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Item 1. Business

2022-08-29 compared with 2021-08-27 · 141 added, 168 removed, 136 unchanged (69% of the section changed)

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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.

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

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 U.S.

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

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, 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.

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).

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.

Our InFoods® IBS product uses a simple blood sample and is designed to identify patient-specific foods that, when removed from the diet, may alleviate Irritable Bowel Syndrome (“IBS”) symptoms such as pain, bloating, diarrhea and constipation.

Instead of broad and difficult to manage dietary restrictions, the InFoods® IBS product works by identifying a patient’s above normal immunoreactivity to specific foods.

A food identified as positive, and causing an abnormal immune response in the patient is simply removed from the diet to help alleviate IBS symptoms.

During fiscal 2022, we completed an endpoint determination clinical trial on our InFoods® IBS product.

This trial was 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.

This trial monitored IBS patients over an 8-week period to determine the efficacy of our InFoods® IBS product to improve the patients’ IBS symptoms or endpoints.

The top-line trial results were reported in February 2022.

Multiple endpoints demonstrated statistically significant improvements, indicating that the elimination of specific foods may meaningfully reduce the symptoms of IBS in all patient subtypes (including patients with IBS-Constipation, IBS-Diarrhea & IBS-Mixed).

The greatest clinical improvements, including but not limited to abdominal pain and bloating, were seen in patients diagnosed with IBS-Mixed and IBS-Constipation, in the top line data.

The purpose of the endpoint study was to determine the primary symptom endpoint, or endpoints to be used in a final pivotal trial that will be conducted to attain the validation data needed to apply for U.S.

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

We are now in the process of reviewing the complete dataset and selecting the target endpoint(s) to be used in the pivotal trial.

We are also writing the protocols for this trial and expect to present these protocols to the FDA during fiscal 2023, with the intention of beginning the trial by the end of fiscal 2023, or May 31, 2023.

The trial is expected to include the large medical institution participants that conducted the endpoint trial, in addition to other new institutions and a Clinical Research Organization.

Following the successful completion and positive results from the Company’s InFoods ® IBS clinical trial we’ve seen significant interest from Gastroenterology (“GI”) physicians who would like to provide the InFoods ® IBS Product to for their patients immediately.

Therefore, while we are proceeding with the work needed to seek FDA clearance for this product, we also are currently preparing to launch the InFoods ® IBS product through a CLIA-certified, high-complexity laboratory facility and offering the product as a laboratory developed test (“LDT”).

Our expectation is that we will begin to generate revenues from this product by the end of December 31, 2022.

In preparation for the launch of this LDT, we are in negotiations with large physician groups that would like to offer the LDT to their IBS patients.

We are also beginning the work of selecting and validating at least one new disease (such as ulcerative colitis or migraines), where there is evidence that certain foods can trigger or contribute to the symptoms found in these indications.

We expect any new disease we target will follow a similar development pathway as InFoods IBS in simultaneously seeking FDA clearance of the product while also launching the product as an LDT.

We will also continue to evaluate partnership/licensing opportunities, as they arise, with U.S.

and multinational companies that could help us commercialize, or accelerate revenue growth of, the InFoods products in the United States and overseas.

Our existing 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 like Walmart and Walgreens).

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

During fiscal 2022, we finalized development of our H.

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

Pylori bacteria.

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

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

We have been in communications with the FDA answering certain follow-up questions and providing additional data as requested.

We are currently awaiting FDA clearance of the product.

Once cleared, we will begin marketing the product in the U.S.

Following fiscal year-end, we announced that Walmart has begun selling our Aware ® Breast Self Exam product through their on-line retailing platform, Walmart.com.

We are also in final discussions with Walmart to offer this product in their U.S.

based retail stores.

We have added new employees in our sales and marketing department in order to increase sales of existing products during fiscal 2022.

Through these efforts, our EZ Detect colon disease home screening test and our Aware ® Breast Self Exam product are seeing an increased interest from retailers such as Walmart, distributors, and screening programs in other countries.

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, or is currently infected.

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

While sales continue to occur in our COVID-19 products, the majority of our research and development efforts are focused on development and commercialization of non-COVID related products such as our H.

Pylori product, and our InFoods® IBS product.

The other existing products that contributed to our 2022 revenues 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 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.

In addition, some products are cleared for sale in the United States by the FDA.

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.

One of our objectives has also been to develop and market rapid diagnostic tests that are accurate, employ easily obtained specimens, and are simple to perform without instrumentation.

One of our objectives also has been to develop and market rapid diagnostic tests that are accurate, employ easily obtained specimens, and are simple to perform without instrumentation.

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.

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We believe that rapid point-of-care tests can be as accurate as laboratory tests when used properly, require limited to no instrumentation, give reliable results in minutes and can be performed with confidence in the home or the physician's office.

Biomerica maintains its headquarters in Irvine, California, where it houses administration, product development, sales and marketing, customer services and its primary manufacturing operations.

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

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.

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We also rely on our Scientific Advisory Board of leading medical doctors and clinicians to assist in guiding our clinical studies and product development.

Biomerica maintains its headquarters in Irvine, California, where it houses administration, finance, regulatory compliance, product development, sales and marketing, customer services and its primary manufacturing operations.

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

Biomerica also has a legal entity in Europe, BioEurope GmbH, for the purpose of selling certain products internationally.

Additional information about Biomerica is available on our website at www.biomerica.com.

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RESEARCH AND DEVELOPMENT

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.

During most of the fiscal year, in addition to our focus on development our InFoods ® IBS product, we also focused a portion of our Research and Development (“R&D”) resources on developing a H.

Pylori diagnostic test.

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

We also utilize 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 we may wish to develop and commercialize.

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 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, 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 allowed or issued in the countries of Japan, Korea, Mexico and Singapore.

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

and in other countries.

We are also developing, and have filed patents for other diseases that utilize the InFoods®

DGT technology platform which include:

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

Research and development expenses include the costs of materials, supplies, personnel, consultants, 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, 2022 and 2021, aggregated to approximately $1,812,000, and $2,194,000, respectively.

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

We’ve 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 patient’s diet, may alleviate or improve their symptoms of IBS.

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

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

Additional patent application pertaining to the InFoods ® IBS product have been filed in the United States and in other countries.

We are also developing and have filed patents for products that target other diseases utilizing the InFoods ® technology platform which include:

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

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.

This patent covers the use of our InFoods® technology to diagnose and treat persons suffering from depression.

We are planning to pursue FDA Clearance through a De Novo submission with the FDA rather than a Premarket Approval Application (“PMA”) or 510(k) for the InFoods® IBS product.

During the fourth quarter of fiscal 2022, we also submitted our proprietary H.

Pylori test to the FDA for clearance through a 510(k) submission.

The clinical studies for our H.

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

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

pylori testing and for monitoring of treatment.

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.

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

She also has strong relationships with key strategic entities in Europe, Eastern Europe, Latin America, Canada and the United States and we expect that she 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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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, 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, 2021, this consisted primarily of orders to our distributor in the Middle East.

Our net sales were approximately $18,871,000 for fiscal 2022 compared to $7,199,000 for fiscal 2021.

For the fiscal years ended May 31, 2022 and 2021, the Company had two distributors, which accounted for a total of 65% and 60% of our net sales, respectively.

Of this, for the fiscal years ended May 31, 2022 and 2021, the largest of the distributors mentioned above accounted for 55% and 33%, respectively, of net sales.

Total gross receivables at May 31, 2022 and 2021 were approximately $927,000 and $2,292,000, respectively.

As of May 31, 2022 and 2021, the Company had one distributor and two distributors, respectively, which accounted for a total of 50% and 73%, respectively, of gross accounts receivable.

Of the 50% as of May 31, 2022, 50% was owed by a distributor in Asia.

On May 31, 2022 and 2021, Biomerica had a backlog of unshipped orders of approximately $754,000 and $85,000, respectively.

On May 31, 2022, this consisted primarily of orders to a distributor in Asia.

RAW MATERIALS

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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.

For the year ended May 31, 2020, one vendor accounted for 59% of our purchases of raw materials.

For the fiscal years ended May 31, 2022 and 2021, the Company had one vendor, which accounted for 84% and 58%, respectively of our purchases of raw materials.

Our inventory consists of various types of materials including antibodies, antigens, bottles, boxes, various chemicals and reagents utilized in the manufacture of our test kits as well as products in various stages of completion.

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It is unclear to what extent raw material availability will be impacted in the foreseeable future, and how that will impact our production and sales.

Due to the global and domestic supply chain disruptions, and overall inflationary pressures in the economy, we have experienced material increases in the cost of our raw materials and in our operating and labor costs.

While we have attempted to respond by increasing the selling price of our own products, the gross margins on our products sold have been negatively impacted.

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

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.

However, we do have certain proprietary products, such as our EZ Detect colon disease home test, the Aware Breast Self Exam product and our InFoods ® IBS that do not have significant competition from tests offered by competitors, and that do not have the features and benefits of our tests.

Our competitors vary greatly in size.

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

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

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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 as wells as European Government agencies.

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

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

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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.

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

We comply with In Vitro Diagnostic Medical Devices Directive (“IVDD”) 98/79/EC and Medical Devices Regulation 2017/745 (“MDR”).

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

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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 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.

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 (cGMP) 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.

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

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

comply with the FDA and state regulations.

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

We believe that all Biomerica products sold in the United States comply with the FDA and state regulations.

We are 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 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 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.

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.

FDA 21 CFR Part 820 Quality Management System, ISO 13485:2016, Medical Devices Quality Management Systems - Requirements for Regulatory Purposes, In Vitro Diagnostic Medical Devices Directive 98/79/EC & and Medical Device Regulation 2017/745, Guidelines related to Medical Devices Directive/Regulation and Guidance on CE Marking, etc.

Biomerica involves 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 In Vitro Diagnostic Medical Device Regulation (“IVDR”) 2017/746 was effective on May 26, 2022.

Manufacturers need 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.

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.

Since August 19, 2021, our Notified Body is officially designated under the IVDR and listed in the European Commission NANDO database.

We are working closely with our Notified Body to update our technical documentation to comply with these new and more stringent IVDR requirements.

Per IVDR 2017/746 Amendment 2021/0323 (COD), devices with a CE certificate that was issued in accordance with IVDD may be placed on the market or put into service until May 26, 2025.

Exceptional Renewal of CE Certificate for IVDD Quality System was granted to Biomerica.

Biomerica received an extended CE Certificate on May 24, 2022, which remains effective until May 26, 2025.

Biomerica has until May 26, 2025, to update the technical documentation and processes to meet the new, more stringent regulatory requirements of IVDR 2017/746.

Per IVDR 2017/746 Amendment 2021/0323 (COD), devices without a CE certificate that was issued in accordance with IVDD, for which a declaration of conformity was drawn up prior to May 26, 2022, per IVDD and for which the conformity assessment procedure pursuant to IVDR requires the involvement of a Notified Body, may be placed on the market or put into service until the following dates.

Biomerica also has until the following dates to update the technical documentation and processes to meet the new, more stringent regulatory requirements of IVDR 2017/746:

(1) May 26, 2025, for class D devices;

(2) May 26, 2026, for class C devices;

(3) May 26, 2027, for class B devices;

(4) May 26, 2027, for class A devices placed on the market in sterile condition.

SEASONALITY OF BUSINESS

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

Our businesses 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:

Revenues from sales to unaffiliated customers:

United States

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

For the year ended May 31,

North America

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, 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.

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, and other disease outbreaks that cause 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.

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depending upon the product and the foreign country, these may be more or less restrictive than requirements within the United States and may change without notice.

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 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.

Foreign sales of our diagnostic products are made primarily through a network of approximately 80 independent distributors in approximately 30 countries.

The COVID-19 related factors mentioned above and in “Risk Factors” negatively impacted domestic and international sales of our non-COVID-19 products during fiscal 2022 and may continue to negatively impact our sales into the foreseeable future.

INTELLECTUAL PROPERTY

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We cannot be certain that these contractual arrangements or the other steps taken by us to protect our intellectual property will prevent misappropriation of our technology.

We have licensed in the past, and expect that we may license in the future, certain of our proprietary rights, such as trademarks, patents or copyrighted material, to third parties.

We have licensed in the past, and expect that we may license in the future, certain of our proprietary rights, such as trademarks, patents, trade secrets, or copyrighted material, to third parties.

While we attempt to ensure that the quality of our product brands is maintained by such licensees, we cannot be certain that such licensees will not take actions that might hurt the value of our proprietary rights or reputation.

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These license agreements typically require royalties and other payments.

We have 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 we obtained rights to manufacture and market an ACTH test (used to detect chronic metabolic conditions).

Royalty expense of approximately $19,000 and $11,000, respectively, is included in cost of sales for this agreement for the fiscal years ended May 31, 2022 and 2021.

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

Sales of products manufactured under this agreement are not material to total sales for the fiscal years ended May 31, 2022 and 2021, respectively.

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.

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 may use to produce a more accurate 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.

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.

Collaboration efforts 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.

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 us.

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

We occasionally register our tradenames with the Office of Patents and Trademarks.

We occasionally register our tradenames with the U.S.

Patent and Trademark Office (“USPTO”).

Of note, we registered the tradename “InFoods” on December 24, 2016.

Our unregistered tradenames are "EZ Detect," "EZ-H.P.," and "EZ-PSA".

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

A trademark for "Aware" was issued and assigned in 2001, renewed in 2011 and 2021.

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.

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

Effective copyright, trademark and trade secret protection may not be available in such jurisdictions.

PATENTS AND INFOODS TECHNOLOGY

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®

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 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, cramping, 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®

We have filed over 100 international and Patent Corporation Treaty patents and have over 10 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 ® technology platform, which is a new method of diagnosing and treating symptoms of many different inflammatory diseases.

Our first planned product launch using this technology is the InFoods ® IBS product which is designed to diagnose and treat IBS.

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 an IBS patient’s diet, can alleviate or reduce the individual's IBS symptoms, including, but not limited to, constipation, diarrhea, bloating, cramping, 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 ® 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, 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.

Several of the patents pertaining to the InFoods®

IBS technology have been issued and many more are in active review and prosecution.

In August 2018, the Korean Intellectual Property Office (“KIPO”) issued a Certificate of Patent ( #10-1887545) covering our InFoods®

IBS product (entitled “COMPOSITIONS, DEVICES, AND METHODS OF IBS SENSIVITY TESTING”).

This patent was the first for the InFoods®

patent portfolio, providing patent protection for InFoods®

IBS in Korea until November 13, 2035.

In June 2019, we received our first issued patent from the USPTO (#10,309,970) pertaining to our InFoods®

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

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.

In addition to the use of our own patents, Biomerica has acquired from third parties the rights to manufacture and sell certain products that are protected by patents or intellectual property owned by these third parties.

The first InFoods ® patents filed by us pertained to IBS.

Several of the patents pertaining to the InFoods ® IBS technology have been issued and many more are in active review and prosecution.

In August 2018, we received our first patent from the Korean Intellectual Property Office, covering our InFoods® IBS product.

Since then we have been granted an additional 11 patents;

3 in Japan, 2 in the United States, 2 in Korea, 1 in Singapore, 1 in Mexico, 1 in Canada, and 1 in Australia.

Additionally, we have filed for over 100 international and USPTO patents.

We believe the claims in these issued InFoods® IBS patents and claims in our pending patents that protect the use of the InFoods® technology to diagnose and treat various diseases, provide us with broad protections from other companies making or selling competing products in this highly disruptive new field of medicine.

In addition to the use of our own patents, we have acquired from third parties the rights to manufacture and sell certain products that are protected by patents or intellectual property owned by these third parties.

In some cases, royalties are paid on the sales of these products.

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.

We anticipate that we will license or purchase the rights to other products or technologies in the future.

We recently completed an endpoint determination clinical trial on our InFoods® IBS 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.

As of May 31, 2022 and 2021, we employed a total of 64 and 67 employees, respectively, in the United States, Mexico, and Germany, of which 64 and 67 were full-time employees, respectively.

Various employees listed in the production department also perform research and development duties as a routine function of their job.

The Company occasionally employs temporary employees when needed.

We occasionally employs temporary employees when needed.

The following is a breakdown of employees by departments:

Administrative

Research and Development

Marketing & Sales

Production and Operations

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

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.

Research & Development

Sales & Marketing

Production & Operations

We also engage the services of many outside Ph.D.’s, M.D.’s and other types of industry expert consultants and organizations 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.

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What changed 10-K

Item 1. Business