What changed in this filing

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Item 1. Financial Statements

2022-01-12 compared with 2021-10-14 · 157 added, 141 removed, 330 unchanged (47% of the section changed)

2 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

Current Assets:

Cash and cash equivalents

Accounts receivable, less allowance for doubtful accounts

of $ 27,777 and $ 837,415 as of November 30, 2021 and May 31, 2021, respectively

Inventories, net

Prepaid expenses and other

Total current assets

Property and equipment, net of accumulated depreciation and amortization

of $ 2,026,764 and $ 1,972,357 as of November 30, 2021 and May 31, 2021, respectively

Right of use assets, net of accumulated amortization of $ 595,116 and $ 469,077

as of November 30, 2021 and May 31, 2021, respectively

Intangible assets, net of accumulated amortization of $ 91,030 and $ 126,769 as

of November 30, 2021 and May 31, 2021, respectively

Liabilities and Shareholders' Equity

Current Liabilities:

Accounts payable and accrued expenses

Accrued compensation

Advance from customers

Lease liability, current portion

Total current liabilities

Lease liability, net of current portion

Total Liabilities

Commitments and contingencies (Notes 1 and 6)

Shareholders' Equity:

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

571,429 shares authorized, none issued and outstanding as of November 30, 2021 and

Preferred stock, undesignated, no par value,

4,428,571 shares authorized, none issued and outstanding as of November 30, 2021 and

Common stock, $ 0.08 par value,

25,000,000 shares authorized, 12,692,327 and 12,307,157 issued and outstanding at

November 30, 2021 and May 31, 2021, respectively

Additional paid-in-capital

Accumulated other comprehensive loss

Accumulated deficit

( 33,214,190 )

( 30,546,335 )

Total Shareholders' Equity

Total Liabilities and Shareholders' Equity

The accompanying notes are an integral part of these statements.

BIOMERICA, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

1 unchanged sentence

Three Months Ended

August 31, 2020

August 31, 2021

Six Months Ended

(As Restated)

Cost of sales

1 unchanged sentence

( 1,063,807 )

Gross (Loss) Profit

( 5,225,898 )

( 2,089,524 )

Operating expenses:

5 unchanged sentences

( 1,712,688 )

( 2,670,130 )

( 3,612,048 )

Other income:

3 unchanged sentences

( 1,704,705 )

( 2,656,409 )

( 3,595,974 )

Provision for income taxes

1 unchanged sentence

( 1,718,098 )

( 2,667,855 )

( 3,610,492 )

Basic net loss per common share

4 unchanged sentences

( 1,718,098 )

( 2,667,855 )

( 3,610,492 )

Other comprehensive loss, net of tax:

3 unchanged sentences

( 1,719,628 )

The accompanying notes are an integral part of these statements.

BIOMERICA, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

August 31, 2021

(As Restated)

Current Assets:

Cash and cash equivalents

Accounts receivable, less allowance for doubtful accounts

of $ 742,524 and $ 837,415 as of August 31, 2021 and May 31, 2021, respectively

Inventories, net

Prepaid expenses and other

Total current assets

Property and equipment, net of accumulated depreciation and amortization

of $ 2,000,167 and $ 1,972,357 as of August 31, 2021 and May 31, 2021, respectively

Right of use assets, net of accumulated amortization of $ 531,974 and $ 469,077

as of August 31, 2021 and May 31, 2021, respectively

Intangible assets, net of accumulated amortization of $ 83,683 and $ 126,769 as

of August 31, 2021 and May 31, 2021, respectively

Liabilities and Shareholders' Equity

Current Liabilities:

Accounts payable and accrued expenses

Accrued compensation

Lease liability, current portion

Total current liabilities

Lease liability, net of current portion

Total Liabilities

Commitments and contingencies (Notes 1 and 6)

Shareholders' Equity:

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

571,429 shares authorized, none issued and outstanding as of August 31, 2021 and May 31, 2021

Preferred stock, undesignated, no par value,

4,428,571 shares authorized, none issued and outstanding as of August 31, 2021 and May 31, 2021

Common stock, $ 0.08 par value,

25,000,000 shares authorized, 12,510,210 and 12,307,157 issued and outstanding at

August 31, 2021 and May 31, 2021, respectively

Additional paid-in-capital

Accumulated other comprehensive loss

Accumulated deficit

( 2,678,218 )

( 3,613,742 )

Total Shareholders' Equity

Total Liabilities and Shareholders' Equity

The accompanying notes are an integral part of these statements.

B IOMERICA, INC.

BIOMERICA, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)

For the Three Months Ended August 31, 2020 (As Restated)

For the Six Months Ended November 30, 2020 (As Restated)

Comprehensive

Series A 5% Convertible

Accumulated Other

Preferred Stock

Comprehensive

Paid-in Capital

Balances, May 31, 2020.

Balances, May 31, 2020, restated

( 23,100,081 )

4 unchanged sentences

( 3,610,492 )

Balances, August 31, 2020, restated

Balances, November 30, 2020, restated

( 26,710,573 )

For the Three Months Ended August 31, 2021

For the Six Months Ended November 30, 2021

Comprehensive

Series A 5% Convertible

Accumulated Other

Preferred Stock

Comprehensive

Paid-in Capital

Balances, May 31, 2021, restated

Balances, May 31, 2021

( 30,546,335 )

2 unchanged sentences

Foreign currency translation

Compensation expense in connection with options granted

Compensation expense in connection with

options granted

( 2,667,855 )

Balances, August 31, 2021

Balances, November 30, 2021

( 33,214,190 )

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

August 31, 2021

August 31, 2020

Six Months Ended

(As Restated)

15 unchanged sentences

Accrued compensation

Advance from customers

Net cash provided by (used in) operating activities

23 unchanged sentences

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

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

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

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

2 unchanged sentences

Our diagnostic test kits are used to analyze blood, urine, nasal or fecal specimens from patients in the diagnosis of various diseases, food intolerances and other medical complications, by measuring or detecting the existence and/or level of specific bacteria, hormones, antibodies, antigens or other substances, which may exist in a patient’s body, stools, or blood, often in extremely small concentrations.

Due to the global 2019 SARS-CoV-2 novel coronavirus pandemic, in March 2020 we began 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) antigen tests that use a patient’s nasal fluid sample to detect if the patient is currently infected with the virus.

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

Due to the global 2019 SARS-CoV-2 novel coronavirus pandemic, in March 2020 we began developing COVID-19 products to indicate if a person has been infected by COVID-19.

While the Company does offer a COVID-19 antibody diagnostic test, all of our COVID-19 revenues in fiscal 2022 have come from international sales of our antigen tests that use a patient’s nasal fluid sample to detect if the patient is currently infected with the virus.

The other products we sell are primarily focused on gastrointestinal diseases, food intolerances, and certain esoteric tests.

These diagnostic test products utilize immunoassay technology.

6 unchanged sentences

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 the annual financial statements and notes.

The condensed consolidated balance sheet data as of May 31, 2021 was derived from audited financial statements.

The condensed consolidated balance sheet data as of May 31, 2021 was derived from restated, audited financial statements.

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 27, 2021 for the fiscal year ended May 31, 2021, which have been restated as described in our Form 10-K/A as filed on October 14, 2021.

4 unchanged sentences

Additionally, our calculation expensed the option at vesting dates versus pro-rata over the period the requisite service was provided.

As a result of these errors, certain previously reported amounts in the condensed consolidated statement of operations, condensed consolidated statement of stockholders’ equity and condensed consolidated statement of cash flows for the quarter ended August 31, 2020, were materially misstated;

As a result of these errors, certain previously reported amounts in the condensed consolidated statement of operations, condensed consolidated statement of stockholders’ equity and condensed consolidated statement of cash flows for the periods ended November 30, 2020, were materially misstated;

accordingly, we have restated the prior period financial statements.

See Note 8 to the Financial Statements.

See Note 8 to these Financial Statements.

SIGNIFICANT ACCOUNTING POLICIES

14 unchanged sentences

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 suppliers, partners and customers, travel, shipping and logistical disruptions, government responses of all types, international business risks in countries where the Company makes and/or sells its products, loss of human capital or personnel at the Company, its partners and its customers, interruptions of production, customer credit risk, and general economic calamities.

These ongoing 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.

The Company has incurred net losses and negative cash flows from operations and has an accumulated deficit of approximately $ 32.1 million as of August 31, 2021.

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

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

The Company has incurred net losses and negative cash flows from operations and has an accumulated deficit of approximately $ 33.2 million as of November 30, 2021.

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

On January 22, 2021, the Company filed a prospectus supplement for purposes of raising up to $ 15,000,000 to the base prospectus filed with the SEC on July 21, 2020 and included in the registration statement on Form S-3 ( File No.

333-239980) that was declared effective by the SEC on September 30, 2020.

The shares included in the prospectus supplement may be sold pursuant to the terms of an At Market Issuance Sales Agreement between the Company and B.

The shares included in the prospectus supplement may be sold pursuant to the terms of an At-The- Market Issuance Sales Agreement between the Company and B.

Riley Securities, Inc., as sales agent, the ATM Agreement.

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The Company has no obligation to sell any of the shares under the ATM Agreement, and may at any time suspend offers under, or terminate the ATM Agreement.

As a result of cash and cash equivalents on hand at August 31, 2021, management believes the Company has sufficient funds to operate through November 2022 and the ability to raise additional funds through the ATM Agreement noted above.

As a result of cash and cash equivalents on hand at November 30, 2021, management believes the Company has sufficient funds to operate through February 2023 and the ability to raise additional funds through the ATM Agreement noted above.

CONCENTRATION OF CREDIT RISK

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

As of August 31, 2021, the Company had approximately $ 4,790,000 of uninsured cash.

As of November 30, 2021, the Company had approximately $ 6,950,000 of uninsured cash.

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

For the three months ended August 31, 2021 and 2020, the Company had two key distributors which accounted for 60 % and 40 % of net consolidated sales, respectively.

At August 31, 2021 and May 31, 2021, the Company had two key distributors which accounted for a total of 77 % and 73 %, respectively, of gross accounts receivable.

For the three months ended August 31, 2021 and 2020, one key vendor accounted for 17 % and two key vendors accounted for 64 % of the purchases of raw materials, respectively.

As of August 31, 2021 and May 31, 2021, the Company had one key vendor which accounted for 25 % and 17 %, respectively, of accounts payable.

For the six months ended November 30, 2021 and 2020, the Company had two and one key customers which accounted for 66 % and 35 % of net consolidated sales, respectively.

At November 30, 2021 and May 31, 2021, the Company had three and two key distributors which accounted for a total of 73 % and 73 %, respectively, of gross accounts receivable.

For the six months ended November 30, 2021 and 2020, the Company had one and two key vendors which accounted for 77 % and 56 % of the purchases of raw materials, respectively.

As of November 30, 2021 and May 31, 2021, the Company had one key vendor which accounted for 47 % and 17 %, respectively, of accounts payable.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of demand deposits and money market accounts with original maturities of less than three months.

Cash and cash equivalents consist of demand deposits and money market accounts with original maturities of less than six months.

ACCOUNTS RECEIVABLE

7 unchanged sentences

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

The Company has established a reserve of approximately $ 743,000 for doubtful accounts as of August 31, 2021.

The majority of this reserve has been established to cover 100 % of outstanding accounts receivable from an international distributor.

The Company has established a reserve of approximately $ 28,000 for doubtful accounts as of November 30, 2021.

PREPAID EXPENSES AND OTHER

1 unchanged sentence

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

As of August 31, 2021 and May 31, 2021, the prepaid expenses and other were approximately $ 315,000 and $ 370,000 , respectively.

The prepaid expenses and other balance were composed of prepayments to insurance and various other suppliers.

As of November 30, 2021 and May 31, 2021, the prepaid expenses and other were approximately $ 1,097,000 and $ 370,000 , respectively.

The prepaid expenses and other balance were composed of prepayments to raw materials suppliers, insurance and various other suppliers.

INVENTORIES, NET

5 unchanged sentences

Inventories approximate the following at:

August 31, 2021

Raw materials

1 unchanged sentence

Finished products

During the first fiscal quarter ended August 31, 2021, the Company wrote-down the carrying value of certain inventory by approximately $ 179,000 to assign a new carrying value for this inventory of $ 211,000 .

As part of a large international order for this product that was to ship in the second quarter of 2022, the Company agreed to sell this product as a small portion of that order at a price below its carrying value, which required a write down.

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

As of August 31, 2021 and May 31, 2021, inventory reserves were approximately $ 1,797,000 and $ 1,617,000 , respectively.

As of November 30, 2021 and May 31, 2021, inventory reserves were approximately $ 1,799,000 and $ 1,617,000 , respectively.

Of the inventory reserve, approximately $ 1,686,000 was related to a market downturn in our COVID-19 antibody test and materials, as the market shifted to COVID-19 PCR viral tests and antigen tests.

6 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 $ 27,809 and $ 26,732 for the three months ended August 31, 2021 and 2020, respectively.

Depreciation and amortization expense on property and equipment were approximately $ 26,000 and $ 26,000 for the three months ended November 30, 2021 and 2020, and approximately $ 54,000 and $ 53,000 for the six months ended November 30, 2021 and 2020, respectively.

INTANGIBLE ASSETS, NET

2 unchanged sentences

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 expense amounted to $ 6,913 and $ 5,838 for the three months ended August 31, 2021 and 2020, respectively.

Amortization was approximately $ 7,000 and $ 6,000 for the three months ended November 30, 2021 and 2020 and approximately $ 14,000 and $ 12,000 for the six months ended November 30, 2021 and 2020, respectively.

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

The Company uses a qualitative assessment to determine whether there was any impairment.

No impairment adjustment was required as of August 31, 2021 or 2020.

No impairment adjustment was required as of November 30 , 2021 or 2020.

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

1 unchanged sentence

If the Company considers any such decline to be other than temporary (based on various factors, including historical financial results, and the overall health of the investee’s industry), a write-down to estimated fair value is recorded.

Investments represent the Company’s investment in a Polish based distributor which is primarily engaged in distributing medical products and devices, including those manufactured by the Company, and in certain cases, manufacturing the certain of the products sold.

Investments represent the Company’s equity investment in a Polish based distribution company which is primarily engaged in distributing medical products and devices, including those manufactured by the Company, and in certain cases, manufacturing the products they sell.

The Company currently has not written down the investment and has no information that would indicate the carrying value is greater than the fair value.

The Company owns approximately 6 % of the investee, and accordingly, applies the cost method to account for the investment.

The Company owns approximately 6 % of the Polish distribution company, and accordingly, applies the cost method to account for the investment.

Under the cost method, investments are recorded at cost, with gains and losses recognized as of the sale date, and income recorded when received.

SHARE-BASED COMPENSATION

The Company follows the guidance of the accounting provisions of ASC 718, Share-based Compensation, which requires the use of the fair-value based method to determine compensation expense for all arrangements under which employees and others receive shares of stock or equity instruments (options).

The Company follows the guidance of the accounting provisions of Accounting Standards Codification 718, Share-based Compensation, which requires the use of the fair-value based method to determine compensation expense for all arrangements under which employees, directors and others are granted shares of the Company’s common stock or equity instruments (stock options).

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model that uses assumptions for expected volatility, expected dividends, expected forfeiture rate, expected term, and the risk-free interest rate.

5 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, canceled and outstanding for the three months ended August 31, 2021:

The following summary presents the options and warrants granted, exercised, expired, canceled and outstanding for the six months ended November 30, 2021:

Option Shares

2 unchanged sentences

Cancelled or expired

Outstanding August 31, 2021

During the three months ended August 31, 2021, options to purchase 1,500 shares of common stock were exercised at price of $ 2.68 .

Total net proceeds to the Company were $ 3,895 .

During the three months ended August 31, 2021, the Company granted 24,000 options to purchase common stock at an average purchase price of $ 4.25 .

Outstanding November 30, 2021

During the six months ended November 30, 2021, options to purchase 21,500 shares of common stock were exercised at prices ranging from $ 1.20 to $ 3.62 .

Total net proceeds to the Company were $ 34,480 .

During the six months ended November 30, 2021, the Company granted 24,000 options to purchase common stock at an average purchase price of $ 4.25 .

REVENUE RECOGNITION

1 unchanged sentence

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.

The Company does not typically 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 August 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 works are invoiced and recognized for work that has been performed as the project progresses.

The Company evaluated the status of these contracts as of November 30 , 2021 and 2020, and does not believe that any additional discounts will be given through the end of the contract periods.

Services for contract works performed by the Company for others are invoiced and recognized as 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.

5 unchanged sentences

Three Months Ended

August 31, 2021

August 31, 2020

Six Months Ended

Physician's office

6 unchanged sentences

Research and development costs are expensed as incurred.

The Company expensed approximately $ 440,000 and $ 712,000 of research and development costs during the three months ended August 31, 2021 and 2020, respectively.

The Company has provided a valuation allowance on deferred income tax assets of approximately $ 6,226,000 and $ 5,904,000 as of August 31, 2021 and May 31, 2021, respectively.

The Company expensed approximately $ 619,000 and $ 617,000 of research and development costs during the three months ended November 30, 2021 and 2020 and approximately $ 1,058,000 and $ 1,328,000 during the six months ended November 30, 2021 and 2020, respectively.

The Company has provided a valuation allowance on deferred income tax assets of approximately $ 6,462,000 and $ 5,904,000 as of November 30, 2021 and May 31, 2021, respectively.

FOREIGN CURRENCY TRANSLATION

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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 three months ended August 31, 2021 and 2020.

There are no adjustments to foreign currency loss that are included in the consolidated statements of operations for the three and six months ended November 30, 2021 and 2020.

RIGHT-OF-USE ASSETS AND LEASE LIABILITY

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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, 2021 and 2020 was 2,081,116 and 1,925,750 , respectively.

The total amount of anti-dilutive stock options not included in the loss per share calculation at November 30, 2021 and 2020 was 2,059,116 and 1,399,763 , respectively.

RECENT ACCOUNTING PRONOUNCEMENTS

Recent ASUs issued by the FASB and guidance issued by the Securities and Exchange Commission (“SEC”) did not, or are not believed by management to, have a material effect on the Company’s present or future consolidated financial statements.

Recent ASUs issued by the Financial Accounting Standards Board and guidance issued by the Securities and Exchange Commission (“SEC”) did not, or are not believed by management to, have a material effect on the Company’s present or future consolidated financial statements.

SHAREHOLDERS’ EQUITY

Stock option expense during the three months ended August 31, 2021 and 2020 were $ 319,622 and $ 246,787 (as restated, see Note 8 to the Financial Statements), respectively.

During the three months ended August 31, 2021, the Company sold 201,553 shares of its common stock at prices ranging from $ 4.02 to $ 4.47 under its January 22, 2021 prospectus supplement and the ATM Agreement (see Note 2 to Financial Statements) which resulted in gross proceeds of $ 838,332 and net proceeds to the Company of $ 800,710 after deducting commissions for each sale and legal, accounting and other fees related to the filing of the Form S-3.

Stock option expense during the six months ended November 30, 2021 and 2020 was approximately $ 634,000 and $ 500,000 (as restated, see Note 8 to these Financial Statements), respectively.

During the six months ended November 30, 2021, the Company sold 363,670 shares of its common stock at prices ranging from $ 4.02 to $ 5.63 under its January 22, 2021 prospectus supplement and the ATM Agreement (see Note 2 to these Financial Statements) which resulted in gross proceeds of approximately $ 1,751,000 and net proceeds to the Company of approximately $ 1,684,000 after deducting commissions for each sale and legal, accounting and other fees related to the filing of the Form S-3.

GEOGRAPHIC INFORMATION

2 unchanged sentences

Three Months Ended

August 31, 2021

August 31, 2020

Six Months Ended

Revenues from sales to unaffiliated customers:

1 unchanged sentence

South America

As of August 31, 2021 and May 31, 2021, approximately $ 665,000 and $ 803,000 of Biomerica’s gross inventory and approximately $ 24,000 and $ 25,000 , of Biomerica’s property and equipment, net of accumulated depreciation and amortization, was located in Mexicali, Mexico, respectively.

As of November 30, 2021 and May 31, 2021, approximately $ 574,000 and $ 803,000 of Biomerica’s gross inventory was located in Mexicali, Mexico, respectively.

As of November 30, 2021 and May 31, 2021, approximately $ 22,000 and $ 25,000 of Biomerica’s 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.

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The Company was also granted an additional five years lease extension option through August 2031.

The rent is currently $23,637 per month and will increase on September 1, 2021 to $ 25,970 per month and be increased 3 % each year thereafter.

The rent is currently $ 25,970 per month and will increase by 3 % each year at the beginning of September.

The security deposit of $ 22,080 remains the same.

8 unchanged sentences

Rent expense in the U.S.

for the three months ended August 31, 2021 and 2020 was $ 78,166 and $ 75,764 , respectively.

Rent expense for the Mexico facility for the three months ended August 31, 2021 and 2020 was $ 10,421 and $ 10,870 , respectively.

For purposes of determining straight-line rent expense, the lease term is calculated from the date the Company first takes possession of the facility, including any periods of free rent and any renewal options periods that the Company is reasonably certain of exercising.

for the six months ended November 30, 2021 and 2020 was approximately $ 155,000 and $ 152,000 , respectively.

Rent expense for the Mexico facility for the six months ended November 30, 2021 and 2020 was approximately $ 21,000 and $ 22,000 , respectively.

For purposes of determining straight-line rent expense, the lease term is calculated from the date the Company first takes possession of the facility, including any periods of free rent and any renewal option periods that the Company is reasonably certain of exercising.

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

1 unchanged sentence

Such amounts are generally variable and therefore not included in the measurement of the right-of-use asset and related lease liability but are instead recognized as variable lease expense in the Consolidated Statements of Operations and Comprehensive Loss when they are incurred.

Supplemental cash flow information related to leases for the three months ended August 31, 2021:

Supplemental cash flow information related to leases for the six months ended November 30, 2021:

Operating cash flows from operating leases

3 unchanged sentences

Weighted average discount rate

The maturity of lease liabilities as of August 31, 2021 are as follows:

The approximate maturity of lease liabilities as of November 30, 2021 are as follows:

Less than 1 year

5 to 10 years

Total undiscounted lease payments

8 unchanged sentences

However, based on facts currently available, management believes such matters will not have a material adverse effect on the Company's consolidated financial position, results of operations or cash flows.

There were no legal proceedings pending as of August 31, 2021.

On July 2, 2020, we received a notice of investigation and subpoena to produce information and documents from the Division of Enforcement of the SEC.

The subpoena requested 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 also requested 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.

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

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

There were no legal proceedings pending as of November 30, 2021.

On July 2, 2020, we received a notice of investigation and subpoena from the Division of Enforcement of the SEC.

The subpoena requested information and documents related to events leading up to our March 17, 2020 announcement that, among other things, we had commenced shipping samples of our COVID-19 IgG/IgM Rapid Test to countries outside of the United States.

In addition, on December 15, 2020, the SEC sent a second subpoena related to this same investigation to Zack Irani, the Company’s CEO, requesting personal and Company documents and information held by Mr.

The Company and Mr.

Irani have cooperated fully with the SEC’s investigation and provided information as requested.

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

Irani cooperated fully with the SEC’s investigation and provided information as requested.

On December 2, 2021, the Company was notified by the SEC that they had concluded their investigations with no enforcement action recommendations.

The notices of investigation conclusion pertain to the Subpoena for information sent to the Company in July 2020, as well as the Subpoena for information sent to the Company’s CEO in December 2020.

CONTRACTS AND LICENSING AGREEMENTS

On April 15, 2021, the Company signed a general merchandise agreement with Walmart for the Company’s EZ Detect product.

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

1 unchanged sentence

SUBSEQUENT EVENTS

Subsequent to November 30, 2021, the Company sold 157,597 shares of its common stock under its S-3 “shelf” Registration statement.

The average sale price was $ 4.13 per share.

Net proceeds to the Company were approximately $ 634,000 .

At the December 9, 2021 board meeting, the Board of Directors approved the grant of 283,000 options to purchase shares of the Company’s 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 $ 4.46 per share and expire ten years from date of grant.

We held our Annual Meeting of Stockholders on December 9, 2021, to consider and vote on the proposals set forth in our proxy statement filed with the Securities and Exchange Commission on September 28, 2021.

Please refer to the Form 8-K filed on December 10, 2021 for a description of the results of the meeting.

RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

Subsequent to the issuance of our financial statements for the quarter ended August 31, 2020, the Company determined that errors were included in the previously issued financial statements as described below.

As a result, we restated our financial statements for the quarter ended August 31, 2020.

During September 2021, the Company determined that errors were included in the previously issued financial statements as described below.

As a result, we restated our financial statements for the periods ended November 30, 2020.

The Company discovered the errors listed below.

The restatement corrects these errors.

Our non-cash stock based compensation expenses calculation applied forfeiture adjustments to both vested and unvested outstanding options, including those for which the employee had provided the requisite service, which resulted in an understatement of stock compensation expense.

Additionally, our calculation expensed the option at vesting dates versus pro rata over the period the requisite service was provided.

Our non-cash stock-based compensation expenses calculation applied forfeiture adjustments to both vested and unvested outstanding options, including those for which the employee had provided the requisite service and vesting had occurred, which resulted in an understatement of stock compensation expense.

Additionally, our calculation expensed all issued options at vesting dates versus pro- rata over the period the requisite service was provided.

Stock-based compensation expense shown on the statement of operations is a non-cash expense, and impacts accumulated deficit and additional paid-in capital on the balance sheet.

However, this does not impact the Company’s cash, revenues or other aspects of ongoing operations.

The restatement for the quarter ended August 31, 2020 resulted in no changes in the provision for income taxes.

The effect of the restatement on the consolidated statement of operations for the three months ended August 31, 2020 is as follows:

The restatement for the quarter ended November 30, 2020 resulted in no changes in the provision for income taxes.

The effect of the restatement on the consolidated statement of operations for the three months ended November 30, 2020 is as follows:

As Previously Reported

14 unchanged sentences

Diluted net loss per common share

Comprehensive loss

The effect of the restatement on the consolidated statement of operations for the six months ended November 30, 2020 is as follows:

As Previously Reported

Cost of sales

Operating Expenses:

Selling, general and administrative

Research and development

Total operating expense

Loss from operations

( 3,136,135 )

( 3,612,048 )

The effect of the restatement on the consolidated balance sheet at May 31, 2021 is as follows:

As Previously Reported

Shareholders' Equity:

Additional paid-in-capital

Accumulated deficit

Loss before income taxes

( 3,120,061 )

1 unchanged sentence

( 3,134,579 )

Other Equity accounts

Total Shareholders' Equity

The effect of the restatement on the consolidated statement of cash flows for the period ended August 31, 2020 is as follows:

( 3,610,492 )

Basic net loss per common share

Diluted net loss per common share

Comprehensive loss

( 3,137,829 )

( 3,613,742 )

The effect of the restatement on the consolidated statement of cash flows for the period ended November 30, 2020 is as follows:

As Previously Reported

9 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-Q

Item 1. Financial Statements