What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-10-12 compared with 2023-04-14 · 508 added, 353 removed, 112 unchanged (88% of the section changed)

FINANCIAL STATEMENTS

BIOMERICA, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

February 28, 2023

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

Current Assets:

Cash and cash equivalents

Accounts receivable, less allowance for doubtful accounts

of $ 17,432 and $ 153,231 as of Feburary 28, 2023 and May 31, 2022, respectively

Inventories, net of inventory reserves

of $ 807,576 and $ 845,549 as of Feburary 28, 2023 and May 31, 2022, respectively

Prepaid expenses and other

Cash and cash

Accounts receivable, net

Inventories, net

expenses and other

Total current assets

Property and equipment, net of accumulated depreciation and amortization

of $ 1,316,268 and $ 1,305,360 as of Feburary 28, 2023 and May 31, 2022, respectively

Property and equipment,

net of accumulated depreciation and amortization

Right-of-use assets, net of accumulated amortization

of $ 927,077 and $ 724,802 as of Feburary 28, 2023 and May 31, 2022, respectively

Intangible assets, net of accumulated amortization

of $ 27,383 and $ 18,994 as of Feburary 28, 2023 and May 31, 2022, respectively

Liabilities and Shareholders' Equity

of $ 688,000 and $ 617,000 as of August 31, 2023 and May 31, 2023, 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 5-7)

Commitments and contingencies (Note 6)

Shareholders’ Equity:

Common stock, $ 0.08 par value,

25,000,000 shares authorized, 13,488,313 and 12,867,924 issued and outstanding at

Feburary 28, 2023 and May 31, 2022, respectively

Preferred stock, Series

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

Preferred stock, undesignated, no par value,

4,428,571 shares authorized, none issued and outstanding as of August 31, 2023 and May 31, 2023

Preferred stock, value

Common stock, $ 0.08 par

value, 25,000,000 shares authorized, 16,821,646 issued and outstanding at August 31, 2023 and May 31, 2023, respectively

Additional paid-in-capital

Accumulated other comprehensive loss

Accumulated deficit

Accumulated other comprehensive

( 43,349,000 )

( 42,217,000 )

Total Shareholders' Equity

Total Liabilities and Shareholders' Equity

The accompanying notes are an integral part of these statements.

BIOMERICA, INC.

Total Shareholders’

Total Liabilities and

Shareholders’ Equity

accompanying notes are an integral part of these statements.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS (UNAUDITED)

Three Months Ended

Nine Months Ended

February 28, 2023

February 28, 2022

February 28, 2023

February 28, 2022

CONSOLIDATED STATEMENTS OF OPERATIONS

COMPREHENSIVE LOSS (UNAUDITED)

the Three Months Ended August 31,

Cost of sales

1 unchanged sentence

( 1,692,000 )

( 11,213,175 )

Gross profit (loss)

Operating expenses:

Selling, general and administrative

Research and development

Total operating expenses

and development

operating expenses

Loss from operations

1 unchanged sentence

( 2,070,000 )

( 2,777,629 )

Other income:

Dividend and interest income

and dividend income

Loss before income taxes

1 unchanged sentence

( 2,070,000 )

( 2,757,889 )

Provision for income taxes

( 1,649,859 )

Provision for income

$ ( 1,132,000 )

$ ( 2,072,000 )

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

2 unchanged sentences

$ ( 2,072,000 )

( 2,772,023 )

Other comprehensive loss, net of tax:

Other comprehensive income (loss), net of tax:

Foreign currency translation

2 unchanged sentences

$ ( 2,085,000 )

( 2,784,924 )

The accompanying notes are an integral part of these statements.

B IOMERICA, INC.

accompanying notes are an integral part of these statements.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)

Accumulated Other

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

the Three Months Ended August 31, 2022

Comprehensive

Paid-in Capital

Balances, May 31, 2022

( 35,077,379 )

Exercise of stock options

Net proceeds from ATM

Foreign currency translation

Stock option expense

( 2,071,876 )

Balances, August 31, 2022

Shareholders’

Balances at May 31, 2022

$ ( 35,077,000 )

1 unchanged sentence

Net proceeds from ATM

Shares issued in connection

with public offering

Foreign currency translation

Stock option expense

Share-based compensation

( 2,072,000 )

Balances, November 30, 2022

Balances at August

$ ( 37,149,000 )

Net proceeds from ATM

Foreign currency translation

Stock option expense

the Three Months Ended August 31, 2023

Comprehensive

Shareholders’

Balances at May 31, 2023

$ ( 110,000 )

$ ( 42,217,000 )

Balances, Feburary 28, 2023

$ ( 110,000 )

Accumulated Other

Comprehensive

Paid-in Capital

Balances, May 31, 2021

$ ( 42,217,000 )

1 unchanged sentence

Net proceeds from ATM

Shares issued in connection

with public offering

Foreign currency translation

Stock option expense

( 1,542,581 )

Share-based compensation

( 1,132,000 )

Balances, August 31, 2021

( 1,132,000 )

Exercise of stock options

Net proceeds from ATM

Foreign currency translation

Stock option expense

Balances at August

$ ( 104,000 )

$ ( 43,349,000 )

Balances, November 30, 2021

$ ( 104,000 )

Exercise of stock options

Net proceeds from ATM

Foreign currency translation

Stock option expense

Balances, Feburary 28, 2022

$ ( 43,349,000 )

The accompanying notes are an integral part of these statements.

BIOMERICA, INC.

accompanying notes are an integral part of these statements.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

February 28, 2023

February 28, 2022

Cash flows from operating activities:

CONSOLIDATED STATEMENTS OF CASH FLOWS

the Three Months Ended August 31,

Cash flows from operating

$ ( 1,132,000 )

$ ( 2,072,000 )

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Adjustments to reconcile

net loss to net cash used in operating activities:

Depreciation and amortization

Recovery for allowance on accounts receivable

Provision for allowance on accounts receivable

Inventory reserve

Stock option expense

Share-based compensation

Amortization of right-of-use asset

5 unchanged sentences

Advance from customers

Reduction in lease liability

Net cash (used in) provided by operating activities

Reduction in lease liabilities

Net cash used in by

operating activities

( 1,674,000 )

Cash flows from investing activities:

Expenditures related to intangibles

( 1,573,000 )

Cash flows from investing

Purchases of property and equipment

Net cash used in investing activities

Cash flows from financing activities:

Expenditures related to intangibles

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

Proceeds from exercise

of stock options

Net cash provided by financing activities

Effect of exchange rate changes on cash

Effect of exchange rate

changes in cash

Net decrease (increase) in cash and cash equivalents

( 1,731,000 )

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of the period

Cash and cash equivalents

at beginning of year

Cash and cash equivalents

at end of the period

Supplemental Disclosure of Cash Flow Information:

Cash paid during the period for:

The accompanying notes are an integral part of these statements.

BIOMERICA, INC.

Cash paid during the period

Non-cash investing and financing

Write off of intangible

Write off of intangible assets, accumulated amortization

accompanying notes are an integral part of these statements.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

BASIS OF PRESENTATION

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 (“OTC”) 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 based on our InFoods® Technology platform that are designed to treat gastrointestinal diseases, such as irritable bowel syndrome (“IBS”), and other inflammatory diseases.

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

The first product we are launching using the patented InFoods Technology is our InFoods® IBS product which 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, cramping 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 causing an abnormal immune response in the patient is simply removed from the diet to help alleviate IBS symptoms.

Following the successful completion and positive statistical results from the Company’s InFoods IBS clinical trial (run at several prominent centers including Mayo Clinic, Beth Israel Deaconess Medical Center Inc.

- a Harvard Medical School Teaching Hospital, Houston Methodist Hospital, and the University of Michigan) which was completed in early calendar 2022, Biomerica received interest from Gastroenterology (“GI”) physicians who would like to order the InFoods IBS test for their patients even prior to the product receiving FDA clearance.

As such, we are currently working with key GI physician groups who are interested in offering this product to their patients.

Given this, during the third quarter ended February 28, 2023, we worked to set up the InFoods® IBS test to be performed in a Clinical Laboratory Improvement Amendments (“CLIA”) certified, and College of American Pathologists (“CAP”) accredited high-complexity laboratory facility and offered as a laboratory developed test (“LDT”).

During the quarter ended February 28, 2023, the CLIA lab completed all validation testing necessary for the InFoods IBS product to be offered as an LDT and, as of quarter end, is now accepting patient samples.

We also worked to optimize the process for GI physicians to order the InFoods IBS test, send patient blood samples to the CLIA lab and receive the test results for their patients.

We believe ease of order and workflow for physicians, with easy to understand and actionable results for patients, is critical to our success.

During the quarter, we also set up customer service and payment systems, along with a dedicated website for patients to receive answers to questions they may have about the test and attain information about how to eliminate a specific food from their diet.

This is especially important for foods that are ingredients in common processed foods like milk, eggs and wheat.

As of the end of the fiscal third quarter, the product is now available to physicians and their patients.

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

1) clinical laboratories and 2) point-of-care (physicians' offices and OTC at Walmart, Amazon, 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.

In fiscal 2022, we generated revenues from the international sale 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.

Due to falling demand for such tests, the Company generated 0.4 % of our sales during the three months ended February 28, 2023, as compared to 79 % of our revenue during the three months ended February 28, 2022..

Further, during the nine months ended February 28, 2023 6 % of our sales were generated from our COVID-19 related products, as compared to 80 % of our revenue during the nine months ended February 28, 2022.

Our non-COVID-19 products that accounted for approximately 94 % and 20 % of our revenues during the nine months ended February 28, 2023 and 2022, respectively, 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.

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 based on our inFoods ® Technology platform that treat gastrointestinal diseases, such

as irritable bowel syndrome (“IBS”), and other inflammatory diseases.

These inFoods ® based products are directed

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

The first product we are launching

using this patented inFoods Technology is our inFoods ® IBS product which uses a simple blood sample to identify patient-specific

foods that, when removed from their diet, may alleviate IBS symptoms such as pain, bloating, diarrhea, cramping and constipation.

of broad and difficult to manage dietary restrictions, the inFoods® IBS product works by identifying a patient’s above normal

immunoreactivity to a panel of specific foods that have been shown to often be problematic to IBS sufferers.

A food identified as positive

(causing an abnormally high immune response in the patient) is simply removed from the diet to help alleviate IBS symptoms.

We have launched

this product with certain large gastroenterology (“GI”) physician groups that are now offering this product to their patients.

We have also recently hired an internal sales force to sign up additional GI physician groups who are interested in offering this product

to their patients.

As such, we are expecting material growth in revenues from the launch of our inFoods ® IBS product in

coming quarters.

other 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 at Walmart, Amazon, 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.

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 initially offered 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 and 2023 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

Due to falling demand, there were no sales of our COVID-19 related products in the three months ended August 31, 2023.

such, our COVID-19 product sales have caused significant swings in our revenues over the past eight quarters.

non-COVID-19 products that accounted for all of our revenues during the three months ended August 31, 2023, are primarily focused on

gastrointestinal diseases, colorectal 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.

The unaudited condensed consolidated financial statements herein have been prepared by management pursuant to the rules and regulations of the United States Securities and Exchange Commission ("SEC").

The accompanying interim unaudited condensed consolidated financial statements have been prepared under the presumption that users of the interim financial information have either read or have access to the audited consolidated financial statements for the latest fiscal year ended May 31, 2022.

Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations.

In the opinion of management, all adjustments considered necessary for a fair presentation have been included.

Operating results for the nine months ended February 28, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending May 31, 2023.

For further information, refer to the audited consolidated financial statements and notes thereto for the fiscal year ended May 31, 2022 included in the Company's Annual Report on Form 10-K filed with the SEC on August 29, 2022.

Management has evaluated all subsequent events and transactions through the date of filing this report.

unaudited condensed consolidated financial statements herein have been prepared by management pursuant to the rules and regulations of

the United States Securities and Exchange Commission (“SEC”).

The accompanying unaudited condensed consolidated financial

statements have been prepared under the presumption that users of the interim financial information have either read or have access to

the audited consolidated financial statements for the latest fiscal year ended May 31, 2023.

Accordingly, certain information and note

disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles

(“GAAP”) have been condensed or omitted pursuant to such rules and regulations.

In the opinion of management, all adjustments

considered necessary for a fair presentation have been included.

Operating results for the three months ended August 31, 2023 are not

necessarily indicative of the results that may be expected for the fiscal year ending May 31, 2024.

For further information, refer to

the audited consolidated financial statements and notes thereto for the fiscal year ended May 31, 2023 included in the Company’s

Annual Report on Form 10-K filed with the SEC on August 25, 2023.

Management has evaluated all subsequent events and transactions through

the date of filing this report.

SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The condensed consolidated financial statements include the accounts of Biomerica, Inc.

as well as its German subsidiary (BioEurope GmbH) and Mexican subsidiary (Biomerica de Mexico).

OF CONSOLIDATION

condensed consolidated financial statements include the accounts of Biomerica, Inc.

as well as its 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 condensed consolidated financial statements in conformity with 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 condensed 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 experience with a customer;

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

preparation of the condensed 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 condensed 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 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.

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.

MARKETS AND METHODS OF DISTRIBUTION

Due to global and economic disruptions caused by the Coronavirus global pandemic, the ongoing war in Ukraine, and tensions between the country of China and the United States, the Company’s operations have been negatively impacted.

The Company has faced disruptions in certain of the following areas, and may face further challenges from supply chain disruptions, cost inflation, loss of contracts and/or customers, closure 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.

The pandemic, war and geopolitical related disruptions have materially negatively impacted 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 $ 40.4 million as of February 28, 2023.

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

As of February 28, 2023, the Company had cash and cash equivalents of approximately $ 3,345,000 and working capital of approximately $ 5,087,000 .

On July 21, 2020, the Company filed with the SEC a “shelf” registration statement on Form S-3.

The registration statement registers common shares that may be issued by the Company in a maximum aggregate amount of up to $ 90,000,000 .

Shares of the Company’s common stock may be sold from time to time under this registration statement for up to three years from the filing date.

On January 22, 2021, the Company filed a prospectus supplement for the sale of up to $ 15,000,000 of shares of our common stock in an at-the-market offering (“ATM Offering”) under the shelf registration statement, of which approximately $ 9,400,000 , remained available for sale under the prospectus supplement as of the third quarter ended February 28, 2023.

Following the end of the third quarter, the Company closed a public offering on March 7, 2023 of an aggregate of 3,333,333 shares of its common stock, par value $ 0.08 per share at a price to the public of $ 2.40 per share for total gross proceeds of $ 8 million, before deducting underwriting discounts and commissions and other offering-related expenses payable by the Company.

In conjunction with the public offering of shares of the Company’s common stock, the Company suspended its at-the-market sales agreement.

The Company intends to use the net proceeds from the prior sale of shares under the at-the-market agreement 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.

The sales agent under the ATM Offering had agreed to use 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 sales agent and the Company.

The Company had no obligation to sell any of the shares under the ATM Offering, and maintained the ability to suspend offers under, or terminate the ATM Offering.

During the nine months ended February 28, 2023, the Company sold 573,889 shares of its common stock at prices ranging from $ 3.15 to $ 4.26 under its ATM Offering which resulted in gross proceeds of approximately $ 2,014,000 and net proceeds to the Company approximately of $ 1,961,000 after deducting commissions for each sale and legal, accounting, and other fees related to the ATM Offering.

As a result of cash and cash equivalents on hand at February 28, 2023, plus the net proceeds from the public offering of common shares which closed in early March 2023, management believes the Company has sufficient funds to operate through at least September 2024.

CONCENTRATION OF CREDIT RISK

The Company’s primary banking partners are Bank of America and Merrill Lynch.

The Company maintains cash balances in accounts at financial institutions in excess of amounts insured by federal agencies, as well as substantial cash reserves in investment grade money market accounts and in U.S.

treasury bills.

As of February 28, 2023, the Company had approximately $ 3,095,000 of uninsured cash.

AND METHODS OF DISTRIBUTION

majority of the Company’s revenues come from the sale of products that the company manufactures in the U.S.

and in Mexico.

of the raw materials used in manufacturing come from Asia and other regions of the world.

Finally, most of the Company’s revenues

are generated from the international sales of its products.

Due to global and economic disruptions caused by the COVID-19 pandemic, the

ongoing war in Ukraine, and tensions between the country of China and the United States, the Company’s operations have been negatively

The Company has faced disruptions in the following areas, and may face further challenges from supply chain disruptions, cost

inflation, loss of contracts and/or customers, closure 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.

The Company’s current sales and marketing focus is on the sale of the inFoods ®

IBS product within the U.S.

As such, going forward, the Company hopes to see reduced disruptions from the issues listed above.

Company has incurred net losses and negative cash flows from operations and has an accumulated deficit of approximately $ 43.3 million

as of August 31, 2023.

Management expects to continue to incur significant costs as it advances its clinical trials, product development,

and commercial product launch activities.

As of August 31, 2023, the Company had cash and cash equivalents of approximately $ 7,988,000

and working capital of approximately $ 9,828,000 .

July 20, 2020, the Company filed with the Securities and Exchange Commission (“SEC”) a Form S-3 shelf registration statement

and base prospectus which was declared effective by the SEC on September 30, 2020.

This shelf registration statement registered the sale

of up to $ 90,000,000 of the Company’s equity securities during the three years ended September 30, 2023.

the Company’s outstanding Registration Statement, on 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.

replace the shelf registration statement that was set to expire on September 30, 2023, on September 27, 2023, the Company filed with

the SEC a new Form S-3 shelf registration statement and base prospectus which was declared effective by the SEC on September 29, 2023.

This new shelf registration statement registers the sale of up to $ 20,000,000 of the Company’s equity securities during the three

years ending September 29, 2026.

Company intends to use the net proceeds from past offerings and any future 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 November 2024.

As a result of cash and cash equivalents

on hand on August 31, 2023, largely from the public offering, and the ability to raise additional funds if needed through the sale of

shares of the Company’s common stock, management believes the Company has sufficient funds to operate through at least November

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.

For the three m onths ended February 28, 2023, the Company had one key customer who is located in Asia which accounted for 22 % .

For the three m onths ended February 28, 2022, the Company had three key customers who are located in Asia and the United States which accounted for 79 % of net consolidated sales .

For the nine m onths ended February 28, 2023, the Company had one key customer who is located in Asia which accounted for 38 % .

For the nine m onths ended February 28, 2022, the Company had three key customers who are located in Asia and the United States which accounted for 75 % of net consolidated sales .

Total gross receivables on February 28, 2023 and May 31, 2022 were approximately $ 772,000 and $ 927,000 , respectively.

On February 28, 2023, the Company had two customers which accounted for a total of 44 % of gross receivables.

On May 31, 2022 the Company had one key customer which accounted for a total of 50 % of gross receivables.

For the three months ended February 28, 2023, the Company had two key vendors which accounted for 31 % of the purchase of raw materials.

For the three months ended February 28, 2022, the Company had one key vendor which accounted for 92 % of the purchase of raw materials.

For the nine months ended February 28, 2023, there was no individual vendor that comprised more than 10 % of the Company’s purchases..

For the nine months ended February 28, 2022, the Company had one key vendor which accounted for 85 % of the purchase of raw materials.

As of February 28, 2023, the Company had one key vendor which accounted for 18 % of accounts payable.

As of May 31, 2022, the Company had two key vendors which accounted for 69 %.

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.

Based on various 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 February 28, 2023 and May 31, 2022, the Company has established a reserve of approximately $ 17,000 and $ 153,000 , respectively, for doubtful accounts.

During the quarter ended February 28, 2023, the Company reduced gross accounts receivable and the allowance for doubtful accounts by $ 465,000 for a 2022 COVID product related customer that is not expected to be collected.

PREPAID EXPENSES AND OTHER

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

These items are reported as prepaid expenses and other, until either the inventory is physically received, or the insurance and other items are expensed.

As of February 28, 2023 and May 31, 2022, the prepaid expenses and other were approximately $ 318,000 and $ 320,000 , 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.

net sales were approximately $ 1,713,000 for the three months ended August 31, 2023, as compared to $ 1,637,000 for the three months ended

August 31, 2022.

For the three months ended August 31, 2023 and 2022, the Company had one and two key customers who are located in foreign

countries which accounted for 59 % and 64 % of net sales, respectively.

gross receivables on August 31, 2023 and May 31, 2023 were approximately $ 1,459,000 and $ 751,000 , respectively.

On August 31, 2023 and

May 31, 2023, the Company had one key customer, who are located in foreign countries which accounted for a total of 67 % and 35 % , respectively,

of gross accounts receivable.

the three months ended August 31, 2023 and 2022, the Company had one key vendor which accounted for 12 % and 9 % of the purchases of raw

materials, respectively.

As of August 31, 2023 and May 31, 2023, the Company had one key vendor which accounted for 47 % and 23 % , respectively,

of accounts payable.

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.

Based on various

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.

Company adopted Accounting Standards Update (“ASU”) No.

2016-13, Financial Instruments – Credit Losses (codified

as Accounting Standards Codification (“ASC”) 326) on June 1, 2023.

ASC 326 adds to U.S.

GAAP the current expected credit

loss (“CECL”) model, a measurement model based on expected losses rather than incurred losses.

Prior to the adoption of ASC

326, the Company evaluated receivables on a quarterly basis and adjusted the allowance for doubtful accounts accordingly.

Balances over

ninety days old were usually reserved for unless collection was reasonably assured.

Under the application of ASC 326, the Company’s

historical credit loss experience provides the basis for the estimation of expected credit losses, as well as current economic and business

conditions, and anticipated future economic events that may impact collectability.

In developing its expected credit loss estimate, the

Company evaluated the appropriate grouping of financial assets based upon its evaluation of risk characteristics, including consideration

of the types of products and services sold.

Account balances are written off against the allowance for expected credit losses after all

means of collection have been exhausted and the potential for recovery is considered remote.

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 August 31, 2023 and May 31, 2023, the Company has established a reserve of approximately $ 29,000 for credit losses.

EXPENSES AND OTHER

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

These items are reported as prepaid expenses and

other, until either the inventory is physically received, or the insurance and other items are expensed.

of August 31, 2023 and May 31, 2023, the prepaids were approximately $ 279,000 and $ 300,000 , 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.

As of February 28, 2023, and May 31, 2022, inventory reserves were approximately $ 808,000 and $ 846,000 , respectively.

Net inventories are approximately the following:

February 28, 2023

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.

inventories are approximately the following:

OF NET INVENTORIES

Raw materials

3 unchanged sentences

Inventory reserves

Reserves for inventory obsolescence and/or inventory that management believes is in excess of an amount that can be sold in the near future, are recorded as necessary to reduce obsolete and excess inventory to estimated net realizable value or to specifically reserve for obsolete inventory.

PROPERTY AND EQUIPMENT, NET

Property and equipment are stated at cost.

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 August 31, 2023, and May 31, 2023, inventory reserves were approximately $ 532,000 and $ 672,000 ,

respectively.

AND EQUIPMENT, NET

and equipment are stated at cost.

Expenditures for additions and major improvements are capitalized.

Repair 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 were approximately $ 15,000 and $ 26,000 for the three months ended February 28, 2023 and 2022, respectively, and approximately $ 51,000 and $ 80,000 for the nine months ended February 28, 2023 and 2022, 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 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 20 years for patents, 18 years for marketing and distribution rights, and 10 years for purchased technology use rights.

Amortization expenses were approximately $ 3,000 and $ 8,000 for the three months ended February 28, 2023 and 2022, respectively, and approximately $ 15,000 and $ 22,000 for the nine months ended February 28, 2023 and 2022, respectively.

Amortizing intangible assets are tested for impairment if management determines that events or changes in circumstances indicate that the asset might be impaired.

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.

As of February 28, 2023 and 2022, an impairment adjustment was made of $ 6,000 and $ 0 , respectively.

The Company has made investments in privately held companies.

These investments represent the Company’s investment in a 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.

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 February 28, 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 Holdings during the period ended February 28, 2023.

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 option-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 was approximately $ 16,000 and $ 20,000 for the three months ended August 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 expense was approximately $ 5,000 and $ 9,000

for the three months ended August 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 three months ended August 31, 2023 and 2022, an impairment adjustment was made of $ 0 and

$ 6,000 , respectively.

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 August 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 Holdings during the period ended August 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 following summary presents the options granted, exercised, expired, canceled and outstanding for the nine months ended February 28, 2023:

Option Shares

Exercise Price Weighted Average

Outstanding May 31, 2022

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 $ 170,000 and $ 304,000 of share-based compensation during the three months ended August 31, 2023 and 2022,

respectively.

following summary presents the options granted, exercised, expired, canceled and outstanding for the three months ended August 31, 2023:

OF OPTIONS ACTIVITY

Exercise Price

Options Outstanding at May

Cancelled or expired

Outstanding February 28, 2023

During the nine months ended February 28, 2023, options to purchase 46,500 shares of common stock were exercised at prices ranging from $ 0.82 to $ 2.68 .

Total net proceeds for the Company were approximately $ 79,000 .

During the nine months ended February 28, 2023, the Company granted 146,000 options to purchase common stock at an average purchase price of $ 3.37 , with the majority of those options issued to the Company’s new Chief Commercial Officer, who is managing the commercialization and roll-out of the InFoods IBS test.

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 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 nine months ended February 28, 2023 and 2022, and does not believe that any additional discounts will be given through the end of the contract periods.

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

As of February 28, 2023, the Company had approximately $ 138,000 of advances from certain foreign customers.

The majority of these advances are prepayments on orders that are expected to ship during our fourth fiscal quarter ending May 31, 2023.

Disaggregation of revenue:

The following is a breakdown of revenues according to markets to which the products are sold:

Three Months Ended February 28,

Nine Months Ended February 28,

Options Outstanding

at August 31, 2023

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 three months ended August 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.

Physician’s 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 August 31, 2023, the Company had approximately $ 60,000 of advances from certain foreign customers.

The majority of these advances

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

Disaggregation

following is a breakdown of revenues according to markets to which the products are sold:

SCHEDULE OF DISAGGREGATION REVENUE

Three Months Ended

Over-the-counter

1 unchanged sentence

Physician’s office

See Note 4 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 $ 392,000 and $ 387,000 of research and development costs during the three months ended February 28, 2023 and 2022, respectively, and approximately $ 1,215,000 and $ 1,317,000 of research and development costs during the nine months ended February 28, 2023 and 2022, respectively.

The Company has provided a full valuation allowance on net deferred income tax assets of approximately $ 8,088,000 and $ 6,967,000 as of February 28, 2023 and May 31, 2022, 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.

Note 4 for additional information regarding 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 $ 472,000 and $ 361,000 of research and development

costs during the three months ended August 31, 2023 and 2022, respectively.

Company had income tax expense for the three months ended August 31, 2023 of approximately $ 23,000 , consisting of state minimum and foreign

miscellaneous taxes.

During the three months ended August 31, 2023, the Company had a net operating loss (“NOL”) that generated

deferred tax assets for NOL carryforwards.

Deferred income tax assets and liabilities are recognized for temporary differences between

the financial statements and income tax carrying values using tax rates in effect for the years such differences are expected to reverse.

Due to uncertainties surrounding our ability to generate future taxable income and consequently realize such deferred income tax assets,

the Company has determined that it is more likely than not that these deferred tax assets will not be realized.

Accordingly, the Company

has established a full valuation allowance against its deferred tax assets as of August 31, 2023.

Company’s policy is to recognize any interest and penalties related to unrecognized tax benefits as a component of income tax expense.

For the three months ended August 31, 2023, the Company had no accrued interest or penalties related to uncertain tax positions.

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

Advertising costs were approximately

$ 30,000 and $ 18,000 for the three months ended August 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 period, and revenues and costs are translated using average exchange rates for the period.

The resulting translation 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 condensed consolidated statements of operations for the three and nine months ended February 28, 2023 and 2022.

RIGHT-OF-USE ASSETS AND LEASE LIABILITY

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.

The Company has elected to exclude short-term leases of 12 months or less, and as a result, those lease payments are recognized in operations on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred.

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

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.

Accordingly, assets and liabilities of these subsidiaries

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

rates for the period.

The resulting translation 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 three months ended August 31, 2023 and 2022.

ASSETS AND LEASE LIABILITY

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.

The Company has elected to exclude short-term leases.

The Company leases office space and

copy machines, all of which are operating leases.

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 amount of anti-dilutive stock options not included in the loss per share calculation on February 28, 2023 and 2022 was 2,313,366 and 2,336,116 , respectively.

RECENT ACCOUNTING PRONOUNCEMENTS

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 2019-10, "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.

The depreciable life

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

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 amount of anti-dilutive stock options not included in the loss per share calculation

at August 31, 2023 and 2022 was 2,363,116 and 2,388,616 , respectively.

ACCOUNTING PRONOUNCEMENTS

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

effect on the Company’s present or future consolidated financial statements.

June 2016, the FASB issued ASU 2016-13.

This ASU requires 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 2019-10, “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 SEC 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.

Other recent Accounting Standards Updates (”ASU's”) issued by the Financial Accounting Standards Board (“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 .

RECLASSIFICATIONS

Certain comparative figures in the February 28, 2022 condensed consolidated statement of operations have been reclassified to conform to the current period presentation.

The Company adopted ASU 2016-03 on June 1, 2023,

and the adoption of this update did not have a material impact on the Company’s condensed consolidated financial statements.

SHAREHOLDERS’ EQUITY

Stock option expense during the nine months ended February 28, 2023 and 2022 was approximately $ 1,006,000 and $ 959,000 , respectively.

During the nine months ended February 28, 2023, the Company sold 573,889 shares of its common stock at prices ranging from $ 3.15 to $ 4.26 under its Form S-3 Registration Statement and ATM Offering which resulted in gross proceeds of approximately $ 2,014,000 and net proceeds to the Company of approximately $ 1,961,000 after deducting commissions for each sale and legal, accounting, and other fees related to the ATM Offering.

the three months ended August 31, 2022, the Company sold 523,977 shares of its common stock at prices ranging from $ 3.15 to $ 3.55 under

its Form S-3 Registration Statement and ATM Offering which resulted in gross proceeds of approximately $ 1,811,000 and net proceeds to

the Company of approximately $ 1,764,000 after deducting commissions for each sale and legal, accounting, and other fees related to the

ATM Offering.

In March 2023, we terminated the ATM offering agreement and sold 3,333,333 shares of our common stock in a firm commitment

public offering under the Company’s shelf registration statement.

Shares sold in the underwritten public offering were sold at

a gross sales price of $ 2.40 per share, resulting in net proceeds from the offering, after deducting issuance fees and expenses, of approximately

$ 7,300,000 .

On August 31, 2023, the Company did not have an open ATM offering in place.

No shares of common stock or other equity securities

of the Company were sold under the shelf registration statement during the three months ended August 31, 2023.

GEOGRAPHIC INFORMATION

The Company operates as one segment.

Company operates as one segment.

Geographic information regarding net sales is approximately as follows:

Three Months Ended February 28,

Nine Months Ended February 28,

Revenues from sales to unaffiliated customers:

North America

South America

As of February 28, 2023, and May 31, 2022, a pproximately $ 672,000 and $ 621,000 of Biomerica’s gross inventory was located in Mexicali, Mexico, respectively.

As of February 28, 2023, and May 31, 2022, approximately $ 18,000 and $ 17,000 of Biomerica’s property and equipment, net of accumulated depreciation and amortization, was located in Mexicali, Mexico, respectively.

The Company leases its facilities.

On February 28, 2023, 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.

OF GEOGRAPHIC INFORMATION

Months Ended August 31,

Revenues from sales to unaffiliated

from sales to unaffiliated customers total

of August 31, 2023 and May 31, 2023, approximately $ 610,000 and $ 626,000 of Biomerica’s gross inventory was located in Mexicali,

Mexico, respectively.

of August 31, 2023 and May 31, 2023, approximately $ 16,000 and $ 17,000 of Biomerica’s property and equipment, net of accumulated

depreciation and amortization, was located in Mexicali, Mexico, respectively.

Company leases its facilities.

On August 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, which it has been leasing since 2009.

The lease for its headquarters expired on August

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 $ 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.

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

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 $ 3,600 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 the nine months ended February 28, 2023 and 2022 was approximately $ 230,000 and $ 230,000 , respectively .

Rent expense for the Mexico facility for the nine months ended February 28, 2023 and 2022 was approximately $ 32,000 and $ 31,000 , 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 when they are incurred.

Supplemental cash flow information related to leases for the nine months ended February 28, 2023:

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)

Weighted average discount rate

The approximate maturity of lease liabilities as of February 28, 2023 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.

Biomerica de Mexico

also leases a smaller unit on a month-to-month basis for use in one 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 three months ended August 31, 2023 and 2022:

OF OPERATING LEASES

Months Ended August 31,

Operating lease

Variable lease cost

approximate maturity of lease liabilities as of August 31, 2023 are as follows:

OF FUTURE MINIMUM LEASE PAYMENTS

Ending August 31:

minimum future lease payments

imputed interest

operating lease liabilities

following table summarizes the Company’s other supplemental lease information for the three months ended August 31, 2023 and 2022:

OF OTHER SUPPLEMENTAL LEASE INFORMATION

Months Ended August 31,

paid for operating lease liabilities

Weighted-average

remaining lease term (years)

Weighted-average

discount rate

Company also has various insignificant leases for office equipment.

COMMITMENTS AND CONTINGENCIES

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

There were no legal proceedings pending as of February 28, 2023.

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

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

SUBSEQUENT EVENTS

The Company closed a public offering on March 7, 2023 of an aggregate of 3,333,333 shares of its common stock, par value $ 0.08 per share at a price to the public of $ 2.40 per share for total gross proceeds of $ 8 million, before deducting underwriting discounts and commissions and other offering-related expenses payable by the Company.

The Company intends to use the net proceeds of the offering for general corporate purposes, including, without limitation, setting up and conducting clinical studies, expanding sales and marketing activities for existing and new products, research and development of new products, acquisitions, capital expenditures, and for other general working capital needs.

In conjunction with the public offering of shares of the Company’s common stock, the Company suspended its at-the-market sales agreement.

September 15, 2023 the Company submitted to the FDA the final H.

Pylori data set requested by the FDA during the FDA’s recent review

of the 510-K filed by the Company.

The Company received confirmation from the FDA that the data was received.

The Biomerica hp+detect™

diagnostic test is designed to detect the presence of the H.

pylori bacteria which infects approximately 35% of the U.S.

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-Q

Item 1. Financial Statements