10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 2022 or

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

Commission File Number:  001-37863

BIOMERICA, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation of organization)	95-2645573 (I.R.S. Employer Identification No.)
17571 Von Karman Avenue, Irvine, CA (Address of principal executive offices)	92614 (Zip Code)

REGISTRANT'S TELEPHONE NUMBER:

(949) 645-2111

Securities registered under Section 12(b) of the Exchange Act:

(Title of each class)

COMMON STOCK, PAR VALUE $0.08

(Name of each exchange on which registered)

NASDAQ Capital Market

(Trading symbol)

BMRA

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, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (paragraph 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

         Yes [X] No [_]

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

Large accelerated filer [  ]	Accelerated filer   [  ]
Non-accelerated filer   [X]	Smaller reporting company [X]
	Emerging growth company [  ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [_]

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

         Yes [_] No [X]

The number of shares of the registrant's common stock outstanding as of January 11, 2023 was 13,479,413.

BIOMERICA, INC.

INDEX

PART I	Financial Information
Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets (unaudited) – November 30, 2022 and May 31, 2022	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) – Three and Six Months Ended November 30, 2022 and 2021	2
	Condensed Consolidated Statements of Shareholders’ Equity (unaudited) – Three and Six Months Ended November 30, 2022 and 2021	3
	Condensed Consolidated Statements of Cash Flows (unaudited) – Six Months Ended November 30, 2022 and 2021	4
	Notes to Condensed Consolidated Financial Statements (unaudited)	5 - 12
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	13 - 17
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	17
Item 4.	Controls and Procedures	17 - 18
PART II	Other Information
Item 1.	Legal Proceedings	18
Item 1A.	Risk Factors	18
Item 5.	Other Information	18
Item 6.	Exhibits	19
	Signatures	20

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BIOMERICA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	November 30, 2022		May 31, 2022
Assets
Current Assets:
Cash and cash equivalents	$	5,066,521	$	5,916,983
Accounts receivable, less allowance for doubtful accounts      of $522,234 and $153,231 as of November 30, 2022 and May 31, 2022, respectively		850,014		773,818
Inventories, net of inventory reserves     of $773,916 and $845,549 as of November 30, 2022 and May 31, 2022, respectively		2,061,444		2,416,447
Prepaid expenses and other		120,721		320,283
Total current assets		8,098,700		9,427,531
Property and equipment, net of accumulated depreciation and amortization      of $1,317,141 and $1,305,360 as of November 30, 2022 and May 31, 2022, respectively		236,719		214,487
Right of use assets, net of accumulated amortization     of $859,269 and $724,802 as of November 30, 2022 and May 31, 2022, respectively		1,169,456		1,301,834
Investments		165,324		165,324
Intangible assets, net of accumulated amortization     of $24,327 and $18,994 as of November 30, 2022 and May 31, 2022, respectively		157,694		169,516
Other assets		79,654		95,588
Total Assets	$	9,907,547	$	11,374,280
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable and accrued expenses	$	670,074	$	972,372
Accrued compensation		697,179		646,944
Advance from customers		49,013		50,670
Lease liability, current portion		346,937		341,296
Total current liabilities		1,763,203		2,011,282
Lease liability, net of current portion		901,449		1,038,284
Total Liabilities		2,664,652		3,049,566
Commitments and contingencies (Notes 5 and 6)
Shareholders' Equity:
Common stock, $0.08 par value, 25,000,000 shares authorized, 13,479,413 and 12,867,924 issued and outstanding at November 30, 2022 and May 31, 2022,  respectively		1,078,353		1,029,432
Additional paid-in-capital		45,035,298		42,446,597
Accumulated other comprehensive loss		(95,413)		(73,936)
Accumulated deficit		(38,775,343)		(35,077,379)
Total Shareholders' Equity		7,242,895		8,324,714
Total Liabilities and Shareholders' Equity	$	9,907,547	$	11,374,280
The accompanying notes are an integral part of these statements.

1

BIOMERICA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS (UNAUDITED)

	Three Months Ended				Six Months Ended
		November 30, 2022		November 30, 2021		November 30, 2022		November 30, 2021
Net sales	$	1,481,915	$	4,646,900	$	3,119,350	$	5,908,687
Cost of sales		(1,130,040)		(3,875,141)		(2,822,430)		(5,225,898)
Gross profit		351,875		771,759		296,920		682,789
Operating expenses:
Selling, general and administrative		1,556,022		1,353,587		3,209,843		2,423,442
Research and development		461,941		547,933		823,112		929,477
Total operating expenses		2,017,963		1,901,520		4,032,955		3,352,919
Loss from operations		(1,666,088)		(1,129,761)		(3,736,035)		(2,670,130)
Other income:
Dividend and interest income		41,254		6,916		41,282		13,721
Loss before income taxes		(1,624,834)		(1,122,845)		(3,694,753)		(2,656,409)
Provision for income taxes		(1,254)		(2,429)		(3,211)		(11,446)
Net loss	$	(1,626,088)	$	(1,125,274)	$	(3,697,964)	$	(2,667,855)
Basic net loss per common share	$	(0.12)	$	(0.09)	$	(0.28)	$	(0.21)
Diluted net loss per common share	$	(0.12)	$	(0.09)	$	(0.28)	$	(0.21)
Weighted average number of common and common equivalent shares:
Basic		13,455,166		12,592,341		13,271,845		12,509,110
Diluted		13,455,166		12,592,341		13,271,845		12,509,110
Net loss	$	(1,626,088)	$	(1,125,274)	$	(3,697,964)	$	(2,667,855)
Other comprehensive loss, net of tax:
Foreign currency translation		(8,950)		(4,750)		(21,477)		(10,363)
Comprehensive loss	$	(1,635,038)	$	(1,130,024)	$	(3,719,441)	$	(2,678,218)
The accompanying notes are an integral part of these statements.

2

BIOMERICA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)

	Common Stock			Additional  Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total
	Shares	Amount
Balances, May 31, 2022	12,867,924	$	1,029,432	$	42,446,597	$	(73,936)	$	(35,077,379)	$	8,324,714
Exercise of stock options	15,000		1,200		12,750		-		-		13,950
Net proceeds from ATM	523,977		41,918		1,721,650		-		-		1,763,568
Foreign currency translation	-		-		-		(12,527)		-		(12,527)
Stock option expense	-		-		303,755		-		-		303,755
Net loss	-		-		-		-		(2,071,876)		(2,071,876)
Balances, August 31, 2022	13,406,901		1,072,550		44,484,752		(86,463)		(37,149,255)		8,321,584
Exercise of stock options	31,500		2,520		62,685		-		-		65,205
Net proceeds from ATM	41,012		3,283		169,631		-		-		172,914
Foreign currency translation	-		-		-		(8,950)		-		(8,950)
Stock option expense	-		-		318,230		-		-		318,230
Net loss	-		-		-		-		(1,626,088)		(1,626,088)
Balances, November 30, 2022	13,479,413	$	1,078,353	$	45,035,298	$	(95,413)	$	(38,775,343)	$	7,242,895
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit
	Shares	Amount								Total
Balances, May 31, 2021	12,307,157	$	984,571	$	38,836,743	$	(47,956)	$	(30,546,335)	$	9,227,023
Exercise of stock options	1,500		120		3,775		-		-		3,895
Net proceeds from ATM	201,553		16,124		784,586		-		-		800,710
Foreign currency translation	-		-		-		(5,613)		-		(5,613)
Stock option expense	-		-		319,622		-		-		319,622
Net loss	-		-		-		-		(1,542,581)		(1,542,581)
Balances, August 31, 2021	12,510,210		1,000,815		39,944,726		(53,569)		(32,088,916)		8,803,056
Exercise of stock options	20,000		1,600		28,985		-		-		30,585
Net proceeds from ATM	162,117		12,970		870,443		-		-		883,413
Foreign currency translation	-		-		-		(4,750)		-		(4,750)
Stock option expense	-		-		314,397		-		-		314,397
Net loss	-		-		-		-		(1,125,274)		(1,125,274)
Balances, November 30, 2021	12,692,327	$	1,015,385	$	41,158,551	$	(58,319)	$	(33,214,190)	$	8,901,427
The accompanying notes are an integral part of these statements.

3

BIOMERICA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended
	November 30, 2022		November 30, 2021
Cash flows from operating activities:
Net loss	$	(3,697,964)	$	(2,667,855)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		47,690		68,668
Provision for allowance on accounts receivable		369,003		(809,638)
Inventory reserve		(71,633)		181,825
Stock option expense		621,985		634,019
Amortization of right-of-use asset		134,467		126,039
Changes in assets and liabilities:
Accounts receivable		(445,199)		1,139,450
Inventories		426,636		42,229
Prepaid expenses and other		199,562		(726,460)
Other assets		15,933		114,570
Accounts payable and accrued expenses		(302,299)		997,327
Accrued compensation		50,235		285,431
Advance from customers		(1,657)		2,150,466
Reduction in lease liability		(133,283)		(117,321)
Net cash (used in) provided by operating activities		(2,786,524)		1,418,750
Cash flows from investing activities:
Expenditures related to intangibles		-		(108,917)
Purchases of property and equipment		(58,098)		(18,212)
Net cash used in investing activities		(58,098)		(127,129)
Cash flows from financing activities:
Gross proceeds from sale of common stock		1,988,422		1,751,222
Costs from sale of common stock		(51,940)		(67,108)
Proceeds from exercise of stock options		79,155		34,480
Net cash provided by financing activities		2,015,637		1,718,594
Effect of exchange rate changes on cash		(21,477)		(10,363)
Net (decrease) increase in cash and cash equivalents		(850,462)		2,999,852
Cash and cash equivalents at beginning of year		5,916,983		4,199,311
Cash and cash equivalents at end of the period	$	5,066,521	$	7,199,163
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Income taxes	$	3,211	$	10,646
Non-cash investing and financing activities:
Increase in right-of-use asset due to CPI rent adjustment	$	2,089	$	-
Increase in lease liability due to CPI rent adjustment	$	2,089	$	-
Write off of intangible assets, cost	$	6,489	$	-
Write off of intangible assets, accumulated amortization	$	850	$	-
The accompanying notes are an integral part of these statements.

4

BIOMERICA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1:  BASIS OF PRESENTATION

Biomerica, Inc. and its subsidiaries (which includes wholly-owned subsidiaries, Biomerica de Mexico and BioEurope GmbH) is a biomedical technology company that develops, patents, manufactures and markets advanced diagnostic and therapeutic products used at the point-of-care (physicians' offices and over-the-counter through drugstores and online) and in hospital/clinical laboratories for detection and/or treatment of medical conditions and diseases. Our diagnostic test kits are used to analyze blood, urine, nasal or fecal material from patients in the diagnosis of various diseases, food intolerances and other medical complications, or to measure the level of specific hormones, antibodies, antigens or other substances, which may exist in the human body in extremely small concentrations. The Company's products are designed to enhance the health and well-being of people, while reducing total healthcare costs.

Our primary focus is the research, development, commercialization, and in certain cases regulatory approval, of patented, diagnostic-guided therapy (“DGT”) products based on our InFoods^® Technology platform that are designed to treat gastrointestinal diseases, such as irritable bowel syndrome (“IBS”), and other inflammatory diseases. These InFoods^® based products are directed at chronic inflammatory illnesses that are widespread and common, and as such address very large markets. The first product we are launching using the patented InFoods Technology is our InFoods® IBS product which uses a simple blood sample and is designed to identify patient-specific foods that, when removed from the diet, may alleviate IBS symptoms such as pain, bloating, diarrhea, cramping and constipation. Instead of broad and difficult-to-manage dietary restrictions, the InFoods® IBS product works by identifying a patient’s above normal immunoreactivity to specific foods.  A food identified as causing an abnormal immune response in the patient is simply removed from the diet to help alleviate IBS symptoms. We are currently working with key gastroenterology (GI) physician groups who are interested in offering this product to their patients. As such, we are expecting to begin generating revenues from the launch of our InFoods^® IBS product during our fiscal third quarter ending February 28, 2023.

Our existing medical diagnostic products are sold worldwide primarily in two markets: 1) clinical laboratories and 2) point-of-care (physicians' offices and over-the-counter at Walmart, Amazon, and Walgreens). The diagnostic test kits are used to analyze blood, urine, nasal or fecal specimens from patients in the diagnosis of various diseases, food intolerances and other medical complications, by measuring or detecting the existence and/or level of specific bacteria, hormones, antibodies, antigens, or other substances, which may exist in a patient’s body, stools, or blood, often in extremely small concentrations.

Due to the global 2019 SARS-CoV-2 novel coronavirus pandemic, in March 2020 we began developing COVID-19 products to indicate if a person has been infected by COVID-19 or is currently infected. While we initially offered a COVID-19 antibody diagnostic test to determine if a person has previously been infected by the COVID-19 virus, all of our COVID-19 revenues in fiscal 2022 and 2023 have come from international sales of our COVID-19 antigen tests that use a patient’s nasal fluid sample to detect if the patient is currently infected with the virus. Due to falling demand, approximately 13% of our revenues during the six months ended November 30, 2022 were from sales of our COVID-19 related products, as compared to 57% of our revenue during the six months ended November 30, 2021.   

Our non-COVID-19 products that accounted for approximately 87% and 43% of our revenues during the six months ended November 30, 2022 and 2021, respectively, are primarily focused on gastrointestinal diseases, food intolerances, and certain esoteric tests. These diagnostic test products utilize immunoassay technology. Most of our products are CE marked and/or sold for diagnostic use where they are registered by each country’s regulatory agency. In addition, some products are cleared for sale in the United States by the FDA.

The unaudited consolidated financial statements herein have been prepared by management pursuant to the rules and regulations of the United States Securities and Exchange Commission ("SEC"). The accompanying interim unaudited consolidated financial statements have been prepared under the presumption that users of the interim financial information have either read or have access to the audited consolidated financial statements for the latest fiscal year ended May 31, 2022. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the six months ended November 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending May 31, 2023. For further information, refer to the audited consolidated financial statements and notes thereto for the fiscal year ended May 31, 2022 included in the Company's Annual Report on Form 10-K filed with the SEC on August 29, 2022. Management has evaluated all subsequent events and transactions through the date of filing this report.

5

NOTE 2:  SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The condensed consolidated financial statements include the accounts of Biomerica, Inc. as well as its German subsidiary (BioEurope GmbH) and Mexican subsidiary (Biomerica de Mexico). All significant intercompany accounts and transactions have been eliminated in consolidation.

ACCOUNTING ESTIMATES

The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reported period. Estimates that are made include the allowance for doubtful accounts, which is estimated based on current as well as historical experience with a customer; stock option forfeiture rates, which are calculated based on historical data; inventory obsolescence, which is based on projected and historical usage of materials; and lease liability and right-of-use assets, which are calculated based on certain assumptions such as borrowing rate, the likelihood of lease extensions to occur, asset valuation, among other things; and other items that may be necessary to estimate using current, historical and judgment based information. Actual results could materially differ from those estimates.

MARKETS AND METHODS OF DISTRIBUTION

Due to global and economic disruptions caused by the Coronavirus global pandemic, and the ongoing war in Ukraine, the Company’s operations have been negatively impacted. The Company has faced disruptions in certain of the following areas, and may face further challenges from supply chain disruptions, cost inflation, loss of contracts and/or customers, closure of the facilities of the Company’s suppliers, partners and customers, travel, shipping and logistical disruptions, government responses of all types, international business risks in countries where the Company makes and/or sells its products, loss of human capital or personnel at the Company, its partners and its customers, interruptions of production, customer credit risk, and general economic calamities. These ongoing pandemic and war related disruptions have materially negatively impacted the Company’s operations and financial performance and may continue to have significant material negative impacts on the Company.

LIQUIDITY

The Company has incurred net losses and negative cash flows from operations and has an accumulated deficit of approximately $38.8 million as of November 30, 2022. Management expects to continue to incur significant costs as it advances its clinical trials, product launches, and product development activities. As of November 30, 2022, the Company had cash and cash equivalents of approximately $5,067,000 and working capital of approximately $6,335,000.

On July 21, 2020, the Company filed with the SEC a “shelf” registration statement on Form S-3. The registration statement registers common shares that may be issued by the Company in a maximum aggregate amount of up to $90,000,000.  Shares of the Company’s common stock may be sold from time to time under this registration statement for up to three years from the filing date. On January 22, 2021, the Company filed a prospectus supplement for the sale of up to $15,000,000 of shares of our common stock in an at-the-market offering (“ATM Offering”) under the shelf registration statement, of which approximately $9,400,000, remains available for sale under the prospectus supplement.

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

The sales agent under the ATM Offering agrees to use commercially reasonable efforts to sell on the Company’s behalf all of the shares requested to be sold from time to time by the Company, consistent with its normal trading and sales practices, on mutually agreed terms between the sales agent and the Company. The Company has no obligation to sell any of the shares under the ATM Offering, and may at any time suspend offers under, or terminate the ATM Offering.

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

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

6

CONCENTRATION OF CREDIT RISK

The Company maintains cash balances at certain financial institutions in excess of amounts insured by federal agencies. As of November 30, 2022, the Company had approximately $4,825,000 of uninsured cash. The Company does not believe it is exposed to any significant credit risks.

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

For the three months ended November 30, 2022 and 2021, the Company had two and one key customers who are located in Asia and the United States which accounted for 48% and 59% of net consolidated sales, respectively. For the six months ended November 30, 2022 and 2021, the Company had one and two key customers who are located in Asia which accounted for 44% and 66% of net consolidated sales, respectively.

Total gross receivables on November 30, 2022 and May 31, 2022 were approximately $1,372,000 and $927,000, respectively. On November 30, 2022 and May 31, 2022, the Company had two and one key customers who are located in foreign countries which accounted for a total of 75% and 50%, respectively, of gross accounts receivable.

For the three months ended November 30, 2022 and 2021, the Company had one key vendor which accounted for 12% and 83% of the purchases of raw materials, respectively. For the six months ended November 30, 2022 and 2021, the Company had one key vendor which accounted for 8% and 77% of the purchases of raw materials, respectively.

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

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 usually required to prepay until they establish a history with the Company and at that time, they are extended credit at levels based on a number of criteria. Based on various criteria, initial credit levels for individual distributors are approved by designated officers and managers of the Company. All increases in credit limits are also approved by designated upper-level management. 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.  

Occasionally certain long-standing customers, who routinely place large orders, will have unusually large receivables balances relative to the total gross receivables. Management monitors the payments for these large balances closely and very often requires payment of existing invoices before shipping new sales orders.

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

PREPAID EXPENSES AND OTHER

The Company occasionally prepays for items such as inventory, insurance, and other items.  These items are reported as prepaid expenses and other, until either the inventory is physically received, or the insurance and other items are expensed.

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

INVENTORIES, NET

The Company values inventory at the lower of cost (determined using a combination of specific lot identification and the first-in, first-out methods) or net realizable value. Management periodically reviews inventory for excess quantities and obsolescence. Management evaluates quantities on hand, physical condition, and technical functionality as these characteristics may be impacted by anticipated customer demand for current products and new product introductions. The reserve is adjusted based on such evaluation, with a corresponding provision included in cost of sales. Abnormal amounts of idle facility expenses, freight, handling costs and wasted material are recognized as current period charges and the allocation of fixed production overhead is based on the normal capacity of the production facilities. As of November 30, 2022, and May 31, 2022, inventory reserves were approximately $774,000 and $846,000, respectively.

7

Net inventories are approximately the following:

	November 30, 2022		May 31, 2022
Raw materials	$	1,685,000	$	1,717,000
Work in progress		811,000		763,000
Finished products		339,000		782,000
Total gross inventory	$	2,835,000	$	3,262,000
Inventory reserves		(774,000)		(846,000)
Net inventory	$	2,061,000	$	2,416,000

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

PROPERTY AND EQUIPMENT, NET

Property and equipment are stated at cost. Expenditures for additions and major improvements are capitalized. Repairs and maintenance costs are charged to operations as incurred. When property and equipment are sold, retired or otherwise disposed of, the related cost and accumulated depreciation or amortization are removed from the accounts, and gains or losses from sales, retirements and dispositions are credited or charged to income.

Depreciation and amortization are provided over the estimated useful lives of the related assets, ranging from 5 to 10 years, using the straight-line method. Leasehold improvements are amortized over the lesser of the estimated useful life of the asset or the term of the lease. Depreciation and amortization expense on property and equipment were approximately $16,000 and $26,000 for the three months ended November 30, 2022 and 2021, respectively, and approximately $36,000 and $54,000 for the six months ended November 30, 2022 and 2021, respectively.

INTANGIBLE ASSETS, NET

Intangible assets include trademarks, product rights, technology rights and patents, and are accounted for based on Accounting Standards Codification (“ASC”), ASC 350 Intangibles – Goodwill and Other (“ASC 350”). In that regard, intangible assets that have indefinite useful lives are not amortized but are tested annually for impairment or more frequently if events or changes in circumstances indicate that the asset might be impaired.

Intangible assets are being amortized using the straight-line method over the useful life, not to exceed 18 years for marketing and distribution rights, 10 years for purchased technology use rights, and 20 years for patents. Amortization expense was approximately $3,000 and $7,000 for the three months ended November 30, 2022 and 2021, respectively, and approximately $12,000 and $14,000 for the six months ended November 30, 2022 and 2021, respectively. Amortizing intangible assets are tested for impairment if management determines that events or changes in circumstances indicate that the asset might be impaired.

The Company assesses the recoverability of these intangible assets by determining whether the amortization of the asset’s balance over its remaining life can be recovered through projected undiscounted future cash flows. As of November 30, 2022 and 2021, an impairment adjustment was made of $6,000 and $0, respectively.

INVESTMENTS

From time-to-time, the Company makes investments in privately held companies. Investments represent the Company’s investment in a Polish distributor, which is primarily engaged in distributing medical products and devices, including the distribution of the products sold by the Company. The Company invested approximately $165,000 into the Polish distributor and owns approximately 6% of the investee.

Equity holdings in nonmarketable unconsolidated entities in which the Company is not able to exercise significant influence ("Cost Method Holdings") are accounted for at the Company's initial cost, minus any impairment (if any), plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar holding or security of the same issuer. Dividends received are recorded as other income.

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The Company assesses its equity holdings for impairment whenever events or changes in circumstances indicate that the carrying value of an equity holding may not be recoverable. Management reviewed the underlying net assets of the Company's equity method holding as of November 30, 2022 and determined that the Company's proportionate economic interest in the entity indicates that the equity holding was not impaired. There were no observable price changes in orderly transactions for identical or a similar holding or security of the Company’s Cost Method Holding during the period ended November 30, 2022.

SHARE-BASED COMPENSATION

The Company follows the guidance of ASC 718, Share-based Compensation (“ASC 718”), which requires the use of the fair-value based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments (options). The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model that uses assumptions for expected volatility, expected dividends, expected forfeiture rate, expected term, and the risk-free interest rate. The Company has not paid dividends historically and does not expect to pay them in the foreseeable future. Expected volatilities are based on weighted averages of the historical volatility of the Company’s common stock estimated over the expected term of the options. The expected forfeiture rate is based on historical forfeitures experienced. The expected term of options granted is derived using the “simplified method” which computes expected term as the average of the sum of the vesting term plus the contract term as historically the Company had limited exercise activity surrounding its options. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the period of the expected term. The grant date fair value of the award is recognized under the straight-line attribution method.

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

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

	Option Shares	Exercise Price Weighted Average
Outstanding May 31, 2022	2,321,616	$	3.72
Granted	146,000		3.37
Exercised	(46,500)		1.73
Cancelled or expired	(82,500)		5.07
Outstanding November 30, 2022	2,338,616	$	3.69

During the six months ended November 30, 2022, options to purchase 46,500 shares of common stock were exercised at prices ranging from $0.82 to $2.68. Total net proceeds to the Company were approximately $79,000.

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

REVENUE RECOGNITION

The Company has various contracts with customers.  All of the contracts specify that revenues from product sales are recognized at the time the product is shipped, customarily FOB shipping point, which is when the transfer of control of goods has occurred and at which point title passes.

The Company does not typically allow for returns from international customers except in the event of defective merchandise and therefore does not establish an allowance for returns. The Company does allow for a return merchandise allowance of approximately one percent of sales to certain domestic retailers. This allowance reduces revenue recognition by approximately one percent and is included in sales discounts. In addition, the Company has contracts with customers wherein customers receive purchase discounts for achieving specified sales volumes. The Company evaluated the status of these contracts during the six months ended November 30, 2022 and 2021, and does not believe that any additional discounts will be given through the end of the contract periods.

Services for contract work performed by the Company for others are invoiced and recognized as that work has been performed and as the project progresses. The Company sells clinical lab products to domestic and international distributors, including hospitals and clinical laboratories, medical research institutions, medical schools and pharmaceutical companies. OTC products are sold directly to drug stores and e-commerce customers as well as to distributors.  Physicians’ office products are sold to physicians and distributors, all of whom are categorized below according to the type of products sold to them. We also manufacture certain components on a contract basis for domestic and international manufacturers.

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As of November 30, 2022, the Company had approximately $49,000 of advances from certain foreign customers. The majority of these advances are prepayments on orders that are expected to ship during our third quarter ending February 28, 2023.

Disaggregation of revenue:

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

	Three Months Ended November 30,				Six Months Ended November 30,
	2022		2021		2022		2021
Clinical lab	$	902,000	$	642,000	$	2,048,000	$	1,528,000
Over-the-counter		466,000		534,000		679,000		613,000
Physician's office		62,000		3,359,000		245,000		3,616,000
Contract manufacturing		52,000		112,000		147,000		152,000
Total	$	1,482,000	$	4,647,000	$	3,119,000	$	5,909,000

See Note 4 for additional information regarding geographic revenue concentrations.

SHIPPING AND HANDLING FEES

The Company includes shipping and handling fees billed to customers in net sales.

RESEARCH AND DEVELOPMENT

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

INCOME TAXES

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

FOREIGN CURRENCY TRANSLATION

The subsidiary located in Mexico operates primarily using the Mexican peso. The subsidiary located in Germany operates primarily using the U.S. dollar, with an immaterial amount of transactions occurring using the Euro. Accordingly, assets and liabilities of these subsidiaries are translated using exchange rates in effect at the end of the period, and revenues and costs are translated using average exchange rates for the period. The resulting translation adjustments to assets and liabilities are presented as a separate component of accumulated other comprehensive loss. There are no foreign currency transactions that are included in the condensed consolidated statements of operations for the three and six months ended November 30, 2022 and 2021.

RIGHT-OF-USE ASSETS AND LEASE LIABILITY

Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.  Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of fixed lease payments over the lease term.  Leases are classified as financing or operating which will drive the expense recognition pattern. The Company has elected to exclude short-term leases.  The Company leases office space and copy machines, all of which are operating leases.  Most leases include the option to renew and the exercise of the renewal options is at the Company’s sole discretion. Options to extend or terminate a lease are considered in the lease term to the extent that the option is reasonably certain of exercise.  The leases do not include the options to purchase the leased property.  The depreciable life of assets and leasehold improvements are limited by the expected lease term.

NET LOSS PER SHARE

Basic loss per share is computed as net loss divided by the weighted average number of common shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur from common shares issuable through stock options, warrants and other convertible securities using the treasury stock method. The total amount of anti-dilutive stock options not included in the loss per share calculation on November 30, 2022 and 2021 was 2,338,616 and 2,059,116, respectively.

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RECENT ACCOUNTING PRONOUNCEMENTS

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

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." This ASU will require the measurement of all expected credit losses for financial assets, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The guidance was initially effective for the Company for annual reporting periods beginning after December 15, 2019, and interim periods within those fiscal years. In November 2019, the FASB issued ASU 2019-10, "Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates," which, among other things, defers the effective date of ASU 2016-13 for public filers that are considered smaller reporting companies as defined by the Securities and Exchange Commission to fiscal years beginning after December 15, 2022, including interim periods within those years. Early adoption is permitted. The Company is currently reviewing the requirements of this ASU to determine its impact on the Company’s consolidated results of operations and financial position.

RECLASSIFICATIONS

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

NOTE 3:  SHAREHOLDERS’ EQUITY

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

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

NOTE 4:  GEOGRAPHIC INFORMATION

The Company operates as one segment. Geographic information regarding net sales is approximately as follows:

	Three Months Ended November 30,				Six Months Ended November 30,
	2022		2021		2022		2021
Revenues from sales to unaffiliated customers:
Asia	$	663,000	$	3,373,000	$	1,477,000	$	4,048,000
Europe		415,000		796,000		967,000		1,267,000
North America		401,000		429,000		669,000		534,000
South America		3,000		3,000		6,000		6,000
Middle East		-		46,000		-		54,000
	$	1,482,000	$	4,647,000	$	3,119,000	$	5,909,000

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

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

NOTE 5:  LEASES

The Company leases its facilities. On November 30, 2022, the Company had approximately 22,000 square feet of floor space at its corporate headquarters at 17571 Von Karman Avenue in Irvine, California, which it has been leasing since 2009. The lease for its headquarters expired on August 31, 2016.  The Company had an option to extend the term of its lease for two additional sixty-month periods. On November 30, 2015, the Company exercised its option to extend its lease for an additional sixty-month period and entered into the First Amendment to Lease wherein it extended its lease until August 31, 2021. On April 9, 2021, the Company exercised its second option to extend its lease for an additional five years.  When the Company extended its lease in April 2021, it was also granted an additional five-year lease extension option. The current rent is approximately $26,000 per month. The security deposit is approximately $22,000. 

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In November 2016, the Company’s Mexican subsidiary, Biomerica de Mexico, entered into a 10-year lease for approximately 8,100 square feet of manufacturing space. The Company has one 10-year option to renew at the end of the initial lease period. The current rent is approximately $3,600 per month. Biomerica de Mexico also leases a smaller unit on a month-to-month basis for use in one manufacturing process.

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

Total gross rent expense in the United States for the six months ended November 30, 2022 and 2021 was approximately $154,000 and $155,000, respectively.  Rent expense for the Mexico facility for the six months ended November 30, 2022 and 2021 was approximately $21,000 and $21,000, respectively.

For purposes of determining straight-line rent expense, the lease term is calculated from the date the Company first takes possession of the facility, including any periods of free rent and any renewal options periods that the Company is reasonably certain of exercising. The Company’s office and equipment leases generally have contractually specified minimum rent and annual rent increases are included in the measurement of the right-of-use asset and related lease liability.  Additionally, under these lease arrangements, the Company may be required to pay directly, or reimburse the lessors, for some maintenance and operating costs. Such amounts are generally variable and therefore not included in the measurement of the right-of-use asset and related lease liability but are instead recognized as variable lease expense when they are incurred.  

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

Operating cash flows from operating leases	$	174,322
Right-of-use assets obtained in exchange for     new operating lease liabilities	$	-
Weighted average remaining lease term (in years)		3.77
Weighted average discount rate		6.50%

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

Less than 1 year	$	357,000
1 to 2 years		368,000
2 to 3 years		379,000
3 to 4 years		298,000
4 to 5 years		0
Total undiscounted lease payments		1,402,000
Less imputed interest		154,000
Total operating lease liabilities	$	1,248,000

According to the terms of the lease in Irvine, the Company is also responsible for routine repairs of the building and for certain increases in property tax.

The Company also has various insignificant leases for office equipment.

NOTE 6:  COMMITMENTS AND CONTINGENCIES

LITIGATION

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

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

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

You should read the following discussion and analysis in conjunction with our unaudited condensed consolidated financial statements and the accompanying notes thereto included in Part I, Item 1 of this Report and the audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended May 31, 2022 (our 2022 Annual Report). This discussion and analysis contains forward-looking statements that are based on our management’s current beliefs and assumptions, which statements are subject to substantial risks and uncertainties. Our actual results may differ materially from those expressed or implied by these forward-looking statements as a result of many factors, including those discussed in “Risk Factors” included in Part I, Item 1A of our 2022 Annual Report. 

OVERVIEW

Biomerica, Inc. and its subsidiaries (which includes wholly-owned subsidiaries, Biomerica de Mexico and BioEurope GmbH) is a biomedical technology company that develops, patents, manufactures and markets advanced diagnostic and therapeutic products used at the point-of-care (physicians' offices and over-the-counter through drugstores and online) and in hospital/clinical laboratories for detection and/or treatment of medical conditions and diseases. Our diagnostic test kits are used to analyze blood, urine, nasal or fecal material from patients in the diagnosis of various diseases, food intolerances and other medical complications, or to measure the level of specific hormones, antibodies, antigens or other substances, which may exist in the human body in extremely small concentrations. The Company's products are designed to enhance the health and well-being of people, while reducing total healthcare costs.

Our primary focus is the research, development, commercialization, and in certain cases regulatory approval, of patented, diagnostic-guided therapy (“DGT”) products based on our InFoods^® Technology platform that are designed to treat gastrointestinal diseases, such as irritable bowel syndrome (“IBS”), and other inflammatory diseases. These InFoods^® based products are directed at chronic inflammatory illnesses that are widespread and common, and as such address very large markets. The first product we are launching using the patented InFoods Technology is our InFoods® IBS product which uses a simple blood sample and is designed to identify patient-specific foods that, when removed from the diet, may alleviate IBS symptoms such as pain, bloating, diarrhea, cramping and constipation. Instead of broad and difficult to manage dietary restrictions, the InFoods® IBS product works by identifying a patient’s above normal immunoreactivity to specific foods.  A food identified as causing an abnormal immune response in the patient is simply removed from the diet to help alleviate IBS symptoms. We are currently working with key gastroenterology (GI) physician groups who are interested in offering this product to their patients. As such, we are expecting to begin generating revenues from the launch of our InFoods^® IBS product during our fiscal third quarter ending February 28, 2023. Due to the proprietary (patented) nature of this product and the size of the market, we believe our InFoods IBS product has the potential to become a significant revenue opportunity.

During fiscal 2022, we completed an endpoint determination clinical trial on our InFoods® IBS product. This trial was conducted at the Mayo Clinic centers in Florida and Arizona, Beth Israel Deaconess Medical Center Inc., a Harvard Medical School Teaching Hospital, University of Texas Health Science Center at Houston, Houston Methodist, the University of Michigan, and other institutions. This trial monitored IBS patients over an 8-week period to determine the efficacy of our InFoods® IBS product to improve the patients’ IBS symptoms or endpoints. The top-line trial results were reported in February 2022. Multiple endpoints demonstrated statistically significant improvements, indicating that the elimination of specific foods may meaningfully reduce the symptoms of IBS in all patient subtypes (including patients with IBS-Constipation, IBS-Diarrhea & IBS-Mixed). The greatest clinical improvements, including but not limited to abdominal pain and bloating, were seen in patients diagnosed with IBS-Mixed and IBS-Constipation, in the top line data. The purpose of the endpoint study was to determine the efficacy of the product. A secondary purpose was to determine the primary symptom endpoint, or endpoints that could be used in a final pivotal trial that will be conducted to attain the validation data needed to apply for U.S. Food and Drug Administration (“FDA”) clearance for the product. We are now in the process of reviewing the complete dataset and selecting the target endpoint(s) to be used in the pivotal trial. We are also preparing the protocols for this trial. The trial is expected to include the large medical institution participants that conducted the endpoint trial, in addition to other new institutions and a clinical research organization.

Following the successful completion and positive results from the Company’s InFoods^® IBS clinical trial, we’ve seen significant interest from Gastroenterology (GI) physicians who would like to provide the InFoods^® IBS Product to their patients immediately.  Therefore, while we are proceeding with the work needed to seek FDA clearance for this product, we also are currently preparing to launch the InFoods^® IBS product through a CLIA-certified, high-complexity laboratory facility that will be offering the product as a laboratory developed test (LDT). Our expectation is that we will begin to generate revenues from this product during our fiscal third quarter. In preparation for the launch of this LDT, we are in negotiations with large physician groups that would like to offer the LDT to their IBS patients.

We are also beginning the work of selecting and validating at least one new disease (such as ulcerative colitis or migraines), where there is evidence that certain foods can trigger or contribute to the symptoms found in these indications. We expect any new disease we target will follow a similar development pathway as InFoods IBS in simultaneously seeking FDA clearance of the product while also initially launching the product as an LDT.

We will also continue to evaluate partnership/licensing opportunities, as they arise, with U.S. and multinational companies that could help us commercialize the InFoods products in the U.S and overseas.

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Our existing medical diagnostic products are sold worldwide primarily in two markets: 1) clinical laboratories and 2) point-of-care (physicians' offices and over-the-counter drugstores like Walmart and Walgreens). The diagnostic test kits are used to analyze blood, urine, nasal or fecal specimens from patients in the diagnosis of various diseases, food intolerances and other medical complications, by measuring or detecting the existence and/or level of specific bacteria, hormones, antibodies, antigens, or other substances, which may exist in a patient’s body, stools, or blood, often in extremely small concentrations.

During fiscal 2022, we finalized development of our H. Pylori diagnostic test that indicates if a patient is infected with the H. Pylori bacteria. H. Pylori infection is extremely common, and if left untreated, can lead to ulcers and possibly stomach cancers. During our fourth quarter of fiscal 2022, we applied for FDA clearance of this product though a 510(k) premarket submission. We have been in communications with the FDA answering certain follow-up questions and providing additional data as requested. We are currently collecting and providing additional data as requested from the FDA. Once cleared, we will begin marketing the product in the U.S. market.

Due to the global 2019 SARS-CoV-2 novel coronavirus pandemic, in March 2020 we began developing COVID-19 products to indicate if a person has been infected by COVID-19 or is currently infected. While we initially offered a COVID-19 antibody diagnostic test to determine if a person has previously been infected by the COVID-19 virus, all our COVID-19 revenues in fiscal 2022 and 2023 have come from international sales of our COVID-19 antigen tests that use a patient’s nasal fluid sample to detect if the patient is currently infected with the virus. Due to falling demand, approximately 13% of our revenues during the six months ended November 30, 2022 were from sales of our COVID-19 related products.

While limited sales continue to occur in our COVID-19 products, virtually all of our research and development efforts are focused on development and commercialization of non-COVID-19 related products such as our H. Pylori product, and our InFoods® IBS product.

Our non-COVID-19 products that accounted for approximately 87% of our revenues during the six months ended November 30, 2022, are primarily focused on gastrointestinal diseases, food intolerances, and certain esoteric tests. These diagnostic test products utilize immunoassay technology. Most of our products are CE marked and/or sold for diagnostic use where they are registered by each country’s regulatory agency. In addition, some products are cleared for sale in the United States by the FDA.

RESULTS OF OPERATIONS

Three months ended November 30, 2022

Net Sales and Cost of Sales

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

	Three Months Ended November 30,				Increase (Decrease)
	2022		2021		$		%
Clinical lab	$	902,000	$	642,000	$	260,000		40%
Over-the-counter		466,000		534,000		(68,000)		-13%
Physician's office		62,000		3,359,000		(3,297,000)		-98%
Contract manufacturing		52,000		112,000		(60,000)		-54%
Total	$	1,482,000	$	4,647,000	$	(3,165,000)		-68%

Consolidated net sales were approximately $1,482,000 for the three months ended November 30, 2022, as compared to $4,647,000 for the three months ended November 30, 2021, a decrease of approximately $3,165,000, or 68%. This decrease for the three months ended November 30, 2022, was driven primarily by lower demand for our physician’s office COVID-19 product in Asia. Excluding COVID-19 product sales, consolidated net sales were approximately $1,423,000 for the three months ended November 30, 2022, as compared to $1,316,000 for the three months ended November 30, 2021, an increase of approximately $107,000, or 8%. Periodic and infrequent orders may cause volatility in quarterly sales.

Consolidated cost of sales were approximately $1,130,000, or 76% of net sales, for the three months ended November 30, 2022, as compared to $3,875,000, or 83% of net sales, for the three months ended November 30, 2021, a decrease of approximately $2,745,000, or 71%. The decrease for the three months ended November 30, 2022, was driven primarily by a decrease in volume of our COVID-19 product.

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Operating Expenses

The following is a summary of operating expenses:

		Three Months Ended November 30,
	2022				2021					Increase (Decrease)
	Operating Expense		As a % of Total Revenues		Operating Expense			As a % of Total Revenues		$			%
Selling, General and Administrative Expenses	$	1,556,000		105%		$	1,354,000		29%		$	202,000		15%
Research and Development	$	462,000		31%		$	548,000		12%		$	(86,000)		-16%

Selling, General and Administrative Expenses

Consolidated selling, general and administrative expenses were approximately $1,556,000 for the three months ended November 30, 2022, as compared to $1,354,000 for the three months ended November 30, 2021, an increase of approximately $202,000, or 15%. The increase in the three months ended November 30, 2022, was primarily due to approximate increases in bad debt expense of $130,000 related to a customer in Vietnam and legal expense of $40,000 related to patent activity.

Research and Development

Consolidated research and development expenses were approximately $462,000 for the three months ended November 30, 2022, as compared to $548,000 for the three months ended November 30, 2021, a decrease of approximately $86,000, or 16%. The decrease in the three months ended November 30, 2022, was primarily due to a reduction in COVID-19 research.

Interest and Dividend Income

Interest and dividend income were approximately $41,000 for the three months ended November 30, 2022, as compared to $7,000 for the three months ended November 30, 2021, an increase of $34,000, or 497%. The increase was primarily driven by interest income on our cash and cash equivalents that resulted from higher current period interest rates.

Six months ended November 30, 2022

Net Sales and Cost of Sales

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

	Six Months Ended November 30,				Increase (Decrease)
	2022		20201		$		%
Clinical lab	$	2,048,000	$	1,528,000	$	520,000		34%
Over-the-counter		679,000		613,000		66,000		11%
Physician's office		245,000		3,616,000		(3,371,000)		-93%
Contract manufacturing		147,000		152,000		(5,000)		-3%
Total	$	3,119,000	$	5,909,000	$	(2,790,000)		-47%

Consolidated net sales were approximately $3,119,000 for the six months ended November 30, 2022, as compared to $5,909,000 for the six months ended November 30, 2021, a decrease of approximately $2,790,000, or 47%. This decrease for the six months ended November 30, 2022, was driven primarily by lower demand for our physician’s office COVID-19 product in Asia, which was partially offset by an increase in demand for our food intolerance product in Asia. Excluding COVID-19 product sales, consolidated net sales were approximately $2,709,000 for the six months ended November 30, 2022, as compared to $2,350,000 for the six months ended November 30, 2021, an increase of approximately $359,000, or 15%. Periodic and infrequent orders may cause volatility in quarterly sales.

Consolidated cost of sales were approximately $2,822,000, or 90% of net sales, for the six months ended November 30, 2022, as compared to $5,226,000, or 88% of net sales, for the six months ended November 30, 2021, a decrease of approximately $2,404,000, or 46%. The decrease for the six months ended November 30, 2022, was driven primarily by a decrease in volume of our COVID-19 product.

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Operating Expenses

The following is a summary of operating expenses:

		Six Months Ended November 30,
	2022				2021					Increase (Decrease)
	Operating Expense		As a % of Total Revenues		Operating Expense			As a % of Total Revenues		$			%
Selling, General and Administrative Expenses	$	3,210,000		103%		$	2,423,000		41%		$	787,000		32%
Research and Development	$	823,000		26%		$	929,000		16%		$	(106,000)		-11%

Selling, General and Administrative Expenses

Consolidated selling, general and administrative expenses were approximately $3,210,000 for the six months ended November 30, 2022, as compared to $2,423,000 for the six months ended November 30, 2021, an increase of approximately $787,000, or 32%. The increase in the six months ended November 30, 2022, was primarily due to approximate increases in bad debt expense of $428,000 related to Vietnam customer, legal expense of $105,000 related to patent activity, and consulting services of $136,000 related to our online presence at Amazon and Walmart.

Research and Development

Consolidated research and development expenses were approximately $823,000 for the six months ended November 30, 2022, as compared to $929,000 for the six months ended November 30, 2021, a decrease of approximately $106,000, or 11%. The decrease in the six months ended November 30, 2022, was primarily due to a reduction in COVID-19 research.

Interest and Dividend Income

Interest and dividend income were approximately $41,000 for the six months ended November 30, 2022, as compared to $14,000 for the six months ended November 30, 2021, an increase of $27,000, or 201%. The increase was primarily driven by interest income on our cash and cash equivalents that resulted from higher current period interest rates.

LIQUIDITY AND CAPITAL RESOURCES

The following are the principal sources of liquidity:

	November 30, 2022		May 31, 2022
Cash and cash equivalents	$	5,067,000	$	5,917,000
Working capital including cash and cash equivalents	$	6,335,000	$	7,416,000

As of November 30, 2022 and May 31, 2022, the Company had cash and cash equivalents of approximately $5,067,000 and $5,917,000, respectively.  As of November 30, 2022 and May 31, 2022, the Company had working capital of approximately $6,335,000 and $7,416,000, respectively. We believe that the aggregate of our existing cash and cash equivalents is sufficient to meet our operating cash requirements and strategic objectives for growth for at least the next year. To satisfy our capital requirements beyond the next year, including ongoing future operations, we may seek to raise additional financing through debt and equity financings, including use of our ATM offering.

Operating Activities

During the six months ended November 30, 2022, cash used in operating activities was approximately $2,787,000. The primary factors that contributed to this was a loss of approximately $3,698,000, non-cash expenses of $1,102,000, primarily associated with stock-based compensation and account receivables provision. This was partially offset by changes in asset and liability accounts that used a net amount of cash of approximately $191,000.

During the six months ended November 30, 2021, cash provided by operating activities was approximately $1,419,000. The primary factors that contributed to this was a loss of approximately $2,668,000, non-cash expenses of $201,000, primarily associated with depreciation, amortization, stock-based compensation, adjustments to allowance for doubtful accounts, and inventory reserves. In addition, we benefited from an increase in customer advances of $2,150,000, a decrease in accounts receivable of $1,139,000, and changes in other asset and liability accounts of $597,000.

16

Investing Activities

During the six months ended November 30, 2022, cash used in investing activities was approximately $58,000 for purchases of property and equipment.

During the six months ended November 30, 2021, cash used in investing activities was approximately $18,000 for purchases of property and equipment, and $109,000 expenditures related to patents.

Financing Activities

During the six months ended November 30, 2022, cash provided by financing activities was approximately $2,016,000 which was a result of net proceeds from the sale of common stock of $1,937,000, and stock option exercises of $79,000.

During the six months ended November 30, 2021, cash provided by financing activities was approximately $1,719,000 which was a result of net proceeds from the sale of common stock of $1,684,000, and stock option exercises of $35,000.

OFF BALANCE SHEET ARRANGEMENTS

There were no off-balance sheet arrangements as of November 30, 2022.

CRITICAL ACCOUNTING POLICIES

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable under the current conditions; however, actual results may differ from these estimates under different future conditions.

We believe that the estimates and assumptions that are most important to the portrayal of our financial condition and results of operations, in that they require subjective or complex judgments, form the basis for the accounting policies deemed to be most critical to us. These relate to revenue recognition, bad debts, inventory overhead application, inventory reserves, lease liabilities and right-of-use assets. We believe estimates and assumptions related to these critical accounting policies are appropriate under the circumstances; however, should future events or occurrences result in unanticipated consequences, there could be a material impact on our future financial conditions or results of operations. We suggest that our significant accounting policies be read in conjunction with this Management’s Discussion and Analysis of Financial Condition and Results of Operations. Please refer to Note 2 for information on Significant Accounting Policies. Our critical accounting policies are discussed in our Annual Report on Form 10-K for the fiscal year ended May 31, 2022.

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.

17

There have been no changes in our internal control over financial reporting identified in connection with the evaluation that occurred during our last fiscal quarter that has materially affected, or that is reasonably likely to materially affect, our internal control over financial reporting.

PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

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

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

ITEM 1A.  RISK FACTORS.

An investment in our common stock involves risks. Before making an investment decision, you should carefully consider all the information within this Quarterly Report, including the information contained in Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," as well as in our condensed consolidated financial statements and the related notes contained in Part I, Item 1 within this Quarterly Report. In addition, you should carefully consider the risks and uncertainties described in Part I, Item 1A, “Risk Factors,” of our 2022 Annual Report on Form 10-K, as well as in our other public filings with the SEC. If any of the identified risks are realized, our business, results of operations, financial condition, liquidity, and prospects could be materially and adversely affected. In that case, the trading price of our common stock may decline, and you could lose all or part of your investment. In addition, other risks of which we are currently unaware, or which we do not currently view as material, could have a material adverse effect on our business, results of operations, financial condition, and prospects.

During the six months ended November 30, 2022, there were no material changes to the risks and uncertainties described in Part I, Item 1A, “Risk Factors,” of our 2022 Annual Report on Form 10-K.

ITEM 5.  OTHER INFORMATION

None.

18

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 — Steven Sloan
	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 — Steven Sloan
		101       Interactive data files pursuant to Rule 405 Regulation S-T, as follows:
101.INS-XBRL Instance Document
101.SCH-XBRL Taxonomy Extension Schema Document           101.CAL-XBRL Taxonomy Extension Calculation Linkbase Document           101.DEF–XBRL Taxonomy Extension Definition Linkbase Document           101.LAB-XBRL Taxonomy Extension Label Linkbase Document           101.PRE-XBRL Taxonomy Extension Presentation Linkbase Document           104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibits 101)                   * Filed herein.                 ** Filed herewith.

19

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:  January 13, 2023
	By:	/S/ Zackary S. Irani
		Zackary S. Irani
		Chief Executive Officer
		(Principal Executive Officer)
Date:  January 13, 2023
	By:	/S/ Steven Sloan
		Steven Sloan
		Chief Financial Officer
		(Principal Financial Officer)

20

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 subsidiaries is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of our internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or other persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: January 13, 2023

/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, Steven Sloan, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Biomerica, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

      a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

      b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America;

      c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

      d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of our internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or other persons performing the equivalent functions):

      a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

      b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: January 13, 2023

/s/ Steven Sloan

Steven Sloan

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 November 30, 2022, 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: January 13, 2023

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 November 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Steve Sloan, 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/ Steven Sloan

Steven Sloan

Chief Financial Officer

Date: January 13, 2023

XML

Document And Entity Information - shares	6 Months Ended
	Nov. 30, 2022	Jan. 11, 2023
Document Information Line Items
Entity Registrant Name	BIOMERICA, INC.
Trading Symbol	BMRA
Document Type	10-Q
Current Fiscal Year End Date	--05-31
Entity Common Stock, Shares Outstanding		13,479,413
Amendment Flag	false
Entity Central Index Key	0000073290
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Document Period End Date	Nov. 30, 2022
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q2
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	001-37863
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	95-2645573
Entity Address, Address Line One	17571 Von Karman Avenue
Entity Address, City or Town	Irvine
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92614
City Area Code	949
Local Phone Number	645-2111
Title of 12(b) Security	COMMON STOCK, PAR VALUE $0.08
Security Exchange Name	NASDAQ
Entity Interactive Data Current	Yes

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($)	Nov. 30, 2022	May 31, 2022
Current Assets:
Cash and cash equivalents	$ 5,066,521	$ 5,916,983
Accounts receivable, less allowance for doubtful accounts of $522,234 and $153,231 as of November 30, 2022 and May 31, 2022, respectively	850,014	773,818
Inventories, net of inventory reserves of $773,916 and $845,549 as of November 30, 2022 and May 31, 2022, respectively	2,061,444	2,416,447
Prepaid expenses and other	120,721	320,283
Total current assets	8,098,700	9,427,531
Property and equipment, net of accumulated depreciation and amortization of $1,317,141 and $1,305,360 as of November 30, 2022 and May 31, 2022, respectively	236,719	214,487
Right of use assets, net of accumulated amortization of $859,269 and $724,802 as of November 30, 2022 and May 31, 2022, respectively	1,169,456	1,301,834
Investments	165,324	165,324
Intangible assets, net of accumulated amortization of $24,327 and $18,994 as of November 30, 2022 and May 31, 2022, respectively	157,694	169,516
Other assets	79,654	95,588
Total Assets	9,907,547	11,374,280
Current Liabilities:
Accounts payable and accrued expenses	670,074	972,372
Accrued compensation	697,179	646,944
Advance from customers	49,013	50,670
Lease liability, current portion	346,937	341,296
Total current liabilities	1,763,203	2,011,282
Lease liability, net of current portion	901,449	1,038,284
Total Liabilities	2,664,652	3,049,566
Commitments and contingencies (Notes 5 and 6)
Common stock, $0.08 par value, 25,000,000 shares authorized, 13,479,413 and 12,867,924 issued and outstanding at November 30, 2022 and May 31, 2022, respectively	1,078,353	1,029,432
Additional paid-in-capital	45,035,298	42,446,597
Accumulated other comprehensive loss	(95,413)	(73,936)
Accumulated deficit	(38,775,343)	(35,077,379)
Total Shareholders' Equity	7,242,895	8,324,714
Total Liabilities and Shareholders' Equity	$ 9,907,547	$ 11,374,280

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parentheticals) - USD ($)	Nov. 30, 2022	May 31, 2022
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 522,234	$ 153,231
Inventory reserves	773,916	845,549
Accumulated depreciation and amortization	1,317,141	1,305,360
Accumulated amortization, Right of Use Assets	859,269	724,802
Accumulated amortization, Intangible Assets	$ 24,327	$ 18,994
Common stock, shares authorized (in Shares)	25,000,000	25,000,000
Common stock, shares issued (in Shares)	13,479,413	12,867,924
Common stock, shares outstanding (in Shares)	13,479,413	12,867,924

XML

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($)	3 Months Ended		6 Months Ended
	Nov. 30, 2022	Nov. 30, 2021	Nov. 30, 2022	Nov. 30, 2021
Income Statement [Abstract]
Net sales	$ 1,481,915	$ 4,646,900	$ 3,119,350	$ 5,908,687
Cost of sales	(1,130,040)	(3,875,141)	(2,822,430)	(5,225,898)
Gross profit	351,875	771,759	296,920	682,789
Operating expenses:
Selling, general and administrative	1,556,022	1,353,587	3,209,843	2,423,442
Research and development	461,941	547,933	823,112	929,477
Total operating expenses	2,017,963	1,901,520	4,032,955	3,352,919
Loss from operations	(1,666,088)	(1,129,761)	(3,736,035)	(2,670,130)
Other income:
Dividend and interest income	41,254	6,916	41,282	13,721
Loss before income taxes	(1,624,834)	(1,122,845)	(3,694,753)	(2,656,409)
Provision for income taxes	(1,254)	(2,429)	(3,211)	(11,446)
Net loss	$ (1,626,088)	$ (1,125,274)	$ (3,697,964)	$ (2,667,855)
Basic net loss per common share (in Dollars per share)	$ (0.12)	$ (0.09)	$ (0.28)	$ (0.21)
Diluted net loss per common share (in Dollars per share)	$ (0.12)	$ (0.09)	$ (0.28)	$ (0.21)
Basic (in Shares)	13,455,166	12,592,341	13,271,845	12,509,110
Diluted (in Shares)	13,455,166	12,592,341	13,271,845	12,509,110
Net loss	$ (1,626,088)	$ (1,125,274)	$ (3,697,964)	$ (2,667,855)
Foreign currency translation	(8,950)	(4,750)	(21,477)	(10,363)
Comprehensive loss	$ (1,635,038)	$ (1,130,024)	$ (3,719,441)	$ (2,678,218)

XML

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED) - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	AOCI Attributable to Parent [Member]	Retained Earnings [Member]	Total
Balances at May. 31, 2021	$ 984,571	$ 38,836,743	$ (47,956)	$ (30,546,335)	$ 9,227,023
Balances (in Shares) at May. 31, 2021	12,307,157
Exercise of stock options	$ 120	3,775			3,895
Exercise of stock options (in Shares)	1,500
Net proceeds from ATM	$ 16,124	784,586			800,710
Net proceeds from ATM (in Shares)	201,553
Foreign currency translation			(5,613)		(5,613)
Stock option expense		319,622			319,622
Net loss				(1,542,581)	(1,542,581)
Balances, August 31, 2022 at Aug. 31, 2021	$ 1,000,815	39,944,726	(53,569)	(32,088,916)	8,803,056
Balances, August 31, 2022 (in Shares) at Aug. 31, 2021	12,510,210
Balances at May. 31, 2021	$ 984,571	38,836,743	(47,956)	(30,546,335)	9,227,023
Balances (in Shares) at May. 31, 2021	12,307,157
Foreign currency translation					(10,363)
Net loss					(2,667,855)
Balances, August 31, 2022 at Nov. 30, 2021	$ 1,015,385	41,158,551	(58,319)	(33,214,190)	8,901,427
Balances, August 31, 2022 (in Shares) at Nov. 30, 2021	12,692,327
Balances at Aug. 31, 2021	$ 1,000,815	39,944,726	(53,569)	(32,088,916)	8,803,056
Balances (in Shares) at Aug. 31, 2021	12,510,210
Exercise of stock options	$ 1,600	28,985			30,585
Exercise of stock options (in Shares)	20,000
Net proceeds from ATM	$ 12,970	870,443			883,413
Net proceeds from ATM (in Shares)	162,117
Foreign currency translation			(4,750)		(4,750)
Stock option expense		314,397			314,397
Net loss				(1,125,274)	(1,125,274)
Balances, August 31, 2022 at Nov. 30, 2021	$ 1,015,385	41,158,551	(58,319)	(33,214,190)	8,901,427
Balances, August 31, 2022 (in Shares) at Nov. 30, 2021	12,692,327
Balances at May. 31, 2022	$ 1,029,432	42,446,597	(73,936)	(35,077,379)	8,324,714
Balances (in Shares) at May. 31, 2022	12,867,924
Exercise of stock options	$ 1,200	12,750			13,950
Exercise of stock options (in Shares)	15,000
Net proceeds from ATM	$ 41,918	1,721,650			1,763,568
Net proceeds from ATM (in Shares)	523,977
Foreign currency translation			(12,527)		(12,527)
Stock option expense		303,755			303,755
Net loss				(2,071,876)	(2,071,876)
Balances, August 31, 2022 at Aug. 31, 2022	$ 1,072,550	44,484,752	(86,463)	(37,149,255)	8,321,584
Balances, August 31, 2022 (in Shares) at Aug. 31, 2022	13,406,901
Balances at May. 31, 2022	$ 1,029,432	42,446,597	(73,936)	(35,077,379)	$ 8,324,714
Balances (in Shares) at May. 31, 2022	12,867,924
Exercise of stock options (in Shares)					46,500
Foreign currency translation					$ (21,477)
Net loss					(3,697,964)
Balances, August 31, 2022 at Nov. 30, 2022	$ 1,078,353	45,035,298	(95,413)	(38,775,343)	7,242,895
Balances, August 31, 2022 (in Shares) at Nov. 30, 2022	13,479,413
Balances at Aug. 31, 2022	$ 1,072,550	44,484,752	(86,463)	(37,149,255)	8,321,584
Balances (in Shares) at Aug. 31, 2022	13,406,901
Exercise of stock options	$ 2,520	62,685			65,205
Exercise of stock options (in Shares)	31,500
Net proceeds from ATM	$ 3,283	169,631			172,914
Net proceeds from ATM (in Shares)	41,012
Foreign currency translation			(8,950)		(8,950)
Stock option expense		318,230			318,230
Net loss				(1,626,088)	(1,626,088)
Balances, August 31, 2022 at Nov. 30, 2022	$ 1,078,353	$ 45,035,298	$ (95,413)	$ (38,775,343)	$ 7,242,895
Balances, August 31, 2022 (in Shares) at Nov. 30, 2022	13,479,413

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED - USD ($)	6 Months Ended
	Nov. 30, 2022	Nov. 30, 2021
Cash flows from operating activities:
Net loss	$ (3,697,964)	$ (2,667,855)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	47,690	68,668
Provision for allowance on accounts receivable	369,003	(809,638)
Inventory reserve	(71,633)	181,825
Stock option expense	621,985	634,019
Amortization of right-of-use asset	134,467	126,039
Changes in assets and liabilities:
Accounts receivable	(445,199)	1,139,450
Inventories	426,636	42,229
Prepaid expenses and other	199,562	(726,460)
Other assets	15,933	114,570
Accounts payable and accrued expenses	(302,299)	997,327
Accrued compensation	50,235	285,431
Advance from customers	(1,657)	2,150,466
Reduction in lease liability	(133,283)	(117,321)
Net cash (used in) provided by operating activities	(2,786,524)	1,418,750
Cash flows from investing activities:
Expenditures related to intangibles		(108,917)
Purchases of property and equipment	(58,098)	(18,212)
Net cash used in investing activities	(58,098)	(127,129)
Cash flows from financing activities:
Gross proceeds from sale of common stock	1,988,422	1,751,222
Costs from sale of common stock	(51,940)	(67,108)
Proceeds from exercise of stock options	79,155	34,480
Net cash provided by financing activities	2,015,637	1,718,594
Effect of exchange rate changes on cash	(21,477)	(10,363)
Net (decrease) increase in cash and cash equivalents	(850,462)	2,999,852
Cash and cash equivalents at beginning of year	5,916,983	4,199,311
Cash and cash equivalents at end of the period	5,066,521	7,199,163
Cash paid during the period for:
Income taxes	3,211	10,646
Non-cash investing and financing activities:
Increase in right-of-use asset due to CPI rent adjustment	2,089
Increase in lease liability due to CPI rent adjustment	2,089
Write off of intangible assets, cost	6,489
Write off of intangible assets, accumulated amortization	$ 850

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BASIS OF PRESENTATION

6 Months Ended

Nov. 30, 2022

Accounting Policies [Abstract]

Basis of Accounting [Text Block]

NOTE 1:  BASIS OF PRESENTATION

Biomerica, Inc. and its subsidiaries (which includes wholly-owned subsidiaries, Biomerica de Mexico and BioEurope GmbH) is a biomedical technology company that develops, patents, manufactures and markets advanced diagnostic and therapeutic products used at the point-of-care (physicians' offices and over-the-counter through drugstores and online) and in hospital/clinical laboratories for detection and/or treatment of medical conditions and diseases. Our diagnostic test kits are used to analyze blood, urine, nasal or fecal material from patients in the diagnosis of various diseases, food intolerances and other medical complications, or to measure the level of specific hormones, antibodies, antigens or other substances, which may exist in the human body in extremely small concentrations. The Company's products are designed to enhance the health and well-being of people, while reducing total healthcare costs.

Our primary focus is the research, development, commercialization, and in certain cases regulatory approval, of patented, diagnostic-guided therapy (“DGT”) products based on our InFoods^® Technology platform that are designed to treat gastrointestinal diseases, such as irritable bowel syndrome (“IBS”), and other inflammatory diseases. These InFoods^® based products are directed at chronic inflammatory illnesses that are widespread and common, and as such address very large markets. The first product we are launching using the patented InFoods Technology is our InFoods® IBS product which uses a simple blood sample and is designed to identify patient-specific foods that, when removed from the diet, may alleviate IBS symptoms such as pain, bloating, diarrhea, cramping and constipation. Instead of broad and difficult-to-manage dietary restrictions, the InFoods® IBS product works by identifying a patient’s above normal immunoreactivity to specific foods.  A food identified as causing an abnormal immune response in the patient is simply removed from the diet to help alleviate IBS symptoms. We are currently working with key gastroenterology (GI) physician groups who are interested in offering this product to their patients. As such, we are expecting to begin generating revenues from the launch of our InFoods^® IBS product during our fiscal third quarter ending February 28, 2023.

Our existing medical diagnostic products are sold worldwide primarily in two markets: 1) clinical laboratories and 2) point-of-care (physicians' offices and over-the-counter at Walmart, Amazon, and Walgreens). The diagnostic test kits are used to analyze blood, urine, nasal or fecal specimens from patients in the diagnosis of various diseases, food intolerances and other medical complications, by measuring or detecting the existence and/or level of specific bacteria, hormones, antibodies, antigens, or other substances, which may exist in a patient’s body, stools, or blood, often in extremely small concentrations.

Due to the global 2019 SARS-CoV-2 novel coronavirus pandemic, in March 2020 we began developing COVID-19 products to indicate if a person has been infected by COVID-19 or is currently infected. While we initially offered a COVID-19 antibody diagnostic test to determine if a person has previously been infected by the COVID-19 virus, all of our COVID-19 revenues in fiscal 2022 and 2023 have come from international sales of our COVID-19 antigen tests that use a patient’s nasal fluid sample to detect if the patient is currently infected with the virus. Due to falling demand, approximately 13% of our revenues during the six months ended November 30, 2022 were from sales of our COVID-19 related products, as compared to 57% of our revenue during the six months ended November 30, 2021.   

Our non-COVID-19 products that accounted for approximately 87% and 43% of our revenues during the six months ended November 30, 2022 and 2021, respectively, are primarily focused on gastrointestinal diseases, food intolerances, and certain esoteric tests. These diagnostic test products utilize immunoassay technology. Most of our products are CE marked and/or sold for diagnostic use where they are registered by each country’s regulatory agency. In addition, some products are cleared for sale in the United States by the FDA.

The unaudited consolidated financial statements herein have been prepared by management pursuant to the rules and regulations of the United States Securities and Exchange Commission ("SEC"). The accompanying interim unaudited consolidated financial statements have been prepared under the presumption that users of the interim financial information have either read or have access to the audited consolidated financial statements for the latest fiscal year ended May 31, 2022. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the six months ended November 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending May 31, 2023. For further information, refer to the audited consolidated financial statements and notes thereto for the fiscal year ended May 31, 2022 included in the Company's Annual Report on Form 10-K filed with the SEC on August 29, 2022. Management has evaluated all subsequent events and transactions through the date of filing this report.

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SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Nov. 30, 2022

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 (BioEurope GmbH) and Mexican subsidiary (Biomerica de Mexico). All significant intercompany accounts and transactions have been eliminated in consolidation.

ACCOUNTING ESTIMATES

The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reported period. Estimates that are made include the allowance for doubtful accounts, which is estimated based on current as well as historical experience with a customer; stock option forfeiture rates, which are calculated based on historical data; inventory obsolescence, which is based on projected and historical usage of materials; and lease liability and right-of-use assets, which are calculated based on certain assumptions such as borrowing rate, the likelihood of lease extensions to occur, asset valuation, among other things; and other items that may be necessary to estimate using current, historical and judgment based information. Actual results could materially differ from those estimates.

MARKETS AND METHODS OF DISTRIBUTION

Due to global and economic disruptions caused by the Coronavirus global pandemic, and the ongoing war in Ukraine, the Company’s operations have been negatively impacted. The Company has faced disruptions in certain of the following areas, and may face further challenges from supply chain disruptions, cost inflation, loss of contracts and/or customers, closure of the facilities of the Company’s suppliers, partners and customers, travel, shipping and logistical disruptions, government responses of all types, international business risks in countries where the Company makes and/or sells its products, loss of human capital or personnel at the Company, its partners and its customers, interruptions of production, customer credit risk, and general economic calamities. These ongoing pandemic and war related disruptions have materially negatively impacted the Company’s operations and financial performance and may continue to have significant material negative impacts on the Company.

LIQUIDITY

The Company has incurred net losses and negative cash flows from operations and has an accumulated deficit of approximately $38.8 million as of November 30, 2022. Management expects to continue to incur significant costs as it advances its clinical trials, product launches, and product development activities. As of November 30, 2022, the Company had cash and cash equivalents of approximately $5,067,000 and working capital of approximately $6,335,000.

On July 21, 2020, the Company filed with the SEC a “shelf” registration statement on Form S-3. The registration statement registers common shares that may be issued by the Company in a maximum aggregate amount of up to $90,000,000.  Shares of the Company’s common stock may be sold from time to time under this registration statement for up to three years from the filing date. On January 22, 2021, the Company filed a prospectus supplement for the sale of up to $15,000,000 of shares of our common stock in an at-the-market offering (“ATM Offering”) under the shelf registration statement, of which approximately $9,400,000, remains available for sale under the prospectus supplement.

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

The sales agent under the ATM Offering agrees to use commercially reasonable efforts to sell on the Company’s behalf all of the shares requested to be sold from time to time by the Company, consistent with its normal trading and sales practices, on mutually agreed terms between the sales agent and the Company. The Company has no obligation to sell any of the shares under the ATM Offering, and may at any time suspend offers under, or terminate the ATM Offering.

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

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

CONCENTRATION OF CREDIT RISK

The Company maintains cash balances at certain financial institutions in excess of amounts insured by federal agencies. As of November 30, 2022, the Company had approximately $4,825,000 of uninsured cash. The Company does not believe it is exposed to any significant credit risks.

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

For the three months ended November 30, 2022 and 2021, the Company had two and one key customers who are located in Asia and the United States which accounted for 48% and 59% of net consolidated sales, respectively. For the six months ended November 30, 2022 and 2021, the Company had one and two key customers who are located in Asia which accounted for 44% and 66% of net consolidated sales, respectively.

Total gross receivables on November 30, 2022 and May 31, 2022 were approximately $1,372,000 and $927,000, respectively. On November 30, 2022 and May 31, 2022, the Company had two and one key customers who are located in foreign countries which accounted for a total of 75% and 50%, respectively, of gross accounts receivable.

For the three months ended November 30, 2022 and 2021, the Company had one key vendor which accounted for 12% and 83% of the purchases of raw materials, respectively. For the six months ended November 30, 2022 and 2021, the Company had one key vendor which accounted for 8% and 77% of the purchases of raw materials, respectively.

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

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 usually required to prepay until they establish a history with the Company and at that time, they are extended credit at levels based on a number of criteria. Based on various criteria, initial credit levels for individual distributors are approved by designated officers and managers of the Company. All increases in credit limits are also approved by designated upper-level management. 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.  

Occasionally certain long-standing customers, who routinely place large orders, will have unusually large receivables balances relative to the total gross receivables. Management monitors the payments for these large balances closely and very often requires payment of existing invoices before shipping new sales orders.

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

PREPAID EXPENSES AND OTHER

The Company occasionally prepays for items such as inventory, insurance, and other items.  These items are reported as prepaid expenses and other, until either the inventory is physically received, or the insurance and other items are expensed.

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

INVENTORIES, NET

The Company values inventory at the lower of cost (determined using a combination of specific lot identification and the first-in, first-out methods) or net realizable value. Management periodically reviews inventory for excess quantities and obsolescence. Management evaluates quantities on hand, physical condition, and technical functionality as these characteristics may be impacted by anticipated customer demand for current products and new product introductions. The reserve is adjusted based on such evaluation, with a corresponding provision included in cost of sales. Abnormal amounts of idle facility expenses, freight, handling costs and wasted material are recognized as current period charges and the allocation of fixed production overhead is based on the normal capacity of the production facilities. As of November 30, 2022, and May 31, 2022, inventory reserves were approximately $774,000 and $846,000, respectively.

Net inventories are approximately the following:

	November 30, 2022		May 31, 2022
Raw materials	$	1,685,000	$	1,717,000
Work in progress		811,000		763,000
Finished products		339,000		782,000
Total gross inventory	$	2,835,000	$	3,262,000
Inventory reserves		(774,000)		(846,000)
Net inventory	$	2,061,000	$	2,416,000

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

PROPERTY AND EQUIPMENT, NET

Property and equipment are stated at cost. Expenditures for additions and major improvements are capitalized. Repairs and maintenance costs are charged to operations as incurred. When property and equipment are sold, retired or otherwise disposed of, the related cost and accumulated depreciation or amortization are removed from the accounts, and gains or losses from sales, retirements and dispositions are credited or charged to income.

Depreciation and amortization are provided over the estimated useful lives of the related assets, ranging from 5 to 10 years, using the straight-line method. Leasehold improvements are amortized over the lesser of the estimated useful life of the asset or the term of the lease. Depreciation and amortization expense on property and equipment were approximately $16,000 and $26,000 for the three months ended November 30, 2022 and 2021, respectively, and approximately $36,000 and $54,000 for the six months ended November 30, 2022 and 2021, respectively.

INTANGIBLE ASSETS, NET

Intangible assets include trademarks, product rights, technology rights and patents, and are accounted for based on Accounting Standards Codification (“ASC”), ASC 350 Intangibles – Goodwill and Other (“ASC 350”). In that regard, intangible assets that have indefinite useful lives are not amortized but are tested annually for impairment or more frequently if events or changes in circumstances indicate that the asset might be impaired.

Intangible assets are being amortized using the straight-line method over the useful life, not to exceed 18 years for marketing and distribution rights, 10 years for purchased technology use rights, and 20 years for patents. Amortization expense was approximately $3,000 and $7,000 for the three months ended November 30, 2022 and 2021, respectively, and approximately $12,000 and $14,000 for the six months ended November 30, 2022 and 2021, respectively. Amortizing intangible assets are tested for impairment if management determines that events or changes in circumstances indicate that the asset might be impaired.

The Company assesses the recoverability of these intangible assets by determining whether the amortization of the asset’s balance over its remaining life can be recovered through projected undiscounted future cash flows. As of November 30, 2022 and 2021, an impairment adjustment was made of $6,000 and $0, respectively.

INVESTMENTS

From time-to-time, the Company makes investments in privately held companies. Investments represent the Company’s investment in a Polish distributor, which is primarily engaged in distributing medical products and devices, including the distribution of the products sold by the Company. The Company invested approximately $165,000 into the Polish distributor and owns approximately 6% of the investee.

Equity holdings in nonmarketable unconsolidated entities in which the Company is not able to exercise significant influence ("Cost Method Holdings") are accounted for at the Company's initial cost, minus any impairment (if any), plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar holding or security of the same issuer. Dividends received are recorded as other income.

The Company assesses its equity holdings for impairment whenever events or changes in circumstances indicate that the carrying value of an equity holding may not be recoverable. Management reviewed the underlying net assets of the Company's equity method holding as of November 30, 2022 and determined that the Company's proportionate economic interest in the entity indicates that the equity holding was not impaired. There were no observable price changes in orderly transactions for identical or a similar holding or security of the Company’s Cost Method Holding during the period ended November 30, 2022.

SHARE-BASED COMPENSATION

The Company follows the guidance of ASC 718, Share-based Compensation (“ASC 718”), which requires the use of the fair-value based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments (options). The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model that uses assumptions for expected volatility, expected dividends, expected forfeiture rate, expected term, and the risk-free interest rate. The Company has not paid dividends historically and does not expect to pay them in the foreseeable future. Expected volatilities are based on weighted averages of the historical volatility of the Company’s common stock estimated over the expected term of the options. The expected forfeiture rate is based on historical forfeitures experienced. The expected term of options granted is derived using the “simplified method” which computes expected term as the average of the sum of the vesting term plus the contract term as historically the Company had limited exercise activity surrounding its options. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the period of the expected term. The grant date fair value of the award is recognized under the straight-line attribution method.

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

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

	Option Shares	Exercise Price Weighted Average
Outstanding May 31, 2022	2,321,616	$	3.72
Granted	146,000		3.37
Exercised	(46,500)		1.73
Cancelled or expired	(82,500)		5.07
Outstanding November 30, 2022	2,338,616	$	3.69

During the six months ended November 30, 2022, options to purchase 46,500 shares of common stock were exercised at prices ranging from $0.82 to $2.68. Total net proceeds to the Company were approximately $79,000.

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

REVENUE RECOGNITION

The Company has various contracts with customers.  All of the contracts specify that revenues from product sales are recognized at the time the product is shipped, customarily FOB shipping point, which is when the transfer of control of goods has occurred and at which point title passes.

The Company does not typically allow for returns from international customers except in the event of defective merchandise and therefore does not establish an allowance for returns. The Company does allow for a return merchandise allowance of approximately one percent of sales to certain domestic retailers. This allowance reduces revenue recognition by approximately one percent and is included in sales discounts. In addition, the Company has contracts with customers wherein customers receive purchase discounts for achieving specified sales volumes. The Company evaluated the status of these contracts during the six months ended November 30, 2022 and 2021, and does not believe that any additional discounts will be given through the end of the contract periods.

Services for contract work performed by the Company for others are invoiced and recognized as that work has been performed and as the project progresses. The Company sells clinical lab products to domestic and international distributors, including hospitals and clinical laboratories, medical research institutions, medical schools and pharmaceutical companies. OTC products are sold directly to drug stores and e-commerce customers as well as to distributors.  Physicians’ office products are sold to physicians and distributors, all of whom are categorized below according to the type of products sold to them. We also manufacture certain components on a contract basis for domestic and international manufacturers.

As of November 30, 2022, the Company had approximately $49,000 of advances from certain foreign customers. The majority of these advances are prepayments on orders that are expected to ship during our third quarter ending February 28, 2023.

Disaggregation of revenue:

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

	Three Months Ended November 30,				Six Months Ended November 30,
	2022		2021		2022		2021
Clinical lab	$	902,000	$	642,000	$	2,048,000	$	1,528,000
Over-the-counter		466,000		534,000		679,000		613,000
Physician's office		62,000		3,359,000		245,000		3,616,000
Contract manufacturing		52,000		112,000		147,000		152,000
Total	$	1,482,000	$	4,647,000	$	3,119,000	$	5,909,000

See Note 4 for additional information regarding geographic revenue concentrations.

SHIPPING AND HANDLING FEES

The Company includes shipping and handling fees billed to customers in net sales.

RESEARCH AND DEVELOPMENT

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

INCOME TAXES

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

FOREIGN CURRENCY TRANSLATION

The subsidiary located in Mexico operates primarily using the Mexican peso. The subsidiary located in Germany operates primarily using the U.S. dollar, with an immaterial amount of transactions occurring using the Euro. Accordingly, assets and liabilities of these subsidiaries are translated using exchange rates in effect at the end of the period, and revenues and costs are translated using average exchange rates for the period. The resulting translation adjustments to assets and liabilities are presented as a separate component of accumulated other comprehensive loss. There are no foreign currency transactions that are included in the condensed consolidated statements of operations for the three and six months ended November 30, 2022 and 2021.

RIGHT-OF-USE ASSETS AND LEASE LIABILITY

Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.  Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of fixed lease payments over the lease term.  Leases are classified as financing or operating which will drive the expense recognition pattern. The Company has elected to exclude short-term leases.  The Company leases office space and copy machines, all of which are operating leases.  Most leases include the option to renew and the exercise of the renewal options is at the Company’s sole discretion. Options to extend or terminate a lease are considered in the lease term to the extent that the option is reasonably certain of exercise.  The leases do not include the options to purchase the leased property.  The depreciable life of assets and leasehold improvements are limited by the expected lease term.

NET LOSS PER SHARE

Basic loss per share is computed as net loss divided by the weighted average number of common shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur from common shares issuable through stock options, warrants and other convertible securities using the treasury stock method. The total amount of anti-dilutive stock options not included in the loss per share calculation on November 30, 2022 and 2021 was 2,338,616 and 2,059,116, respectively.

RECENT ACCOUNTING PRONOUNCEMENTS

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

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." This ASU will require the measurement of all expected credit losses for financial assets, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The guidance was initially effective for the Company for annual reporting periods beginning after December 15, 2019, and interim periods within those fiscal years. In November 2019, the FASB issued ASU 2019-10, "Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates," which, among other things, defers the effective date of ASU 2016-13 for public filers that are considered smaller reporting companies as defined by the Securities and Exchange Commission to fiscal years beginning after December 15, 2022, including interim periods within those years. Early adoption is permitted. The Company is currently reviewing the requirements of this ASU to determine its impact on the Company’s consolidated results of operations and financial position.

RECLASSIFICATIONS

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

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SHAREHOLDERS' EQUITY

6 Months Ended

Nov. 30, 2022

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

NOTE 3:  SHAREHOLDERS’ EQUITY

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

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

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GEOGRAPHIC INFORMATION

6 Months Ended

Nov. 30, 2022

Geographic Information Disclosure Abstract

Geographic Information Disclosure [Text Block]

NOTE 4:  GEOGRAPHIC INFORMATION

The Company operates as one segment. Geographic information regarding net sales is approximately as follows:

	Three Months Ended November 30,				Six Months Ended November 30,
	2022		2021		2022		2021
Revenues from sales to unaffiliated customers:
Asia	$	663,000	$	3,373,000	$	1,477,000	$	4,048,000
Europe		415,000		796,000		967,000		1,267,000
North America		401,000		429,000		669,000		534,000
South America		3,000		3,000		6,000		6,000
Middle East		-		46,000		-		54,000
	$	1,482,000	$	4,647,000	$	3,119,000	$	5,909,000

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

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

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LEASES

6 Months Ended

Nov. 30, 2022

Disclosure Text Block [Abstract]

Lessee, Operating Leases [Text Block]

NOTE 5:  LEASES

The Company leases its facilities. On November 30, 2022, the Company had approximately 22,000 square feet of floor space at its corporate headquarters at 17571 Von Karman Avenue in Irvine, California, which it has been leasing since 2009. The lease for its headquarters expired on August 31, 2016.  The Company had an option to extend the term of its lease for two additional sixty-month periods. On November 30, 2015, the Company exercised its option to extend its lease for an additional sixty-month period and entered into the First Amendment to Lease wherein it extended its lease until August 31, 2021. On April 9, 2021, the Company exercised its second option to extend its lease for an additional five years.  When the Company extended its lease in April 2021, it was also granted an additional five-year lease extension option. The current rent is approximately $26,000 per month. The security deposit is approximately $22,000. 

In November 2016, the Company’s Mexican subsidiary, Biomerica de Mexico, entered into a 10-year lease for approximately 8,100 square feet of manufacturing space. The Company has one 10-year option to renew at the end of the initial lease period. The current rent is approximately $3,600 per month. Biomerica de Mexico also leases a smaller unit on a month-to-month basis for use in one manufacturing process.

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

Total gross rent expense in the United States for the six months ended November 30, 2022 and 2021 was approximately $154,000 and $155,000, respectively.  Rent expense for the Mexico facility for the six months ended November 30, 2022 and 2021 was approximately $21,000 and $21,000, respectively.

For purposes of determining straight-line rent expense, the lease term is calculated from the date the Company first takes possession of the facility, including any periods of free rent and any renewal options periods that the Company is reasonably certain of exercising. The Company’s office and equipment leases generally have contractually specified minimum rent and annual rent increases are included in the measurement of the right-of-use asset and related lease liability.  Additionally, under these lease arrangements, the Company may be required to pay directly, or reimburse the lessors, for some maintenance and operating costs. Such amounts are generally variable and therefore not included in the measurement of the right-of-use asset and related lease liability but are instead recognized as variable lease expense when they are incurred.  

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

Operating cash flows from operating leases	$	174,322
Right-of-use assets obtained in exchange for     new operating lease liabilities	$	-
Weighted average remaining lease term (in years)		3.77
Weighted average discount rate		6.50%

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

Less than 1 year	$	357,000
1 to 2 years		368,000
2 to 3 years		379,000
3 to 4 years		298,000
4 to 5 years		0
Total undiscounted lease payments		1,402,000
Less imputed interest		154,000
Total operating lease liabilities	$	1,248,000

According to the terms of the lease in Irvine, the Company is also responsible for routine repairs of the building and for certain increases in property tax.

The Company also has various insignificant leases for office equipment.

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Nov. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

NOTE 6:  COMMITMENTS AND CONTINGENCIES

LITIGATION

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

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

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Accounting Policies, by Policy (Policies)

6 Months Ended

Nov. 30, 2022

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 (BioEurope GmbH) and Mexican subsidiary (Biomerica de Mexico). All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates, Policy [Policy Text Block]

ACCOUNTING ESTIMATES

The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reported period. Estimates that are made include the allowance for doubtful accounts, which is estimated based on current as well as historical experience with a customer; stock option forfeiture rates, which are calculated based on historical data; inventory obsolescence, which is based on projected and historical usage of materials; and lease liability and right-of-use assets, which are calculated based on certain assumptions such as borrowing rate, the likelihood of lease extensions to occur, asset valuation, among other things; and other items that may be necessary to estimate using current, historical and judgment based information. Actual results could materially differ from those estimates.

Markets And Methods of Distribution Policy [Text Block]

MARKETS AND METHODS OF DISTRIBUTION

Due to global and economic disruptions caused by the Coronavirus global pandemic, and the ongoing war in Ukraine, the Company’s operations have been negatively impacted. The Company has faced disruptions in certain of the following areas, and may face further challenges from supply chain disruptions, cost inflation, loss of contracts and/or customers, closure of the facilities of the Company’s suppliers, partners and customers, travel, shipping and logistical disruptions, government responses of all types, international business risks in countries where the Company makes and/or sells its products, loss of human capital or personnel at the Company, its partners and its customers, interruptions of production, customer credit risk, and general economic calamities. These ongoing pandemic and war related disruptions have materially negatively impacted the Company’s operations and financial performance and may continue to have significant material negative impacts on the Company.

Liquidity Policy [Text Block]

LIQUIDITY

The Company has incurred net losses and negative cash flows from operations and has an accumulated deficit of approximately $38.8 million as of November 30, 2022. Management expects to continue to incur significant costs as it advances its clinical trials, product launches, and product development activities. As of November 30, 2022, the Company had cash and cash equivalents of approximately $5,067,000 and working capital of approximately $6,335,000.

On July 21, 2020, the Company filed with the SEC a “shelf” registration statement on Form S-3. The registration statement registers common shares that may be issued by the Company in a maximum aggregate amount of up to $90,000,000.  Shares of the Company’s common stock may be sold from time to time under this registration statement for up to three years from the filing date. On January 22, 2021, the Company filed a prospectus supplement for the sale of up to $15,000,000 of shares of our common stock in an at-the-market offering (“ATM Offering”) under the shelf registration statement, of which approximately $9,400,000, remains available for sale under the prospectus supplement.

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

The sales agent under the ATM Offering agrees to use commercially reasonable efforts to sell on the Company’s behalf all of the shares requested to be sold from time to time by the Company, consistent with its normal trading and sales practices, on mutually agreed terms between the sales agent and the Company. The Company has no obligation to sell any of the shares under the ATM Offering, and may at any time suspend offers under, or terminate the ATM Offering.

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

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

Concentration Risk, Credit Risk, Policy [Policy Text Block]

CONCENTRATION OF CREDIT RISK

The Company maintains cash balances at certain financial institutions in excess of amounts insured by federal agencies. As of November 30, 2022, the Company had approximately $4,825,000 of uninsured cash. The Company does not believe it is exposed to any significant credit risks.

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

For the three months ended November 30, 2022 and 2021, the Company had two and one key customers who are located in Asia and the United States which accounted for 48% and 59% of net consolidated sales, respectively. For the six months ended November 30, 2022 and 2021, the Company had one and two key customers who are located in Asia which accounted for 44% and 66% of net consolidated sales, respectively.

Total gross receivables on November 30, 2022 and May 31, 2022 were approximately $1,372,000 and $927,000, respectively. On November 30, 2022 and May 31, 2022, the Company had two and one key customers who are located in foreign countries which accounted for a total of 75% and 50%, respectively, of gross accounts receivable.

For the three months ended November 30, 2022 and 2021, the Company had one key vendor which accounted for 12% and 83% of the purchases of raw materials, respectively. For the six months ended November 30, 2022 and 2021, the Company had one key vendor which accounted for 8% and 77% of the purchases of raw materials, respectively.

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

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.

Accounts Receivable [Policy Text Block]

ACCOUNTS RECEIVABLE

The Company extends unsecured credit to its customers on a regular basis. International accounts are usually required to prepay until they establish a history with the Company and at that time, they are extended credit at levels based on a number of criteria. Based on various criteria, initial credit levels for individual distributors are approved by designated officers and managers of the Company. All increases in credit limits are also approved by designated upper-level management. 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.  

Occasionally certain long-standing customers, who routinely place large orders, will have unusually large receivables balances relative to the total gross receivables. Management monitors the payments for these large balances closely and very often requires payment of existing invoices before shipping new sales orders.

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

Prepaids Policy [Policy Text Block]

PREPAID EXPENSES AND OTHER

The Company occasionally prepays for items such as inventory, insurance, and other items.  These items are reported as prepaid expenses and other, until either the inventory is physically received, or the insurance and other items are expensed.

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

Inventory, Policy [Policy Text Block]

INVENTORIES, NET

The Company values inventory at the lower of cost (determined using a combination of specific lot identification and the first-in, first-out methods) or net realizable value. Management periodically reviews inventory for excess quantities and obsolescence. Management evaluates quantities on hand, physical condition, and technical functionality as these characteristics may be impacted by anticipated customer demand for current products and new product introductions. The reserve is adjusted based on such evaluation, with a corresponding provision included in cost of sales. Abnormal amounts of idle facility expenses, freight, handling costs and wasted material are recognized as current period charges and the allocation of fixed production overhead is based on the normal capacity of the production facilities. As of November 30, 2022, and May 31, 2022, inventory reserves were approximately $774,000 and $846,000, respectively.

Net inventories are approximately the following:

	November 30, 2022		May 31, 2022
Raw materials	$	1,685,000	$	1,717,000
Work in progress		811,000		763,000
Finished products		339,000		782,000
Total gross inventory	$	2,835,000	$	3,262,000
Inventory reserves		(774,000)		(846,000)
Net inventory	$	2,061,000	$	2,416,000

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

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

Depreciation and amortization are provided over the estimated useful lives of the related assets, ranging from 5 to 10 years, using the straight-line method. Leasehold improvements are amortized over the lesser of the estimated useful life of the asset or the term of the lease. Depreciation and amortization expense on property and equipment were approximately $16,000 and $26,000 for the three months ended November 30, 2022 and 2021, respectively, and approximately $36,000 and $54,000 for the six months ended November 30, 2022 and 2021, respectively.

Goodwill and Intangible Assets, Policy [Policy Text Block]

INTANGIBLE ASSETS, NET

Intangible assets include trademarks, product rights, technology rights and patents, and are accounted for based on Accounting Standards Codification (“ASC”), ASC 350 Intangibles – Goodwill and Other (“ASC 350”). In that regard, intangible assets that have indefinite useful lives are not amortized but are tested annually for impairment or more frequently if events or changes in circumstances indicate that the asset might be impaired.

Intangible assets are being amortized using the straight-line method over the useful life, not to exceed 18 years for marketing and distribution rights, 10 years for purchased technology use rights, and 20 years for patents. Amortization expense was approximately $3,000 and $7,000 for the three months ended November 30, 2022 and 2021, respectively, and approximately $12,000 and $14,000 for the six months ended November 30, 2022 and 2021, respectively. Amortizing intangible assets are tested for impairment if management determines that events or changes in circumstances indicate that the asset might be impaired.

The Company assesses the recoverability of these intangible assets by determining whether the amortization of the asset’s balance over its remaining life can be recovered through projected undiscounted future cash flows. As of November 30, 2022 and 2021, an impairment adjustment was made of $6,000 and $0, respectively.

Investment, Policy [Policy Text Block]

INVESTMENTS

From time-to-time, the Company makes investments in privately held companies. Investments represent the Company’s investment in a Polish distributor, which is primarily engaged in distributing medical products and devices, including the distribution of the products sold by the Company. The Company invested approximately $165,000 into the Polish distributor and owns approximately 6% of the investee.

Equity holdings in nonmarketable unconsolidated entities in which the Company is not able to exercise significant influence ("Cost Method Holdings") are accounted for at the Company's initial cost, minus any impairment (if any), plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar holding or security of the same issuer. Dividends received are recorded as other income.

The Company assesses its equity holdings for impairment whenever events or changes in circumstances indicate that the carrying value of an equity holding may not be recoverable. Management reviewed the underlying net assets of the Company's equity method holding as of November 30, 2022 and determined that the Company's proportionate economic interest in the entity indicates that the equity holding was not impaired. There were no observable price changes in orderly transactions for identical or a similar holding or security of the Company’s Cost Method Holding during the period ended November 30, 2022.

Share-Based Payment Arrangement [Policy Text Block]

SHARE-BASED COMPENSATION

The Company follows the guidance of ASC 718, Share-based Compensation (“ASC 718”), which requires the use of the fair-value based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments (options). The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model that uses assumptions for expected volatility, expected dividends, expected forfeiture rate, expected term, and the risk-free interest rate. The Company has not paid dividends historically and does not expect to pay them in the foreseeable future. Expected volatilities are based on weighted averages of the historical volatility of the Company’s common stock estimated over the expected term of the options. The expected forfeiture rate is based on historical forfeitures experienced. The expected term of options granted is derived using the “simplified method” which computes expected term as the average of the sum of the vesting term plus the contract term as historically the Company had limited exercise activity surrounding its options. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the period of the expected term. The grant date fair value of the award is recognized under the straight-line attribution method.

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

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

	Option Shares	Exercise Price Weighted Average
Outstanding May 31, 2022	2,321,616	$	3.72
Granted	146,000		3.37
Exercised	(46,500)		1.73
Cancelled or expired	(82,500)		5.07
Outstanding November 30, 2022	2,338,616	$	3.69

During the six months ended November 30, 2022, options to purchase 46,500 shares of common stock were exercised at prices ranging from $0.82 to $2.68. Total net proceeds to the Company were approximately $79,000.

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

Revenue [Policy Text Block]

REVENUE RECOGNITION

The Company has various contracts with customers.  All of the contracts specify that revenues from product sales are recognized at the time the product is shipped, customarily FOB shipping point, which is when the transfer of control of goods has occurred and at which point title passes.

The Company does not typically allow for returns from international customers except in the event of defective merchandise and therefore does not establish an allowance for returns. The Company does allow for a return merchandise allowance of approximately one percent of sales to certain domestic retailers. This allowance reduces revenue recognition by approximately one percent and is included in sales discounts. In addition, the Company has contracts with customers wherein customers receive purchase discounts for achieving specified sales volumes. The Company evaluated the status of these contracts during the six months ended November 30, 2022 and 2021, and does not believe that any additional discounts will be given through the end of the contract periods.

Services for contract work performed by the Company for others are invoiced and recognized as that work has been performed and as the project progresses. The Company sells clinical lab products to domestic and international distributors, including hospitals and clinical laboratories, medical research institutions, medical schools and pharmaceutical companies. OTC products are sold directly to drug stores and e-commerce customers as well as to distributors.  Physicians’ office products are sold to physicians and distributors, all of whom are categorized below according to the type of products sold to them. We also manufacture certain components on a contract basis for domestic and international manufacturers.

As of November 30, 2022, the Company had approximately $49,000 of advances from certain foreign customers. The majority of these advances are prepayments on orders that are expected to ship during our third quarter ending February 28, 2023.

Disaggregation of revenue:

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

	Three Months Ended November 30,				Six Months Ended November 30,
	2022		2021		2022		2021
Clinical lab	$	902,000	$	642,000	$	2,048,000	$	1,528,000
Over-the-counter		466,000		534,000		679,000		613,000
Physician's office		62,000		3,359,000		245,000		3,616,000
Contract manufacturing		52,000		112,000		147,000		152,000
Total	$	1,482,000	$	4,647,000	$	3,119,000	$	5,909,000

See Note 4 for additional information regarding geographic revenue concentrations.

Cost of Goods and Service [Policy Text Block]

SHIPPING AND HANDLING FEES

The Company includes shipping and handling fees billed to customers in net sales.

Research and Development Expense, Policy [Policy Text Block]

RESEARCH AND DEVELOPMENT

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

Income Tax, Policy [Policy Text Block]

INCOME TAXES

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

Foreign Currency Transactions and Translations Policy [Policy Text Block]

FOREIGN CURRENCY TRANSLATION

The subsidiary located in Mexico operates primarily using the Mexican peso. The subsidiary located in Germany operates primarily using the U.S. dollar, with an immaterial amount of transactions occurring using the Euro. Accordingly, assets and liabilities of these subsidiaries are translated using exchange rates in effect at the end of the period, and revenues and costs are translated using average exchange rates for the period. The resulting translation adjustments to assets and liabilities are presented as a separate component of accumulated other comprehensive loss. There are no foreign currency transactions that are included in the condensed consolidated statements of operations for the three and six months ended November 30, 2022 and 2021.

Lessee, Leases [Policy Text Block]

RIGHT-OF-USE ASSETS AND LEASE LIABILITY

Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.  Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of fixed lease payments over the lease term.  Leases are classified as financing or operating which will drive the expense recognition pattern. The Company has elected to exclude short-term leases.  The Company leases office space and copy machines, all of which are operating leases.  Most leases include the option to renew and the exercise of the renewal options is at the Company’s sole discretion. Options to extend or terminate a lease are considered in the lease term to the extent that the option is reasonably certain of exercise.  The leases do not include the options to purchase the leased property.  The depreciable life of assets and leasehold improvements are limited by the expected lease term.

Earnings Per Share, Policy [Policy Text Block]

NET LOSS PER SHARE

Basic loss per share is computed as net loss divided by the weighted average number of common shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur from common shares issuable through stock options, warrants and other convertible securities using the treasury stock method. The total amount of anti-dilutive stock options not included in the loss per share calculation on November 30, 2022 and 2021 was 2,338,616 and 2,059,116, respectively.

New Accounting Pronouncements, Policy [Policy Text Block]

RECENT ACCOUNTING PRONOUNCEMENTS

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

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." This ASU will require the measurement of all expected credit losses for financial assets, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The guidance was initially effective for the Company for annual reporting periods beginning after December 15, 2019, and interim periods within those fiscal years. In November 2019, the FASB issued ASU 2019-10, "Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates," which, among other things, defers the effective date of ASU 2016-13 for public filers that are considered smaller reporting companies as defined by the Securities and Exchange Commission to fiscal years beginning after December 15, 2022, including interim periods within those years. Early adoption is permitted. The Company is currently reviewing the requirements of this ASU to determine its impact on the Company’s consolidated results of operations and financial position.

Reclassification, Comparability Adjustment [Policy Text Block]

RECLASSIFICATIONS

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

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SIGNIFICANT ACCOUNTING POLICIES (Tables)

6 Months Ended

Nov. 30, 2022

Accounting Policies [Abstract]

Schedule of Inventory, Current [Table Text Block]

	November 30, 2022		May 31, 2022
Raw materials	$	1,685,000	$	1,717,000
Work in progress		811,000		763,000
Finished products		339,000		782,000
Total gross inventory	$	2,835,000	$	3,262,000
Inventory reserves		(774,000)		(846,000)
Net inventory	$	2,061,000	$	2,416,000

Share-Based Payment Arrangement, Option, Activity [Table Text Block]

	Option Shares	Exercise Price Weighted Average
Outstanding May 31, 2022	2,321,616	$	3.72
Granted	146,000		3.37
Exercised	(46,500)		1.73
Cancelled or expired	(82,500)		5.07
Outstanding November 30, 2022	2,338,616	$	3.69

Disaggregation of Revenue [Table Text Block]

	Three Months Ended November 30,				Six Months Ended November 30,
	2022		2021		2022		2021
Clinical lab	$	902,000	$	642,000	$	2,048,000	$	1,528,000
Over-the-counter		466,000		534,000		679,000		613,000
Physician's office		62,000		3,359,000		245,000		3,616,000
Contract manufacturing		52,000		112,000		147,000		152,000
Total	$	1,482,000	$	4,647,000	$	3,119,000	$	5,909,000

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GEOGRAPHIC INFORMATION (Tables)

6 Months Ended

Nov. 30, 2022

Geographic Information Disclosure Abstract

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

	Three Months Ended November 30,				Six Months Ended November 30,
	2022		2021		2022		2021
Revenues from sales to unaffiliated customers:
Asia	$	663,000	$	3,373,000	$	1,477,000	$	4,048,000
Europe		415,000		796,000		967,000		1,267,000
North America		401,000		429,000		669,000		534,000
South America		3,000		3,000		6,000		6,000
Middle East		-		46,000		-		54,000
	$	1,482,000	$	4,647,000	$	3,119,000	$	5,909,000

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LEASES (Tables)

6 Months Ended

Nov. 30, 2022

Disclosure Text Block [Abstract]

Schedule Of Cash Flow Supplemental Disclosures Related To Lease [Table Text Block]

Operating cash flows from operating leases	$	174,322
Right-of-use assets obtained in exchange for     new operating lease liabilities	$	-
Weighted average remaining lease term (in years)		3.77
Weighted average discount rate		6.50%

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

Less than 1 year	$	357,000
1 to 2 years		368,000
2 to 3 years		379,000
3 to 4 years		298,000
4 to 5 years		0
Total undiscounted lease payments		1,402,000
Less imputed interest		154,000
Total operating lease liabilities	$	1,248,000

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BASIS OF PRESENTATION (Details) - Revenue Benchmark [Member] - Product Concentration Risk [Member]	6 Months Ended
	Nov. 30, 2022	Nov. 30, 2021
COVID-19 Related Product [Member]
BASIS OF PRESENTATION (Details) [Line Items]
Concentration Risk, Percentage	13.00%	57.00%
Non COVID-19 Product [Member]
BASIS OF PRESENTATION (Details) [Line Items]
Concentration Risk, Percentage	87.00%	43.00%

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SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($)	3 Months Ended				6 Months Ended		12 Months Ended
	Nov. 30, 2022	Aug. 31, 2022	Nov. 30, 2021	Aug. 31, 2021	Nov. 30, 2022	Nov. 30, 2021	May 31, 2022	Jan. 22, 2021	Jul. 21, 2020
SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Retained Earnings (Accumulated Deficit)	$ (38,775,343)				$ (38,775,343)		$ (35,077,379)
Cash and Cash Equivalents, at Carrying Value	5,066,521				5,066,521		5,916,983
Working Capital					6,335,000
Shelf Registration Statement Maximum Authorized Common Stock Issuance Value								$ 15,000,000	$ 90,000,000
Common Stock, Capital Shares Reserved for Future Issuance (in Shares)								9,400,000
Proceeds from Issuance of Common Stock					1,988,422	$ 1,751,222
Cash, Uninsured Amount	4,825,000				4,825,000
Revenues	1,481,915		$ 4,646,900		3,119,350	5,908,687
Accounts Receivable, before Allowance for Credit Loss	1,372,000				1,372,000		927,000
Accounts Receivable, Allowance for Credit Loss, Current	522,234				522,234		153,231
Prepaid Expense and Other Assets	121,000				121,000		320,000
Inventory Valuation Reserves	773,916				773,916		845,549
Depreciation, Depletion and Amortization	16,000		26,000		36,000	54,000
Amortization of Intangible Assets	3,000		7,000		12,000	14,000
Asset Impairment Charges					6,000		0
Investments	165,324				$ 165,324		165,324
Share-Based Payment Arrangement, Expense	318,230	$ 303,755	314,397	$ 319,622
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Exercises in Period (in Shares)					46,500
Share-Based Compensation Arrangements by Share-Based Payment Award, Options, Exercises in Period, Weighted Average Exercise Price (in Dollars per share)					$ 1.73
Proceeds from Stock Options Exercised					$ 79,155	34,480
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Grants in Period, Gross (in Shares)					146,000
Share-Based Compensation Arrangements by Share-Based Payment Award, Options, Grants in Period, Weighted Average Exercise Price (in Dollars per share)					$ 3.37
Proceeds from Customers					$ 49,000
Research and Development Expense	461,941		547,933		823,112	$ 929,477
Deferred Tax Assets, Gross	7,748,000				$ 7,748,000		$ 6,967,000
Share-Based Payment Arrangement, Option [Member]
SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in Shares)					2,338,616	2,059,116
Minimum [Member]
SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Property, Plant and Equipment, Estimated Useful Lives					5
Maximum [Member]
SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Property, Plant and Equipment, Estimated Useful Lives					10 years
Distribution Rights [Member]
SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Finite-Lived Intangible Asset, Useful Life					18 years
Purchased Technology Rights [Member]
SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Finite-Lived Intangible Asset, Useful Life					10 years
Patents [Member]
SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Finite-Lived Intangible Asset, Useful Life					20 years
Asia [Member]
SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Revenues	$ 663,000		$ 3,373,000		$ 1,477,000	$ 4,048,000
Asia [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member]
SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Concentration Risk, Percentage	48.00%
UNITED STATES | Revenue Benchmark [Member] | Customer Concentration Risk [Member]
SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Concentration Risk, Percentage			59.00%
Foreign [Member] | Accounts Receivable [Member] | Credit Concentration Risk [Member]
SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Concentration Risk, Percentage					75.00%		50.00%
Polish Distributor [Member]
SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Investments	$ 165,000				$ 165,000
Equity Method Investment, Ownership Percentage	6.00%				6.00%
Share-Based Payment Arrangement, Option [Member]
SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Share-Based Payment Arrangement, Expense					$ 622,000	$ 634,000
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Exercises in Period (in Shares)					46,500
Proceeds from Stock Options Exercised					$ 79,000
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Grants in Period, Gross (in Shares)					146,000
Share-Based Compensation Arrangements by Share-Based Payment Award, Options, Grants in Period, Weighted Average Exercise Price (in Dollars per share)					$ 3.37
Share-Based Payment Arrangement, Option [Member] | Minimum [Member]
SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Share-Based Compensation Arrangements by Share-Based Payment Award, Options, Exercises in Period, Weighted Average Exercise Price (in Dollars per share)					0.82
Share-Based Payment Arrangement, Option [Member] | Maximum [Member]
SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Share-Based Compensation Arrangements by Share-Based Payment Award, Options, Exercises in Period, Weighted Average Exercise Price (in Dollars per share)					$ 2.68
One Cutomer [Member] | Asia [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member]
SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Concentration Risk, Percentage					44.00%
Two Customer [Member] | Asia [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member]
SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Concentration Risk, Percentage						66.00%
One Vendor [Member] | Cost of Goods and Service Benchmark [Member] | Supplier Concentration Risk [Member]
SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Concentration Risk, Percentage	12.00%		83.00%		8.00%	77.00%
One Vendor [Member] | Accounts Payable [Member] | Supplier Concentration Risk [Member]
SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Concentration Risk, Percentage					27.00%
Two Vendors [Member] | Accounts Payable [Member] | Supplier Concentration Risk [Member]
SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Concentration Risk, Percentage							69.00%
ATM Agreement [Member]
SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Stock Issued During Period, Shares, New Issues (in Shares)					565,664
Proceeds from Issuance of Common Stock					$ 1,988,000
Sale of Stock, Consideration Received on Transaction					$ 1,936,000
ATM Agreement [Member] | Minimum [Member]
SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Share Price (in Dollars per share)	$ 3.15				$ 3.15
ATM Agreement [Member] | Maximum [Member]
SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Share Price (in Dollars per share)	$ 4.26				$ 4.26

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SIGNIFICANT ACCOUNTING POLICIES (Details) - Inventories - USD ($)	Nov. 30, 2022	May 31, 2022
Inventories Abstract
Raw materials	$ 1,685,000	$ 1,717,000
Work in progress	811,000	763,000
Finished products	339,000	782,000
Total gross inventory	2,835,000	3,262,000
Inventory reserves	(773,916)	(845,549)
Net inventory	$ 2,061,444	$ 2,416,447

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SIGNIFICANT ACCOUNTING POLICIES (Details) - Options Activity	6 Months Ended
	Nov. 30, 2022 $ / shares shares
Options Activity Abstract
Options Outstanding, Shares | shares	2,321,616
Option Outstanding, Exercise Price Weighted Average | $ / shares	$ 3.72
Option Granted, Shares | shares	146,000
Option Granted, Exercise Price Weighted Average | $ / shares	$ 3.37
Option Exercised, Shares | shares	(46,500)
Option Exercised, Exercise Price Weighted Average | $ / shares	$ 1.73
Option Cancelled or expired, Shares | shares	(82,500)
Option Cancelled or expired, Exercise Price Weighted Average | $ / shares	$ 5.07
Options Outstanding, Shares | shares	2,338,616
Option Outstanding, Exercise Price Weighted Average | $ / shares	$ 3.69

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SIGNIFICANT ACCOUNTING POLICIES (Details) - Revenue from contracts with customers - USD ($)	3 Months Ended		6 Months Ended
	Nov. 30, 2022	Nov. 30, 2021	Nov. 30, 2022	Nov. 30, 2021
Disaggregation of Revenue [Line Items]
Revenue From Customers	$ 1,482,000	$ 4,647,000	$ 3,119,000	$ 5,909,000
Clinical Lab [Member]
Disaggregation of Revenue [Line Items]
Revenue From Customers	902,000	642,000	2,048,000	1,528,000
Over-the-counter [Member]
Disaggregation of Revenue [Line Items]
Revenue From Customers	466,000	534,000	679,000	613,000
Physicians Office [Member]
Disaggregation of Revenue [Line Items]
Revenue From Customers	62,000	3,359,000	245,000	3,616,000
Contract Manufacturing [Member]
Disaggregation of Revenue [Line Items]
Revenue From Customers	$ 52,000	$ 112,000	$ 147,000	$ 152,000

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SHAREHOLDERS' EQUITY (Details) - USD ($)	6 Months Ended
	Nov. 30, 2022	Nov. 30, 2021
SHAREHOLDERS' EQUITY (Details) [Line Items]
Stock or Unit Option Plan Expense	$ 621,985	$ 634,019
Sale of Stock, Number of Shares Issued in Transaction (in Shares)		565,664
Proceeds from Sale of Stock, Gross	1,988,000
Proceeds from Sale of Stock, Net	$ 1,936,000
Minimum [Member]
SHAREHOLDERS' EQUITY (Details) [Line Items]
Sale of Stock, Price Per Share (in Dollars per share)		$ 3.15
Maximum [Member]
SHAREHOLDERS' EQUITY (Details) [Line Items]
Sale of Stock, Price Per Share (in Dollars per share)		$ 4.26

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GEOGRAPHIC INFORMATION (Details)	6 Months Ended
	Nov. 30, 2022 USD ($)	May 31, 2022 USD ($)
GEOGRAPHIC INFORMATION (Details) [Line Items]
Number of Operating Segments	1
Inventory, Gross	$ 2,835,000	$ 3,262,000
Property, Plant and Equipment, Net	236,719	214,487
MEXICO
GEOGRAPHIC INFORMATION (Details) [Line Items]
Inventory, Gross	685,000	621,000
Property, Plant and Equipment, Net	$ 19,000	$ 17,000

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GEOGRAPHIC INFORMATION (Details) - Geographic information regarding net sales - USD ($)	3 Months Ended		6 Months Ended
	Nov. 30, 2022	Nov. 30, 2021	Nov. 30, 2022	Nov. 30, 2021
Revenues from sales to unaffiliated customers:
Net Sales	$ 1,481,915	$ 4,646,900	$ 3,119,350	$ 5,908,687
Asia [Member]
Revenues from sales to unaffiliated customers:
Net Sales	663,000	3,373,000	1,477,000	4,048,000
Europe [Member]
Revenues from sales to unaffiliated customers:
Net Sales	415,000	796,000	967,000	1,267,000
North America [Member]
Revenues from sales to unaffiliated customers:
Net Sales	401,000	429,000	669,000	534,000
South America [Member]
Revenues from sales to unaffiliated customers:
Net Sales	3,000	3,000	6,000	6,000
Middle East [Member]
Revenues from sales to unaffiliated customers:
Net Sales		$ 46,000		$ 54,000

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LEASES (Details) - USD ($)	6 Months Ended
	Nov. 30, 2022	Nov. 30, 2021
Building In Irvine California [Member]
LEASES (Details) [Line Items]
Payments for Rent	$ 26,000
Security Deposit	22,000
Lease by Mexican Subsidiary [Member]
LEASES (Details) [Line Items]
Payments for Rent	3,600
United States Facility [Member]
LEASES (Details) [Line Items]
Payments for Rent	154,000	$ 155,000
Mexico Facility [Member]
LEASES (Details) [Line Items]
Payments for Rent	$ 21,000	$ 21,000

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LEASES (Details) - Supplemental cash flow information related to leases	6 Months Ended
	Nov. 30, 2022 USD ($)
Supplemental Cash Flow Information Related To Leases Abstract
Operating cash flows from operating leases	$ 174,322
Right-of-use assets obtained in exchange for new operating lease liabilities
Weighted average remaining lease term (in years)	3 years 9 months 7 days
Weighted average discount rate	6.50%

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LEASES (Details) - The maturity of lease liabilities	Nov. 30, 2022 USD ($)
The Maturity Of Lease Liabilities Abstract
Less than 1 year	$ 357,000
1 to 2 years	368,000
2 to 3 years	379,000
3 to 4 years	298,000
4 to 5 years	0
Total undiscounted lease payments	1,402,000
Less imputed interest	154,000
Total operating lease liabilities	$ 1,248,000