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Item 1. Business

2021-08-27 compared with 2020-08-31 · 136 added, 133 removed, 168 unchanged (62% of the section changed)

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We are a global biomedical technology company that develops, patents, manufactures and markets advanced diagnostic and therapeutic products used at the point-of-care (in home and in physicians' offices) and in hospital/clinical laboratories for detection and/or treatment of medical conditions and diseases.

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

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

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

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Food and Drug Administration (“FDA”), we believe the revenues potential to the Company is significant.

Our medical diagnostic products are sold worldwide in two markets:

We are currently finalizing an endpoint determination clinical study on it’s InFoods ®

This trial is being conducted at Mayo Clinics in Florida and Arizona, Beth Israel Deaconess Medical Center Inc., a Harvard Medical School Teaching Hospital, University of Texas Health Science Center at Houston, Houston Methodist, University of Michigan and other institutions .

We expect final patient enrollment in September 2021, and the trial completed by the end of our second fiscal quarter of 202 2, with trial results reported shortly thereafter.

During fiscal 2022, we also expect to be entertaining partnership/licensing discussions with pharmaceutical and technology companies that could help us commercialize the product, including obtaining FDA clearance.

In order to file for final FDA clearance, we will need to conduct a pivotal trial that will be substantially similar to the endpoint trial that is currently nearing completion.

The pivotal trial will focus on treating the specific endpoint(s) in IBS patients that show positive improvement under the current endpoint trial.

We expect this final pivotal trial to be run at the same institutions that performed the endpoint trial, plus additional large gastrointestinal (GI) medical groups.

If the endpoint trial shows positive results in IBS patients, we will also have the option to immediately seek regulatory clearance for the product to be sold outside of the US.

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

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

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

The diagnostic test kits are used to analyze blood, urine, or fecal specimens from patients in the diagnosis of various diseases 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, within stools, or blood, often in extremely small concentrations.

Due to the global 2019 SARS-CoV-2 novel coronavirus (“COVID-19”) pandemic, in March 2020 we began redirecting and focusing a majority of our resources to develop, test, validate, seek regulatory approval for, and sell diagnostic products that indicate if a person has been infected by COVID-19.

These diagnostic tests use a patient’s blood sample to detect if the patient has certain antibodies to COVID-19 that were created as part of their body’s immune response to a COVID-19 infection, even if the infection was asymptomatic.

During the fourth quarter of fiscal 2020 we began marketing and selling outside of the U.S.

a disposable rapid finger-prick blood test, which detects COVID-19 IgG/IgM antibodies within 10 minutes.

This test is designed to be performed by trained professionals anywhere (e.g.

airports, schools, work, pharmacies and doctors’ offices).

Following fiscal 2020 year-end we submitted to the FDA an application under an Emergency Use Authorization (“EUA”) to sell in the U.S.

a lab-scale, high throughput ELISA COVID-19 antibody test kit that would be sold to labs and hospitals to perform COVID-19 antibody testing.

The Company also anticipates selling this test kit outside of the U.S.

During fiscal 2021, we sold two primary types of Covid 19 tests;

1) antibody diagnostic tests that use a patient’s blood sample to detect if the patient has certain antibodies to COVID-19 that were created as part of their body’s immune response to a COVID-19 infection, even if the infection was asymptomatic, and 2) COVID-19 antigen tests that use a patient’s nasal fluid sample to detect if a patient is currently infected with the virus.

During the year, we sold these products outside of the U.S.

under a CE Mark (European Conformity).

Initial sales for this product are expected during the Company’s second quarter of fiscal 2021 upon EUA clearance.

The Company manufactures this COVID-19 ELISA test on its automated equipment at the Company’s California facility that is also used to produce serology antibody tests for other diseases.

Aside from the current focus on COVID-19 products in research, development and clinical trials, the products we continue to sell are primarily focused on gastrointestinal diseases, food intolerances, diabetes and certain esoteric tests.

Because individual orders for these tests have been large in size, this has created volatility and material fluctuations in our monthly and quarterly revenues.

We continue to receive and fill orders for our COVID-19 test products.

Aside from the COVID-19 products we offer, the other products we sell are primarily focused on gastrointestinal diseases, food intolerances and certain esoteric tests.

These diagnostic test products utilize immunoassay technology.

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

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 U.S.

While sales continue to occur in our COVID-19 products, by fiscal year end, the majority of our research and development efforts have returned to a focus on development and commercialization of non-Covid related products such as our Helicobacter pylori (“H.

Pylori”) product, and our InFoods ®

IBS diagnostic guided therapy product and our EZ Detect colon disease home screening test.

As such, we expect to file for 510K clearance with the FDA for its H.

Pylori laboratory diagnostic test during our second fiscal quarter of 2022.

If approved by the FDA, we intend to commence sales of this product in the U.S.

We also intend to sell this product internationally including in the European Union (“EU”) under a CE Mark which we will seek once we file 510K application with the FDA.

International sales could commence earlier than U.S.

We recently added several new employees in its sales and marketing department in order to increase sales of existing non-Covid products during fiscal 2022.

Through these efforts, our EZ Detect colon disease home screening test is seeing a significant increased interest from retailers and distributors.

Technological advances in medical diagnostics have made it possible to perform diagnostic tests within the home and the physician's office (the point-of-care), rather than in the clinical laboratory.

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Our over-the-counter (home use) and professional use (doctor’s office, clinics, etc.) rapid diagnostic products help to manage existing medical conditions and may save lives through early detection and prompt diagnosis.

Typically, tests of this kind required the services of medical technologists and sophisticated instrumentation.

Typically, tests of this kind require the services of medical technologists and sophisticated instrumentation.

Further, results are often not available until at least the following day.

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Biomerica also maintains manufacturing and assembly operations in Mexicali, Mexico, in order to reduce the cost of manufacturing and compete more effectively worldwide.

The Company expends considerable funds in research and development of certain new products that diagnose and, in certain cases, are designed to be used as a therapy for several major medical diseases.

We expend considerable funds in research and development of certain new products that diagnose and, in certain cases, are designed to be used as a therapy for several major medical diseases.

These products are both internally developed and licensed from others.

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RESEARCH AND DEVELOPMENT

We are currently focused on developing several COVID-19 diagnostic tests, as discussed in this section below, and developing and pursuing the regulatory approval of two tests for the gastrointestinal market.

During most of the fiscal year, we focused much of our Research and Development (“R&D”) resources on developing several COVID-19 diagnostic tests, as discussed in this section below, and pursuing the regulatory approval of two tests for the gastrointestinal market.

Our increase in research and development spending is due to our focus on these tests and outside clinical studies intended to demonstrate the feasibility of FDA clearance for such tests.

The Company also utilizes technical personnel, with Ph.D.

and other degrees and extensive experience in development and production of health diagnostic tests, to conduct other development activities and improve existing products, as well as explore potential new technologies that the Company may wish to develop and commercialize.

We also utilize technical personnel, with Ph.D.

Research and development expenses include the costs of materials, supplies, personnel, consultants, legal fees, facilities, outside clinical trial sites and equipment as well as outside contract services.

Consolidated research and development expenses incurred by Biomerica for the years ended May 31, 2021 and 2020 aggregated $2,410,506, and $1,910,209, respectively.

As Biomerica begins to validate and commercialize additional key products that address diseases with large market opportunities, research and development expenses are expected to increase during upcoming quarters.

The Company has developed a unique diagnostic guided therapy that is designed to allow physicians to identify patient-specific foods (e.g.

pork, milk, onions, sugar, chickpeas, etc.), that when removed from the diet, may alleviate or improve an individual's symptoms of IBS.

As Biomerica moves forward with development, validation and commercialize of additional key products that address diseases with large market opportunities, research and development expenses are expected to increase during upcoming quarters.

We developed a unique diagnostic-guided therapy that is designed to allow physicians to identify patient-specific foods (e.g.

pork, milk, onions, sugar, chickpeas, etc.), that when removed from the diet, may alleviate or improve an individual's symptoms of Irritable Bowel Syndrome (IBS).

This product is called InFoods®

IBS and is currently in clinical studies at the Mayo Clinics in Florida and Arizona, Beth Israel Deaconess Medical Center Inc., a Harvard Medical School Teaching Hospital, University of Texas Health Science Center at Houston, Houston Methodist and at the University of Michigan.

IBS and is currently in clinical studies at the Mayo Clinics in Florida and Arizona, Houston Methodist, the University of Michigan and other institutions .

The United States Patent and Trademark Office (“USPTO”) has issued the Company two patents with broad claims that protect the InFoods®

Patents have also been issued in the countries of Japan and Korea.

Patents have also been allowed or issued in the countries of Japan, Korea, Mexico and Singapore.

Additional patents for this product have been filed in the U.S.

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Functional Dyspepsia, Crohn’s Disease, Ulcerative Colitis, Gastroesophageal reflux disease (“GERD”), Migraine Headaches, and Osteoarthritis.

We are also in clinical studies to evaluate the performance of our new and proprietary Helicobacter pylori (“H.

pylori”) test.

The clinical studies are being conducted at the University of Southern California (“USC”), a European University and several other U.S.

The Company is working to complete the analytical studies needed to prepare for submission to the FDA and plans to utilize a 510(k) clearance pathway for this test.

Our first patent to be allowed for a disease/illness other than IBS was allowed in Japan in August, 2021.

This patent covers the use of our InFoods®

technology to diagnose and treat persons suffering from depression.

We are planning to pursue a de novo 510(k) clearance with the FDA rather than a Premarket Approval Application (“PMA”) for the InFoods®

De novo clearance is typically faster and less expensive than the PMA route, which is the most stringent type of device marketing application required by the FDA for this type of product.

We are also in studies to evaluate the performance of our new and proprietary H.

The clinical studies were conducted at the University of Southern California (“USC”), a European University and several other U.S.

We are working to complete the analytical studies needed to prepare for submission to the FDA and plans to utilize a 510(k) clearance pathway for this test.

Biomerica’s test is designed to provide highly accurate sensitivity and specificity for H.

pylori testing and for monitoring of treatment.

We are planning to pursue a de novo 510(k) clearance with the FDA rather than a Premarket Approval Application (“PMA”) for the InFoods®

De novo clearance is typically faster and less expensive than the PMA route, which is the most stringent type of device marketing application required by the FDA.

We are planning to submit the H.

pylori product using a 510(k) application if validation testing proves effective.

Since March 2020, we have dedicated a majority of resources to develop, test, validate, seek regulatory approval for, and sell diagnostic products that indicate if a person has been infected by COVID-19.

These diagnostic tests use a patient’s blood sample to determine if the patient has certain antibodies to COVID-19 that were created as part of their body’s immune response to a COVID-19 infection.

Following the end of fiscal 2020, we have also dedicated resources to developing a COVID-19 antigen test that is intended to use a patient’s nasal or saliva sample to determine if the patient has a current and ongoing COVID-19 infection.

We submitted to the FDA an application under and Emergency Use Authorization (“EUA”) to sell in the U.S.

During fiscal 2021, we dedicated much of our resources to develop, test, validate, seek regulatory approval for, and sell diagnostic products that indicate if a person has been infected by COVID-19.

Our COVID-19 R&D efforts focused primarily on the following two types of tests:

1) antibody diagnostic tests that use a patient’s blood sample to detect if the patient has certain antibodies to COVID-19 that were created as part of their body’s immune response to a COVID-19 infection, even if the infection was asymptomatic, and 2) antigen tests that use a patient’s nasal fluid sample to detect if a patient is currently infected with the virus.

These tests were sold, and continue to be sold by us, in various markets outside of the US.

We currently do not intend to offer either of these tests in the US.

During the fiscal year we also submitted to the FDA an application under and Emergency Use Authorization (“EUA”) to sell in the U.S.

a lab-scale, high throughput ELISA COVID-19 antibody test kit that would be sold to labs and hospitals to perform COVID-19 antibody testing.

As part of this test we developed and are testing a whole blood collection system to allow simple whole blood sample collection from a finger stick.

We anticipate that upon FDA EUA clearance, this collection system will be marketed in the U.S.

and internationally.

We also are developing and working on other COVID-19 test technologies.

Since the beginning of March 2020, the majority of our research and development resources and our regulatory clearance resources have been focused on developing, validating and registering for sale both point of care (finger-prick rapid tests), and ELISA high throughput laboratory COVID-19 antibody tests in that our primary InFoods product, InFoods®

IBS , is now in clinical trials and as such requires limited research and development or regulatory resources.

We expect that the majority of these Company resources will continue to be used in the foreseeable future for the development of COVID-19 tests.

After the EUA was submitted to the FDA, on two separate occasions the FDA assigned reviewers to this EUA who each requested additional information and interacted with us on this submission, as is customary.

However, we have not yet been issued clearance for this product to be sold.

It appears that the FDA began redirecting and focusing its resources on reviewing applications for products that pertain to patients who are currently infected with the COVID-19 virus such as polymerase chain reaction tests and antigen tests, as the demand for antibody tests diminished in the second half of calendar year 2020.

Beginning in our fourth quarter of fiscal 2021, the focus of our R&D resources returned to non-COVID-19 products such as our H.

Pylori product, our InFoods®

IBS product and other products that we sell or would like to sell in the future.

MARKETS AND METHODS OF DISTRIBUTION

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We employ a director of sales and marketing for Europe and South America who is headquartered in Germany.

She has 23 years of experience selling and marketing diagnostic and life science products across multiple diagnostics technologies and disciplines.

She has over 20 years of experience selling and marketing diagnostic and life science products across multiple diagnostics technologies and disciplines.

She possesses broad international business experience, with communication skills in German, English, Spanish, French and Portuguese, and scientific and technical understanding of gastrointestinal diagnostic products.

She also has strong relationships with key strategic entities in Europe, Eastern Europe, Latin America, Canada and the U.S.

who we believe will help Biomerica add new distributors for existing products, and add new product-lines for future distribution by the Company.

who is and will continue to help Biomerica add new distributors for existing products, and add new product-lines for future distribution by us.

We rely on affiliated and unaffiliated distributors, advertising in medical and trade journals, exhibitions at trade shows, direct mailings and an internal sales staff to market our diagnostic products.

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(a) clinical laboratories and (b) point-of-care testing (physicians' offices and over-the-counter drug stores).

Subsequent to February 29, 2020, the Company’s fiscal third quarter end, the Coronavirus pandemic, which started in China at the end of 2019, has spread throughout the world, including the U.S.

The impact it will have on the Company’s operations is unknown at this time.

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

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

On March 17, 2020, the Company announced it had commenced shipping initial samples of its COVID-19 IgG/IgM Rapid Test (qualitative membrane-based immunoassay for the detection of IgG and IgM antibodies to SARS-CoV-2 in whole blood or serum) to countries outside the U.S.

for evaluation.

The test is a finger-prick blood test that is designed to show results in approximately 10 minutes and can be performed by trained professionals at any location, including airports, schools, work, pharmacies and doctors’ offices.

On March 16, 2020, the Company commenced shipping and fulfilling commercial orders for this Rapid Test to customers outside of the U.S primarily through distributors.

The Company has also filed for EUA clearance with the FDA to sell its ELISA COVID-19 test kit in the U.S.

Once approved, we will market this ELISA COVID-19 product directly to hospitals and clinical labs, as well as sell it through distributors.

The Company continues to sell its COVID-19 IgG/IgM Rapid Tests outside of the U.S.

For the fiscal years ended May 31, 2020 and 2019, the Company had three distributors and two distributors, respectively, which accounted for a total of 57.2% and 46.3% of our net consolidated sales, respectively.

Due to the Coronavirus global pandemic, our operations have been negatively impacted.

We have faced disruptions in certain of the following areas, and may face further challenges from supply chain disruptions, loss of contracts and/or customers, closure of our manufacturing or distribution facilities or of the facilities of our suppliers, partners and customers, travel, shipping and logistical disruptions, government responses of all types, international business risks in countries where we make and/or sell our products, loss of human capital or personnel at the Company, its partners and its customers, interruptions of production, customer credit risk, and general economic calamities.

These ongoing pandemic related disruptions can materially negatively impact our operations and financial performance and may continue to have significant material negative impacts on us.

For the fiscal years ended May 31, 2021 and 2020, the Company had two distributors and three distributors, respectively, which accounted for a total of 60% and 57% of our net consolidated sales, respectively.

Of this, for the fiscal years ended May 31, 2021 and 2020, the largest of the distributors mentioned above accounted for 33% and 26%, respectively, of net consolidated sales.

At May 31, 2020 and 2019, the Company had three distributors and two distributors, respectively, which accounted for a total of 80.0% and 68.1%, respectively, of gross accounts receivable.

Of the 80.0% as of May 31, 2020, 43.9% was owed by a distributor in Ecuador.

Total gross receivables for fiscal 2020 and 2019 were $1,836,852 and $1,527,762, respectively.

At May 31, 2021 and 2020, the Company had two distributors and three distributors, respectively, which accounted for a total of 73% and 80%, respectively, of gross accounts receivable.

Of the 73% as of May 31, 2021, 41% was owed by a distributor in China.

Total gross receivables at May 31, 2021 and 2020 were $2,292,466 and $1,836,852, respectively.

At May 31, 2021 and 2020, Biomerica had a backlog of unshipped orders of approximately $85,000 and $727,000 respectively.

At May 31, 2020 this consisted primarily of orders to our distributor in Asia as well as some contract manufacturing work.

At May 31, 2021, this consisted primarily of orders to our distributor in the Middle East.

RAW MATERIALS

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Almost all of our raw materials are available from several sources, and we are not dependent upon any single source of supply or a few suppliers.

However, due to the limited number of suppliers of some materials, especially those such as antibodies, there is always the possibility that the Company may encounter difficulty in the future obtaining key raw materials for its manufacturing processes or that such materials may be exceedingly costly.

However, due to the limited number of suppliers of some materials, especially those such as antibodies, there is always the possibility that we may encounter difficulty in the future obtaining key raw materials for its manufacturing processes or that such materials may be exceedingly costly.

For the year ended May 31, 2021, one vendor accounted for 58% of our purchases of raw materials.

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Our sourcing and receiving of raw materials have been negatively impacted due to the global COVID-19 pandemic.

Many of our suppliers have been impacted by plant shut-downs, state or national mandates or recommended shut-downs, restrictions on distribution channels including ship freight, air freight and trucking, among other things.

Many of our suppliers have been impacted by plant shut-downs, state or national mandated or recommended shut-downs, restrictions and constraints on distribution channels including ship freight, air freight and trucking, among other things.

These suppliers are also experiencing their own disruptions in sourcing raw materials.

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Immunodiagnostic products, including COVID-19 products are currently produced globally by hundreds of companies.

Biomerica is not a significant player in the overall market.

Biomerica is not a significant player in the overall market for most of the product categories in which we compete.

However, we do have certain proprietary products, such as our EZ Detect colon disease home test, that do not have significant competition from competitors with identical tests.

Our competitors vary greatly in size.

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We offer a broad range of products, but have had limited marketing capability.

We are working on expanding this capability through marketing and strategic cooperation with larger companies and distributors as well as hiring new marketing and sales expertise.

However, during the past 18 months, we have expanded our sales and marketing capability, through marketing and strategic cooperation with larger companies and distributors and by hiring several new employees with marketing and sales expertise.

GOVERNMENT REGULATION OF OUR DIAGNOSTIC BUSINESS

Our primary business consists of selling products that are generally legally defined to be in vitro diagnostic and medical devices.

As a result, we are considered to be an in vitro diagnostic and medical device manufacturer, and as such are subject to the regulations of numerous governmental entities.

Our primary business consists of selling products that are generally legally defined to be in vitro diagnostic medical devices and medical devices.

As a result, we are considered to be an in vitro diagnostic medical devices and medical device manufacturer, and as such are subject to the regulations of numerous governmental entities.

These agencies include the FDA, Environmental Protection Agency, Federal Trade Commission, Occupational Safety and Health Administration, U.S.

Department of Agriculture ("USDA"), and Consumer Product Safety Commission.

Department of Agriculture ("USDA"), and Consumer Product Safety Commission as wells as European Government agencies.

These activities are also regulated by various agencies of the states and localities in which our products are sold.

These regulations govern the introduction of new medical devices, the observance of certain standards with respect to the manufacture and labeling of medical devices, the maintenance of certain records, the reporting of potential product problems, and other matters.

These regulations govern the introduction of new in vitro diagnostic medical devices and medical devices, the observance of certain standards with respect to the manufacture and labeling of medical devices, the maintenance of certain records, the reporting of potential product problems, and other matters.

The Food, Drug & Cosmetic Act of 1938 (the "FDCA") regulates medical devices in the United States by classifying them into one of three classes based on the extent of regulation believed necessary to ensure safety and effectiveness.

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However, this classification can also apply to novel technology or new intended uses or applications for existing devices.

The Company's products are primarily either Class I or Class II medical devices.

Our products are primarily either Class I or Class II medical devices.

Pursuant to FDA requirements, we have registered our manufacturing facility with the FDA as a medical device manufacturer, and listed the medical devices we manufacture.

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The license is not transferable and must be renewed biannually.

Approval of the license requires that we be in compliance with QSR, labeling and MDR regulations.

Our current license expires on December 31, 2020.

These licenses are renewed periodically, and to date we have never failed to obtain a renewal.

Our current license is valid until November 19, 2022.

Through compliance with FDA and California regulations, we can market some of our medical devices throughout the United States.

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In Europe, the directives of the European Union (“EU’) require that a device have a CE Mark in order to be sold in EU countries.

The directive went into effect beginning December 7, 2003.

The Company has completed the process for complying with the CE Mark directives;

and In Vitro Diagnostics Directive 98/79/EC.

We also comply with ISO 13485 for medical devices Quality Management Systems.

Our Company complies with In Vitro Diagnostic Medical Devices Directive (“IVDD”) 98/79/EC and Medical Devices Directive 93/42/EEC (“MDD”).

We also comply with ISO 13485 2016 Medical Devices Quality Management Systems - Requirements for Regulatory Purposes.

At present, outside the EU the regulatory international review process varies from country to country.

We, in general, rely upon our distributors and sales representatives in the foreign countries in which we market our products to ensure that we comply with the regulatory laws of those countries.

We work with our distributors and sales representatives in the foreign countries in which we market our products to ensure that we comply with the regulatory laws of those countries.

We believe that our international sales to date have been in compliance with the laws of all foreign countries in which we have made sales.

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The designing, development, manufacturing, marketing, post-market surveillance, distribution, advertising and labeling of Biomerica’s immunoassay in vitro diagnostic (“IVD”) medical device products are subject to regulation in the United States by the Center for Devices and Radiological Health of the FDA and state agencies.

FDA regulations require that some new products have pre-marketing clearance or approval by the FDA and require certain products to be manufactured in accordance with the FDA’s “Good Manufacturing Practice” regulations, to be extensively tested and to be properly labeled to disclose test results and performance claims and limitations.

FDA regulations require that some new products have pre-marketing clearance or approval by the FDA and require these products to be manufactured in accordance with the FDA’s “Current Good Manufacturing Practice” regulations, to be extensively tested and to be properly labeled to disclose test results and performance claims and limitations.

After a product that is subject to FDA regulation is placed on the market, numerous regulatory requirements apply, including, for example, the requirement that we comply with recordkeeping and reporting requirements, such as the FDA’s medical device reporting regulations and reporting of corrections and removals.

The FDA enforces these requirements by inspection and market surveillance.

The FDA enforces these requirements by inspection and post -market surveillance.

The last FDA announced inspection was in November 2019 and no observations were noted.

Biomerica is currently registered and licensed with the State of California's Department of Health Services.

The Company believes that all Biomerica products sold in the U.S.

We believe that all Biomerica products sold in the U.S.

comply with the FDA and state regulations.

Management believes that Biomerica's Quality Management System is in material compliance with the EN ISO 13485:2016.

EN ISO 13485:2016 is an internationally recognized standard in which companies establish their methods of operation and commitment to quality.

We are an FDA regulated and ISO 13485:2016 certified In Vitro Diagnostic (“IVD”) Medical Devices company.

Biomerica is an FDA regulated and ISO 13485:2016 certified In Vitro Diagnostic Medical Devices company.

Our goal is to provide high quality medical diagnostic products that generally meet or exceed customer requirements and comply with all applicable regulatory requirements:

FDA 21 CFR Part 820 Quality Management System, EN ISO 13485:2016, Medical Devices Quality Management Systems - Requirements for Regulatory Purposes, In Vitro Diagnostic Medical Devices Directive (“IVDD”) 98/79/EC & and Medical Device Directive 93/42/EEC, Guidelines related to Medical Devices Directives and Guidance on CE Marking, etc.

FDA 21 CFR Part 820 Quality Management System, EN ISO 13485:2016, Medical Devices Quality Management Systems - Requirements for Regulatory Purposes, In Vitro Diagnostic Medical Devices Directive 98/79/EC & and Medical Device Directive 93/42/EEC, Guidelines related to Medical Devices Directives and Guidance on CE Marking, etc.

Biomerica involve its employees in a continuous improvement process to increase productivity, improve quality and maintain the suitability, adequacy, and effectiveness of our quality management system.

The new EU Medical Device Regulation (“MDR”) 2017/745 entered into force on May 25, 2017.

The MDR transition period ends May 26, 2021 and will replace Medical Device Directive (“MDD”) 93/42/EEC.

The MDR transition period ends May 26, 2021 and will replace MDD 93/42/EEC.

Manufacturers have less than one year to update their technical documentation and processes to meet the new, more stringent regulatory requirements of the European Union.

Notified Bodies can begin certifying devices to the new MDR requirements once they have been designated under MDR by their Competent Authority.

Our Notified Body recently became designated against MDR in July 2020.

The new EU In Vitro Diagnostic Medical Device Regulation (“IVDR”) 2017/746 entered into force on May 25, 2017.

The IVDR transition period ends May 26, 2022 and will replace IVDD 98/79/EC.

Manufacturers have less than two years to update their technical documentation and processes to meet the new, more stringent regulatory requirements of the European Union.

Our Notified Body became designated under MDR in July 2020.

The new EU In Vitro Diagnostic Medical Device Regulation (“IVDR”) 2017/746 transition period ends May 26, 2022 and will replace IVDD 98/79/EC.

Manufacturers have less than one year to update their technical documentation and processes to meet the new, more stringent regulatory requirements of the European Union.

Notified Bodies can begin certifying devices to the new IVDR requirements once they have been designated under IVDR by their Competent Authority.

The application process for Notified Bodies to be designated against IVDR takes 12-18 months.

Our Notified Body is currently in the process of being designated under IVDR.

While we are working to update our technical documentation to comply with these new and more stringent IVDR requirements, it is unclear which of our product will meet these new requirements prior to the May 26, 2022 deadline.

If we are unable to complete the new technical documentation requirement, or have our updated documentation files approved by our Notified Body, prior to May 26, 2022, we will potentially be unable to sell these products in markets that require compliance with these EU IVDR regulations.

In addition, our current Notified Body, which represents the regulatory bodies in the EU, may themselves not be able to meet all of the new IVDR requirements and become designated under IVDR.

If this happens, we may need to transfer to a new Notified Body that does meet the new IVDR requirements and has been designated, or we may need to delay selling products in these regions until our Notified Body becomes designated under IVDR regulations.

SEASONALITY OF BUSINESS

The businesses of the Company and its subsidiaries have not been subject to significant seasonal fluctuations.

The businesses of our Company and its subsidiaries have not been subject to significant seasonal fluctuations.

INTERNATIONAL BUSINESS

The following table sets forth the dollar volume of revenue attributable to sales to domestic customers and foreign customers during the last two fiscal years for Biomerica:

Year Ended May 31

2,434,000/36.4%

1,694,000/32.6%

Revenues from sales to unaffiliated customers:

United States

523,000/10.1%

1,867,000/27.9%

2,514,000/48.3%

1,615,000/24.1%

Other foreign

6,693,000/100%

5,201,000/100%

South America

We recognize that our foreign sales could be subject to some special or unusual risks, which are not present in the ordinary course of business in the United States.

Changes in economic factors, government regulations, terrorism, tariffs and import restrictions, disruptions in shipping and distribution channels and drop in demand for our products due to regional or national shut-downs from the COVID-19 pandemic, patients’ fear or refusal to visit hospitals and healthcare provides due to the pandemic where our products are sold and used, the erosion of economic conditions in those countries, and many other factors all could impact sales within certain foreign countries.

In addition, these factors could also impact the ability of the Company to collect foreign accounts receivable.

Changes in economic factors, government regulations, terrorism, tariffs, embargos, trade wars, import/export restrictions, disruptions in shipping and distribution channels and drop in demand for our products due to regional or national shut-downs from the COVID-19 pandemic, patients’ fear or refusal to visit hospitals and healthcare providers due to the pandemic where our products are sold and used, the erosion of economic conditions in those countries, and many other factors all could impact sales within certain foreign countries.

In addition, these factors could also impact our ability to collect foreign accounts receivable.

Foreign countries have licensing requirements applicable to the sale of diagnostic products, which vary substantially from domestic requirements;

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Foreign diagnostic sales at Biomerica are made primarily through a network of approximately 75 independent distributors in approximately 65 countries.

The COVID-19 related factors mentioned above have also negatively impacted domestic sales of our non-Covid-19 products and may continue to negatively impact our domestic and international sales into the foreseeable future.

The COVID-19 related factors mentioned above and in “Risk Factors” have also negatively impacted domestic sales of our non-COVID-19 products and may continue to negatively impact our domestic and international sales into the foreseeable future.

INTELLECTUAL PROPERTY

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These license agreements typically require royalties and other payments.

The Company has a royalty agreement in which it has obtained rights to manufacture and market an ACTH test (used to detect chronic metabolic conditions).

We have a royalty agreement in which it has obtained rights to manufacture and market an ACTH test (used to detect chronic metabolic conditions).

Royalty expense of approximately $11,000 and $15,000, respectively, is included in cost of sales for this agreement for the fiscal years ended May 31, 2021 and 2020.

Sales of products manufactured under this agreement are non-material to total sales for the fiscal years ended May 31, 2021 and 2020, respectively.

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

In April 2020, we signed two license agreements with the Icahn School of Medicine at Mount Sinai, a New York not-for-profit education corporation, pertaining to certain technology that we have used to develop our ELISA COVID-19 serology test.

This agreement requires a royalty payment on all sales of products that utilize the licensed technology.

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

In May, 2020, we signed an exclusive license agreement with The Regents of the University of California, to license patents pertaining to a CRISPR-based technology that we hope to use to produce a rapid test for the COVID-19 virus, that could be used to test individuals to determine if they are currently infected with the COVID-19 virus.

This agreement requires the payment of certain milestone payments and a royalty on all sales that utilize the licensed technology.

Some of the products that we manufacture, sell or use may be covered by claims in issued patents held by other persons or entities, and as such, upon notice from such persons or entity we may be required to pay a license fee or may be required to cease all manufacture, sale or use of such products, which could negatively impact the Company.

Collaboration efforts with the University on a CRISPR product that may be commercialized using this technology continues, however, there are no imminent plans to launch a product from this collaboration.

While we have not been notified of any such claims by third parties, we cannot guarantee that such claims will not be made in the future.

We are nearing completion of the endpoint determination clinical trial for our patented InFoods ®

IBS diagnostic guided therapy product.

Our business model for this product includes the possible licensing of this product to a large international life sciences or technology company that would commercialize the product or assist us with the commercialization.

BRANDS AND TRADEMARKS

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A trademark for "Aware" was issued and assigned in November 2001 and renewed in 2011.

On January 11, 2020, the USPTO renewed the Company’s “FORTEL” trademark for another ten years.

On January 11, 2020, the USPTO renewed our “FORTEL” trademark for another ten years.

The laws of some foreign countries do not protect our proprietary rights to the same extent as do the laws of the U.S.

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PATENTS AND INFOODS TECHNOLOGY

The Company has filed over 100 international and PCT patents, and has 22 provisional and non-provisional patents currently filed with the USPTO.

Some of these patent applications pertain to COVID-19 and other products.

However, the majority of our patents that are pending pertain to the InFoods®

IBS technology platform.

We have filed over 100 international and Patent Corporation Treaty patents, and has 12 provisional and non-provisional patents currently filed with the USPTO.

Some of these patent applications pertain to COVID-19 and other products, however, the majority of our patents that are pending, allowed or issued pertain to the InFoods®

technology platform.

Our most important family of patent applications pertains to our InFoods®

IBS technology platform, which is a revolutionary and disruptive new method of the symptoms of many different diseases.

technology platform, which is a new method of possibly diagnosing and treating symptoms of many different diseases.

Our first planned product launch using this technology is the InFoods®

IBS product which diagnoses and treats Irritable Bowel Syndrome.

IBS product which is designed to diagnose and treat Irritable Bowel Syndrome.

Using a patient blood sample, a physician or lab can run our test to identify specific foods (e.g.

pork, milk, shrimp, broccoli, eggs) that, if eliminated from the patient’s diet, can alleviate or reduce the individual's IBS symptoms, including, but not limited to, constipation, diarrhea, bloating, severe pain and indigestion.

We have filed many patent applications with the USPTO and with other such similar agencies in other countries outside of the United States pertaining to this InFoods®

IBS technology.

These patent applications include claims that address the diagnosis and treatment of several disease states including IBS, functional dyspepsia, Crohn’s disease, ulcerative colitis, gastroesophageal reflux disease, migraine headaches, osteoarthritis, psoriasis and others.

These patent applications include claims that address the diagnosis and treatment of several disease states including IBS, functional dyspepsia, Crohn’s disease, ulcerative colitis, gastroesophageal reflux disease, osteoarthritis, psoriasis, migraine headaches and depression.

These applications include the use of this technology in both humans and animals.

The first patents filed by us pertained to IBS.

The International Search Authority (“ISA”) has deemed that for one of Biomerica’s key patent applications pertaining to IBS, all of the International Patent Application claims for its composition and methods to identify trigger foods for IBS are novel and non-obvious.

Several of the patents pertaining to the InFoods®

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IBS product, with claims that covers the test kit that is used to determine patient food intolerances.

In May 2020, the Japanese Patent Office issued our first InFoods®

IBS patent in that country (JP,6681907,B) which covers the compositions, devices and methods of IBS sensitivity testing.

In August 2020, we received notice of allowance from the USPTO for our second patent for the InFoods®

IBS product (#16/385,322) that expands our claims to include the method for identifying and setting the antibody cut-off values for each individual food to determine if a person has an intolerance to that food.

We believe the claims in these issued InFoods IBS patents, and claims in pending patents that protect the use of the InFoods®

In March 2020, the Japanese Patent Office issued our first InFoods®

IBS patent in that country (6681907) which covers the compositions, devices and methods of IBS sensitivity testing.

In September 2020, the USPTO issued our second InFoods®

IBS patent in the U.S.

(10,788,498) which covers IBS sensitivity testing.

In November 2020, the Singapore Patent Office issued our first InFoods®

IBS patent in that country (11201705102Q) which covers the compositions, devices and methods of IBS sensitivity testing.

In March 2021, the Korean Patent Office issued a second InFoods®

IBS patent in that country (10-2224649) which covers the compositions, devices and methods of IBS sensitivity testing.

In April 2021, the Japanese Patent Office issued a notice of allowance for an InFoods®

IBS patent in that country (6876338) which covers the compositions, devices and methods of IBS sensitivity testing.

In May 2021, the Company received a notice of allowance for an InFoods®

IBS patent in Mexico which covers the compositions, devices and methods of IBS sensitivity testing.

We believe the claims in these issued InFoods®

IBS patents, and claims in pending patents that protect the use of the InFoods®

IBS technology to diagnose and treat other diseases, provide us with broad protections from other companies making or selling competing products in this highly disruptive new field of medicine.

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Biomerica anticipates that it will license or purchase the rights to other products or technologies in the future.

We are nearing completion of the endpoint determination clinical trial for our patented InFoods®

IBS diagnostic guided therapy product.

Our business model for this product includes the possible out-licensing of this product and the related patents to a large international life sciences or technology company that would commercialize the product or assist us with the commercialization.

As of May 31, 2021 and 2020, the Company employed 49 and 45 employees, respectively, in the U.S.

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In addition, Biomerica de Mexico employs 17 people at its Mexico facility.

We also engage the services of many outside Ph.D.

and other types of industry expert consultants as well as medical institutions for technical support, regulatory advisors, marketing and public relations advisors, financial advisors, contract product development and manufacturing organization, and other advisors on a regular basis.

We also engage the services of many outside Ph.D.’s and M.D.’s and other types of industry expert consultants as well as medical institutions for technical support, regulatory advisors, marketing and public relations advisors, financial advisors, contract product development and manufacturing organization, and other advisors on a regular basis.

We try to protect the Company with the use of confidentiality, intellectual property ownership and indemnifications agreements.

However, we cannot guarantee that the use of such third parties will fully protect the Company from third-party claims or from theft of our intellectual property.

However, we cannot guarantee that the use of such experts will fully protect the Company from third-party claims or from theft of our intellectual property.

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What changed 10-K

Item 1. Business