UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
FOR
THE QUARTERLY PERIOD ENDED
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of Incorporation of organization) |
(I.R.S. Employer Identification No.) | |
(Address of principal executive offices) |
(Zip Code) |
REGISTRANT’S TELEPHONE NUMBER:
(
Securities registered under Section 12(b) of the Exchange Act:
| Title of each class | Trading Symbols | Name of each exchange on which registered | ||
Indicate by check whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (paragraph 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,”, “accelerated filer,”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Smaller
reporting company | ||
| Emerging
growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes
☐
The number of shares of the registrant’s common stock outstanding as of October 12, 2023 was .
BIOMERICA, INC.
INDEX
PART I - FINANCIAL INFORMATION
SUMMARIZED FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BIOMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| August 31, 2023 | May 31, 2023 | |||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventories, net | ||||||||
| Prepaid expenses and other | ||||||||
| Total current assets | ||||||||
| Property and equipment, net of accumulated depreciation and amortization | ||||||||
| Right-of-use assets, net of accumulated amortization
of $ | ||||||||
| Investments | ||||||||
| Intangible assets, net of accumulated amortization | ||||||||
| Other assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accrued compensation | ||||||||
| Advance from customers | ||||||||
| Lease liabilities, current portion | ||||||||
| Total current liabilities | ||||||||
| Lease liabilities, net of current portion | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies (Note 6) | ||||||||
| Shareholders’ Equity: | ||||||||
| Preferred stock, Series A 5% convertible, $ par value, shares authorized, issued and outstanding as of August 31, 2023 and May 31, 2023 | ||||||||
| Preferred stock, undesignated, par value, shares authorized, issued and outstanding as of August 31, 2023 and May 31, 2023 | ||||||||
| Common stock, $ par value, shares authorized, issued and outstanding at August 31, 2023 and May 31, 2023, respectively | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Shareholders’ Equity | ||||||||
| Total Liabilities and Shareholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of these statements.
| 1 |
BIOMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS (UNAUDITED)
| For the Three Months Ended August 31, | ||||||||
| 2023 | 2022 | |||||||
| Net sales | $ | $ | ||||||
| Cost of sales | ( | ) | ( | ) | ||||
| Gross profit (loss) | ( | ) | ||||||
| Operating expenses: | ||||||||
| Selling, general and administrative | ||||||||
| Research and development | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income: | ||||||||
| Interest and dividend income | ||||||||
| Total other income | ||||||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Provision for income taxes | ( | ) | ( | ) | ||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Basic net loss per common share | $ | ( | ) | $ | ( | ) | ||
| Diluted net loss per common share | $ | ( | ) | $ | ( | ) | ||
| Weighted average number of common and | ||||||||
| common equivalent shares: | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive income (loss), net of tax: | ||||||||
| Foreign currency translation | ( | ) | ||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | ||
The accompanying notes are an integral part of these statements.
| 2 |
BIOMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)
For the Three Months Ended August 31, 2022
| Common Stock | Additional Paid in | Accumulated Other Comprehensive | Accumulated | Total Shareholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | Loss | Deficit |
Equity | |||||||||||||||||||
| Balances at May 31, 2022 | $ | | $ | | $ | ( | ) | $ | ( | ) | $ | | ||||||||||||
| Exercise of stock options | ||||||||||||||||||||||||
| Net proceeds from ATM | ||||||||||||||||||||||||
| Shares issued in connection with public offering | - | |||||||||||||||||||||||
| Foreign currency translation | - | ( | ) | ( | ) | |||||||||||||||||||
| Share-based compensation | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balances at August 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
For the Three Months Ended August 31, 2023
| Common Stock | Additional Paid in | Accumulated Other Comprehensive | Accumulated | Total Shareholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | Loss | Deficit |
Equity | |||||||||||||||||||
| Balances at May 31, 2023 | $ | | $ | | $ | ( | ) | $ | ( | ) | $ | | ||||||||||||
| Exercise of stock options | - | |||||||||||||||||||||||
| Net proceeds from ATM | - | |||||||||||||||||||||||
| Shares issued in connection with public offering | - | |||||||||||||||||||||||
| Foreign currency translation | - | |||||||||||||||||||||||
| Share-based compensation | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balances at August 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
The accompanying notes are an integral part of these statements.
| 3 |
BIOMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Three Months Ended August 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Provision for allowance on accounts receivable | ||||||||
| Inventory reserve | ( | ) | ||||||
| Share-based compensation | ||||||||
| Amortization of right-of-use asset | ||||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Inventories | ||||||||
| Prepaid expenses and other | ||||||||
| Other assets | ( | ) | ||||||
| Accounts payable and accrued expenses | ( | ) | ( | ) | ||||
| Accrued compensation | ( | ) | ( | ) | ||||
| Advance from customers | ||||||||
| Reduction in lease liabilities | ( | ) | ( | ) | ||||
| Net cash used in by operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Expenditures related to intangibles | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Gross proceeds from sale of common stock | ||||||||
| Costs from sale of common stock | ( | ) | ||||||
| Proceeds from exercise of stock options | ||||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes in cash | ( | ) | ||||||
| Net decrease (increase) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning of year | ||||||||
| Cash and cash equivalents at end of the period | $ | $ | ||||||
| Supplemental Disclosure of Cash Flow Information: | ||||||||
| Cash paid during the period for: | ||||||||
| Income taxes | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Write off of intangible assets, cost | $ | $ | ||||||
| Write off of intangible assets, accumulated amortization | $ | $ | ||||||
The accompanying notes are an integral part of these statements.
| 4 |
BIOMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
Biomerica, Inc. and its subsidiaries (which includes wholly-owned subsidiaries, Biomerica de Mexico and BioEurope GmbH) is a biomedical technology company that develops, patents, manufactures and markets advanced diagnostic and therapeutic products used at the point-of-care (physicians’ offices and over-the-counter through drugstores and online) and in hospital/clinical laboratories for detection and/or treatment of medical conditions and diseases. Our diagnostic test kits are used to analyze blood, urine, nasal or fecal material from patients in the diagnosis of various diseases, food intolerances and other medical complications, or to measure the level of specific hormones, antibodies, antigens or other substances, which may exist in the human body in extremely small concentrations. The Company’s products are designed to enhance the health and well-being of people, while reducing total healthcare costs.
Our primary focus is the research, development, commercialization and in certain cases regulatory approval, of patented, diagnostic-guided therapy (“DGT”) products based on our inFoods® Technology platform that treat gastrointestinal diseases, such as irritable bowel syndrome (“IBS”), and other inflammatory diseases. These inFoods® based products are directed at chronic inflammatory illnesses that are widespread and common, and as such address very large markets. The first product we are launching using this patented inFoods Technology is our inFoods® IBS product which uses a simple blood sample to identify patient-specific foods that, when removed from their diet, may alleviate IBS symptoms such as pain, bloating, diarrhea, cramping 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 a panel of specific foods that have been shown to often be problematic to IBS sufferers. A food identified as positive (causing an abnormally high immune response in the patient) is simply removed from the diet to help alleviate IBS symptoms. We have launched this product with certain large gastroenterology (“GI”) physician groups that are now offering this product to their patients. We have also recently hired an internal sales force to sign up additional GI physician groups who are interested in offering this product to their patients. As such, we are expecting material growth in revenues from the launch of our inFoods® IBS product in coming quarters.
Our other 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). 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, there were no sales of our COVID-19 related products in the three months ended August 31, 2023. As such, our COVID-19 product sales have caused significant swings in our revenues over the past eight quarters.
Our non-COVID-19 products that accounted for all of our revenues during the three months ended August 31, 2023, are primarily focused on gastrointestinal diseases, colorectal 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 United States by the FDA.
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 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, 2023. 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. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three months ended August 31, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending May 31, 2024. For further information, refer to the audited consolidated financial statements and notes thereto for the fiscal year ended May 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on August 25, 2023. Management has evaluated all subsequent events and transactions through the date of filing this report.
| 5 |
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the accounts of Biomerica, Inc. as well as its German subsidiary (BioEurope GmbH) and Mexican subsidiary (Biomerica de Mexico). All significant intercompany accounts and transactions have been eliminated in consolidation.
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. Estimates that are made include the allowance for doubtful accounts, which is estimated based on current as well as historical practices with a customer; stock option forfeiture rates, which are calculated based on historical data; inventory obsolescence, which is based on projected and historical usage of materials; and lease liability and right-of-use assets, which are calculated based on certain assumptions such as borrowing rate, the likelihood of lease extensions to occur, asset valuation, among other things; and other items that may be necessary to estimate using current, historical and judgment based information. Actual results could materially differ from those estimates.
MARKETS AND METHODS OF DISTRIBUTION
The majority of the Company’s revenues come from the sale of products that the company manufactures in the U.S. and in Mexico. Some of the raw materials used in manufacturing come from Asia and other regions of the world. Finally, most of the Company’s revenues are generated from the international sales of its products. Due to global and economic disruptions caused by the COVID-19 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 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. The Company’s current sales and marketing focus is on the sale of the inFoods® IBS product within the U.S. As such, going forward, the Company hopes to see reduced disruptions from the issues listed above.
LIQUIDITY
The
Company has incurred net losses and negative cash flows from operations and has an accumulated deficit of approximately $
On
July 20, 2020, the Company filed with the Securities and Exchange Commission (“SEC”) a Form S-3 shelf registration statement
and base prospectus which was declared effective by the SEC on September 30, 2020. This shelf registration statement registered the sale
of up to $
Under
the Company’s outstanding Registration Statement, on March 7, 2023, the Company sold shares of common stock in a firm
commitment public offering at a gross sales price of $ per share, with net total proceeds, after deducting issuance fees and expenses
of $
To
replace the shelf registration statement that was set to expire on September 30, 2023, on September 27, 2023, the Company filed with
the SEC a new Form S-3 shelf registration statement and base prospectus which was declared effective by the SEC on September 29, 2023.
This new shelf registration statement registers the sale of up to $
The Company intends to use the net proceeds from past offerings and any future offerings for general corporate purposes, including, without limitation, sales and marketing activities, clinical studies, product development, making acquisitions of assets, businesses, companies or securities, capital expenditures, and for working capital needs.
| 6 |
Management has analyzed the cash requirements of the Company’s business through at least November 2024. As a result of cash and cash equivalents on hand on August 31, 2023, largely from the public offering, and the ability to raise additional funds if needed through the sale of shares of the Company’s common stock, management believes the Company has sufficient funds to operate through at least November 2024.
CONCENTRATION OF CREDIT RISK
The Company maintains cash balances at certain financial institutions in excess of amounts insured by federal agencies. From time to time, the Company has uninsured balances. The Company does not believe it is exposed to any significant credit risks.
Consolidated
net sales were approximately $
Total
gross receivables on August 31, 2023 and May 31, 2023 were approximately $
For
the three months ended August 31, 2023 and 2022, the Company had one key vendor which accounted for
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of demand deposits and money market accounts with original maturities of less than three months.
ACCOUNTS RECEIVABLE, NET
The Company extends unsecured credit to its customers on a regular basis. International accounts are usually required to prepay until they establish a history with the Company and at that time, they are extended credit at levels based on a number of criteria. Based on various criteria, initial credit levels for individual distributors are approved by designated officers and managers of the Company. All increases in credit limits are also approved by designated upper-level management.
The Company adopted Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (codified as Accounting Standards Codification (“ASC”) 326) on June 1, 2023. ASC 326 adds to U.S. GAAP the current expected credit loss (“CECL”) model, a measurement model based on expected losses rather than incurred losses. Prior to the adoption of ASC 326, the Company evaluated receivables on a quarterly basis and adjusted the allowance for doubtful accounts accordingly. Balances over ninety days old were usually reserved for unless collection was reasonably assured. Under the application of ASC 326, the Company’s historical credit loss experience provides the basis for the estimation of expected credit losses, as well as current economic and business conditions, and anticipated future economic events that may impact collectability. In developing its expected credit loss estimate, the Company evaluated the appropriate grouping of financial assets based upon its evaluation of risk characteristics, including consideration of the types of products and services sold. Account balances are written off against the allowance for expected credit losses after all means of collection have been exhausted and the potential for recovery is considered remote.
Occasionally certain long-standing customers, who routinely place large orders, will have unusually large receivables balances relative to the total gross receivables. Management monitors the payments for these large balances closely and very often requires payment of existing invoices before shipping new sales orders.
As
of August 31, 2023 and May 31, 2023, the Company has established a reserve of approximately $
PREPAID EXPENSES AND OTHER
The Company occasionally prepays for items such as inventory, insurance, and other items. These items are reported as prepaid expenses and other, until either the inventory is physically received, or the insurance and other items are expensed.
As
of August 31, 2023 and May 31, 2023, the prepaids were approximately $
| 7 |
INVENTORIES, NET
The Company values inventory at the lower of cost (determined using a combination of specific lot identification and the first-in, first-out methods) or net realizable value. Management periodically reviews inventory for excess quantities and obsolescence. 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.
Net inventories are approximately the following:
| August 31, 2023 | May 31, 2023 | |||||||
| Raw materials | $ | $ | ||||||
| Work in progress | ||||||||
| Finished products | ||||||||
| Total gross inventory | ||||||||
| Inventory reserves | ( | ) | ( | ) | ||||
| Net inventory | $ | $ | ||||||
Reserves
for inventory obsolescence are recorded as necessary to reduce obsolete inventory to estimated net realizable value or to specifically
reserve for obsolete inventory. As of August 31, 2023, and May 31, 2023, inventory reserves were approximately $
PROPERTY AND EQUIPMENT, NET
Property and equipment are stated at cost. Expenditures for additions and major improvements are capitalized. Repairs 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.
Depreciation
and amortization are provided over the estimated useful lives of the related assets, ranging from
INTANGIBLE ASSETS, NET
Intangible assets include trademarks, product rights, technology rights and patents, and are accounted for based on Accounting Standards Codification (“ASC”), ASC 350 Intangibles – Goodwill and Other (“ASC 350”). In that regard, intangible assets that have indefinite useful lives are not amortized but are tested at least 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
The
Company assesses the recoverability of these intangible assets by determining whether the amortization of the asset’s balance over
its remaining life can be recovered through projected undiscounted future cash flows. The Company uses a qualitative assessment to determine
whether there was any impairment. During the three months ended August 31, 2023 and 2022, an impairment adjustment was made of $
INVESTMENTS
The
Company has made investments in a privately held 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 $
Equity holdings in nonmarketable unconsolidated entities in which the Company is not able to exercise significant influence (“Cost Method Holdings”) are accounted for at the Company’s initial cost, minus any impairment (if any), plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar holding or security of the same issuer. Dividends received are recorded as other income.
| 8 |
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 August 31, 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 August 31, 2023.
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.
The Company expensed approximately $ and $ of share-based compensation during the three months ended August 31, 2023 and 2022, respectively.
| Option Shares | Weighted Average Exercise Price | |||||||
| Options Outstanding at May 31, 2023 | $ | |||||||
| Granted | ||||||||
| Exercised | ||||||||
| Cancelled or expired | ( | ) | ||||||
| Options Outstanding at August 31, 2023 | $ | |||||||
REVENUE RECOGNITION
The Company has various contracts with customers. All of the contracts specify that revenues from product sales are recognized at the time the product is shipped, customarily FOB shipping point, which is when the transfer of control of goods has occurred and at which point title passes.
The Company does not 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 three months ended August 31, 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. The Company sells clinical lab products to domestic and international distributors, including hospitals and clinical laboratories, medical research institutions, medical schools and pharmaceutical companies. OTC products are sold directly to drug stores and e-commerce customers as well as to distributors. Physician’s office products are sold to physicians and distributors, all of whom are categorized below according to the type of products sold to them. We also manufacture certain components on a contract basis for domestic and international manufacturers.
As
of August 31, 2023, the Company had approximately $
| 9 |
Disaggregation of revenue:
The following is a breakdown of revenues according to markets to which the products are sold:
Three Months Ended August 31, | ||||||||
| 2023 | 2022 | |||||||
| Clinical lab | $ | $ | ||||||
| Over-the-counter | ||||||||
| Contract manufacturing | ||||||||
| Physician’s office | ||||||||
| Total | $ | $ | ||||||
See Note 4 for additional information regarding revenue concentrations.
SHIPPING AND HANDLING FEES
The Company includes shipping and handling fees billed to customers in net sales.
RESEARCH AND DEVELOPMENT
Research
and development costs are expensed as incurred. The Company expensed approximately $
INCOME TAXES
The
Company had income tax expense for the three months ended August 31, 2023 of approximately $
The Company’s policy is to recognize any interest and penalties related to unrecognized tax benefits as a component of income tax expense. For the three months ended August 31, 2023, the Company had no accrued interest or penalties related to uncertain tax positions.
ADVERTISING COSTS
The
Company reports the cost of advertising as expense in the period in which those costs are incurred. Advertising costs were approximately
$
FOREIGN CURRENCY TRANSLATION
The subsidiary located in Mexico operates primarily using the Mexican peso. The subsidiary located in Germany operates primarily using the U.S. dollar, with an immaterial amount of transactions occurring using the Euro. Accordingly, assets and liabilities of these subsidiaries are translated using exchange rates in effect at the end of the period, and revenues and costs are translated using average exchange rates for the period. 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 consolidated statements of operations for the three months ended August 31, 2023 and 2022.
RIGHT-OF-USE ASSETS AND LEASE LIABILITY
Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of fixed lease payments over the lease term. Leases are classified as financing or operating which will drive the expense recognition pattern. The Company has elected to exclude short-term leases. The Company leases office space and copy machines, all of which are operating leases. Most leases include the option to renew and the exercise of the renewal options is at the Company’s sole discretion. Options to extend or terminate a lease are considered in the lease term to the extent that the option is reasonably certain of exercise. The leases do not include the options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term.
| 10 |
Basic loss per share is computed as net loss divided by the weighted average number of common shares outstanding for the period. 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 at August 31, 2023 and 2022 was and , respectively.
RECENT ACCOUNTING PRONOUNCEMENTS
Recent ASU’s issued by the 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 June 2016, the FASB issued ASU 2016-13. This ASU requires the measurement of all expected credit losses for financial assets, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The guidance was initially effective for the Company for annual reporting periods beginning after December 15, 2019, and interim periods within those fiscal years. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates,” which, among other things, defers the effective date of ASU 2016-13 for public filers that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those years. Early adoption is permitted. The Company adopted ASU 2016-03 on June 1, 2023, and the adoption of this update did not have a material impact on the Company’s condensed consolidated financial statements.
NOTE 3: SHAREHOLDERS’ EQUITY
During
the three months ended August 31, 2022, the Company sold shares of its common stock at prices ranging from $ to $ under
its Form S-3 Registration Statement and ATM Offering which resulted in gross proceeds of approximately $
NOTE 4: GEOGRAPHIC INFORMATION
The
Company operates as
| Three Months Ended August 31, | ||||||||
| 2023 | 2022 | |||||||
| Revenues from sales to unaffiliated customers: | ||||||||
| Asia | $ | $ | ||||||
| Europe | ||||||||
| North America | ||||||||
| South America | ||||||||
| $ | $ | |||||||
As
of August 31, 2023 and May 31, 2023, approximately $
As
of August 31, 2023 and May 31, 2023, approximately $
NOTE 5: LEASES
The
Company leases its facilities. On August 31, 2023, the Company had approximately
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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.
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. The Company’s office and equipment leases generally have contractually specified minimum rent and annual rent increases are included in the measurement of the right-of-use asset and related lease liabilities. Additionally, under these lease arrangements, the Company may be required to pay directly, or reimburse the lessors, for some maintenance and operating costs. Such amounts are generally variable and therefore not included in the measurement of the right-of-use asset and related lease liabilities but are instead recognized as variable lease expense in the consolidated statements of operations and comprehensive loss when they are incurred.
The following table presents information on our operating leases for the three months ended August 31, 2023 and 2022:
| Three Months Ended August 31, | ||||||||
| 2023 | 2022 | |||||||
| Operating lease cost | $ | $ | ||||||
| Variable lease cost | ||||||||
| Short-term lease cost | ||||||||
| Total lease cost | $ | $ | ||||||
The approximate maturity of lease liabilities as of August 31, 2023 are as follows:
| Year Ending August 31: | ||||
| Operating Leases | ||||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Thereafter | ||||
| Total minimum future lease payments | $ | |||
| Less: imputed interest | ||||
| Total operating lease liabilities | $ | |||
The following table summarizes the Company’s other supplemental lease information for the three months ended August 31, 2023 and 2022:
| Three Months Ended August 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash paid for operating lease liabilities | $ | $ | ||||||
| Weighted-average remaining lease term (years) | ||||||||
| Weighted-average discount rate | % | % | ||||||
The Company also has various insignificant leases for office equipment.
NOTE 6: COMMITMENTS AND CONTINGENCIES
LITIGATION
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 August 31, 2023.
NOTE 7: SUBSEQUENT EVENTS
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis in conjunction with our unaudited condensed consolidated financial statements and the accompanying notes thereto included in Part I, Item 1 of this Report and the audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended May 31, 2023 (our 2023 Annual Report). This discussion and analysis contains forward-looking statements that are based on our management’s current beliefs and assumptions, which statements are subject to substantial risks and uncertainties. Our actual results may differ materially from those expressed or implied by these forward-looking statements as a result of many factors, including those discussed in “Risk Factors” included in Part I, Item 1A of our 2023 Annual Report.
OVERVIEW
Biomerica, Inc. and its subsidiaries (which includes wholly-owned subsidiaries, Biomerica de Mexico and BioEurope GmbH), is a biomedical technology company that develops, patents, manufactures and markets advanced diagnostic and therapeutic products used at the point-of-care (physicians’ offices and over-the-counter through drugstores and online) and in hospital/clinical laboratories for detection and/or treatment of medical conditions and diseases. Our diagnostic test kits are used to analyze blood, urine, nasal, or fecal material from patients in the diagnosis of various diseases, food intolerances and other medical complications, or to measure the level of specific hormones, antibodies, antigens, or other substances, which may exist in the human body in extremely small concentrations. The Company’s products are designed to enhance the health and well-being of people, while reducing total healthcare costs.
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 (“IBS”), and other inflammatory diseases. These inFoods® based products are directed at chronic inflammatory illnesses that are widespread and common, and as such address very large markets. Our inFoods® IBS product uses a simple blood sample to identify patient-specific foods that, when removed from the patient’s diet, may alleviate 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 a panel of specific foods that have been shown to often be problematic to IBS suffers. A food identified as positive, and causing an abnormally high 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 double blinded, placebo-controlled trial monitored IBS patients over an 8-week treatment period to determine the efficacy of our inFoods® IBS product to improve the patients’ IBS symptoms or endpoints. The trial was designed to determine the difference in the improvement in IBS symptoms for patients in the treatment arm, versus patients in the placebo arm of the trial. The top-line trial results were reported in February 2022. Multiple endpoints demonstrated statistically significant improvements for participants in the treatment arm, indicating that the elimination of specific foods may meaningfully reduce the symptoms of IBS in each patient subtype (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 validate the efficacy of the product, and to determine the primary symptom endpoint, or endpoints to be used in a possible final pivotal trial that would be conducted to attain the validation data needed to apply for U.S. Food and Drug Administration (“FDA”) product clearance. We are continuing to review and refine the complete dataset and have selected the final endpoint that we would intend to use in a possible final pivotal trial. We are identifying the trial protocol for submission to the FDA, and once approved the trial would be run thereafter. The trial is expected to include the large medical institution participants that conducted the endpoint clinical trial, in addition to other new institutions and a Clinical Research Organization.
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Following the successful completion and positive statistical results from the Company’s inFoods® IBS clinical trial, Biomerica received interest from Gastroenterology (“GI”) physicians who would like to order the inFoods® IBS test for their patients.
In fiscal 2023, we worked to set up the inFoods® IBS test to be performed in a 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 February 28, 2023, patient samples were being accepted. 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 fiscal third 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 identified as needing to be eliminated 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, we trial launched this product with one large GI physician group that are now offering this product to their patients. We have also recently hired an internal sales force to sign up additional GI physician groups who are interested in offering this product to their patients. As such, we are expecting material growth in revenues from the launch of our inFoods® IBS product in coming quarters.
We are also beginning the work of selecting and validating 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 OTC at Walmart, CVS Pharmacy, Amazon, etc.). 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, there were no sales of our COVID-19 related products in the three months ended August 31, 2023. As such, our COVID-19 product sales have caused significant swings in our revenues over the past eight quarters.
During fiscal 2022, we finalized development of our H. Pylori diagnostic test that indicates if a patient is infected with the H. Pylori bacteria. H. 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 communication with the FDA answering certain follow-up questions and providing additional data as requested. Working with the FDA, in August 2023, we completed one additional set of in-lab tests that the FDA requested prior to making their final determination on clearance of the product. This set of data was sent to the FDA and our 510(k) for the H. Pylori product was resubmitted to the FDA in September 2023. Once cleared, we will begin marketing the product in the U.S. market. We have also begun discussions with international distributors for this product and expect to see revenues both in the U.S. market and through these international channels during 2024.
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.
Our existing products that contributed to our fiscal 2023 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 United States by the FDA.
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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:
| Three Months Ended August 31, | Increase (Decrease) | |||||||||||||||
| 2023 | 2022 | $ | % | |||||||||||||
| Clinical lab | $ | 1,289,000 | $ | 1,146,000 | $ | 143,000 | 12 | % | ||||||||
| Over-the-counter | 303,000 | 213,000 | 90,000 | 42 | % | |||||||||||
| Contract Manufacturing | 117,000 | 95,000 | 22,000 | 23 | % | |||||||||||
| Physician’s office | 4,000 | 183,000 | (179,000 | ) | -98 | % | ||||||||||
| Total | $ | 1,713,000 | $ | 1,637,000 | $ | 76,000 | 5 | % | ||||||||
Consolidated net sales was approximately $1,713,000 for the three months ended August 31, 2023, as compared to $1,637,000 for the three months ended August 31, 2022, an increase of approximately $76,000, or 5%. This increase for the three months ended August 31, 2023, was driven primarily by demand for our clinical lab products in Asia and OTC products in the United States which was partially offset by a reduction in Physician’s office sales associated to COVID products. Periodic and infrequent orders may cause volatility in quarterly sales.
Consolidated cost of sales was approximately $1,301,000, or 76% of net sales, for the three months ended August 31, 2023, as compared to $1,692,000, or 107% of net sales, for the three months ended August 31, 2022, a decrease of approximately $391,000, or 23%. The decrease for the three months ended August 31, 2023, was driven primarily by the decrease in volume of COVID products and related inventory write-offs.
Operating Expenses
The following is a summary of operating expenses:
| Three Months Ended August 31, | ||||||||||||||||||||||||
| 2023 | 2022 | Increase (Decrease) | ||||||||||||||||||||||
| Operating Expense | As
a % of Total Revenues | Operating Expense | As
a % of Total Revenues | $ | % | |||||||||||||||||||
| Selling, General and Administrative Expenses | $ | 1,172,000 | 68 | % | $ | 1,654,000 | 101 | % | $ | (482,000 | ) | -29 | % | |||||||||||
| Research and Development | $ | 472,000 | 28 | % | $ | 361,000 | 22 | % | $ | 111,000 | 31 | % | ||||||||||||
Selling, General and Administrative Expenses
Consolidated selling, general and administrative expenses were approximately $1,172,000 for the three months ended August 31, 2023, as compared to $1,654,000 for the three months ended August 31, 2022, a decrease of approximately $481,000, or 29%. The decrease in the three months ended August 31, 2023, was primarily due to approximate decreases in bad debt expense of $220,000, share-based compensation of $123,000, and legal expense of $170,000.
Research and Development
Consolidated research and development expenses were approximately $472,000 for the three months ended August 31, 2023, as compared to $361,000 for the three months ended August 31, 2022, an increase of approximately $111,000, or 31%. The increase in the three months ended August 31, 2023, was primarily due to R&D wages.
Interest and Dividend Income
Interest and dividend income were approximately $123,000 for the three months ended August 31, 2023, as compared to $0 for the three months ended August 31, 2022, an increase of $123,000, or 100%. The $123,000 increase was due to market interest rates on our cash balance, which, on August 31, 2022, the cash balance had not been invested.
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LIQUIDITY AND CAPITAL RESOURCES
The following are the principal sources of liquidity:
| August 31, 2023 | May 31, 2023 | |||||||
| Cash and cash equivalents | $ | 7,988,000 | $ | 9,719,000 | ||||
| Working capital including cash and cash equivalents | $ | 9,828,000 | $ | 10,852,000 | ||||
As of August 31, 2023 and May 31, 2023, the Company had cash and cash equivalents of approximately $7,988,000 and $9,719,000, respectively. As of August 31, 2023 and May 31, 2023, the Company had working capital of approximately $9,828,000 and $10,852,000, respectively. We believe that the aggregate of our existing cash and cash equivalents is sufficient to meet our operating cash requirements and strategic objectives for growth for at least the next year. To satisfy our capital requirements, including ongoing future operations, beyond next year, we are working on increasing sales, reducing expenses and may seek to raise additional financing through debt and equity financing.
Operating Activities
During the three months ended August 31, 2023, cash used in operating activities was approximately $1,674,000. The primary factors that contributed to this were a loss of approximately $1,132,000, non-cash expenses of $122,000, primarily associated with depreciation and amortization, share-based compensation, inventory reserves and amortization of right-of-use assets. This was partially offset by changes in asset and liability accounts of $664,000.
During the three months ended August 31, 2022, cash used in operating activities was approximately $1,573,000. The primary factors that contributed to this were a loss of approximately $2,072,000, non-cash expenses of $766,000, primarily associated with depreciation and amortization, share-based compensation, account receivables provision, and inventory reserves. This was partially offset by changes in asset and liability accounts of $267,000.
Investing Activities
During the three months ended August 31, 2023, cash used in investing activities was approximately $63,000. During the three months ended August 31, 2023, the Company purchased approximately $21,000 of property and equipment and had $42,000 in expenditures related to patents.
During the three months ended August 31, 2022, cash used in investing activities was approximately $34,000 for purchases of property and equipment.
Financing Activities
During the three months ended August 31, 2023, cash provided by financing activities was $0, with no net proceeds from the sale of common stock or from stock option exercises.
During the three months ended August 31, 2022, cash provided by financing activities was approximately $1,778,000 which was a result of net proceeds from the sale of common stock of $1,764,000, and stock option exercises of $14,000.
OFF BALANCE SHEET ARRANGEMENTS
There were no off-balance sheet arrangements as of August 31, 2023.
CRITICAL ACCOUNTING POLICIES
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, bad debts, inventory overhead application, inventory reserves, lease liabilities and right-of-use assets. 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 for information on Significant Accounting Policies. Our critical accounting policies are discussed in our Annual Report on Form 10-K for the fiscal year ended May 31, 2023.
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ITEM 3. 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.
ITEM 4. CONTROLS AND PROCEDURES
Our management evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of the end of the period covered by this report. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The disclosure controls and procedures have been designed to provide reasonable assurance of achieving their objectives and the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective at the “reasonable assurance” level. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that we file and submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms; and (2) accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
There have been no changes in our internal control over financial reporting identified in connection with the evaluation that occurred during our last fiscal quarter that has materially affected, or that is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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 August 31, 2023.
ITEM 1A. RISKS FACTORS
An investment in our common stock involves risks. Before making an investment decision, you should carefully consider all the information within this Quarterly Report, including the information contained in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as in our condensed consolidated financial statements and the related notes contained in Part I, Item 1 within this Quarterly Report. In addition, you should carefully consider the risks and uncertainties described in Part I, Item 1A, “Risk Factors,” of our 2023 Annual Report on Form 10-K, as well as in our other public filings with the SEC. If any of the identified risks are realized, our business, results of operations, financial condition, liquidity, and prospects could be materially and adversely affected. In that case, the trading price of our common stock may decline, and you could lose all or part of your investment. In addition, other risks of which we are currently unaware, or which we do not currently view as material, could have a material adverse effect on our business, results of operations, financial condition, and prospects.
During the three months ended August 31, 2023, there were no material changes to the risks and uncertainties described in Part I, Item 1A, “Risk Factors,” of our 2023 Annual Report on Form 10-K.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
The following exhibits are filed or furnished as part of this quarterly report on Form 10-Q:
101 Interactive data files pursuant to Rule 405 Regulation S-T, as follows: |
| 101.INS-XBRL Instance Document |
| 101.SCH-XBRL Taxonomy Extension Schema Document |
| 101.CAL-XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF–XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB-XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE-XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibits 101) |
* Filed herein.
** Filed herewith.
| 18 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has fully caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| BIOMERICA, INC. | |||
| Date: | October 12, 2023 | ||
| By: | /S/ Zackary S. Irani | ||
| Zackary S. Irani | |||
| Chief Executive Officer | |||
| (Principal Executive Officer) | |||
| Date: | October 12, 2023 | ||
| By: | /S/ Gary Lu | ||
| Gary Lu | |||
| Chief Financial Officer | |||
| (Principal Financial Officer) | |||
| 19 |
Exhibit 3.2
AMENDED AND RESTATED BYLAWS
OF
BIOMERICA, INC.
(a Delaware corporation)
Adopted by the Board of Directors on July 24, 2023
ARTICLE I
Offices
1. The principal office of the Corporation shall be at 251 Little Falls Dr., City of Wilmington, State of Delaware, and the name of the resident agent in charge thereof is CSC-Global.
2. The Corporation may also have an office or offices at such other place or places, within or without the State of Delaware, as the Board of Directors of the Corporation (the “Board”) may from time to time designate or the business of the Corporation may require.
ARTICLE II
Stockholders’ Meeting
1. Meetings of the stockholders of the Corporation may be held at such place, either within or without the State of Delaware, as may be determined from time to time by the Board. The Board may, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication as provided under the Delaware General Corporation Law (the “DGCL”).
2. Unless members of the Board are elected by written consent in lieu of an annual meeting, as permitted by Section 211 of the Delaware General Corporation Law (the “DGCL”) and these Bylaws, an annual meeting of stockholders shall be held for the election of directors at such date and time as the Board shall each year fix. At such meeting the stockholders may elect the directors and transact any business properly brought before the meeting.
3. Special meetings of the stockholders shall be held upon call of the Board, and shall be called by the Chairperson of the Board or the President or the Secretary at the request in writing of the stockholders owning of record at least twenty-five percent of the issued and outstanding capital stock of the Corporation entitled to vote thereat.
4. Notice of the purpose or purposes and of the time and place within or without the State of Delaware of every meeting of stockholders shall be given by the Chairperson of the Board or the President or the Secretary or an Assistant Secretary either personally or by mail or by telegraph or by any other lawful means of communication not less than ten nor more than sixty days before the meeting, to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be directed to each stockholder at such stockholder’s address as it appears on the stock book unless such stockholder shall have filed with the Secretary of the Corporation a written request that notices intended for him or her be mailed to some other address, in which case it shall be mailed or transmitted to the address designated in such request. Such further notice shall be given as may be required by law. Except as otherwise expressly provided by statute, no publication of any notice of meeting of stockholders shall be required to be given any stockholder who shall attend such meeting in person or by proxy, or who shall, in person or by attorney thereunto authorized, waive notice in writing or by wireless communication either before or after such meeting. Except where otherwise required by law, notice of any adjourned meeting of the stockholders of the Corporation shall not be required to be given.
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5. A quorum at all meetings of stockholders shall consist of the holders of record of a majority of the shares of stock of the Corporation, issued and outstanding, entitled to vote at the meeting, present in person or by proxy, except as otherwise provided by statute or the Certificate of Incorporation. In the absence of a quorum at any meeting or any adjournment thereof, a majority of those present in person or by proxy and entitled to vote may adjourn such meeting from time to time. At any such adjourned meeting at which a quorum is present any business may be transacted which might have been transacted at the meeting as originally called.
6. Meetings of the stockholders shall be presided over by a chairperson which shall be the chief executive officer (the “CEO”). If the CEO is not present, the meetings of the stockholders shall be presided over by the Chairperson of the Board (the “Chairperson”), or the Vice Chairperson (the “Vice Chairperson”). If neither the CEO the Chairperson, or the Vice Chairperson is present, the meeting may be presided over by a chairperson to be chosen by a majority of the stockholders entitled to vote who are present in person or by proxy at the meeting. The Secretary of the Corporation, or in his or her absence, an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present, the meeting shall choose any person present to act as secretary of the meeting.
7. Except as otherwise provided in these Bylaws, the Certificate of Incorporation, or in the laws of the State of Delaware, at every meeting of the stockholders, each stockholder of the Corporation entitled to vote at such meeting shall have one vote in person or by proxy for each share of stock having voting rights held by him or her and registered in his or her name on the books of the Corporation at the time of such meeting. Any vote on shares of stock of the Corporation may be given by the stockholder entitled thereto in person or by proxy appointed by an instrument in writing, subscribed by such stockholder or by his or her attorney thereunto authorized and delivered to the secretary of the meeting. Except for the election of directors or as otherwise required by statute, by the Certificate of Incorporation or these Bylaws, all matters coming before any meeting of the stockholders shall be decided by a majority vote of the stockholders of the Corporation present in person or by proxy at such meetings and entitled to vote on the subject matter, a quorum being present.
8. A complete list of the stockholders entitled to vote at a meeting of stockholders, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder shall be prepared by the Secretary or other officer of the Corporation having charge of the stock ledger. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting, for a period of at least ten days ending on the day before the meeting, either on a reasonably accessible electronic network as permitted by law (provided that the information required to gain access to the list is provided with the notice of the meeting) or during ordinary business hours at the principal place of business of the Corporation.
9. At all elections of directors, or in any other case in which inspectors may act, an inspector, or inspectors, of election shall be appointed by the Board or the chairperson of the meeting, except as otherwise provided by law. The inspectors of election shall take and subscribe an oath faithfully to execute the duties of inspectors at such meeting with strict impartiality, and according to the best of their ability and shall take charge of the polls and after the vote shall have been taken shall make a certificate of the result thereof. If there be a failure to appoint an inspector or if any inspector appointed be absent or refuse to act, or if his or her office becomes vacant, the chairperson present at the meeting may choose an inspector of election to fill the vacancy.
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ARTICLE III
Directors
1. The property, affairs and business of the Corporation shall be managed by the Board, consisting of not less than three nor more than nine persons. The exact number of directors within the maximum and minimum limitations specified shall be fixed from time to time by resolution of the Board. Except as hereinafter provided, directors shall be elected at the annual meeting of the stockholders by plurality vote of the stockholders of the Corporation present in person or by proxy at such meeting and entitled to vote on the election of directors, and each director shall be elected to serve for one year and until his or her successor shall be elected and shall qualify. Directors need not be stockholders.
2. Meetings of the Board shall be held at such place within or outside the State of Delaware as may from time to time be fixed by resolution of the Board, or as may be specified in the notice of the meeting. Regular meetings of the Board shall be held at such times as may from time to time be fixed by resolution of the Board, and special meetings may be held at any time upon the call of the Chairperson of the Board, the President, or a majority of the directors by oral, electronic or written notice duly served on or sent or mailed to each director not less than one day before such meeting. A meeting of the Board may be held without notice immediately after annual meeting of the stockholders. Notice need not be given of regular meetings of the Board. Meetings may be held at any time without prior notice if all the directors are present, or if at any time before or after the meeting those not present waive notice of the meeting in writing.
3. A majority of the members of the Board then acting at a meeting duly assembled, shall constitute a quorum for the transaction of business, but if at any meeting of the Board there shall be less than a quorum present, a majority of those present may adjourn the meeting, without further notice, from time to time until a quorum shall have been obtained.
4. In case one or more vacancies shall occur or exist in the Board by reason of death, resignation, increase in the number of directors or otherwise except in so far as otherwise provided in these Bylaws, the remaining directors, even if less than a quorum, may, by a majority vote, elect a successor or successors for the unexpired term or terms.
5. At any special meeting of the stockholders, duly called as provided in these Bylaws, any director or directors may by the affirmative vote of the holders of a majority of all the shares of stock outstanding and entitled to vote for election of directors be removed from office, either with or without cause, and his or her successor or their successors may be elected at such meeting; or the remaining directors may, to the extent vacancies are not filled by such election, fill any vacancy or vacancies created by such removal.
6. Indemnification.
6.1. Obligation and Power to Indemnify.
a) Actions, Suits, and Proceedings Other than By or In the Right of the Corporation. Subject to the limitations set forth in Section 6.2, the Corporation will indemnify any Director or Executive Officer, and will indemnify and hold harmless any employee or agent of the Corporation who is not a Director or Executive Officer, who was or is a party or is threatened to be made a party, including as a witness, to any Proceeding (other than an action by or in the right of the Corporation) by reason of such person’s Corporate Status from and against all Expenses and Liabilities actually and reasonably incurred or paid by or on behalf of such person in connection with such Proceeding or any claim, issue or matter therein, if such indemnitee acted in good faith and in a manner the indemnitee reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person’s conduct was unlawful, to the fullest extent permitted by law as the same exists or may hereafter be amended; provided, however, that except with respect to Proceedings to enforce rights to indemnification, the Corporation will indemnify any such indemnitee in connection with a Proceeding (or part thereof) initiated by such indemnitee only if such Proceeding (or part thereof) was authorized by the Board.
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b) Actions, Suits, and Proceedings By or In the Right of the Corporation. Subject to the limitations set forth in Section 6.2, the Corporation will indemnify any Director or Executive Officer, and will indemnify and hold harmless any employee or agent of the Corporation who is not a Director or Executive Officer, who was or is a party or is threatened to be made a party to any Proceeding (including as a witness) by or in the right of the Corporation to procure a judgment in its favor by reason of such person’s Corporate Status from and against all Expenses actually and reasonably incurred or paid by or on behalf of such person in connection with such Proceeding or any claim, issue or matter therein, if such indemnitee acted in good faith and in a manner the indemnitee reasonably believed to be in, or not opposed to, the best interests of the Corporation; provided, however, that no indemnification will be made under this Section 6.1(b) in respect of any claim, issue or matter as to which such person has been finally adjudged by a court of competent jurisdiction to be liable to the Corporation, unless, and only to the extent that, the Court of Chancery of the State of Delaware or another court in which such Proceeding was brought determines upon application that, despite adjudication of liability, but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnification for such Expenses that such court deems proper.
c) No Presumption. The termination of any Proceeding by a judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, will not, of itself create a presumption that such person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person’s conduct was lawful.
6.2. Limitation on Indemnification.
a) Requirement for Determination of Eligibility for Indemnification by Disinterested Directors. Any indemnification to be provided under Section 6.1 will (unless ordered by a court) be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the indemnitee is proper in the circumstances because such person has met the applicable standard of conduct set forth in Section 6.1. Such determination will be made (a) by a majority vote of the Disinterested Directors (even though less than a quorum); (b) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors (even though less than a quorum); (c) if there are no Disinterested Directors or if the Disinterested Directors so direct, by independent legal counsel in a written opinion; or (d) by the vote of a majority of the stockholders of the Corporation entitled to vote and voting on the matter. To the extent, however, that the indemnitee has been successful on the merits or otherwise in defense of any Proceeding described in Section 6.1, or in defense of any claim, issue or matter therein, such person will (in the case of a Director or Executive Officer) and will (in the case of an employee or agent of the Corporation who is not a Director or Executive Officer) be indemnified against Expenses actually and reasonably incurred by such person in connection therewith, without the necessity of authorization in the specific case.
b) No Indemnification for Matters Initiated by Indemnitee. Notwithstanding the provisions of Section 6.1, the Corporation will indemnify any person seeking indemnification in connection with a Proceeding initiated by such person only if such Proceeding (including any parts of such Proceeding not initiated by such person) was authorized in advance by the Board, unless such Proceeding was brought to enforce such person’s rights to indemnification or advancement of Expenses under these Bylaws in accordance with the provisions set forth herein.
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c) The Corporation’s obligation, if any, to indemnify or provide advancement of Expenses to any person under this Section 6 as a result of such person’s Corporate Status will be reduced by any amount such person may collect as indemnification or advancement of Expenses from another corporation, partnership, joint venture, trust, employee benefit plan or enterprise (the “Primary Indemnitor”). Any indemnification or advancement of Expenses under this Section 6 owed by the Corporation as a result of a person serving, at the request of the Corporation, as a director, partner, trustee, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise will only be in excess of, and will be secondary to, the indemnification or advancement of Expenses available from the applicable Primary Indemnitor(s) and any applicable insurance policies.
6.3. Indemnification by a Court. Notwithstanding any contrary determination in the specific case under Section 6.2, and notwithstanding the absence of any determination thereunder, any party to a Proceeding by reason of their Corporate Status may apply to any court of competent jurisdiction in the State of Delaware for indemnification to the extent otherwise permissible under Section 6.1. The basis of such indemnification by a court will be a determination by such court that indemnification of the person is proper in the circumstances because such person has met the applicable standards of conduct set forth in Section 6.1. Neither a contrary determination in the specific case under Section 6.2 nor the absence of any determination thereunder will be a defense to such application or create a presumption that the person seeking indemnification has not met any applicable standard of conduct. The person seeking application for indemnification pursuant to this Section 6.3 must give notice of such filing to the Corporation before or promptly after the filing of such application. If the person seeking indemnification pursuant to the foregoing is successful, in whole or in part, the Corporation will also be obligated to pay such person’s Expense of prosecuting such application.
6.4. Expenses Payable in Advance.
| a) | Advancement of Expenses to Directors and Executive Officers Prior to Final Disposition. |
i. The Corporation will advance all Expenses incurred by or on behalf of any Director or Executive Officer in connection with any Proceeding in which such person is involved by reason of such person’s Corporate Status within 30 days after the receipt by the Corporation of a written statement from such person requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements must reasonably evidence the Expenses incurred by such person and be preceded or accompanied by an undertaking by or on behalf of such person to repay any Expenses so advanced if it is ultimately determined that such person is not entitled to be indemnified against such Expenses. Notwithstanding the foregoing, the Corporation will advance all Expenses incurred by or on behalf of any Director or Executive Officer seeking advancement of expenses hereunder in connection with a Proceeding initiated by such Director or Executive Officer only if such Proceeding (including any parts of such Proceeding not initiated by such Director) was (A) authorized by the Board, or (B) brought to enforce such Director’s or Executive Officer’s rights to indemnification or advancement of Expenses under these Bylaws.
ii. If a claim for advancement of Expenses hereunder by a Director or Executive Officer is not paid in full by the Corporation within 30 days after receipt by the Corporation of documentation of Expenses and the required undertaking, such Director or Executive Officer may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and if successful in whole or in part, such Director or Executive Officer will also be entitled to be paid the expenses of prosecuting such claim. The failure of the Corporation (including its Board or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the permissibility of such advancement of Expenses under this Section 6 will not be a defense to an action brought by a Director or Executive Officer for recovery of the unpaid amount of an advancement claim and will not create a presumption that such advancement is not permissible.
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iii. The burden of proving that a Director or Executive Officer is not entitled to an advancement of Expenses will be on the Corporation.
iv. In any suit brought by the Corporation to recover an advancement of Expenses pursuant to the terms of an undertaking, the Corporation will be entitled to recover such Expenses upon a final adjudication that the Director or Executive Officer has not met any applicable standard for indemnification set forth in the Delaware General Corporation Law.
| b) | Advancement of Expenses to Officers and Non-Officer Employees Prior to Final Disposition. |
i. The Corporation may, at the discretion of the Board, advance any or all Expenses incurred by or on behalf of any employee or agent of the Corporation that is not a Director or Executive Officer in connection with any Proceeding in which such person is involved by reason of his or her Corporate Status upon the receipt by the Corporation of a statement or statements from such person requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements must reasonably evidence the Expenses incurred by such person and be preceded or accompanied by an undertaking by or on behalf of such person to repay any Expenses so advanced if it is ultimately determined that such person is not entitled to be indemnified against such Expenses.
ii. In any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation will be entitled to recover such expenses upon a final adjudication that the employee or agent of the Corporation that is not a Director or Executive Officer has not met any applicable standard for indemnification set forth in the DGCL.
6.5. Contractual Nature of Rights.
a) The provisions of this Section 6 constitute a contract between the Corporation and each Director and Executive Officer entitled to the benefits hereof at any time while this Section 6 is in effect, in consideration of such person’s past or current and any future performance of services in their Corporate Status. Neither amendment, repeal or modification of any provision of this Section 6, nor the adoption of any provision of the Certificate of Incorporation inconsistent with this Section 6 will eliminate or reduce any right conferred by this Section 6 in respect of any act or omission occurring, or any cause of action or claim that accrues or arises or any state of facts existing, at the time of or before such amendment, repeal, modification or adoption of an inconsistent provision (even in the case of a Proceeding based on such a state of facts that is commenced after such time), and all rights to indemnification and advancement of Expenses granted herein or arising out of any act or omission will vest at the time of the act or omission in question, regardless of when or if any Proceeding with respect to such act or omission is commenced. The rights to indemnification and to advancement of Expenses provided by, or granted pursuant to, this Section 6 will continue notwithstanding that the person has ceased to be a Director or Executive Officer and will inure to the benefit of the estate, heirs, executors, administrators, legatees and distributes of such person.
(b) If a claim for indemnification hereunder by a Director or Executive Officer is not paid in full by the Corporation within 60 days after receipt by the Corporation of a written claim for indemnification, such Director or Executive Officer may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim, and if successful in whole or in part, such Director or Executive Officer will also be entitled to be paid the Expenses of prosecuting such claim. The failure of the Corporation (including its Board or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the permissibility of such indemnification under this Section 6 will not be a defense to an action brought by a Director or Executive Officer for recovery of the unpaid amount of an indemnification claim and will not create a presumption that such indemnification is not permissible. The burden of proving that a Director or Executive Officer is not entitled to indemnification will be on the Corporation.
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(c) In any suit brought by a Director or Executive Officer to enforce a right to indemnification hereunder, it will be a defense that such Director or Executive Officer has not met any applicable standard for indemnification set forth in the Delaware General Corporation Law.
6.6. Non-exclusivity. The indemnification and advancement of expenses permitted by this Section 6 are exclusive of any other rights to which any person may be entitled under any statute, the Corporation’s Amended and Restated Certificate of Incorporation or these Bylaws, any agreement, vote of stockholders or Disinterested Directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding an office, and will continue as to a person who has ceased to be a Director, Executive Officer, employee or agent of the Corporation and will inure to the benefit of the heirs, executors and administrators of such person.
6.7. Indemnification Agreements. The Corporation may enter into agreements with any person described in this Section 6 for the purpose of providing for the indemnification set forth in Section 6.1(a) and Section 6.1(b).
6.8. Insurance. The Corporation has the power to purchase and maintain insurance to protect itself and any person who is or was a Director, Executive Officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, limited liability company, partnership, joint venture, employee benefit plan, trust or other enterprise against any Expenses or Liabilities asserted against such person and incurred by such person by reason of their Corporate Status, whether or not the Corporation would have the power to indemnify such person against such Expense or Liability under the provisions of this Section 6 or otherwise.
6.9. Certain Definitions. For purposes of this Section 6, references to:
a) a person’s “Corporate Status” describes the status of a person who is serving or has served (i) as a Director, (ii) as an Executive Officer, (iii) as an employee or agent of the Corporation, or (iv) as a director, partner, trustee, officer, employee or agent of any other corporation, partnership, limited liability company, joint venture, trust, employee benefit plan, foundation, association, organization or other legal entity that such person is or was serving at the request of the Corporation. For purposes of this Section 6, a Director, Executive Officer, employee or agent of the Corporation who is serving or has served as a director, partner, trustee, officer, employee or agent of a Subsidiary will be deemed to be serving at the request of the Corporation;
b) the “Corporation” means the current Corporation and includes any (i) resulting corporation in a merger of the Corporation and (ii) constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, executive officers, employees or agents, so that any person who is or was a director, executive officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, executive officer, employee or agent of another corporation, limited liability company, partnership, joint venture, employee benefit plan, trust or other enterprise, will stand in the same position under the provisions of this Section 6 with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued;
c) a “Director” means any person who serves or has served the Corporation as a director on the Board;
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d) a “Disinterested Director” means, with respect to each Proceeding in respect of which indemnification is sought hereunder, a Director of the Corporation who is not a party to such Proceeding;
e) an “Executive Officer” means executive officer, as such term is defined in Rule 405 promulgated under the Securities Act of 1933, as amended, of the Corporation;
f) “Expenses” means all attorneys’ fees, retainers, court costs, transcript costs, fees of expert witnesses, private investigators and professional advisors (including, without limitation, accountants and investment bankers), travel expenses, duplicating costs, printing and binding costs, costs of preparation of demonstrative evidence and other courtroom presentation aids and devices, costs incurred in connection with document review, organization, imaging and computerization, telephone charges, postage, delivery service fees, and all other disbursements, costs or expenses of the type customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, settling or otherwise participating in, a Proceeding;
g) a “Proceeding” means any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, inquiry, investigation, administrative hearing or other proceeding, whether civil, criminal, administrative, arbitrative or investigative;
h) “Liabilities” means judgments, damages, liabilities, losses, penalties, excise taxes, fines and amounts paid in settlement; and
i) “Subsidiary” means any corporation, partnership, limited liability company, joint venture, trust or other entity of which the Corporation owns (either directly or through or together with another Subsidiary of the Corporation) either (i) a general partner, managing member or other similar interest or (ii) (A) 50% or more of the voting power of the voting capital equity interests of such corporation, partnership, limited liability company, joint venture or other entity, or (B) 50% or more of the outstanding voting capital stock or other voting equity interests of such corporation, partnership, limited liability company, joint venture or other entity.
6.10. Severability. If any word, clause, provision or provisions of this Section 6 is held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Section 6 (including each portion of any section of this Section 6 containing any such provision held to be invalid, illegal or unenforceable, that is not itself held to be invalid, illegal or unenforceable) will not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Section 6 (including each such portion of any section of this Section 6 containing any such provision held to be invalid, illegal or unenforceable) will be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.
7. Any action required or permitted to be taken at any meeting of the Board or any committee thereof may be taken without a meeting if prior to such action a written consent thereto is signed by all members of the Board or of the committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board or the committee.
8. Directors may, by resolution of the Board, be allowed a fixed sum and expenses of attendance for attendance at regular or special meetings of the Board; provided that nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees, and others who attend pursuant to direction, may, by vote of the Board, be allowed a like fixed sum and expenses of attendance for attending committee meetings.
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9. The Board, in its discretion, may appoint an Executive Committee consisting of three or more directors of the corporation, one of whom shall be the President of the corporation, who shall serve during the pleasure of the Board for the terms fixed by it. Two members of the Executive Committee shall constitute a quorum for the transaction of business. The Executive Committee shall have and may exercise the powers of the Board in the management of the business and affairs of the corporation and may authorize the seal of the corporation to be affixed to all papers. The Executive Committee shall meet at such intervals between regular meetings. The Board, as may from time to time be fixed by the Board, shall keep regular records of its meetings and report the same to the Board when required.
ARTICLE IV
Officers
1. The officers of the Corporation shall be chosen by the Board and shall be a President, one or more Vice Presidents, a Secretary and a Treasurer. From time to time the Board may also appoint a Chairperson of the Board a CEO, a Vice Chairperson of the Board, a Chief Financial Officer, Assistant Secretaries, Assistant Treasurers and such other officers, agents and employees as it may deem proper. Any number of offices, except the offices of President and Secretary, may be held by the same person. The Chairperson of the Board, if such office exists, and the President shall be chosen from among the directors.
2. The term of office of all officers shall be one year or until their respective successors are elected and qualify by the Board, but any officer may be removed from office, either with or without cause at any time by the affirmative vote of a majority of the members of the Board then in office. A vacancy in any office arising from any cause may be filled for the unexpired portion of the term by the Board.
3. Unless otherwise ordered by the Board, the President shall have full power and authority on behalf of the Corporation to attend and to act and to vote at any meetings of security holders of the corporations in which the Corporation may hold securities, and at such meeting shall possess and may exercise any and all rights and powers incident to the ownership of such securities, and which as the owner thereof the Corporation might have possessed and exercised, if present. The Board by resolution from time to time may confer like power upon any other person or persons.
ARTICLE V
Duties of Officers
1. The President shall be chief executive officer of the Corporation and as such shall have general and active direction of the management and supervision of the business operations of the Corporation. The President shall have such other duties and powers as may be assigned from time to time by the Board and shall preside at all meetings of the stockholders and Board.
2. During the absence or disability of the President (or the CEO if one is appointed), an officer designated by the Board, shall exercise all the functions and duties of the President or the CEO. Each officer shall have such powers and discharge such duties as may be assigned to him or her from time to time by the Board.
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3. The Treasurer shall have the custody of all the funds and securities of the Corporation. When necessary or proper, the Treasurer shall endorse on behalf of the Corporation, for collection, checks, notes and other obligations and shall deposit the same to the credit of the Corporation in such bank, or banks, or depositories as may be designated by the Board, or by any officer acting under authority conferred by the Board. The Treasurer shall enter regularly in books to be kept for the purpose a full and accurate account of all monies received and paid on account of the Corporation. Whenever required by the Board, the Treasurer shall render an account of all transactions as Treasurer and of the financial condition of the Corporation. The Treasurer shall at all reasonable times exhibit his or her books and accounts to any director of the Corporation upon application at the office of the Corporation during business hours and shall perform all things incident to the position of Treasurer, subject to the control of the Board. The Treasurer shall give bond for the faithful discharge of his or her duties if the Board so require. The Treasurer shall do and perform such other duties as may be assigned from time to time by the Board.
4. The Assistant Treasurers, in the order of their seniority, shall, in the absence of or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as the Board shall prescribe.
5. The Secretary shall attend all meetings of the stockholders and all meetings of the Board, and record all votes and the minutes of all proceedings in a book to be kept for that purpose; and shall perform like duties for other committees when so required. The Secretary shall give, or cause to be given, notice of all meetings of stockholders and the Board and of committees and shall perform such other duties as may be prescribed by the Board. The Secretary shall be sworn to the faithful discharge of his or her duties. The Secretary shall do and perform such other duties as may be assigned from time to time by the Board.
6. The Assistant Secretaries, in the order of their seniority, shall in the absence of or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties as the Board shall prescribe.
7. In the case of absence or inability to act of any officer of the Corporation and of any person herein authorized to act in his or her place, the Board may from time-to-time delegate the powers and duties of such officer to any other officer or any director or any other person whom it may select.
ARTICLE VI
Certificates of Stock
1. The interest of each stockholder of the Corporation shall be evidenced by certificates for shares of stock certifying the number of shares represented thereby and in such form not inconsistent with the Certificate of Incorporation as the Board may from time to time prescribe.
Except as otherwise required by law, transfers of shares of stock of the Corporation shall be made only on the books of the Corporation by the registered holder thereof, or by his or her attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation, or with a transfer clerk or a transfer agent appointed as in Section 4 of this Article provided, and on surrender of the certificate or certificates for such shares properly endorsed and the payment of all taxes thereon. The person in whose name. Shares of stock stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation. The Board may, from time to time, make such additional rules and regulations as it may deem expedient, not inconsistent with these Bylaws, concerning the issue, transfer, and registration of certificates for shares of the capital stock of the Corporation.
The certificates of stock shall be signed by the President or a Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and sealed with the seal of the Corporation. Such seal may be a facsimile, engraved or printed. Where any such certificate is signed by a transfer agent other than the Corporation or its employee, or by a registrar other than the Corporation or its employee, the signatures of the President, Vice President, Secretary, Assistant Secretary, Treasurer or Assistant Treasurer upon such certificate may be facsimiles, engraved or printed. In case any such officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such certificate is issued, it may be issued by the Corporation with the same effect as if such officer had not ceased to be such at the time of its issue.
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2. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action.
If no record date is fixed:
The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.
The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjournment meeting.
3. No certificate for shares of stock of the Corporation shall be issued in place of any certificate alleged to have been lost, destroyed or stolen, except on production of such evidence of such loss, destruction or theft and on delivery to the Corporation, if the Board shall so require, of a bond of indemnity in such amount (not exceeding twice the value of the shares represented by such certificate), upon such terms and secured by such surety as the Board may in its discretion require.
4. The Board may appoint one or more transfer clerks or one or more transfer agents and one or more registrars, and may require all certificates for shares of stock to bear the signature or signatures of any of them.
5. The books, accounts and records of the Corporation, except as may otherwise be required by statute, may be kept outside of the State of Delaware, at such place or places as the Board may from time to time appoint. The Board shall determine whether and to what extent the books, accounts and records of the Corporation, or any of them, other than the stock ledger, shall be open to the inspection of stockholders, and no stockholder shall have any right to inspect any book, account or record of the Corporation except as conferred by statute or by resolution of the Board.
ARTICLE VII
Corporate Seal
The corporate seal of the Corporation shall consist of two concentric circles, between which shall be the name of the Corporation, and its state of incorporation, and in the center shall be inscribed the words, “Corporate Seal.”
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ARTICLE VIII
Amendments
The Bylaws of the Corporation shall be subject to alteration, amendment or repeal, and new Bylaws not inconsistent with any provision of the Certificates of Incorporation or statute, may be made, either by the affirmative vote of the holders of a majority in interest of the stockholders of the Corporation present in person or by proxy at any annual or special meeting of the stockholders and entitled to vote on the subject matter, a quorum being present, provided that notice of such proposed action shall have been given in the call for the meeting, or by the affirmative vote of a majority of the whole Board, given at any regular or special meeting of the Board.
ARTICLE IX
Fiscal Year
The fiscal year of the Corporation shall end on the last day of May in each year.
ARTICLE X
Forum
1. Forum for Adjudication of Disputes. Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if and only if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state or federal court located within the State of Delaware) shall be the sole and exclusive forum for: (a) any derivative action or proceeding brought on behalf of the Corporation, (b) any action or proceeding asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (c) any action or proceeding asserting a claim against the Corporation or any director, officer or other employee of the Corporation arising pursuant to, or seeking to enforce any right or remedy under, any provision of the DGCL, the Corporation’s Certificate of Incorporation or these Bylaws (in each case, as they may be amended and restated from time to time), (d) any action or proceeding asserting a claim against the Corporation or any director, officer or other employee of the Corporation governed by the internal affairs doctrine, or (e) any action or proceeding to interpret, apply, enforce, or determine the validity of any provision or provisions of the Corporation’s Certificate of Incorporation or these Bylaws (in each case, as they may be amended and restated from time to time), in all cases to the full extent permitted by applicable law and subject to the court’s having personal jurisdiction over the indispensable parties named as defendants. Any person or entity purchasing, otherwise acquiring, or continuing to own any interest in shares of capital stock of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Section 1 of Article X.
2. Federal Forum Selection. Unless the Corporation consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended. Any person or entity purchasing, otherwise acquiring, or continuing to own any interest in shares of capital stock of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Section 2 of Article X.
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CERTIFICATION OF BYLAWS
OF
BIOMERICA, INC.
a Delaware Corporation
I, Allen Barbieri, certify that I am Secretary of Biomerica, Inc., a Delaware corporation (the “Corporation”), that I am duly authorized to make and deliver this certification and that the attached Bylaws are a true and complete copy of the Bylaws of the Corporation in effect as of the date of this certificate.
| Dated: | _____________, 2023 | ||
| Name: | Allen Barbieri | ||
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EXHIBIT 31.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Zackary S. Irani, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Biomerica, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of our internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or other persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: October 12, 2023 | |
| /s/ Zackary S. Irani | |
| Zackary S. Irani | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Gary Lu, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Biomerica, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of our internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or other persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: October 12, 2023 | |
| /s/ Gary Lu | |
| Gary Lu | |
| Chief Financial Officer | |
| (Principal Financial Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Biomerica, Inc. (the “Company”) on Form 10-Q for the period ended August 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Zackary Irani, Chief Executive Officer of the Company, certify, to the best of my knowledge, Pursuant to Exchange Act Rule 15d-14(b) and 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002,
i. The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, and
ii. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Zackary S. Irani | |
| Zackary S. Irani | |
| Chief Executive Officer | |
| Date: October 12, 2023 |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Biomerica, Inc. (the “Company”) on Form 10-Q for the period ended August 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gary Lu, Chief Financial Officer of the Company, certify, to the best of my knowledge, Pursuant to Exchange Act Rule 15d-14(b) and 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002,
i. The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, and
ii. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Gary Lu | |
| Gary Lu | |
| Chief Financial Officer | |
| Date: October 12, 2023 |
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) |
Aug. 31, 2023 |
May 31, 2023 |
|---|---|---|
| Accumulated amortization | $ 688,000 | $ 617,000 |
| Preferred stock, par value | $ 0 | $ 0 |
| Preferred stock, shares authorized | 4,428,571 | 4,428,571 |
| Preferred stock, shares issued | 0 | 0 |
| Preferred stock, shares outstanding | 0 | 0 |
| Common stock, par value | $ 0.08 | $ 0.08 |
| Common stock, shares authorized | 25,000,000 | 25,000,000 |
| Common stock, shares issued | 16,821,646 | 16,821,646 |
| Common stock, shares outstanding | 16,821,646 | 16,821,646 |
| Series A Preferred Stock [Member] | ||
| Preferred stock, par value | $ 0.08 | $ 0.08 |
| Preferred stock, shares authorized | 571,429 | 571,429 |
| Preferred stock, shares issued | 0 | 0 |
| Preferred stock, shares outstanding | 0 | 0 |
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($) |
3 Months Ended | |
|---|---|---|
Aug. 31, 2023 |
Aug. 31, 2022 |
|
| Income Statement [Abstract] | ||
| Net sales | $ 1,713,000 | $ 1,637,000 |
| Cost of sales | (1,301,000) | (1,692,000) |
| Gross profit (loss) | 412,000 | (55,000) |
| Operating expenses: | ||
| Selling, general and administrative | 1,172,000 | 1,654,000 |
| Research and development | 472,000 | 361,000 |
| Total operating expenses | 1,644,000 | 2,015,000 |
| Loss from operations | (1,232,000) | (2,070,000) |
| Other income: | ||
| Interest and dividend income | 123,000 | |
| Total other income | 123,000 | |
| Loss before income taxes | (1,109,000) | (2,070,000) |
| Provision for income taxes | (23,000) | (2,000) |
| Net loss | $ (1,132,000) | $ (2,072,000) |
| Basic net loss per common share | $ (0.07) | $ (0.16) |
| Diluted net loss per common share | $ (0.07) | $ (0.16) |
| Weighted average number of common and | ||
| Basic | 16,821,646 | 13,100,407 |
| Diluted | 16,821,646 | 13,100,407 |
| Other comprehensive income (loss), net of tax: | ||
| Foreign currency translation | $ 6,000 | $ (13,000) |
| Comprehensive loss | $ (1,126,000) | $ (2,085,000) |
Condensed Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($) |
Common Stock [Member] |
Additional Paid-in Capital [Member] |
AOCI Attributable to Parent [Member] |
Retained Earnings [Member] |
Total |
|---|---|---|---|---|---|
| Balances at May. 31, 2022 | $ 1,029,000 | $ 42,447,000 | $ (74,000) | $ (35,077,000) | $ 8,325,000 |
| Balance, shares at May. 31, 2022 | 12,867,924 | ||||
| Exercise of stock options | $ 1,000 | 13,000 | 14,000 | ||
| Exercise of stock options, shares | 15,000 | ||||
| Net proceeds from ATM | $ 42,000 | 1,722,000 | 1,764,000 | ||
| Net proceeds from ATM, shares | 523,977 | ||||
| Shares issued in connection with public offering | |||||
| Foreign currency translation | (13,000) | (13,000) | |||
| Share-based compensation | 304,000 | 304,000 | |||
| Net loss | (2,072,000) | (2,072,000) | |||
| Balances at Aug. 31, 2022 | $ 1,072,000 | 44,486,000 | (87,000) | (37,149,000) | 8,322,000 |
| Balance, shares at Aug. 31, 2022 | 13,406,901 | ||||
| Balances at May. 31, 2023 | $ 1,346,000 | 52,705,000 | (110,000) | (42,217,000) | 11,724,000 |
| Balance, shares at May. 31, 2023 | 16,821,646 | ||||
| Exercise of stock options | |||||
| Exercise of stock options, shares | |||||
| Net proceeds from ATM | |||||
| Shares issued in connection with public offering | |||||
| Foreign currency translation | 6,000 | 6,000 | |||
| Share-based compensation | 170,000 | 170,000 | |||
| Net loss | (1,132,000) | (1,132,000) | |||
| Balances at Aug. 31, 2023 | $ 1,346,000 | $ 52,875,000 | $ (104,000) | $ (43,349,000) | $ 10,768,000 |
| Balance, shares at Aug. 31, 2023 | 16,821,646 |
BASIS OF PRESENTATION |
3 Months Ended |
|---|---|
Aug. 31, 2023 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| BASIS OF PRESENTATION | NOTE 1: BASIS OF PRESENTATION
Biomerica, Inc. and its subsidiaries (which includes wholly-owned subsidiaries, Biomerica de Mexico and BioEurope GmbH) is a biomedical technology company that develops, patents, manufactures and markets advanced diagnostic and therapeutic products used at the point-of-care (physicians’ offices and over-the-counter through drugstores and online) and in hospital/clinical laboratories for detection and/or treatment of medical conditions and diseases. Our diagnostic test kits are used to analyze blood, urine, nasal or fecal material from patients in the diagnosis of various diseases, food intolerances and other medical complications, or to measure the level of specific hormones, antibodies, antigens or other substances, which may exist in the human body in extremely small concentrations. The Company’s products are designed to enhance the health and well-being of people, while reducing total healthcare costs.
Our primary focus is the research, development, commercialization and in certain cases regulatory approval, of patented, diagnostic-guided therapy (“DGT”) products based on our inFoods® Technology platform that treat gastrointestinal diseases, such as irritable bowel syndrome (“IBS”), and other inflammatory diseases. These inFoods® based products are directed at chronic inflammatory illnesses that are widespread and common, and as such address very large markets. The first product we are launching using this patented inFoods Technology is our inFoods® IBS product which uses a simple blood sample to identify patient-specific foods that, when removed from their diet, may alleviate IBS symptoms such as pain, bloating, diarrhea, cramping 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 a panel of specific foods that have been shown to often be problematic to IBS sufferers. A food identified as positive (causing an abnormally high immune response in the patient) is simply removed from the diet to help alleviate IBS symptoms. We have launched this product with certain large gastroenterology (“GI”) physician groups that are now offering this product to their patients. We have also recently hired an internal sales force to sign up additional GI physician groups who are interested in offering this product to their patients. As such, we are expecting material growth in revenues from the launch of our inFoods® IBS product in coming quarters.
Our other 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). 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, there were no sales of our COVID-19 related products in the three months ended August 31, 2023. As such, our COVID-19 product sales have caused significant swings in our revenues over the past eight quarters.
Our non-COVID-19 products that accounted for all of our revenues during the three months ended August 31, 2023, are primarily focused on gastrointestinal diseases, colorectal 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 United States by the FDA.
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 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, 2023. 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. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three months ended August 31, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending May 31, 2024. For further information, refer to the audited consolidated financial statements and notes thereto for the fiscal year ended May 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on August 25, 2023. Management has evaluated all subsequent events and transactions through the date of filing this report.
|
SIGNIFICANT ACCOUNTING POLICIES |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SIGNIFICANT ACCOUNTING POLICIES | NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the accounts of Biomerica, Inc. as well as its German subsidiary (BioEurope GmbH) and Mexican subsidiary (Biomerica de Mexico). All significant intercompany accounts and transactions have been eliminated in consolidation.
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. Estimates that are made include the allowance for doubtful accounts, which is estimated based on current as well as historical practices with a customer; stock option forfeiture rates, which are calculated based on historical data; inventory obsolescence, which is based on projected and historical usage of materials; and lease liability and right-of-use assets, which are calculated based on certain assumptions such as borrowing rate, the likelihood of lease extensions to occur, asset valuation, among other things; and other items that may be necessary to estimate using current, historical and judgment based information. Actual results could materially differ from those estimates.
MARKETS AND METHODS OF DISTRIBUTION
The majority of the Company’s revenues come from the sale of products that the company manufactures in the U.S. and in Mexico. Some of the raw materials used in manufacturing come from Asia and other regions of the world. Finally, most of the Company’s revenues are generated from the international sales of its products. Due to global and economic disruptions caused by the COVID-19 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 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. The Company’s current sales and marketing focus is on the sale of the inFoods® IBS product within the U.S. As such, going forward, the Company hopes to see reduced disruptions from the issues listed above.
LIQUIDITY
The Company has incurred net losses and negative cash flows from operations and has an accumulated deficit of approximately $43.3 million as of August 31, 2023. Management expects to continue to incur significant costs as it advances its clinical trials, product development, and commercial product launch activities. As of August 31, 2023, the Company had cash and cash equivalents of approximately $7,988,000 and working capital of approximately $9,828,000.
On July 20, 2020, the Company filed with the Securities and Exchange Commission (“SEC”) a Form S-3 shelf registration statement and base prospectus which was declared effective by the SEC on September 30, 2020. This shelf registration statement registered the sale of up to $90,000,000 of the Company’s equity securities during the three years ended September 30, 2023.
Under the Company’s outstanding Registration Statement, on March 7, 2023, the Company sold shares of common stock in a firm commitment public offering at a gross sales price of $ per share, with net total proceeds, after deducting issuance fees and expenses of $700,000, of approximately $7,300,000. Since the closing of the March 7, 2023 offering, the ATM has been withdrawn and is not active.
To replace the shelf registration statement that was set to expire on September 30, 2023, on September 27, 2023, the Company filed with the SEC a new Form S-3 shelf registration statement and base prospectus which was declared effective by the SEC on September 29, 2023. This new shelf registration statement registers the sale of up to $20,000,000 of the Company’s equity securities during the three years ending September 29, 2026.
The Company intends to use the net proceeds from past offerings and any future offerings for general corporate purposes, including, without limitation, sales and marketing activities, clinical studies, product development, making acquisitions of assets, businesses, companies or securities, capital expenditures, and for working capital needs.
Management has analyzed the cash requirements of the Company’s business through at least November 2024. As a result of cash and cash equivalents on hand on August 31, 2023, largely from the public offering, and the ability to raise additional funds if needed through the sale of shares of the Company’s common stock, management believes the Company has sufficient funds to operate through at least November 2024.
CONCENTRATION OF CREDIT RISK
The Company maintains cash balances at certain financial institutions in excess of amounts insured by federal agencies. From time to time, the Company has uninsured balances. The Company does not believe it is exposed to any significant credit risks.
Consolidated net sales were approximately $1,713,000 for the three months ended August 31, 2023, as compared to $1,637,000 for the three months ended August 31, 2022. For the three months ended August 31, 2023 and 2022, the Company had one and two key customers who are located in foreign countries which accounted for 59% and 64% of net sales, respectively.
Total gross receivables on August 31, 2023 and May 31, 2023 were approximately $1,459,000 and $751,000, respectively. On August 31, 2023 and May 31, 2023, the Company had one key customer, who are located in foreign countries which accounted for a total of 67% and 35%, respectively, of gross accounts receivable.
For the three months ended August 31, 2023 and 2022, the Company had one key vendor which accounted for 12% and 9% of the purchases of raw materials, respectively. As of August 31, 2023 and May 31, 2023, the Company had one key vendor which accounted for 47% and 23%, respectively, of accounts payable.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of demand deposits and money market accounts with original maturities of less than three months.
ACCOUNTS RECEIVABLE, NET
The Company extends unsecured credit to its customers on a regular basis. International accounts are usually required to prepay until they establish a history with the Company and at that time, they are extended credit at levels based on a number of criteria. Based on various criteria, initial credit levels for individual distributors are approved by designated officers and managers of the Company. All increases in credit limits are also approved by designated upper-level management.
The Company adopted Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (codified as Accounting Standards Codification (“ASC”) 326) on June 1, 2023. ASC 326 adds to U.S. GAAP the current expected credit loss (“CECL”) model, a measurement model based on expected losses rather than incurred losses. Prior to the adoption of ASC 326, the Company evaluated receivables on a quarterly basis and adjusted the allowance for doubtful accounts accordingly. Balances over ninety days old were usually reserved for unless collection was reasonably assured. Under the application of ASC 326, the Company’s historical credit loss experience provides the basis for the estimation of expected credit losses, as well as current economic and business conditions, and anticipated future economic events that may impact collectability. In developing its expected credit loss estimate, the Company evaluated the appropriate grouping of financial assets based upon its evaluation of risk characteristics, including consideration of the types of products and services sold. Account balances are written off against the allowance for expected credit losses after all means of collection have been exhausted and the potential for recovery is considered remote.
Occasionally certain long-standing customers, who routinely place large orders, will have unusually large receivables balances relative to the total gross receivables. Management monitors the payments for these large balances closely and very often requires payment of existing invoices before shipping new sales orders.
As of August 31, 2023 and May 31, 2023, the Company has established a reserve of approximately $29,000 for credit losses.
PREPAID EXPENSES AND OTHER
The Company occasionally prepays for items such as inventory, insurance, and other items. These items are reported as prepaid expenses and other, until either the inventory is physically received, or the insurance and other items are expensed.
As of August 31, 2023 and May 31, 2023, the prepaids were approximately $279,000 and $300,000, respectively, composed of prepayments to insurance and various other suppliers.
INVENTORIES, NET
The Company values inventory at the lower of cost (determined using a combination of specific lot identification and the first-in, first-out methods) or net realizable value. Management periodically reviews inventory for excess quantities and obsolescence. 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.
Net inventories are approximately the following:
Reserves for inventory obsolescence are recorded as necessary to reduce obsolete inventory to estimated net realizable value or to specifically reserve for obsolete inventory. As of August 31, 2023, and May 31, 2023, inventory reserves were approximately $532,000 and $672,000, respectively.
PROPERTY AND EQUIPMENT, NET
Property and equipment are stated at cost. Expenditures for additions and major improvements are capitalized. Repairs 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.
Depreciation and amortization are provided over the estimated useful lives of the related assets, ranging from 5 to 10 years, using the straight-line method. 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 was approximately $16,000 and $20,000 for the three months ended August 31, 2023 and 2022, respectively.
INTANGIBLE ASSETS, NET
Intangible assets include trademarks, product rights, technology rights and patents, and are accounted for based on Accounting Standards Codification (“ASC”), ASC 350 Intangibles – Goodwill and Other (“ASC 350”). In that regard, intangible assets that have indefinite useful lives are not amortized but are tested at least 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 $5,000 and $9,000 for the three months ended August 31, 2023 and 2022, respectively.
The Company assesses the recoverability of these intangible assets by determining whether the amortization of the asset’s balance over its remaining life can be recovered through projected undiscounted future cash flows. The Company uses a qualitative assessment to determine whether there was any impairment. During the three months ended August 31, 2023 and 2022, an impairment adjustment was made of $0 and $6,000, respectively.
INVESTMENTS
The Company has made investments in a privately held 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.
Equity holdings in nonmarketable unconsolidated entities in which the Company is not able to exercise significant influence (“Cost Method Holdings”) are accounted for at the Company’s initial cost, minus any impairment (if any), plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar holding or security of the same issuer. Dividends received are recorded as other income.
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 August 31, 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 August 31, 2023.
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.
The Company expensed approximately $ and $ of share-based compensation during the three months ended August 31, 2023 and 2022, respectively.
REVENUE RECOGNITION
The Company has various contracts with customers. All of the contracts specify that revenues from product sales are recognized at the time the product is shipped, customarily FOB shipping point, which is when the transfer of control of goods has occurred and at which point title passes.
The Company does not 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 three months ended August 31, 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. The Company sells clinical lab products to domestic and international distributors, including hospitals and clinical laboratories, medical research institutions, medical schools and pharmaceutical companies. OTC products are sold directly to drug stores and e-commerce customers as well as to distributors. Physician’s office products are sold to physicians and distributors, all of whom are categorized below according to the type of products sold to them. We also manufacture certain components on a contract basis for domestic and international manufacturers.
As of August 31, 2023, the Company had approximately $60,000 of advances from certain foreign customers. The majority of these advances are prepayments on orders that are expected to ship during our second fiscal quarter ended November 30, 2023.
Disaggregation of revenue:
The following is a breakdown of revenues according to markets to which the products are sold:
See Note 4 for additional information regarding revenue concentrations.
SHIPPING AND HANDLING FEES
The Company includes shipping and handling fees billed to customers in net sales.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred. The Company expensed approximately $472,000 and $361,000 of research and development costs during the three months ended August 31, 2023 and 2022, respectively.
INCOME TAXES
The Company had income tax expense for the three months ended August 31, 2023 of approximately $23,000, consisting of state minimum and foreign miscellaneous taxes. During the three months ended August 31, 2023, the Company had a net operating loss (“NOL”) that generated deferred tax assets for NOL carryforwards. Deferred income tax assets and liabilities are recognized for temporary differences between the financial statements and income tax carrying values using tax rates in effect for the years such differences are expected to reverse. Due to uncertainties surrounding our ability to generate future taxable income and consequently realize such deferred income tax assets, the Company has determined that it is more likely than not that these deferred tax assets will not be realized. Accordingly, the Company has established a full valuation allowance against its deferred tax assets as of August 31, 2023.
The Company’s policy is to recognize any interest and penalties related to unrecognized tax benefits as a component of income tax expense. For the three months ended August 31, 2023, the Company had no accrued interest or penalties related to uncertain tax positions.
ADVERTISING COSTS
The Company reports the cost of advertising as expense in the period in which those costs are incurred. Advertising costs were approximately $30,000 and $18,000 for the three months ended August 31, 2023 and 2022, respectively.
FOREIGN CURRENCY TRANSLATION
The subsidiary located in Mexico operates primarily using the Mexican peso. The subsidiary located in Germany operates primarily using the U.S. dollar, with an immaterial amount of transactions occurring using the Euro. Accordingly, assets and liabilities of these subsidiaries are translated using exchange rates in effect at the end of the period, and revenues and costs are translated using average exchange rates for the period. 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 consolidated statements of operations for the three months ended August 31, 2023 and 2022.
RIGHT-OF-USE ASSETS AND LEASE LIABILITY
Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of fixed lease payments over the lease term. Leases are classified as financing or operating which will drive the expense recognition pattern. The Company has elected to exclude short-term leases. The Company leases office space and copy machines, all of which are operating leases. Most leases include the option to renew and the exercise of the renewal options is at the Company’s sole discretion. Options to extend or terminate a lease are considered in the lease term to the extent that the option is reasonably certain of exercise. The leases do not include the options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term.
Basic loss per share is computed as net loss divided by the weighted average number of common shares outstanding for the period. 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 at August 31, 2023 and 2022 was and , respectively.
RECENT ACCOUNTING PRONOUNCEMENTS
Recent ASU’s issued by the 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 June 2016, the FASB issued ASU 2016-13. This ASU requires the measurement of all expected credit losses for financial assets, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The guidance was initially effective for the Company for annual reporting periods beginning after December 15, 2019, and interim periods within those fiscal years. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates,” which, among other things, defers the effective date of ASU 2016-13 for public filers that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those years. Early adoption is permitted. The Company adopted ASU 2016-03 on June 1, 2023, and the adoption of this update did not have a material impact on the Company’s condensed consolidated financial statements.
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SHAREHOLDERS’ EQUITY |
3 Months Ended |
|---|---|
Aug. 31, 2023 | |
| Equity [Abstract] | |
| SHAREHOLDERS’ EQUITY | NOTE 3: SHAREHOLDERS’ EQUITY
During the three months ended August 31, 2022, the Company sold shares of its common stock at prices ranging from $ to $ under its Form S-3 Registration Statement and ATM Offering which resulted in gross proceeds of approximately $1,811,000 and net proceeds to the Company of approximately $1,764,000 after deducting commissions for each sale and legal, accounting, and other fees related to the ATM Offering. In March 2023, we terminated the ATM offering agreement and sold shares of our common stock in a firm commitment public offering under the Company’s shelf registration statement. Shares sold in the underwritten public offering were sold at a gross sales price of $ per share, resulting in net proceeds from the offering, after deducting issuance fees and expenses, of approximately $7,300,000. On August 31, 2023, the Company did not have an open ATM offering in place. No shares of common stock or other equity securities of the Company were sold under the shelf registration statement during the three months ended August 31, 2023.
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GEOGRAPHIC INFORMATION |
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| GEOGRAPHIC INFORMATION | NOTE 4: GEOGRAPHIC INFORMATION
The Company operates as one segment. Geographic information regarding net sales is approximately as follows:
As of August 31, 2023 and May 31, 2023, approximately $610,000 and $626,000 of Biomerica’s gross inventory was located in Mexicali, Mexico, respectively.
As of August 31, 2023 and May 31, 2023, approximately $16,000 and $17,000 of Biomerica’s property and equipment, net of accumulated depreciation and amortization, was located in Mexicali, Mexico, respectively.
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LEASES |
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| LEASES | NOTE 5: LEASES
The Company leases its facilities. On August 31, 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. The Company had an option to extend the term of its lease for two additional sixty-month periods. On November 30, 2015, the Company exercised its option to extend its lease for an additional sixty-month period and entered into the First Amendment to Lease wherein it extended its lease until August 31, 2021. On April 9, 2021, the Company exercised its second option to extend its lease for an additional five years. When the Company extended its lease in April 2021, it was also granted an additional five-year lease extension option. The Company made a security deposit of approximately $22,000.
In November 2016, the Company’s Mexican subsidiary, Biomerica de Mexico, entered into a 10-year lease for approximately 8,100 square feet of manufacturing space. The Company has one 10-year option to renew at the end of the initial lease period. Biomerica de Mexico also leases a smaller unit on a month-to-month basis for use in one manufacturing process.
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.
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. The Company’s office and equipment leases generally have contractually specified minimum rent and annual rent increases are included in the measurement of the right-of-use asset and related lease liabilities. Additionally, under these lease arrangements, the Company may be required to pay directly, or reimburse the lessors, for some maintenance and operating costs. Such amounts are generally variable and therefore not included in the measurement of the right-of-use asset and related lease liabilities but are instead recognized as variable lease expense in the consolidated statements of operations and comprehensive loss when they are incurred.
The following table presents information on our operating leases for the three months ended August 31, 2023 and 2022:
The approximate maturity of lease liabilities as of August 31, 2023 are as follows:
The following table summarizes the Company’s other supplemental lease information for the three months ended August 31, 2023 and 2022:
The Company also has various insignificant leases for office equipment.
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COMMITMENTS AND CONTINGENCIES |
3 Months Ended |
|---|---|
Aug. 31, 2023 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| COMMITMENTS AND CONTINGENCIES | NOTE 6: COMMITMENTS AND CONTINGENCIES
LITIGATION
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 August 31, 2023.
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SUBSEQUENT EVENTS |
3 Months Ended |
|---|---|
Aug. 31, 2023 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | NOTE 7: SUBSEQUENT EVENTS
On September 15, 2023 the Company submitted to the FDA the final H. Pylori data set requested by the FDA during the FDA’s recent review of the 510-K filed by the Company. The Company received confirmation from the FDA that the data was received. The Biomerica hp+detect™ diagnostic test is designed to detect the presence of the H. pylori bacteria which infects approximately 35% of the U.S. population. |
SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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| PRINCIPLES OF CONSOLIDATION | PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the accounts of Biomerica, Inc. as well as its German subsidiary (BioEurope GmbH) and Mexican subsidiary (Biomerica de Mexico). All significant intercompany accounts and transactions have been eliminated in consolidation.
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| ACCOUNTING ESTIMATES | 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. Estimates that are made include the allowance for doubtful accounts, which is estimated based on current as well as historical practices with a customer; stock option forfeiture rates, which are calculated based on historical data; inventory obsolescence, which is based on projected and historical usage of materials; and lease liability and right-of-use assets, which are calculated based on certain assumptions such as borrowing rate, the likelihood of lease extensions to occur, asset valuation, among other things; and other items that may be necessary to estimate using current, historical and judgment based information. Actual results could materially differ from those estimates.
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| MARKETS AND METHODS OF DISTRIBUTION | MARKETS AND METHODS OF DISTRIBUTION
The majority of the Company’s revenues come from the sale of products that the company manufactures in the U.S. and in Mexico. Some of the raw materials used in manufacturing come from Asia and other regions of the world. Finally, most of the Company’s revenues are generated from the international sales of its products. Due to global and economic disruptions caused by the COVID-19 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 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. The Company’s current sales and marketing focus is on the sale of the inFoods® IBS product within the U.S. As such, going forward, the Company hopes to see reduced disruptions from the issues listed above.
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| LIQUIDITY | LIQUIDITY
The Company has incurred net losses and negative cash flows from operations and has an accumulated deficit of approximately $43.3 million as of August 31, 2023. Management expects to continue to incur significant costs as it advances its clinical trials, product development, and commercial product launch activities. As of August 31, 2023, the Company had cash and cash equivalents of approximately $7,988,000 and working capital of approximately $9,828,000.
On July 20, 2020, the Company filed with the Securities and Exchange Commission (“SEC”) a Form S-3 shelf registration statement and base prospectus which was declared effective by the SEC on September 30, 2020. This shelf registration statement registered the sale of up to $90,000,000 of the Company’s equity securities during the three years ended September 30, 2023.
Under the Company’s outstanding Registration Statement, on March 7, 2023, the Company sold shares of common stock in a firm commitment public offering at a gross sales price of $ per share, with net total proceeds, after deducting issuance fees and expenses of $700,000, of approximately $7,300,000. Since the closing of the March 7, 2023 offering, the ATM has been withdrawn and is not active.
To replace the shelf registration statement that was set to expire on September 30, 2023, on September 27, 2023, the Company filed with the SEC a new Form S-3 shelf registration statement and base prospectus which was declared effective by the SEC on September 29, 2023. This new shelf registration statement registers the sale of up to $20,000,000 of the Company’s equity securities during the three years ending September 29, 2026.
The Company intends to use the net proceeds from past offerings and any future offerings for general corporate purposes, including, without limitation, sales and marketing activities, clinical studies, product development, making acquisitions of assets, businesses, companies or securities, capital expenditures, and for working capital needs.
Management has analyzed the cash requirements of the Company’s business through at least November 2024. As a result of cash and cash equivalents on hand on August 31, 2023, largely from the public offering, and the ability to raise additional funds if needed through the sale of shares of the Company’s common stock, management believes the Company has sufficient funds to operate through at least November 2024.
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| CONCENTRATION OF CREDIT RISK | CONCENTRATION OF CREDIT RISK
The Company maintains cash balances at certain financial institutions in excess of amounts insured by federal agencies. From time to time, the Company has uninsured balances. The Company does not believe it is exposed to any significant credit risks.
Consolidated net sales were approximately $1,713,000 for the three months ended August 31, 2023, as compared to $1,637,000 for the three months ended August 31, 2022. For the three months ended August 31, 2023 and 2022, the Company had one and two key customers who are located in foreign countries which accounted for 59% and 64% of net sales, respectively.
Total gross receivables on August 31, 2023 and May 31, 2023 were approximately $1,459,000 and $751,000, respectively. On August 31, 2023 and May 31, 2023, the Company had one key customer, who are located in foreign countries which accounted for a total of 67% and 35%, respectively, of gross accounts receivable.
For the three months ended August 31, 2023 and 2022, the Company had one key vendor which accounted for 12% and 9% of the purchases of raw materials, respectively. As of August 31, 2023 and May 31, 2023, the Company had one key vendor which accounted for 47% and 23%, respectively, of accounts payable.
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| CASH AND CASH EQUIVALENTS | CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of demand deposits and money market accounts with original maturities of less than three months.
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| ACCOUNTS RECEIVABLE, NET | ACCOUNTS RECEIVABLE, NET
The Company extends unsecured credit to its customers on a regular basis. International accounts are usually required to prepay until they establish a history with the Company and at that time, they are extended credit at levels based on a number of criteria. Based on various criteria, initial credit levels for individual distributors are approved by designated officers and managers of the Company. All increases in credit limits are also approved by designated upper-level management.
The Company adopted Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (codified as Accounting Standards Codification (“ASC”) 326) on June 1, 2023. ASC 326 adds to U.S. GAAP the current expected credit loss (“CECL”) model, a measurement model based on expected losses rather than incurred losses. Prior to the adoption of ASC 326, the Company evaluated receivables on a quarterly basis and adjusted the allowance for doubtful accounts accordingly. Balances over ninety days old were usually reserved for unless collection was reasonably assured. Under the application of ASC 326, the Company’s historical credit loss experience provides the basis for the estimation of expected credit losses, as well as current economic and business conditions, and anticipated future economic events that may impact collectability. In developing its expected credit loss estimate, the Company evaluated the appropriate grouping of financial assets based upon its evaluation of risk characteristics, including consideration of the types of products and services sold. Account balances are written off against the allowance for expected credit losses after all means of collection have been exhausted and the potential for recovery is considered remote.
Occasionally certain long-standing customers, who routinely place large orders, will have unusually large receivables balances relative to the total gross receivables. Management monitors the payments for these large balances closely and very often requires payment of existing invoices before shipping new sales orders.
As of August 31, 2023 and May 31, 2023, the Company has established a reserve of approximately $29,000 for credit losses.
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| PREPAID EXPENSES AND OTHER | PREPAID EXPENSES AND OTHER
The Company occasionally prepays for items such as inventory, insurance, and other items. These items are reported as prepaid expenses and other, until either the inventory is physically received, or the insurance and other items are expensed.
As of August 31, 2023 and May 31, 2023, the prepaids were approximately $279,000 and $300,000, respectively, composed of prepayments to insurance and various other suppliers.
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| INVENTORIES, NET | INVENTORIES, NET
The Company values inventory at the lower of cost (determined using a combination of specific lot identification and the first-in, first-out methods) or net realizable value. Management periodically reviews inventory for excess quantities and obsolescence. 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.
Net inventories are approximately the following:
Reserves for inventory obsolescence are recorded as necessary to reduce obsolete inventory to estimated net realizable value or to specifically reserve for obsolete inventory. As of August 31, 2023, and May 31, 2023, inventory reserves were approximately $532,000 and $672,000, respectively.
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| PROPERTY AND EQUIPMENT, NET | PROPERTY AND EQUIPMENT, NET
Property and equipment are stated at cost. Expenditures for additions and major improvements are capitalized. Repairs 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.
Depreciation and amortization are provided over the estimated useful lives of the related assets, ranging from 5 to 10 years, using the straight-line method. 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 was approximately $16,000 and $20,000 for the three months ended August 31, 2023 and 2022, respectively.
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| INTANGIBLE ASSETS, NET | INTANGIBLE ASSETS, NET
Intangible assets include trademarks, product rights, technology rights and patents, and are accounted for based on Accounting Standards Codification (“ASC”), ASC 350 Intangibles – Goodwill and Other (“ASC 350”). In that regard, intangible assets that have indefinite useful lives are not amortized but are tested at least 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 $5,000 and $9,000 for the three months ended August 31, 2023 and 2022, respectively.
The Company assesses the recoverability of these intangible assets by determining whether the amortization of the asset’s balance over its remaining life can be recovered through projected undiscounted future cash flows. The Company uses a qualitative assessment to determine whether there was any impairment. During the three months ended August 31, 2023 and 2022, an impairment adjustment was made of $0 and $6,000, respectively.
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| INVESTMENTS | INVESTMENTS
The Company has made investments in a privately held 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.
Equity holdings in nonmarketable unconsolidated entities in which the Company is not able to exercise significant influence (“Cost Method Holdings”) are accounted for at the Company’s initial cost, minus any impairment (if any), plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar holding or security of the same issuer. Dividends received are recorded as other income.
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 August 31, 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 August 31, 2023.
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| 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.
The Company expensed approximately $ and $ of share-based compensation during the three months ended August 31, 2023 and 2022, respectively.
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| REVENUE RECOGNITION | REVENUE RECOGNITION
The Company has various contracts with customers. All of the contracts specify that revenues from product sales are recognized at the time the product is shipped, customarily FOB shipping point, which is when the transfer of control of goods has occurred and at which point title passes.
The Company does not 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 three months ended August 31, 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. The Company sells clinical lab products to domestic and international distributors, including hospitals and clinical laboratories, medical research institutions, medical schools and pharmaceutical companies. OTC products are sold directly to drug stores and e-commerce customers as well as to distributors. Physician’s office products are sold to physicians and distributors, all of whom are categorized below according to the type of products sold to them. We also manufacture certain components on a contract basis for domestic and international manufacturers.
As of August 31, 2023, the Company had approximately $60,000 of advances from certain foreign customers. The majority of these advances are prepayments on orders that are expected to ship during our second fiscal quarter ended November 30, 2023.
Disaggregation of revenue:
The following is a breakdown of revenues according to markets to which the products are sold:
See Note 4 for additional information regarding revenue concentrations.
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| SHIPPING AND HANDLING FEES | SHIPPING AND HANDLING FEES
The Company includes shipping and handling fees billed to customers in net sales.
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| RESEARCH AND DEVELOPMENT | RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred. The Company expensed approximately $472,000 and $361,000 of research and development costs during the three months ended August 31, 2023 and 2022, respectively.
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| INCOME TAXES | INCOME TAXES
The Company had income tax expense for the three months ended August 31, 2023 of approximately $23,000, consisting of state minimum and foreign miscellaneous taxes. During the three months ended August 31, 2023, the Company had a net operating loss (“NOL”) that generated deferred tax assets for NOL carryforwards. Deferred income tax assets and liabilities are recognized for temporary differences between the financial statements and income tax carrying values using tax rates in effect for the years such differences are expected to reverse. Due to uncertainties surrounding our ability to generate future taxable income and consequently realize such deferred income tax assets, the Company has determined that it is more likely than not that these deferred tax assets will not be realized. Accordingly, the Company has established a full valuation allowance against its deferred tax assets as of August 31, 2023.
The Company’s policy is to recognize any interest and penalties related to unrecognized tax benefits as a component of income tax expense. For the three months ended August 31, 2023, the Company had no accrued interest or penalties related to uncertain tax positions.
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| ADVERTISING COSTS | ADVERTISING COSTS
The Company reports the cost of advertising as expense in the period in which those costs are incurred. Advertising costs were approximately $30,000 and $18,000 for the three months ended August 31, 2023 and 2022, respectively.
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| FOREIGN CURRENCY TRANSLATION | FOREIGN CURRENCY TRANSLATION
The subsidiary located in Mexico operates primarily using the Mexican peso. The subsidiary located in Germany operates primarily using the U.S. dollar, with an immaterial amount of transactions occurring using the Euro. Accordingly, assets and liabilities of these subsidiaries are translated using exchange rates in effect at the end of the period, and revenues and costs are translated using average exchange rates for the period. 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 consolidated statements of operations for the three months ended August 31, 2023 and 2022.
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| RIGHT-OF-USE ASSETS AND LEASE LIABILITY | RIGHT-OF-USE ASSETS AND LEASE LIABILITY
Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of fixed lease payments over the lease term. Leases are classified as financing or operating which will drive the expense recognition pattern. The Company has elected to exclude short-term leases. The Company leases office space and copy machines, all of which are operating leases. Most leases include the option to renew and the exercise of the renewal options is at the Company’s sole discretion. Options to extend or terminate a lease are considered in the lease term to the extent that the option is reasonably certain of exercise. The leases do not include the options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term.
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| NET LOSS PER SHARE |
Basic loss per share is computed as net loss divided by the weighted average number of common shares outstanding for the period. 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 at August 31, 2023 and 2022 was and , respectively.
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| RECENT ACCOUNTING PRONOUNCEMENTS | RECENT ACCOUNTING PRONOUNCEMENTS
Recent ASU’s issued by the 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 June 2016, the FASB issued ASU 2016-13. This ASU requires the measurement of all expected credit losses for financial assets, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The guidance was initially effective for the Company for annual reporting periods beginning after December 15, 2019, and interim periods within those fiscal years. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates,” which, among other things, defers the effective date of ASU 2016-13 for public filers that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those years. Early adoption is permitted. The Company adopted ASU 2016-03 on June 1, 2023, and the adoption of this update did not have a material impact on the Company’s condensed consolidated financial statements. |
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SIGNIFICANT ACCOUNTING POLICIES (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Aug. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF NET INVENTORIES | Net inventories are approximately the following:
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| SUMMARY OF OPTIONS ACTIVITY |
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| SCHEDULE OF DISAGGREGATION REVENUE | The following is a breakdown of revenues according to markets to which the products are sold:
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GEOGRAPHIC INFORMATION (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF GEOGRAPHIC INFORMATION |
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LEASES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF OPERATING LEASES | The following table presents information on our operating leases for the three months ended August 31, 2023 and 2022:
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| SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS | The approximate maturity of lease liabilities as of August 31, 2023 are as follows:
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| SCHEDULE OF OTHER SUPPLEMENTAL LEASE INFORMATION | The following table summarizes the Company’s other supplemental lease information for the three months ended August 31, 2023 and 2022:
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SCHEDULE OF NET INVENTORIES (Details) - USD ($) |
Aug. 31, 2023 |
May 31, 2023 |
|---|---|---|
| Accounting Policies [Abstract] | ||
| Raw materials | $ 1,454,000 | $ 1,677,000 |
| Work in progress | 793,000 | 869,000 |
| Finished products | 162,000 | 182,000 |
| Total gross inventory | 2,409,000 | 2,728,000 |
| Inventory reserves | (532,000) | (672,000) |
| Net inventory | $ 1,877,000 | $ 2,056,000 |
SUMMARY OF OPTIONS ACTIVITY (Details) |
3 Months Ended |
|---|---|
|
Aug. 31, 2023
$ / shares
shares
| |
| Accounting Policies [Abstract] | |
| Option outstanding, begining balance | shares | 2,342,616 |
| Weighted average exercise price, begining balance | $ / shares | $ 3.52 |
| Options granted | shares | 68,000 |
| Weighted average exercise price, granted | $ / shares | $ 1.18 |
| Options exercised | shares | |
| Weighted average exercise price, exercised | $ / shares | |
| Options cancelled or expired | shares | (47,500) |
| Weighted average exercise price, cancelled or expired | $ / shares | $ 3.31 |
| Option outstanding, ending balance | shares | 2,363,116 |
| Weighted average exercise price, ending balance | $ / shares | $ 3.45 |
SCHEDULE OF DISAGGREGATION REVENUE (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Aug. 31, 2023 |
Aug. 31, 2022 |
|
| Product Information [Line Items] | ||
| Total | $ 1,713,000 | $ 1,637,000 |
| Clinical Lab [Member] | ||
| Product Information [Line Items] | ||
| Total | 1,289,000 | 1,146,000 |
| Over The Counte [Member] | ||
| Product Information [Line Items] | ||
| Total | 303,000 | 213,000 |
| Contract Manufacturing [Member] | ||
| Product Information [Line Items] | ||
| Total | 117,000 | 95,000 |
| Physicians Office [Member] | ||
| Product Information [Line Items] | ||
| Total | $ 4,000 | $ 183,000 |
SHAREHOLDERS’ EQUITY (Details Narrative) - USD ($) |
1 Months Ended | 3 Months Ended | |
|---|---|---|---|
Mar. 31, 2023 |
Aug. 31, 2023 |
Aug. 31, 2022 |
|
| Subsidiary, Sale of Stock [Line Items] | |||
| Sale of stock, net proceeds | $ 1,811,000 | ||
| Common Stock [Member] | |||
| Subsidiary, Sale of Stock [Line Items] | |||
| Sale of stock shares issued | 3,333,333 | ||
| Sale of stock, price per share | $ 2.40 | ||
| Sale of stock, net proceeds | $ 7,300,000 | ||
| Common Stock [Member] | ATM Offering [Member] | |||
| Subsidiary, Sale of Stock [Line Items] | |||
| Sale of stock shares issued | 523,977 | ||
| Sale of stock gross proceeds | $ 1,811,000 | ||
| Sale of stock, net proceeds | $ 1,764,000 | ||
| Common Stock [Member] | ATM Offering [Member] | Minimum [Member] | |||
| Subsidiary, Sale of Stock [Line Items] | |||
| Sale of stock, price per share | $ 3.15 | ||
| Common Stock [Member] | ATM Offering [Member] | Maximum [Member] | |||
| Subsidiary, Sale of Stock [Line Items] | |||
| Sale of stock, price per share | $ 3.55 | ||
SCHEDULE OF GEOGRAPHIC INFORMATION (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Aug. 31, 2023 |
Aug. 31, 2022 |
|
| Revenues from External Customers and Long-Lived Assets [Line Items] | ||
| Revenues from sales to unaffiliated customers total | $ 1,713,000 | $ 1,637,000 |
| Asia [Member] | ||
| Revenues from External Customers and Long-Lived Assets [Line Items] | ||
| Revenues from sales to unaffiliated customers total | 1,026,000 | 814,000 |
| Europe [Member] | ||
| Revenues from External Customers and Long-Lived Assets [Line Items] | ||
| Revenues from sales to unaffiliated customers total | 327,000 | 552,000 |
| North America [Member] | ||
| Revenues from External Customers and Long-Lived Assets [Line Items] | ||
| Revenues from sales to unaffiliated customers total | 355,000 | 268,000 |
| South America [Member] | ||
| Revenues from External Customers and Long-Lived Assets [Line Items] | ||
| Revenues from sales to unaffiliated customers total | $ 5,000 | $ 3,000 |
GEOGRAPHIC INFORMATION (Details Narrative) |
3 Months Ended | |
|---|---|---|
|
Aug. 31, 2023
USD ($)
Segment
|
May 31, 2023
USD ($)
|
|
| Revenues from External Customers and Long-Lived Assets [Line Items] | ||
| Number of operating segments | Segment | 1 | |
| Inventory, gross | $ 2,409,000 | $ 2,728,000 |
| Property and equipment, net | 218,000 | 213,000 |
| MEXICO | ||
| Revenues from External Customers and Long-Lived Assets [Line Items] | ||
| Inventory, gross | 610,000 | 626,000 |
| Property and equipment, net | $ 16,000 | $ 17,000 |
SCHEDULE OF OPERATING LEASES (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Aug. 31, 2023 |
Aug. 31, 2022 |
|
| Leases | ||
| Operating lease cost | $ 88,000 | $ 88,000 |
| Variable lease cost | 3,000 | |
| Short-term lease cost | 5,000 | 4,000 |
| Total lease cost | $ 96,000 | $ 92,000 |
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS (Details) |
Aug. 31, 2023
USD ($)
|
|---|---|
| Leases | |
| 2024 | $ 359,000 |
| 2025 | 368,000 |
| 2026 | 378,000 |
| 2027 | 6,000 |
| Thereafter | |
| Total minimum future lease payments | 1,111,000 |
| Less: imputed interest | 100,000 |
| Total operating lease liabilities | $ 1,011,000 |
SCHEDULE OF OTHER SUPPLEMENTAL LEASE INFORMATION (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Aug. 31, 2023 |
Aug. 31, 2022 |
|
| Leases | ||
| Cash paid for operating lease liabilities | $ 87,000 | $ 86,000 |
| Weighted average remaining lease term (years) | 3 years 7 days | 4 years 7 days |
| Weighted-average discount rate | 6.50% | 6.50% |
LEASES (Details Narrative) |
1 Months Ended | 3 Months Ended |
|---|---|---|
|
Nov. 30, 2016
ft²
|
Aug. 31, 2023
USD ($)
ft²
|
|
| Leases | ||
| Area of land | ft² | 8,100 | 22,000 |
| Lease term description | In November 2016, the Company’s Mexican subsidiary, Biomerica de Mexico, entered into a 10-year lease for approximately 8,100 square feet of manufacturing space. The Company has one 10-year option to renew at the end of the initial lease period. Biomerica de Mexico also leases a smaller unit on a month-to-month basis for use in one manufacturing process. | On November 30, 2015, the Company exercised its option to extend its lease for an additional sixty-month period and entered into the First Amendment to Lease wherein it extended its lease until August 31, 2021. On April 9, 2021, the Company exercised its second option to extend its lease for an additional five years. When the Company extended its lease in April 2021, it was also granted an additional five-year lease extension option |
| Security deposit | $ | $ 22,000 |
SUBSEQUENT EVENTS (Details Narrative) |
Sep. 15, 2023 |
|---|---|
| Subsequent Event [Member] | |
| Subsequent Event [Line Items] | |
| Subsequent Event, Description | On September 15, 2023 the Company submitted to the FDA the final H. Pylori data set requested by the FDA during the FDA’s recent review of the 510-K filed by the Company. The Company received confirmation from the FDA that the data was received. The Biomerica hp+detect™ diagnostic test is designed to detect the presence of the H. pylori bacteria which infects approximately 35% of the U.S. population. |