BIOMERICA INC 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the accompanying notes thereto included elsewhere in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that are based on our management team’s expectations, beliefs, intentions, strategies, estimates and assumptions, which statements are subject to substantial risks and uncertainties. Our actual results may differ materially from those expressed or implied by these forward-looking statements as a result of many factors, including those discussed in the sections titled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” appearing elsewhere in this Annual Report on Form 10-K. OVERVIEW We are a global biomedical technology company that develops, patents, manufactures and markets advanced diagnostic and therapeutic products. 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. They can also be used to measure or detect the presence and levels of specific bacteria, hormones, antibodies, antigens and other substances, which may exist in the human body in extremely small concentrations. Our products are designed to enhance the health and well-being of people, while reducing total healthcare cost. Our extensive range of medical diagnostic products is sold worldwide, primarily in two markets: clinical laboratories and point-of-care settings. Most of our products are Conformite Europeenne (“CE”) marked and/or registered with regulatory agencies in various countries for diagnostic use, with several also cleared by the U.S. Food and Drug Administration (“FDA”) for sale in the United States. Technological advances in medical diagnostics have enabled diagnostic tests to be performed not only in clinical laboratories but also at home and at the point-of-care in physicians’ offices. One of our key objectives has been to develop and market rapid diagnostic tests that are accurate, utilize easily obtained patient specimens, and are simple to perform without the need for complex instrumentation. Our home use (over-the-counter) and professional use (physicians’ office, clinics, etc.) rapid diagnostic test products help manage existing medical conditions and may save lives through early detection and diagnosis of specific diseases. Traditionally, such tests required the expertise of medical technologists and sophisticated equipment, with results often not available for days. We believe our rapid point-of-care tests, when properly used, can be as accurate as laboratory tests. Our products require limited to no instrumentation, deliver reliable results in minutes, and can be performed with confidence at home or in a physician’s office. We invest resources in the research and development of new products designed to diagnose and, in some cases, treat several major medical diseases. These products are either internally developed or licensed from others. Our experienced and highly trained technical personnel, including Ph.D. holders and other scientists, are dedicated to developing new products and managing technology transfer activities. Our technical staff, many of whom, have extensive experience from previous employment at large diagnostic manufacturing companies, bring a wealth of industry knowledge. Additionally, we rely on our Scientific Advisory Board, comprised of leading medical doctors and clinicians, to guide our clinical studies and product development efforts. A key outcome from our research and development efforts is our patented diagnostic-guided therapy (“DGT”) product, developed on the inFoods® technology platform. This innovative technology is designed to aid in the management of gastrointestinal conditions such as irritable bowel syndrome (“IBS”) and other inflammatory diseases. The DGT product targets chronic inflammatory illnesses that are widespread and prevalent in large markets. We have launched inFoods® IBS product, which leverages this patented technology. The inFoods® IBS product utilizes a simple blood test to identify patient-specific foods that, when eliminated from the diet, may help reduce IBS symptoms such as pain, bloating, diarrhea, cramping, and constipation. Unlike broad and difficult to manage dietary restrictions, the inFoods® IBS product pinpoints a patient’s heightened immunoreactivity to specific foods known to frequently trigger IBS symptoms. By removing the foods identified as problematic, patients can achieve relief from IBS symptoms. 21 We have introduced our inFoods® product to select gastroenterology (“GI”) physician groups in multiple states and regions, including collaboration with one of the largest GI groups in the U.S. This initial phase was focused on gathering real-world feedback, optimizing physician engagement, and validating operational processes. GI physician feedback has been generally positive, and we are continuing to expand our network by onboarding additional physician practices. Our dedicated sales team is focused on building strong relationships within the GI segment while selectively exploring opportunities to introduce inFoods® to other medical specialties, including integrated health practices and primary-care providers. These efforts are intended to lay the groundwork for broader adoption by showcasing the distinct clinical value of inFoods® across multiple healthcare channels. Concurrently, we are evaluating distribution, partnership, and licensing opportunities with U.S. companies to support a scalable, broad market launch. These potential collaborations could significantly enhance the commercialization trajectory of inFoods® products, both domestically and internationally. We are currently in the process of applying for US government payment or reimbursement for the inFoods IBS product through the Medicare system. If the Company is successful in attaining reimbursement, we will move forward with applying for reimbursement of this product by private payer insurance companies. If patients are able to attain and use our inFoods IBS® product at no cost, or with a small co-payment, we believe this will dramatically increase our revenues from this product. As we continue pursue commercial opportunities in both U.S. and international markets, we remain attentive to evolving global economic conditions, including uncertainties related to international trade policies, tariffs, and supply chain dynamics. Although these factors have not had a material impact on our operations to date, future changes in trade regulations, tariff structures, or logistical constraints could influence the cost, availability, or timing of materials and components used in our manufacturing processes. We continue to monitor these developments closely and are actively implementing contingency plans, including alternative sourcing strategies and supplier diversification, to support supply chain continuity, maintain operational efficiency, and help mitigate potential future impacts. We are also focusing on alternative manufacturing and shipping strategies of our products through our European subsidiary (BioEurope), and our Mexican subsidiary (BioMexico), to mitigate some of the risk these policies may have on our revenues and operations. In addition, in December 2023 we received FDA clearance for hp+detect™, a diagnostic test designed to detect Helicobacter pylori (H. pylori) bacteria in the gastrointestinal tract. H. pylori is a prevalent infection, affecting approximately 35% of the U.S. population and 45% of the population in Europe’s largest countries. This bacterium is recognized as the strongest known risk factor for gastric cancer, which remains one of the leading causes of cancer-related deaths globally. The hp+detect™ test is marketed directly to laboratories and is intended to provide physicians and medical centers with a reliable tool for diagnosing H. pylori infections and monitoring treatment effectiveness. We are actively promoting hp+detect™ to large end-customer laboratories and positioning the product for commercial adoption. Due to the slower-than-expected launch of our key products, inFoods ® IBS and hp+detect ™ , we have initiated significant cost-cutting measures to extend our cash runway and work towards increasing revenues to cover overhead costs. These measures include a workforce reduction of nearly 15% during this fiscal year, which incurred costs such as severance, impacting typical cost trends and margins. Additionally, we raised $2,015,000 in net proceeds from the ATM offering filed in May 2024 providing additional liquidity to support our operations. We are actively exploring strategic opportunities to enhance and create shareholder value. Reverse Stock Split Effective April 21, 2025 (the “Effective Date”), we filed a Certificate of Amendment to our Second Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware, to effect a 1-for-8 reverse stock split (the “Reverse Stock Split”) of our Common Stock. Beginning with the opening of trading on the Effective Date, our common stock began trading on Nasdaq on a split-adjusted basis under the same symbol, “BMRA.” As a result of the Reverse Stock Split, every 8 shares of our common stock issued and outstanding were automatically combined and converted into 1 validly issued, fully paid and non-assessable share of common stock. In lieu of any fractional shares, stockholders who would otherwise have been entitled to receive a fractional share instead had their interests automatically rounded up to the next whole share, after aggregating all the fractional interests of a holder resulting from the Reverse Stock Split. The Reverse Stock Split did not change the number of authorized shares of our common stock or preferred stock as set forth in our Certificate of Incorporation, as amended. All historical share and per share data for the periods presented in our consolidated financial statements, including for periods ending prior to the Effective Date, has been adjusted to reflect the 1-for-8 Reverse Stock Split on a retroactive basis as if the Reverse Stock Split occurred as of the earliest period presented. RESULTS OF OPERATIONS Net Sales and Cost of Sales The following is a breakdown of revenues according to markets to which the products are sold: Year Ended May 31, Increase (Decrease) 2025 2024 $ % Clinical lab $ 3,181,000 $ 3,236,000 $ (55,000 ) -2 % Over-the-counter 1,049,000 1,426,000 (377,000 ) -26 % Contract manufacturing 1,070,000 741,000 329,000 44 % Physician’s office 11,000 12,000 (1,000 ) -8 % Total $ 5,311,000 $ 5,415,000 $ (104,000 ) -2 % For the fiscal year ended May 31, 2025, our net sales were approximately $5,311,000, representing a decrease of $104,000, or 2%, compared to $5,415,000 for the fiscal year ended May 31, 2024. The decrease was primarily driven by reduced retail market activity, lower international over-the-counter sales due to potential tariff impacts, and volatility in clinical laboratory demand. These declines were partially offset by higher contract manufacturing billings and increased demand for our inFoods® IBS product. Consolidated cost of sales for the fiscal year ended May 31, 2025 was approximately $4,813,000, or 91% of net sales, compared to $4,804,000, or 89% of net sales, for the fiscal year ended May 31, 2024, reflecting a slight increase of $9,000, or 0.2%. The increase was primarily attributable to higher contract manufacturing costs, driven by increased sales in this category, as well as higher costs associated with our inFoods® product. These increases were partially offset by a reduction in direct labor costs. The overall margin impact also reflected a shift in sales mix, with lower over-the-counter sales, which typically generate higher margins in the retail market. 22 Operating Expenses The following is a summary of operating expenses: Year Ended May 31, 2025 2024 Increase (Decrease) Operating Expense As a % of Total Revenues Operating Expense As a % of Total Revenues $ % Selling, General and Administrative Expenses $ 4,612,000 87 % $ 5,487,000 101 % $ (875,000 ) -16 % Research and Development $ 1,023,000 19 % $ 1,491,000 28 % $ (468,000 ) -31 % Selling, General and Administrative Expenses Our selling, general, and administrative expenses were approximately $4,612,000 for the fiscal year ended May 31, 2025, compared to $5,487,000 for the fiscal year ended May 31, 2024, a decrease of $875,000, or 16%. This reduction reflects our strategic financial management and was primarily attributable to a $351,000 decrease in payroll expenses following a reduction in force implemented in July 2024, a $327,000 decrease in stock compensation, a $66,000 decrease in marketing expenses for OTC products, and a $59,000 decrease in sales and marketing outside services. Overall, the decrease in SG&A expenses demonstrates our continued commitment to strategically allocating capital and maintaining financial discipline while pursuing growth opportunities. Research and Development Our research and development expenses were approximately $1,023,000 for the fiscal year ended May 31, 2025, compared to $1,491,000 for the fiscal year ended May 31, 2024, a decrease of $468,000, or 31%. The decrease was primarily driven by a $311,000 reduction in payroll expenses following a reduction in force implemented in July 2024, $68,000 in cost saving related to our inFoods® research and development projects, and a $33,000 reduction in research and development hp+detect™ project expenses as the research phase was completed. For a detailed discussion of our ongoing research initiatives and their potential market impacts, please refer to the “Research and Development” section in Item 1. Dividend and Interest income Dividend and interest income was approximately $165,000 for the fiscal year ended May 31, 2025, compared to $431,000 for the fiscal year ended May 31, 2024. The decrease of $266,000 was primarily attributable to lower market interest rates on our cash and cash equivalents, as well as a reduction in cash and cash equivalent balances. LIQUIDITY, CAPITAL RESOURCES AND GOING CONCERN The following are the principal sources of liquidity: Year Ended May 31, 2025 2024 Cash and cash equivalents $ 2,399,000 $ 4,170,000 Working capital including cash and cash equivalents $ 3,135,000 $ 5,527,000 The Company’s ability to continue as a going concern over the next twelve months is influenced by several factors, including: ● Our need and ability to generate additional revenue from international opportunities and our new product launches; ● Our need to access the capital and debt markets to meet current obligations and fund operations; ● Our capacity to manage operating expenses and maintain gross margins as we grow; and ● Our ability to retain key employees and maintain critical operations with a substantially reduced workforce; and ● Certain SEC regulations that limit the amount of capital the Company can raise through issuance of its equity. Management has analyzed the Company’s cash flow requirements through August 2026 and beyond. Based on this analysis, we believe our current cash and cash equivalents are insufficient to meet our operating cash requirements and strategic growth objectives for the next twelve months. To address our capital needs and sustain operations beyond the next year, we are actively pursuing strategies to increase sales, reduce expenses, sell non-core assets, seek additional financing through debt or equity, and seek other strategic alternatives. As part of our efforts to reduce costs, we have initiated significant cost-cutting measures to extend our cash runway and work towards increasing revenues to cover overhead costs. These measures include a workforce reduction of nearly 16% and a substantial reduction in other operating expenses. As part of our financing plan, on September 28, 2023, we filed a “shelf” registration statement on Form S-3 with the SEC, which was declared effective on September 29, 2023, allowing the Company to issue up to $20,000,000 in shares of our common stock. Under this registration statement, shares of our common stock may be sold from time to time for up to three years from the filing date. On May 10, 2024, the Company filed a prospectus supplement with the SEC, as part of this registration statement. This prospectus supplement was intended to facilitate the sale of up to $5,500,000 in common stock through ATM offerings, as defined in Rule 415 under the Securities Act. As part of this transaction, the Company incurred $81,000 in deferred offering costs during the year ended May 31, 2024. During the year ended May 31, 2025, the Company sold 440,687 shares of its common stock at prices ranging from $3.06 to $8.32 pursuant to the ATM Agreement, which resulted in gross proceeds of approximately $2,143,000 and net proceeds to the Company of $2,015,000, after deducting commissions for each sale and legal, accounting, and other fees related to offering in the amount of $128,000. The Company intends to use the net proceeds from this offering for general corporate purposes, including, but not limited to, sales and marketing activities, clinical studies and product development, acquisitions of assets, businesses, companies, or securities, capital expenditures, and working capital needs. While we are committed to these plans, there is no assurance that these efforts will be successful or sufficient to meet our capital requirements. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Our future viability depends on the successful execution of our strategic plans, securing additional financing, and achieving profitable operations. In addition, our business is subject to additional risks and uncertainties, including, but not limited to, those described in Item 1A. “Risk Factors”. 23 Operating Activities During the fiscal year ended May 31, 2025, cash used in operating activities was approximately $3,841,000 compared to $5,361,000 for the fiscal year ended May 31, 2024. The primary factors contributing to this were a loss of approximately $4,973,000, an increase in inventory reserves of $4,000, an increase in accounts receivable of $209,000, a decrease in inventories of $882,000 and a non-cash expense of approximately $944,000. These were partially offset by a decrease in accounts payable and accrued expenses of $467,000, and reduction in lease liabilities of $326,000. During the fiscal year ended May 31, 2024, cash used in operating activities was approximately $5,361,000, compared to $5,474,000 for the fiscal year ended May 31, 2023. The primary factors contributing to this were a loss of approximately $5,978,000, a decrease in inventory reserves of $205,000, an increase in accounts receivable of $215,000, an increase in inventories of $115,000 and a decrease in lease liability of $297,000. These were partially offset by an increase in accounts payable and accrued expenses of $246,000, and non-cash expenses of approximately $1,211,000. Investing Activities During the fiscal year ended May 31, 2025, cash used in investing activities was approximately $37,000, as compared to $115,000 for the fiscal year ended May 31, 2024. During the fiscal year ended May 31, 2025, we had $37,000 in expenditures related to patents. During the fiscal year ended May 31, 2024, we purchased approximately $51,000 of property and equipment and had $64,000 in expenditures related to patents. Financing Activities Cash provided financing activities was approximately $2,111,000 for the fiscal year ended May 31, 2025, compared to cash used in financing activities of $81,000 in the fiscal year ended May 31, 2024. In fiscal year end May 31, 2025, we received net proceeds of $2,015,000 from the sale of our common stock and $15,000 from the exercise of stock options. In addition, the Company recorded a non-cash reclassification of $84,000 in deferred offering costs during the same period. By contrast, in the fiscal year ended May 31, 2024, our financing activities primarily consisted of $81,000 in payments for deferred offering costs. During the fiscal years ended May 31, 2025 and 2024, we received approximately $2,015,000 and $0, respectively, in net proceeds from the sale of common stock. Our common stock sold and issued in the fiscal year ended May 31, 2025 was issued under our shelf registration statement filed with the SEC on September 28, 2023, which was declared effective on September 29, 2023 (the “2023 Registration Statement”). On May 10, 2024, the Company filed a prospectus supplement to the 2023 Registration Statement with the SEC for the sale of up to $5,500,000 in common stock through ATM offerings, as defined in Rule 415 under the Securities Act. As part of this transaction, the Company incurred $81,000 in deferred offering costs during the fiscal year ended May 31, 2024. As of August 29, 2025, the date on which this Annual Report on Form 10-K for the fiscal year ended May 31, 2025, is filed with the SEC, our 2023 Registration Statement remains subject to the offering limits set forth in General Instruction I.B.6 of Form S-3 because our public float is less than $75 million. For so long as the Company’s public float is less than $75 million, the aggregate market value of securities sold by the Company under the 2023 Shelf Registration Statement pursuant to Instruction I.B.6 to Form S-3 during any 12 consecutive months may not exceed one-third of the Company’s public float. For purposes of this limitation, the aggregate market value of our outstanding common stock held by non-affiliates, or public float, was $9,945,252, based on 2,402,235 non-restricted shares of our outstanding common stock held by non-affiliates and a price of $4.14 per share, which was the price at which our common stock was last sold on the Nasdaq Capital Market on July 24, 2025 (a date within 60 days of the date hereof), calculated in accordance with General Instruction I.B.6 of Form S-3. After giving effect to the $3,315,084 offering limit imposed by General Instruction I.B.6 of Form S-3, and after deducting the shares we sold within the preceding 12 months, as of the date of filing this Annual Report, we may sell $231,986 shares of our common stock at this time under the 2023 Shelf Registration Statement . 24 SUBSEQUENT EVENTS On July 21, 2025, the Company received a cash refund of approximately $1.1 million from the Internal Revenue Service (IRS) related to previously filed claims for the Employee Retention Credit (ERC), a refundable payroll tax credit under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This amount was recorded and collected subsequent to year-end. In July and August 2025, the Company completed sales of its common stock under its At-the-Market (“ATM”) offering program, generating net proceeds of approximately $919,000 subsequent to year-end. OFF BALANCE SHEET ITEMS There were no off-balance sheet arrangements as of May 31, 2025. CRITICAL ACCOUNTING ESTIMATES The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable under the current conditions; however, actual results may differ from these estimates under different future conditions. We believe that the estimates and assumptions that are most important to the portrayal of our financial condition and results of operations, in that they require subjective or complex judgments, form the basis for the accounting policies deemed to be most critical to us. These relate to revenue recognition, inventory overhead application, inventory reserve and share based compensation. We believe estimates and assumptions related to these critical accounting policies are appropriate under the circumstances; however, should future events or occurrences result in unanticipated consequences, there could be a material impact on our future financial conditions or results of operations. We suggest that our significant accounting policies be read in conjunction with this Management’s Discussion and Analysis of Financial Condition and Results of Operations. Please refer to Note 2 of the Company’s consolidated financial statements for information on Significant Accounting Policies. REVENUE RECOGNITION The Company has various contracts with customers, and these contracts specify the recognition of revenue based on the nature of the transaction. 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 title passes. This applies to clinical lab products sold to domestic and international distributors, including hospitals, clinical laboratories, medical research institutions, medical schools, and pharmaceutical companies. OTC products are sold directly to drug stores, e-commerce customers, and distributors, while physicians’ office products are sold to physicians and distributors. The Company does not allow for returns except in the event of defective merchandise and, therefore, does not establish an allowance for returns. Additionally, the Company has contracts with customers that provide purchase discounts for achieving specified sales volumes. The Company regularly evaluates the status of these contracts and does not believe any discounts will be given through the end of the contract periods. For diagnostic testing services sold directly to patients or physician offices that require processing by a third-party CLIA-certified lab, we recognize revenue once the lab has completed the test results. For services related to contract manufacturing, revenue is recognized when the service has been performed. Services for some contract works are invoiced and recognized as the project progresses. 25 SHARE-BASED COMPENSATION The Company follows the guidance of ASC 718, Share-based Compensation (“ASC 718”), which requires the use of the fair-value based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments (options). The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model that uses assumptions for expected volatility, expected dividends, expected forfeiture rate, expected term, and the risk-free interest rate. The Company has not paid dividends historically and does not expect to pay them in the foreseeable future. Expected volatilities are based on weighted averages of the historical volatility of the Company’s common stock estimated over the expected term of the options. The expected forfeiture rate is based on historical forfeitures experienced. The expected term of options granted is derived using the “simplified method” which computes expected term as the average of the sum of the vesting term plus the contract term as historically the Company had limited exercise activity surrounding its options. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the period of the expected term. The grant date fair value of the award is recognized under the straight-line attribution method. VALUATION OF INVENTORIES, NET Our inventories are made up of raw materials, work in progress, and finished goods and are valued at the lower of cost (determined using a combination of specific lot identification and the first-in, first-out methods) or net realizable value. We record valuation reserves for inventory items with excess quantities and obsolescence exposure. These reserves are estimates of a reduction in value to reflect inventory valuation at the lower of cost or net realizable value. Management evaluates quantities on hand, physical condition, and technical functionality as these characteristics may be impacted by anticipated customer demand for current products and new product introductions. The reserve is adjusted based on such evaluation, with a corresponding provision included in cost of sales. 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. Our inventory valuation reserves totaled $471,000 and $467,000 as of May 31, 2025 and 2024, representing approximately 24% and 16% of our inventory, respectively. RECENT ACCOUNTING PRONOUNCEMENTS Recent ASU’s issued by the Financial Accounting Standards Board (“FASB”) and guidance issued by the SEC did not, or are not believed by the management to, have a material effect on the Company’s present or future consolidated financial statements. In November 2023, the FASB issued ASU 2023-07, “Improvements to Reportable Segment Disclosures.” The ASU includes enhanced disclosure requirements, primarily related to significant segment expenses that are regularly provided to and used by the chief operating decision maker (“CODM”). The amendments are to be applied retrospectively to all prior periods presented in the financial statements. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, with early adoption permitted. The Company adopted ASU 2023-07 on May 31, 2025, and the adoption of this update did not have a material impact on the Company’s consolidated financial statements. In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The ASU includes enhanced disclosure requirements, primarily related to the rate reconciliation and income taxes paid information. The amendments are to be applied prospectively in the financial statements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted ASU 2023-07 on May 31, 2025, and the adoption of this update did not have a material impact on the Company’s consolidated financial statements. In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40)”. The ASU includes enhanced disclosure requirements, which mandates enhanced transparency in financial statements by requiring detailed disclosures of specific expenses like inventory purchases, employee compensation, depreciation, and intangible asset amortization. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. We are currently evaluating the effect of adopting this pronouncement on our financial statements and disclosures. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.