UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED ~~NOVEMBER 30, 2020~~AUGUST 31, 2021

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

Commission File Number: 001-37863

BIOMERICA, INC.

~~--------------------------------------------------------------------------------------------~~--------------------------------------------------------------------------------------------------------------------------------------------------------------------

(Exact name of registrant as specified in its charter)

Delaware 95-2645573

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

incorporation or organization) Identification No.)

17571 Von Karman Avenue, Irvine, CA 92614

(Address of principal executive offices) (Zip Code)

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

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

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

~~--------------------- -------------------------------------------~~

~~Common, par value $.08 NASDAQ Capital Market~~

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

~~(TITLE OF EACH CLASS)~~

(TITLE OF EACH CLASS)	(TICKER SYMBOL)	(NAME OF EACH EXCHANGE ON WHICH REGISTERED)
-----------------------------------	-----------------------------------	-------------------------------------------------------------------------------
Common, par value $.08	BMRA	NASDAQ Capital Market

~~COMMON STOCK, PAR VALUE $0.08~~

Indicate by check whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No ~~[_]~~[]

Indicate by check mark whether the registrant has submitted electronically, ~~and posted on its corporate Website, if any,~~ every Interactive ~~Date~~Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (paragraph 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X] No ~~[_]~~[]

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

~~Large Accelerated Filer [_] Accelerated Filer [_]~~

           ~~Non-Accelerated Filer   [_]~~
Large Accelerated Filer [ ]
Accelerated Filer   []
Non-Accelerated Filer   [X]
Smaller Reporting Company [X]
Emerging Growth Company []

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

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

Yes [] No [X]

~~Yes [_] No [X]~~

~~Indicate the~~The number of shares ~~outstanding of each~~ of the registrant's common stock outstanding as of ~~the latest practicable date 11,780,089 shares of common stock, par value $0.08, as of January~~October 14, ~~2021.~~2021 was 12,511,210.

Table of Contents

PART I - FINANCIAL INFORMATION

SUMMARIZED FINANCIAL INFORMATION

ITEM 1.1. FINANCIAL STATEMENTS

BIOMERICA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE ~~LOSS(UNAUDITED)~~LOSS (UNAUDITED)

	Six Months Ended				Three Months Ended				Three Months Ended
	November 30, 2020		November 30, 2019		November 30, 2020		November 30, 2019				August 31, 2020
										August 31, 2021	( As Restated)
Net sales	$	2,516,332	$	2,790,823	$	1,372,526	$	1,596,408	$	1,261,787	$	1,143,806
Cost of sales		(1,971,960)		(1,954,647)		(1,011,030)		(1,127,536)		(1,350,757)		(1,025,717)
Gross Profit		544,372		836,176		361,496		468,872
Gross (Loss) Profit										(88,970)		118,089

Operating Expenses:
Selling, general and administrative		2,419,411		1,060,958		1,254,847		553,761		1,011,535		1,305,944
Research and development		1,261,096		775,320		586,403		404,854		439,864		711,505
Total operating expense		3,680,507		1,836,278		1,841,250		958,615		1,451,399		2,017,449

Loss from operations		(3,136,135)		(1,000,102)		(1,479,754)		(489,743)		(1,540,369)		(1,899,360)

Other Income:
Dividend and interest income		16,074		8,551		7,983		4,488		6,805		8,091
Interest expense		-		(5)		-		(5)
Total other income		16,074		8,546		7,983		4,483

Loss before income taxes		(3,120,061)		(991,556)		(1,471,771)		(485,260)		(1,533,564)		(1,891,269)

Provision for income taxes		14,518		-		13,393		-		(9,017)		(1,125)

Net loss	$	(3,134,579)	$	(991,556)	$	(1,485,164)	$	(485,260)	$	(1,542,581)	$	(1,892,394)

Basic net loss per common share	$	(0.27)	$	(0.10)	$	(0.13)	$	(0.05)	$	(0.12)	$	(0.16)

Diluted net loss per common share	$	(0.27)	$	(0.10)	$	(0.13)	$	(0.05)	$	(0.12)	$	(0.16)

Weighted average number of common and common equivalent shares:
Basic		11,752,299		9,780,813		11,756,265		9,817,363		12,426,784		11,748,377

Diluted		11,752,299		9,780,813		11,756,265		9,817,363		12,426,784		11,748,377

Net loss	$	(3,134,579)	$	(991,556)	$	(1,485,164)	$	(485,260)	$	(1,542,581)	$	(1,892,394)

Other comprehensive loss, net of tax:
Foreign currency translation		(3,250)		(5,085)		(1,530)		(1,643)		(5,613)		(1,721)

Comprehensive loss	$	(3,137,829)	$	(996,641)	$	(1,486,694)	$	(486,903)	$	(1,548,194)	$	(1,894,115)

The accompanying notes are an integral part of these statements.

November 30, 2020
(unaudited)
May 31, 2020
(audited)
Assets

Current Assets:

Cash and cash equivalents
$
5,683,787
$
8,641,027
Accounts receivable, less allowance for doubtful accounts
    of $481,142 and $70,981 as of November 30, 2020 and May 31, 2020,
    respectively

1,611,769

1,765,871
Inventories, net
4,198,213
2,850,836
Prepaid expenses and other

453,137

1,509,083
Total current assets
11,946,906
14,766,817

Property and equipment, net of accumulated depreciation and amortization
    of $1,920,217 and $1,867,643 as of November 30, 2020 and May 31, 2020,
    respectively
288,370
279,379

Right of use assets, net of accumulated amortization of $346,514 and $231,489
    as of November 30, 2020 and May 31, 2020, respectively
1,596,485
1,711,510

Investments
165,324
165,324

Intangible assets, net of accumulated amortization of $513,367 and $496,124 as
    of November 30, 2020 and May 31, 2020, respectively
218,331
168,655

Other assets

262,278

168,193
Total Assets
$
14,477,694

$
17,259,878
Liabilities and Shareholders' Equity

Current Liabilities:

Accounts payable and accrued expenses
$
1,258,097
$
986,711
Accrued compensation

392,006

278,627
Lease liability, current portion

223,920

211,809
Total current liabilities

1,874,023

1,477,147
Lease liability, net of current portion

1,454,890

1,569,678
Total Liabilities

3,328,913

3,046,825
Commitments and contingencies (Notes 5 and 6)

Shareholders' Equity:

Preferred stock, Series A 5% convertible, $0.08 par value,
    571,429 shares authorized, 321,429 issued and outstanding at November
    30, 2020 and May 31, 2020

25,714

25,714
Preferred stock, undesignated, no par value,
    4,428,571 shares authorized, none issued and outstanding at November
    30, 2020 and May 31, 2020
-
-
Common stock, $0.08 par value,
    25,000,000 shares authorized, 11,770,089 and 11,740,089 issued and
    outstanding at November 30, 2020 and May 31, 2020, respectively

941,605

939,205
Additional paid-in-capital
35,284,864
35,213,707
Accumulated other comprehensive loss

(43,091)

(39,841)
Accumulated deficit

(25,060,311)

(21,925,732)
Total Shareholders' Equity

11,148,781

14,213,053
Total Liabilities and Shareholders' Equity
$
14,477,694
$
17,259,878
The accompanying notes are an integral part of these statements.

	August 31, 2021		May 31, 2021
	(Unaudited)		(As Restated)
Assets

Current Assets:
Cash and cash equivalents	$	4,996,623	$	4,199,311
Accounts receivable, less allowance for doubtful accounts of $742,524 and $837,415 as of August 31, 2021 and May 31, 2021, respectively		772,190		1,455,051
Inventories, net		2,861,779		3,206,255
Prepaid expenses and other		315,221		370,290
Total current assets		8,945,813		9,230,907

Property and equipment, net of accumulated depreciation and amortization of $2,000,167 and $1,972,357 as of August 31, 2021 and May 31, 2021, respectively		287,852		310,520

Right of use assets, net of accumulated amortization of $531,974 and $469,077 as of August 31, 2021 and May 31, 2021, respectively		1,490,184		1,553,081

Investments		165,324		165,324

Intangible assets, net of accumulated amortization of $83,683 and $126,769 as of August 31, 2021 and May 31, 2021, respectively		360,292		294,830

Other assets		266,582		264,151
Total Assets	$	11,516,047	$	11,818,813

Liabilities and Shareholders' Equity

Current Liabilities:
Accounts payable and accrued expenses	$	641,404	$	583,380
Accrued compensation		507,722		388,896
Lease liability, current portion		332,967		327,944
Total current liabilities		1,482,093		1,300,220
Lease liability, net of current portion		1,230,898		1,291,570
Total Liabilities		2,712,991		2,591,790

Commitments and contingencies (Notes 1 and 6)

Shareholders' Equity:

Preferred stock, Series A 5% convertible, $0.08 par value, 571,429 shares authorized, NaN issued and outstanding as of August 31, 2021 and May 31, 2021		-		-
Preferred stock, undesignated, 0 par value, 4,428,571 shares authorized, NaN issued and outstanding as of August 31, 2021 and May 31, 2021		-		-
Common stock, $0.08 par value, 25,000,000 shares authorized, 12,510,210 and 12,307,157 issued and outstanding at August 31, 2021 and May 31, 2021, respectively		1,000,815		984,571
Additional paid-in-capital		39,944,726		38,836,743
Accumulated other comprehensive loss		(53,569)		(47,956)
Accumulated deficit		(32,088,916)		(30,546,335)
Total Shareholders' Equity		8,803,056		9,227,023
Total Liabilities and Shareholders' Equity	$	11,516,047	$	11,818,813

	Common Stock			Series A 5% Convertible Preferred Stock			Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit									Series A 5% Convertible							Accumulated Other
	Shares	Amount		Shares	Amount					Accumulated Other Comprehensive Loss			Accumulated Deficit		Total		Common Stock				Preferred Stock				Additional			Comprehensive			Accumulated
																		Shares	Amount			Shares	Amount			Paid-in Capital			Loss			Deficit		Total
Balances, May 31, 2020	11,740,089	$	939,205	321,429	$	25,714	Additional Paid-in Capital	$	35,213,707		$	(39,841)		$	(21,925,732)		$	14,213,053
Balances, May 31, 2020. restated																		11,740,089	$	939,205		321,429	$	25,714		$	36,388,056		$	(39,841)		$	(23,100,081)	$	14,213,053

Exercise of stock options	30,000		2,400	-		-		46,930			-			-			49,330	12,500		1,000		-		-			13,900			-			-		14,900

Foreign currency translation	-		-	-		-		-			(3,250)			-			(3,250)	-		-		-		-			-			(1,721)			-		(1,721)

Compensation expense in connection with options granted	-		-	-		-		24,227			-			-			24,227	-		-		-		-			246,787			-			-		246,787

Net loss	-		-	-		-		-			-			(3,134,579)			(3,134,579)	-		-		-		-			-			-			(1,892,394)		(1,892,394)
Balances, November 30, 2020	11,770,089	$	941,605	321,429	$	25,714	$	35,284,864		$	(43,091)		$	(25,060,311)		$	11,148,781

The accompanying notes are an integral part of these statements.
Balances, August 31, 2020, restated																		11,752,589	$	940,205		321,429	$	25,714		$	36,648,743		$	(41,562)		$	(24,992,475)	$	12,580,625

				Series A 5% Convertible					Accumulated Other
	Common Stock			Preferred Stock			Additional		Comprehensive		Accumulated
	Shares	Amount		Shares	Amount		Paid-in Capital		Loss		Deficit		Total
Balances, May 31, 2021, restated	12,307,157	$	984,571	-	$	-	$	38,836,743	$	(47,956)	$	(30,546,335)	$	9,227,023

Exercise of stock options	1,500		120	-		-		3,775		-		-		3,895

Net proceeds from ATM	201,553		16,124	-		-		784,586		-		-		800,710

Foreign currency translation	-		-	-		-		-		(5,613)		-		(5,613)

Compensation expense in connection with options granted	-		-	-		-		319,622		-		-		319,622

Net loss	-		-	-		-		-		-		(1,542,581)		(1,542,581)

Balances, August 31, 2021	12,510,210	$	1,000,815	-	$	-	$	39,944,726	$	(53,569)	$	(32,088,916)	$	8,803,056

	Six Months Ended
	November 30, 2020		November 30, 2019
					August 31, 2021		August 31, 2020 (As Restated)
Cash flows from operating activities:

Net loss	$	(3,134,579)	$	(991,556)	$	(1,542,581)	$	(1,892,394)
Adjustments to reconcile net loss to net cash used in operating activities:
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		64,435		65,545		34,722		32,570
Change in allowance on accounts receivable		410,161		3,571		(94,891)		201,375
Inventory reserve		11,943		6,873		179,744		5,005
Stock option expense		24,227		34,978		319,622		246,787
Reduction in deferred rent liability		-		(37,971)
Amortization of right-of-use asset		115,025		157,356		62,897		57,257
Changes in assets and liabilities:
Accounts receivable		(256,059)		168,133		777,752		(18,924)
Inventories		(1,359,320)		(46,675)		164,732		(1,255,573)
Prepaid expenses		1,055,946		18,431
Prepaid expenses and other						55,069		1,038,149
Reduction in lease liability		(102,677)		(102,133)		(55,649)		(49,880)
Other assets		(94,085)		-		(2,431)		(276,438)
Accounts payable and accrued expenses		271,386		345,211		58,024		284,202
Accrued compensation		113,379		12,243		118,826		30,718
Net cash used in operating activities		(2,880,218)		(365,994)
Net cash provided by (used in) operating activities						75,836		(1,597,146)

Cash flows from investing activities:
Increase in intangibles		(61,536)		(15,008)		(72,375)		(53,158)
Purchases of property and equipment		(61,566)		(6,323)		(5,141)		(39,588)
Net cash used in investing activities		(123,102)		(21,331)		(77,516)		(92,746)

Cash flows from financing activities:
Proceeds from sale of common stock, net		-		307,686		800,710		-
Proceeds from exercise of stock options		49,330		48,928		3,895		14,900
Proceeds from equity financing-officer		-		200,000
Net cash provided by financing activities		49,330		556,614		804,605		14,900

Effect of exchange rate changes in cash		(3,250)		(5,085)		(5,613)		(1,721)
Net (decrease) increase in cash and cash equivalents		(2,957,240)		164,204
Net increase (decrease) in cash and cash equivalents						797,312		(1,676,713)

Cash and cash equivalents at beginning of period		8,641,027		686,785		4,199,311		8,641,027

Cash and cash equivalents at end of period	$	5,683,787	$	850,989	$	4,996,623	$	6,964,314

Supplemental Disclosure of Cash-Flow Information:
Cash paid during the period for:
Interest	$	-	$	5
Income taxes	$	11,735	$	7,844	$	9,017	$	1,125
Non-cash investing and financing activities:
Establishment of Right-Of-Use Asset per ASC 842	$	-	$	1,942,999
Establishment of Lease Liability per ASC 842	$	-	$	1,980,970

The accompanying notes are an integral part of these statements.

Biomerica Inc. and ~~Subsidiaries~~subsidiaries (collectively ~~"the Company"~~the “Company”, “Biomerica”, “we”, “us”, or “our”) ~~are primarily engaged in the development, manufacturing and marketing of medical diagnostic products.~~

~~The Company~~ develops, patents, manufactures and markets advanced diagnostic and therapeutic products used at the point-of-care (in home and physicians' offices) and in hospital/clinical laboratories for detection and/or treatment of medical conditions and diseases. 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 and development of revolutionary, patented, diagnostic-guided therapy (“DGT”) products to treat gastrointestinal diseases, such as irritable bowel syndrome, and other inflammatory diseases. These products are directed at chronic inflammatory illnesses that are widespread and common, and as such address very large markets.

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

Due to the global 2019 SARS-CoV-2 novel coronavirus pandemic, in March 2020 we began redirecting and focusing a majority of our resources to develop, test, validate, seek regulatory approval for, and sell diagnostic products that indicate if a person has been infected by COVID-19. During fiscal 2021, we sold 2 primary types of COVID-19 tests; 1) antibody diagnostic tests that use a patient’s blood sample to detect if the patient has certain antibodies to COVID-19 that were created as part of their body’s immune response to a COVID-19 infection, even if the infection was asymptomatic, and 2) antigen tests that use a patient’s nasal fluid sample to detect if the patient is currently infected with the virus.

Aside from the COVID-19 products we offer, the other products we sell are primarily focused on gastrointestinal diseases, food intolerances, cancer screening and awareness and certain esoteric tests. These diagnostic test products utilize immunoassay technology. Most of our commercial 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 U.S. by the FDA.

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

The unaudited, ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements and notes are presented as permitted by the requirements for Form 10-Q and do not contain certain information included in the annual financial statements and notes. The condensed consolidated balance sheet data as of May 31, ~~2020~~2021 was derived from audited financial statements. The accompanying interim condensed consolidated financial statements should be read in conjunction with the financial statements and related notes included in the Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on August ~~31, 2020~~27, 2021 for the fiscal year ended May 31, ~~2020.~~2021, which have been restated as described in our Form 10-K/A as filed on October 14, 2021. The results of operations for the interim periods are not necessarily indicative of results to be achieved for the full fiscal year.

As disclosed in our Form 10-K/A for the year ended May 31, 2021, filed on October 14, 2021, during the process of preparing our financial statements for the quarter ended August 31, 2021, we determined that our calculation of non-cash stock-based compensation expense related to issued stock options in previously issued financial statements was incorrect. Our calculation applied forfeiture adjustments to both vested and unvested outstanding options, including those for which the employee had provided the requisite service, which resulted in an understatement of stock compensation expense. Additionally, our calculation expensed the option at vesting dates versus pro rata over the period the requisite service was provided. As a result of these errors, certain previously reported amounts in the condensed consolidated statement of operations, condensed consolidated statement of stockholders’ equity and condensed consolidated statement of cash flows for the quarter ended August 31, 2020, were materially misstated; accordingly, we have restated the prior period financial statements. See Note 8 to the Financial Statements.

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

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

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

The Company has incurred net losses and negative cash flows from operations and has an accumulated deficit of approximately $32.1 million as of August 31, 2021. Management expects to continue to incur significant costs as it advances its trials and development activities.

On January 22, 2021, the Company filed a prospectus supplement for purposes of raising up to $15,000,000 to the base prospectus filed with the SEC on July 21, 2020 and included in the registration statement on Form S-3 (File No. 333-239980) that was declared effective by the SEC on September 30, 2020. The shares included in the prospectus supplement may be sold pursuant to the terms of an At Market Issuance Sales Agreement between the Company and B. Riley Securities, Inc., as sales agent, the ATM Agreement.

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

Under an ATM Agreement, sales of shares are deemed to be “at the market offerings” as defined in Rule 415 promulgated under the Securities Act. The sales agent under the ATM Agreement agrees to use commercially reasonable efforts to sell on the Company’s behalf all of the shares requested to be sold from time to time by the Company, consistent with its normal trading and sales practices, on mutually agreed terms between the sales agent and the Company. The Company has no obligation to sell any of the shares under the ATM Agreement, and may at any time suspend offers under, or terminate the ATM Agreement.

The Company maintains cash balances at certain financial institutions in excess of amounts insured by federal agencies. As of ~~November 30, 2020,~~August 31, 2021, the Company had approximately ~~$5,417,958~~$4,790,000 of uninsured cash. The Company does not believe it is exposed to any significant credit risks.

For the ~~six~~three months ended ~~November 30,~~August 31, 2021 and 2020, ~~and November 30, 2019,~~ the Company had ~~one distributor~~two key distributors which accounted for ~~35.1%~~60% and ~~50.3%~~40% of net consolidated sales, respectively. At ~~November 30, 2020~~August 31, 2021 and May 31, ~~2020,~~2021, the Company had two ~~distributors and three~~key distributors which accounted for a total of ~~61.9%~~77% and ~~80.0%~~73%, respectively, of gross accounts receivable. ~~Of the 61.9% as of November 30, 2020, 37.1% was owed by a distributor in South America.~~

For the ~~six~~three months ended ~~November 30,~~August 31, 2021 and 2020, one key vendor accounted for 17% and ~~2019,~~ two key vendors accounted for ~~56.0% and three vendors which accounted for 51.4%~~64% of the purchases of raw materials, respectively. As of ~~November 30, 2020~~August 31, 2021 and May 31, ~~2020,~~2021, the Company had one key vendor ~~and two vendors~~ which accounted for ~~26.5%~~25% and ~~26.9%~~17%, respectively, of accounts payable.

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

The Company extends unsecured credit to its customers ~~located throughout the United States and the world.~~on a regular basis. International accounts are ~~normally~~usually required to prepay until they establish a history with the Company and at that time, they are extended credit at levels based on a number of criteria. Based on various criteria, initial credit levels for individual distributors are approved by designated officers and managers of the Company. All increases in credit limits are also approved by designated upper-level management. Management evaluates receivables on a quarterly basis and adjusts the allowance for doubtful accounts accordingly. ~~For receivables~~Balances over ninety days old ~~the Company begins to reserve a portion of the balance~~are usually reserved for unless collection is reasonably assured.

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

The Company has established a reserve of ~~$481,142~~approximately $743,000 for doubtful ~~accounts.~~accounts as of August 31, 2021. The majority of this reserve has been established to cover ~~40%~~100% of outstanding accounts receivable from an international distributor. ~~The distributor continues to make small payments and the Company is continuining to work on collection of this account.~~

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

As of August 31, 2021 and May 31, ~~2020,~~2021, the prepaid expenses and other were approximately ~~$1 million~~$315,000 and $370,000, respectively. The prepaid expenses and other balance were composed of ~~the prepaids was an advance payment~~prepayments to ~~one of our~~insurance and various other suppliers. ~~This prepayment was subsequently refunded by the supplier.~~

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

During the first fiscal quarter ended August 31, 2021, the Company wrote-down the carrying value of certain inventory by approximately $179,000 to assign a new carrying value for this inventory of $211,000. As part of a large international order for this product that was to ship in the second quarter of 2022, the Company agreed to sell this product as a small portion of that order at a price below its carrying value, which required a write down.

Reserves for inventory obsolescence are recorded as necessary to reduce obsolete inventory carrying value to estimated realizable value or to specifically reserve for obsolete inventory that the Company intends to dispose of. As of ~~November 30, 2020~~August 31, 2021 and May 31, ~~2020,~~2021, inventory reserves were approximately ~~$78,000~~$1,797,000 and ~~$67,000,~~$1,617,000, respectively.

~~Table of Contents~~ Of the inventory reserve, approximately $1,683,000 was related to a market downturn in our COVID-19 antibody test and materials, as the market shifted to COVID-19 PCR viral tests and antigen tests.

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

Depreciation and amortization are provided over the estimated useful lives of the related assets, ranging from 5 to 10 years, using the straight-line method. Leasehold improvements are amortized over the lesser of the estimated useful life of the asset or the term of the lease. Depreciation and amortization expense on property and equipment amounted to ~~$25,843~~$27,809 and ~~$24,321~~$26,732 for the three months ended ~~November 30,~~August 31, 2021 and 2020, ~~and 2019, and $52,575 and $53,819 for the six months ended November 30, 2020 and 2019,~~ respectively.

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

The Company assesses the recoverability of these intangible assets by determining whether the amortization of the asset’s balance over its remaining life can be recovered through projected undiscounted future cash flows. The Company uses a qualitative assessment to determine whether there was any impairment. No impairment adjustment was required as of ~~November 30, 2020~~August 31, 2021 or ~~2019.~~2020.

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

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

The following summary presents the options and warrants granted, exercised, expired, ~~cancelled~~canceled and outstanding for the ~~six~~three months ended ~~November 30, 2020:~~August 31, 2021:

During the ~~six~~three months ended ~~November 30, 2020,~~August 31, 2021, options to purchase ~~30,000~~1,500 shares of common stock were exercised at ~~prices ranging from $1.04 to $3.62.~~price of $2.68. Total net proceeds to the Company were ~~$49,330.~~$3,895.

During the ~~six~~three months ended ~~November 30, 2020,~~August 31, 2021, the Company granted ~~171,000~~24,000 options to purchase common stock at an average purchase price of ~~$7.46.~~$4.25. Total net proceeds to the Company were $14,900.

The Company has various contracts with customers. All of the contracts specify that revenues from product sales are recognized at the time the product is shipped, customarily FOB shipping point, which is when the transfer of control of goods has occurred and at which point title passes. The Company does not 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 evaluated the status of these contracts as of ~~November 30,~~August 31, 2021 and 2020, and does not believe that any additional discounts will be given through the end of the contract periods. Services for some contract ~~work~~works are invoiced and recognized for work that has been performed as the project progresses. The Company sells clinical lab products to domestic and international distributors, including hospitals and clinical laboratories, medical research institutions, medical schools and pharmaceutical companies. OTC products are sold directly to drug stores and e-commerce customers as well as to distributors. ~~Physician’s~~Physicians’ office products are sold to physicians and distributors, all of whom are categorized below according to the type of ~~product~~products sold to them. ~~The Company~~We also ~~manufactures~~manufacture certain components on a contract basis for domestic and international manufacturers.

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

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

Research and development costs are expensed as incurred. The Company expensed ~~$586,403~~approximately $440,000 and ~~$404,854~~$712,000 of research and development costs during the three months ended ~~November 30,~~August 31, 2021 and 2020, ~~and 2019 and $1,261,096 and $775,320 during the six months ended November 30, 2020 and 2019,~~ respectively.

The Company has provided a valuation allowance on deferred income tax assets of approximately ~~$3,832,000~~$6,226,000 and ~~$3,175,000~~$5,904,000 as of ~~November 30, 2020~~August 31, 2021 and May 31, ~~2020,~~2021, respectively.

The subsidiary located in Mexico operates primarily using the Mexican peso. The subsidiary located in Germany operates primarily using the U.S. dollar, with an immaterial amount of transactions occurring using the Euro. Accordingly, assets and liabilities of these subsidiaries are translated using exchange rates in effect at the end of the period, and revenues and costs are translated using average exchange rates for the period. The resulting adjustments to assets and liabilities are presented as a separate component of accumulated other comprehensive loss. There are no adjustments to foreign currency loss that are included in the consolidated statements of operations for the three months ended ~~November 30, 2020~~August 31, 2021 and ~~2019 and six months ended November 30, 2020 and 2019.~~2020.

The Company follows the guidance of ASC 842, Leases, which requires lessees to recognize most leases on the balance sheet with a corresponding right-of-use asset. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. The Company leases office space and copy machines, all of which are operating leases. The Company has elected to exclude short-term leases. Most leases include the option to renew and the exercise of the renewal options is at the Company’s sole discretion. Options to extend or terminate a lease are considered in the lease term to the extent that the option is reasonably certain of exercise. The leases do not include the options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term.

Basic loss per share is computed as net loss divided by the weighted average number of common shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur from common shares issuable through stock options, warrants and other convertible securities using the treasury stock method. The total amount of anti-dilutive stock options not included in the loss per share calculation for the three months ended ~~November 30,~~August 31, 2021 and 2020 was 2,081,116 and ~~2019 was 1,326,489 and 521,782,~~1,925,750, respectively. The total amount of anti-dilutive stock options not included in the loss per share calculation for the six months ended November 30, 2020 and 2019 was 1,399,763 and 498,040, respectively. The Company also has outstanding 321,429 of series A 5% convertible preferred stock, which may be converted at any time to common stock.

Recent ~~ASU's~~ASUs issued by the FASB and guidance issued by the Securities and Exchange Commission (“SEC”) did not, or are not believed by management to, have a material effect on the Company’s present or future consolidated financial statements.

~~On July 20,~~Stock option expense during the three months ended August 31, 2021 and 2020 were $319,622 and $246,787 (as restated, see Note 8 to the Company’s outstanding SEC Form S-3 “Shelf” registration statement dated July 20, 2017 expired. This prior registration statement registered an indeterminant number of shares equating to a maximum aggregate offering amount of $45,000,000 of shares.Financial Statements), respectively.

~~On July 21, 2020,~~During the three months ended August 31, 2021, the Company ~~filed with~~sold 201,553 shares of its common stock at prices ranging from $4.02 to $4.47 under its January 22, 2021 prospectus supplement and the ~~SEC a new Form S-3 “Shelf” registration statement~~ATM Agreement (see Note 2 to ~~replace~~Financial Statements) which resulted in gross proceeds of $838,332 and net proceeds to the ~~registration statement that expired on July 20, 2020. The new registration statement registers common shares~~Company of $800,710 after deducting commissions for each sale and legal, accounting and other fees related to ~~be issued in a maximum aggregate amount of $90,000,000.~~ ~~Included in this registration statement was~~ the ~~registration of all~~filing of the ~~common shares issued, or to be issued, to Palm Global Small Cap Master Fund LP upon conversion of their Series A 5% Convertible Preferred Stock into common shares.~~ ~~This S-3 registration statement became effective September 30, 2020.~~Form S-3.

~~Financial~~The Company operates as 1 segment. Geographic information ~~about foreign and domestic operations and export~~regarding net sales is approximately as follows:

As of ~~November 30, 2020~~August 31, 2021 and May 31, ~~2020,~~2021, approximately ~~$555,000~~$665,000 and ~~$613,000~~$803,000 of Biomerica’s gross inventory and approximately ~~$28,000~~$24,000 and ~~$31,000,~~$25,000, of Biomerica’s property and equipment, net of accumulated depreciation and amortization, was located in Mexicali, Mexico, respectively.

On June 18, 2009, the Company entered into an agreement to lease a building in Irvine, California. The lease commenced September 1, 2009 and ended August 31, 2016. In On November 30, 2015, the Company ~~signed~~entered into the First Amendment to Lease wherein it exercised its option to extend ~~the~~its lease until August 31, 2021. ~~As of~~The initial base rent for the lease extension was $21,000 per month, increasing to $23,637 through August 31, 2021. On April 9, 2021, the Company exercised its second option to extend its lease for an additional five years through August 2026. The Company was also granted an additional five years lease extension option through August 2031. The rent is currently $23,637 per month and will increase on September 1, ~~2020,~~2021 to $25,970 per month and be increased 3% each year thereafter. The security deposit of $22,080 remains the ~~rent was $23,637 per month. The Company has an option to renew this lease for another 5 years and intends to pursue this renewal.~~same.

In November 2016, the Company’s ~~Mexican~~ subsidiary, Biomerica de Mexico, entered into a ~~10-year~~ten-year lease for approximately ~~8,100~~8,104 square feet at a monthly rent of ~~manufacturing space. The rent is currently $3,383 per month.~~$2,926. The Company has one 10-year option to renew at the end of the initial lease period. The yearly rate is subject to an annual adjustment for inflation according to the United States Bureau of Labor Statistics Consumer Price Index for All Urban Consumers. The monthly rate is currently $3,262. Biomerica, Inc. is not a guarantor of such lease. Biomerica de Mexico also leases a smaller unit on a month-to-month basis for use in one manufacturing process.

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

~~Components of lease~~Rent expense ~~include fixed lease expense of $171,769~~in the U.S. for the ~~six~~three months ended ~~November 30, 2020.~~ August 31, 2021 and 2020 was $78,166 and $75,764, respectively. Rent expense for the Mexico facility for the three months ended August 31, 2021 and 2020 was $10,421 and $10,870, respectively.

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

Supplemental cash flow information related to leases for the three months ended August 31, 2021:

The maturity of lease liabilities as of ~~November 30, 2020~~August 31, 2021 are as follows:

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

~~On May 25, 2016, the~~The Company ~~entered into an Exclusive Marketing License Agreement (“Telcon Agreement”) with Celtis Pharm Co., Ltd., who subsequently changed their name~~is, from time to ~~Telcon Pharmaceutical Co., LTD (“Telcon”), a medical company~~time, involved in legal proceedings, claims and litigation arising in the ~~South Korea. The Telcon Agreement grants to Telcon an exclusive license to market and sell Biomerica’s new InFoods® IBS products (“IBS Products”) in South Korea. The term~~ordinary course of business. While the agreement is for a period of five years following Korean FDA clearance of the product and provides an additional two years for Telcon to attain such Korean FDA clearance. The sequential two-year and five-year terms do not begin until after Biomerica first receives final clearance for sale of the IBS Products in the United States from the US FDA. Telcon, at its sole cost and expense, must use its commercially reasonably good faith efforts to obtain Korean FDA for the IBS Product to be sold in South Korea. The agreementamounts claimed may be ~~cancelled if Biomerica has~~substantial, the ultimate liability cannot presently be determined because of considerable uncertainties that exist. Therefore, it is possible the outcome of such legal proceedings, claims and litigation could have a material effect on quarterly or annual operating results or cash flows when resolved in a future period. However, based on facts currently available, management believes such matters will not ~~obtained final US FDA clearance for sale~~have a material adverse effect on the Company's consolidated financial position, results of ~~the IBS Products on~~operations or ~~before December~~cash flows. There were no legal proceedings pending as of August 31, ~~2019. Biomerica is also obligated to maintain a full quality assurance system for the IBS Products following the harmonized standards according to Annex IV of Directive 98/79/EC.~~2021.

The terms of the Telcon Agreement provide up to $1.25 million in exclusivity fees based on certain milestones including Biomerica’s starting clinical trials in the United States, receipt of US FDA clearance and Telcon’s first sales of IBS Products in Korea. If Biomerica commences FDA Trials and Telcon pays the initial $250,000 milestone-based exclusivity fees, and the Agreement is subsequently terminated by either party for lack of performance, then Biomerica shall issue to Telcon 83,333 shares of Biomerica common in consideration for the $250,000 of paid exclusivity fee. No exclusivity fees have yet been paid.

Additionally, the Telcon Agreement provides for a royalty of 15% paid to Biomerica on all sales in Korea of the IBS Product, and further sets the pricing of IBS Products sold to Telcon. In order to retain the exclusivity within South Korean, Telcon must meet certain annual minimum royalty payments to Biomerica following Telcon’s receipt of Korean FDA approval or clearance for the IBS Product to be sold in Korea, which in no case will be later than May 31, 2019.In September 2017, the Telcon Agreement was amended to extend the date by which Telcon must attain Korean FDA approval until April 30, 2020. During the quarter ended August 31, 2020, a second amendment was signed extending the required FDA approval date to December 31, 2021.

On June 25, 2020, the Company entered into a Clinical Trial Agreement with the University of Texas Health Science Center for the purpose of conducting a clinical trial of the Biomerica InFoods product. The term of the agreement shall be until completion of the work outlined and the charges will be invoiced monthly for work performed in the previous month. The maximum budgeted costs will be $139,850.

~~On September 15, 2020, the Company entered into an agreement with Public Health England research institution for the purpose of evaluating the Company’s COVID-19 Rapid Test.~~

~~As disclosed in the Form 10K filed with the SEC on August 31, 2020, on~~ July 2, 2020, ~~the Company~~we received a notice of investigation and subpoena to produce information and documents from the Division of Enforcement of the SEC. The subpoena ~~seeks~~requested information and documents related to events and circumstances leading up to ~~the~~our March 17, 2020 announcement that ~~the Company~~we had commenced shipping samples of ~~the Company’s~~our COVID-19 IgG/IgM Rapid Test to countries outside of the United States, and had initiated the application process with the United States Food and Drug Administration under the COVID-19 Emergency Use Authorization for approval to market and sell the test in the United States. The subpoena also ~~seeks~~requested information and documents about the identity of any persons who were aware of the substance of the March 17, 2020 announcement prior to that date. In addition, on December 15, 2020, the SEC sent a second subpoena related to this investigation to Zack Irani, the Company’s CEO, requesting documents held by Mr. Irani concerning his past purchases of Company stock, ~~any~~his past communications with certain persons and entities, and other personal and Company documents. The Company and Mr. Irani ~~are continuing to cooperate~~have cooperated fully with the SEC’s investigation and ~~provide~~provided information as requested. At this time, the Company is unable to predict the duration, scope or outcome of these investigations.

On June 21, 2021, the Company signed an exclusive distribution and marketing agreement in Canada for its Helicobacter Pylori (H. Pylori) test.

Subsequent to the issuance of our financial statements for the quarter ended August 31, 2020, the Company ~~filed the necessary paperwork with Medical Device Safety Service who then notified the competent authority in Germany to attain CE Mark~~determined that errors were included in the EUpreviously issued financial statements as described below. As a result, we restated our financial statements for the quarter ended August 31, 2020.

The Company discovered the errors listed below. The restatement corrects these errors.

Our non-cash stock based compensation expenses calculation applied forfeiture adjustments to both vested and unvested outstanding options, including those for which the employee had provided the requisite service, which resulted in an understatement of stock compensation expense. Additionally, our calculation expensed the option at vesting dates versus pro rata over the period the requisite service was provided.

Stock-based compensation expense shown on the statement of operations is a non-cash expense, and impacts accumulated deficit and additional paid-in capital on the balance sheet. However, this does not impact the Company’s ~~COVID-19 antigen test that uses a nasal swab to collect a person’s nasal fluid sample to detect if~~cash, revenues or other aspects of ongoing operations.

The restatement for the ~~person has COVID-19 antigen~~quarter ended August 31, 2020 resulted in their system, which can indicate that the person has recently been infected with the COVID-19 virus and may still be infectious to others. This nasal swab antigen test received CE clearance on January 8, 2021, and is now available for saleno changes in the ~~EU.~~ provision for income taxes.

The ~~Company has received an initial order~~effect of the restatement on the consolidated statement of operations for ~~over $1 million~~the three months ended August 31, 2020 is as follows:

	As Previously Reported		Adjustments		As Restated
Cost of sales	$	960,930	$	64,787	$	1,025,717
Gross Profit		182,876		(64,787)		118,089

Operating Expenses:
Selling, general and administrative		1,164,564		141,380		1,305,944
Research and development		674,693		36,812		711,505
Total operating expense		1,839,257		178,192		2,017,449

Loss from operations		(1,656,381)		(242,979)		(1,899,360)

Loss before income taxes		(1,648,290)		(242,979)		(1,891,269)

Net loss	$	(1,649,415)	$	(242,979)	$	(1,892,394)

Basic net loss per common share	$	(0.14)	$	(0.02)	$	(0.16)

Diluted net loss per common share	$	(0.14)	$	(0.02)	$	(0.16)

Comprehensive loss	$	(1,651,136)	$	(242,979)	$	(1,894,115)

The effect of ~~these tests and~~the restatement on the consolidated balance sheet at May 31, 2021 is inas follows:

The effect of the ~~process~~restatement on the consolidated statement of ~~filling this order.~~cash flows for the period ended August 31, 2020 is as follows:

EXCEPT FOR HISTORICAL INFORMATION CONTAINED HEREIN, THE STATEMENTS IN THIS QUARTERLY REPORT ON FORM 10-Q MAY BE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934 AND SECTION 27A OF THE SECURITIES ACT OF 1933. FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES WHICH MAY CAUSE BIOMERICA'S RESULTS IN FUTURE PERIODS TO DIFFER MATERIALLY FROM FORECASTED RESULTS.

~~Like other businesses, THE COMPANY IS susceptible to macroeconomic downturns~~You should read the following discussion and analysis in the United States or abroad, as were experienced recently AND AS CURRENTLY CONTINUE, that may affect the general economic climate and OUR performance or OUR customers. Aside from general macroeconomic downturns, the additional material factors, RISKS AND UNCERTAINTIES that could affect futureconjunction with our consolidated financial ~~results include, but are not limited to:~~ THE CONTINUED DEMAND FOR THE COMPANY'S PRODUCTS; AVAILABILITY OF RAW MATERIALS; RESULTS OF RESEARCH AND DEVELOPMENT ACTIVITIES; THE ABILITY TO RETAIN KEY EMPLOYEES AND CUSTOMERS; THE ABILITY TO COLLECT RECEIVABLES FROM CUSTOMERS; THE CONTINUED ABILITY OF THE COMPANY TO ATTAIN AND MAINTAIN THE LICENSES AND APPROVALS REQUIRED, INCLUDING EUA CLEARANCE FROM THE FDA FOR THE COMPANY’S COVID-10 PRODUCTS;~~Regional or global pandemics, GOVERNMENT RESPONSES TO SUCH PANDEMICS,~~statements and the ~~economic~~accompanying notes thereto included in Part II, Item 8 of this Report. This discussion and ~~social disruptions~~analysis contains forward-looking statements that are based on our management’s current beliefs and assumptions, which statements are subject to substantial risks and uncertainties. Our actual results may differ materially from those expressed or implied by these ~~cause ESPECIALLY IN THE HEALTHCARE INDUSTRY IN WHICH WE OPERATE; SHUTDOWNS OR DISRUPTIONS IN OUR MANUFACTURING DUE TO WIDESPRED ILLNESS, OR OTHER ISSUES; terrorist attacks and the impact~~forward-looking statements as a result of such events; existing and potential increase in trade tariffs, especially with China; diminished or no access to raw materials that directly enter into our manufacturing process; shipping labor disruption or other major degradation of the ability to ship out products to end users; inability to successfully control our margins which are affected by many factors, including ~~RAW MATERIALS, competition and product mix; protracted shutdown~~those discussed in “Risk Factors” included in Part I, Item 1A of the U.S. border due to an escalation of terrorist or counter terrorist activity; any changes in our business relationships with international distributors or the economic climate they operate in; any event that has a material adverse impact on our foreign manufacturing operations may adversely affect our operations as a whole; failure to manage the future expansion of our business could have a material adverse effect on our revenues and profitability; possible costs in complying with government regulations and the delays in receiving required regulatory approvals or the enactment of new adverse regulations or regulatory requirements; numerous competitors, some of which have substantially greater financial and other resources than we do; potential claims and litigation brought by patients or medical professionals alleging harm caused by the use of or exposure to our products; recalls of products; inability to obtain FDA clearance on products or excessive costs incurred in order to obtain such approvals; regulatory actions taken by government agencies such as the FDA, SEC, USDA and other regulators; quarterly variations in operating results caused by a number of factors, including business and industry conditions; and other factors beyond our control. All these factors make it difficult to predict operating results for any particular period.

EXCEPT AS MAY BE REQUIRED BY APPLICABLE LAW, WE MAY NOT UPDATE OR REVISE OUR FORWARD-LOOKING STATEMENTS AND THE LACK OF SUCH UPDATE DOES NOT IMPLY THAT ACTUAL EVENTS ARE AS ORIGINALLY EXPRESSED BY SUCH FORWARD-LOOKING STATEMENTS. YOU SHOULD READ THE DISCLOSURES IN THIS REPORT AND OTHER REPORTS, WHICH WE FILE WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE RISK FACTORS CONTAINED THEREIN.this Report.

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

Our primary focus is the research and development of ~~disruptive,~~revolutionary, patented, diagnostic-guided therapy, ~~(“DGT”)~~or 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. If these DGT products prove effective in their clinical trials, and are ultimately cleared for sale by the U.S. ~~FDA, management believes~~Food and Drug Administration, we believe the ~~revenue~~revenues potential to the Company is significant.

We are currently finalizing an endpoint determination clinical trial on our InFoods® IBS product. This trial is and has been conducted at Mayo Clinics in Florida and Arizona, Beth Israel Deaconess Medical Center Inc., a Harvard Medical School Teaching Hospital, University of Texas Health Science Center at Houston, Houston Methodist, the University of Michigan and other institutions. This trial monitors IBS patients over an 8-week period to determine the efficacy of our InFoods® IBS product to improve the patients’ IBS symptoms. We expect our final enrolled patients to complete the trial, and for top-line trial results to be reported at or around the end of December 2021. During the next six months, we also expect to be entertaining partnership/licensing discussions with pharmaceutical and technology companies that could help us commercialize the product, including obtaining final FDA clearance.

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

Due to the global 2019 SARS-CoV-2 novel coronavirus ~~(“COVID-19”)~~ pandemic, in March 2020 we began redirecting and focusing ~~a majority~~much of our resources to develop, test, validate, seek regulatory approval for ~~and sell~~COVID-19 tests. During fiscal 2021, we sold 2 primary types of COVID-19 tests: 1) antibody diagnostic ~~products~~tests that ~~indicate if a person has been infected by COVID-19. These diagnostic tests~~ use a patient’s blood sample to detect if the patient has certain antibodies to COVID-19 that were created as part of their body’s immune response to a COVID-19 infection, even if the infection was ~~asymptomatic. The Company~~asymptomatic, and 2) antigen tests that use a patient’s nasal fluid sample to detect if a patient is ~~marketing and selling outside of~~currently infected with the ~~U.S. a disposable rapid finger-prick blood test, which detects COVID-19 IgG/IgM antibodies within 10 minutes.~~

~~Following~~virus. During the fiscal ~~2020 year-end,~~year, we ~~submitted to the FDA an application under an Emergency Use Authorization (“EUA”) to sell in the U.S.~~ ~~a lab-scale, high throughput ELISA COVID-19 antibody test kit that would be~~ sold ~~to labs and hospitals to perform COVID-19 antibody testing. The Company also anticipates selling this test kit~~these products outside of the U.S. under a CE Mark (European Conformity). ~~This ELISA lab test can be run using blood drawn by a medical professional, or can be run using a finger prick blood sample that can be collected by a patient~~Because individual orders for these tests have been large in ~~their own home, using~~size, this has created volatility and material fluctuations in our proprietary “at-home” blood collection kit, that the patient sends to a lab for processing on our ELISA test. Our EUA application/submission for the ELISA COVID-19 antibody test includes the at-home blood collection kit. Initial sales for the ELISA test kitmonthly and the at-home blood collection kits are expected following EUA clearance from the FDA for the products to be sold in the US. The FDA has now assigned an examiner to review this submission and the Company is actively working with the FDA to attain EUA clearance. The Company manufactures this COVID-19 ELISA test on its automated equipment at the Company’s California facility that is also used to produce serology antibody tests for other diseases. Since we did not receive FDA clearance for this product during our second quarter of fiscal year 2021, we did not record anyquarterly revenues. Although sales in ~~the U.S.~~these products have slowed, we continue to receive and fill orders for our COVID-19 ~~ELISA~~test products. ~~Further,~~During our fiscal first quarter of 2022, we recorded approximately $226,000 in sales of our disposable rapid finger prick blood test, which is only authorized for sale outside of the U.S., were slower in the second quarter as we are told by customers that most government health agencies are focused on viral testing (determining who is currently infected) while the infection rates in the territories we serve showed lower overall cases. However, the Company believes even with vaccines beginning to become available in the market, demand for serology (antibody) tests, like those we produce, could increase. In addition, the infection rates in the territories we serve have increased, which we believe will result in a higher demand for both antibody and viral testing, as long as pandemic continues. Vaccines are designed to create antibodies in individuals that will enable them to avoid serious illness when exposed to the COVID-19 virus. Therefore, following vaccination, the Company believes many patients will want to know if the vaccination worked and they have produced antibodies to the COVID-19 virus. Further, at various points following vaccination (e.g., 3 months, 6 months, etc.), we anticipate people will want to receive an antibody test to determine if the level of antibodies produced from the vaccine are still adequate to fight off a serious infection. Therefore, we believe demand for COVID-19 antibody testing will begin to strengthen near term, and could remain strong into the foreseeable future, even after demand for actual virus testing begins to fall.antigen test.

Aside from the ~~current focus on~~ COVID-19 products ~~in research, development and clinical trials,~~we offer, the other products we ~~continue to~~ sell are primarily focused on gastrointestinal diseases, food intolerances, ~~diabetes~~cancer screening and awareness and certain esoteric tests. These diagnostic test products utilize immunoassay technology. ~~Our~~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 U.S. by the FDA.

~~Finally,~~ While sales continue to occur in our COVID-19 products, the ~~Company continues to see progress in completing the testing required to attain FDA clearance for~~majority of our ~~patented~~ research and development efforts are focused on development and commercialization of non-COVID related products such as our H. Pylori product, and our InFoods® IBS ~~DGT product that is designed to diagnose and treat sufferers of IBS. Mayo Clinic,~~ Beth Israel Deaconess Medical Center Inc., a Harvard Medical School teaching hospital, University of Texas Health Science Center at Houston, Houston Methodist and the University of Michigan are participating in our clinical trials for this product.

InFoods® IBS is a unique, patented product that can allow physicians to identify specific foods (e.g., pork, milk, onions, sugar, chickpeas, etc.) for each IBS patient, that when removed from that patient’s diet, may alleviate or improve their IBS symptoms and suffering.

Further, the United States Patent and Trademark Office (“USPTO”) has issued the Company two patents with broad claims that protect the InFoods® IBS product. Patents have also been issued in the countries of Japan, Korea and recently Singapore with many other patents still pending globally. Additional patents have also been filed for other diseases that utilize the InFoods® DGT technology platform which include: functional dyspepsia, Crohn’s Disease, ulcerative colitis, gastroesophageal reflux disease (“GERD”), migraine headaches, and osteoarthritis.

~~Consolidated net sales~~As disclosed in Note 8 to the unaudited condensed consolidated financial statements in Item 1, during the process of preparing our financial statements for ~~Biomerica were $1,372,526~~the quarter ended August 31, 2021, we determined that our calculation of non-cash stock-based compensation expense related to issued stock options in previously issued financial statements was incorrect. Our calculation applied forfeiture adjustments to both vested and unvested outstanding options, including those for which the employee had provided the requisite service, which resulted in an understatement of stock compensation expense. Additionally, our calculation expensed the option at vesting dates versus pro rata over the period the requisite service was provided. These errors resulted in an understatement of stock compensation expense during the three months ended August 31, 2020, and periods prior to May 31, 2020, resulting in a cumulative adjustment to equity accounts. As a result, our previously issued financial statements for the three months ended ~~November 30,~~August 31, 2020 ~~as compared to $1,596,408 for the same period in the previous year. This represents a decrease~~have been restated.

Consolidated net sales ~~for Biomerica~~ were ~~$2,516,332 for the six months ended November 30, 2020 as compared to $2,790,823 for the same period in the previous year. This represents a decrease of $274,491, or 10%. The decrease~~$1,261,787 for the three months ended ~~November 30, 2020~~August 31, 2021, as compared to the same period in the previous year was primarily due to softness in demand for our non-COVID products in certain markets due to the pandemic. However, the Company believes demand to be returning for certain regions as orders for non-COVID products received from Asian customers during the first six weeks of fiscal third quarter 2021 were over $700,000. Nevertheless, the Company still believes that total sales of non-COVID-19 products could continue to be negatively impacted by the world-wide pandemic. Because the Company sells both COVID-19 and Non-COVID-19 products, the impact COVID-19 will have on future revenues is difficult to predict.

~~Consolidated cost of sales for Biomerica were $1,011,030~~$1,143,806 for the three months ended November 30, 2020 as compared to $1,127,536 for the same period in the previous year. This represents a decrease of $116,506, or 10%. Consolidated cost of sales for Biomerica were $1,971,960 for the six months ended November 30, 2020 as compared to $1,954,647 for the same period in the previous year.August 31, 2020. This represents an increase of ~~$17,313,~~$117,981 or 1%10%. The ~~percentage~~increase for the three months ended August 31, 2021, as compared to the three months ended August 31, 2020, was primarily due to the sale of our food intolerance products to a distributor in Asia.

Consolidated cost of sales ~~relative to~~was $1,350,757, or 107% of net sales, for the three months ended ~~November 30, 2020 increased from 71%~~August 31, 2021, as compared to ~~74%~~$1,025,717, or 90% of net sales, for the three months ended August 31, 2020. This represents an increase of $325,040 or 32%. ~~The percentage of~~Our cost of sales ~~relative to sales~~ for the ~~six~~three months ended ~~November 30, 2020 increased from 70%~~August 31, 2021, were impacted by an adjustment to 78%. The Company’s standard margin on products sold was similar to previous periods. However, during the three and six months ended November 30, 2020 the manufacturing facilities were not running at 100% capacity due to the negative impactmarket or net realizable value for COVID-19 ~~had on sales~~antigen tests of ~~the Company’s non-COVID-19 products. This generated unfavorable manufacturing variances within our reported cost of sales.~~ ~~Because the Company sells both COVID-19 and Non-COVID-19 products, the impact COVID-19 will have on future cost of sales is difficult to determine.~~approximately $179,000.

Consolidated selling, general and administrative expenses ~~for Biomerica~~ were ~~$1,254,847~~$1,011,535 for the three months ended ~~November 30, 2020~~August 31, 2021, as compared to ~~$553,761~~$1,305,944 for the ~~same period in the previous year.~~three months ended August 31, 2020. This represents ~~an increase~~a decrease of ~~$701,086,~~$294,409 or ~~127%~~23%. ~~Consolidated~~ selling, general and administrative expense for Biomerica were $2,419,411 for the six months ended November 30, 2020 as compared to $1,060,958 for the same period in the previous year. This represents an increase of $1,358,453, or 128%. The ~~increase~~decrease in the three ~~and six month periods~~months ended August 31, 2021, was primarily due to a reduction of legal expenses related to responding to the SEC inquiry discussed in Part II, as well as an increase in the allowance for doubtful accounts, additional consulting fees, and increased personnel costs as the Company is expanding and strengthening its management team in sales, marketing, and administration.expenses.

Consolidated research and development expenses ~~for Biomerica~~ were ~~$586,403~~$439,864 for the three months ended ~~November 30, 2020~~August 31, 2021, as compared to ~~$404,854~~$711,505 for the ~~same period in the previous year.~~three months ended August 31, 2020. This represents ~~an increase~~a decrease of ~~$181,549,~~$271,641, or ~~45%~~38%. Consolidated research and development expense for Biomerica were $1,261,096 for the six months ended November 30, 2020 as compared to $775,320 for the same period in the previous year. This represents an increase of $485,776, or 63%. The ~~increase~~decrease in the three ~~and six month periods~~months ended August 31, 2021, was primarily a result of ~~increases~~decreases in costs related to the research, development, and validation of COVID-19 ~~tests, and the initiation costs at Mayo Clinic, University of Houston Texas, and Methodist Hospital in Texas for clinical trials for our~~ ~~InFoods® IBS~~ ~~product.~~tests.

Interest and dividend income were ~~$7,983~~$6,805 for the three months ended ~~November 30, 2020~~August 31, 2021, as compared to ~~$4,488~~$8,091 for the ~~same period in the previous year.~~three months ended August 31, 2020. This represents ~~an increase~~a decrease of ~~$3,495,~~$1,286, or ~~78%~~16%. ~~Interest and dividend income were $16,074 for the six months ended November 30, 2020 as compared to $8,551 for the same period in the previous year. This represents an increase of $7,523, or 88%.~~

As of ~~November 30, 2020~~August 31, 2021 and May 31, ~~2020, the Company~~2021, we had cash and cash equivalents in the amount of ~~$5,683,787~~approximately $4,997,000 and ~~$8,641,027~~$4,199,000, respectively, and working capital of ~~$10,072,883~~approximately $7,464,000 and ~~$13,289,670,~~$7,931,000, respectively. As a result of cash and cash equivalents on hand at August 31, 2021, and our ability to raise additional funds through our ATM Agreement, management believes we have sufficient funds to operate through the next twelve months or more.

Cash provided by operating activities of $75,836 during the ~~six~~three months ended ~~November 30, 2020, the Company’s operations used cash~~August 31, 2021, reflects a net loss of ~~$2,880,218 compared to cash used in operations~~$1,542,581 and non-cash adjustments of ~~$365,994 in the same period of the prior fiscal year. Cash used by operations increased year to date in fiscal 2021 compared to year-to-date fiscal 2020~~$502,094 primarily ~~due to operating losses of $3,134,579, growth in~~associated with depreciation, amortization, stock-based compensation, and inventory ~~of $1,359,320 driven by~~reserves. In addition, we realized an increase in ~~COVID-19~~net working capital of $1,116,322 primarily driven by a decrease in accounts receivable and inventory. For the three months ended August 31, 2020, cash used by operating activities of $1,597,146 reflects a net loss of $1,892,394 and non-cash adjustments of $542,994 primarily associated with depreciation, amortization, stock-based compensation, and inventory ~~of approximately $1,519,000~~reserves. This was partially offset by a ~~reduction~~decline in ~~prepaids~~net working capital of ~~$1,055,946~~$247,746 driven by increases in inventory, which was ~~primarily driven~~partially offset by a ~~repayment of an advance the Company had with one of our suppliers.~~ decrease in prepaid expenses.

Cash used in investing activities ~~year to date in fiscal~~for the three months ended August 31, 2021, was ~~$61,566~~$5,141 for purchases of ~~fixed assets~~property and ~~$61,536~~equipment and $72,375 for increased intangibles. Cash used in investing activities for the three months ended August 31, 2020, was $39,588 for purchases of property and equipment and $53,158 for increased intangibles.

Cash provided by financing activities ~~in fiscal year~~for the three months ended August 31, 2021, ~~to date~~ was ~~$49,330~~$804,605 which was a result of stock option ~~exercises.~~

~~We have been working on new products that address large markets for the gastroenterology sector. Patent applications for these new products have been filed~~exercises of $3,895 and six patents have been issued (two in the USA, two in Korea, and one each in Japan, and Singapore). The Company has been working on obtaining additional patents and U.S. regulatory approvals for these products. Due to the significant revenue opportunities these products represent, the Company has been spending significant funds on research, development, patents and related costs, and expects this will continue in order to strengthen and expand our patent protection, and attain regulatory approvals of these products.

On July 21, 2020, the Company filed with the SEC a new Form S-3 “Shelf” registration statement to replace the registration statement that expired on July 20, 2020. The new registration statement registers common shares to be issued in a maximum aggregate amount of $90,000,000. Included in this registration statement was the registration of all of the common shares issued, or to be issued, to Palm Global Small Cap Master Fund LP upon conversion of their convertible Preferred stock into common shares. ~~This S-3 registration statement became effective September 30, 2020.~~ ~~The Company intended to use the~~ net proceeds from ~~this offering~~the sale of common stock of $800,710. Cash provided by financing activities for ~~general corporate purposes, including, without limitation, sales and marketing activities, clinical studies and product development, making acquisitions~~the three months ended August 31, 2020, was $14,900 which was a result of ~~assets, businesses, companies or securities, capital expenditures, and for working capital needs.~~stock option exercises of $14,900.

There were no off-balance sheet arrangements as of ~~November 30, 2020.~~August 31, 2021.

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

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

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Our management, ~~evaluated~~including our principal executive officer and principal financial officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures as(as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities and Exchange Act of 1934 as of August 31, 2021. Our evaluation tested controls and other procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities and Exchange Act of 1934, as amended, or the Exchange Act, as of the end of the period covered by this report. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The disclosure controls and procedures have been designed to provide reasonable assurance of achieving their objectives and the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective at the "reasonable assurance" level. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that we file and submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the ~~Commission's~~SEC’s rules and ~~forms;~~forms. Disclosure controls and ~~(2)~~procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the ~~Company's~~issuer’s management, including its ~~Chief Executive Officer~~principal executive and ~~Chief Financial Officer,~~principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

~~There have been no changes~~ Based on our evaluation, as of August 31, 2021, our management, including our principal executive officer and principal financial officer, concluded that our disclosure controls and procedures were not effective due to a material weakness in our internal control over financial reporting ~~identified~~related to the financial reporting described below in ~~connection with~~ the ~~evaluation that occurred during our last fiscal~~area of accounting for non-cash stock-based compensation.

Other than as described below, there were no changes to internal controls in the first quarter that ~~has~~have materially affected, or ~~that is~~are reasonably likely to materially affect, our internal control over financial reporting.

During the second quarter ending November 30, 2021 and prior to filing this Quarterly Report, we completed the following steps to address the non-cash stock-based compensation deficiency identified in our Form 10-K/A filed on October 14, 2021:

15• implemented a leading industry standard equity and disclosure management software system to calculate non-cash stock-based compensation expense;

• increased the level of knowledge among our executives and accounting staff in the area of stock-based compensation; and

• independently tested the calculations produced by our new equity and disclosure management software system

The Company is, from time to time, involved in legal proceedings, claims and litigation arising in the ordinary course of business. While the amounts claimed may be substantial, the ultimate liability cannot presently be determined because of considerable uncertainties that exist. Therefore, it is possible the outcome of such legal proceedings, claims and litigation could have a material effect on quarterly or annual operating results or cash flows when resolved in a future period. 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 ~~November 30, 2020.~~August 31, 2021.

~~As disclosed in the Form 10K filed with the SEC on August 31, 2020, on~~On July 2, 2020, ~~the Company~~we received a notice of investigation and subpoena to produce information and documents from the Division of Enforcement of the SEC. The subpoena ~~seeks~~requested information and documents related to events and circumstances leading up to ~~the~~our March 17, 2020 announcement that ~~the Company~~we had commenced shipping samples of ~~the Company’s~~our COVID-19 IgG/IgM Rapid Test to countries outside of the United States, and had initiated the application process with the United States Food and Drug Administration under the COVID-19 Emergency Use Authorization for approval to market and sell the test in the United States. The subpoena also ~~seeks~~requested information and documents about the identity of any persons who were aware of the substance of the March 17, 2020 announcement prior to that date. In addition, on December 15, 2020, the SEC sent a second subpoena related to this investigation to Zack Irani, the Company’s CEO, requesting documents held by Mr. Irani concerning his past purchases of Company stock, ~~any~~his past communications with certain persons and entities, and other personal and Company documents. The Company and Mr. Irani ~~are continuing to cooperate~~have cooperated fully with the SEC’s investigation and ~~provide~~provided information as requested. At this time, the Company is unable to predict the duration, scope or outcome of these investigations.

~~You~~An investment in our common stock involves risks. Before making an investment decision, you should ~~read~~carefully consider all the ~~following factors~~information within this Quarterly Report, including the information contained in ~~conjunction with~~Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," as well as in our condensed consolidated financial statements and the ~~factors discussed elsewhere~~related notes contained in Part I, Item 1 within this Quarterly Report. In addition, you should carefully consider the risks and uncertainties described in Part I, Item 1A, “Risk Factors,” of our 2021 Annual Report on Form 10-K, as well as in our other public filings with the ~~Securities and Exchange Commission and in materials incorporated by reference in these filings such as~~SEC. If any of the ~~Form S-3 and Prospectus Supplement filed on July 21, 2020. The following is intended to highlight certain factors that may affect the financial condition and~~identified risks are realized, our business, results of operations, ~~of Biomerica, Inc.~~financial condition, liquidity, and ~~are not meant to~~prospects could be ~~an exhaustive discussion of risks~~materially and adversely affected. In that ~~apply to companies such as Biomerica, Inc. Like other businesses, Biomerica, Inc. is susceptible to macroeconomic downturns in~~case, the United States or abroad, as were experienced in recent history that may affect the general economic climate and performance of Biomerica, Inc. or its customers. Our results may fluctuate adversely as a result of many factors that are outside our control, which may negatively impact our stock price. Salestrading price of our common stock ~~in the public market~~may decline, and you could ~~lower the market price for our common stock and the price~~lose all or part of ~~our stock could fluctuate unpredictably in response to various factors. The Company does not anticipate paying dividends in the foreseeable future, which could affect the market price of the stock.~~

~~Our business could be adversely affected by the effects of widespread public health epidemics~~.

We are susceptible to a widespread outbreak of an illness or other health issue, such as the recent COVID-19 Coronavirus outbreak first reported in Wuhan, Hubei Province, China in December 2019 and subsequently spreading throughout the world resulting in tens of millions of confirmed cases worldwide and hundreds of thousands of deaths. The outbreak of the COVID-19 virus has caused virtually all governments, including the U.S., to implement quarantines, various restrictions on travel causing airlines to suspend international and certain domestic flights, shelter in place orders and other restrictions. Governments have also implemented work restrictions that prohibit many employees from going to work, and for businesses that are allowed to remain open, many employees are electing to remain at home to avoid spread of the disease.your investment. In addition, ~~infections among employees at Company’s like ours is causing significant work disruptions. As a result of this~~ ~~COVID-19~~ ~~virus outbreak and potential future pandemic outbreaks, the Company faces significant~~other risks including, but not limited to: a) supply chain disruptions making it difficult for the Company to contract and receive materials needed for production of its products, and needed to ship finished products to our end customers, b) loss of contracts and customers from the financial strains or other disruptions they are experiencing as a result of the pandemic, c) financial risks pertaining to receivables due from customers that may fall into insolvency or otherwise be unable to pay their bills, d) government responses including 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 foreseeable or unforeseen actions taken by government agencies, e) absenteeism or loss of employees at the Company, or at our partner’s companies due to COVID-19 infection or infection of employee family members or do to other health reasons, f) government restrictions, that are needed to develop, validate, manufacture and perform other necessary functions for our operations, g) equipment failures, loss of utilities and other disruptions that could impact our operations or render them inoperable, h) litigation or government actions against the Company pertaining to existing products or new products sold by the Company that are designed to detect if a person has been infected by the COVID-19 virus or designed to help limit the spread of the pandemic outbreak, i) a local or global recession or depression that could harm the international banking system, limit demand for all products including those made by the Company, j) 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 many other seen and unforeseen events and circumstances, all of which ~~could negatively impact the Company.~~

~~If our COVID-19 tests~~we are ~~unable to gain acceptance in the market, prove to be ineffective~~currently unaware, or ~~less effective than expected, and/or~~which we do not ~~receive regulatory approvals for our COVID-19 tests to be sold, our results of operation could be materially harmed.~~

Although we believe that our COVID-19 tests represent promising tests to detect prior COVID-19 virus exposure, the tests may never gain significant acceptance in the marketplace and therefore may never generate substantial revenue or profits for us. We will need to establish a market for our COVID-19 antibody and antigen tests. Gaining acceptance in medical communities requires increasing awareness of our COVID-19 tests and their benefits. Also, there are a large number of companies around the world now making and selling COVID-19 tests that compete with our COVID-19 tests. Many of these competitor products are made in China and other parts of Asia where manufacturing costs are low. As such, we are seeing supply and price competition which could make it difficult for the Company to compete. Other risks pertaining to these products include:

• ~~our ability to demonstrate the efficacy, speed and cost competitiveness of our COVID-19 tests;~~

• ~~whether healthcare providers and governmental agencies believe our COVID-19 tests are sufficiently safe, effective, and accurate;~~

• ~~our ability to transfer, further develop, integrate and use third-party licensed technology;~~

• ~~our ability to source required raw materials in a cost effective and timely manner;~~

• ~~manufacturing capabilities of our materials partners and their ability to meet our quality and delivery requirements;~~

• ~~receipt of regulatory approvals necessary prior to commercialization of our products;~~

• ~~the FDA or other regulatory agencies retracting their prior approval for our products to be sold in their market or changing regulations~~
~~for approval; and~~

• ~~whether the medical community accepts our COVID-19 tests~~currently view as ~~a supplement to, alternative to, or complementary to, current PCR or other~~
~~tests for COVID-19 infection.~~

In addition, each country in which we wish to sell these tests has its own regulatory approval requirements. We will need to comply with the regulatory requirements of each country before we are permitted to sell in that country. There can be no assurance that governmental agencies, including the FDA, will provide clearance of our COVID-19 tests to be sold in their markets. Failure to achieve widespread market acceptance of our COVID-19 tests, or failure to achieve regulatory clearance of our COVID-19 tests, could materially harm our business, financial condition, and results of operations. Our COVID-19 tests are new tests that only generated revenue during the last two months of our prior fiscal year and for the current fiscal year. It is uncertain how long we will be able to generate revenues from these tests, and what level of sales, if any, we will attain in the future.

There is no assurance that we will be able to remain competitive and develop new products and markets for these products. Raising funds to support this development may be difficult and the inability to do so may impact our ability to develop these new products. Acceptance of these new products by health care providers and physicians could have a negative impact on future sales.

Our business is subject to regulation by various governmental agencies. Our results of operations could be negatively impacted by failures or delays in approvals or the loss of previously received approvals or changes to existing laws and regulations. Possible costs or difficulty in complying with government regulations and the delays in receiving required regulatory approvals or the enactment of new adverse regulations or regulatory requirements could affect results adversely.

Interruptions in the supply of raw materials could adversely affect our operations and results. Inability to successfully control our margins is affected by many factors including competition and product mix.

~~The loss of key personnel and the inability to hire key personnel could affect the business. Aside from general macroeconomic downturns, the additional~~ material, factors that could affect future financial results include, but are not limited to: Terrorist attacks and the impact of such events; shipping labor disruption or other major degradation of the ability to ship out products to end users; inability to successfully control our margins which are affected by many factors including competition and product mix; protracted shutdown of the U.S. border due to an escalation of terrorist or counter terrorist activity; additional governmental tariffs or other fees imposed by the U.S. government for the export of goods to China or other countries; tariffs or restrictions implemented by the Chinese government on shipments of raw materials to us from our suppliers in China; any changes in our business relationships with international distributors or the economic climate they operate in; any event that has a material adverse impact on our foreign manufacturing operations may adversely affect our operations as a whole; failure to manage the future expansion of our business could have a material adverse effect on our revenues and profitability; numerous competitors, some of which have substantially greater financial and other resources than we do; potential claims and litigation brought by patients or medical professionals alleging harm caused by the use of or exposure to our products; quarterly variations in operating results caused by a number of factors, including business, and industry conditions; concentrations of sales with certain distributors-the loss of certain of these distributors could lead to significantly reduced sales, which have been increasing. This could adversely affect the results of ~~the Company if the Company were to lose the sales of that distributor~~operations, financial condition, and other factors beyond our control; high balances carried on accounts receivables from concentrated customers could result in write-offs of accounts receivable; and the costs of recalls, should such occasion arise. All these factors make it difficult to predict operating results for any particular period.prospects.

~~ITEM 3.~~ During the three months ended August 31, 2021, there were no material changes to the risks and uncertainties described in Part I, Item 1A, “Risk Factors,” of our 2021 Annual Report on Form 10-K/A.

The Company held its Annual Meeting of Stockholders on December 10, 2020, to consider and vote on the proposals set forth in our proxy statement filed with the Securities and Exchange Commission on September 25, 2020. Please referSee Note 8 to the ~~Form 8-K filed on December 11, 2020~~Financial Statements for ~~a description~~discussion of ~~the results of the meeting.~~our prior period financial restatements.

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

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has fully caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

BIOMERICA, INC.

INDEX

PART I	Financial Information

Item 1.	Financial Statements:

	Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) – Three ~~and Six~~ Months Ended ~~November 30,~~August 31, 2021 and 2020 ~~and 2019~~(restated)	1

	Condensed Consolidated Balance Sheets (unaudited) ~~November 30, 2020~~August 31, 2021 and ~~(audited)~~ May 31, ~~2020~~2021 (restated)	2

	Condensed Consolidated ~~Statement~~Statements of Shareholders’ Equity – (unaudited) ~~Six~~Three Months Ended ~~November 30,~~August 31, 2021 and 2020 (restated)	3

	Condensed Consolidated Statements of Cash Flows (unaudited) - ~~Six~~Three Months Ended ~~November 30,~~August 31, 2021 and 2020 ~~and 2019~~(restated)	4

	Notes to Condensed Consolidated Financial Statements (unaudited)	~~5-11~~5 - 14

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	~~11-15~~14 - 16

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	1516

Item 4.	Controls and Procedures	1516 - 17

PART II	Other Information

Item 1.	Legal Proceedings	1617

Item 1A.	Risk and Uncertainties	~~16-18~~17 - 18

Item 2.5.	~~Unregistered Sales of Equity Securities & Use of Proceeds~~Other Information	18

Item 3.6.	~~Defaults upon Senior Securities~~Exhibits	18

	~~Item 4.~~Signatures	~~Mine Safety Disclosures~~	18

~~Item 5.~~	~~Other Information~~	18

~~Item 6.~~	~~Exhibits~~	18

	~~Signatures~~	19

	November 30, 2020		May 31, 2020		August 31, 2021		May 31, 2021
Raw materials	$	1,748,000	$	1,635,000	$	1,493,000	$	1,583,000
Work in progress		1,516,000		988,000		926,000		1,006,000
Finished products		934,000		228,000		443,000		617,000
Total	$	4,198,000	$	2,851,000	$	2,862,000	$	3,206,000

	Option Shares	Exercise Price Weighted Average
Outstanding May 31, 2021	2,081,366	$	3.59
Granted	24,000		4.25
Exercised	(1,500)		2.68
Cancelled or expired	(22,750)		3.02
Outstanding August 31, 2021	2,081,116	$	3.60

	Option Shares	Exercise Price Weighted Average
Outstanding May 31, 2020	1,789,251	$	2.75
Granted	171,000		7.46
Exercised	(30,000)		1.67
Cancelled or expired	(22,001)		3.43
Outstanding November 30, 2020	1,908,250	$	3.18

	Six Months Ended				Three Months Ended				Three Months Ended
	November 30, 2020		November 30, 2019		November 30, 2020		November 30, 2019		August 31, 2021		August 31, 2020
Clinical lab	$	1,474,512	$	2,034,228	$	892,804	$	1,144,172	$	886,000	$	582,000
Lab Supplies		2,884		-		2,884		-
OTC		457,131		520,109		272,223		320,785
Physician's office		350,604		124,493		153,273		79,226		257,000		197,000
Over-the-counter										79,000		185,000
Contract Manufacturing		231,201		111,993		51,342		52,225		40,000		180,000
Total	$	2,516,332	$	2,790,823	$	1,372,526	$	1,596,408	$	1,262,000	$	1,144,000

Large Accelerated Filer [ ]		Accelerated Filer []
Non-Accelerated Filer [X]		Smaller Reporting Company [X]
		Emerging Growth Company []

	November 30, 2020 (unaudited)		May 31, 2020 (audited)
	November 30, 2020 (unaudited)		May 31, 2020 (audited)

Assets

Current Assets:
Cash and cash equivalents	$	5,683,787	$	8,641,027
Accounts receivable, less allowance for doubtful accounts of $481,142 and $70,981 as of November 30, 2020 and May 31, 2020, respectively		1,611,769		1,765,871
Inventories, net		4,198,213		2,850,836
Prepaid expenses and other		453,137		1,509,083
Total current assets		11,946,906		14,766,817

Property and equipment, net of accumulated depreciation and amortization of $1,920,217 and $1,867,643 as of November 30, 2020 and May 31, 2020, respectively		288,370		279,379

Right of use assets, net of accumulated amortization of $346,514 and $231,489 as of November 30, 2020 and May 31, 2020, respectively		1,596,485		1,711,510

Investments		165,324		165,324

Intangible assets, net of accumulated amortization of $513,367 and $496,124 as of November 30, 2020 and May 31, 2020, respectively		218,331		168,655

Other assets		262,278		168,193
Total Assets	$	14,477,694	$	17,259,878

Liabilities and Shareholders' Equity

Current Liabilities:
Accounts payable and accrued expenses	$	1,258,097	$	986,711
Accrued compensation		392,006		278,627
Lease liability, current portion		223,920		211,809
Total current liabilities		1,874,023		1,477,147
Lease liability, net of current portion		1,454,890		1,569,678
Total Liabilities		3,328,913		3,046,825

Commitments and contingencies (Notes 5 and 6)

Shareholders' Equity:

Preferred stock, Series A 5% convertible, $0.08 par value, 571,429 shares authorized, 321,429 issued and outstanding at November 30, 2020 and May 31, 2020		25,714		25,714
Preferred stock, undesignated, no par value, 4,428,571 shares authorized, none issued and outstanding at November 30, 2020 and May 31, 2020		-		-
Common stock, $0.08 par value, 25,000,000 shares authorized, 11,770,089 and 11,740,089 issued and outstanding at November 30, 2020 and May 31, 2020, respectively		941,605		939,205
Additional paid-in-capital		35,284,864		35,213,707
Accumulated other comprehensive loss		(43,091)		(39,841)
Accumulated deficit		(25,060,311)		(21,925,732)
Total Shareholders' Equity		11,148,781		14,213,053
Total Liabilities and Shareholders' Equity	$	14,477,694	$	17,259,878

The accompanying notes are an integral part of these statements.

Supplemental cash flow information related to leases for
the six months ended November 30, 2020:

Operating cash flows from operating leases	$	159,212		$	80,697
Right-of-use assets obtained in exchange for new operating lease liabilities		--
Right-of-use assets obtained in exchange for
new operating lease liabilities				$	-
Weighted average remaining lease term (in years)		5.77			5.02
Weighted average discount rate		6.5	%		6.50%

2021	$	108,290
2022		235,569
2023		262,698
2024		291,210
2025		321,971
Thereafter		459,072
Total	$	1,678,810

Less than 1 year	$	342,640
1 to 2 years		352,869
2 to 3 years		363,404
3 to 4 years		374,253
4 to 5 years		385,426
5 to 10 years		7,517
Total undiscounted lease payments		1,826,109
Less imputed interest		262,244
Total operating lease liabilities	$	1,563,865


Exhibit No.			Description

	31.1	*	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act — Zackary S. Irani

	31.2	*	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act — Steve Sloan

	32.1	*	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act — Zackary S. Irani

	32.2	*	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act — Steve Sloan

	101		Interactive data files pursuant to Rule 405 Regulation S-T, as follows:

		~~101 Interactive data files pursuant to Rule 405 Regulation S-T, as follows:~~ 101. INS-XBRL Instance Document
~~101.INS-XBRL Instance Document~~
~~101.SCH-XBRL~~101. SCH-XBRL Taxonomy Extension Schema Document
~~101.CAL-XBRL~~		101. CAL-XBRL Taxonomy Extension Calculation Linkbase Document
~~101.DEF–~~		101. DEF–XBRL Taxonomy Extension Definition Linkbase Document
~~101.LAB-XBRL~~		101. LAB-XBRL Taxonomy Extension Label Linkbase Document
		101.PRE-XBRL Taxonomy Extension Presentation Linkbase Document

	BIOMERICA, INC.

Date: ~~January~~October 14, 2021
	By:	/S/ Zackary S. Irani
		Zackary S. Irani
		Chief Executive Officer
		(Principal Executive Officer)

	~~By:~~	~~/S/ Zackary S. Irani~~
	Date: October 14, 2021	~~Zackary S. Irani~~
	~~Chief Executive Officer~~By:	/S/ Steve Sloan
	~~(Principal Executive Officer)~~

~~Date: January 14, 2021~~
	~~By:~~	~~/S/~~ Steve Sloan
		~~Steve Sloan~~
		Chief Financial Officer
		(Principal Financial Officer)

	Six Months Ended				Three Months Ended				Three Months Ended
	November 30, 2020		November 30, 2019		November 30, 2020		November 30, 2019		August 31, 2021		August 31, 2020
Revenues from sales to unaffiliated customers:
United States	$	241,000	$	224,000	$	107,000	$	109,000
Asia		897,000		1,460,000		550,000		797,000	$	675,000	$	347,000
Europe		1,170,000		717,000		580,000		416,000		471,000		591,000
North America										105,000		134,000
Middle East										8,000		29,000
South America		82,000		71,000		39,000		24,000		3,000		43,000
Middle East		125,000		309,000		96,000		241,000
Other		1,000		10,000		1,000		10,000
	$	2,516,000	$	2,791,000	$	1,373,000	$	1,597,000	$	1,262,000	$	1,144,000