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What changed in BIOMERICA INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of BIOMERICA INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+265 added−271 removedSource: 10-K (2024-08-28) vs 10-K (2023-08-25)

Top changes in BIOMERICA INC's 2024 10-K

265 paragraphs added · 271 removed · 153 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

50 edited+27 added−58 removed35 unchanged
Biggest changeWe are in the process of finalizing one additional set of in-house validation tests that the FDA has requested us to complete before they review the submission and decide on the allowance on this product. 5 We have developed a unique diagnostic-guided therapy which we call the InFoods ® technology, that is designed to allow physicians to identify patient-specific foods (e.g. pork, milk, onions, sugar, chickpeas, etc.), that when removed from the patient’s diet, may alleviate or improve their symptoms of IBS and other diseases.
Biggest changeThis platform enables physicians to identify patient-specific foods (e.g., pork, milk, onions, sugar, chickpeas) that, when eliminated from the patient’s diet, may alleviate or improve symptoms of IBS and other conditions. We have filed patents globally related to the use of inFoods® diagnostic technology for detecting abnormal immune responses in patients with various diseases.
Our products are primarily either Class I or Class II medical devices. Pursuant to FDA requirements, we have registered our manufacturing facility with the FDA as a medical device manufacturer and listed the medical devices we manufacture. We are also subject to inspection on a routine basis for compliance with FDA regulations.
Our products are primarily either Class I or Class II medical devices. 6 Pursuant to FDA requirements, we have registered our manufacturing facility with the FDA as a medical device manufacturer and listed the medical devices we manufacture. We are also subject to inspection on a routine basis for compliance with FDA regulations.
PRODUCTION Most of our diagnostic test kits are manufactured and/or assembled at our facilities in Irvine, California and in Mexicali, Mexico. We established our manufacturing facility in Mexicali, Mexico in fiscal 2003 and moved a significant portion of our diagnostic packaging and assembly to that facility.
PRODUCTION Our diagnostic test kits are manufactured and/or assembled at our facilities in Irvine, California and in Mexicali, Mexico. We established our manufacturing facility in Mexicali, Mexico in fiscal 2003 and moved a significant portion of our diagnostic packaging and assembly to that facility.
FDA regulations require that some new products have pre-marketing clearance or approval by the FDA and require these products to be manufactured in accordance with the FDA’s current Good Manufacturing Practice (cGMP) regulations, to be extensively tested and to be properly labeled to disclose test results and performance claims and limitations.
FDA regulations require that some new products have pre-marketing clearance or approval by the FDA and require these products to be manufactured in accordance with the FDA’s current Good Manufacturing Practice (“cGMP”) regulations, to be extensively tested and to be properly labeled to disclose test results and performance claims and limitations.
MARKETS AND METHODS OF DISTRIBUTION Biomerica has approximately 80 current customers for its diagnostic business, of which approximately 40 are foreign distributors, 10 are domestic distributors and the balance are primarily domestic hospital and clinical laboratories, medical research institutions, medical schools, pharmaceutical companies, chain drugstores, wholesalers, physicians’ offices, and e-commerce customers.
MARKETS AND METHODS OF DISTRIBUTION Biomerica has approximately 80 current customers for its diagnostic business, of which approximately 38 are foreign distributors, 12 are domestic distributors and the balance are primarily domestic hospital and clinical laboratories, medical research institutions, medical schools, pharmaceutical companies, chain drugstores, wholesalers, physicians’ offices, and e-commerce customers.
The last FDA announced inspection was in November 2019 and no observations were noted. We believe that all Biomerica products sold in the United States comply with the FDA and state regulations. We are an FDA regulated and ISO 13485:2016 certified In Vitro Diagnostic Medical Devices company.
The last FDA announced inspection was in May 2024 and no observations were noted. We believe that all Biomerica products sold in the United States comply with the FDA and state regulations. We are an FDA regulated and ISO 13485:2016 certified In Vitro Diagnostic Medical Devices company.
EMPLOYEES As of May 31, 2023 and 2022, we employed a total of 62 and 64 employees, respectively, in the United States, Mexico, and Germany, of which 62 and 64 were full-time employees, respectively. Various employees listed in the production department also perform research and development duties as a routine function of their job.
EMPLOYEES As of May 31, 2024 and 2023, we employed a total of 64 and 62 employees, respectively, in the United States, Mexico, UK and Germany, of which 63 and 62 were full-time employees, respectively. Various employees listed in the production department also perform research and development duties as a routine function of their job.
Using a patient blood sample, a physician or lab can run our test to identify specific foods (e.g., pork, milk, shrimp, broccoli, eggs) that, if eliminated from an IBS patient’s diet, can alleviate or reduce the individual’s IBS symptoms, including, but not limited to, constipation, diarrhea, bloating, cramping, severe pain, and indigestion.
Using a patient blood sample, a physician or lab can run our test to identify specific foods (e.g., pork, milk, onions, sugar, chickpeas) that, if eliminated from an IBS patient’s diet, can alleviate or reduce the individual’s IBS symptoms, including, but not limited to, constipation, diarrhea, bloating, cramping, severe pain, and indigestion.
Per IVDR 2017/746 Amendment 2021/0323 (COD), devices without a CE certificate that was issued in accordance with IVDD, for which a declaration of conformity was drawn up prior to May 26, 2022, per IVDD and for which the conformity assessment procedure pursuant to IVDR requires the involvement of a Notified Body, may be placed on the market, or put into service until the following dates.
Per IVDR 2017/746 Amendment Regulation (EU) 2022/112, and published proposal 2024/0021 (COD), devices without a CE certificate that was issued in accordance with IVDD, for which a declaration of conformity was drawn up prior to May 26, 2022, per IVDD and for which the conformity assessment procedure pursuant to IVDR requires the involvement of a Notified Body, may be placed on the market, or put into service until the following dates.
Since then, we have been granted a total of 19 patents; The United States Patent and Trademark Office (“USPTO”) has issued the Company two patents with broad claims that protect our InFoods ® technology in testing and treating patients with IBS.
Since then, we have been granted a total of 19 patents; The USPTO has issued the Company two patents with broad claims that protect our inFoods ® technology in testing and treating patients with IBS.
In these situations, this intellectual property is typically licensed to us under a limited license agreement enabling us to perform the services being contracted. We recently completed an endpoint determination clinical trial on our InFoods® IBS product.
In these situations, this intellectual property is typically licensed to us under a limited license agreement enabling us to perform the services being contracted. We have recently launched the inFoods ® IBS product.
While we have not been notified of any such claims by third parties, we cannot guarantee that such claims will not be made in the future. BRANDS AND TRADEMARKS We occasionally register our tradenames with the U.S. Patent and Trademark Office (“USPTO”). Of note, we registered the tradename “InFoods” on December 24, 2016.
While we have not been notified of any such claims by third parties, we cannot guarantee that such claims will not be made in the future. BRANDS AND TRADEMARKS We occasionally register our tradenames with the USPTO. Of note, we registered the tradename “InFoods” on December 24, 2016. Our unregistered tradenames are “EZ Detect,” “EZ-H.P.,” and “EZ-PSA”.
These products have certain and significant competitive advantages compared to tests offered by competitors. Our competitors vary greatly in size. Many are divisions or subsidiaries of well-established medical and pharmaceutical companies which are much larger than Biomerica and expend substantially greater amounts than we do for research and development, manufacturing, advertising, and marketing.
These products stand out due to their unique features and benefits compared to competing tests in the market. Our competitors vary greatly in size. Many are divisions or subsidiaries of well-established medical and pharmaceutical companies which are much larger than Biomerica and expend substantially greater amounts than we do for research and development, manufacturing, advertising, and marketing.
The Company has two wholly owned subsidiaries, Biomerica de Mexico, which is used for assembly/manufacturing, and BioEurope GmbH, which acts as a distributor of Biomerica products in certain markets.
The Company has two wholly owned subsidiaries, Biomerica de Mexico, which is used for assembly/manufacturing, and BioEurope GmbH, which acts as a distributor of Biomerica products in certain markets. We are a global biomedical technology company that develops, patents, manufactures and markets advanced diagnostic and therapeutic products.
We are working closely with our Notified Body to update our technical documentation to comply with these more stringent IVDR requirements. 8 Per IVDR 2017/746 Amendment 2021/0323 (COD), devices with a CE certificate that was issued in accordance with IVDD may be placed on the market or put into service until May 26, 2025.
We are working closely with our Notified Body to update our technical documentation to comply with these more stringent IVDR requirements. 7 Per IVDR 2017/746 Amendment Regulation (EU) 2022/112, and published proposal 2024/0021 (COD), devices with a CE certificate that was issued in accordance with IVDD may be placed on the market or put into service until December 31, 2027, providing a formal application to the notified body has been made by May 26, 2025.
We have entered into confidentiality and invention assignment agreements with our employees and contractors, and nondisclosure agreements with most of our fulfillment partners and strategic partners to limit access to and disclosure of proprietary information.
Our efforts include confidentiality and invention assignment agreements with employees and contractors, as well as nondisclosure agreements with most fulfillment and strategic partners to restrict access to and disclosure of proprietary information.
Exceptional Renewal of CE Certificate for IVDD Quality System was granted to Biomerica. Biomerica received an extended CE Certificate on May 24, 2022, which remains effective until May 26, 2025. We have until May 26, 2025, to update the technical documentation and processes to meet these regulatory requirements of IVDR 2017/746.
Exceptional Renewal of CE Certificate for IVDD Quality System was granted to Biomerica. Biomerica received an extended CE Certificate on May 24, 2022, which remains effective until May 26, 2025.
Production of diagnostic tests can involve formulating component antibodies and antigens in specified concentrations, attaching a tracer to the antigen, filling components into vials, packaging and labeling. We continually engage in quality control procedures to assure the consistency and quality of our products and to comply with applicable FDA and international regulations.
Production of diagnostic tests can involve formulating component antibodies and antigens in specified concentrations, attaching a tracer to the antigen, filling components into vials, packaging and labeling.
Our manufacturing operations and facilities are regulated by the FDA Good Manufacturing Practices for medical devices. We have an internal quality department that monitors and evaluates product quality and output.
We continually engage in quality control procedures to assure the consistency and quality of our products and to comply with applicable FDA and international regulations. 4 Our manufacturing operations and facilities are regulated by the FDA Good Manufacturing Practices for medical devices. We have an internal quality department that monitors and evaluates product quality and output.
Patents have also been issued in the countries of Australia (two patents), Canada, Japan (two patents), Korea (two patents), Mexico, Panama, Peru, and Singapore, covering our InFoods ® IBS technology. Additional patent applications pertaining to the InFoods ® IBS product are in prosecution and review at the USPTO and with the patent issuance authorities in other countries.
Patents have also been issued in the countries of Australia (two patents), Canada, Japan (two patents), Korea (two patents), Mexico, Panama, Peru, and Singapore, covering our inFoods ® IBS technology.
These products are both internally developed and licensed from others. We employ experienced and highly trained technical personnel (including Ph.D.’s and other scientists) to develop new products and evaluate and implement technology technical transfer activities. Our technical staff, many of whom have been previously employed at large diagnostic manufacturing companies, has extensive industry experience.
These products are both internally developed and obtained through licensing agreements. Our experienced and highly trained technical personnel, including Ph.D. holders and other scientists, are dedicated to developing new products and managing technology transfer activities. Many of our technical staff have extensive industry experience from previous employment at large diagnostic manufacturing companies.
Our over-the-counter (home use) and professional use (doctor’s office, clinics, etc.) rapid diagnostic test products help to manage existing medical conditions and may save lives through early detection and diagnosis of specific diseases. Typically, tests of this kind require the services of medical technologists and sophisticated instrumentation. Further, results are often not available until at least the following day.
Our over-the-counter (home use) and professional use (physicians’ office, clinics, etc.) rapid diagnostic test products help manage existing medical conditions and may save lives through early detection and diagnosis of specific diseases. Traditionally, such tests required the expertise of medical technologists and sophisticated equipment, with results often not available for days.
These regulations govern the introduction of new in vitro diagnostic medical devices and medical devices, the observance of certain standards with respect to the manufacture and labeling of medical devices, the maintenance of certain records, the reporting of potential product problems, and other matters. 7 The Food, Drug & Cosmetic Act of 1938 (the “FDCA”) regulates medical devices in the United States by classifying them into one of three classes based on the extent of regulation believed necessary to ensure safety and effectiveness.
The Food, Drug & Cosmetic Act of 1938 (the “FDCA”) regulates medical devices in the United States by classifying them into one of three classes based on the extent of regulation believed necessary to ensure safety and effectiveness.
Biomerica also has until the following dates to update the technical documentation and processes to meet these regulatory requirements of IVDR 2017/746: (1) May 26, 2025, for class D devices. (2) May 26, 2026, for class C devices.
Biomerica also has until the following dates to update the technical documentation and processes to meet these regulatory requirements of IVDR 2017/746 providing a formal application to the notified body has been made: (1) December 31, 2027, for class D devices, formal application to notified body by May 26, 2025; (2) December 31, 2028, for class C devices, formal application to notified body by May 26, 2026; (3) December 31, 2029, for class B devices, formal application to notified body by May 26, 2027; and (4) December 31, 2029, for class A devices placed on the market in sterile condition, formal application to notified body by May 26, 2027.
We are also developing and have filed patents with claims that cover products that target other diseases utilizing the InFoods ® technology platform. We have dozens of patents in prosecution or review pertaining to these other diseases, including: Functional Dyspepsia, Crohn’s disease, Ulcerative Colitis, Gastroesophageal Reflux disease (“GERD”), Migraine Headaches, Depression, and Osteoarthritis.
We have dozens of patents in prosecution or review pertaining to these other diseases, including: Functional Dyspepsia, Crohn’s disease, Ulcerative Colitis, GERD, Migraine Headaches, Depression, and Osteoarthritis.
INTERNATIONAL BUSINESS The following table sets forth the dollar volume of revenue attributable to sales to domestic customers and foreign customers during our last two fiscal years: For the Year Ended May 31, 2023 2022 Asia $ 2,021,000 38 % $ 13,375,000 71 % Europe 1,798,000 34 % 4,339,000 23 % North America 1,470,000 28 % 997,000 5 % Middle East 39,000 1 % 70,000 0 % South America 11,000 0 % 90,000 1 % Total $ 5,339,000 100 % $ 18,871,000 100 % We recognize that our foreign sales could be subject to some special or unusual risks, which are not present in the ordinary course of business in the United States.
INTERNATIONAL BUSINESS The following table sets forth the dollar volume of revenue attributable to sales to domestic customers and foreign customers during our last two fiscal years: For the Year Ended May 31, 2024 2023 Asia $ 1,881,000 35 % $ 2,021,000 38 % Europe 1,438,000 27 % 1,798,000 34 % North America 1,285,000 24 % 1,470,000 28 % Middle East 800,000 15 % 39,000 1 % South America 11,000 0 % 11,000 0 % Total $ 5,415,000 100 % $ 5,339,000 100 % Our international operations face distinct risks that differ from those encountered in the United States.
Substantially all of our patents that are pending or registered pertain to the InFoods® technology platform. 10 Our most important family of patent applications pertains to our InFoods ® technology platform, which is a method of diagnosing and treating symptoms of many different inflammatory diseases.
Our most important family of patent applications pertains to our inFoods ® technology platform, which is a method of diagnosing and treating symptoms of many different inflammatory diseases. Our first product launch using this technology is the inFoods ® IBS product which is designed to diagnose and treat IBS.
Research and development expenses include the costs of materials, supplies, personnel, consultants, facilities, outside clinical trial sites and equipment as well as outside contract services. Consolidated research and development expenses incurred by Biomerica for the years ended May 31, 2023 and 2022, aggregated to approximately $1,584,000, and $1,812,000, respectively.
R&D expenses encompass materials, supplies, personnel, consultants, facilities, outside clinical trial sites, equipment, and contract services. For the fiscal years ended May 31, 2024, and 2023, consolidated R&D expenses totaled approximately $1,491,000 and $1,584,000, respectively.
Our business model for this product includes the possible out-licensing of this product and the related patents to a large international life sciences or technology company that would commercialize the product or assist us with the commercialization.
Our business model for this product includes the potential out-licensing of the product and related patents to a large international life sciences or technology company that could commercialize it or support us in its commercialization. Additionally, we may explore out-licensing opportunities for the patents or intellectual property associated with other products, including our H. pylori product.
The content on any website referred to in this Form 10-K is not a part of or incorporated by reference in this Form 10-K unless expressly noted.
Additionally, Biomerica operates BioEurope GmbH in Europe, facilitating the international sales of specific products. Additional information about Biomerica is available on our website at www.biomerica.com. The content on any website referred to in this Form 10-K is not a part of or incorporated by reference in this Form 10-K unless expressly noted.
As of May 31, 2023 and 2022, the Company had one distributor which accounted for 36% and 50%, respectively, of gross accounts receivable. Of the 36% as of May 31, 2023, 100% was owed by a distributor in Asia. BACKLOG On May 31, 2023 and 2022, Biomerica had a backlog of unshipped orders of approximately $655,000 and $754,000, respectively.
As of May 31, 2024, and 2023, the Company had four and one distributor, respectively, that accounted for a total of 64% and 36% of gross accounts receivable. Of the 64% as of May 31, 2024, 37% was owed by a distributor in Asia.
We are also developing and have filed patents for products that target other diseases utilizing the InFoods ® technology platform which include: Functional Dyspepsia, Crohn’s disease, Ulcerative Colitis, Gastroesophageal Reflux disease (“GERD”), Migraine Headaches, Depression, and Osteoarthritis. Our first patent to be allowed for a disease/illness other than IBS was allowed in Japan in August 2021.
Further patent applications related to the inFoods® IBS product are pending or under review in the United States and other countries. We are also developing and have filed patents for additional products targeting other diseases using the inFoods® technology platform. These diseases include Functional Dyspepsia, Crohn’s Disease, Ulcerative Colitis, Gastroesophageal Reflux Disease (“GERD”), Migraine Headaches, Depression, and Osteoarthritis.
We believe rapid point-of-care tests can be as accurate as laboratory tests when developed and used properly, may require limited to no instrumentation, can give reliable results in minutes, and can be performed with confidence in the home or the physician’s office. 4 We expend considerable funds in research and development of certain new products that diagnose and, in certain cases, are designed to be used as a therapy for several major medical diseases.
We believe that properly developed and utilized rapid point-of-care tests can match the accuracy of laboratory tests, delivering reliable results in minutes with minimal or no instrumentation. RESEARCH AND DEVELOPMENT We invest considerable resources in the research and development of new products designed to diagnose and, in some cases, treat several major medical diseases.
The United States Patent and Trademark Office (“USPTO”) has issued the Company two patents with broad claims that protect this InFoods ® IBS product. Patents have also been issued in the countries of Australia, Japan, Korea, Mexico, and Singapore. Additional patent applications pertaining to the InFoods ® IBS product have been filed in the United States and in other countries.
Many of these patents have been recently issued, while others are in the review and prosecution phase. The United States Patent and Trademark Office (“USPTO”) has granted us two patents with broad claims protecting the inFoods® IBS product. Additionally, patents have been issued in Australia, Japan, Korea, Mexico, and Singapore.
We cannot be certain that these contractual arrangements or the other steps taken by us to protect our intellectual property (“IP”) will prevent misappropriation of our technology. We have licensed in the past, and expect that we may license in the future, certain of our proprietary rights, such as trademarks, patents, trade secrets, or copyrighted material, to third parties.
However, these measures may not entirely prevent unauthorized use or disclosure of our technology. 8 In the past, we have licensed and may continue to license certain proprietary rights, such as trademarks, patents, trade secrets, or copyrighted material, to third parties.
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.
Our diagnostic test kits are utilized in the analysis of blood, urine, nasal, or fecal samples for the diagnosis of various diseases, food intolerances, and other medical conditions. These kits also measure levels of specific hormones, antibodies, antigens, and other substances, which may exist in the human body at extremely low concentrations.
We may license other products or technology in the future as it is deemed necessary or opportunistic for conducting business.
Sales of products manufactured under this agreement are not material to total sales for the fiscal years ended May 31, 2024 and 2023, respectively. We may license other products or technology in the future as it is deemed necessary or opportunistic for conducting business.
Our unregistered tradenames are “EZ Detect,” “EZ-H.P.,” and “EZ-PSA”. A trademark for “Aware” was issued and assigned in 2001, renewed in 2011 and 2021. On January 11, 2020, the USPTO renewed our “FORTEL” trademark for another ten years.
A trademark for “Aware” was issued and assigned in 2001, renewed in 2011 and 2021. On January 11, 2020, the USPTO renewed our “FORTEL” trademark for another ten years. The laws of some foreign countries do not protect our proprietary rights to the same extent as do the laws of the United States.
We occasionally employ temporary employees when needed. 11 The following is a breakdown of employees by departments: May 31, 2023 2022 Administrative 5 8 Research & Development 9 8 Sales & Marketing 7 6 Production & Operations 41 42 Total 62 64 We also engage the services of many outside Ph.D.’s, M.D.’s, and other types of industry expert consultants and organizations as well as medical institutions for technical support, regulatory advisors, marketing and public relations advisors, financial advisors, contract product development and manufacturing organization, and other advisors on a regular basis.
The following is a breakdown of employees by departments: May 31, 2024 2023 Administrative 6 5 Research & Development 7 9 Sales & Marketing 13 7 Production & Operations 38 41 Total 64 62 We do engage in a range of external experts, including Ph.D.’s, M.D.’s, and other industry specialists, as well as medical institutions, to support various aspects of our operations.
LICENSE OF THIRD-PARTY INTELLECTUAL PROPERTY On occasion, we in-licensed both exclusive and non-exclusive rights to intellectual property and patents owned by third parties. These license agreements typically require royalties and other payments. We have a royalty agreement in which we obtained rights to manufacture and market an ACTH test (used to detect chronic metabolic conditions).
These license agreements typically require royalties and other payments. We have a royalty agreement in which we obtained rights to manufacture and market an ACTH test (used to detect chronic metabolic conditions). Royalty expenses of approximately $10,000 and $13,000, respectively, are included in cost of sales for this agreement for the fiscal years ended May 31, 2024 and 2023.
Our InFoods® IBS product 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 and constipation.
This innovative product is designed to treat gastrointestinal conditions such as irritable bowel syndrome (“IBS”) and other inflammatory diseases, targeting chronic inflammatory conditions prevalent in large markets. The inFoods® IBS product, which we have already launched, uses a simple blood test to identify patient-specific foods that, when eliminated, may alleviate IBS symptoms such as pain, bloating, diarrhea, cramping, and constipation.
We have alternate, approved sources for most critical raw materials and are working to procure alternate sources for the few that we do not have. RESEARCH AND DEVELOPMENT Beyond our focus on development of our InFoods ® IBS product, we also focused a portion of our Research and Development (“R&D”) resources on continued validation of our H. Pylori diagnostic test.
We have alternate, approved sources for most critical raw materials and are working to procure alternate sources for the few that we do not have.
Of this, for the fiscal years ended May 31, 2023 and 2022, the largest of the distributors mentioned above accounted for 35% and 55%, respectively, of net sales. Total gross receivables on May 31, 2023 and 2022 were approximately $751,000 and $927,000, respectively.
Our net sales were approximately $5,415,000 for fiscal 2024, compared to $5,339,000 for fiscal 2023. For the fiscal years ended May 31, 2024, and 2023, the Company had one distributor each year that accounted for 33% and 35% of our net sales, respectively. 5 Total gross receivables as of May 31, 2024, and 2023 were approximately $966,000 and $751,000, respectively.
PATENTS AND INFOODS TECHNOLOGY We have filed over 100 international and Patent Corporation Treaty patents (“PCT”) and have over multiple provisional and non-provisional patents currently filed with the USPTO.
Effective copyright, trademark, and trade secret protection may not be available in such jurisdictions. PATENTS AND INFOODS TECHNOLOGY We have filed over 100 international and Patent Corporation Treaty patents (“PCT”) and have multiple provisional and non-provisional patents currently filed with the USPTO. Substantially all of our patents that are pending or registered pertain to the inFoods ® technology platform.
Foreign sales of our diagnostic products are made primarily through a network of approximately 40 independent distributors in approximately 30 countries. 9 INTELLECTUAL PROPERTY We regard the protection of our methodologies, designs, product formulations, manufacturing processes, diagnostic procedures, copyrights, service marks, trademarks, and trade secrets as important to our future success.
INTELLECTUAL PROPERTY We consider the protection of our methodologies, designs, product formulations, manufacturing processes, diagnostic procedures, copyrights, service marks, trademarks, and trade secrets essential for our future success. To safeguard our proprietary rights in products and services, we utilize copyright, trademark, patent, service mark, and trade secret laws, alongside contractual restrictions.
Our non-COVID-19 products that accounted for approximately 96% and 25% of our revenues during the fiscal years ended May 31, 2023, and 2022, respectively, are primarily focused on gastrointestinal diseases, food intolerances, and certain esoteric tests. These diagnostic test products utilize immunoassay technology.
In contrast, our non-COVID-19 products, have accounted for approximately 100% and 96% of our revenues during the fiscal years ended May 31, 2024, and 2023, respectively, and have remained our core focus.
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).
Our products are designed to enhance health and well-being while reducing overall healthcare costs. Our extensive range of medical diagnostic products is sold worldwide, primarily in two markets: clinical laboratories and point-of-care settings, including physicians’ offices and over-the-counter sales at major retailers such as Walmart, CVS Pharmacy, and Amazon.
(3) May 26, 2027, for class B devices; and (4) May 26, 2027, for class A devices placed on the market in sterile condition. SEASONALITY OF BUSINESS Our business has not been subject to significant seasonal fluctuations.
SEASONALITY OF BUSINESS Our business has not been subject to significant seasonal fluctuations.
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.
Most of our products are Conformite Europeenne (“CE”) marked and/or registered with regulatory agencies in various countries for diagnostic use, with several also cleared for sale in the United States by the FDA. IMPACT OF COVID-19 ON REVENUES In response to the global COVID-19 pandemic, we began developing, marketing, and selling COVID-19 diagnostic tests in March 2020.
The clinical studies for our H. Pylori were conducted at the University of Southern California, a European University, and several other U.S. locations. Biomerica’s test is designed to provide highly accurate sensitivity and specificity for H. Pylori testing and for monitoring of treatment.
Our additional R&D efforts have led to the 510(k) clearance of our proprietary H. pylori test, hp+detect ™ , which is designed to provide highly accurate sensitivity and specificity for detecting H. pylori and monitoring treatment.
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We are a global biomedical technology company that develops, patents, manufactures and markets advanced diagnostic and therapeutic products used at the point-of-care (in home and in physicians’ offices) and in hospital/clinical laboratories for detection and/or treatment of medical conditions and diseases. Our products are designed to enhance the health and well-being of people, while reducing total healthcare costs.
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These tests contributed significantly to our revenues during fiscal years 2021 and 2022. However, demand sharply declined in fiscal 2023, leading to no sales of COVID-19-related products in fiscal 2024. As a result, our COVID-19 product sales have caused significant fluctuations in our revenues over the past four years.
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Our primary focus is the research, development, commercialization and in certain cases regulatory approval, of patented, diagnostic-guided therapy (“DGT”) products to treat gastrointestinal diseases, such as irritable bowel syndrome (“IBS”), and other inflammatory diseases. These products are directed at chronic inflammatory illnesses that are widespread and common, and as such address very large markets.
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TECHNOLOGICAL ADVANCEMENTS AND PRODUCT DEVELOPMENT Technological advances in medical diagnostics have enabled the performance of diagnostic tests not only in clinical laboratories but also at home and in point-of-care settings, such as physicians’ offices.
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Instead of broad and difficult to manage dietary restrictions, the InFoods® IBS product works by identifying specific foods that may be an abnormally high immune response in the patient. A food identified as positive, which is causing the abnormal immune response in the patient, can be simply removed from the diet to help alleviate IBS symptoms.
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A key objective for us has been the development and marketing of rapid diagnostic tests that are accurate, utilize easily obtained patient specimens, and can be performed without the need for complex instrumentation.
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During fiscal 2022, we completed an endpoint determination clinical trial on our InFoods® IBS product. This trial was conducted at Mayo Clinics in Florida and Arizona, Beth Israel Deaconess Medical Center Inc., a Harvard Medical School Teaching Hospital, University of Texas Health Science Center at Houston, Houston Methodist, the University of Michigan and other institutions.
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We also rely on our Scientific Advisory Board, comprised of leading medical doctors and clinicians, to guide our clinical studies and product development efforts. KEY PRODUCT LAUNCHES A key outcome of our recent research and development efforts is our patented diagnostic-guided therapy (“DGT”) product, developed on the inFoods® technology platform.
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This trial monitored IBS patients over an 8-week treatment period to determine the efficacy of our InFoods® IBS product to improve the patients’ IBS symptoms or endpoints. The top-line trial results were reported in February 2022.
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Unlike broad dietary restrictions, the inFoods® IBS product pinpoints a patient’s heightened immunoreactivity to specific foods known to frequently trigger IBS symptoms, providing targeted relief. We have launched our inFoods® product across numerous gastroenterology (“GI”) physician groups in various states and regions, including collaboration with one of the largest GI groups in the U.S.
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Multiple endpoints demonstrated statistically significant improvements, indicating that the elimination of specific foods may meaningfully reduce the symptoms of IBS in each patient subtype (including patients with IBS-Constipation, IBS-Diarrhea & IBS-Mixed). The greatest clinical improvements, including but not limited to abdominal pain and bloating, were seen in patients diagnosed with IBS-Mixed and IBS-Constipation, in the top line data.
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Feedback from GI specialty physicians has been positive, and we are actively expanding our network by onboarding additional physician practices. Our dedicated sales team is focused on deepening relationships within the GI segment and targeting opportunities to introduce inFoods® to other medical specialties, including integrated health practices and concierge physicians.
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The purpose of the endpoint study was to validate the efficacy of the product, and to determine the primary symptom endpoint, or endpoints to be used in a 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.
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We are also evaluating distribution, partnership, and licensing opportunities with U.S. and multinational companies to accelerate the commercialization and growth of inFoods® products both domestically and internationally. 3 Beyond our inFoods ® product line, our additional efforts have led to a significant milestone by receiving FDA clearance in December 2023 for hp+detect ™ , a new diagnostic test for detecting Helicobacter pylori (H. pylori) bacteria in the gastrointestinal tract.
Removed
We are continuing to review and refine the complete dataset and have selected the final endpoint that we would intend to use in a final pivotal trial. We are starting to develop the protocol for submission to the FDA, and once approved the trial will be run thereafter.
Added
H. pylori is a widespread infection, affecting an estimated 35% of the U.S. population and 45% of the population in Europe’s five largest countries. This bacterium is recognized as the strongest known risk factor for gastric cancer, which is the third most common cause of cancer-related deaths globally.
Removed
The trial is expected to include the large medical institution participants that conducted the endpoint clinical trial, in addition to other new institutions and a Clinical Research Organization.
Added
The hp+detect™ test provides physicians and medical centers with a reliable tool for diagnosing H. pylori infections and monitoring the effectiveness and safety of treatments. The diagnostic test is marketed directly to laboratories, where patient samples are analyzed.
Removed
Following the successful completion and positive results from the Company’s InFoods ® IBS clinical trial, we saw significant interest from Gastroenterology (“GI”) physicians who would like to provide the InFoods ® IBS product to their patients.
Added
We are actively promoting hp+detect™ to large end-customer labs to support its launch and distribution, aiming to enhance patient care through timely and accurate detection of H. pylori infections.
Removed
Therefore, while we continue the work of advancing this product toward FDA clearance, during our fourth quarter of fiscal 2023, we launched the InFoods ® IBS product through a CAP-Certified high-complexity Clinical Laboratory Improvement Amendments (“CLIA”) laboratory facility and began offering the product as a laboratory developed test (“LDT”) to GI physicians.
Added
STRATEGIC INITIATIVES AND COST MANAGEMENT Due to slower-than-expected launches of our key products, inFoods ® IBS and hp+detect ™ , we have initiated significant cost-cutting measures to extend our cash runway and work towards increasing revenues to cover overhead costs. These measures include a workforce reduction of nearly 15% and a significant reduction in expenses.
Removed
The first physician group to offer InFoods ® IBS to their IBS patients is Gastro Health at their flagship location in Miami, Florida. Gastro Health is a leading GI physician group with over 390 physicians operating in over 150 offices in seven states. InFoods ® IBS product is currently offered on a “cash-pay” basis (without insurance reimbursement) to IBS patients.
Added
Additionally, we are actively exploring strategic opportunities to enhance shareholder value. OPERATIONS AND GLOBAL PRESENCE Biomerica is headquartered in Irvine, California, where it centralizes administration, finance, regulatory compliance, product development, sales, marketing, customer service, and primary manufacturing operations. To enhance global competitiveness, the Company maintains manufacturing and assembly operations in Mexicali, Mexico, aiming to reduce production costs.
Removed
However, we have begun the process of speaking to reimbursement consultants who can help us seek and attain reimbursement through government pay (i.e., Medicare and Medicaid), and from private insurers. 3 We are also beginning the work of validating one new disease (such as ulcerative colitis or migraines), where there is evidence that certain foods can trigger or contribute to the symptoms found in patients suffering from those illnesses.
Added
RESEARCH AND DEVELOPMENT We employ a team of highly qualified technical personnel, including Ph.D. holders and experts with extensive experience in the development and production of diagnostic tests, to support our research and development (“R&D”) initiatives. Our team is actively engaged in enhancing existing products and driving ongoing innovation.
Removed
Each InFoods ® test is developed specifically for patients suffering from the disease being targeted. For instance, the panel of foods that would be tested for patients with migraines will be different from the known problematic foods that we test for in IBS.
Added
We anticipate that R&D expenses will decrease significantly in the upcoming quarters as we are in the commercialization phase of inFoods ® and hp+detect ™ and in an effort to preserve cash. A cornerstone of our R&D efforts is the development of our proprietary diagnostic-guided therapy, known as the inFoods® technology.
Removed
We have already performed much of the initial research and development work necessary to determine what foods are commonly problematic for each of eight different diseases. We have found that some diseases show approximately 20 foods that are commonly problematic for patients, while other diseases show over 70 foods for which patients commonly show an abnormal immune response.
Added
In addition to our issued U.S. patents, we now hold 3 6 foreign patents that have either been issued or for which we have received a notice of allowance, covering over 50 countries. These patents protect the use of inFoods® technology for IBS and several other conditions.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe currently sell and market our products through distributor organizations and sales agents which creates foreign risks include, among others: ● compliance with multiple different registration requirements and new and changing registration requirements, our inability to benefit from registration for our products inasmuch as registrations may be controlled by a distributor, and the difficulty in transitioning our product registrations; ● compliance with complex foreign and U.S. laws and regulations that apply to our international operations, including U.S. laws such as import/export limitations, the Foreign Corrupt Practices Act, and local laws; ● tariffs or other barriers as we continue to expand into new countries and geographic regions, especially related to China as tariffs are changing constantly; ● exposure to currency exchange fluctuations against the U.S. dollar; ● longer payment cycles, generally lower average selling prices and greater difficulty in accounts receivable collection; ● lack of ability to enforce receivables collections contracts in foreign legal courts; ● reduced, or lack of protection for, and enforcement of, intellectual property rights; ● political and economic instability in some of the regions where we currently sell our products or that we may expand into in the future; ● complex and potentially adverse tax consequences; and ● diversion to the United States of our products sold into international markets at lower prices.
Biggest changeWe rely on distributor organizations and sales agents to market and sell our products abroad, which exposes us to various foreign risks, including: ● Compliance Challenges: We must adhere to diverse and evolving registration requirements, which can be controlled by distributors, complicating transitions and limiting our ability to benefit from product registrations. ● Regulatory Risks: We must comply with complex foreign and U.S. laws and regulations, such as import/export limitations, the Foreign Corrupt Practices Act, and local laws in each market. ● Tariffs and Trade Barriers: As we expand into new countries and regions, we face changing tariffs and trade barriers, particularly in China, where tariff policies are in flux. ● Currency Exchange Fluctuations: Our international sales are subject to currency risks, as changes in the values of foreign currencies relative to the U.S. dollar can make our products more expensive and negatively impact sales. ● Payment and Pricing Challenges: We encounter longer payment cycles, generally lower average selling prices, and greater difficulty in collecting accounts receivable. ● Legal Enforceability: We may lack the ability to enforce receivables collections contracts in foreign legal systems. ● Intellectual Property Risks: There is often reduced protection for, and enforcement of, intellectual property rights in foreign markets. ● Political and Economic Instability: We are exposed to political and economic instability in regions where we currently sell or plan to expand our product sales. ● Tax Consequences: We face complex and potentially adverse tax implications in different jurisdictions. ● Product Diversion: Products sold internationally at lower prices may be diverted back to the United States, affecting our domestic sales. 13 Most of our international sales are negotiated and paid in U.S. dollars.
To the extent the costs and procedures associated with meeting new or changing requirements are substantial, our business, results of operations and financial condition could be adversely affected. Our total revenue could be affected by third-party reimbursement policies and potential cost constraints. The end-users of our products are primarily physicians, labs, and other healthcare providers.
To the extent the costs and procedures associated with meeting new or changing requirements are substantial, our business, results of operations and financial condition could be adversely affected. 16 Our total revenue could be affected by third-party reimbursement policies and potential cost constraints. The end-users of our products are primarily physicians, labs, and other healthcare providers.
As a result, our financial results and the commercial prospects for our product candidates would be harmed, our costs could increase, and our ability to generate revenue could be delayed. Failures in our information technology and storage systems could significantly disrupt our business or force us to expend excessive costs.
As a result, our financial results and the commercial prospects for our product candidates would be harmed, our costs could increase, and our ability to generate revenue could be delayed. Failures in our information technology and storage systems or data security breaches could significantly disrupt our business or force us to expend excessive costs.
Our ability to obtain patents and licenses, and their benefits, is uncertain. 13 To remain competitive, we must expend considerable resources to research new technologies and products and develop new markets, and there is no assurance our efforts to develop new technologies, products, or markets will be successful or such technologies, products, or markets will be commercially viable.
To remain competitive, we must expend considerable resources to research new technologies and products and develop new markets, and there is no assurance our efforts to develop new technologies, products, or markets will be successful or such technologies, products, or markets will be commercially viable.
If end-user consumption is less than estimated, revenues from our distribution partners and other distribution channels would be expected to fall short of expectations, and because such a significant portion of our costs are fixed, could result in operating losses.
Our revenue estimates for future periods are based, among other factors, on estimated end-user demand for our products. If end-user consumption is less than estimated, revenues from our distribution partners and other distribution channels would be expected to fall short of expectations, and because such a significant portion of our costs are fixed, could result in operating losses.
There is a risk that our measures to protect our systems from cyber-attack are not sufficient to avoid attacks by new sources and methods. Our business could be negatively affected by the loss of or the inability to hire key personnel.
There is also a risk that our measures and those of our third-party vendors to protect our systems from cyber-attacks may not be sufficient to prevent attacks by new sources and methods. Our business could be negatively affected by the loss of or the inability to hire key personnel.
In addition, despite the implementation of security measures, information technology systems are vulnerable to damage from a variety of sources, including computer viruses, unauthorized access, telecommunications or network failures, malicious human acts, terrorism, and natural disasters.
Despite our and our vendors’ implementation of security measures, information technology systems remain vulnerable to damage from various sources, including computer viruses, unauthorized access, telecommunications or network failures, malicious human acts, terrorism, and natural disasters.
As of May 31, 2023 and 2022, the Company had one distributor which accounted for a total of 36% and 50%, respectively, of gross accounts receivable. Of the 36% as of May 31, 2023, 100% was owed by a distributor in Asia.
As of May 31, 2024, and 2023, the Company had four and one distributor, respectively, that accounted for a total of 64% and 36% of gross accounts receivable. Of the 64% as of May 31, 2024, 37% was owed by a distributor in Asia.
Shares sold in the underwritten public offering were sold at a gross sales price of $2.40 per share, resulting in net proceeds from the offering, after deducting issuance fees and expenses, of approximately $7,300,000. At fiscal year-end 2023, the Company did not have an open ATM offering in place.
Shares sold in the underwritten public offering were sold at a gross sales price of $2.40 per share, resulting in net proceeds from the offering, after deducting issuance fees and expenses, of approximately $7,300,000.
Regulatory agencies may analyze or interpret the results differently than we do. Even if the results of our clinical trials are favorable, the clinical trials for a number of our product candidates may take a significant amount of time to complete.
Even if the results of our clinical trials are favorable, the clinical trials for a number of our product candidates may take a significant amount of time to complete.
Any substantial underinsured loss resulting from such a claim or defect would have a material adverse effect on our operating results and financial conditions and the damage to our reputation or product lines in the industry could have a material adverse effect on our business.
Any substantial underinsured loss resulting from such a claim or defect would have a material adverse effect on our operating results and financial conditions and the damage to our reputation or product lines in the industry could have a material adverse effect on our business. 17 We are exposed to business risks which, if not covered by insurance, could have an adverse effect on our results of operations.
If one or more of these stockholders were to sell large portions of their holdings in a relatively short time, for liquidity or other reasons, the prevailing market price of shares of our common stock could be negatively affected. The price of our stock may fluctuate unpredictably in response to factors unrelated to our operating performance.
We also have a number of stockholders who own large blocks of our common stock. If one or more of these stockholders were to sell large portions of their holdings in a relatively short time, for liquidity or other reasons, the prevailing market price of shares of our common stock could be negatively affected.
Although we have Federal income tax net operating loss carryforwards of approximately $21,778,000 and California state income tax net operating loss carryforwards of approximately $17,090,000, use of these loss carryforwards will depend on future income in relationship to expirations dates of these carryforwards.
Although we have Federal income tax net operating loss carryforwards of approximately $24,384,000 and California state income tax net operating loss carryforwards of approximately $22,014,000, as of May 31, 2024, use of these loss carryforwards will depend on future income in relationship to expirations dates of these carryforwards.
Third-party reimbursement and coverage may not be available or adequate in either the United States or foreign markets, current reimbursement amounts may be decreased in the future and future legislation, regulation, or reimbursement policies of third-party payers may reduce the demand for our products or adversely impact our ability to sell our products on a profitable basis. 18 Unexpected increases in, or inability to meet, demand for our products could require us to spend considerable resources to meet the demand or harm our reputation and customer relationships if we are unable to meet demand.
Third-party reimbursement and coverage may not be available or adequate in either the United States or foreign markets, current reimbursement amounts may be decreased in the future and future legislation, regulation, or reimbursement policies of third-party payers may reduce the demand for our products or adversely impact our ability to sell our products on a profitable basis.
The stock market periodically experiences significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These broad market fluctuations may cause the market price of our common stock to drop.
The price of our stock may fluctuate unpredictably in response to factors unrelated to our operating performance. The stock market can experience significant price and volume fluctuations that are unrelated to the operating performance of individual companies. These broad market fluctuations may cause the market price of our common stock to drop.
Furthermore, to the extent that any disruption or security breach resulted in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could face a variety of negative consequences, including regulatory actions or litigation, fines or penalties, adverse publicity, increased cybersecurity protection costs, and lost revenue.
Furthermore, any disruption or security breach resulting in data loss or damage, or inappropriate disclosure of confidential or proprietary information, could result in regulatory actions, litigation, fines or penalties, adverse publicity, increased cybersecurity protection costs, and lost revenue.
Continued change in the values of the Euro, the Mexican peso and other foreign currencies could have a negative impact on our business, financial condition, and results of operations. In addition, we have certain supply agreements with foreign vendors whereby we share the foreign currency exchange fluctuation risk. We may, in the future, enter into similar arrangements.
Continued changes in the values of the Euro, the Mexican peso, and other foreign currencies could adversely affect our business, financial condition, and results of operations. We also have supply agreements with foreign vendors that involve sharing foreign currency exchange fluctuation risks. We may enter into similar arrangements in the future.
No assurances can be given that our efforts to develop new technologies or products will be successful, that such technologies and products will be commercially viable, or our expansion into new markets will be profitable. There is also no guarantee that our new products, including our InFoods® IBS products, will get approval and be well accepted into the marketplace.
No assurances can be given that our efforts to develop new technologies or products will be successful, that such technologies and products will be commercially viable, or our expansion into new markets will be profitable.
In particular, the market price of our common stock has been very volatile and unpredictable and may vary substantially in the future in response to: ● announcements by us or our competitors concerning technological innovations; ● introductions of new products by us or by our competitors; ● FDA, SEC, Financial Industry Regulation Authority, and foreign regulatory actions against the Company; ● developments or disputes relating to patents or proprietary rights; ● failure to meet the expectations of stock market analysts and investors; ● the Company reporting material weakness in our internal control; ● changes in stock market analyst recommendations regarding our common stock; ● changes in healthcare policy in the United States or other countries; ● lawsuits or liability claims from shareholders or other parties; ● legal disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our product candidates, and the results of any proceedings or lawsuits, including patent or shareholder litigation; ● possible recalls of our products or false positive/false negative results; ● sales of our common stock or other securities by us or our stockholders in the future; ● trading volume of our common stock; ● actual or anticipated variations in quarterly operating results; ● publication of research reports about us or our industry or positive or negative recommendations or withdrawal of research coverage by securities analysts; ● effects of natural or man-made catastrophic events, including widespread public health epidemics like the pandemic related to COVID-19; ● general stock market conditions and other factors unrelated to our operating performance; ● volatility and disruptions in the capital and credit markets due to rising inflation and interest rates ● wars or expansion of wars or other related actions and events that impact the markets in which we operate; and ● political or societal unrest in the markets in which we operate.
Factors that could cause fluctuations in our stock price include, but are not limited to: ● Announcements by us or our competitors concerning technological innovations or new product introductions. ● Regulatory actions or changes, including those by the FDA, SEC, or international regulatory bodies. ● Developments or disputes related to patents or proprietary rights. ● Failure to meet the expectations of stock market analysts and investors. ● Reporting material weaknesses in our internal controls. ● Changes in stock market analyst recommendations or financial estimates regarding our common stock. ● Shifts in healthcare policy in the United States or other countries. ● Lawsuits or liability claims from shareholders or other parties. ● Legal disputes related to intellectual property or other significant litigation. ● Possible recalls of our products or reports of false positive/negative results. ● Sales of our common stock or other securities by us or our stockholders. ● Changes in trading volume of our common stock. ● Variations in quarterly operating results, whether actual or anticipated. ● Publication of research reports about us or our industry, or changes in securities analysts’ recommendations. ● Effects of natural or man-made catastrophic events, including widespread health epidemics. ● General stock market conditions and other factors unrelated to our operating performance. ● Volatility and disruptions in capital and credit markets due to economic conditions such as rising inflation and interest rates. ● Geopolitical events, such as wars or political unrest, that impact the markets in which we operate. ● Changes in the macroeconomic environment that affect market conditions.
The loss of any key distributor or an unsuccessful effort by us to directly distribute our products could lead to reduced sales. Our net sales were approximately $5,339,000 for fiscal 2023 compared to $18,871,000 for fiscal 2022.
We rely on a limited number of key distributors that account for a substantial majority of our total revenue. The loss of any key distributor or an unsuccessful effort by us to directly distribute our products could lead to reduced sales. Our net sales were approximately $5,415,000 for fiscal 2024, compared to $5,339,000 for fiscal 2023.
Some of the products that we manufacture, sell, or use may be covered by claims in issued patents held by other persons or entities, and as such, upon notice from such persons or entity, we may be required to pay a license fee or may be required to cease all manufacture, sale or use of such products, which could negatively impact our financial results or operations.
Our contractors, suppliers, and licensors may not be required or financially able to indemnify us in the event that a claim of infringement is asserted against us, or they may be required to indemnify us only up to a maximum amount, above which we would be responsible for any further costs or damages. 15 Some of the products that we manufacture, sell, or use may be covered by claims in issued patents held by other persons or entities, and as such, upon notice from such persons or entity, we may be required to pay a license fee or may be required to cease all manufacture, sale or use of such products, which could negatively impact our financial results or operations.
Our future success depends in part on our ability to retain our key technical, sales, marketing, and executive personnel and our ability to identify and hire additional qualified personnel. Competition for these personnel is intense, both in the industry in which we operate and where our operations are located.
Our future success is heavily dependent on our ability to retain key technical, sales, marketing, and executive personnel, as well as our capacity to identify and recruit additional qualified individuals. The competition for talent is intense, both within our industry and in the regions where we operate.
In addition, the loss of any of our key personnel, particularly key research and development personnel, could harm our business and prospects and could impede the achievement of our research and development, operation or strategic objectives. 20 We face risks relating to our international sales, including inherent economic, political, and regulatory risks, which could impact our financial performance, cause interruptions in our current business operations and impede our growth strategy.
We face risks relating to our international sales, including inherent economic, political, and regulatory risks, which could impact our financial performance, cause interruptions in our current business operations and impede our growth strategy.
A significant portion of our operating expenses are fixed, and we may not be able to rapidly adjust our expenses if our revenues fall short of our expectations. Our revenue estimates for future periods are based, among other factors, on estimated end-user demand for our products.
We base the scope of our operations and related expenses on our estimates of future revenues. A significant portion of our operating expenses are fixed, and we may not be able to rapidly adjust our expenses if our revenues fall short of our expectations.
Any of these IP-related risks could cause material damage to future revenues and to the long-term enterprise values of the Company. 15 We have hired and will continue to hire individuals or contractors who have experience in medical diagnostics and these individuals or contractors may have confidential trade secret or proprietary information of third parties.
We have hired and will continue to hire individuals or contractors who have experience in medical diagnostics and these individuals or contractors may have confidential trade secret or proprietary information of third parties.
We can provide no assurances that consumers and the medical community will purchase our products or that they will not prefer to purchase a competitive product. The industry and market segments in which we operate are highly competitive, and intense competition with other providers of diagnostic products may reduce our sales and margins.
The industry and market segments in which we operate are highly competitive, and intense competition with other providers of diagnostic products may reduce our sales and margins. The diagnostic products industry and market segments in which we operate are highly competitive.
These risks could lead to additional costs that we cannot foresee at this time and may materially adversely impact our business, results of operations, and financial condition. We use hazardous materials in our research and production that may result in unexpected and substantial claims against us relating to handling, storage, or disposal.
These factors could lead to unforeseen costs and disruptions, materially impacting our business, financial results, and operational stability. 12 We use hazardous materials in our research and production that may result in unexpected and substantial claims against us relating to handling, storage, or disposal. Our research and production processes involve the use of hazardous materials, which presents inherent risks.
These future costs could be much higher than anticipated and current operations are unlikely to be able to cover these costs. 16 Clinical trials involve a lengthy and expensive process with an uncertain outcome, and results of studies and trials may not be predictive of future trial results. Clinical trials are expensive, time consuming, and difficult to design and implement.
Clinical trials involve a lengthy and expensive process with an uncertain outcome, and results of studies and trials may not be predictive of future trial results. Clinical trials are expensive, time consuming, and difficult to design and implement. Regulatory agencies may analyze or interpret the results differently than we do.
If we are held liable for a claim against which we are not insured or for damages exceeding the limits of our insurance coverage, whether arising out of product liability matters, cybersecurity matters, or from some other matter, that claim could have a material adverse effect on our results of operations. 19 We may rely on third parties to conduct or be part of our clinical trials.
If we are held liable for a claim against which we are not insured or for damages exceeding the limits of our insurance coverage, that claim could have a material adverse effect on our results of operations.
This includes the possibility and risk that the Company’s products do not meet the new EU IVDR testing and documentation requirements in the future as described in the above “Research and Development” section of this document. Significant government regulation exists in countries in which we conduct business.
There is no assurance that the Company will be able to retain its certification in the future. This includes the possibility and risk that the Company’s products do not meet the new EU IVDR testing and documentation requirements in the future as described in the above “Research and Development” section of this document.
In particular, any disruptions, delays, or deficiencies caused by our enterprise resource planning system could adversely affect our ability to process orders, ship products, provide services and customer support, send invoices and track payments, fulfill contractual obligations, or otherwise operate our business.
Any failures or disruptions in the services provided by these third-party vendors could result in excessive costs or significant disruptions to our business operations. 18 Specifically, any disruptions, delays, or deficiencies caused by our enterprise resource planning system or other outsourced systems could negatively impact our ability to process orders, ship products, provide services and customer support, send invoices, track payments, fulfill contractual obligations, and maintain overall business operations.
Any of the foregoing could have a material adverse effect on our business, results of operations and financial condition. Our results of operations and financial conditions may be adversely affected by the financial soundness of our customers, distributors, and suppliers.
Any of the foregoing could have a material adverse effect on our business, results of operations and financial condition. We may rely on third parties to conduct or be part of our clinical trials.
For the fiscal years ended May 31, 2023 and 2022, the Company had one distributor and two distributors, respectively, which accounted for a total of 35% and 65% of our net sales, respectively.
For the fiscal years ended May 31, 2024, and 2023, the Company had one distributor each year that accounted for 33% and 35% of our net sales, respectively. Total gross receivables as of May 31, 2024, and 2023 were approximately $966,000 and $751,000, respectively.
A large part of the Company’s sales is to distributors in Europe, China, and other countries, which require us to maintain certain certifications to sell our products. Failure to comply with current governmental regulations and quality assurance guidelines could cause the loss of these certifications, which could materially adversely affect the results of the Company.
Failure to comply with current governmental regulations and quality assurance guidelines could cause the loss of these certifications, which could materially adversely affect the results of the Company. Loss of certifications could lead to temporary manufacturing shutdowns, product recalls, product shortages, or delays in product manufacturing and a decline in sales.
We are exposed to business risks which, if not covered by insurance, could have an adverse effect on our results of operations. We face potential product liability exposure, and, if claims brought against us are successful, we could incur substantial liabilities.
We face potential product liability exposure, and, if claims brought against us are successful, we could incur substantial liabilities.
Despite the precautionary measures we have taken to prevent unanticipated problems that could affect our systems, sustained or repeated system failures that interrupt our ability to generate and maintain data, could result in a material disruption in our operations and material adverse financial costs to the Company.
Cyber-attacks could result in the loss of vital company documentation and data, or confidential third-party documents held by the company, essential for our operations. Despite precautionary measures to prevent unforeseen problems, sustained or repeated system failures that interrupt our ability to generate and maintain data could materially disrupt our operations and lead to significant financial costs.
Trading of our stock is limited and liquidation of the Company’s stock may be difficult as there is a limited market for our stock. Our ability to use our net operating loss carry forwards in the future may be subject to limitation.
Additionally, the market price of the Common Stock may decline further and stockholders may lose some or all of their investment. Our ability to use our net operating loss carry forwards in the future may be subject to limitation.
However, the Company may in the future commence a new ATM offering or otherwise sell securities under a registration statement or in private placements, which sales would be dilutive to existing shareholders. 21 The issuance of additional shares of our common stock, or issuances of additional securities, could dilute the ownership interest of our common stockholders and could depress the market price of shares of our common stock and impair our ability to raise capital through the sale of additional equity securities.
The issuance of additional shares of our common stock, or other securities, could dilute our existing stockholders’ ownership interests, potentially depress the market price of our common stock, and impair our ability to raise capital through future equity sales. The size and impact of future issuances on the market price of our common stock cannot be predicted.
These exchange rate fluctuations could negatively impact international sales of our products, as could changes in the general economic conditions in those markets. In order to maintain a competitive price for our products internationally, we may have to continue to provide discounts or otherwise effectively reduce our prices, resulting in a lower margin on products sold internationally.
However, currency risks remain, as fluctuations in foreign exchange rates can make our products comparatively more expensive. These exchange rate changes, along with general economic conditions in international markets, could negatively impact our sales. To maintain competitive pricing, we may need to offer discounts or reduce prices, leading to lower margins on international sales.
Our operations will be adversely affected if our operating results do not correspondingly increase with our increased expenditures or if our technology, product, and market development efforts are unsuccessful or delayed. Furthermore, our failure to successfully introduce new technologies or products and develop new markets could have a material adverse effect on our business and prospects.
There is also no guarantee that our new products, including our inFoods ® IBS products and hp+detect ™ , will be well accepted into the marketplace. Our operations will be adversely affected if our operating results do not correspondingly increase with our increased expenditures or if our technology, product, and market development efforts are unsuccessful or delayed.
A number of our competitors have a potential competitive advantage because they have substantially greater financial, technical, research and other resources, larger, more established marketing, sales, distribution and service organizations; more established relationships with healthcare professionals; and greater experience in conducting research and development, manufacturing, clinical trials, and obtaining regulatory approval for products .
They also possess larger, more established marketing, sales, distribution, and service networks; stronger relationships with healthcare professionals; and extensive experience in research and development, manufacturing, clinical trials, and regulatory approvals. Furthermore, some competitors offer a broader range of products and enjoy greater brand recognition.
Such third-party claims could have a material negative impact on the Company.
Such third-party claims could have a material negative impact on the Company. Any of these IP-related risks could cause material damage to future revenues and to the long-term enterprise values of the Company.
Our inability to collect on receivables from customers, in particular those outside of the United States, could negatively impact the Company. If we are not able to manage our growth strategy our operating results may be adversely affected.
If we are not able to manage our growth strategy our operating results may be adversely affected. Our business strategy contemplates further growth, including scaling up our operational systems and entering new geographical markets, including those outside the United States.
The Company is required to obtain government or regulatory certification in many countries and the European community to sell its products in those countries or regions. There is no assurance that the Company will be able to retain its certification in the future.
Furthermore, our failure to successfully introduce new technologies or products and develop new markets could have a material adverse effect on our business and prospects. The Company is required to obtain government or regulatory certification in many countries and the European community to sell its products in those countries or regions.
Factors that are beyond our control and that could affect our operating results in the future include: ● regulatory clearance of our products in the U.S. and in other markets; ● regulatory compliance in the U.S., Europe and other territories; ● changes in the level of competition, such as would occur if one of our competitors introduced a new, better performing or lower priced product to compete with one or more of our products; ● changes in the reimbursement systems or reimbursement amounts that end-users may rely upon in choosing to use our products; ● changes in economic conditions in our domestic and international markets, such as economic downturns, decreased healthcare spending, reduced consumer demand, inflation and currency fluctuations; changes in government laws and regulations affecting our business; reluctance for consumers to visit healthcare providers; ● lower than anticipated market penetration of our new or more recently introduced products; ● significant quantities of our product or that of our competitors in our distributors’ inventories or distribution channels; ● changes in distributor buying patterns; ● government mandated shelter-in-place, lock downs or other crisis related orders; ● potential resurgence of the COVID-19 virus or mutations of the virus; and ● changes in the healthcare market including consolidation in our customer base.
Key factors include: ● Regulatory Clearances: Delays or issues with obtaining regulatory approvals in the U.S., Europe, and other markets. ● Regulatory Compliance: Challenges in meeting compliance requirements in various jurisdictions. ● Competition: Introduction of superior or lower-priced products by competitors could impact our market share. ● Reimbursement Changes: Alterations in reimbursement systems or amounts could affect product usage decisions. ● Economic Conditions: Economic downturns, changes in healthcare spending, reduced consumer demand, inflation, and currency fluctuations. ● Legal and Regulatory Changes: New or amended laws and regulations affecting our business operations. ● Market Penetration: Lower than expected adoption of new or recently introduced products. ● Distributor Dynamics: Variability in distributor inventory levels, buying patterns, and overall performance. ● Government Mandates: Risks from shelter-in-place orders, lockdowns, or other crisis-related directives. ● Health Crises: Potential resurgence of COVID-19 or new health threats. ● Healthcare Market Changes: Consolidation in our customer base or shifts in the healthcare market landscape. 11 Fluctuations in our operating results, for any reason, could cause operating losses as a result of significant fixed expenses.
Our operating results are dependent upon many factors that are substantially outside of our control that could materially and adversely affect our business, results of operations, and financial condition.
Our operating results are subject to fluctuations due to factors outside our control, which may adversely affect our business, financial condition, and stock price.
Further, we expect to grow our operations, and our needs for additional management and other key personnel are expected to increase. If we are not able to retain existing key personnel, or timely identify and hire replacement or additional qualified personnel to meet expected growth, our business could be adversely impacted.
As we anticipate growth in our operations, our need for additional management and other key personnel is expected to increase. Failure to retain our existing key personnel or to promptly identify and hire qualified replacements or additional staff to support our growth could have a detrimental impact on our business.
Moreover, despite network security and back-up measures, some of our servers are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptive problems. Cyber security is a great and growing risk to operating companies.
Moreover, despite network security and backup measures, some of our servers and those of our vendors may still be susceptible to physical or electronic break-ins, computer viruses, and similar disruptive issues. Cybersecurity risks are escalating and pose significant threats to our operations.
Our diagnostic tests compete with similar products made by our competitors. There are a large number of multinational and regional competitors making investments in competing technologies and products. We also face competition from our distributors as some have created, and others may decide to create their own products to compete with ours.
Our diagnostic tests face competition from similar products produced by numerous multinational and regional competitors who are heavily investing in competing technologies. Additionally, some of our distributors have developed, or may develop, their own products to compete directly with ours. 14 Many of our competitors have substantial competitive advantages over us, including significantly greater financial, technical, and research resources.
Trading of our common stock is not significant, therefore sales of a larger volume of the stock could adversely affect the stock price. As of August 26, 2016, our Company’s stock has been traded on the Nasdaq Capital Market.
Additionally, due to the limited trading volume of our common stock, substantial sales of our stock could adversely impact its market price. While our common stock has been traded on the Nasdaq Capital Market since August 26, 2016, liquidity may be limited, and it could be challenging to liquidate large positions without adversely affecting the stock price.
We have historically incurred net losses. There can be no assurance that we will generate net profits in future periods. Further, there can be no assurance that we will be cash flow positive in future periods. In the event that we fail to achieve profitability in future periods, the value of our common stock may decline.
RISKS RELATED TO OUR BUSINESS We have a history of operating losses. We have a history of operating losses, and there is no guarantee that we will achieve profitability in the future. Our ability to generate net profits and maintain positive cash flows is uncertain.
Loss of certifications could lead to temporary manufacturing shutdowns, product recalls, product shortages, or delays in product manufacturing and a decline in sales. The Company maintains a manufacturing plant in Mexico which presents risks to the Company including risks associated with doing business outside the United States.
The Company maintains a manufacturing plant in Mexico which presents risks to the Company including risks associated with doing business outside the United States. We operate a significant manufacturing facility in Mexico through our subsidiary, Biomerica de Mexico. This international presence introduces a range of risks, including exposure to local economic and political conditions.
A material portion of our revenues come specifically from sales to our distribution partner located in China, who sells into the Chinese market. Future political tensions between the U.S. and China governments could cause a disruption or reduction in our sales into that market.
A significant portion of our revenues comes from sales to our distribution partner in China. Political tensions between the U.S. and China could disrupt or reduce our sales in the Chinese market, posing a substantial risk to our business. Our results of operations and financial conditions may be adversely affected by the financial soundness of our customers, distributors, and suppliers.
If our customers’ or suppliers’ operating and financial performance deteriorates, or if they are unable to make scheduled payments or obtain credit, our customers may not be able to pay, or may delay payment of, accounts receivable owed to us, and our suppliers may restrict credit or impose different payment terms or reduce or terminate production of products they supply to us, or may cease all operations.
For instance, if our customers are unable to pay or delay payment on accounts receivable, this would negatively impact our cash flow. Similarly, if our suppliers face financial challenges, they may restrict credit, impose more stringent payment terms, reduce or cease production of essential components, or even stop operations entirely.
Our products are primarily sold internationally, with the majority of our international sales to our distributors in Asia and Europe.
We face risks relating to our international sales, including economic, political, and regulatory challenges, which could impact our financial performance, disrupt our business operations, and hinder our growth strategy. Our products are primarily sold internationally, with significant sales to distributors in Asia and Europe.
Adverse changes in our relationships with these distributors and other partners, or adverse developments in their financial condition, performance, or purchasing patterns, could adversely affect our business and consolidated financial statements. We sell to countries in Asia including China where trade policies and political issues could impact our revenues.
Any adverse changes in our relationships with key distributors, or issues related to their financial condition, performance, or purchasing patterns, could have a significant impact on our sales and overall financial results. The loss of a key distributor, or the failure of our direct distribution efforts, could further exacerbate these challenges and adversely affect our business.
In addition, if we are unable to achieve or maintain positive cash flows, we would be required to seek additional funding, which may not be available on favorable terms, if at all. Our operating results may fluctuate adversely as a result of many factors that are outside our control, which may negatively impact our stock price.
Our financial statements do not reflect any adjustments that might result from the resolution of this uncertainty. Our operating results may fluctuate adversely as a result of many factors that are outside our control, which may negatively impact our stock price.
If any governmental authorities were to impose new environmental regulations requiring compliance in addition to that required by existing regulations or alter their interpretation of the requirements of such existing regulations, such environmental and safety regulations could impair our research, development, or production efforts by imposing additional, and possibly substantial, costs, restrictions, or compliance procedures on our business.
If government authorities introduce new environmental regulations or change the interpretation of existing regulations, our operations could be further impacted. Such changes may impose additional costs, restrictions, or compliance requirements, which could hinder our research, development, or production efforts. Noncompliance with these regulations may result in significant fines, penalties, or damages, and could necessitate costly remediation efforts.
Moreover, the availability of additional capital, whether debt or equity from private capital sources (including banks) or the public capital markets, fluctuates as our financial condition and industry or market conditions in general change.
This often involves seeking public or private debt or issuing equity. Raising funds through equity can dilute the interests of our existing stockholders. The availability of capital, whether through debt or equity, is subject to fluctuations based on our financial condition and general market or industry conditions.
We extend credit to many of our customers including those outside of the United States. It is often difficult to obtain adequate credit information on these customers. Further, our ability to collect receivables from these customers through the court systems in those countries can be more difficult than here in the United States.
The combined effect of these potential challenges could significantly influence our operating results and financial stability. We extend credit to customers outside the United States which can be difficult to collect. We extend credit to many of our customers, including those located outside the United States.
There may be times when the private capital markets and the public debt or equity markets lack sufficient liquidity or when our securities cannot be sold at attractive prices, in which case we would not be able to access capital from these sources on favorable terms, if at all.
There may be periods when private capital markets or public debt and equity markets lack liquidity, or when we are unable to sell our securities at favorable prices. In such scenarios, accessing capital on favorable terms may become challenging. Failure to secure adequate funding could force us to delay, reduce, or even eliminate certain development programs or commercialization efforts.
We use hazardous materials in our research and production. The risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, the Company could be held liable for any harm or damages that result and any such liability could exceed the resources of the Company.
Despite rigorous safety protocols, the possibility of accidental contamination or injury cannot be entirely eliminated. In the event of an accident, we could face significant liability for harm or damages, potentially exceeding our financial resources. Compliance with environmental regulations also entails substantial costs.
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RISKS RELATED TO OUR BUSINESS Our business could be adversely affected by the effects of widespread public health epidemics or other broad government-imposed restrictions on societies . During recent years, certain aspects of our business were negatively impacted by the COVID-19 pandemic.
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Failure to achieve or sustain profitability could result in a decline in the value of our common stock and may necessitate seeking additional funding under potentially unfavorable conditions.
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We may be materially impacted by ongoing outbreaks of illness or other health issues, such as the COVID-19 outbreak. The outbreak of the COVID-19 virus caused various governments, including the United States, to implement quarantines, various restrictions on transportation, and shelter in place orders and other broad restrictions.
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Although our financial statements have been prepared on a going concern basis, our current level of cash and cash equivalents available to us is not sufficient to meet our operating plans for the next 12 months, raising substantial doubt regarding our ability to continue as a going concern.
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Governments have also implemented sweeping work restrictions that prohibit most employees from going to work.
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Our financial statements as of May 31, 2024, have been prepared under the assumption that we will continue as a going concern for the next twelve months from the date of issuance.
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The Company faces significant future risks from such government imposed restrictions, laws and regulations pertaining to health epidemics or various other government declared crisis’, that include but are not limited to: a) supply chain disruptions making it difficult for the Company to receive materials needed for production of its products, and needed to ship finished products to our customers, b) loss of contracts and customers from the financial strains or other disruptions they are experiencing as a result of the government restrictions, c) financial risks pertaining to receivables due from customers that may fall into insolvency or otherwise be unable to pay their bills, d) government orders that make it difficult to remain open for business, restrict imports of raw materials or exports of finished goods, refusal to allow the Company’s product to be licensed for sale in their countries, and other seen and unforeseen actions taken by government agencies, e) absenteeism or loss of employees at the Company, or at our partner’s companies, due to health reasons or government restrictions, that are needed to develop, validate, manufacture, and perform other necessary functions for our operations, f) equipment failures, loss of utilities, and other disruptions that could impact our operations or render them inoperable, g) litigation or government actions against the Company pertaining to existing products and new products sold by the Company that are directed at limiting or treating the spread of the pandemic outbreak, h) a local or global recession or depression that could harm the international banking, economic and financial systems, i) a drop in demand for our products, that are all medical related, due to patients’ reluctance or refusal to visit hospitals, labs, and doctors’ offices where our products are used, due to their fear of contracting a disease, and j) many other seen and unforeseen events and circumstances, all of which could negatively impact the Company. 12 We have a history of operating losses.
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However, our independent registered public accounting firm has issued a report that includes an explanatory paragraph highlighting our operational losses and expressing substantial doubt about our ability to continue as a going concern for a period of at least the next twelve months from the date this report is filed.
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Fluctuations in our operating results, for any reason, could cause operating losses as a result of significant fixed expenses. We base the scope of our operations and related expenses on our estimates of future revenues.
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Our ability to continue as a going concern depends on obtaining additional financing, achieving further operating efficiencies, increasing sales, reducing costs, and ultimately generating profitable operations. There is no assurance that we will be able to secure the necessary capital on favorable terms, achieve sufficient revenue growth, or implement adequate cost reductions.
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Our competitive position is heavily dependent on obtaining and protecting our own proprietary technology or obtaining licenses from others.
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Significant government regulation exists in countries in which we conduct business. A large part of the Company’s sales is to distributors in Europe, China, and other countries, which require us to maintain certain certifications to sell our products.
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The Company has a significant investment in its manufacturing facility in Mexico through its subsidiary, Biomerica de Mexico. In addition, the Company warehouses a significant amount of its inventory at the Mexico facility.
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Factors such as social unrest, potential terrorism, export and import restrictions, and fluctuations in currency exchange rates could impact our operations. Additionally, there is a risk of labor shortages, which could affect our manufacturing capabilities.
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There are a number of risks associated with doing business in Mexico, including, exposure to local economic and political conditions, social unrest, including risks of terrorism or other hostilities, export and import restrictions, the potential for shortages of trained labor, and the possible effects of currency exchange rate fluctuations.
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Furthermore, severe environmental or safety violations could lead to partial or total shutdowns of our research and manufacturing facilities, adversely affecting our business. The risk of contamination or injury from hazardous materials may also expose individuals to potential health hazards, resulting in fines or penalties that might not be covered by insurance, thereby impacting our financial stability and operational continuity.
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The Company may incur substantial costs to comply with environmental regulations.
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Our operational results and financial condition are closely linked to the financial health of our customers, distributors, and suppliers. If any of these parties experience a deterioration in their financial performance or encounter difficulties with scheduled payments or credit, it could have several adverse effects on our business.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWhen 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 and will increase on September 1, 2023, to $27,000 per month. The security deposit is approximately $22,000.
Biggest changeWhen the Company extended its lease in April 2021, it was also granted an additional five- year lease extension option. The current rent is approximately $27,000 per month and will increase on September 1, 2024, to $28,000 per month. The security deposit is approximately $22,000.
ITEM 2. PROPERTIES The Company leases its facilities. On May 31, 2023, the Company had approximately 22,000 square feet of floor space at its corporate headquarters at 17571 Von Karman Avenue in Irvine, California, 92614 which it has been leasing since 2009.
ITEM 2. PROPERTIES The Company leases its facilities. On May 31, 2024, the Company had approximately 22,000 square feet of floor space at its corporate headquarters at 17571 Von Karman Avenue in Irvine, California, 92614 which it has been leasing since 2009.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS The Company is, from time to time, involved in legal proceedings, claims and litigation arising in the ordinary course of business that have a negative impact on the financial results of the Company. While the amounts claimed may be substantial, the ultimate liability cannot be estimated because of considerable uncertainties that exist.
Biggest changeITEM 3. LEGAL PROCEEDINGS From time to time, the Company is involved in legal proceedings, claims, and litigation arising in the ordinary course of business, which may impact its financial results. As of May 31, 2024, there were no pending legal proceedings.
Therefore, it is possible the outcome of such legal proceedings, claims, and litigation could have a material negative effect on quarterly or annual operating results or cash flows when resolved in a future period.
However, the outcome of any future legal matters, claims, or litigation could potentially have a material adverse effect on the Company’s quarterly or annual operating results or cash flows when resolved in subsequent periods.
However, based on facts currently available, management believes such matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. There were no legal proceedings pending as of May 31, 2023.
Nonetheless, based on current information, management believes these matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe did not purchase any of our shares of common stock or other securities during our fiscal year ended May 31, 2023. 23 The table below provides information relating to our equity compensation plans as of May 31, 2023: Securities Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options Compensation Plans Weighted-Average Exercise Price of Outstanding Options Securities Remaining Available for Future Issuance Under Compensation Plans (Excluding those Reflected in Second Column) Equity compensation Plans approved by Securities holders 2,342,616 $ 3.52 28,301
Biggest changeThe table below provides information relating to our equity compensation plans as of May 31, 2024: Securities Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options Compensation Plans Weighted-Average Exercise Price of Outstanding Options Securities Remaining Available for Future Issuance Under Compensation Plans Equity Compensation Plans Approved by Securities Holders 3,479,616 $ 2.53 89,801
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company’s common stock is listed for trading on the Nasdaq Capital Market stock exchange under the symbol BMRA. As of August 25, 2023, the number of holders of record of Biomerica’s common stock was approximately 800, excluding stock held in street name.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company’s common stock is listed for trading on the Nasdaq Capital Market stock exchange under the symbol BMRA. As of August 28, 2024, the number of holders of record of Biomerica’s common stock was approximately 850, excluding stock held in street name.
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We did not purchase any of our shares of common stock or other securities during our fiscal year ended May 31, 2024.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeIn March 2023, we terminated the at-the-market offering and sold 3,333,333 shares of our common stock in a firm commitment public offering under the 2020 Shelf Registration Statement at a price to the public of $2.40 per share, for total gross proceeds of $8,00 0 ,000, before deducting underwriting discounts and commissions and other offering-related expenses payable by the Company. 27 As of August 25, 2023, the date on which this Annual Report on Form 10-K for the fiscal year ended May 31, 2023, is filed with the SEC, our 2020 Registration Statement remains subject to the offering limits set forth in General Instruction I.B.6 of Form S-3 because our public float is less than $75 million.
Biggest changeIn March 2023, we terminated the at-the-market offering and sold 3,333,333 shares of our common stock in a firm commitment public offering under the 2020 Shelf Registration Statement at a price to the public of $2.40 per share, for total gross proceeds of $8,000,000, before deducting underwriting discounts and commissions and other offering-related expenses payable by the Company.
The common stock sold and issued in fiscal 2022 and 2023 was issued under the Company’s shelf registration statement filed with the SEC on July 21, 2020 (the “2020 Shelf Registration Statement”) and declared effective by the SEC on September 30, 2020, and under the prospectus supplement filed with the SEC on January 22, 2021 (“2021 Prospectus Supplement”), and the prospectus supplement filed in conjunction with the Company’s underwritten public offering of common shares on March 7, 2023 (the “2023 Prospectus Supplement”) (See Shareholders’ Equity in the notes to the consolidated financial statements for further details about SEC registration statements).
The common stock sold and issued in fiscal 2023 was issued under the Company’s shelf registration statement filed with the SEC on July 21, 2020 (the “2020 Shelf Registration Statement”) and declared effective by the SEC on September 30, 2020, and under the prospectus supplement filed with the SEC on January 22, 2021 (“2021 Prospectus Supplement”), and the prospectus supplement filed in conjunction with the Company’s underwritten public offering of common shares on March 7, 2023 (the “2023 Prospectus Supplement”) (See Shareholders’ Equity in the notes to the consolidated financial statements for further details about SEC registration statements).
For so long as the Company’s public float is less than $75 million, the aggregate market value of securities sold by the Company under the 2020 Shelf Registration Statement pursuant to Instruction I.B.6 to Form S-3 during any 12 consecutive months may not exceed one-third of the Company’s public float.
For so long as the Company’s public float is less than $75 million, the aggregate market value of securities sold by the Company under the 2023 Shelf Registration Statement pursuant to Instruction I.B.6 to Form S-3 during any 12 consecutive months may not exceed one-third of the Company’s public float.
We have sold $7,631,000 of our common stock pursuant to General Instruction I.B.6 of Form S-3 in the 12 calendar months preceding the date of filing this Annual Report on Form 10-K.
We have not sold any of our common stock pursuant to General Instruction I.B.6 of Form S-3 in the 12 calendar months preceding the date of filing this Annual Report on Form 10-K.
The primary factors that contributed to this were a loss of approximately $7,140,000, an increase in accounts receivable of $291,000, a decrease in inventory reserves of $174,000, and a decrease in accounts payable and accrued expenses of $79,000.
The primary factors that contributed to this were a loss of approximately $7,140,000, an increase in accounts receivable of $291,000, a decrease in inventory reserves of $174,000, and a decrease in accounts payable and accrued expenses of $80,000 and a decrease in lease liability of $297,000.
We suggest that our significant accounting policies be read in conjunction with this Management’s Discussion and Analysis of Financial Condition and Results of Operations. Please refer to Note 2 of the Company’s consolidated financial statements for information on Significant Accounting Policies. 28 REVENUE RECOGNITION The Company has various contracts with customers.
We suggest that our significant accounting policies be read in conjunction with this Management’s Discussion and Analysis of Financial Condition and Results of Operations. Please refer to Note 2 of the Company’s consolidated financial statements for information on Significant Accounting Policies.
The Company does not allow for returns except in the event of defective merchandise and therefore does not establish an allowance for returns. In addition, the Company has contracts with customers wherein they receive purchase discounts for achieving specified sales volumes.
The Company does not allow for returns except in the event of defective merchandise and, therefore, does not establish an allowance for returns. Additionally, the Company has contracts with customers that provide purchase discounts for achieving specified sales volumes.
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.
We believe that the estimates and assumptions that are most important to the portrayal of our financial condition and results of operations, in that they require subjective or complex judgments, form the basis for the accounting policies deemed to be most critical to us. These relate to revenue recognition, inventory overhead application, inventory reserve and share based compensation.
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).
Services for some contract work are invoiced and recognized as the project progresses. 28 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).
For purposes of this limitation, the aggregate market value of our outstanding common stock held by non-affiliates, or public float, was $25,638,909, based on 15,538733 non-restricted shares of our outstanding common stock held by non-affiliates and a price of $1.65 per share, which was the price at which our common stock was last sold on the Nasdaq Capital Market on August 3, 2023 (a date within 60 days of the date hereof), calculated in accordance with General Instruction I.B.6 of Form S-3.
For purposes of this limitation, the aggregate market value of our outstanding common stock held by non-affiliates, or public float, was $7,037,587, based on 15,639,082 non-restricted shares of our outstanding common stock held by non-affiliates and a price of $0.45 per share, which was the price at which our common stock was last sold on the Nasdaq Capital Market on July 2, 2024 (a date within 60 days of the date hereof), calculated in accordance with General Instruction I.B.6 of Form S-3.
These relate to revenue recognition, bad debts, inventory overhead application, inventory reserve, 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 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.
As of May 31, 2023 and 2022, the Company had working capital of approximately $10,852,000 and $7,416,000, respectively.
As of May 31, 2024 and 2023, the Company had working capital of approximately $5,527,000 and $10,852,000, respectively.
Operating Expenses The following is a summary of operating expenses: Year Ended May 31, 2023 2022 Increase (Decrease) Operating Expense As a % of Total Revenues Operating Expense As a % of Total Revenues $ % Selling, General and Administrative Expenses $ 6,085,000 114% $ 5,699,000 30% $ 386,000 7% Research and Development $ 1,584,000 30% $ 1,812,000 10% $ (228,000 ) -13% Selling, General and Administrative Expenses Our selling, general and administrative expenses were approximately $6,085,000 for fiscal 2023 compared to $5,699,000 for fiscal 2022, an increase of $386,000, or 7%.
Operating Expenses The following is a summary of operating expenses: Year Ended May 31, 2024 2023 Increase (Decrease) Operating Expense As a % of Total Revenues Operating Expense As a % of Total Revenues $ % Selling, General and Administrative Expenses $ 5,487,000 101 % $ 6,085,000 114 % $ (598,000 ) -10 % Research and Development $ 1,491,000 28 % $ 1,584,000 30 % $ (93,000 ) -6 % 25 Selling, General and Administrative Expenses Our selling, general, and administrative expenses were approximately $5,487,000 for fiscal 2024, compared to $6,085,000 for fiscal 2023, a decrease of $598,000, or 10%.
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.
This applies to clinical lab products sold to domestic and international distributors, including hospitals, clinical laboratories, medical research institutions, medical schools, and pharmaceutical companies. OTC products are sold directly to drug stores, e-commerce customers, and distributors, while physicians’ office products are sold to physicians and distributors.
All 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.
REVENUE RECOGNITION The Company has various contracts with customers, and these contracts specify the recognition of revenue based on the nature of the transaction. Revenues from product sales are recognized at the time the product is shipped, customarily FOB shipping point, which is when the transfer of control of goods has occurred and title passes.
These were partially offset by a decrease in accounts receivable of $1,365,000, a decrease in inventories of $1,562,000, an increase in accounts payable and accrued expenses of $389,000, and non-cash expenses of approximately $1,855,000. Investing Activities During fiscal 2023, cash used in investing activities was approximately $78,000, as compared to $170,000 for fiscal 2022.
These were partially offset by an increase in the allowance on accounts receivable of $342,000, a decrease in inventories of $534,000, and non-cash expenses of approximately $1,536,000. Investing Activities During fiscal 2024, cash used in investing activities was approximately $115,000, as compared to $78,000 for fiscal 2023.
In fiscal 2023 and 2022, the Company had proceeds from the exercise of stock options of approximately $81,000 and $77,000, respectively. During fiscal 2023 and 2022, the Company received approximately $9,309,000 and $2,317,000, respectively, in net proceeds from the sale of common stock.
During fiscal 2024 and 2023, the Company received approximately $0 and $9,309,000, respectively, in net proceeds from the sale of common stock.
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.
Our diagnostic test kits analyze blood, urine, nasal, or fecal specimens from patients to diagnose various diseases, food intolerances, and other medical conditions. They measure or detect the presence and levels of specific bacteria, hormones, antibodies, antigens, and other substances in the body, often in extremely small concentrations.
RESULTS OF OPERATIONS Net Sales and Cost of Sales The following is a breakdown of revenues according to markets to which the products are sold: For the Year Ended May 31, Increase (Decrease) 2023 2022 $ % Clinical lab $ 3,310,000 $ 3,064,000 $ 246,000 8% Over-the-counter 1,169,000 1,089,000 $ 80,000 7% Contract manufacturing $ 610,000 $ 459,000 $ 151,000 33% Physician’s office 250,000 14,259,000 $ (14,009,000 ) -98% Total $ 5,339,000 $ 18,871,000 $ (13,532,000 ) -72% Our net sales were approximately $5,339,000 for fiscal 2023 compared to $18,871,000 for fiscal 2022, a decrease of $13,532,000, or 72%.
RESULTS OF OPERATIONS Net Sales and Cost of Sales The following is a breakdown of revenues according to markets to which the products are sold: Year Ended May 31, Increase (Decrease) 2024 2023 $ % Clinical lab $ 3,236,000 $ 3,310,000 $ (74,000 ) -2 % Over-the-counter 1,426,000 1,169,000 257,000 22 % Contract manufacturing 741,000 610,000 131,000 21 % Physician’s office 12,000 250,000 (238,000 ) -95 % Total $ 5,415,000 $ 5,339,000 $ 76,000 1 % For fiscal 2024, our net sales were approximately $5,415,000, representing an increase of $76,000, or 1%, compared to $5,339,000 for fiscal 2023.
After giving effect to the $8,546,303 offering limit imposed by General Instruction I.B.6 of Form S-3, and after deducting the shares we sold within the preceding 12 months, as of the date of filing this Annual Report, we may sell $915,3030 shares of our common stock at this time under the 2020 Shelf Registration Statement.
After giving effect to the $2,345,862 offering limit imposed by General Instruction I.B.6 of Form S-3, and after deducting the shares we sold within the preceding 12 months, as of the date of filing this Annual Report, we may sell $2,345,862 shares of our common stock at this time under the 2023 Shelf Registration Statement. 27 SUBSEQUENT EVENTS As part of our ongoing efforts to reduce costs, we have implemented significant cost-cutting measures, including a workforce reduction of nearly 15% in July 2024.
Based on management’s analysis of the Company’s cash flow requirements through August 2024 and beyond, 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.
Management has analyzed the Company’s cash flow requirements through August 2025 and beyond. Based on this analysis, we believe our current cash and cash equivalents are insufficient to meet our operating cash requirements and strategic growth objectives for the next twelve months.
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.
OVERVIEW Biomerica, Inc. and its subsidiaries (which includes wholly-owned subsidiaries, Biomerica de Mexico and BioEurope GmbH), is a global biomedical technology company that develops, patents, manufactures and markets advanced diagnostic and therapeutic products.
During fiscal 2023, the Company purchased approximately $64,000 of property and equipment and had $14,000 in expenditures related to patents. During fiscal 2022, the Company purchased approximately $57,000 of property and equipment and $113,000 in expenditures related to patents. Financing Activities Cash provided by financing activities for fiscal 2023 was approximately $9,390,000 as compared to $2,394,000 for fiscal 2022.
During fiscal 2024, the Company purchased approximately $51,000 of property and equipment and had $64,000 in expenditures related to patents. During fiscal 2023, the Company purchased approximately $64,000 of property and equipment and had $14,000 in expenditures related to patents.
The $106,000 increase was due to higher market interest rates on our higher cash balance due to the current fiscal year financings. 26 LIQUIDITY AND CAPITAL RESOURCES The following are the principal sources of liquidity: May 31, 2023 2022 Cash and cash equivalents $ 9,719,000 $ 5,917,000 Working capital including cash and cash equivalents $ 10,852,000 $ 7,416,000 As of May 31, 2023 and 2022, the Company had cash and cash equivalents of approximately $9,719,000 and $5,917,000, respectively.
LIQUIDITY, CAPITAL RESOURCES AND GOING CONCERN The following are the principal sources of liquidity: Year Ended May 31, 2024 2023 Cash and cash equivalents $ 4,170,000 $ 9,719,000 Working capital including cash and cash equivalents $ 5,527,000 $ 10,852,000 As of May 31, 2024 and 2023, the Company had cash and cash equivalents of approximately $4,170,000 and $9,719,000, respectively.
These products are directed at chronic inflammatory illnesses that are widespread and common, and as such address very large markets. Our InFoods® IBS product uses a simple blood sample and is designed to identify patient-specific foods that, when removed from the diet, may alleviate IBS symptoms such as pain, bloating, diarrhea, and constipation.
We have launched the inFoods ® IBS product, which leverages this patented technology. The inFoods® IBS product utilizes a simple blood test to identify patient-specific foods that, when eliminated from the diet, may alleviate IBS symptoms such as pain, bloating, diarrhea, cramping, and constipation.
Our inventory valuation reserves totaled $672,000 and $846,000 as of May 31, 2023 and 2022, representing approximately 25% and 26% of our inventory, respectively. RECENT ACCOUNTING PRONOUNCEMENTS See Note 2 to our consolidated financial statements for a listing of adopted and soon to be adopted accounting pronouncements.
Our inventory valuation reserves totaled $467,000 and $672,000 as of May 31, 2024 and 2023, representing approximately 16% and 25% of our inventory, respectively.
Our existing medical diagnostic products are sold worldwide primarily in two markets: 1) clinical laboratories and 2) point-of-care (physicians’ offices and OTC at Walmart, CVS Pharmacy, Amazon, etc.).
The Company’s products are designed to enhance the health and well-being of people, while reducing total healthcare costs. 23 Our extensive range of medical diagnostic products is sold worldwide, primarily in two markets: clinical laboratories and point-of-care settings, including physicians’ offices and over-the-counter sales at major retailers such as Walmart, CVS Pharmacy, and Amazon.
The Company regularly evaluates the status of these contracts and does not believe that any discounts will be given through the end of the contract periods. Services for some contract work are invoiced and recognized for work that has been performed as the project progresses.
The Company regularly evaluates the status of these contracts and does not believe any discounts will be given through the end of the contract periods. For diagnostic testing services sold directly to patients or physician offices that require processing by a third-party CLIA-certified lab, we recognize revenue once the lab has completed the test results.
Interest and Dividend Income Interest and dividend income for fiscal 2023 and 2022 was approximately $133,000 and $27,000, respectively.
Dividend and Interest income Dividend and interest income for fiscal 2024 and 2023 was approximately $431,000 and $133,000, respectively. The $298,000 increase was primarily driven by higher market interest rates on our cash and cash equivalents.
The Company’s products are designed to enhance the health and well-being of people, while reducing total healthcare costs. Our primary focus is the research, development, commercialization and in certain cases regulatory approval, of patented, diagnostic-guided therapy (“DGT”) products to treat gastrointestinal diseases, such as irritable bowel syndrome (“IBS”), and other inflammatory diseases.
A key outcome of our recent research and development efforts is our patented diagnostic-guided therapy (“DGT”) product, developed on the inFoods ® technology platform. This innovative product is designed to treat gastrointestinal conditions such as irritable bowel syndrome (“IBS”) and other inflammatory diseases, targeting chronic inflammatory illnesses that are widespread and prevalent in large markets.
This decrease in annual sales is primarily attributable to the decrease of $13,950,000 in sales of COVID-19 tests. Our cost of sales were approximately $4,893,000 for fiscal 2023 compared to $15,894,000 for fiscal 2022, a decrease of $11,001,000, or 69%. This decrease was driven by the significant decrease in the demand for our COVID-19 tests.
Consolidated cost of sales for fiscal 2024 was approximately $4,804,000, or 89% of net sales, compared to $4,893,000, or 92% of net sales, for fiscal 2023, reflecting a slight decrease of $89,000, or 2%. The decrease was primarily driven by a $171,000 reduction due to the absence of COVID-related sales.
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 positive, and causing an abnormal immune response in the patient is simply removed from the diet to help alleviate IBS symptoms.
Unlike broad and difficult-to-manage dietary restrictions, the inFoods® IBS product pinpoints a patient’s heightened immunoreactivity to specific foods known to frequently trigger IBS symptoms. By removing the foods identified as problematic, patients can achieve relief from their IBS symptoms.
The increase was primarily due to $350,000 in legal expenses and a $290,000 non-recurring write-off of bad debt expense related to COVID-19 sales. This was partially offset by a decrease of $75,000 in share-based compensation expense.
The reduction in fiscal 2024 was primarily due to decreases of $822,000 in legal expenses, $399,000 in bad debt expenses, and $247,000 in share-based compensation.
These were partially offset by an increase in the allowance on accounts receivable of $342,000, a decrease in inventories of $534,000, and non-cash expenses of approximately $1,237,000. During fiscal 2022, the Company had a net loss of approximately $4,531,000, a decrease in inventory reserves of $772,000, and a decrease in the allowance on accounts receivable of $684,000.
These were partially offset by an increase in accounts payable and accrued expenses of $246,000, and non-cash expenses of approximately $1,211,000. During fiscal 2023, cash used in operating activities was approximately $5,474,000.
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During fiscal 2022, we completed an endpoint determination clinical trial on our InFoods® IBS product. This trial was conducted at Mayo Clinics in Florida and Arizona, Beth Israel Deaconess Medical Center Inc., a Harvard Medical School Teaching Hospital, University of Texas Health Science Center at Houston, Houston Methodist, the University of Michigan, and other institutions.
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Most of our products are Conformite Europeenne (“ CE”) marked and/or registered with regulatory agencies in various countries for diagnostic use, with several also cleared for sale in the United States by the FDA. Due to the global SARS-CoV-2 novel coronavirus (“COVID-19”) pandemic, we began developing, marketing, and selling COVID-19 diagnostic tests in March 2020.
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This trial monitored IBS patients over an 8-week treatment period to determine the efficacy of our InFoods® IBS product to improve the patients’ IBS symptoms or endpoints. The top-line trial results were reported in February 2022.
Added
We started selling these tests in fiscal 2021, generating significant revenues during fiscal 2021 and 2022. However, we experienced a substantial drop in sales in fiscal 2023, followed by no sales of our COVID-19-related products in fiscal 2024 due to falling demand. Consequently, our COVID-19 product sales have caused significant fluctuations in our revenues over the past four years.
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Multiple endpoints demonstrated statistically significant improvements, indicating that the elimination of specific foods may meaningfully reduce the symptoms of IBS in each patient subtype (including patients with IBS-Constipation, IBS-Diarrhea & IBS-Mixed). The greatest clinical improvements, including but not limited to abdominal pain and bloating, were seen in patients diagnosed with IBS-Mixed and IBS-Constipation, in the top line data.
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In contrast, our non-COVID-19 products, which accounted for approximately 100% and 96% of our revenues during the fiscal years ended May 31, 2024, and 2023, respectively, and have been our core focus. Technological advances in medical diagnostics have enabled diagnostic tests to be performed not only in clinical laboratories but also at home and at the point-of-care in physicians’ offices.
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The purpose of the endpoint study was to validate the efficacy of the product, and to determine the primary symptom endpoint, or endpoints to be used in a 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.
Added
One of our key objectives has been to develop and market rapid diagnostic tests that are accurate, utilize easily obtained patient specimens, and are simple to perform without the need for complex instrumentation.
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We are continuing to review and refine the complete dataset and have selected the final endpoint that we would intend to use in a final pivotal trial. We are starting to develop the protocol for submission to the FDA, and once approved the trial will be run thereafter.
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Our over-the-counter (home use) and professional use (physicians’ office, clinics, etc.) rapid diagnostic test products help manage existing medical conditions and may save lives through early detection and diagnosis of specific diseases. Traditionally, such tests required the expertise of medical technologists and sophisticated equipment, with results often not available for days.
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The trial is expected to include the large medical institution participants that conducted the endpoint clinical trial, in addition to other new institutions and a Clinical Research Organization. 24 Following the successful completion and positive statistical results from the Company’s InFoods® IBS clinical trial (run at several prominent centers including Mayo Clinic, Beth Israel Deaconess Medical Center Inc. – a Harvard Medical School Teaching Hospital, Houston Methodist Hospital, and the University of Michigan) which was completed in early calendar 2022, Biomerica received interest from Gastroenterology (“GI”) physicians who would like to order the InFoods® IBS test for their patients.
Added
We believe that rapid point-of-care tests, when properly developed and used, can be as accurate as laboratory tests. They require limited to no instrumentation, deliver reliable results in minutes, and can be performed with confidence in the home or physician’s office.
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As such, we are currently working with key GI physician groups who are interested in offering this product to their patients. In fiscal 2023, we worked to set up the InFoods® IBS test to be performed in a CLIA certified, and College of American Pathologists (“CAP”) accredited high-complexity laboratory facility and offered as a laboratory developed test (“LDT”).
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We invest considerable resources in the research and development of new products designed to diagnose and, in some cases, treat several major medical diseases. These products are both internally developed and obtained licensed from others. Our experienced and highly trained technical personnel, including Ph.D. holders and other scientists, are dedicated to developing new products and managing technology transfer activities.
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During the quarter ended February 28, 2023, the CLIA lab completed all validation testing necessary for the InFoods® IBS product to be offered as an LDT and, as of quarter end, is now accepting patient samples.
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Our technical staff, many of whom have extensive experience from previous employment at large diagnostic manufacturing companies, bring a wealth of industry knowledge. Additionally, we rely on our Scientific Advisory Board, comprised of leading medical doctors and clinicians, to guide our clinical studies and product development efforts.
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We also worked to optimize the process for GI physicians to order the InFoods® IBS test, send patient blood samples to the CLIA lab, and receive the test results for their patients. We believe ease of order and workflow for physicians, with easy to understand and actionable results for patients, is critical to our success.
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We have launched our inFoods® product across numerous gastroenterology (“GI”) physician groups in various states and regions, including collaboration with one of the largest GI groups in the U.S. Feedback from GI specialty physicians have generally been positive, and we are actively expanding our network by onboarding additional physician practices.
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During the fiscal third quarter, we also set up customer service and payment systems, along with a dedicated website for patients to receive answers to questions they may have about the test and attain information about how to eliminate a specific food from their diet.
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These GI practices are beginning to prescribe inFoods® IBS to their patients. Our dedicated sales team is deepening relationships within the GI segment and strategically targeting opportunities to introduce inFoods® to other medical specialties.
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This is especially important for foods that are ingredients in common processed foods like milk, eggs, and wheat. As of the end of the fiscal third quarter, the product is now available to physicians and their patients.
Added
By leveraging their expertise and building strong partnerships, our sales team is now working to engage with key physician groups outside the GI field such as integrated health practices and primary-care general practitioners.
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We are also beginning the work of selecting and validating one new disease (such as ulcerative colitis or migraines), where there is evidence that certain foods can trigger or contribute to the symptoms found in these indications.
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These efforts aim to broaden our market reach and enhance the overall adoption of inFoods® across various healthcare sectors and to capitalize on the distinct advantages of inFoods® for a strong foundation of meaningful growth in the future.
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We expect any new disease we target will follow a similar development pathway as InFoods® IBS in simultaneously seeking FDA clearance of the product while also launching the product as an LDT.
Added
We are also continuing to evaluate distribution, partnership and licensing opportunities with U.S. and multinational companies, which have the potential to significantly aid in the commercialization and accelerated growth of inFoods® products both domestically and internationally. 24 Beyond our inFoods ® product line, our additional efforts have led to a significant milestone by receiving FDA clearance in December 2023 for hp+detect ™ , a new diagnostic test for detecting Helicobacter pylori (“H. pylori”) bacteria in the gastrointestinal tract.
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We will also continue to evaluate partnership/licensing opportunities, as they arise, with U.S and multinational companies that could help us commercialize, or accelerate revenue growth of, the InFoods® products in the United States and overseas.
Added
H. pylori is a widespread infection, affecting an estimated 35% of the U.S. population and 45% of the population in Europe’s five largest countries. This bacterium is recognized as the strongest known risk factor for gastric cancer, which is the third most common cause of cancer-related deaths globally.
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Due to the global COVID-19 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. In fiscal 2022, we generated revenues from the international sale of our COVID-19 antigen tests.
Added
The hp+detect ™ test provides physicians and medical centers with a reliable tool for diagnosing H. pylori infections and monitoring the effectiveness and safety of treatments. The diagnostic test is marketed directly to laboratories, where patient samples are analyzed, and diagnoses are made.
Removed
However, in fiscal 2023, due to the decline in severity of COVID-19 and the corresponding lower sales volumes we no longer sell these products. 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.
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To support the launch and distribution of hp+detect ™ , we are actively promoting the test to large end-customer labs. This strategic initiative aims to enhance patient care by enabling timely and accurate detection of H. pylori infections.
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Pylori infection is extremely common, and if left untreated, can lead to ulcers and possibly stomach cancers. During our fourth quarter of fiscal 2022, we applied for FDA clearance of this product though a 510(k) premarket submission. We have been in communication with the FDA answering certain follow-up questions and providing additional data as requested.
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Due to slower-than-expected launch of the Company’s key products, inFoods ® IBS and hp+detect ™ , the Company has initiated significant cost-cutting measures to extend its cash runway and work towards increasing revenues to cover overhead costs. These measures include a workforce reduction of nearly 15%.
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We are working with the FDA to perform one additional set of in-lab tests that the FDA has requested prior to making their final determination on clearance of the product. Once cleared, we will begin marketing the product in the U.S. market.
Added
In addition, the Company is actively exploring strategic opportunities to enhance and create shareholder value.
Removed
We have already begun discussions with international distributors for this product and expect to see revenues through these international channels during 2024. The majority of our research and development efforts are focused on development and commercialization of non-COVID related products such as our H.
Added
When comparing fiscal 2024 net sales excluding COVID-19 test sales from fiscal 2023, there is an increase of $290,000, or 5%. This growth was primarily attributable to the $257,000 increase in OTC Product sales that were within the UAE market, reflecting stronger demand and expanded distribution channels in the region.
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Pylori product, and our InFoods® IBS product. 25 Our existing products that contributed to our fiscal 2023 revenues are primarily focused on gastrointestinal diseases, food intolerances, and certain esoteric tests. These diagnostic test products utilize immunoassay technology. Most of our products are CE marked and/or sold for diagnostic use where they are registered by each country’s regulatory agency.
Added
Additionally, a $131,000 increase in revenues from Contract Manufacturing projects contributed positively to our overall sales performance. These increases were partially offset by a $214,000 decline in sales of COVID-19 tests as the global pandemic situation stabilized.
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In addition, some products are cleared for sale in the United States by the FDA.
Added
However, this decline was partially offset by a $32,000 increase in OTC product costs and a $56,000 rise in contract manufacturing costs, reflecting higher sales in both categories during fiscal year 2024.
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The percentage of cost of sales compared to revenue in fiscal 2023 was 92%, versus 84% in fiscal 2022.
Added
These significant operating expense reductions were partially offset by strategic investments in key areas of our business, including a $535,000 expansion of our sales team, a $136,000 increase in sales commission expenses, and a $171,000 increase in outside services for sales and administration.
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Research and Development Our research and development expenses were approximately $1,584,000 for fiscal 2023 compared to $1,812,000 for fiscal 2022, a decrease of $228,000, or 13%, primarily as a result of decreases in costs related to the research, development and validation of COVID-19. See “Research and Development” for a more extensive description of the research being conducted.
Added
Despite these increases, the overall cost reductions from the previous year underscore our commitment to strategically allocating capital and maintaining financial discipline while pursuing growth opportunities. Research and Development Our research and development expenses were approximately $1,491,000 for fiscal 2024 compared to $1,584,000 for fiscal 2023, a decrease of $93,000, or 6%.

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