What changed in this filing

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Item 1. Financial Statements

2021-01-14 compared with 2020-10-15 · 91 added, 69 removed, 276 unchanged (37% of the section changed)

4 unchanged sentences

AND COMPREHENSIVE LOSS(UNAUDITED)

Six Months Ended

Three Months Ended

August 31, 2020

August 31, 2019

November 30, 2020

November 30, 2019

November 30, 2020

November 30, 2019

Cost of sales

6 unchanged sentences

Dividend and interest income

Interest expense

Total other income

12 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

August 31, 2020

November 30, 2020

Current Assets:

1 unchanged sentence

Accounts receivable, less allowance for doubtful accounts

of $272,356 and $70,981 as of August 31, 2020 and May 31, 2020, respectively

of $481,142 and $70,981 as of November 30, 2020 and May 31, 2020,

Inventories, net

2 unchanged sentences

Property and equipment, net of accumulated depreciation and amortization

of $1,894,375 and $1,867,643 as of August 31, 2020 and May 31, 2020,

of $1,920,217 and $1,867,643 as of November 30, 2020 and May 31, 2020,

Right of use assets, net of accumulated amortization of $346,514 and $231,489

as of August 31, 2020 and May 31, 2020, respectively

as of November 30, 2020 and May 31, 2020, respectively

Intangible assets, net of accumulated amortization of $513,367 and $496,124 as

of August 31, 2020 and May 31, 2020, respectively

The accompanying notes are an integral part of these statements.

BIOMERICA, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS - Continued

August 31, 2020

of November 30, 2020 and May 31, 2020, respectively

Liabilities and Shareholders' Equity

Current Liabilities:

8 unchanged sentences

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

571,429 shares authorized, 321,429 issued and outstanding at August 31, 2020

571,429 shares authorized, 321,429 issued and outstanding at November

30, 2020 and May 31, 2020

Preferred stock, undesignated, no par value,

4,428,571 shares authorized, none issued and outstanding at August 31, 2020

4,428,571 shares authorized, none issued and outstanding at November

30, 2020 and May 31, 2020

Common stock, $0.08 par value,

25,000,000 shares authorized, 11,752,589 and 11,740,089 issued and outstanding

at August 31, 2020 and May 31, 2020, respectively

25,000,000 shares authorized, 11,770,089 and 11,740,089 issued and

outstanding at November 30, 2020 and May 31, 2020, respectively

Additional paid-in-capital

4 unchanged sentences

The accompanying notes are an integral part of these statements.

BIOMERICA, INC.

B IOMERICA, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS ' EQUITY (Unaudited)

Three Months Ended August 31, 2020

Six Months Ended November 30, 2020

Series A 5% Convertible Preferred Stock

5 unchanged sentences

Compensation expense in connection with options granted

Balances, August 31, 2020

Balances, November 30, 2020

The accompanying notes are an integral part of these statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

August 31, 2020

August 31, 2019

Six Months Ended

November 30, 2020

November 30, 2019

Cash flows from operating activities:

1 unchanged sentence

Depreciation and amortization

Change in provision for allowance on accounts receivable

Change in allowance on accounts receivable

Inventory reserve

4 unchanged sentences

Accounts receivable

Prepaid expenses and other assets

Prepaid expenses

Reduction in lease liability

9 unchanged sentences

Proceeds from exercise of stock options

Proceeds from equity financing-officer

Net cash provided by financing activities

14 unchanged sentences

Biomerica, Inc.

and Subsidiaries (collectively "the Company") are primarily engaged in the development, manufacture and marketing of medical diagnostic products.

and Subsidiaries (collectively "the Company") are primarily engaged in the development, manufacturing and marketing of medical diagnostic products.

The Company develops, manufactures, and markets medical diagnostic products designed for the early detection and monitoring of chronic diseases and other medical conditions.

6 unchanged sentences

All adjustments that were made are of a normal recurring nature.

The unaudited, Condensed Consolidated Financial Statements and notes are presented as permitted by the requirements for Form 10-Q and do not contain certain information included in our annual financial statements and notes.

The condensed consolidated balance sheet data as of May 31, 2020 was derived from audited financial statements.

The accompanying interim condensed consolidated financial statements should be read in conjunction with the financial statements and related notes included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on August 31, 2020 for the fiscal year ended May 31, 2020.

The results of operations for our interim periods are not necessarily indicative of results to be achieved for our full fiscal year.

The accompanying interim condensed consolidated financial statements should be read in conjunction with the financial statements and related notes included in the Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on August 31, 2020 for the fiscal year ended May 31, 2020.

The results of operations for the interim periods are not necessarily indicative of results to be achieved for the full fiscal year.

SIGNIFICANT ACCOUNTING POLICIES

4 unchanged sentences

ACCOUNTING ESTIMATES

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

The 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 past practices with a customer;

6 unchanged sentences

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

As of August 31, 2020, the Company had approximately $6,758,700 of uninsured cash.

As of November 30, 2020, the Company had approximately $5,417,958 of uninsured cash.

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

For the quarters ended August 31, 2020 and August 31, 2019, the Company had two distributors and one distributor which accounted for 40.1% and 45.8% of net consolidated sales, respectively.

At August 31, 2020 and May 31, 2020 the Company had two distributors and three distributors which accounted for a total of 62.1% and 80.0%, respectively, of gross accounts receivable.

Of the 62.1% as of August 31, 2020, 43.6% was owed by a distributor in South America.

For the quarters ended August 31, 2020 and 2019, two vendors accounted for approximately 63.8% and two vendors which accounted for 47.5% of the purchases or raw materials, respectively.

As of August 31, 2020 and May 31, 2020 the Company had 3 vendors and 2 vendors which accounted for 50.0% and 26.9%, respectively, of accounts payable.

For the six months ended November 30, 2020 and November 30, 2019, the Company had one distributor which accounted for 35.1% and 50.3% of net consolidated sales, respectively.

At November 30, 2020 and May 31, 2020, the Company had two distributors and three distributors which accounted for a total of 61.9% and 80.0%, respectively, of gross accounts receivable.

Of the 61.9% as of November 30, 2020, 37.1% was owed by a distributor in South America.

For the six months ended November 30, 2020 and 2019, two vendors accounted for 56.0% and three vendors which accounted for 51.4% of the purchases of raw materials, respectively.

As of November 30, 2020 and May 31, 2020, the Company had one vendor and two vendors which accounted for 26.5% and 26.9%, respectively, of accounts payable.

CASH AND CASH EQUIVALENTS

8 unchanged sentences

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.

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

The Company has established a reserve of $481,142 for doubtful accounts.

The majority of this reserve has been established to cover 40% of outstanding accounts receivable from an international distributor.

The distributor continues to make small payments and the Company is continuining to work on collection of this account.

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

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

As of May 31, 2020, approximately $1 million of the prepaids was an advance payment to one of our suppliers.

This prepayment was subsequently refunded by the supplier.

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.

4 unchanged sentences

Inventories approximate the following at:

August 31,2020

Raw materials

2 unchanged sentences

Reserves for inventory obsolescence are recorded as necessary to reduce obsolete inventory to estimated realizable value or to specifically reserve for obsolete inventory that the Company intends to dispose of.

As of August 31, 2020 and May 31, 2020, inventory reserves were approximately $72,000 and $67,000, respectively.

As of November 30, 2020 and May 31, 2020, inventory reserves were approximately $78,000 and $67,000, respectively.

PROPERTY AND EQUIPMENT, NET

5 unchanged sentences

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

Depreciation and amortization expense on property and equipment amounted to $26,732 and $29,498 for the three months ended August 31, 2020 and 2019, respectively.

INTANGIBLES ASSETS, NET

Depreciation and amortization expense on property and equipment amounted to $25,843 and $24,321 for the three months ended November 30, 2020 and 2019, and $52,575 and $53,819 for the six months ended November 30, 2020 and 2019, 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).

1 unchanged sentence

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

Amortization amounted to $5,838 and $5,780 for the three months ended August 31, 2020 and 2019, respectively.

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

Amortization amounted to $6,022 and $5,946 for the three months ended November 30, 2020 and 2019 and $11,860 and $11,726 for the six months ended November 30, 2020 and 2019, respectively.

The Company assesses the recoverability of these intangible assets by determining whether the amortization of the assets 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.

No impairment adjustment was required as of August 31, 2020 or 2019.

No impairment adjustment was required as of November 30, 2020 or 2019.

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

14 unchanged sentences

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

The following summary presents the options and warrants granted, exercised, expired, cancelled and outstanding as of August 31, 2020:

The following summary presents the options and warrants granted, exercised, expired, cancelled and outstanding for the six months ended November 30, 2020:

Option Shares

Exercise Price Weighted Average

Outstanding May 31, 2020

Cancelled or expired

Outstanding August 31, 2020

During the three months ended August 31, 2020, options to purchase 12,500 shares of common stock were exercised at price of $1.20.

Outstanding November 30, 2020

During the six months ended November 30, 2020, options to purchase 30,000 shares of common stock were exercised at prices ranging from $1.04 to $3.62.

Total net proceeds to the Company were $49,330.

During the three months ended August 31, 2020, the Company granted 171,000 options to purchase common stock at an average purchase price of $7.46.

During the six months ended November 30, 2020, the Company granted 171,000 options to purchase common stock at an average purchase price of $7.46.

REVENUE RECOGNITION

3 unchanged sentences

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

The Company evaluated the status of these contracts as of August 31, 2020 and does not believe that any additional discounts will be given through the end of the contract periods.

The Company evaluated the status of these contracts as of November 30, 2020 and does not believe that any additional discounts will be given through the end of the contract periods.

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

5 unchanged sentences

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

Six Months Ended

Three Months Ended

August 31,2020

August 31,2019

November 30, 2020

November 30, 2019

November 30, 2020

November 30, 2019

Physician's office

5 unchanged sentences

Research and development costs are expensed as incurred.

The Company expensed $674,693 and $370,466 of research and development costs during the quarters ended August 31, 2020 and 2019, respectively.

The Company has provided a valuation allowance on deferred income tax assets of approximately $3,522,000 and $3,175,000 as of August 31, 2020 and May 31, 2020, respectively.

The Company expensed $586,403 and $404,854 of research and development costs during the three months ended November 30, 2020 and 2019 and $1,261,096 and $775,320 during the six months ended November 30, 2020 and 2019, respectively.

The Company has provided a valuation allowance on deferred income tax assets of approximately $3,832,000 and $3,175,000 as of November 30, 2020 and May 31, 2020, respectively.

FOREIGN CURRENCY TRANSLATION

4 unchanged sentences

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

There are no adjustments to foreign currency loss that are included in the consolidated statements of operations for the quarters ended August 31, 2020 and 2019.

There are no adjustments to foreign currency loss that are included in the consolidated statements of operations for the three months ended November 30, 2020 and 2019 and six months ended November 30, 2020 and 2019.

RIGHT-OF-USE ASSETS AND LEASE LIABILITY

10 unchanged sentences

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 for the three months ended August 31, 2020 and 2019 was 1,925,750 and 1,416,584, respectively.

The total amount of anti-dilutive stock options not included in the loss per share calculation for the three months ended November 30, 2020 and 2019 was 1,326,489 and 521,782, respectively.

The total amount of anti-dilutive stock options not included in the loss per share calculation for the six months ended November 30, 2020 and 2019 was 1,399,763 and 498,040, respectively.

The Company also has outstanding 321,429 of series A 5% convertible preferred stock, which may be converted at any time to common stock.

10 unchanged sentences

Financial information about foreign and domestic operations and export sales is approximately as follows:

Six Months Ended

Three Months Ended

August 31, 2020

August 31, 2019

November 30, 2020

November 30, 2019

November 30, 2020

November 30, 2019

Revenues from sales to unaffiliated customers:

1 unchanged sentence

South America

As of August 31, 2020 and May 31, 2020, approximately $587,000 and $613,000 of Biomericas gross inventory and approximately $30,000 and $31,000, of Biomericas property and equipment, net of accumulated depreciation and amortization, was located in Mexicali, Mexico, respectively.

As of November 30, 2020 and May 31, 2020, approximately $555,000 and $613,000 of Biomericas gross inventory and approximately $28,000 and $31,000, of Biomericas property and equipment, net of accumulated depreciation and amortization, was located in Mexicali, Mexico, respectively.

On June 18, 2009, the Company entered into an agreement to lease a building in Irvine, California.

2 unchanged sentences

As of September 1, 2020, the rent was $23,637 per month.

The Company has an option to renew this lease for another 5 years and intends to pursue this renewal.

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

5 unchanged sentences

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

Components of lease expense include fixed lease expense of $85,946 for the three months ended August 31, 2020.

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.

Components of lease expense include fixed lease expense of $171,769 for the six months ended November 30, 2020.

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 option periods that the Company is reasonably certain of exercising.

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

2 unchanged sentences

Supplemental cash flow information related to leases for

the three months ended August 31, 2020:

the six months ended November 30, 2020:

Operating cash flows from operating leases

3 unchanged sentences

Weighted average discount rate

The maturity of lease liabilities as of August 31, 2020 are as follows:

Fiscal Years ending May 31st:

The maturity of lease liabilities as of November 30, 2020 are as follows:

COMMITMENTS AND CONTINGENCIES

4 unchanged sentences

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

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

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

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

10 unchanged sentences

The maximum budgeted costs will be $139,850.

On September 15, 2020, the Company entered into an agreement with Public Health England research institution for the purpose of evaluating the Companys COVID-19 Rapid Test.

As disclosed in the Form 10K filed with the SEC on August 31, 2020, on July 2, 2020, the Company received a notice of investigation and subpoena to produce information and documents from the Division of Enforcement of the SEC.

The subpoena seeks information and documents related to events and circumstances leading up to our March 17, 2020 announcement that we had commenced shipping samples of our COVID-19 IgG/IgM Rapid Test to countries outside of the United States, and had initiated the application process with the United States Food and Drug Administration under the COVID-19 Emergency Use Authorization for approval to market and sell the test in the United States.

The subpoena seeks information and documents related to events and circumstances leading up to the March 17, 2020 announcement that the Company had commenced shipping samples of the Companys COVID-19 IgG/IgM Rapid Test to countries outside of the United States, and had initiated the application process with the United States Food and Drug Administration under the COVID-19 Emergency Use Authorization for approval to market and sell the test in the United States.

The subpoena also seeks information and documents about the identity of any persons who were aware of the substance of the March 17, 2020 announcement prior to that date.

The Company is continuing to cooperate fully with the SECs investigation and provide information as requested.

At this time, the Company is unable to predict the duration, scope or outcome of this investigation.

In addition, on December 15, 2020, the SEC sent a second subpoena related to this investigation to Zack Irani, the Companys CEO, requesting documents held by Mr.

Irani concerning his past purchases of Company stock, any past communications with certain persons and entities, and other personal and Company documents.

The Company and Mr.

Irani are continuing to cooperate fully with the SECs investigation and provide information as requested.

At this time, the Company is unable to predict the duration, scope or outcome of these investigations.

SUBSEQUENT EVENTS

On September 15, 2020, the Company entered into an agreement with Public Health England research institution for the purpose of evaluating the Companys COVID-19 Rapid Test.

On October 5, 2020, the Company entered into a sales agreement with a Ukrainian distributor.

The agreement covers a four-year period and the total contract is valued at $480,000.

At the December 10, 2020 board meeting, the Board of Directors approved the grant of 213,616 options to purchase shares of the Companys common stock to officers, directors and certain employees.

The options are exercisable by outside board members one year from date of grant and for officers and employees one-quarter per year with the first quarter vesting one year from date of grant.

The options will be at the exercise price of $6.36 per share and expire ten years from date of grant.

During December 2020, the Company filed the necessary paperwork with Medical Device Safety Service who then notified the competent authority in Germany to attain CE Mark in the EU for the Companys COVID-19 antigen test that uses a nasal swab to collect a persons nasal fluid sample to detect if the person has COVID-19 antigen in their system, which can indicate that the person has recently been infected with the COVID-19 virus and may still be infectious to others.

This nasal swab antigen test received CE clearance on January 8, 2021, and is now available for sale in the EU.

The Company has received an initial order for over $1 million of these tests and is in the process of filling this order.

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