What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2021-08-27 compared with 2020-08-31 · 92 added, 142 removed, 72 unchanged (76% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

EXCEPT FOR HISTORICAL INFORMATION CONTAINED HEREIN, THE STATEMENTS IN THIS ANNUAL REPORT ON FORM 10-K MAY BE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934 AND SECTION 27A OF THE SECURITIES ACT OF 1933.

FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES WHICH MAY CAUSE BIOMERICA'S RESULTS IN FUTURE PERIODS TO DIFFER MATERIALLY FROM FORECASTED RESULTS.

Like other businesses, WE are susceptible to macroeconomic downturns in the United States or abroad, as were experienced recently, that may affect the general economic climate and OUR performance or OUR customers.

Aside from general macroeconomic downturns, the additional material factors, RISKS AND UNCERTAINTIES that could affect future financial results include, but are not limited to:

THE CONTINUED DEMAND FOR THE COMPANY'S PRODUCTS;

AVAILABILITY OF RAW MATERIALS;

RESULTS OF RESEARCH AND DEVELOPMENT ACTIVITIES;

THE ABILITY TO RETAIN KEY EMPLOYEES AND CUSTOMERS;

THE ABILITY TO COLLECT RECEIVABLES FROM CUSTOMERS;

THE CONTINUED ABILITY OF THE COMPANY TO ATTAIN AND MAINTAIN THE LICENSES AND APPROVALS REQUIRED,.

Regional or global pandemics and the economic and social disruptions these cause;

terrorist attacks and the impact of such events;

existing and potential increase in trade tariffs, especially with China, diminished or no access to raw materials that directly enter into our manufacturing process;

shipping labor disruption or other major degradation of the ability to ship out products to end users;

inability to successfully control our margins which are affected by many factors including competition and product mix;

protracted shutdown of the U.S.

border due to an escalation of terrorist or counter terrorist activity;

any changes in our business relationships with international distributors or the economic climate they operate in;

any event that has a material adverse impact on our foreign manufacturing operations may adversely affect our operations as a whole;

failure to manage the future expansion of our business could have a material adverse effect on our revenues and profitability;

possible costs in complying with government regulations and the delays in receiving required regulatory approvals or the enactment of new adverse regulations or regulatory requirements;

numerous competitors, some of which have substantially greater financial and other resources than we do;

potential claims and litigation brought by patients or medical professionals alleging harm caused by the use of or exposure to our products;

recalls of products;

inability to obtain FDA clearance on products or excessive costs incurred in order to obtain such approvals;

regulatory actions taken by government agencies such as the FDA, SEC, USDA and other regulators;

quarterly variations in operating results caused by a number of factors, including business and industry conditions;

and other factors beyond our control.

All these factors make it difficult to predict operating results for any particular period.

EXCEPT AS MAY BE REQUIRED BY APPLICABLE LAW, WE MAY NOT UPDATE OR REVISE OUR FORWARD-LOOKING STATEMENTS AND THE LACK OF SUCH UPDATE DOES NOT IMPLY THAT ACTUAL EVENTS ARE AS ORIGINALLY EXPRESSED BY SUCH FORWARD-LOOKING STATEMENTS.

YOU SHOULD READ THE DISCLOSURES IN THIS REPORT AND OTHER REPORTS, WHICH WE FILE WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE RISK FACTORS CONTAINED THEREIN.

You should read the following discussion and analysis in conjunction with our consolidated financial statements and the accompanying notes thereto included in Part II, Item 8 of this Report.

This discussion and analysis contains forward-looking statements that are based on our management’s current beliefs and assumptions, which statements are subject to substantial risks and uncertainties.

Our actual results may differ materially from those expressed or implied by these forward-looking statements as a result of many factors, including those discussed in “Risk Factors” included in Part I, Item 1A of this Report.

Biomerica, Inc.

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

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

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

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

1 unchanged sentence

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

If these DGT products prove effective in their clinical trials, and are ultimately cleared for sale by the FDA, the revenues potential to the Company is significant.

Due to the global COVID-19 pandemic, in March 2020 we began redirecting and focused a majority of our resources to develop, test, validate, seek regulatory approval for, and sell diagnostic products that indicate if a person has been exposed to 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.

During the fiscal fourth quarter, 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 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.

under a CE Mark.

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.

These antibody tests are designed to detect if a person has been infected by COVID-19 and mounted an immune response even if the infection was asymptomatic.

If these DGT products prove effective in their clinical trials, and are ultimately cleared for sale by the U.S.

Food and Drug Administration, we believe the revenues potential to the Company is significant.

The Company is currently finalizing an endpoint determination clinical trial on it’s InFoods ®

This trial is and has been 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, the University of Michigan and other institutions .

We expect all patients to be either enrolled or 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.

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.

Due to the global 2019 SARS-CoV-2 novel coronavirus 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.

During fiscal 2021, we sold 2 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, the Company sold these products outside of the U.S.

under a CE Mark (European Conformity).

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

Although sales in these products have slowed, the company continues 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.

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 H.

Pylori product, and our InFoods ®

As such, the Company expects 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 will 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.

International sales could commence earlier than U.S.

The Company has also 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.

RESULTS OF OPERATIONS

Net Sales and Cost of Sales

Our consolidated net sales were $7,199,027 for fiscal 2021 compared to $6,692,711 for fiscal 2020.

This represents an increase of $506,316, or 8% .

This increase in annual sales is primarily attributable to sales of COVID-19 tests during the last quarter of the fiscal year, which offset decreases in other product lines that were negatively impacted by the COVID-19 pandemic and related national and international mandates affecting consumers.

This increase in annual sales is primarily attributable to sales of COVID-19 tests, which offset decreases in other product lines that were negatively impacted by the COVID-19 pandemic and related national and international mandates affecting consumers.

Our consolidated net sales were $1,054,057 for the fiscal fourth quarter 2021, compared to $2,725,000 for fiscal fourth quarter of 2020.

The lower sales in the fiscal fourth quarter 2021 were due to lower COVID-19 sales.

Consolidated cost of sales in fiscal 2021 as compared to fiscal 2020 increased from $4,910,935 to $6,702,046, or by $1,791,111.

The percentage of cost of sales relative to sales decreased from 75.2% to 73.4%, due to various factors, primarily due to higher margins on the COVID-19 products.

The percentage of cost of sales in 2020 was 73%.

In 2021, this increased to 93%, due to various factors, primarily the establishment of an inventory reserve for slow moving COVID-19 antibody products.

Our cost of goods sold for the fiscal fourth quarter 2021 were $1,062,943, or 101%, compared to $1,991,378, or 73%, for the fourth quarter of 2020.

In fourth quarter 2021, the higher COGS was due to an approximate $100,000 increase in COVID-19 reserves and slower production in our factory.

Selling, General and Administrative Expenses

Consolidated selling, general and administrative costs increased in fiscal 2021 as compared to fiscal 2020 from $2,274,415 to $4,608,950, or by $2,334,535, or 103%.

The increase was due to increases in legal and consulting fees, personnel costs as the Company is expanding and strengthening its management team in sales and marketing, and an increase in administrative expenses due to a non-cash option expense of $156,750 in fiscal 2020 compared to $143,299 in the prior fiscal year.

The increase was due to an approximate increase of $766,000 in allowance for doubtful accounts, $884,000 in personnel costs as the Company is expanding its team, $520,000 in legal fees related to the SEC investigation, and $145,000 in consulting fees.

Our consolidated selling, general and administrative expenses were $911,146 for the fiscal fourth quarter 2021, compared to $559,872 for the fourth quarter of 2020.

Consolidated research and development expense was $1,910,209 in fiscal 2020 as compared to $1,679,098 in fiscal 2019, an increase of $231,111, or 13.8%, primarily as a result of increases in costs related to the research, development and validation of COVID-19 tests, and increased costs related to our clinical trials for our InFoods®

The fourth quarter increase was primarily due to an approximate increase of $200,000 in allowance for doubtful accounts, and $100,000 in additional personnel costs as the Company is expanding its team.

Research and Development

Consolidated research and development expense was $2,410,506 in fiscal 2021 as compared to $1,910,209 in fiscal 2020, an increase of $500,297, or 26%, primarily as a result of increases in costs related to the research, development and validation of COVID-19 tests, and increased costs related to our clinical trials and patents for our InFoods®

See “Research and Development” for a more extensive description of the research being conducted.

Our consolidated research and development expenses were $586,194 for the fourth quarter of 2021, compared to $661,610 for the fourth quarter of 2020.

These costs increased in fiscal 2020 due to additional research on COVID-19 products.

Interest expense remained constant in fiscal 2020 at $9 as compared to $47 in fiscal 2019.

Interest and dividend income for those same years increased from $44,014 to $71,193, respectively.

Interest Expense

Interest expense increased in fiscal 2021 to $367 as compared to $9 in fiscal 2020.

Interest and dividend income for those same years decreased to $66,862 from $71,193, respectively.

LIQUIDITY AND CAPITAL RESOURCES

1 unchanged sentence

As of May 31, 2021 and 2020, the Company had working capital of $7,930,687 and $13,289,670, 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.

To satisfy our capital requirements, including ongoing future operations, we may seek to raise additional financing through debt and equity financings.

Operating Activities

During fiscal 2021, cash used in operating activities was $5,251,748 as compared to $4,297,498 in fiscal 2020.

The factors that contributed to this were a loss of $2,339,054, an increase in accounts receivable of $309,090, an increase in inventories of $717,460, and an increase in prepaid expenses of $1,306,681, which was a result of prepayments for inventory purchase orders.

The primary factors that contributed to this were a loss of $6,469,036, an increase in accounts receivable of $455,614, and an increase in inventories of $1,906,013, and paydown of accounts payable and accrued expenses of $403,331.

These were primarily offset by a decrease in prepaid expenses of $1,138,793, which was a result of a refund of the prepayment from the prior year, a non-cash stock option expense of $377,391, an increase in inventory reserves of $1,550,594, and an increase in the allowance on accounts receivable of $766,434.

During fiscal 2020, the Company had a net loss of $2,339,054, an increase in accounts receivable of $309,090, an increase in inventories of $717,460, and an increase in prepaid expenses of $1,306,681.

These were offset by an increase in accrued compensation of $51,798, a non-cash stock option expense of $200,470 and depreciation and amortization of $129,172.

During fiscal 2019, the Company had a net loss of $2,393,060 and an increase in accounts receivable of $670,126.

These were offset by an increase in accounts payable and accrued expenses of $343,994, a non-cash stock option expense of $151,224 and depreciation and amortization of $162,905.

Investing Activities

5 unchanged sentences

In fiscal 2021 and 2020, the Company had proceeds from the exercise of stock options of $102,255 and $223,534, respectively.

During fiscal 2020 and 2019, the Company received $10,232,857 and $1,776,575, respectively, in net proceeds from the sale of common stock through the S-3 Registration Statement, net of subscriptions receivable.

The common stock issued in fiscal 2020 and fiscal 2019 was issued under the S-3 “shelf” Registration Statement base prospectus filed with the SEC on June 30, 2017 and declared effective by the SEC on July 20, 2017, and under the prospectus supplement and At Market Issuance Sales Agreement, filed with the SEC on December 4, 2017 and the prospectus supplement filed with the SEC on March 20, 2020.

During fiscal 2021 and 2020, the Company received $1,011,475 and $10,232,857, respectively, in net proceeds from the sale of common stock through the two S-3 Registration Statements filed by the company, net of subscriptions receivable.

In fiscal 2020, the Company also had proceeds from the sale of convertible preferred stock, net, in the amount of $1,917,586.

The common stock sold and issued in fiscal 2020 was issued under the S-3 “shelf” Registration Statement base prospectus filed with the Securities and Exchange Commission on June 30, 2017 and declared effective by the SEC on July 20, 2017, and under the prospectus supplement and At Market Issuance Sales Agreement, filed with the SEC on December 4, 2017, and the prospectus supplement filed with the SEC on March 20, 2020.

The common stock sold and issued in fiscal 2021 was issued under the S-3 “shelf” Registration Statement base prospectus filed with the SEC on July 21, 2020 (the “2020 Shelf Registration Statement”) and declared effective by the SEC on September 30, 2020, and under the prospectus supplement and At Market Issuance Sales Agreement, filed with the SEC on January 22, 2021.

(See Shareholders’ Equity and Subsequent Events in the notes to the consolidated financial statements for further details about SEC registrations).

The 2020 Shelf Registration Statement registers common shares that may be issued by the Company in a maximum aggregate amount of up to $90,000,000.

On January 22, 2021, we filed a prospectus supplement (“2021 Prospectus Supplement”) for the sale of up to $15,000,000 of shares of our common stock in an at-the-market offering under the 2020 Shelf Registration Statement, of which $12,984,273 remains available for sale under the 2021 Prospectus Supplement.

On August 27, 2021, the date on which this Annual Report on Form 10-K for the fiscal year ended May 31, 2021 is filed with the SEC, our 2020 Registration Statement became subject to the offering limits set forth in General Instruction I.B.6 of Form S-3 because our public float is less than $75 million.

For so long as the Company's public float is less than $75 million, the aggregate market value of securities sold by the Company under the 2020 Shelf Registration Statement pursuant to Instruction I.B.6 to Form S-3 during any 12 consecutive months may not exceed one-third of the Company’s public float.

We have not offered any securities pursuant to General Instruction I.B.6 of Form S-3 in the 12 calendar months preceding the date of filing this Annual Report on Form 10-K.

For purposes of this limitation, the aggregate market value of our outstanding common stock held by non-affiliates, or public float, was $47,283,738, based on 11,151,825 shares of our outstanding common stock held by non-affiliates and a price of $4.24 per share, which was the price at which our common stock was last sold on The Nasdaq Capital Market on August 23, 2021 (a date within 60 days of the date hereof), calculated in accordance with General Instruction I.B.6 of Form S-3.

After giving effect to the $15,761,246 offering limit imposed by General Instruction I.B.6 of Form S-3, we may offer and sell from time to time up to the full amount of the $12,984,273 remaining under the 2021 Prospectus Supplement.

On February 24, 2020, Biomerica, Inc.

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

entered into and closed on a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Palm Global Small Cap Master Fund LP (“Palm”) pursuant to which the Company agreed to sell and issue to Palm, and Palm agreed to purchase from the Company, 571,429 shares of the Company’s Series A 5% Convertible Preferred Stock, $0.08 par value per share for a purchase price of approximately $2,000,000, or $3.50 per Series A Preferred Share.

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

1 unchanged sentence

The Company received approximately $1,917,586 in net proceeds from this sale.

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

On September 30, 2020, these 250,000 unregistered shares became fully registered shares.

In January 2021, Palm Global Small Cap Master Fund LP converted 321,429 preferred shares into 321,429 fully registered common shares.

Following this conversion, Palm Global Small Cap Master Fund LP no longer owns any preferred stock, and Biomerica currently has no preferred shares outstanding.

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

SUBSEQUENT EVENTS

On June 16, 2020, the Company announced it had submitted to the U.S.

FDA an EUA application for an ELISA lab-based serology blood test for the detection of antibodies that identify if a person has been infected with COVID-19.

This is the third COVID-19 antibody test introduced by the Company.

The other two, which are finger-prick rapid tests, are only being sold outside of the US.

The Company also intends to obtain a CE Mark to allow the sale and marketing of this ELISA laboratory test outside of the US.

On July 20, 2020, the Company filed with the SEC an S-3 registration statement that among other things registered all of the common shares issued, or to be issued, to Palm upon conversion of the Convertible Preferred Stock into common shares.

The Company anticipates this registration statement shall become effective promptly following the filing of this annual report on Form 10-K with the SEC.

On July 20, 2020, the Company’s outstanding Securities and Exchange Commission (“SEC”) Form S-3 “Shelf” registration statement dated July 20, 2017 expired.

This prior registration statement registered an indeterminant number of shares equating to a maximum aggregate offering amount of $45,000,000 of shares.

On July 20, 2020, the Company filed with the SEC a new Form S-3 “Shelf” registration statement to replace the registration statement that expired on that day.

The new registration statement registers common shares to be issued in a maximum aggregate amount of $90,000,000.

On July 27, 2020 the Company received notice from the SEC that they did not intend to review this new registration statement, and as such the Company expects this Form S-3 registration statement to be declared effective promptly following the filing of this Form 10-K.

The Company filed for a larger maximum issuance amount in anticipation of the approaching completion of the Company’s clinical trials for its InFoods®

IBS product and the subsequent product launch that may require raising significant capital associated with this substantial opportunity to grow revenues and profits.

Further, the Company’s current data shows that the InFoods technology platform has great promise in diagnosing and treating several other disease states outside of IBS.

The pursuit of this expanded portfolio of disease states and other opportunities may also require significant capital in the future.

On August 7, 2020, the Company received notice of allowance from the USPTO of a key patent pertaining to the Company’s InFoods IBS Product.

This is the second patent issued in the U.S.

for the InFoods®

IBS technology, and contains broad issued claims that the Company believes create strong protection for the InFoods®

IBS product that is in clinical trials with several major medical institutions including Mayo Clinic, University of Texas Houston, Michigan Medicine University of Michigan, Houston Methodist and Beth Israel Deaconess Medical Center, a Harvard teaching hospital.

The Company has also been issued patents for the InFoods®

IBS product in Japan and Korea, and has numerous InFoods®

IBS patents in review and prosecution in other countries.

In addition, the Company has also filed several patents, both in the U.S.

and internationally, for the InFoods®

IBS technology platform that include broad claims protecting the uses of the Infoods Technology to diagnose and treat other disease states outside of IBS.

Several of these patents are currently in active prosecution and review.

On August 3, 2020, the Company hired Steven Sloan, whom the Board intends to appoint as Chief Financial Officer (“CFO”) on September 3, 2020, following the filing of this Form 10K.

In approximately December 2019, Janet Moore, the Company’s current CFO, announced to the Board her desire to retire from the Company at some point in the future once a suitable replacement could be found and hired.

As such, the Company conducted an exhaustive search for a new CFO, and having determined Mr.

Sloan to be an excellent candidate, hired Mr.

Sloan on August 3, 2020.

At the Board meeting held on August 27, 2020, the Board officially appointed and approved Mr.

Sloan to serve as the Company’s CFO effective September 3, 2020.

Sloan’s background and experience includes 13 years at General Electric with roles in internal audit, corporate finance and manufacturing finance.

Most recently, Mr.

Sloan spent 10 years with medical device maker Medtronic.

At Medtronic, Mr.

Sloan worked in four divisions over the 10 years, and most recently served as a divisional finance director.

The Board is excited to have Mr.

Sloan join the company as an executive officer.

Janet Moore will remain an employee of the Company during a transition period.

On August 27, 2020, at a Board meeting held on that day, the Board nominated, unanimously approved and elected Cathy Coste to join the Board of Directors as a member of the Board effective September 3, 2020.

Coste was elected to serve as a Board member until the Company’s annual meeting in December 2020, at which time she will stand for re-election along with several other members of the Board.

Coste is replacing Janet Moore, the Company’s current CFO and Board member who, as previously stated, has announced her retirement from the Company and the Board and will not be standing for re-election at the upcoming annual meeting in December 2020.

Cathy Coste is in the process of retiring from Deloitte and Touche where she is currently a senior partner and is an industry executive leader in Deloitte’s life sciences group.

During her career at Deloitte, Ms.

Coste has been directly involved with over 30 life science corporations, the majority of which were large-cap and medium-cap public corporations.

Coste also has extensive public company Board experience, often attending multiple Board and Board Committee meetings per month.

Coste also has extensive experience in Sarbanes-Oxley compliance, corporate risk analysis and management, cyber risk assessment, fraud prevention, IT systems analysis and upgrades, internal controls and corporate governance.

On August 27, 2020, at a Board meeting held on that day, Board Member, Allen Barbieri, agreed to change from independent outside director status to become an executive director.

Barbieri’s title was changed to Executive Vice- Chairman.

As the Company’s many new products, projects and opportunities have expanded, the CEO and the other members of the Board felt it was necessary to have additional executive support with managing the strategic transactions, operations and affairs of the Company, and to manage communications between the Board and management.

Barbieri agreed to take on this additional responsibility.

On August 27, 2020, at a Board of Directors meeting held on that day, with the election of Ms.

Coste as a member of the Board, and the designation of Mr.

Barbieri as an executive Board member, the Board deemed it necessary to make certain changes to the Committees of the Board.

As such, effective September 3, 2020, the following Board members will be serving in the following Board committees;

1) Audit Committee:

Cathy Coste, Mark Sirgo and Jane Emerson, with Cathy Coste as the Chair of the Committee, 2) Compensation Committee:

Mark Sirgo, Francis Cano and Jane Emerson, with Mark Sirgo as the Chair of the Committee, 3) Nominating and Corporate Governance Committee:

Francis Cano, Cathy Coste and Jane Emerson, with Francis Cano as Chair of the Committee.

Subsequent to May 31, 2021, options to purchase 1,500 shares of Biomerica common stock were exercised at the exercise price of $2.68 per share.

Proceeds to the Company were approximately $4,000.

Subsequent to May 31, 2021, the Company sold 201,553 shares of its common stock under its S-3 “shelf” Registration statement.

The average sale price was $4.16 per share.

Net proceeds to the Company were approximately $824,000.

On June 21, 2021, the Company signed an exclusive distribution and marketing agreement in Canada for its Helicobacter Pylori (H.

Pylori) test.

In June 2021, the Company received a patent in Japan (#6902526) for the System and Method for a Digital Health System Providing a Food Recommendation Based on Food Sensitivity Testing.

This technology is designed to allow for easier implementation of the dietary restrictions that result from InFoods®

diagnostic testing.

This method describes using a smartphone or similar technology to identify prepared or packaged foods that contain restricted food ingredients, using barcodes or product labels.

In August 2021 the Company received a notice of allowance for a patent in Japan whose claims cover the use of the InFoods®

technology to diagnose and treat depression, and covers the compositions, devices and methods of depression sensitivity testing.

OFF BALANCE SHEET ITEMS

27 unchanged sentences

As a result, the existing deferred rent liability was netted against the Right-of-Use Asset which was capitalized at that time.

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

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

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

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

For lessees, the statement of operations presentation and expense recognition pattern for financing and operating leases is similar to the current model for capital and operating leases, respectively.

The Company has elected to exclude short-term leases.

The update also requires additional disclosures that will better enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.

The Company adopted this guidance as of June 1, 2019, the required effective date, using the effective date transition method.

As permitted under the effective date transition method, financial information and disclosure for periods prior to the date of initial application will not be updated.

An adjustment to opening accumulated deficit was not required in conjunction with adoption.

The adoption of this statement resulted in a right-of-use asset being recorded in the amount of $1,942,999 and a lease liability being recorded in the amount of $1,980,970.

Both will be amortized over the life of the underlying leases.

For additional information, see Note 8-Commitments and Contingencies.

The Company has elected not to reassess whether expired or existing contracts contain leases, or reassess the classification of existing leases as of the adoption date.

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

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

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

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

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

REVENUE RECOGNITION

The Company has various contracts with customers.

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

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

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

The Company evaluated the status of these contracts as of May 31, 2021 and 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.

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

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

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

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

RECENT ACCOUNTING PRONOUNCEMENTS

7 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis