What changed in this filing

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Item 1. Financial Statements

2023-04-14 compared with 2023-01-13 · 133 added, 112 removed, 332 unchanged (42% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

November 30, 2022

February 28, 2023

Current Assets:

1 unchanged sentence

Accounts receivable, less allowance for doubtful accounts

of $ 522,234 and $ 153,231 as of November 30, 2022 and May 31, 2022, respectively

of $ 17,432 and $ 153,231 as of Feburary 28, 2023 and May 31, 2022, respectively

Inventories, net of inventory reserves

of $ 773,916 and $ 845,549 as of November 30, 2022 and May 31, 2022, respectively

of $ 807,576 and $ 845,549 as of Feburary 28, 2023 and May 31, 2022, respectively

Prepaid expenses and other

1 unchanged sentence

Property and equipment, net of accumulated depreciation and amortization

of $ 1,317,141 and $ 1,305,360 as of November 30, 2022 and May 31, 2022, respectively

of $ 1,316,268 and $ 1,305,360 as of Feburary 28, 2023 and May 31, 2022, respectively

Right of use assets, net of accumulated amortization

of $ 859,269 and $ 724,802 as of November 30, 2022 and May 31, 2022, respectively

of $ 927,077 and $ 724,802 as of Feburary 28, 2023 and May 31, 2022, respectively

Intangible assets, net of accumulated amortization

of $ 24,327 and $ 18,994 as of November 30, 2022 and May 31, 2022, respectively

of $ 27,383 and $ 18,994 as of Feburary 28, 2023 and May 31, 2022, respectively

Liabilities and Shareholders' Equity

7 unchanged sentences

Total Liabilities

Commitments and contingencies (Notes 5 and 6)

Commitments and contingencies (Notes 5-7)

Shareholders' Equity:

1 unchanged sentence

25,000,000 shares authorized, 13,488,313 and 12,867,924 issued and outstanding at

November 30, 2022 and May 31, 2022, respectively

Feburary 28, 2023 and May 31, 2022, respectively

Additional paid-in-capital

11 unchanged sentences

Three Months Ended

Six Months Ended

November 30, 2022

November 30, 2021

November 30, 2022

November 30, 2021

Nine Months Ended

February 28, 2023

February 28, 2022

February 28, 2023

February 28, 2022

Cost of sales

2 unchanged sentences

( 11,213,175 )

( 5,225,898 )

Operating expenses:

6 unchanged sentences

( 2,777,629 )

( 2,670,130 )

Other income:

4 unchanged sentences

( 2,757,889 )

( 2,656,409 )

Provision for income taxes

2 unchanged sentences

( 2,772,023 )

( 2,667,855 )

Basic net loss per common share

5 unchanged sentences

( 2,772,023 )

( 2,667,855 )

Other comprehensive loss, net of tax:

4 unchanged sentences

( 2,784,924 )

( 2,678,218 )

The accompanying notes are an integral part of these statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)

Paid-in Capital

Accumulated Other

Comprehensive

Paid-in Capital

Balances, May 31, 2022

16 unchanged sentences

( 38,775,343 )

Paid-in Capital

Net proceeds from ATM

Foreign currency translation

Stock option expense

( 1,649,859 )

Balances, Feburary 28, 2023

( 40,425,202 )

Accumulated Other

Comprehensive

Paid-in Capital

Balances, May 31, 2021

16 unchanged sentences

( 33,214,190 )

Exercise of stock options

Net proceeds from ATM

Foreign currency translation

Stock option expense

Balances, Feburary 28, 2022

( 33,318,358 )

The accompanying notes are an integral part of these statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

November 30, 2022

November 30, 2021

Nine Months Ended

February 28, 2023

February 28, 2022

Cash flows from operating activities:

3 unchanged sentences

Depreciation and amortization

Provision for allowance on accounts receivable

Recovery for allowance on accounts receivable

Inventory reserve

21 unchanged sentences

Net (decrease) increase in cash and cash equivalents

( 2,571,771 )

Cash and cash equivalents at beginning of year

2 unchanged sentences

Cash paid during the period for:

Non-cash investing and financing activities:

Increase in right-of-use asset due to CPI rent adjustment

Increase in lease liability due to CPI rent adjustment

Write off of intangible assets, cost

Write off of intangible assets, accumulated amortization

The accompanying notes are an integral part of these statements.

4 unchanged sentences

Biomerica, Inc.

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

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

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

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

We are currently working with key gastroenterology (GI) physician groups who are interested in offering this product to their patients.

As such, we are expecting to begin generating revenues from the launch of our InFoods ® IBS product during our fiscal third quarter ending February 28, 2023.

Following the successful completion and positive statistical results from the Company’s InFoods IBS clinical trial (run at several prominent centers including Mayo Clinic, Beth Israel Deaconess Medical Center Inc.

- a Harvard Medical School Teaching Hospital, Houston Methodist Hospital, and the University of Michigan) which was completed in early calendar 2022, Biomerica received interest from Gastroenterology (“GI”) physicians who would like to order the InFoods IBS test for their patients even prior to the product receiving FDA clearance.

As such, we are currently working with key GI physician groups who are interested in offering this product to their patients.

Given this, during the third quarter ended February 28, 2023, we worked to set up the InFoods® IBS test to be performed in a Clinical Laboratory Improvement Amendments (“CLIA”) certified, and College of American Pathologists (“CAP”) accredited high-complexity laboratory facility and offered as a laboratory developed test (“LDT”).

During the quarter ended February 28, 2023, the CLIA lab completed all validation testing necessary for the InFoods IBS product to be offered as an LDT and, as of quarter end, is now accepting patient samples.

We also worked to optimize the process for GI physicians to order the InFoods IBS test, send patient blood samples to the CLIA lab and receive the test results for their patients.

We believe ease of order and workflow for physicians, with easy to understand and actionable results for patients, is critical to our success.

During the quarter, we also set up customer service and payment systems, along with a dedicated website for patients to receive answers to questions they may have about the test and attain information about how to eliminate a specific food from their diet.

This is especially important for foods that are ingredients in common processed foods like milk, eggs and wheat.

As of the end of the fiscal third quarter, the product is now available to physicians and their patients.

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 at Walmart, Amazon, and Walgreens).

1) clinical laboratories and 2) point-of-care (physicians' offices and OTC at Walmart, Amazon, 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.

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 initially offered 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 and 2023 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.

Due to falling demand, approximately 13 % of our revenues during the six months ended November 30, 2022 were from sales of our COVID-19 related products, as compared to 57 % of our revenue during the six months ended November 30, 2021.

Our non-COVID-19 products that accounted for approximately 87 % and 43 % of our revenues during the six months ended November 30, 2022 and 2021, respectively, are primarily focused on gastrointestinal diseases, food intolerances, and certain esoteric tests.

In fiscal 2022, we generated revenues from the international sale 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.

Due to falling demand for such tests, the Company generated 0.4 % of our sales during the three months ended February 28, 2023, as compared to 79 % of our revenue during the three months ended February 28, 2022..

Further, during the nine months ended February 28, 2023 6 % of our sales were generated from our COVID-19 related products, as compared to 80 % of our revenue during the nine months ended February 28, 2022.

Our non-COVID-19 products that accounted for approximately 94 % and 20 % of our revenues during the nine months ended February 28, 2023 and 2022, respectively, are primarily focused on gastrointestinal diseases, food intolerances, and certain esoteric tests.

These diagnostic test products utilize immunoassay technology.

1 unchanged sentence

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

The unaudited consolidated financial statements herein have been prepared by management pursuant to the rules and regulations of the United States Securities and Exchange Commission ("SEC").

The accompanying interim unaudited consolidated financial statements have been prepared under the presumption that users of the interim financial information have either read or have access to the audited consolidated financial statements for the latest fiscal year ended May 31, 2022.

Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to such rules and regulations.

The unaudited condensed consolidated financial statements herein have been prepared by management pursuant to the rules and regulations of the United States Securities and Exchange Commission ("SEC").

The accompanying interim unaudited condensed consolidated financial statements have been prepared under the presumption that users of the interim financial information have either read or have access to the audited consolidated financial statements for the latest fiscal year ended May 31, 2022.

Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations.

In the opinion of management, all adjustments considered necessary for a fair presentation have been included.

Operating results for the six months ended November 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending May 31, 2023.

Operating results for the nine months ended February 28, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending May 31, 2023.

For further information, refer to the audited consolidated financial statements and notes thereto for the fiscal year ended May 31, 2022 included in the Company's Annual Report on Form 10-K filed with the SEC on August 29, 2022.

6 unchanged sentences

ACCOUNTING ESTIMATES

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

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reported period.

Estimates that are made include the allowance for doubtful accounts, which is estimated based on current as well as historical experience with a customer;

5 unchanged sentences

MARKETS AND METHODS OF DISTRIBUTION

Due to global and economic disruptions caused by the Coronavirus global pandemic, and the ongoing war in Ukraine, the Company’s operations have been negatively impacted.

Due to global and economic disruptions caused by the Coronavirus global pandemic, the ongoing war in Ukraine, and tensions between the country of China and the United States, the Company’s operations have been negatively impacted.

The Company has faced disruptions in certain of the following areas, and may face further challenges from supply chain disruptions, cost inflation, loss of contracts and/or customers, closure 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 and war 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 $ 38.8 million as of November 30, 2022.

The pandemic, war and geopolitical 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 $ 40.4 million as of February 28, 2023.

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

As of November 30, 2022, the Company had cash and cash equivalents of approximately $ 5,067,000 and working capital of approximately $ 6,335,000 .

As of February 28, 2023, the Company had cash and cash equivalents of approximately $ 3,345,000 and working capital of approximately $ 5,087,000 .

On July 21, 2020, the Company filed with the SEC a “shelf” registration statement on Form S-3.

1 unchanged sentence

Shares of the Company’s common stock may be sold from time to time under this registration statement for up to three years from the filing date.

On January 22, 2021, the Company filed a prospectus supplement for the sale of up to $ 15,000,000 of shares of our common stock in an at-the-market offering (“ATM Offering”) under the shelf registration statement, of which approximately $ 9,400,000 , remains available for sale under the prospectus supplement.

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

The sales agent under the ATM Offering agrees to use commercially reasonable efforts to sell on the Company’s behalf all of the shares requested to be sold from time to time by the Company, consistent with its normal trading and sales practices, on mutually agreed terms between the sales agent and the Company.

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

During the six months ended November 30, 2022, the Company sold 565,664 shares of its common stock at prices ranging from $ 3.15 to $ 4.26 under its ATM Offering which resulted in gross proceeds of approximately $ 1,988,000 and net proceeds to the Company approximately of $ 1,936,000 after deducting commissions for each sale and legal, accounting, and other fees related to the ATM Offering.

As a result of cash and cash equivalents on hand at November 30, 2022, and the ability to raise additional funds, including through the ATM Offering noted above, management believes the Company has sufficient funds to operate through at least February 2024.

On January 22, 2021, the Company filed a prospectus supplement for the sale of up to $ 15,000,000 of shares of our common stock in an at-the-market offering (“ATM Offering”) under the shelf registration statement, of which approximately $ 9,400,000 , remained available for sale under the prospectus supplement as of the third quarter ended February 28, 2023.

Following the end of the third quarter, the Company closed a public offering on March 7, 2023 of an aggregate of 3,333,333 shares of its common stock, par value $ 0.08 per share at a price to the public of $ 2.40 per share for total gross proceeds of $ 8 million, before deducting underwriting discounts and commissions and other offering-related expenses payable by the Company.

In conjunction with the public offering of shares of the Company’s common stock, the Company suspended its at-the-market sales agreement.

The Company intends to use the net proceeds from the prior sale of shares under the at-the-market agreement for general corporate purposes, including, without limitation, sales and marketing activities, clinical studies and product development, making acquisitions of assets, businesses, companies or securities, capital expenditures, and for working capital needs.

The sales agent under the ATM Offering had agreed to use commercially reasonable efforts to sell on the Company’s behalf all of the shares requested to be sold from time to time by the Company, consistent with its normal trading and sales practices, on mutually agreed terms between the sales agent and the Company.

The Company had no obligation to sell any of the shares under the ATM Offering, and maintained the ability to suspend offers under, or terminate the ATM Offering.

During the nine months ended February 28, 2023, the Company sold 573,889 shares of its common stock at prices ranging from $ 3.15 to $ 4.26 under its ATM Offering which resulted in gross proceeds of approximately $ 2,014,000 and net proceeds to the Company approximately of $ 1,961,000 after deducting commissions for each sale and legal, accounting, and other fees related to the ATM Offering.

As a result of cash and cash equivalents on hand at February 28, 2023, plus the net proceeds from the public offering of common shares which closed in early March 2023, management believes the Company has sufficient funds to operate through at least September 2024.

CONCENTRATION OF CREDIT RISK

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

As of November 30, 2022, the Company had approximately $ 4,825,000 of uninsured cash.

The Company’s primary banking partners are Bank of America and Merrill Lynch.

The Company maintains cash balances in accounts at financial institutions in excess of amounts insured by federal agencies, as well as substantial cash reserves in investment grade money market accounts and in U.S.

treasury bills.

As of February 28, 2023, the Company had approximately $ 3,095,000 of uninsured cash.

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

Consolidated net sales were approximately $ 1,482,000 and $ 4,647,000 for the three months ended November 30, 2022 and 2021, respectively, and approximately $ 3,119,000 and $ 5,909,000 for the six months ended November 30, 2022 and 2021, respectively.

For the three months ended November 30, 2022 and 2021, the Company had two and one key customers who are located in Asia and the United States which accounted for 48 % and 59 % of net consolidated sales, respectively.

For the six months ended November 30, 2022 and 2021, the Company had one and two key customers who are located in Asia which accounted for 44 % and 66 % of net consolidated sales, respectively.

Total gross receivables on November 30, 2022 and May 31, 2022 were approximately $ 1,372,000 and $ 927,000 , respectively.

On November 30, 2022 and May 31, 2022, the Company had two and one key customers who are located in foreign countries which accounted for a total of 75 % and 50 %, respectively, of gross accounts receivable.

For the three months ended November 30, 2022 and 2021, the Company had one key vendor which accounted for 12 % and 83 % of the purchases of raw materials, respectively.

For the six months ended November 30, 2022 and 2021, the Company had one key vendor which accounted for 8 % and 77 % of the purchases of raw materials, respectively.

As of November 30, 2022 and May 31, 2022, the Company had one and two key vendors which accounted for 27 % and 69 %, respectively , of accounts payable.

For the three m onths ended February 28, 2023, the Company had one key customer who is located in Asia which accounted for 22 % .

For the three m onths ended February 28, 2022, the Company had three key customers who are located in Asia and the United States which accounted for 79 % of net consolidated sales .

For the nine m onths ended February 28, 2023, the Company had one key customer who is located in Asia which accounted for 38 % .

For the nine m onths ended February 28, 2022, the Company had three key customers who are located in Asia and the United States which accounted for 75 % of net consolidated sales .

Total gross receivables on February 28, 2023 and May 31, 2022 were approximately $ 772,000 and $ 927,000 , respectively.

On February 28, 2023, the Company had two customers which accounted for a total of 44 % of gross receivables.

On May 31, 2022 the Company had one key customer which accounted for a total of 50 % of gross receivables.

For the three months ended February 28, 2023, the Company had two key vendors which accounted for 31 % of the purchase of raw materials.

For the three months ended February 28, 2022, the Company had one key vendor which accounted for 92 % of the purchase of raw materials.

For the nine months ended February 28, 2023, there was no individual vendor that comprised more than 10 % of the Company’s purchases..

For the nine months ended February 28, 2022, the Company had one key vendor which accounted for 85 % of the purchase of raw materials.

As of February 28, 2023, the Company had one key vendor which accounted for 18 % of accounts payable.

As of May 31, 2022, the Company had two key vendors which accounted for 69 %.

CASH AND CASH EQUIVALENTS

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

As of November 30, 2022 and May 31, 2022, the Company has established a reserve of approximately $ 522,000 and $ 153,000 , respectively, for doubtful accounts.

As of February 28, 2023 and May 31, 2022, the Company has established a reserve of approximately $ 17,000 and $ 153,000 , respectively, for doubtful accounts.

During the quarter ended February 28, 2023, the Company reduced gross accounts receivable and the allowance for doubtful accounts by $ 465,000 for a 2022 COVID product related customer that is not expected to be collected.

PREPAID EXPENSES AND OTHER

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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 November 30, 2022 and May 31, 2022, the prepaid expenses and other were approximately $ 121,000 and $ 320,000 , respectively , composed of prepayments to insurance and various other suppliers.

As of February 28, 2023 and May 31, 2022, the prepaid expenses and other were approximately $ 318,000 and $ 320,000 , respectively , composed of prepayments to insurance and various other suppliers.

INVENTORIES, NET

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Abnormal amounts of idle facility expenses, freight, handling costs and wasted material are recognized as current period charges and the allocation of fixed production overhead is based on the normal capacity of the production facilities.

As of November 30, 2022, and May 31, 2022, inventory reserves were approximately $ 774,000 and $ 846,000 , respectively.

As of February 28, 2023, and May 31, 2022, inventory reserves were approximately $ 808,000 and $ 846,000 , respectively.

Net inventories are approximately the following:

November 30, 2022

February 28, 2023

Raw materials

3 unchanged sentences

Inventory reserves

Net inventory

Reserves for inventory obsolescence and/or inventory that management believes is in excess of an amount that can be sold in the near future, are recorded as necessary to reduce obsolete and excess inventory to estimated net realizable value or to specifically reserve for obsolete inventory.

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Expenditures for additions and major improvements are capitalized.

Repairs and maintenance costs are charged to operations as incurred.

Repair and maintenance costs are charged to operations as incurred.

When property and equipment are sold, retired or otherwise disposed of, the related cost and accumulated depreciation or amortization are removed from the accounts, and gains or losses from sales, retirements and dispositions are credited or charged to income.

1 unchanged sentence

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 were approximately $ 16,000 and $ 26,000 for the three months ended November 30, 2022 and 2021, respectively, and approximately $ 36,000 and $ 54,000 for the six months ended November 30, 2022 and 2021, respectively .

Depreciation and amortization expense on property and equipment were approximately $ 15,000 and $ 26,000 for the three months ended February 28, 2023 and 2022, respectively, and approximately $ 51,000 and $ 80,000 for the nine months ended February 28, 2023 and 2022, respectively .

INTANGIBLE ASSETS, NET

1 unchanged sentence

In that regard, intangible assets that have indefinite useful lives are not amortized but are tested annually for impairment or more frequently if events or changes in circumstances indicate that the asset might be impaired.

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 was approximately $ 3,000 and $ 7,000 for the three months ended November 30, 2022 and 2021, respectively, and approximately $ 12,000 and $ 14,000 for the six months ended November 30, 2022 and 2021, respectively.

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

Amortization expenses were approximately $ 3,000 and $ 8,000 for the three months ended February 28, 2023 and 2022, respectively, and approximately $ 15,000 and $ 22,000 for the nine months ended February 28, 2023 and 2022, respectively.

Amortizing intangible assets are tested for impairment if management determines that events or changes in circumstances indicate that the asset might be impaired.

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.

As of November 30, 2022 and 2021, an impairment adjustment was made of $ 6,000 and $ 0 , respectively.

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

Investments represent the Company’s investment in a Polish distributor, which is primarily engaged in distributing medical products and devices, including the distribution of the products sold by the Company.

As of February 28, 2023 and 2022, an impairment adjustment was made of $ 6,000 and $ 0 , respectively.

The Company has made investments in privately held companies.

These investments represent the Company’s investment in a Polish distributor, which is primarily engaged in distributing medical products and devices, including the distribution of the products sold by the Company.

The Company invested approximately $ 165,000 into the Polish distributor and owns approximately 6 % of the investee.

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The Company assesses its equity holdings for impairment whenever events or changes in circumstances indicate that the carrying value of an equity holding may not be recoverable.

Management reviewed the underlying net assets of the Company's equity method holding as of November 30, 2022 and determined that the Company's proportionate economic interest in the entity indicates that the equity holding was not impaired.

There were no observable price changes in orderly transactions for identical or a similar holding or security of the Company’s Cost Method Holding during the period ended November 30, 2022.

Management reviewed the underlying net assets of the Company's equity method holding as of February 28, 2023 and determined that the Company's proportionate economic interest in the entity indicates that the equity holding was not impaired.

There were no observable price changes in orderly transactions for identical or a similar holding or security of the Company’s Cost Method Holdings during the period ended February 28, 2023.

SHARE-BASED COMPENSATION

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The grant date fair value of the award is recognized under the straight-line attribution method.

The Company expensed approximately $ 622,000 and $ 634,000 of stock-based compensation during the six months ended November 30, 2022 and 2021, respectively.

The following summary presents the options granted, exercised, expired, canceled and outstanding for the six months ended November 30, 2022:

The following summary presents the options granted, exercised, expired, canceled and outstanding for the nine months ended February 28, 2023:

Option Shares

Exercise Price

Weighted Average

Exercise Price Weighted Average

Outstanding May 31, 2022

Cancelled or expired

Outstanding November 30, 2022

During the six months ended November 30, 2022, options to purchase 46,500 shares of common stock were exercised at prices ranging from $ 0.82 to $ 2.68 .

Total net proceeds to the Company were approximately $ 79,000 .

During the six months ended November 30, 2022, the Company granted 146,000 options to purchase common stock at an average purchase price of $ 3.37 , with the majority of those options issued to the Company’s new Chief Commercial Officer, who is managing the commercialization and roll-out of the InFoods IBS test.

Outstanding February 28, 2023

During the nine months ended February 28, 2023, options to purchase 46,500 shares of common stock were exercised at prices ranging from $ 0.82 to $ 2.68 .

Total net proceeds for the Company were approximately $ 79,000 .

During the nine months ended February 28, 2023, the Company granted 146,000 options to purchase common stock at an average purchase price of $ 3.37 , with the majority of those options issued to the Company’s new Chief Commercial Officer, who is managing the commercialization and roll-out of the InFoods IBS test.

REVENUE RECOGNITION

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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 typically allow for returns from international customers except in the event of defective merchandise and therefore does not establish an allowance for returns.

The Company does allow for a return merchandise allowance of approximately one percent of sales to certain domestic retailers.

This allowance reduces revenue recognition by approximately one percent and is included in sales discounts.

The Company does not typically allow for returns from customers 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 customers receive purchase discounts for achieving specified sales volumes.

The Company evaluated the status of these contracts during the six months ended November 30, 2022 and 2021, and does not believe that any additional discounts will be given through the end of the contract periods.

The Company evaluated the status of these contracts during the nine months ended February 28, 2023 and 2022, and does not believe that any additional discounts will be given through the end of the contract periods.

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

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

As of November 30, 2022, the Company had approximately $ 49,000 of advances from certain foreign customers.

The majority of these advances are prepayments on orders that are expected to ship during our third quarter ending February 28, 2023.

As of February 28, 2023, the Company had approximately $ 138,000 of advances from certain foreign customers.

The majority of these advances are prepayments on orders that are expected to ship during our fourth fiscal quarter ending May 31, 2023.

Disaggregation of revenue:

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

Three Months Ended November 30,

Six Months Ended November 30,

Three Months Ended February 28,

Nine Months Ended February 28,

Over-the-counter

Physician's office

Contract manufacturing

Physician's office

See Note 4 for additional information regarding geographic revenue concentrations.

3 unchanged sentences

Research and development costs are expensed as incurred.

The Company expensed approximately $ 462,000 and $ 548,000 of research and development costs during the three months ended November 30, 2022 and 2021, respectively, and approximately $ 823,000 and $ 929,000 of research and development costs during the six months ended November 30, 2022 and 2021, respectively.

The Company has provided a full valuation allowance on deferred income tax assets of approximately $ 7,748,000 and $ 6,967,000 as of November 30, 2022 and May 31, 2022, respectively.

The Company expensed approximately $ 392,000 and $ 387,000 of research and development costs during the three months ended February 28, 2023 and 2022, respectively, and approximately $ 1,215,000 and $ 1,317,000 of research and development costs during the nine months ended February 28, 2023 and 2022, respectively.

The Company has provided a full valuation allowance on net deferred income tax assets of approximately $ 8,088,000 and $ 6,967,000 as of February 28, 2023 and May 31, 2022, respectively.

FOREIGN CURRENCY TRANSLATION

4 unchanged sentences

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

There are no foreign currency transactions that are included in the condensed consolidated statements of operations for the three and six months ended November 30, 2022 and 2021.

There are no foreign currency transactions that are included in the condensed consolidated statements of operations for the three and nine months ended February 28, 2023 and 2022.

RIGHT-OF-USE ASSETS AND LEASE LIABILITY

2 unchanged sentences

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

The Company has elected to exclude short-term leases.

The Company has elected to exclude short-term leases of 12 months or less, and as a result, those lease payments are recognized in operations on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred.

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

6 unchanged sentences

Diluted loss per share reflects the potential dilution that could occur from common shares issuable through stock options, warrants and other convertible securities using the treasury stock method.

The total amount of anti-dilutive stock options not included in the loss per share calculation on November 30, 2022 and 2021 was 2,338,616 and 2,059,116 , respectively.

The total amount of anti-dilutive stock options not included in the loss per share calculation on February 28, 2023 and 2022 was 2,313,366 and 2,336,116 , respectively.

RECENT ACCOUNTING PRONOUNCEMENTS

Recent ASU's issued by the FASB and guidance issued by the SEC did not, or are not believed by management to, have a material effect on the Company’s present or future consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments-Credit Losses (Topic 326):

5 unchanged sentences

The Company is currently reviewing the requirements of this ASU to determine its impact on the Company’s consolidated results of operations and financial position.

Other recent Accounting Standards Updates (”ASU's”) issued by the Financial Accounting Standards Board (“FASB”) and guidance issued by the SEC did not, or are not believed by management to, have a material effect on the Company’s present or future consolidated financial statements .

RECLASSIFICATIONS

Certain comparative figures in the November 30, 2021 condensed consolidated statement of operations have been reclassified to conform to the current period presentation.

Certain comparative figures in the February 28, 2022 condensed consolidated statement of operations have been reclassified to conform to the current period presentation.

SHAREHOLDERS’ EQUITY

Stock option expense during the six months ended November 30, 2022 and 2021 was approximately $ 622,000 and $ 634,000 , respectively.

During the six months ended November 30, 2022, the Company sold 565,664 shares of its common stock at prices ranging from $ 3.15 to $ 4.26 under its Form S-3 Registration Statement and ATM Offering which resulted in gross proceeds of approximately $ 1,988,000 and net proceeds to the Company of approximately $ 1,936,000 after deducting commissions for each sale and legal, accounting, and other fees related to the ATM Offering.

Stock option expense during the nine months ended February 28, 2023 and 2022 was approximately $ 1,006,000 and $ 959,000 , respectively.

During the nine months ended February 28, 2023, the Company sold 573,889 shares of its common stock at prices ranging from $ 3.15 to $ 4.26 under its Form S-3 Registration Statement and ATM Offering which resulted in gross proceeds of approximately $ 2,014,000 and net proceeds to the Company of approximately $ 1,961,000 after deducting commissions for each sale and legal, accounting, and other fees related to the ATM Offering.

GEOGRAPHIC INFORMATION

1 unchanged sentence

Geographic information regarding net sales is approximately as follows:

Three Months Ended November 30,

Six Months Ended November 30,

Three Months Ended February 28,

Nine Months Ended February 28,

Revenues from sales to unaffiliated customers:

1 unchanged sentence

South America

As of November 30, 2022, and May 31, 2022, a pproximately $ 685,000 and $ 621,000 of Biomerica’s gross inventory was located in Mexicali, Mexico, respectively.

As of November 30, 2022, and May 31, 2022, approximately $ 19,000 and $ 17,000 of Biomerica’s property and equipment, net of accumulated depreciation and amortization, was located in Mexicali, Mexico, respectively.

As of February 28, 2023, and May 31, 2022, a pproximately $ 672,000 and $ 621,000 of Biomerica’s gross inventory was located in Mexicali, Mexico, respectively.

As of February 28, 2023, and May 31, 2022, approximately $ 18,000 and $ 17,000 of Biomerica’s property and equipment, net of accumulated depreciation and amortization, was located in Mexicali, Mexico, respectively.

The Company leases its facilities.

On November 30, 2022, the Company had approximately 22,000 square feet of floor space at its corporate headquarters at 17571 Von Karman Avenue in Irvine, California, which it has been leasing since 2009.

On February 28, 2023, the Company had approximately 22,000 square feet of floor space at its corporate headquarters at 17571 Von Karman Avenue in Irvine, California, which it has been leasing since 2009.

The lease for its headquarters expired on August 31, 2016.

10 unchanged sentences

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

Total gross rent expense in the United States for the six months ended November 30, 2022 and 2021 was approximately $ 154,000 and $ 155,000 , respectively .

Rent expense for the Mexico facility for the six months ended November 30, 2022 and 2021 was approximately $ 21,000 and $ 21,000 , respectively.

Total gross rent expense in the United States for the nine months ended February 28, 2023 and 2022 was approximately $ 230,000 and $ 230,000 , respectively .

Rent expense for the Mexico facility for the nine months ended February 28, 2023 and 2022 was approximately $ 32,000 and $ 31,000 , 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 options periods that the Company is reasonably certain of exercising.

2 unchanged sentences

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 when they are incurred.

Supplemental cash flow information related to leases for the six months ended November 30, 2022:

Supplemental cash flow information related to leases for the nine months ended February 28, 2023:

Operating cash flows from operating leases

3 unchanged sentences

Weighted average discount rate

The approximate maturity of lease liabilities as of November 30, 2022 are as follows:

The approximate maturity of lease liabilities as of February 28, 2023 are as follows:

Less than 1 year

6 unchanged sentences

The Company is, from time to time, involved in legal proceedings, claims and litigation arising in the ordinary course of business.

There were no legal proceedings pending as of November 30, 2022.

There were no legal proceedings pending as of February 28, 2023.

SUBSEQUENT EVENTS

The Company closed a public offering on March 7, 2023 of an aggregate of 3,333,333 shares of its common stock, par value $ 0.08 per share at a price to the public of $ 2.40 per share for total gross proceeds of $ 8 million, before deducting underwriting discounts and commissions and other offering-related expenses payable by the Company.

The Company intends to use the net proceeds of the offering for general corporate purposes, including, without limitation, setting up and conducting clinical studies, expanding sales and marketing activities for existing and new products, research and development of new products, acquisitions, capital expenditures, and for other general working capital needs.

In conjunction with the public offering of shares of the Company’s common stock, the Company suspended its at-the-market sales agreement.

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