What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-01-16 compared with 2023-10-12 · 187 added, 130 removed, 87 unchanged (78% of the section changed)

18 unchanged sentences

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 inFoods ® based 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 to identify patient-specific

foods that, when removed from the patient’s 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 a panel of specific foods that have been shown to often be problematic to IBS suffers.

A food identified as

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

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 inFoods based 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 to

identify patient-specific foods that, when removed from the patient’s 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 a panel of specific foods that have been shown to often be

problematic to IBS suffers.

A food identified as positive, and causing an abnormally high immune response in the patient is simply

removed from the diet to help alleviate IBS symptoms.

fiscal 2022, we completed an endpoint determination clinical trial on our inFoods IBS product.

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Texas Health Science Center at Houston, Houston Methodist, the University of Michigan, and other institutions.

This double blinded, placebo-controlled

trial monitored IBS patients over an 8-week treatment period to determine the efficacy of our inFoods® IBS product to improve the

patients’ IBS symptoms or endpoints.

The trial was designed to determine the difference in the improvement in IBS symptoms for

patients in the treatment arm, versus patients in the placebo arm of the trial.

The top-line trial results were reported in February

Multiple endpoints demonstrated statistically significant improvements for participants in the treatment arm, indicating that the

elimination of specific foods may meaningfully reduce the symptoms of IBS in each patient subtype (including patients with IBS-Constipation,

IBS-Diarrhea & IBS-Mixed).

The greatest clinical improvements, including but not limited to abdominal pain and bloating, were seen

in patients diagnosed with IBS-Mixed and IBS-Constipation, in the top line data.

The purpose of the endpoint study was to validate the

efficacy of the product, and to determine the primary symptom endpoint, or endpoints to be used in a possible final pivotal trial that

would be conducted to attain the validation data needed to apply for U.S.

This double blinded,

placebo-controlled trial monitored IBS patients over an 8-week treatment period to determine the efficacy of our inFoods IBS product

to improve the patients’ IBS symptoms or endpoints.

The trial was designed to determine the difference in the improvement in

IBS symptoms for patients in the treatment arm, versus patients in the placebo arm of the trial.

The top-line trial results were

reported in February 2022.

Multiple endpoints demonstrated statistically significant improvements for participants in the treatment

arm, indicating that the elimination of specific foods may meaningfully reduce the symptoms of IBS in each patient subtype

(including patients with IBS-Constipation, IBS-Diarrhea & IBS-Mixed).

The greatest clinical improvements, including but not

limited to abdominal pain and bloating, were seen in patients diagnosed with IBS-Mixed and IBS Constipation, in the top line data.

The purpose of the endpoint study was designed to provide efficacy data for the product, and to determine the primary symptom

endpoint, or endpoints to be used in a possible final pivotal trial that would be conducted to attain the validation data needed to

apply for U.S.

Food and Drug Administration (“FDA”) product clearance.

We are continuing to review and refine the complete dataset and have selected the final endpoint that we would intend to use in a possible

final pivotal trial.

We are identifying the trial protocol for submission to the FDA, and once approved the trial would be run thereafter.

The trial is expected to include the large medical institution participants that conducted the endpoint clinical trial, in addition to

other new institutions and a Clinical Research Organization.

the successful completion and positive statistical results from the Company’s inFoods® IBS clinical trial, Biomerica received

interest from Gastroenterology (“GI”) physicians who would like to order the inFoods® IBS test for their patients.

fiscal 2023, we worked to set up the inFoods® IBS test to be performed in a CLIA certified, and College of American Pathologists

(“CAP”) accredited high-complexity laboratory facility and offered as a laboratory developed test (“LDT”).

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 February 28, 2023, patient samples were being accepted.

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.

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

the fiscal third 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 identified as needing

to be eliminated from their diet.

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

As of the end of the fiscal third quarter, we trial launched this product with one large GI physician group 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.

are also beginning the work of selecting and validating one new disease (such as ulcerative colitis or migraines), where there is evidence

that certain foods can trigger or contribute to the symptoms found in these indications.

We expect any new disease we target will follow

a similar development pathway as inFoods® IBS in simultaneously seeking FDA clearance of the product while also launching the product

will also continue to evaluate partnership/licensing opportunities, as they arise, with U.S and multinational companies that could help

us commercialize, or accelerate revenue growth of, the inFoods® products in the United States and overseas.

We are continuing to review and refine the

complete dataset and have selected the final endpoint that we would intend to use in a possible final pivotal trial.

No date has yet

been set for commencing this final trial.

In fiscal 2023, we worked to set up the inFoods IBS test to be performed

in a 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 patient samples are now being run at the lab.

In late fiscal

2023, we trial launched this product with one large GI physician group that is now offering this product to their patients.

During fiscal

2024, we are working 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.

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 growth in revenues from the launch of

our inFoods IBS product in coming quarters.

are also beginning the work of selecting and validating one new disease (such as ulcerative colitis or migraines), where there is

evidence that certain foods can trigger or contribute to the symptoms found in these indications.

We expect any new disease we

target will follow a similar development pathway as inFoods IBS in simultaneously seeking FDA clearance of the product while

also launching the product as an LDT.

are also evaluating and pursuing partnership/licensing opportunities with U.S.

and multinational companies that could help us commercialize,

or accelerate revenue growth of, the inFoods products in the United States and overseas.

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, CVS Pharmacy, Amazon, etc.).

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.

fiscal 2022, we finalized development of our H.

Pylori diagnostic test that indicates if a patient is infected with the H.

offices and OTC at Walmart, Walgreens, CVS Pharmacy, Amazon, etc.).

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.

We began selling these COVID-19 related diagnostic tests during fiscal

2021, and we experienced significant revenues from such sales during fiscal 2021 and 2022 with lesser sales in fiscal 2023.

Due to falling

demand, there were no sales of our COVID-19 related products in the three months ended November 30, 2023.

As such, our COVID-19

product sales have caused significant swings in our revenues over the past nine quarters.

Pylori diagnostic test that indicates if a patient is infected with

Pylori bacteria.

Pylori infection is extremely common, and if left untreated, can lead to ulcers and possibly stomach cancers.

During our fourth quarter

of fiscal 2022, we applied for FDA clearance of this product though a 510(k) premarket submission.

We have been in communication with

the FDA answering certain follow-up questions and providing additional data as requested.

Working with the FDA, in August 2023, we completed

one additional set of in-lab tests that the FDA requested prior to making their final determination on clearance of the product.

set of data was sent to the FDA and our 510(k) for the H.

Pylori product was resubmitted to the FDA in September 2023.

Once cleared,

we will begin marketing the product in the U.S.

We have also begun discussions with international distributors for this product

and expect to see revenues both in the U.S.

On December 18, 2023, the Company received FDA clearance for the H.

Pylori product to be sold in the US.

Subsequently, we have now begun

marketing the product in the U.S.

We have also begun discussions with international distributors for this product and expect to

see revenues both in the U.S.

market and through these international channels during 2024.

majority of our research and development efforts are focused on development and commercialization of non-COVID related products such

Pylori product, and our inFoods® IBS product.

majority of our research and development efforts are focused on development and commercialization of products such as our H.

Pylori product,

improving and expanding the inFoods IBS product, developing other new products that utilize the inFoods platform, and developing

new diagnostic products with outside medical diagnostic companies that we intend to manufacture for them.

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

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OF OPERATIONS

Three months ended November 30, 2023

Sales and Cost of Sales

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

Three Months Ended August 31,

Three Months Ended November 30,

Increase (Decrease)

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Physician’s office

net sales was 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, an increase of approximately $76,000, or 5%.

This increase for the three months ended August 31, 2023, was

driven primarily by demand for our clinical lab products in Asia and OTC products in the United States which was partially offset by a reduction in Physician’s office sales associated to COVID products.

net sales were approximately $1,567,000 for the three months ended November 30, 2023, as compared to $1,482,000 for the three months

ended November 30, 2022, an increase of approximately $85,000, or 6%.

This increase for the three months ended November 30, 2023, was

driven primarily by larger sales in the food intolerance products and increased contract manufacturing billings.

Periodic and infrequent

orders may cause volatility in quarterly sales.

cost of sales was approximately $1,301,000, or 76% of net sales, for the three months ended August 31, 2023, as compared to

$1,692,000, or 107% of net sales, for the three months ended August 31, 2022, a decrease of approximately $391,000, or 23%.

decrease for the three months ended August 31, 2023, was driven primarily by the decrease in volume of COVID products and related

inventory write-offs.

cost of sales were approximately $1,242,000, or 79% of net sales, for the three months ended November 30, 2023, as compared to $1,130,000,

or 76% of net sales, for the three months ended November 30, 2022, an increase of approximately $112,000, or 10%.

The increase for the

three months ended November 30, 2023, was driven primarily by correlated increased sales for the quarter.

following is a summary of operating expenses:

Months Ended August 31,

Three Months Ended November 30,

Increase (Decrease)

Operating Expense

Total Revenues

Operating Expense

Total Revenues

Selling, General and Administrative Expenses

Research and Development

General and Administrative Expenses

selling, general and administrative expenses were approximately $1,521,000 for the three months ended November 30, 2023, as compared

to $1,556,000 for the three months ended November 30, 2022, a decrease of approximately $35,000, or 2%.

For the three months ended

November 30, 2023, the decrease was primarily due to an approximate $209,000 reduction in bad debt expense related to a customer in

Vietnam, a $158,000 decrease in share-based compensation expenses, and a $128,000 decrease in legal expenses.

These decreases were

partially offset by a $160,000 increase in marketing expenses for the recent CVS retail launch, a $124,000 increase in salaries and wages for the sales and

marketing team, and a $92,000 increase in expenses for marketing outside services.

and Development

research and development expenses were approximately $412,000 for the three months ended November 30, 2023, as compared to $462,000 for

the three months ended November 30, 2022, a decrease of approximately $50,000, or 11%.

The decrease in the three months ended November

30, 2023, was primarily due to an approximate decrease of $59,000 in inFoods research expenses.

and Dividend Income

and dividend income were approximately $109,000 for the three months ended November 30, 2023, as compared to $41,000 for the three months

ended November 30, 2022, an increase of $68,000, or 166%.

The increase was primarily driven by higher market interest rates on our cash

and cash equivalents.

months ended November 30, 2023

Sales and Cost of Sales

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

Six Months Ended November 30,

Increase (Decrease)

Over-the-counter

Contract manufacturing

Physician’s office

net sales were approximately $3,281,000 for the six months ended November 30, 2023, as compared to $3,119,000 for the six months ended

November 30, 2022, an increase of approximately $162,000, or 5%.

This increase for the six months ended November 30, 2023, was primarily

driven by an increase in demand for our food intolerance products and contract manufacturing billings, which was partially offset by

a reduction in Physician’s office sales associated with COVID products.

Periodic and infrequent orders may cause volatility in

quarterly sales.

cost of sales were approximately $2,541,000, or 77% of net sales, for the six months ended November 30, 2023, as compared to $2,822,000,

or 90% of net sales, for the six months ended November 30, 2022, a decrease of approximately $281,000, or 10%.

The decrease for the

six months ended November 30, 2023, was primarily driven by a $90,000 increase in salary and wages for the production team, that

was more than offset by a $332,000 decrease in costs associated with reduced sales of our COVID-19 products.

following is a summary of operating expenses:

Six Months Ended November 30,

Increase (Decrease)

Operating Expense

Total Revenues

Operating Expense

Total Revenues

Selling, General and Administrative Expenses

Research and Development

General and Administrative Expenses

selling, general and administrative expenses were approximately $1,172,000 for the three months ended August 31, 2023, as compared to

$1,654,000 for the three months ended August 31, 2022, a decrease of approximately $481,000, or 29%.

The decrease in the three months

ended August 31, 2023, was primarily due to approximate decreases in bad debt expense of $220,000, share-based compensation of $123,000,

and legal expense of $170,000.

selling, general and administrative expenses were approximately $2,696,000 for the six months ended November 30, 2023, as compared

to $3,210,000 for the six months ended November 30, 2022, a decrease of approximately $514,000, or 16%.

For the six months ended

November 30, 2023, the decrease was primarily due to an approximate $429,000 reduction in bad debt expense related to a customer in

Vietnam, a $327,000 decrease in share-based compensation expenses, and a $297,000 decrease in legal expenses.

These decreases were

partially offset by a $160,000 increase in marketing expenses for the recent CVS retail launch, a $174,000 increase in salaries and wages for the sales and

marketing team, and a $61,000 increase in expenses for marketing outside services.

and Development

research and development expenses were approximately $472,000 for the three months ended August 31, 2023, as compared to $361,000 for

the three months ended August 31, 2022, an increase of approximately $111,000, or 31%.

The increase in the three months ended August

31, 2023, was primarily due to R&D wages.

research and development expenses were approximately $883,000 for the six months ended November 30, 2023, as compared to $823,000 for

the six months ended November 30, 2022, an increase of approximately $60,000, or 7%.

The increase for the six months ended November 30,

2023, was primarily due to an increase in salaries and wages of $104,000, partially offset by a decrease in share-based compensation

expenses of $21,000 and lab supplies expenses of $15,000.

and Dividend Income

and dividend income were approximately $123,000 for the three months ended August 31, 2023, as compared to $0 for the three months ended

August 31, 2022, an increase of $123,000, or 100%.

The $123,000 increase was due to market interest rates on our cash balance, which,

on August 31, 2022, the cash balance had not been invested.

and dividend income were approximately $231,000 for the six months ended November 30, 2023, as compared to $41,000 for the six months

ended November 30, 2022, an increase of $190,000, or 463%.

The increase was primarily driven by higher market interest rates on our cash

and cash equivalents.

AND CAPITAL RESOURCES

following are the principal sources of liquidity:

and cash equivalents

capital including cash and cash equivalents

of August 31, 2023 and May 31, 2023, the Company had cash and cash equivalents of approximately $7,988,000 and $9,719,000, respectively.

As of August 31, 2023 and May 31, 2023, the Company had working capital of approximately $9,828,000 and $10,852,000, respectively.

believe that the aggregate of our existing cash and cash equivalents is sufficient to meet our operating cash requirements and strategic

November 30, 2023

Cash and cash equivalents

Working capital including cash and cash equivalents

of November 30, 2023 and May 31, 2023, the Company had cash and cash equivalents of approximately $7,134,000 and $9,719,000, respectively.

As of November 30, 2023 and May 31, 2023, the Company had working capital of approximately $8,443,000 and $10,852,000, respectively.

We believe that the aggregate of our existing cash and cash equivalents is sufficient to meet our operating cash requirements and strategic

objectives for growth for at least the next year.

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year, we are working on increasing sales, reducing expenses and may seek to raise additional financing through debt and equity financing.

the three months ended August 31, 2023, cash used in operating activities was approximately $1,674,000.

The primary factors that

contributed to this were a loss of approximately $1,132,000, non-cash expenses of $122,000, primarily associated with

depreciation and amortization, share-based compensation, inventory reserves and amortization of right-of-use assets.

partially offset by changes in asset and liability accounts of $664,000.

the three months ended August 31, 2022, cash used in operating activities was approximately $1,573,000.

The primary factors that

contributed to this were a loss of approximately $2,072,000, non-cash expenses of $766,000, primarily

associated with depreciation and amortization, share-based compensation, account receivables provision, and inventory

This was partially offset by changes in asset and liability accounts of $267,000.

the three months ended August 31, 2023, cash used in investing activities was approximately $63,000.

During the three months ended August

31, 2023, the Company purchased approximately $21,000 of property and equipment and had $42,000 in expenditures related to patents.

the three months ended August 31, 2022, cash used in investing activities was approximately $34,000 for purchases of property and equipment.

the three months ended August 31, 2023, cash provided by financing activities was $0, with no net proceeds from the sale

of common stock or from stock option exercises.

the three months ended August 31, 2022, cash provided by financing activities was approximately $1,778,000 which was a result of net

the six months ended November 30, 2023, cash used in operating activities was approximately $2,516,000.

The primary factors that contributed

to this was a loss of approximately $2,639,000, non-cash expenses of $294,000, primarily associated

with depreciation and amortization, provision for allowance on accounts receivable, inventory reserves, share-based compensation, and

amortization of right-of-use assets .

This was partially offset by changes in asset and liability accounts of approximately $171,000.

the six months ended November 30, 2022, cash used in operating activities was approximately $2,786,000.

The primary factors that contributed

to this was a loss of approximately $3,698,000, non-cash expenses of $1,101,000, primarily associated

with share-based compensation and provision for allowance on accounts receivable .

This was partially offset by changes in asset

and liability accounts of approximately $189,000.

the six months ended November 30, 2023, cash used in investing activities was approximately $27,000 for purchases of property and equipment,

and $48,000 in expenditures related to patents.

the six months ended November 30, 2022, cash used in investing activities was approximately $58,000 for purchases of property and equipment.

the six months ended November 30, 2023, cash provided by financing activities was $0, with no net proceeds from the sale of common stock

or from stock option exercises.

the six months ended November 30, 2022, cash provided by financing activities was approximately $2,015,000 which was a result of net

proceeds from the sale of common stock of $1,937,000, and stock option exercises of $79,000.

BALANCE SHEET ARRANGEMENTS

were no off-balance sheet arrangements as of August 31, 2023.

were no off-balance sheet arrangements as of November 30, 2023.

ACCOUNTING POLICIES

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We believe estimates and assumptions related to these critical accounting policies are appropriate under the circumstances;

should future events or occurrences result in unanticipated consequences, there could be a material impact on our future financial conditions

should future events or occurrences result in unanticipated consequences, there could be a material impact on our future financial condition

or results of operations.

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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 2. Management’s Discussion and Analysis