the years ended May 31, 2023 and 2022, respectively.

applying the Black-Scholes option-pricing model, the following assumptions used in the valuation of awards issued for period ending May 31, 2023 and 2022:

SCHEDULE OF SHARE-BASED PAYMENT AWARD, STOCK OPTIONS, VALUATION ASSUMPTIONS

the year ended May 31,

Dividend yield

Expected volatility

102.54 - 105.48 %

71.19 - 107.53 %

Risk free interest rate

0.97 - 2.75 %

0.34 - 1.18 %

Expected term

5.50 - 6.25 Years

REVENUE RECOGNITION

The Company has various contracts with customers.

All of the contracts specify that revenues from product sales are recognized at the time the product is shipped, customarily FOB shipping point, which is when the transfer of control of goods has occurred, and at which point title passes.

The Company does not allow for returns except in the event of defective merchandise and therefore does not establish an allowance for returns.

In addition, the Company has contracts with customers wherein they receive purchase discounts for achieving specified sales volumes.

The Company regularly evaluates the status of these contracts and does not believe that any additional discounts will be given through the end of the contract periods.

Services for contract work are invoiced and recognized for work that has been performed as the project progresses.

The Company sells clinical lab products to domestic and international distributors, including hospitals and clinical laboratories, medical research institutions, medical schools, and pharmaceutical companies.

OTC products are sold directly to drug stores and e-commerce customers as well as to distributors.

Physicians’ office products are sold to physicians and distributors, all of whom are categorized below according to the type of products sold to them.

We also manufacture certain components on a contract basis for domestic and international manufacturers.

Disaggregation of revenue:

The following is an approximate breakdown of revenues according to primary markets to which the products are sold:

For the year ended May 31,

Physician's office

Company has various contracts with customers.

All of the contracts specify that revenues from product sales are recognized at the time

the product is shipped, customarily FOB shipping point, which is when the transfer of control of goods has occurred and at which point

title passes.

Company does not typically allow for returns from customers except in the event of defective merchandise and therefore does not establish

an allowance for returns.

In addition, the Company has contracts with customers wherein customers receive purchase discounts for achieving

specified sales volumes.

The Company evaluated the status of these contracts during the years ended May 31, 2023 and 2022 and does not

believe that any additional discounts will be given through the end of the contract periods.

for contract work performed by the Company for others are invoiced and recognized as that work has been performed and as the project

The Company sells clinical lab products to domestic and international distributors, including hospitals and clinical laboratories,

medical research institutions, medical schools, and pharmaceutical companies.

OTC products are sold directly to drug stores and e-commerce

customers as well as to distributors.

Physicians’ office products are sold to physicians and distributors, all of whom are categorized

below according to the type of products sold to them.

We also manufacture certain components on a contract basis for domestic and international

manufacturers.

of May 31, 2023, the Company had approximately $ 60,000 of advances from certain foreign customers.

These advances are prepayments on

orders that are expected to ship during our second fiscal quarter ending November 30, 2023.

Disaggregation

following is an approximate breakdown of revenues according to primary markets to which the products are sold:

SCHEDULE OF DISAGGREGATION REVENUE

the Year Ended May 31,

Over-the-counter

Contract manufacturing

See Note 8 for additional information regarding geographic revenue concentrations.

SHIPPING AND HANDLING FEES

The Company includes shipping and handling fees billed to customers in net sales.

RESEARCH AND DEVELOPMENT

Research and development costs are expensed as incurred.

The Company expensed approximately $ 1,812,000 and $ 2,194,000 of research and development costs during the years ended May 31, 2022 and 2021, respectively.

The Company accounts for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”).

Deferred tax assets and liabilities arise from temporary differences between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements that will result in taxable or deductible amounts in future years and the benefits of net operating loss and tax credit carryforwards.

These temporary differences and the benefits of net operating loss and tax credit carryforwards are measured using enacted tax rates.

A valuation allowance is recorded to reduce deferred tax assets to the extent that management considers it is more likely than not that a deferred tax asset will not be realized.

In determining the valuation allowance, the Company considers factors such as the reversal of deferred income tax assets, projected taxable income, and the character of income tax assets and tax planning strategies.

A change to these factors could impact the estimated valuation allowance and income tax expense.

On May 31, 2022 and 2021, in accordance with ASC 740, the Company has a valuation allowance for substantially all of its net deferred tax assets.

During the fiscal year ended May 31, 2022, this valuation allowance was increased to $ 6,967,000 , which fully covers the net tax asset of $ 6,967,000 .

The Company accounts for its uncertain tax provisions by using a two-step approach to recognizing and measuring uncertain tax positions.

The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not, based solely on the technical merits, that the position will be sustained in an audit, including resolution of related appeals or litigation processes, if any.

Physician’s office

Note 8 for additional information regarding geographic revenue concentrations.

AND HANDLING FEES

Company includes shipping and handling fees billed to customers in net sales.

AND DEVELOPMENT

and development costs are expensed as incurred.

The Company expensed approximately $ 1,584,000 and $ 1,812,000 of research and development

costs during the years ended May 31, 2023 and 2022, respectively.

Company accounts for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”).

Deferred tax assets and

liabilities arise from temporary differences between the tax bases of assets and liabilities and their reported amounts in the

consolidated financial statements that will result in taxable or deductible amounts in future years and the benefits of net

operating loss and tax credit carryforwards.

These temporary differences and the benefits of net operating loss and tax credit

carryforwards are measured using enacted tax rates.

A valuation allowance is recorded to reduce deferred tax assets to the extent

that management considers it is more likely than not that a deferred tax asset will not be realized.

In determining the valuation

allowance, the Company considers factors such as the reversal of deferred income tax assets, projected taxable income, and the

character of income tax assets and tax planning strategies.

A change to these factors could impact the estimated valuation allowance

and income tax expense.

As of May 31, 2023 and 2022, in accordance with ASC 740, the Company has a valuation allowance for

substantially all of its net deferred tax assets.

During the year ended May 31, 2023, this valuation allowance was increased to

$ 8,940,000 ,

which fully covers the net deferred tax asset of $ 8,940,000 .

Company accounts for its uncertain tax provisions by using a two-step approach to recognizing and measuring uncertain tax positions.

The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more

likely than not, based solely on the technical merits, that the position will be sustained in an audit, including resolution of related

appeals or litigation processes, if any.

The second step is to measure the appropriate amount of the benefit to recognize.

The amount of benefit to recognize is measured as the maximum amount which is more likely than not to be realized.

The tax position is derecognized when it is no longer more likely than not capable of being sustained.

On subsequent recognition and measurement, the maximum amount which is more likely than not to be recognized at each reporting date will represent the Company’s best estimate, given the information available at the reporting date, although the outcome of the tax position is not absolute or final.

The Company elected to follow an accounting policy to classify accrued interest related to liabilities for income taxes within the “Interest expense” line and penalties related to liabilities for income taxes within the “Other expense” line of the consolidated statements of operations and comprehensive loss.

ADVERTISING COSTS

The Company reports the cost of all advertising as expense in the period in which those costs are incurred.

Advertising costs were approximately $ 76,000 and $ 10,000 for the years ended May 31, 2022 and 2021, respectively.

FOREIGN CURRENCY TRANSLATION

The subsidiary located in Mexico operates primarily using the Mexican peso.

The subsidiary located in Germany operates primarily using the U.S.

of benefit to recognize is measured as the maximum amount which is more likely than not to be realized.

The tax position is derecognized

when it is no longer more likely than not capable of being sustained.

On subsequent recognition and measurement, the maximum amount which

is more likely than not to be recognized at each reporting date will represent the Company’s best estimate, given the information

available at the reporting date, although the outcome of the tax position is not absolute or final.

The Company elected to follow an

accounting policy to classify accrued interest related to liabilities for income taxes within the “Interest expense” line

and penalties related to liabilities for income taxes within the “Other expense” line of the consolidated statements of operations

and comprehensive loss.

Company reports the cost of all advertising as expense in the period in which those costs are incurred.

Advertising costs were approximately

$ 156,000 and $ 76,000 for the years ended May 31, 2023 and 2022, respectively.

CURRENCY TRANSLATION

subsidiary located in Mexico operates primarily using the Mexican peso.

The subsidiary located in Germany operates primarily using the

dollar, with an immaterial amount of transactions occurring using the Euro.

Accordingly, assets and liabilities of these subsidiaries are translated using exchange rates in effect at the end of the year, and revenues and costs are translated using average exchange rates for the year.

The resulting adjustments to assets and liabilities are presented as a separate component of accumulated other comprehensive loss.

There are no foreign currency transactions that are included in the consolidated statements of operations for the years ended May 31, 2022 and 2021.

RIGHT-OF-USE ASSETS AND LEASE LIABILITY

In February 2016, the Financial Accounting Standards Board (“FASB”) issued an accounting standard update which requires lessees to recognize most leases on the balance sheet with a corresponding right-of-use asset.

Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of fixed lease payments over the lease term.

Leases are classified as financing or operating which will drive the expense recognition pattern.

Accordingly, assets and liabilities of these subsidiaries

are translated using exchange rates in effect at the end of the year, and revenues and costs are translated using average exchange rates

for the year.

The resulting adjustments to assets and liabilities are presented as a separate component of accumulated other comprehensive

There are no foreign currency transactions that are included in the consolidated statements of operations for the years ended May

31, 2023 and 2022.

ASSETS AND LEASE LIABILITIES

February 2016, the Financial Accounting Standards Board (“FASB”) issued an accounting standard update which requires lessees

to recognize most leases on the balance sheet with a corresponding right-of-use asset.

Right-of-use assets represent the Company’s

right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from

Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value

of fixed lease payments over the lease term.

Leases are classified as financing or operating which will drive the expense recognition

The Company has elected to exclude short-term leases.

The Company adopted this guidance as of June 1, 2019, the required effective date, which resulted in a right-of-use asset being recorded of approximately $ 1,943,000 and a lease liability being recorded of approximately $ 1,981,000 .

On April 9, 2021, the Company exercised its second option to extend its lease for an additional five years.

As part of that lease extension agreement, the Company was granted an additional right to extend its lease for five years, up through August 2031.

However, given the recent growth in the Company’s operations, and the expectation that operations will continue to grow in the near future, the Company believes that it will be necessary to relocate into larger facilities by the end of the current lease term.

Therefore, the Company has elected to not include the additional five-year extension option, from August 2026 to August 2031, into its right-of-use asset or its lease liability accounts.

For additional information, see Note 9-Commitments and Contingencies.

The Company leases office space and copy machines, all of which are operating leases.

The Company leases office space and copy machines, all of which are operating

Most leases include the option to renew and the exercise of the renewal options is at the Company’s sole discretion.

Options to extend or terminate a lease are considered in the lease term to the extent that the option is reasonably certain of exercise.

The leases do not include the options to purchase the leased property.

The depreciable life of assets and leasehold improvements are limited by the expected lease term.

NET LOSS PER SHARE

Basic loss per share is computed as net loss divided by the weighted average number of common shares outstanding for the period.

Diluted loss per share reflects the potential dilution that could occur from common shares issuable through stock options, warrants and other convertible securities using the treasury stock method.

The total amounts of anti-dilutive stock options not included in the loss per share calculation for the years ended May 31, 2022 and 2021 were 2,321,616 and 2,081,366 , respectively.

SEGMENT REPORTING

ASC 280, Segment Reporting (“ASC 280”), establishes standards for reporting, by public business enterprises, information about operating segments, products and services, geographic areas, and major customers.

The Company’s operations are analyzed by management and its chief operating decision maker as being part of a single industry segment:

the design, development, marketing, and sales of diagnostic kits.

REPORTING COMPREHENSIVE LOSS

Comprehensive loss represents net loss and any revenues, expenses, gains and losses that, under GAAP, are excluded from net loss and recognized directly as a component of shareholders’ equity.

Items of other comprehensive loss consist solely of foreign currency translation adjustments for the years ended May 31, 2022 and 2021.

RECENT ACCOUNTING PRONOUNCEMENTS

Recent ASU's issued by the FASB and guidance issued by the SEC did not, or are not believed by management to, have a material effect on the Company’s present or future consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments." This ASU will require the measurement of all expected credit losses for financial assets, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

The guidance was initially effective for the Company for annual reporting periods beginning after December 15, 2019, and interim periods within those fiscal years.

In November 2019, the FASB issued ASU 201·9- 10, "Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842):

Effective Dates," which, among other things, defers the effective date of ASU 2016-13 for public filers that are considered smaller reporting companies as defined by the Securities and Exchange Commission to fiscal years beginning after December 15, 2022, including interim periods within those years.

to extend or terminate a lease are considered in the lease term to the extent that the option is reasonably certain of exercise.

leases do not include the options to purchase the leased property.

The depreciable life of assets and leasehold improvements are limited

by the expected lease term.

For additional information, see Note 9-Commitments and Contingencies.

LOSS PER SHARE

loss per share is computed as net loss divided by the weighted average number of common shares outstanding for the period.

per share reflects the potential dilution that could occur from common shares issuable through stock options, warrants and other convertible

securities using the treasury stock method.

The total amounts of anti-dilutive stock options not included in the loss per share calculation

for the years ended May 31, 2023 and 2022 were 2,342,616 and 2,321,616 , respectively.

280, Segment Reporting (“ASC 280”), establishes standards for reporting, by public business enterprises, information about

operating segments, products and services, geographic areas, and major customers.

The Company’s operations are analyzed by management

and its chief operating decision maker as being part of a single industry segment:

the design, development, marketing, and sales of diagnostic

COMPREHENSIVE LOSS

Comprehensive

loss represents net loss and any revenues, expenses, gains and losses that, under GAAP, are excluded from net loss and recognized directly

as a component of shareholders’ equity.

Items of other comprehensive loss consist solely of foreign currency translation adjustments

for the years ended May 31, 2023 and 2022.

ACCOUNTING PRONOUNCEMENTS

Except as follows, recent

ASU’s issued by the FASB and guidance issued by the SEC did not, or are not believed by management to, have a material effect on

the Company’s present or future consolidated financial statements.

June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

This ASU will require the measurement of all expected credit losses for financial assets, including trade receivables, held at the reporting

date based on historical experience, current conditions, and reasonable and supportable forecasts.

The guidance was initially effective

for the Company for annual reporting periods beginning after December 15, 2019, and interim periods within those fiscal years.

2019, the FASB issued ASU 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases

Effective Dates, which, among other things, defers the effective date of ASU 2016-13 for public filers that are considered

smaller reporting companies as defined by the Securities and Exchange Commission to fiscal years beginning after December 15, 2022, including

interim periods within those years.

Early adoption is permitted.

The Company is currently reviewing the requirements of this ASU to determine its impact on the Company’s consolidated results of operations and financial position.

RECLASSIFICATIONS

Certain comparative figures in the 2021 Statement of Operations have been reclassified to conform to the current year’s presentation.

The Company is currently reviewing the requirements of this ASU to determine

its impact on the Company’s consolidated results of operations and financial position.

PROPERTY AND EQUIPMENT, NET

The following is an approximate breakdown of property and equipment, net of accumulated depreciation:

following is an approximate breakdown of property and equipment, net of accumulated depreciation:

OF PROPERTY AND EQUIPMENT, NET

Furniture, fixtures and leasehold improvements

2 unchanged sentences

( 1,305,000 )

Net property and equipment

property and equipment

INTANGIBLE ASSETS, NET

The following is an approximate breakdown of intangible assets, net of accumulated amortization:

Less accumulated amortization-licenses

following is an approximate breakdown of intangible assets, net of accumulated amortization:

OF INTANGIBLE ASSETS, NET

Less accumulated amortization-patents

Intangible asssets, net

Expected amortization of intangible assets for the years ending May 31:

amortization of intangible assets for the years ending May 31:

OF EXPECTED AMORTIZATION OF INTANGIBLE ASSETS

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

The following is an approximate breakdown of accounts payable and accrued expenses balances:

Accounts payable

Accrued expenses

As of May 31, 2022 and 2021 the Company had two vendors and one vendor, respectively, which accounted for 69 % and 17 %, respectively, of accounts payable.

following is an approximate breakdown of accounts payable and accrued expenses balances:

SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES

of May 31, 2023, the Company had one vendor which accounted for 23 % of accounts payable.

As of May 31, 2022, the Company had two vendors

which accounted for 69 % of accounts payable.

SHAREHOLDERS’ EQUITY

STOCK OPTION AND RESTRICTED STOCK PLANS

In December 2014, the Company adopted a stock option and restricted stock plan (the "2014 Plan") which provides that non-qualified options and incentive stock options and restricted stock covering an aggregate of 850,000 shares of the Company's unissued common stock may be granted to affiliates, employees, or consultants of the Company.

This plan was approved by shareholders in December 2014.

The 2014 Plan expires in December 2024.

Options granted under the 2014 Plan will be granted at prices not less than 80 % of the then fair market value of the common stock and will expire not more than 10 years after the date of grant.

In December 2017, the Company adopted a stock option and restricted stock plan (the “2017 Plan”) which provides that non-qualified options and incentive stock options and restricted stock covering an aggregate of 900,000 shares of the Company’s unissued common stock may be granted to affiliates, employees, or consultants of the Company.

This plan was approved by shareholders in December 2017.

The 2017 Plan expires in December 2027.

Options granted under the 2017 Plan will be granted at prices not less than 80 % of the then fair market value of the common stock and will expire not more than 10 years after the date of grant.

In February 2020, the Board approved the 2020 Stock Incentive Plan (the “2020 Plan”) and on December 11, 2020, the shareholders of the Company approved The Plan.

The 2020 Plan authorizes the issuance of an aggregate number of common stock options and/or restricted common shares to be issued in an amount not to exceed 900,000 .

The 2020 Plan authorizes the issuance of common stock options and restricted common shares to employees, directors, and consultants of the Company.

During fiscal 2020, certain common stock options were granted under this plan.

Stock option expense during fiscal 2022 was approximately $ 1,260,000 .

This included, by department, $ 954,000 for administrative, $ 159,000 for production, $ 80,000 for research and development and $ 67,000 for sales and marketing.

Stock option expense during fiscal 2021 was approximately $ 1,355,000 .

This included, by department, $ 957,000 for administrative, $ 205,000 for production, $ 125,000 for research and development and $ 68,000 for sales and marketing

Activity as to aggregate stock options outstanding is as follows:

STOCK OPTIONS

EXERCISE PRICE

OPTION AND RESTRICTED STOCK PLANS

December 2014, the Company adopted and shareholders approved a stock option and restricted stock plan (the “2014 Plan”).

Subsequently, in December 2017, the Company adopted and shareholders approved an stock option and restricted stock plan (the “2017

In February 2020, the Board approved the 2020 Stock Incentive Plan (the “2020 Plan”, and collectively with

the 2014 Plan and 2017 Plan, the “Equity Incentive Plans”) and on December 11, 2020, the shareholders of the Company approved

the 2020 Plan.

The Equity Incentive Plans provide that non-qualified options and incentive stock options and restricted stock may be

granted to directors, affiliates, employees, or consultants of the Company.

The Equity Incentive Plans authorize awards representing

up to 850,000 , 900,000 and 900,000 shares of the Company’s common stock to be issued under the 2014 Plan, 2017 Plan, and 2020 Plan,

respectively.

Awards granted under the Equity Incentive Plans typically vest over 4 years.

Options granted under the Equity Incentive

Plans will be granted at prices not less than 80 % of the then fair market value of the common stock and will expire not more than 10

years after the date of grant.

The 2014 Plan expires in December 2024, the 2017 Plan expires in December 2027, and the 2020 Plan expires

in December 2030.

compensation expense for the years ended May 31, 2023 and 2022 is as follows:

OF STOCK BASED COMPENSATION EXPENSE

the Year Ended May 31,

Cost of sales

Selling, general and administrative

Research and development

stock option expense

as to aggregate stock options outstanding is as follows:

OF ACTIVITY TO AGGREGATE STOCK OPTIONS

Number of Stock Options

Weighted Average Exercise Price

Aggregate Intrinsic Value

Options Outstanding at May 31, 2021

Options granted

Options excercised

Options exercised

Options canceled or expired

1 unchanged sentence

Options granted

Options excercised

Options exercised

Options canceled or expired

Options Outstanding at May 31, 2023

The weighted average fair value of options granted during 2022 and 2021 were $ 4.43 and $ 6.73 , respectively.

The aggregate intrinsic value of options exercised during 2022 and 2021 was approximately $ 90,000 and $ 501,000 , respectively.

The aggregate intrinsic value of options outstanding on May 31, 2022 and 2021 was approximately $ 1,838,000 and $ 2,132,000 , respectively.

The aggregate intrinsic value of options vested and exercisable on May 31, 2022 and 2021 was approximately $ 1,731,000 and $ 1,872,000 , respectively.

The number of non-vested stock options included in the table above is as follows:

Stock options

average grant

date fair value

Non-vested shares at May 31, 2021

Non-vested shares at May 31, 2022

On May 31, 2022, total compensation cost related to non-vested stock option awards not yet recognized totaled approximately $ 1,982,000 .

Options vested and exercisable at May 31, 2023

weighted average grant date fair value of options granted during 2023 and 2022 were $ 2.19 and $ 4.43 , respectively.

May 31, 2023, total compensation cost related to non-vested stock option awards not yet recognized totaled approximately $ 1,145,000 .

The weighted-average period over which this amount is expected to be recognized is 2.52 years.

The weighted average remaining contractual term of options that were exercisable on May 31, 2022, was 5.47 years.

The following summarizes information about all the Company's stock options outstanding on May 31, 2022.

These options are comprised of those granted under the 2014, 2017 and 2020 plans.

EXERCISE PRICES

LIFE IN YEARS

EXERCISE PRICE

AT MAY 31, 2022

EXERCISE PRICE

$ 0.82 -$ 1.52

$ 2.25 -$ 4.25

$ 4.34 -$ 8.70

COMMON STOCK ACTIVITY

On January 22, 2021, the Company filed a Prospectus Supplement, for purposes of raising up to $ 15,000,000 to the base prospectus filed with the SEC on July 21, 2020, and declared effective by the SEC on September 30, and an ATM Agreement.

On May 21, 2021, in conjunction with the Company’s 2020 Stock Incentive Plan, that was approved by shareholders at the Company’s annual meeting in December 2020, the Company filed an S-8 Registration Statement to register up to 900,000 shares of the Company’s common stock that could be issued under this Plan.

Under ATM Agreements, sales of the Placement Shares are deemed to be “at the market offering” as defined in Rule 415 promulgated under the Securities Act.

The agent acts as sales agent under the ATM and uses commercially reasonable efforts to sell on the Company’s behalf all of the Placement Shares requested to be sold from time to time by the Company, consistent with its normal trading and sales practices, on mutually agreed terms between the agent and the Company.

The Company has no obligation to sell any of the Placement Shares under the ATM Agreement, and may at any time suspend offers under, or terminate the ATM Agreement.

During the year ended May 31, 2022, the Company sold 521,267 shares of its common stock at prices ranging from $ 4.02 to $ 5.63 under its Form S-3 Registration Statement ( File No.

During the year ended May 31, 2021, the Company sold 158,889 shares of its common stock at prices ranging from $ 7.06 to $ 7.79 under its Form S-3 Registration Statement (File No.

333-239980) and ATM Agreement which resulted in gross proceeds of approximately $ 1,177,000 and net proceeds to the Company of $ 1,011,000 after deducting commissions for each sale and legal, accounting, and other fees related to the filing of the Form S-3.

During the year ended May 31, 2022, options to purchase 39,500 shares of common stock were exercised at prices ranging from $ 1.20 to $ 3.62 .

Total net proceeds to the Company were approximately $ 77,000 .

During the year ended May 31, 2021, 321,429 shares of common stock were converted from Preferred Stock as described below in “Preferred Stock Activity”.

PREFERRED STOCK ACTIVITY

On February 24, 2020, the Company entered into and closed on a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Palm Global Small Cap Master Fund LP (“Palm”) pursuant to which the Company agreed to sell and issue to Palm, and Palm agreed to purchase from the Company, 571,429 shares of the Company’s Series A 5% Convertible Preferred Stock, $ 0.08 par value per share for a purchase price of approximately $ 2 million, or $ 3.50 per Series A Convertible Preferred Stock.

Under the terms of the Stock Purchase Agreement, each share of issued Convertible Preferred Stock can be converted at any time by Palm into one share of the Company’s common stock, subject to certain adjustments.

The Series A 5% Convertible Preferred Stock accrued annual preferred dividends at a rate of $ 0.175 per Series A 5% Convertible Preferred Share.

However, accruing dividends were payable only when, as, and if declared by the Board and the Company had no obligation to pay such accruing dividends.

On March 24, 2020, Palm converted 250,000 shares of Convertible Preferred Stock into 250,000 shares of unregistered common stock.

On July 21, 2020, the Company filed with the SEC a registration statement on Form S-3, that among other things, registered 571,429 common shares issued, or to be issued, to Palm upon conversion of the Convertible Preferred Stock into common shares.

On September 30, 2020, the Company received a Notice of Effectiveness from the Securities and Exchange Commission for registration of these shares.

On January 21, 2021, Palm Converted their remaining 321,429 Convertible Preferred Shares into registered common shares.

On May 30, 2021, the Company had no shares of Preferred Stock outstanding.

Under the terms of the Preferred Stock Purchase Agreement, none of the cumulative Dividends were paid to Palm during the period they owned the Preferred Stock.

Once converted to common shares, Palm lost all rights to receive any past cumulative dividends.

Provision for income taxes for the years ended May 31 consists of the following:

For the year ended May 31,

Foreign Taxes Subsidiaries

State and local

Total current

The weighted average remaining contractual

term of options that were exercisable on May 31, 2023 was 4.97 years.

The weighted average remaining contractual term of options that

were vested, exercisable, or expected to vest on May 31, 2023 was 5.67 years.

STOCK ACTIVITY

January 22, 2021, the Company filed a prospectus supplement to the base prospectus included in a registration statement filed with the

SEC on July 21, 2020, and declared effective by the SEC on September 30, 2020, for purposes of selling up to $ 15,000,000 in “at-the-market”

offerings, as defined in Rule 415 promulgated under the Securities Act (the “ATM Offering”).

May 21, 2021, in conjunction with the Company’s 2020 Stock Incentive Plan, that was approved by shareholders at the Company’s

annual meeting in December 2020, the Company filed an S-8 Registration Statement to register up to 900,000 shares of the Company’s

common stock that could be issued under this Plan.

the ATM Offering, the sales agent uses commercially reasonable efforts to sell on the Company’s behalf all of the shares requested

to be sold from time to time by the Company, consistent with its normal trading and sales practices, on mutually agreed terms between

the agent and the Company.

The Company has no obligation to sell any of the shares under the ATM Offering, and may at any time suspend

offers under, or terminate the ATM Offering.

the year ended May 31, 2023, the Company sold 573,889 shares of its common stock at prices ranging from $ 3.15 to $ 4.26 pursuant to the

ATM Offering, which resulted in gross proceeds of approximately $ 2,014,000 and net proceeds to the Company of $ 1,961,000 , after deducting

commissions for each sale and legal, accounting, and other fees related to the offering in the amount of $ 53,000 .

the year ended May 31, 2022, the Company sold 521,267 shares of its common stock at prices ranging from $ 4.02 to $ 5.63 pursuant to the

ATM Offering, which resulted in gross proceeds of approximately $ 2,402,000 and net proceeds to the Company of $ 2,317,000 , after deducting

commissions for each sale and legal, accounting, and other fees related to the offering in the amount of $ 85,000 .

March 7, 2023, the Company closed on an underwritten sale of 3,333,333 shares of our registered common stock through an investment banking

firm, which shares were issued under our shelf registration.

In this offering, the Company sold the registered shares at a gross sales

price of $ 2.40 per share, with net proceeds, after deducting issuance fees and expenses of $ 700,000 , of approximately $ 7,300,000 .

STOCK ACTIVITY

February 24, 2020, the Company entered into and closed on a Stock Purchase Agreement (the “Stock Purchase Agreement”) with

Palm Global Small Cap Master Fund LP (“Palm”) pursuant to which the Company agreed to sell and issue to Palm, and Palm agreed

to purchase from the Company, 571,429 shares of the Company’s Series A 5% Convertible Preferred Stock, $ 0.08 par value per share

for a purchase price of approximately $ 2 million, or $ 3.50 per Series A Convertible Preferred Stock.

Under the terms of the Stock Purchase

Agreement, each share of issued Convertible Preferred Stock can be converted at any time by Palm into one share of the Company’s

common stock, subject to certain adjustments.

Series A 5% Convertible Preferred Stock accrued annual preferred dividends at a rate of $ 0.175 per Series A 5% Convertible Preferred

However, accruing dividends were payable only when, as, and if declared by the Board and the Company had no obligation to pay

such accruing dividends.

March 24, 2020, Palm converted 250,000 shares of Convertible Preferred Stock into 250,000 shares of unregistered common stock.

21, 2020, the Company filed with the SEC a registration statement on Form S-3, that among other things, registered 571,429 common shares

issued, or to be issued, to Palm upon conversion of the Convertible Preferred Stock into common shares.

On September 30, 2020, the Company

received a Notice of Effectiveness from the Securities and Exchange Commission for registration of these shares.

On January 21, 2021,

Palm Converted their remaining 321,429 Convertible Preferred Shares into registered common shares.

On May 30, 2021, the Company had no

shares of Preferred Stock outstanding.

Under the terms of the Preferred Stock Purchase Agreement, none of the cumulative dividends were

paid to Palm during the period they owned the Preferred Stock.

Once converted to common shares, Palm lost all rights to receive any past

cumulative dividends.

for income taxes for the years ended May 31 consists of the following:

OF PROVISION FOR INCOME TAXES

the Year Ended May 31,

Foreign Taxes

State and local

Total deferred

Income tax expense

Provision for income taxes differs from the amounts computed by applying the U.S.

Federal income tax rate applicable for each year ( 21 % for 2022 and 2021) to pretax income as a result of the following:

For the year ended May 31,

Computed "expected" tax benefit

Increase (reduction) in income taxes resulting from:

for income taxes differs from the amounts computed by applying the U.S.

Federal income tax rate applicable for each year ( 21 % for 2023

and 2022) to pretax income as a result of the following:

OF EFFECTIVE INCOME TAX RECONCILIATION

the Year Ended May 31,

Computed “expected”

Increase (reduction) in income taxes resulting

Change in valuation allowance

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Foreign taxes of subsidiaries

Income tax expense

The tax effect of significant temporary differences is presented below:

tax effect of significant temporary differences is presented below:

OF DEFERRED TAX ASSETS

Deferred tax assets:

Accounts receivable, principally due to allowance for doubtful accounts

Accounts receivable,

principally due to allowance for doubtful accounts

Inventory valuation

4 unchanged sentences

Stock Options

Losses of foreign subsidiaries & Other, net

Accumulated depreciation and amortization

Sec 174 capitalized costs

Losses of foreign subsidiaries & other,

depreciation and amortization

Total deferred tax assets

2 unchanged sentences

( 6,967,000 )

Net deferred tax asset

The Company has provided a valuation allowance of approximately $ 6,967,000 and $ 5,904,000 as of May 31, 2022 and 2021, respectively.

The net change in the valuation allowance for the years ended May 31, 2022 and 2021, was an increase of $ 1,063,000 and $ 2,292,000 , respectively.

On May 31, 2022, the Company has Federal income tax net operating loss carryforwards of approximately $ 17,116,000 .

On May 31, 2022, the Company has California state income tax net operating loss carryforwards of approximately $ 10,805,000 .

For tax reporting purposes, operating loss carryforwards are available to offset future taxable income;

such carryforwards expire in varying amounts beginning in 2023 and 2037 for federal and state purposes, respectively.

deferred tax asset

Company has provided a valuation allowance of approximately $ 8,940,000 and $ 6,967,000 as of May 31, 2023 and 2022, respectively.

net change in the valuation allowance for the years ended May 31, 2023 and 2022 was an increase of $ 1,973,000 and $ 1,063,000 , respectively.

May 31, 2023, the Company has Federal income tax net operating loss carryforwards of approximately $ 21,958,000 .

On May 31, 2023, the

Company has California state income tax net operating loss carryforwards of approximately $ 17,269,000 .

For tax reporting purposes, operating

loss carryforwards are available to offset future taxable income;

such carryforwards expire in varying amounts beginning in 2024 and

2038 for federal and state purposes, respectively.

Federal net operating losses beginning in 2018 have no expiration date.

On May 31, 2022, the Company has Federal research and development tax credit carryforward of approximately $ 784,000 .

The Federal credits begin to expire in 2027 .

The Company also had similar credit carryforwards for state purposes of $ 395,000 on May 31, 2022, which don’t expire.

Pursuant to Internal Revenue Code (“IRC”) Sections 382 and 383, annual use of the Company's net operating loss ("NOL") and credit carryforwards may be limited by statute because of a cumulative change in ownership of more than 50%.

Pursuant to Sections 382 and 383 of the IRC, the annual use of the Company's NOLs and credit carryforwards would be limited if there is a cumulative change of ownership (as that term is defined in Section 382(g) of the IRC of greater than 50% in a three-year period.

Management has not performed an analysis to determine if the Company has had a cumulative change in ownership of greater than 50%.

For the year ended May 31, 2022, the Company did an analysis of its ASC 740 position and has not identified any uncertain tax positions as defined under ASC 740 .

Should such position be identified in the future, and should the Company owe interest and penalties as a result of this, these would be recognized as interest expense and other expense, respectively, in the consolidated financial statements.

The Company is no longer subject to any significant U.S.

May 31, 2023, the Company has Federal research and development tax credit carryforward of approximately $ 817,000 .

The Federal credits

begin to expire in 2028.

The Company also had similar credit carryforwards for state purposes of $ 533,000 on May 31, 2023, which do not

to Internal Revenue Code (“IRC”) Sections 382 and 383, annual use of the Company’s net operating loss (“NOL”)

and credit carryforwards may be limited by statute because of a cumulative change in ownership of more than 50%.

Pursuant to Sections

382 and 383 of the IRC, the annual use of the Company’s NOLs and credit carryforwards would be limited if there is a cumulative

change of ownership (as that term is defined in Section 382(g) of the IRC of greater than 50% in a three-year period).

Management has

not performed an analysis to determine if the Company has had a cumulative change in ownership of greater than 50%.

the year ended May 31, 2023, the Company performed an analysis and has not identified any uncertain tax positions as

defined under ASC 740.

Should such position be identified in the future, and should the Company owe interest and penalties as a result

of this, these would be recognized as interest expense and other expense, respectively, in the consolidated financial statements.

Company is no longer subject to any significant U.S.

federal tax examinations by tax authorities for years before fiscal 2018.

GEOGRAPHIC INFORMATION

The Company operates as one segment.

Company operates as one segment.

Geographic information regarding net sales is approximately as follows:

For the year ended May 31,

OF GEOGRAPHIC INFORMATION

the Year Ended May 31,

Revenues from sales to unaffiliated customers:

North America

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COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

The Company leases its facilities.

On May 31, 2022, the Company had approximately 22,000 square feet of floor space at its corporate headquarters at 17571 Von Karman Avenue in Irvine, California, which it has been leasing since 2009.

The lease for its headquarters expired on August 31, 2016.

The Company had an option to extend the term of its lease for two additional sixty-month periods.

On November 30, 2015, the Company exercised its option to extend its lease for an additional sixty-month period and entered into the First Amendment to Lease wherein it extended its lease until August 31, 2021 .

On April 9, 2021, the Company exercised its second option to extend its lease for an additional five years.

When the Company extended its lease in April 2021, it was also granted an additional five-year lease extension option.

The current rent is approximately $ 25,000 per month and will increase on September 1, 2022, to $ 26,000 per month.

The security deposit is approximately $22,000.

In November 2016, the Company’s Mexican subsidiary, Biomerica de Mexico, entered into a 10 -year lease for approximately 8,100 square feet of manufacturing space.

Company leases facilities in Irvine, California and Mexicali, Mexico.

of May 31, 2023, the Company had approximately 22,000 square feet of floor space at its corporate headquarters at 17571 Von Karman Avenue

in Irvine, California.

The lease for its headquarters expires in August 2026.

The Company has the option to extend the lease for an additional

five-year term .

The Company made a security deposit of approximately $ 22,000 .

November 2016, the Company’s Mexican subsidiary, Biomerica de Mexico, entered into a 10 -year lease for approximately 8,100 square

feet of manufacturing space.

The Company has one 10 -year option to renew at the end of the initial lease period.

The current rent is approximately $ 3,400 per month.

Biomerica de Mexico also leases a smaller unit on a month-to-month basis for use in one manufacturing process.

In addition, the Company leases a small office in Lindau, Germany on a month-to-month basis, as headquarters for BioEurope GmbH, its Germany subsidiary.

Total gross rent expense in the United States for fiscal 2022 was approximately $ 310,000 , and for fiscal 2021 was $ 295,000 .

Rent expense for the Mexico facility for fiscal 2022 and 2021 was approximately $ 42,000 and $ 25,000 , respectively.

For purposes of determining straight-line rent expense, the lease term is calculated from the date the Company first takes possession of the facility, including any periods of free rent and any renewal options periods that the Company is reasonably certain of exercising.

The Company’s office and equipment leases generally have contractually specified minimum rent and annual rent increases are included in the measurement of the right-of-use asset and related lease liability.

Additionally, under these lease arrangements, the Company may be required to pay directly, or reimburse the lessors, for some maintenance and operating costs.

Such amounts are generally variable and therefore not included in the measurement of the right-of-use asset and related lease liability but are instead recognized as variable lease expense in the Consolidated Statements of Operations and Comprehensive Loss when they are incurred.

Supplemental cash flow information related to leases for the year ended May 31, 2022:

Operating cash flows from operating leases

Right-of-use assets obtained in exchange for

new operating lease liabilities

Weighted average remaining lease term (in years)

Biomerica de Mexico

also leases a smaller unit on a month-to-month basis for use in the Company’s manufacturing process.

addition, the Company leases a small office in Lindau, Germany on a month-to-month basis, as headquarters for BioEurope GmbH, its Germany

purposes of determining straight-line rent expense, the lease term is calculated from the date the Company first takes possession of

the facility, including any periods of free rent and any renewal options periods that the Company is reasonably certain of exercising.

The Company’s office and equipment leases generally have contractually specified minimum rent and annual rent increases are included

in the measurement of the right-of-use asset and related lease liabilities.

Additionally, under these lease arrangements, the Company

may be required to pay directly, or reimburse the lessors, for some maintenance and operating costs.

Such amounts are generally variable

and therefore not included in the measurement of the right-of-use asset and related lease liabilities but are instead recognized as variable

lease expense in the consolidated statements of operations and comprehensive loss when they are incurred.

following table presents information on our operating leases for the years ended May 31, 2023 and 2022:

OF OPERATING LEASES

Ended May 31,

Operating lease cost

Short-term lease cost

Total lease cost

future minimum lease payments of the Company’s operating lease liabilities by fiscal year are as follows:

OF FUTURE MINIMUM LEASE PAYMENTS

Year Ending May 31:

Total minimum future lease payments

imputed interest

Total operating lease

following table summarizes the Company’s other supplemental lease information for the years ended May 31, 2023 and 2022:

OF OTHER SUPPLEMENTAL LEASE INFORMATION

Ended May 31,

Cash paid for operating lease liabilities

Weighted-average remaining lease term (years)

Weighted-average discount rate

Future minimum lease payments under operating leases on May 31, 2022, are as follows:

Less than 1 year

Total undiscounted lease payments

Less imputed interest

Total operating lease liabilities

According to the terms of the lease in Irvine, the Company is also responsible for routine repairs of the building and for certain increases in property tax.

The Company also has various insignificant leases for office equipment.

RETIREMENT SAVINGS PLAN

Effective September 1, 1986, the Company established a 401(k) plan for the benefit of its employees.

The plan permits eligible employees to contribute to the plan up to the maximum percentage of total annual compensation allowable under the limits of IRC Sections 415, 401(k) and 404.

The Company, at the discretion of its Board of Directors, may make contributions to the plan in amounts determined by the Board each year.

Company also has various insignificant leases for office equipment.

September 1, 1986, the Company established a 401(k) plan for the benefit of its employees.

The plan permits eligible employees to contribute

to the plan up to the maximum percentage of total annual compensation allowable under the limits of IRC Sections 415, 401(k) and 404.

The Company, at the discretion of its Board of Directors, may make contributions to the plan in amounts determined by the Board each

No contributions by the Company have been made since the plan’s inception.

The Company is, from time to time, involved in legal proceedings, claims and litigation arising in the ordinary course of business.

While the amounts claimed may be substantial, the ultimate liability cannot presently be determined because of considerable uncertainties that exist.

Therefore, it is possible the outcome of such legal proceedings, claims and litigation could have a material effect on quarterly or annual operating results or cash flows when resolved in a future period.

However, based on facts currently available, management believes such matters will not have a material adverse effect on the Company's consolidated financial position, results of operations or cash flows.

There were no legal proceedings pending as of May 31, 2022.

Contracts and Licensing Agreements

The Company has one royalty agreement in which it has obtained rights to manufacture and market certain products for the life of the products.

Royalty expense of approximately $ 19,000 and $ 11,000 is included in cost of sales for the agreement for each of the years ended May 31, 2022 and 2021, respectively.

Sales of products manufactured under these agreements comprise approximately 1.5 % and 1.5 % of total sales for the years ended May 31, 2022 and 2021, respectively.

The Company may license other products or technology in the future as it deems necessary for conducting business.

Company is, from time to time, involved in legal proceedings, claims, and litigation arising in the ordinary course of business.

the amounts claimed may be substantial, the ultimate liability cannot presently be determined because of considerable uncertainties that

Therefore, it is possible the outcome of such legal proceedings, claims, and litigation could have a material effect on quarterly

or annual operating results or cash flows when resolved in a future period.

However, based on facts currently available, management believes

such matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations or

were no legal proceedings pending as of May 31, 2023.

and Licensing Agreements

Company has one royalty agreement in which it has obtained rights to manufacture and market certain products for the life of the products.

Royalty expense of approximately $ 13,000 and $ 19,000 is included in cost of sales for the agreement for each of the years ended May 31,

2023 and 2022, respectively.

Sales of products manufactured under these agreements comprise approximately 2.1 % and 1.5 % of total sales

for the years ended May 31, 2023 and 2022, respectively.

The Company may license other products or technology in the future as it deems

necessary for conducting business.

The Company has other royalty agreements however they are not considered material.

On May 25, 2016, the Company entered into an Exclusive Marketing License Agreement (“Telcon Agreement”) with Celtis Pharm Co., Ltd., who subsequently changed their name to Telcon Pharmaceutical Co., LTD (“Telcon”), a medical company in South Korea.

The Telcon Agreement grants to Telcon an exclusive license to market and sell Biomerica’s new InFoods® IBS products (“IBS Products”) in South Korea.

The term of the agreement is for a period of five years following Korean FDA clearance of the product and provides an additional two years for Telcon to attain such Korean FDA clearance.

The sequential two-year and five-year terms do not begin until after Biomerica first receives final clearance for sale of the IBS Products in the United States from the FDA.

Telcon, at its sole cost and expense, must use its commercially reasonable good faith efforts to obtain Korean FDA for the IBS Product to be sold in South Korea.

The agreement may be cancelled if Biomerica has not obtained final USFDA clearance for sale of the IBS Products on or before December 31, 2019.

The required FDA approval was not obtained by December 31, 2019, however, neither party has terminated the agreement.

Once the IBS Product is cleared by the United States FDA, Biomerica is also obligated to maintain a full quality assurance system for the IBS Products following the harmonized standards according to Annex IV of Directive 98/79/EC.

The terms of the Telcon Agreement provide up to $ 1.25 million in future exclusivity fees to be possibly paid to Biomerica based on certain milestones including Biomerica’s starting clinical trials in the United States, receipt of U.S.

FDA clearance and Telcon’s first sales of IBS Products in Korea.

If Biomerica commences FDA Trials and Telcon pays the initial $250,000 milestone-based exclusivity fees, and the Agreement is subsequently terminated by either party for lack of performance, then Biomerica shall issue to Telcon 83,333 shares of Biomerica common stock in consideration for the $ 250,000 of paid exclusivity fee.

No exclusivity fees have yet been paid.

Additionally, the Telcon Agreement provides for a royalty of 15 % paid to Biomerica on all sales in Korea of the IBS Product, and further sets the pricing of IBS Products sold to Telcon.

In order to retain the exclusivity within South Korea, Telcon must meet certain annual minimum royalty payments to Biomerica following Telcon’s receipt of Korean FDA approval or clearance for the IBS Product to be sold in Korea, which in no case will be later than May 31, 2019.

In September 2017, an agreement to extend this date was signed extending the date until April 30, 2020.

During the quarter ended August 31, 2020, a second amendment was signed extending the required FDA approval date to December 31, 2021.

The required FDA approval date hasn’t been delivered however, neither party has terminated the agreement.

On April 1, 2020, the Company entered into two separate non-exclusive license agreements (the “Mount Sinai License Agreements”) with the Mount Sinai Icahn School of Medicine in New York (“Mount Sinai”) to license technology from Mount Sinai that the Company intends to use to scale up and manufacture a laboratory version serological test for SARS-CoV-2 coronavirus.

The non-exclusive Mount Sinai License Agreements provide for royalty payments to Mount Sinai based on a percentage of gross sales of commercial products manufactured and sold by Biomerica that incorporate the Mount Sinai technology licensed under the Mount Sinai License Agreement.

On June 20, 2020, the Company filed for Emergency Use Authorization (“EUA”) with the FDA for the sale of a product developed by the Company that is based on this technology.

The FDA has still not approved the Company’s Emergency Use Authorization for this product to be sold.

As such, no royalty fees have been paid yet on these agreements.

The Company is selling a COVID-19 rapid test outside of the United States, which is unrelated to the EUA product discussed above.

On May 7, 2020, the Company entered into an exclusive license agreement (the “UC License Agreement”) with The Regents of the University of California (“UC”) to license all patent rights pertaining to certain licensed technology from UC.

This technology is being developed at UC-San Diego by one of the professors and his team utilizing CRISPR technology.

This group is developing a viral detection test for SARS-CoV-2 coronavirus.

If this technology development is successful, the Company will work with the UC to transfer the technology to Biomerica where the CRISPR based product will need to be further developed, validated, and cleared with regulatory agencies for commercial sale into the market.

The exclusive UC License Agreement provides for an initial and annual license fee, and a royalty payment on all commercial revenues, to the UC Regents.

The UC License Agreement also includes certain investment requirements and milestones the Company will need to meet for the launch of a commercial product based on the licensed technology.

The Company paid an initial license fee of $ 5,000 with the execution of the agreement.

An additional $ 5,000 was paid in September 2020.

No royalties have been paid yet on this agreement.

A license maintenance fee of $ 10,000 is due annually.

This is creditable against earned royalties due each year in the amount of five percent on net sales of licensed products.

Clinical Trial Agreements

In September 2017, the Company signed a Clinical Samples Agreement with the University of Southern California for the purpose of providing clinical samples for use by the Company in conducting future clinical trials for one of the products which the Company is developing.

Trial Agreements

September 2017, the Company signed a Clinical Samples Agreement with the University of Southern California for the purpose of providing

clinical samples for use by the Company in conducting future clinical trials for one of the products which the Company is developing.

The initial budget was estimated to be approximately $ 82,000 .

The work started in October 2017 with charges for work performed being invoiced and paid monthly.

The work started in October 2017 with charges for work performed being

invoiced and paid monthly.

This study ended in February 2020.

Approximately $ 17,000 in fees has been accrued for unbilled charges as of May 31, 2022.

The Company entered into a Clinical Trial Agreement with a research institute for the purpose of conducting a clinical trial of the Biomerica InFoods® product.

The term of the agreement shall be until completion of the work outlined and the charges will be invoiced monthly for work performed in the previous month.

Approximately $ 17,000 in fees has been accrued for unbilled charges as

of May 31, 2022.

There are no unbilled charges as of May 31, 2023.

Company entered into a Clinical Trial Agreement with a research institute for the purpose of conducting a clinical trial of the Biomerica

InFoods® product.

The term of the agreement shall be until completion of the work outlined and the charges will be invoiced monthly

for work performed in the previous month.

The maximum budgeted costs will be approximately $ 107,000 .

1 unchanged sentence

Approximately $ 28,000 in fees has been accrued for unbilled charges as of May 31, 2022.

There are no unbilled charges as of May 31, 2023.

SUBSEQUENT EVENTS

Subsequent to May 31, 2022, as of the filing of Form 10-K, the Company sold 523,977 shares of its common stock under its Form S-3 “shelf” Registration statement.

The average sale price was $ 3.46 per share.

Net proceeds to the Company were approximately $ 1,765,000 .

On July 14, 2022, the Company announced they had entered into a General Merchandise Supplier Agreement with Walmart, for the Company’s Aware ® Breast Self Exam product to be sold in Walmart’s retail system.

August 3, 2023, the Company announced it had entered into a sales agreement with CVS Pharmacy wherein the Company’s EZ Detect™

colorectal disease screening test will be offered at approximately 7,000 CVS Pharmacy retail stores .

Biomerica has shipped the EZ Detect

product to CVS Health distribution centers in the United States, and the product is projected to be on store shelves in September.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures