10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 2016

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number:  0-8765

BIOMERICA, INC.

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(Exact name of registrant as specified in its charter)

Delaware                                                             95-2645573

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(State or other jurisdiction of                                           (I.R.S. Employer

  incorporation or organization)                                          Identification No.)

17571 Von Karman Avenue, Irvine, CA                                               92614

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(Address of principal executive offices)                                        (Zip Code)

Registrant's telephone number including area code:  (949) 645-2111

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(Former name, former address and former fiscal year, if changed since last report.)

(TITLE OF EACH CLASS)                             (NAME OF EACH EXCHANGE ON WHICH REGISTERED)

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Common, par value $.08                                                 NASDAQ Capital Market 

Securities registered pursuant to Section 12(g) of the Act:

(TITLE OF EACH CLASS)

COMMON STOCK, PAR VALUE $0.08

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.

         Yes [X] No [_]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Date File required to be submitted and posted 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).

         Yes [X] No [_]

Indicate by check mark whether the registrant is a large accelerated, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer", "accelerated filer", and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

           Large Accelerated Filer [_]           Accelerated Filer [_]

           Non-Accelerated Filer   [_]           Smaller Reporting Company [X]

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).

         Yes [_] No [X]

Indicate the number of shares outstanding of each of the registrant's common stock, as of the latest practicable date 8,184,673 shares of common stock, par value $0.08, as of October 17, 2016.

BIOMERICA, INC.
INDEX
PART I	Financial Information
Item 1.	Financial Statements:
	Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) – Three Months Ended August 31, 2016 and 2015	1
	Condensed Consolidated Balance Sheets (unaudited) August 31, 2016 and (audited) May 31, 2016	2-3
	Condensed Consolidated Statements of Cash Flows (unaudited) - Three Months Ended August 31, 2016 and 2015	4
	Notes to Condensed Consolidated Financial Statements (unaudited)	5-10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	10-12
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	12
Item 4.	Controls and Procedures	12
PART II	Other Information
Item 1.	Legal Proceedings	12
Item 1A.	Risk Factors	12
Item 2.	Unregistered Sales of Equity Securities & Use of Proceeds	13
Item 3.	Defaults upon Senior Securities	13
Item 4.	Mine Safety Disclosures	13
Item 5.	Other Information	13
Item 6.	Exhibits	13
	Signatures	14

PART I - FINANCIAL INFORMATION

SUMMARIZED FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BIOMERICA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS(UNAUDITED)
	Three Months Ended August 31,
	2016		2015
Net sales	$	1,410,110	$	1,286,993
Cost of sales		(833,148)		(865,572)
Gross profit		576,962		421,421
Operating Expenses:
Selling, general and administrative		418,348		339,660
Research and development		224,246		157,994
Total operating expenses		642,594		497,654
Loss from operations		(65,632)		(76,233)
Other Income (Expense):
Dividend and interest income		10,215		3,934
Interest expense		--		(36)
Total other income		10,215		3,898
Loss before income tax		(55,417)		(72,335)
Provision for income taxes		--		--
Net loss	$	(55,417)	$	(72,335)
Basic net loss per common share	$	(.01)	$	(0.01)
Diluted net loss per common share	$	(.01)	$	(0.01)
Weighted average number of common and common equivalent shares:
Basic		8,169,673		7,582,056
Diluted		8,169,673		7,582,056
Net loss	$	(55,417)	$	(72,335)
Other comprehensive gain (loss), net of tax:
Foreign currency translation		26		(343)
Comprehensive loss	$	(55,391)	$	(72,678)
The accompanying notes are an integral part of these statements.

1

BIOMERICA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
	August 31, 2016  (unaudited)		May 31, 2016 (audited)
Assets
Current Assets:
Cash and cash equivalents	$	1,817,019	$	1,888,925
Accounts receivable, less allowance for doubtful accounts of $8,213 and $8,405 as of
August 31, 2016 and May 31, 2016, respectively		969,016		969,474
Inventories, net		1,850,451		1,863,091
Prepaid expenses and other		132,186		113,578
Total Current Assets		4,768,672		4,835,068
Property and Equipment, net of accumulated depreciation and amortization of $1,460,871
and $1,423,900		343,688		380,659
Deferred Tax Assets		41,000		41,000
Investments		165,324		165,324
Intangible Assets, net		232,794		248,801
Other Assets		58,695		55,653
Total Assets	$	5,610,173	$	5,726,505
The accompanying notes are an integral part of these statements.

2

BIOMERICA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS - Continued
	August 31, 2016 (unaudited)		May 31, 2016 (audited)
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable and accrued expenses	$	263,177	$	333,485
Accrued compensation		181,737		172,542
Total Current Liabilities		444,914		506,027
Commitments and Contingencies (Note 6)
Shareholders' Equity:
Preferred stock, no par value authorized 5,000,000 shares, none issued and none
outstanding at August 31, 2016 and May 31, 2016		--		--
Common stock, $0.08 par value authorized 25,000,000 shares, Issued and outstanding
8,169,673 at August 31, 2016 and May 31, 2016		653,573		653,573
Additional paid-in-capital		19,399,892		19,399,720
Accumulated other comprehensive loss		(13,560)		(13,586)
Accumulated deficit		(14,874,646)		(14,819,229)
Total Shareholders' Equity		5,165,259		5,220,478
Total Liabilities and Shareholders' Equity	$	5,610,173	$	5,726,505
The accompanying notes are an integral part of these statements.

3

BIOMERICA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
	Three Months Ended August 31,
	2016		2015
Cash flows from operating activities:
Net loss	$	(55,417)	$	(72,335)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		52,978		58,874
Change in provision for losses on accounts receivable		(192)		(14,314)
Inventory reserve		(9,974)		(92)
Stock option expense		172		292
Decrease in deferred rent liability		(7,501)		(5,571)
Changes in assets and liabilities:
Accounts receivable		650		(87,835)
Inventories		22,614		(81,710)
Prepaid expenses and other assets		(21,650)		(13,737)
Accounts payable and accrued expenses		(62,807)		18,759
Accrued compensation		9,195		2,026
Net cash used in operating activities		(71,932)		(195,643)
Cash flows from investing activities:
Purchases of property and equipment		--		(5,680)
Net cash used in investing activities		--		(5,680)
Cash flows from financing activities:
Exercise of stock options		--		7,549
Increase in intangible assets		--		(925)
Net cash provided by financing activities		--		6,624
Effect of exchange rate changes in cash		26		(343)
Net decrease in cash and cash equivalents		(71,906)		(195,042)
Cash and cash equivalents at beginning of period		1,888,925		1,088,307
Cash and cash equivalents at end of period	$	1,817,019	$	893,265
Supplemental Disclosure of Cash-Flow Information:
Cash paid during the period for:
Interest	$	--	$	36
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

The information set forth in these condensed consolidated statements is unaudited and reflects all adjustments which, in the opinion of management, are necessary to present a fair statement of the consolidated results of operations of Biomerica, Inc. and subsidiaries (collectively the “Company”), for the periods indicated. It does not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America. All adjustments that were made are of a normal recurring nature.

The unaudited Condensed Consolidated Financial Statements and notes are presented as permitted by the requirements for Form 10-Q and do not contain certain information included in our annual financial statements and notes. The condensed consolidated balance sheet data as of May 31, 2016 was derived from audited financial statements. The accompanying interim condensed consolidated financial statements should be read in conjunction with the financial statements and related notes included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) for the fiscal year ended May 31, 2016. The results of operations for our interim periods are not necessarily indicative of results to be achieved for our full fiscal year.

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 and Mexican subsidiary. The Mexican subsidiary has not begun operations. All significant intercompany accounts and transactions have been eliminated in consolidation.

Accounting Estimates

The preparation of 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 financial statements, and the reported amounts of revenues and expenses during the reported period. Actual results could materially differ from those estimates.

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

The Company extends unsecured credit to its customers on a regular basis.  International accounts are 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.  Credit levels are approved by designated upper level management. Domestic customers are extended initial credit limits until they establish a history with the Company or submit credit information. All increases in credit limits are also approved by designated upper level management. Management evaluates receivables on a quarterly basis and adjusts the allowance for doubtful accounts accordingly. Balances over ninety days old are usually reserved for unless collection is reasonably assured. Management evaluates quarterly what items to charge off.  

Occasionally certain long-standing customers, who routinely place large orders, may 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. 

Inventories

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 market. 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 Company’s production facilities.

5

Inventories approximate the following at:

	August 31, 2016		May 31, 2016
Raw materials	$	871,000	$	942,000
Work in progress		681,000		690,000
Finished products		299,000		231,000
Total	$	1,851,000	$	1,863,000

Reserves for inventory obsolescence are reduced as necessary to reduce obsolete inventory to estimated realizable value or to specifically reserve for obsolete inventory that the Company intends to dispose of. As of August 31, 2016 and May 31, 2016 inventory reserves were approximately $42,000 and $52,000, 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 retired or otherwise disposed of, the related cost and accumulated depreciation or amortization is removed from the accounts, and gains or losses from 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 and leasehold improvements amounted to $36,971 and $40,151 for the three months ended August 31, 2016 and 2015, respectively.

Intangible Assets, net

Intangible assets include trademarks, product rights, licenses, technology rights and patents, and are accounted for based on Accounting Standards Codification (“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, licenses, and 17 years for patents. Amortization amounted to $16,007 and $18,723 for the three months ended August 31, 2016 and 2015, respectively.

Share-Based Compensation

The Company follows the guidance of the accounting provisions 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 valuation model that uses assumptions for expected volatility, expected dividends, expected forfeiture rate, expected term, and the risk-free interest rate.

Expected volatilities are based on weighted averages of the historical volatility of the Company’s stock and other factors 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 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.

6

The following summary presents the options and warrants granted, exercised, expired, cancelled and outstanding as of August 31, 2016:

		Exercise Price Weighted Average
	Option Shares
Outstanding May 31, 2016	1,199,000	$	0.81
Granted	55,000		1.55
Forfeited	(5,000)		0.96
Outstanding; August 31, 2016	1,249,000	$	0.84

       In the quarter ended August 31, 2016 options to acquire 55,000 shares of the Company’s common stock were granted at exercise prices ranging from $1.52 to $1.61 per share. 

Revenue Recognition

Revenues from product sales are recognized at the time the product is shipped, customarily FOB shipping point, at which point title passes. An allowance is established when necessary for estimated returns as revenue is recognized. In conjunction with sales to certain customers, the Company provides free products upon attaining certain levels of purchases by the customer. The Company accounts for these free products in accordance with ASC 605-50, Revenue Recognition – Customer Payments and Incentives and recognizes the cost of the product as part of cost of sales.

Investments

From time-to-time, the Company makes investments in privately-held companies. The Company determines whether the fair values of any investments in privately-held entities have declined below their carrying value whenever adverse events or changes in circumstances indicate that recorded values may not be recoverable. If the Company considers any such decline to be other than temporary (based on various factors, including historical financial results, and the overall health of the investee’s industry), a write-down to estimated fair value is recorded.  The Company currently has not written down the investment and no events have occurred which could indicate the carrying value to be less than the fair value. Investments represent the Company’s investment in a Polish distributor which is primarily engaged in distributing medical devices. The Company owns approximately 6% of the investee, and accordingly, applies the cost method to account for the investment. Under the cost method, investments are recorded at cost, with gains and losses recognized as of the sale date, and income recorded when received.

Shipping and Handling Fees and Costs

Shipping and handling fees billed to customers are classified as net sales and shipping and handling costs are classified as cost of sales. The Company included shipping and handling fees billed to customers in net sales. The Company included shipping and handling costs associated with inbound freight and unreimbursed shipping to customers in cost of sales.

Research and Development

Research and development costs are expensed as incurred.

Income Taxes

The Company has provided a valuation allowance of approximately $1,043,000 and $1,038,000 as of August 31, 2016 and May 31, 2016, respectively.  

Foreign Currency Translation

The subsidiary located in Germany is accounted for primarily using local functional currency. Accordingly, assets and liabilities of this subsidiary 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 subsidiary in Mexico, although not operating, has two bank accounts which according to exchange rates in effect at the end of each period need to be adjusted for that fluctuation. The resulting adjustments are presented as a separate component of accumulated other comprehensive loss.

7

Deferred Rent

Incentive payments received from landlords are recorded as deferred lease incentives and are amortized over the underlying lease term on a straight-line basis as a reduction of rent expense. When the terms of an operating lease provide for periods of free rent, rent concessions, and/or rent escalations, the Company establishes a deferred rent liability for the difference between the scheduled rent payment and the straight-line rent expense recognized. This deferred rent liability is amortized over the underlying lease term on a straight-line basis as a reduction of rent expense.

Net Loss Per Share

Basic loss per share are computed as net loss or income 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 using the treasury stock method. The total amount of anti-dilutive warrants or options not included in the earnings per share calculation for the three months ended August 31, 2016 and 2015 was 1,249,000 and 1,109,852 respectively.

The following table illustrates the required disclosure of the reconciliation of the numerators and denominators of the basic and diluted earnings per share computations:

	Three Months Ended August 31,
	2016		2015
Numerator:
Loss from continuing operations	$	(55,417)	$	(72,335)
Denominator for basic net loss Per common share		8,169,673		7,582,056
Effect of dilutive securities:
Options		--		--
Denominator for diluted net loss per common share		8,169,673		7,582,056
Basic net loss per common share	$	(0.01)	$	(0.01)
Diluted net loss per common share	$	(0.01)	$	(0.01)

New Accounting Pronouncements

      In February 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2013-04, Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (“ASU 2013-04”). The amendments in ASU 2013-04 provide guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this update is fixed at the reporting date, except for obligations addressed within existing guidance in generally accepted accounting principles in the United States of America. The guidance requires an entity to measure those obligations as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. The guidance in this update also requires an entity to disclose the nature and amount of the obligation as well as other information about those obligations. The amendments in this standard are effective retrospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013, which corresponds to the Company’s first quarter of fiscal 2015. The adoption of ASU 2013-04 did not have a material impact on the Company’s consolidated financial statements.

      In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In adopting, ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach. ASU 2014-09 is effective for the first interim period within annual reporting periods beginning December 15, 2016, and early adoption is not permitted.  Management is evaluating the provisions of this statement and has not determined what impact the adoption of ASU 2014-09 will have on the Company’s financial position or results of operations. During August 2015, the FASB voted to defer the effective date of the above mentioned revenue recognition guidance by one year to December 15, 2017 for interim and annual reporting periods beginning after that date and permitted early adoption of the standard, but not before the original effective date of December 15, 2016. Management is evaluating the provisions of this statement and has not determined what impact the adoption of ASU 2014-09 will have on the Company’s financial position or results of operations.

8

      In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory (“ASU-2015-11”). ASU 2015-11 applies to inventory that is measured using first-in, first-out (“FIFO”) or average cost. An entity should measure inventory within the scope of ASU 2015-11 at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The amendments in ASU 2015-11 more closely align the measurement of inventory in general accepted accounting principles of the United States of America with the measurement of inventory in International Financial Reporting Standards (“IFRS”). ASU 2015-11 is effective for fiscal years beginning after December 31, 2016. Management is evaluating the provisions of this statement and has not determined what impact the adoption of ASU 2015-11 will have on the Company’s financial position or results of operations.

      On November 20, 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes (“ASU-2015-17”). The update eliminates the requirement to classify deferred tax assets and liabilities on a classified statement of financial position. ASU 2015-17 is effective for fiscal years beginning after December 15, 2015, and interim periods within those annual periods. Early adoption is permitted for financial statements as of the beginning of an interim or annual reporting period. The Company chose to adopt ASU 2015-17 as of the fiscal quarter ended November 30, 2015.

      On January 5, 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU-2016-01”). The release affects public and private companies that hold financial assets or owe financial liabilities. ASU-2016-01 will take effect for public companies for fiscal years beginning after December 15, 2017. Management is evaluating the provisions of this statement and has not determined what impact the adoption of ASU- 2016-01 will have on the Company’s financial position or results of operations.

      On February 25, 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU-2016-02”). ASU-2016-02 defines whether a contract is a lease. If it is a lease, the Company is required to recognize the lease assets and liabilities. ASU-2016-02 is effective for public companies for the annual periods beginning after December 15, 2018. Management is evaluating the provisions of this statement and has not determined what impact the adoption of ASU-2016-02 will have on the Company’s financial position or results of operations.

      On March 30, 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The update includes provisions intended to simplify various aspects of accounting for share-based compensation. ASU-2016-09 will take effect for public companies for the annual periods beginning after December 15, 2016. Management is evaluating the provisions of this statement and has not determined what impact the adoption of ASU-2016-09 will have on the Company’s financial position or results of operations.

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

Note 3: Accounts Payable and Accrued Expenses

      The Company’s accounts payable and accrued expense balances consist of the following at:

	August 31, 2016		May 31, 2016
Accounts payable	$	263,177	$	325,984
Deferred rent		--		7,501
Total	$	263,177	$	333,485

9

Note 4: Shareholders’ Equity

      On August 24, 2016, the Company’s common stock was approved for listing on the Nasdaq Capital Market and began trading on that exchange on August 26, 2016 under the symbol “BMRA”.

      For the three months ended August 31, 2016, options to purchase 55,000 shares of the Company’s common stock were granted at exercise prices of $1.52 to $1.61.

Note 5: Geographic Information

Financial information about foreign and domestic operations and export sales is approximately as follows:

	Three Months Ended August 31,
	2016		2015
Revenues from sales to unaffiliated customers:
United States	$	226,000	$	187,000
Asia		575,000		433,000
Europe		554,000		619,000
South America		16,000		17,000
Middle East		38,000		31,000
Other		1,000		--
	$	1,410,000	$	1,287,000

      No other geographic concentrations exist where net sales exceed 10% of total net sales.

       As of August 31, 2016 and May 31, 2016, approximately $592,000 and $659,000 of Biomerica’s gross inventory and approximately $23,000 and $26,000, of Biomerica’s property and equipment, net of accumulated depreciation and amortization, was located in Mexicali, Mexico, respectively.

Note 6: Commitments and Contingencies

On June 18, 2009, the Company entered into an agreement to lease a building in Irvine, California. The lease commenced September 1, 2009 and ended August 31, 2016.  The initial base rent was set at $18,490 per month with scheduled annual increases through the end of the lease term. The rent was $22,080. In November 2015, the Company signed the First Amendment to Lease to extend the lease until August 31, 2021. The initial base rent for the lease amendment which starts September 1, 2016 is $21,000 per month.

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CERTAIN INFORMATION CONTAINED HEREIN (AS WELL AS INFORMATION INCLUDED IN ORAL STATEMENTS OR OTHER WRITTEN STATEMENTS MADE OR TO BE MADE BY BIOMERICA) CONTAINS STATEMENTS THAT ARE FORWARD-LOOKING, SUCH AS STATEMENTS RELATING TO ANTICIPATED FUTURE REVENUES OF THE COMPANY AND SUCCESS OR CURRENT PRODUCT OFFERINGS. SUCH FORWARD-LOOKING INFORMATION INVOLVES IMPORTANT RISKS AND UNCERTAINTIES THAT COULD SIGNIFICANTLY AFFECT ANTICIPATED RESULTS IN THE FUTURE, AND ACCORDINGLY, SUCH RESULTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD-LOOKING STATEMENTS MADE BY OR ON BEHALF OF BIOMERICA. THE POTENTIAL RISKS AND UNCERTAINTIES INCLUDE, AMONG OTHERS, FLUCTUATIONS IN THE COMPANY'S OPERATING RESULTS. THESE RISKS AND UNCERTAINTIES ALSO INCLUDE THE SUCCESS OF THE COMPANY IN RAISING NEEDED CAPITAL, THE ABILITY OF THE COMPANY TO MAINTAIN REQUIREMENTS TO BE LISTED ON NASDAQ, THE CONTINUAL DEMAND FOR THE COMPANY'S PRODUCTS, COMPETITIVE AND ECONOMIC FACTORS OF THE MARKETPLACE, AVAILABILITY OF RAW MATERIALS, HEALTH CARE REGULATIONS AND THE STATE OF THE ECONOMY. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF, AND THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE THESE FORWARD-LOOKING STATEMENTS.

10

OVERVIEW

Biomerica, Inc. and Subsidiaries ("Biomerica", the "Company", "we" or "our") develops, manufactures, and markets medical diagnostic products designed for the early detection and monitoring of chronic diseases and medical conditions. Our medical diagnostic products are sold worldwide in two markets: 1) clinical laboratories and 2) point of care (physicians' offices and over-the-counter drugstores). Our diagnostic test kits are used to analyze blood or urine from patients in the diagnosis of various diseases 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.

       We primarily focus on products for gastrointestinal, food intolerances, diabetes and esoteric tests. These diagnostic test products utilize immunoassay technology. Some of these products have not yet been submitted for clearance by the Food and Drug Administration (“FDA”)or each country’s equivalent for diagnostic use, but can still be sold in various foreign countries without this approval.

RESULTS OF OPERATIONS

     Consolidated net sales for Biomerica were $1,410,110 for the three months ended August 31, 2016 as compared to $1,286,993 for the same period in the previous year. This represents an increase of $123,117, or 9.6%. The increase was primarily due to an increase of sales in Asia of approximately $142,000 and in the U.S. of $39,000 which was offset by a decrease of approximately $65,000 in Europe.

      For the three months ended August 31, 2016 as compared to August 31, 2015, cost of sales decreased as a percentage of sales from 67.3% of sales, or $865,572, to 59.1% of sales, or $833,148. Cost of sales as a percentage of sales decreased due to the higher volume of sales which contributed more towards covering fixed expenses in addition to lower material costs for products and mix of products sold.

      For the three months ended August 31, 2016 compared to 2015, selling, general and administrative costs increased by $78,688, or 23.2%. This was primarily due to a one-time Nasdaq entry fee of $45,000 and to higher legal fees and outside services.

      For the three months ended August 31, 2016 and 2015, research and development expenses were $224,246 as compared to $157,994, an increase of $66,252, or 41.9%. The increase was due to higher costs (materials, regulatory and wages) incurred in the development and approval of new products in the gastroenterology area.

      For the three months ended August 31, 2016 as compared to August 31, 2015, dividend and interest income increased from $3,934 to $10,215.

LIQUIDITY AND CAPITAL RESOURCES

       As of August 31, 2016 and May 31, 2016, the Company had cash and cash equivalents in the amount of $1,817,019 and $1,888,925 and working capital of $4,323,758 and $4,329,041, respectively.

       During the three months ended August 31, 2016 the Company’s operations used cash of $71,932­­ compared to cash used in operations of $195,643 in the same period of the prior fiscal year. Cash used by operations in fiscal 2017 was primarily a result of a decrease in accounts payable and accrued liabilities of $62,807 and an increase in prepaids and other assets of $21,650 as compared to fiscal 2016 which had increased accounts receivables of $87,835 and an increase in inventories of $81,710. Cash used in investing activities in fiscal 2017 was $0 compared to fiscal 2016 of $5,680.  Cash provided by financing activities in fiscal 2017 was $0 compared to $6,624 in fiscal 2016, primarily a result of the exercise of stock options.

Off Balance Sheet Arrangements – None.

CRITICAL ACCOUNTING POLICIES

The preparation of condensed 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 in the circumstances; however, actual results may differ from these estimates under different future conditions.

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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, and inventory reserve. 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.

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.  None.

Item 1A. RISKS AND UNCERTAINTIES.

You should read the following factors in conjunction with the factors discussed elsewhere in this and our other filings with the Securities and Exchange Commission and in materials incorporated by reference in these filings. The following is intended to highlight certain factors that may affect the financial condition and results of operations of Biomerica, Inc. and are not meant to be an exhaustive discussion of risks that apply to companies such as Biomerica, Inc. Like other businesses, Biomerica, Inc. is susceptible to macroeconomic downturns in the United States or abroad, as were experienced in recent history that may affect the general economic climate and performance of Biomerica, Inc. or its customers.

Aside from general macroeconomic downturns, the additional material factors that could affect future financial results include, but are not limited to: Terrorist attacks and the impact of such events; diminished access to raw materials that directly enter into our manufacturing process; shipping labor disruption or other major degradation of the ability to ship our products to end users; inability to successfully control our margins which are affected by many factors including competition and product mix; protracted shutdown of the U.S. border due to an escalation of terrorist or counter terrorist activity; any changes in our business relationships with international distributors or the economic climate they operate in; any event that has a material adverse impact on our foreign manufacturing operations may adversely affect our operations as a whole; failure to manage the future expansion of our business could have a material adverse effect on our revenues and profitability; possible costs or difficulty in complying with government regulations and the delays in receiving required regulatory approvals or the enactment of new adverse regulations or regulatory requirements; numerous competitors, some of which have substantially greater financial and other resources than we do; potential claims and litigation brought by patients or medical professionals alleging harm caused by the use of or exposure to our products; quarterly variations in operating results caused by a number of factors, including business and industry conditions; concentrations of sales with certain distributions could adversely affect the results of the Company if the Company were to lose the sales of that distributor and other factors beyond our control; high balances carried on accounts receivables from concentrated customers; and the costs of recalls, should such occasion arise. All these factors make it difficult to predict operating results for any particular period.

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Item 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. None.

Item 3.  DEFAULTS UPON SENIOR SECURITIES.  None.

Item 4.  MINE SAFETY DISCLOSURES. None.

Item 5.  OTHER INFORMATION.  None.

Item 6.  EXHIBITS.

The following exhibits are filed or furnished as part of this quarterly report on Form 10-Q:

Exhibit No.			Description
	31.1	*	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act — Zackary S. Irani
	31.2	*	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act — Janet Moore
	32.1	*	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act — Zackary S. Irani
	32.2	*	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act — Janet Moore
	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

           *Filed herewith.

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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 17, 2016
	By:	/S/ Zackary S. Irani
		Zackary S. Irani
		Chief Executive Officer
		(Principal Executive Officer)
Date:  October 17, 2016
	By:	/S/ Janet Moore
		Janet Moore
		Chief Financial Officer
		(Principal Financial Officer)

14

EX-31.1

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 subsidiary, 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 generally accepted accounting principles;

      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 17, 2016

/s/ Zackary S. Irani

Zackary S. Irani

Chief Executive Officer

(Principal Executive Officer) 

EX-31.2

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, Janet Moore, 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 subsidiary, 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 generally accepted accounting principles;

      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 17, 2016

/s/ Janet Moore

Janet Moore

Chief Financial Officer

(Principal Financial Officer)

EX-32.1

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 ending August 31, 2016, 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 17, 2016

EX-32.2

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 ending August 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Janet Moore, 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/ Janet Moore

Janet Moore

Chief Financial Officer

Date: October 17, 2016

XML

Document And Entity Information - shares	3 Months Ended
	Aug. 31, 2016	Oct. 17, 2016
Document and Entity Information [Abstract]
Entity Registrant Name	BIOMERICA INC.
Document Type	10-Q
Current Fiscal Year End Date	--05-31
Entity Common Stock, Shares Outstanding		8,184,673
Amendment Flag	false
Entity Central Index Key	0000073290
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Aug. 31, 2016
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q1

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED) - USD ($)	3 Months Ended
	Aug. 31, 2016	Aug. 31, 2015
Net sales	$ 1,410,110	$ 1,286,993
Cost of sales	(833,148)	(865,572)
Gross profit	576,962	421,421
Operating Expenses:
Selling, general and administrative	418,348	339,660
Research and development	224,246	157,994
Total operating expenses	642,594	497,654
Loss from operations	(65,632)	(76,233)
Other Income (Expense):
Dividend and interest income	10,215	3,934
Interest expense		(36)
Total other income	10,215	3,898
Loss before income tax	(55,417)	(72,335)
Provision for income taxes
Net loss	$ (55,417)	$ (72,335)
Basic net loss per common share (in Dollars per share)	$ (0.01)	$ (0.01)
Diluted net loss per common share (in Dollars per share)	$ (0.01)	$ (0.01)
Weighted average number of common and common equivalent shares:
Basic (in Shares)	8,169,673	7,582,056
Diluted (in Shares)	8,169,673	7,582,056
Net loss	$ (55,417)	$ (72,335)
Other comprehensive gain (loss), net of tax:
Foreign currency translation	26	(343)
Comprehensive loss	$ (55,391)	$ (72,678)

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Aug. 31, 2016	May 31, 2016
Current Assets:
Cash and cash equivalents	$ 1,817,019	$ 1,888,925
Accounts receivable, less allowance for doubtful accounts of $8,213 and $8,405 as of August 31, 2016 and May 31, 2016, respectively	969,016	969,474
Inventories, net	1,850,451	1,863,091
Prepaid expenses and other	132,186	113,578
Total Current Assets	4,768,672	4,835,068
Property and Equipment, net of accumulated depreciation and amortization of $1,460,871 and $1,423,900	343,688	380,659
Deferred Tax Assets	41,000	41,000
Investments	165,324	165,324
Intangible Assets, net	232,794	248,801
Other Assets	58,695	55,653
Total Assets	5,610,173	5,726,505
Current Liabilities:
Accounts payable and accrued expenses	263,177	333,485
Accrued compensation	181,737	172,542
Total Current Liabilities	444,914	506,027
Commitments and Contingencies (Note 6)
Shareholders' Equity:
Preferred stock, no par value authorized 5,000,000 shares, none issued and none outstanding at August 31, 2016 and May 31, 2016
Common stock, $0.08 par value authorized 25,000,000 shares, Issued and outstanding 8,169,673 at August 31, 2016 and May 31, 2016	653,573	653,573
Additional paid-in-capital	19,399,892	19,399,720
Accumulated other comprehensive loss	(13,560)	(13,586)
Accumulated deficit	(14,874,646)	(14,819,229)
Total Shareholders' Equity	5,165,259	5,220,478
Total Liabilities and Shareholders' Equity	$ 5,610,173	$ 5,726,505

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($)	Aug. 31, 2016	May 31, 2016
Allowance for doubtful accounts (in Dollars)	$ 8,213	$ 8,405
Accumulated depreciation and amortization (in Dollars)	$ 1,460,871	$ 1,423,900
Preferred Stock, No Par Value (in Dollars per share)	$ 0	$ 0
Preferred Stock, Shares Authorized	5,000,000	5,000,000
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Common stock par value (in Dollars per share)	$ 0.08	$ 0.08
Common stock, shares authorized	25,000,000	25,000,000
Common stock, shares issued	8,169,673	8,169,673
Common stock, shares outstanding	8,169,673	8,169,673

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($)	3 Months Ended
	Aug. 31, 2016	Aug. 31, 2015
Cash flows from operating activities:
Net loss	$ (55,417)	$ (72,335)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	52,978	58,874
Change in provision for losses on accounts receivable	(192)	(14,314)
Inventory reserve	(9,974)	(92)
Stock option expense	172	292
Decrease in deferred rent liability	(7,501)	(5,571)
Changes in assets and liabilities:
Accounts receivable	650	(87,835)
Inventories	22,614	(81,710)
Prepaid expenses and other assets	(21,650)	(13,737)
Accounts payable and accrued expenses	(62,807)	18,759
Accrued compensation	9,195	2,026
Net cash used in operating activities	(71,932)	(195,643)
Cash flows from investing activities:
Purchases of property and equipment		(5,680)
Net cash used in investing activities		(5,680)
Cash flows from financing activities:
Exercise of stock options		7,549
Increase in intangible assets		(925)
Net cash provided by financing activities		6,624
Effect of exchange rate changes in cash	26	(343)
Net decrease in cash and cash equivalents	(71,906)	(195,042)
Cash and cash equivalents at beginning of period	1,888,925	1,088,307
Cash and cash equivalents at end of period	$ 1,817,019	893,265
Cash paid during the period for:
Interest		$ 36

XML

Basis of Presentation

3 Months Ended

Aug. 31, 2016

Disclosure Text Block [Abstract]

Basis of Accounting [Text Block]

Note 1: Basis of Presentation

The information set forth in these condensed consolidated statements is unaudited and reflects all adjustments which, in the opinion of management, are necessary to present a fair statement of the consolidated results of operations of Biomerica, Inc. and subsidiaries (collectively the “Company”), for the periods indicated. It does not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America. All adjustments that were made are of a normal recurring nature.

The unaudited Condensed Consolidated Financial Statements and notes are presented as permitted by the requirements for Form 10-Q and do not contain certain information included in our annual financial statements and notes. The condensed consolidated balance sheet data as of May 31, 2016 was derived from audited financial statements. The accompanying interim condensed consolidated financial statements should be read in conjunction with the financial statements and related notes included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) for the fiscal year ended May 31, 2016. The results of operations for our interim periods are not necessarily indicative of results to be achieved for our full fiscal year.

XML

Significant Accounting Policies

3 Months Ended

Aug. 31, 2016

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

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 and Mexican subsidiary. The Mexican subsidiary has not begun operations. All significant intercompany accounts and transactions have been eliminated in consolidation.

Accounting Estimates

The preparation of 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 financial statements, and the reported amounts of revenues and expenses during the reported period. Actual results could materially differ from those estimates.

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

The Company extends unsecured credit to its customers on a regular basis.  International accounts are 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.  Credit levels are approved by designated upper level management.  Domestic customers are extended initial credit limits until they establish a history with the Company or submit credit information.  All increases in credit limits are also approved by designated upper level management.  Management evaluates receivables on a quarterly basis and adjusts the allowance for doubtful accounts accordingly.  Balances over ninety days old are usually reserved for unless collection is reasonably assured.  Management evaluates quarterly what items to charge off.  

Occasionally certain long-standing customers, who routinely place large orders, may 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. 

Inventories

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 market. 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 Company’s production facilities.

Inventories approximate the following at:

	August 31, 2016		May 31, 2016
Raw materials	$	871,000	$	942,000
Work in progress		681,000		690,000
Finished products		299,000		231,000
Total	$	1,851,000	$	1,863,000

Reserves for inventory obsolescence are reduced as necessary to reduce obsolete inventory to estimated realizable value or to specifically reserve for obsolete inventory that the Company intends to dispose of. As of August 31, 2016 and May 31, 2016 inventory reserves were approximately $42,000 and $52,000, 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 retired or otherwise disposed of, the related cost and accumulated depreciation or amortization is removed from the accounts, and gains or losses from 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 and leasehold improvements amounted to $36,971 and $40,151 for the three months ended August 31, 2016 and 2015, respectively.

Intangible Assets, net

Intangible assets include trademarks, product rights, licenses, technology rights and patents, and are accounted for based on Accounting Standards Codification (“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, licenses, and 17 years for patents. Amortization amounted to $16,007 and $18,723 for the three months ended August 31, 2016 and 2015, respectively.

Share-Based Compensation

The Company follows the guidance of the accounting provisions 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 valuation model that uses assumptions for expected volatility, expected dividends, expected forfeiture rate, expected term, and the risk-free interest rate.

Expected volatilities are based on weighted averages of the historical volatility of the Company’s stock and other factors 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 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 following summary presents the options and warrants granted, exercised, expired, cancelled and outstanding as of August 31, 2016:

		Exercise Price Weighted Average
	Option Shares
Outstanding May 31, 2016	1,199,000	$	0.81
Granted	55,000		1.55
Forfeited	(5,000)		0.96
Outstanding  August 31, 2016	1,249,000	$	0.84

       In the quarter ended August 31, 2016 options to acquire 55,000 shares of the Company’s common stock were granted at exercise prices ranging from $1.52 to $1.61 per share. 

Revenue Recognition

Revenues from product sales are recognized at the time the product is shipped, customarily FOB shipping point, at which point title passes. An allowance is established when necessary for estimated returns as revenue is recognized. In conjunction with sales to certain customers, the Company provides free products upon attaining certain levels of purchases by the customer. The Company accounts for these free products in accordance with ASC 605-50, Revenue Recognition – Customer Payments and Incentives and recognizes the cost of the product as part of cost of sales.

Investments

From time-to-time, the Company makes investments in privately-held companies.  The Company determines whether the fair values of any investments in privately-held entities have declined below their carrying value whenever adverse events or changes in circumstances indicate that recorded values may not be recoverable.  If the Company considers any such decline to be other than temporary (based on various factors, including historical financial results, and the overall health of the investee’s industry), a write-down to estimated fair value is recorded.  The Company currently has not written down the investment and no events have occurred which could indicate the carrying value to be less than the fair value. Investments represent the Company’s investment in a Polish distributor which is primarily engaged in distributing medical devices.  The Company owns approximately 6% of the investee, and accordingly, applies the cost method to account for the investment.  Under the cost method, investments are recorded at cost, with gains and losses recognized as of the sale date, and income recorded when received.

Shipping and Handling Fees and Costs

Shipping and handling fees billed to customers are classified as net sales and shipping and handling costs are classified as cost of sales. The Company included shipping and handling fees billed to customers in net sales. The Company included shipping and handling costs associated with inbound freight and unreimbursed shipping to customers in cost of sales.

Research and Development

Research and development costs are expensed as incurred.

Income Taxes

The Company has provided a valuation allowance of approximately $1,043,000 and $1,038,000 as of August 31, 2016 and May 31, 2016, respectively.

Foreign Currency Translation

The subsidiary located in Germany is accounted for primarily using local functional currency. Accordingly, assets and liabilities of this subsidiary 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 subsidiary in Mexico, although not operating, has two bank accounts which according to exchange rates in effect at the end of each period need to be adjusted for that fluctuation. The resulting adjustments are presented as a separate component of accumulated other comprehensive loss.

Deferred Rent

Incentive payments received from landlords are recorded as deferred lease incentives and are amortized over the underlying lease term on a straight-line basis as a reduction of rent expense. When the terms of an operating lease provide for periods of free rent, rent concessions, and/or rent escalations, the Company establishes a deferred rent liability for the difference between the scheduled rent payment and the straight-line rent expense recognized. This deferred rent liability is amortized over the underlying lease term on a straight-line basis as a reduction of rent expense.

Net Loss Per Share

Basic loss per share are computed as net loss or income 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 using the treasury stock method. The total amount of anti-dilutive warrants or options not included in the earnings per share calculation for the three months ended August 31, 2016 and 2015 was 1,249,000 and 1,109,852 respectively.

The following table illustrates the required disclosure of the reconciliation of the numerators and denominators of the basic and diluted earnings per share computations:

	Three Months Ended August 31,
	2016		2015
Numerator:
Loss from continuing operations	$	(55,417)	$	(72,335)
Denominator for basic net loss Per common share		8,169,673		7,582,056
Effect of dilutive securities:
Options		--		--
Denominator for diluted net loss per common share		8,169,673		7,582,056
Basic net loss per common share	$	(0.01)	$	(0.01)
Diluted net loss per common share	$	(0.01)	$	(0.01)

New Accounting Pronouncements

     In February 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2013-04, Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (“ASU 2013-04”). The amendments in ASU 2013-04 provide guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this update is fixed at the reporting date, except for obligations addressed within existing guidance in generally accepted accounting principles in the United States of America. The guidance requires an entity to measure those obligations as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. The guidance in this update also requires an entity to disclose the nature and amount of the obligation as well as other information about those obligations. The amendments in this standard are effective retrospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013, which corresponds to the Company’s first quarter of fiscal 2015. The adoption of ASU 2013-04 did not have a material impact on the Company’s consolidated financial statements.

      In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”).  ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services.  In adopting, ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach.  ASU 2014-09 is effective for the first interim period within annual reporting periods beginning December 15, 2016, and early adoption is not permitted.  Management is evaluating the provisions of this statement and has not determined what impact the adoption of ASU 2014-09 will have on the Company’s financial position or results of operations. During August 2015, the FASB voted to defer the effective date of the above mentioned revenue recognition guidance by one year to December 15, 2017 for interim and annual reporting periods beginning after that date and permitted early adoption of the standard, but not before the original effective date of December 15, 2016. Management is evaluating the provisions of this statement and has not determined what impact the adoption of ASU 2014-09 will have on the Company’s financial position or results of operations.

     In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory (“ASU-2015-11”). ASU 2015-11 applies to inventory that is measured using first-in, first-out (“FIFO”) or average cost.  An entity should measure inventory within the scope of ASU 2015-11 at the lower of cost and net realizable value.  Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.  The amendments in ASU 2015-11 more closely align the measurement of inventory in general accepted accounting principles of the United States of America with the measurement of inventory in International Financial Reporting Standards (“IFRS”).  ASU 2015-11 is effective for fiscal years beginning after December 31, 2016.  Management is evaluating the provisions of this statement and has not determined what impact the adoption of ASU 2015-11 will have on the Company’s financial position or results of operations.

         On November 20, 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes (“ASU-2015-17”).  The update eliminates the requirement to classify deferred tax assets and liabilities on a classified statement of financial position. ASU 2015-17 is effective for fiscal years beginning after December 15, 2015, and interim periods within those annual periods. Early adoption is permitted for financial statements as of the beginning of an interim or annual reporting period.  The Company chose to adopt ASU 2015-17 as of the fiscal quarter ended November 30, 2015.

         On January 5, 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU-2016-01”).  The release affects public and private companies that hold financial assets or owe financial liabilities.  ASU-2016-01 will take effect for public companies for fiscal years beginning after December 15, 2017. Management is evaluating the provisions of this statement and has not determined what impact the adoption of ASU- 2016-01 will have on the Company’s financial position or results of operations.

         On February 25, 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU-2016-02”).  ASU-2016-02 defines whether a contract is a lease. If it is a lease, the Company is required to recognize the lease assets and liabilities. ASU-2016-02 is effective for public companies for the annual periods beginning after December 15, 2018. Management is evaluating the provisions of this statement and has not determined what impact the adoption of ASU-2016-02 will have on the Company’s financial position or results of operations.

         On March 30, 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.  The update includes provisions intended to simplify various aspects of accounting for share-based compensation. ASU-2016-09 will take effect for public companies for the annual periods beginning after December 15, 2016. Management is evaluating the provisions of this statement and has not determined what impact the adoption of ASU-2016-09 will have on the Company’s financial position or results of operations.

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

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Accounts Payable and Accrued Expenses

3 Months Ended

Aug. 31, 2016

Payables and Accruals [Abstract]

Accounts Payable and Accrued Liabilities Disclosure [Text Block]

Note 3: Accounts Payable and Accrued Expenses

      The Company’s accounts payable and accrued expense balances consist of the following at:

	August 31, 2016		May 31, 2016
Accounts payable	$	263,177	$	325,984
Deferred rent		--		7,501
Total	$	263,177	$	333,485

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Shareholders' Equity

3 Months Ended

Aug. 31, 2016

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Note 4:  Shareholders’ Equity

     On August 24, 2016, the Company’s common stock was approved for listing on the Nasdaq Capital Market and began trading on that exchange on August 26, 2016 under the symbol “BMRA”.

     For the three months ended August 31, 2016, options to purchase 55,000 shares of the Company’s common stock were granted at exercise prices of $1.52 to $1.61.

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Geographic Information

3 Months Ended

Aug. 31, 2016

Geographic Information Disclosure [Abstract]

Geographic Information Disclosure [Text Block]

Note 5: Geographic Information

Financial information about foreign and domestic operations and export sales is approximately as follows:

	Three Months Ended August 31,
	2016		2015
Revenues from sales to unaffiliated customers:
United States	$	226,000	$	187,000
Asia		575,000		433,000
Europe		554,000		619,000
South America		16,000		17,000
Middle East		38,000		31,000
Other		1,000		--
	$	1,410,000	$	1,287,000

         No other geographic concentrations exist where net sales exceed 10% of total net sales.

     As of August 31, 2016 and May 31, 2016, approximately $592,000 and $659,000 of Biomerica’s gross inventory and approximately $23,000 and $26,000, of Biomerica’s property and equipment, net of accumulated depreciation and amortization, was located in Mexicali, Mexico, respectively.

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Commitments and Contingencies

3 Months Ended

Aug. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

Note 6: Commitments and Contingencies

On June 18, 2009, the Company entered into an agreement to lease a building in Irvine, California. The lease commenced September 1, 2009 and ended August 31, 2016.  The initial base rent was set at $18,490 per month with scheduled annual increases through the end of the lease term. The rent was $22,080. In November 2015, the Company signed the First Amendment to Lease to extend the lease until August 31, 2021.  The initial base rent for the lease amendment which starts September 1, 2016 is $21,000 per month.

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Accounting Policies, by Policy (Policies)

3 Months Ended

Aug. 31, 2016

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Biomerica, Inc. as well as its German subsidiary and Mexican subsidiary. The Mexican subsidiary has not begun operations. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates, Policy [Policy Text Block]

Accounting Estimates

The preparation of 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 financial statements, and the reported amounts of revenues and expenses during the reported period. Actual results could materially differ from those estimates.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

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

Trade and Other Accounts Receivable, Policy [Policy Text Block]

Accounts Receivable

The Company extends unsecured credit to its customers on a regular basis.  International accounts are 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.  Credit levels are approved by designated upper level management.  Domestic customers are extended initial credit limits until they establish a history with the Company or submit credit information.  All increases in credit limits are also approved by designated upper level management.  Management evaluates receivables on a quarterly basis and adjusts the allowance for doubtful accounts accordingly.  Balances over ninety days old are usually reserved for unless collection is reasonably assured.  Management evaluates quarterly what items to charge off.  

Occasionally certain long-standing customers, who routinely place large orders, may 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.

Inventory, Policy [Policy Text Block]

Inventories

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 market. 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 Company’s production facilities.

Inventories approximate the following at:

	August 31, 2016		May 31, 2016
Raw materials	$	871,000	$	942,000
Work in progress		681,000		690,000
Finished products		299,000		231,000
Total	$	1,851,000	$	1,863,000

Reserves for inventory obsolescence are reduced as necessary to reduce obsolete inventory to estimated realizable value or to specifically reserve for obsolete inventory that the Company intends to dispose of. As of August 31, 2016 and May 31, 2016 inventory reserves were approximately $42,000 and $52,000, respectively.

Property, Plant and Equipment, Policy [Policy Text Block]

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 retired or otherwise disposed of, the related cost and accumulated depreciation or amortization is removed from the accounts, and gains or losses from 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 and leasehold improvements amounted to $36,971 and $40,151 for the three months ended August 31, 2016 and 2015, respectively.

Intangible Assets, Finite-Lived, Policy [Policy Text Block]

Intangible Assets, net

Intangible assets include trademarks, product rights, licenses, technology rights and patents, and are accounted for based on Accounting Standards Codification (“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, licenses, and 17 years for patents. Amortization amounted to $16,007 and $18,723 for the three months ended August 31, 2016 and 2015, respectively.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Share-Based Compensation

The Company follows the guidance of the accounting provisions 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 valuation model that uses assumptions for expected volatility, expected dividends, expected forfeiture rate, expected term, and the risk-free interest rate.

Expected volatilities are based on weighted averages of the historical volatility of the Company’s stock and other factors 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 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 following summary presents the options and warrants granted, exercised, expired, cancelled and outstanding as of August 31, 2016:

		Exercise Price Weighted Average
	Option Shares
Outstanding May 31, 2016	1,199,000	$	0.81
Granted	55,000		1.55
Forfeited	(5,000)		0.96
Outstanding  August 31, 2016	1,249,000	$	0.84

       In the quarter ended August 31, 2016 options to acquire 55,000 shares of the Company’s common stock were granted at exercise prices ranging from $1.52 to $1.61 per share.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

Revenues from product sales are recognized at the time the product is shipped, customarily FOB shipping point, at which point title passes. An allowance is established when necessary for estimated returns as revenue is recognized. In conjunction with sales to certain customers, the Company provides free products upon attaining certain levels of purchases by the customer. The Company accounts for these free products in accordance with ASC 605-50, Revenue Recognition – Customer Payments and Incentives and recognizes the cost of the product as part of cost of sales.

Investment, Policy [Policy Text Block]

Investments

From time-to-time, the Company makes investments in privately-held companies.  The Company determines whether the fair values of any investments in privately-held entities have declined below their carrying value whenever adverse events or changes in circumstances indicate that recorded values may not be recoverable.  If the Company considers any such decline to be other than temporary (based on various factors, including historical financial results, and the overall health of the investee’s industry), a write-down to estimated fair value is recorded.  The Company currently has not written down the investment and no events have occurred which could indicate the carrying value to be less than the fair value. Investments represent the Company’s investment in a Polish distributor which is primarily engaged in distributing medical devices.  The Company owns approximately 6% of the investee, and accordingly, applies the cost method to account for the investment.  Under the cost method, investments are recorded at cost, with gains and losses recognized as of the sale date, and income recorded when received.

Shipping and Handling Cost, Policy [Policy Text Block]

Shipping and Handling Fees and Costs

Shipping and handling fees billed to customers are classified as net sales and shipping and handling costs are classified as cost of sales. The Company included shipping and handling fees billed to customers in net sales. The Company included shipping and handling costs associated with inbound freight and unreimbursed shipping to customers in cost of sales.

Research and Development Expense, Policy [Policy Text Block]

Research and Development

Research and development costs are expensed as incurred.

Income Tax, Policy [Policy Text Block]

Income Taxes

The Company has provided a valuation allowance of approximately $1,043,000 and $1,038,000 as of August 31, 2016 and May 31, 2016, respectively.

Foreign Currency Transactions and Translations Policy [Policy Text Block]

Foreign Currency Translation

The subsidiary located in Germany is accounted for primarily using local functional currency. Accordingly, assets and liabilities of this subsidiary 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 subsidiary in Mexico, although not operating, has two bank accounts which according to exchange rates in effect at the end of each period need to be adjusted for that fluctuation. The resulting adjustments are presented as a separate component of accumulated other comprehensive loss.

Deferred Charges, Policy [Policy Text Block]

Deferred Rent

Incentive payments received from landlords are recorded as deferred lease incentives and are amortized over the underlying lease term on a straight-line basis as a reduction of rent expense. When the terms of an operating lease provide for periods of free rent, rent concessions, and/or rent escalations, the Company establishes a deferred rent liability for the difference between the scheduled rent payment and the straight-line rent expense recognized. This deferred rent liability is amortized over the underlying lease term on a straight-line basis as a reduction of rent expense.

Earnings Per Share, Policy [Policy Text Block]

Net Loss Per Share

Basic loss per share are computed as net loss or income 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 using the treasury stock method. The total amount of anti-dilutive warrants or options not included in the earnings per share calculation for the three months ended August 31, 2016 and 2015 was 1,249,000 and 1,109,852 respectively.

The following table illustrates the required disclosure of the reconciliation of the numerators and denominators of the basic and diluted earnings per share computations:

	Three Months Ended August 31,
	2016		2015
Numerator:
Loss from continuing operations	$	(55,417)	$	(72,335)
Denominator for basic net loss Per common share		8,169,673		7,582,056
Effect of dilutive securities:
Options		--		--
Denominator for diluted net loss per common share		8,169,673		7,582,056
Basic net loss per common share	$	(0.01)	$	(0.01)
Diluted net loss per common share	$	(0.01)	$	(0.01)

New Accounting Pronouncements, Policy [Policy Text Block]

New Accounting Pronouncements

     In February 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2013-04, Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (“ASU 2013-04”). The amendments in ASU 2013-04 provide guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this update is fixed at the reporting date, except for obligations addressed within existing guidance in generally accepted accounting principles in the United States of America. The guidance requires an entity to measure those obligations as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. The guidance in this update also requires an entity to disclose the nature and amount of the obligation as well as other information about those obligations. The amendments in this standard are effective retrospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013, which corresponds to the Company’s first quarter of fiscal 2015. The adoption of ASU 2013-04 did not have a material impact on the Company’s consolidated financial statements.

      In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”).  ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services.  In adopting, ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach.  ASU 2014-09 is effective for the first interim period within annual reporting periods beginning December 15, 2016, and early adoption is not permitted.  Management is evaluating the provisions of this statement and has not determined what impact the adoption of ASU 2014-09 will have on the Company’s financial position or results of operations. During August 2015, the FASB voted to defer the effective date of the above mentioned revenue recognition guidance by one year to December 15, 2017 for interim and annual reporting periods beginning after that date and permitted early adoption of the standard, but not before the original effective date of December 15, 2016. Management is evaluating the provisions of this statement and has not determined what impact the adoption of ASU 2014-09 will have on the Company’s financial position or results of operations.

     In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory (“ASU-2015-11”). ASU 2015-11 applies to inventory that is measured using first-in, first-out (“FIFO”) or average cost.  An entity should measure inventory within the scope of ASU 2015-11 at the lower of cost and net realizable value.  Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.  The amendments in ASU 2015-11 more closely align the measurement of inventory in general accepted accounting principles of the United States of America with the measurement of inventory in International Financial Reporting Standards (“IFRS”).  ASU 2015-11 is effective for fiscal years beginning after December 31, 2016.  Management is evaluating the provisions of this statement and has not determined what impact the adoption of ASU 2015-11 will have on the Company’s financial position or results of operations.

         On November 20, 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes (“ASU-2015-17”).  The update eliminates the requirement to classify deferred tax assets and liabilities on a classified statement of financial position. ASU 2015-17 is effective for fiscal years beginning after December 15, 2015, and interim periods within those annual periods. Early adoption is permitted for financial statements as of the beginning of an interim or annual reporting period.  The Company chose to adopt ASU 2015-17 as of the fiscal quarter ended November 30, 2015.

         On January 5, 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU-2016-01”).  The release affects public and private companies that hold financial assets or owe financial liabilities.  ASU-2016-01 will take effect for public companies for fiscal years beginning after December 15, 2017. Management is evaluating the provisions of this statement and has not determined what impact the adoption of ASU- 2016-01 will have on the Company’s financial position or results of operations.

         On February 25, 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU-2016-02”).  ASU-2016-02 defines whether a contract is a lease. If it is a lease, the Company is required to recognize the lease assets and liabilities. ASU-2016-02 is effective for public companies for the annual periods beginning after December 15, 2018. Management is evaluating the provisions of this statement and has not determined what impact the adoption of ASU-2016-02 will have on the Company’s financial position or results of operations.

         On March 30, 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.  The update includes provisions intended to simplify various aspects of accounting for share-based compensation. ASU-2016-09 will take effect for public companies for the annual periods beginning after December 15, 2016. Management is evaluating the provisions of this statement and has not determined what impact the adoption of ASU-2016-09 will have on the Company’s financial position or results of operations.

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

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Significant Accounting Policies (Tables)

3 Months Ended

Aug. 31, 2016

Accounting Policies [Abstract]

Schedule of Inventory, Current [Table Text Block]

	August 31, 2016		May 31, 2016
Raw materials	$	871,000	$	942,000
Work in progress		681,000		690,000
Finished products		299,000		231,000
Total	$	1,851,000	$	1,863,000

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

		Exercise Price Weighted Average
	Option Shares
Outstanding May 31, 2016	1,199,000	$	0.81
Granted	55,000		1.55
Forfeited	(5,000)		0.96
Outstanding  August 31, 2016	1,249,000	$	0.84

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended August 31,
	2016		2015
Numerator:
Loss from continuing operations	$	(55,417)	$	(72,335)
Denominator for basic net loss Per common share		8,169,673		7,582,056
Effect of dilutive securities:
Options		--		--
Denominator for diluted net loss per common share		8,169,673		7,582,056
Basic net loss per common share	$	(0.01)	$	(0.01)
Diluted net loss per common share	$	(0.01)	$	(0.01)

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Accounts Payable and Accrued Expenses (Tables)

3 Months Ended

Aug. 31, 2016

Payables and Accruals [Abstract]

Schedule of Accounts Payable and Accrued Liabilities [Table Text Block]

	August 31, 2016		May 31, 2016
Accounts payable	$	263,177	$	325,984
Deferred rent		--		7,501
Total	$	263,177	$	333,485

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Geographic Information (Tables)

3 Months Ended

Aug. 31, 2016

Geographic Information Disclosure [Abstract]

Revenue from External Customers by Geographic Areas [Table Text Block]

	Three Months Ended August 31,
	2016		2015
Revenues from sales to unaffiliated customers:
United States	$	226,000	$	187,000
Asia		575,000		433,000
Europe		554,000		619,000
South America		16,000		17,000
Middle East		38,000		31,000
Other		1,000		--
	$	1,410,000	$	1,287,000

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Significant Accounting Policies (Details) - USD ($)	3 Months Ended
	Aug. 31, 2016	Aug. 31, 2015	May 31, 2016
Significant Accounting Policies (Details) [Line Items]
Threshold Period Past Due for Write-off of Trade Accounts Receivable	90 days
Inventory Valuation Reserves	$ 42,000		$ 52,000
Depreciation, Depletion and Amortization	36,971	$ 40,151
Amortization of Intangible Assets	$ 16,007	$ 18,723
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in Shares)	55,000
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Lower Range Limit (in Dollars per share)	$ 1.52
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Upper Range Limit (in Dollars per share)	$ 1.61
Deferred Tax Assets, Valuation Allowance	$ 1,043,000		$ 1,038,000
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in Shares)	1,249,000	1,109,852
Investment In Polish Distributor [Member]
Significant Accounting Policies (Details) [Line Items]
Equity Method Investment, Ownership Percentage	6.00%
Minimum [Member]
Significant Accounting Policies (Details) [Line Items]
Property, Plant and Equipment, Useful Life	5 years
Minimum [Member] | Technology-Based Intangible Assets [Member]
Significant Accounting Policies (Details) [Line Items]
Finite-Lived Intangible Asset, Useful Life	10 years
Minimum [Member] | Patents [Member]
Significant Accounting Policies (Details) [Line Items]
Finite-Lived Intangible Asset, Useful Life	17 years
Maximum [Member]
Significant Accounting Policies (Details) [Line Items]
Property, Plant and Equipment, Useful Life	10 years
Maximum [Member] | Marketing-Related Intangible Assets [Member]
Significant Accounting Policies (Details) [Line Items]
Finite-Lived Intangible Asset, Useful Life	18 years

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Significant Accounting Policies (Details) - Inventories - USD ($)	Aug. 31, 2016	May 31, 2016
Inventories [Abstract]
Raw materials	$ 871,000	$ 942,000
Work in progress	681,000	690,000
Finished products	299,000	231,000
Total	$ 1,850,451	$ 1,863,091

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Significant Accounting Policies (Details) - Options Activity	3 Months Ended
	Aug. 31, 2016 $ / shares shares
Options Activity [Abstract]
Outstanding May 31, 2016 | shares	1,199,000
Outstanding May 31, 2016 | $ / shares	$ 0.81
Granted | shares	55,000
Granted | $ / shares	$ 1.55
Forfeited | shares	(5,000)
Forfeited | $ / shares	$ 0.96
Outstanding August 31, 2016 | shares	1,249,000
Outstanding August 31, 2016 | $ / shares	$ 0.84

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Significant Accounting Policies (Details) - Reconciliation of the numerators and denominators of the basic and diluted earnings per share - USD ($)	3 Months Ended
	Aug. 31, 2016	Aug. 31, 2015
Numerator:
Loss from continuing operations (in Dollars)	$ (55,417)	$ (72,335)
Denominator for basic net loss Per common share	8,169,673	7,582,056
Effect of dilutive securities:
Options
Denominator for diluted net loss per common share	8,169,673	7,582,056
Basic net loss per common share (in Dollars per share)	$ (0.01)	$ (0.01)
Diluted net loss per common share (in Dollars per share)	$ (0.01)	$ (0.01)

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Accounts Payable and Accrued Expenses (Details) - Accounts payable and accrued expense balances - USD ($)	Aug. 31, 2016	May 31, 2016
Accounts payable and accrued expense balances [Abstract]
Accounts payable	$ 263,177	$ 325,984
Deferred rent		7,501
Total	$ 263,177	$ 333,485

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Shareholders' Equity (Details)	3 Months Ended
	Aug. 31, 2016 $ / shares shares
Stockholders' Equity Note [Abstract]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in Shares) | shares	55,000
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Lower Range Limit	$ 1.52
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Upper Range Limit	$ 1.61

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Geographic Information (Details) - USD ($)	3 Months Ended
	Aug. 31, 2016	May 31, 2016
Geographic Information (Details) [Line Items]
Property, Plant and Equipment, Net	$ 343,688	$ 380,659
MEXICO
Geographic Information (Details) [Line Items]
Inventory, Gross	592,000	659,000
Property, Plant and Equipment, Net	$ 23,000	$ 26,000
Geographic Concentration Risk [Member]
Geographic Information (Details) [Line Items]
Concentration Risk, Percentage	10.00%

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Geographic Information (Details) - Financial information about foreign and domestic operations and export sales - USD ($)	3 Months Ended
	Aug. 31, 2016	Aug. 31, 2015
Revenues from sales to unaffiliated customers:
Net Sales	$ 1,410,110	$ 1,286,993
UNITED STATES
Revenues from sales to unaffiliated customers:
Net Sales	226,000	187,000
Asia [Member]
Revenues from sales to unaffiliated customers:
Net Sales	575,000	433,000
Europe [Member]
Revenues from sales to unaffiliated customers:
Net Sales	554,000	619,000
South America [Member]
Revenues from sales to unaffiliated customers:
Net Sales	16,000	17,000
Middle East [Member]
Revenues from sales to unaffiliated customers:
Net Sales	38,000	31,000
Other Foreign [Member]
Revenues from sales to unaffiliated customers:
Net Sales	$ 1,000

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Commitments and Contingencies (Details) - Operating Lease Rental [Member] - Building In Irvine California [Member]	3 Months Ended
	Aug. 31, 2016 USD ($)
Commitments and Contingencies (Details) [Line Items]
Operating Lease Initiation Date	Sep. 01, 2009
Lease Expiration Date	Aug. 31, 2016
Operating Leases, Rent Expense, Minimum Rentals	$ 18,490
Operating Leases, Rent Expense, Contingent Rentals	$ 22,080
First Amendment To Lease [Member]
Commitments and Contingencies (Details) [Line Items]
Operating Lease Initiation Date	Sep. 01, 2016
Lease Expiration Date	Aug. 31, 2021
Operating Leases, Rent Expense, Minimum Rentals	$ 21,000