~~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 ~~FEBRUARY 28,~~AUGUST 31, 2022

ORor

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

Commission File Number: 001-37863

BIOMERICA, INC.

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

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of

Incorporation of organization)

~~Delaware~~ 95-2645573

(I.R.S. Employer
Identification No.)

17571 Von Karman Avenue, Irvine, CA

(Address of principal executive offices)

92614

(Zip Code)

~~--------------------------------------------------------------------------------------------------------------------------------------------------------------------~~REGISTRANT'S TELEPHONE NUMBER:

(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)~~949) 645-2111

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

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

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

~~(TITLE OF EACH CLASS)~~

(Title of each class)

COMMON STOCK, PAR VALUE $0.08

(Name of each exchange on which registered)

NASDAQ Capital Market

(Trading symbol)

~~(TICKER SYMBOL)~~

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

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

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

~~Common, par value $.08~~

BMRA

~~NASDAQ Capital Market~~

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

Yes [X] No [_]

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

Yes [X] No [_]

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

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

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

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

Yes [_] No [X]

The number of shares of the registrant's common stock outstanding as of ~~April 14,~~October 11, 2022was ~~12,851,924.~~13,427,651.

BIOMERICA, INC.

INDEX

PART I	Financial Information

Item 1.	Financial Statements:

	Condensed Consolidated Balance Sheets (unaudited) ~~– February 28,~~–August 31, 2022 and May 31, ~~2021~~2022	1

	Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) – Three ~~and Nine~~ Months Ended ~~February 28,~~August 31, 2022 and 2021 ~~(restated)~~	2

	Condensed Consolidated Statements of Shareholders’ Equity (unaudited) – ~~Nine~~Three Months Ended ~~February 28,~~August 31, 2022 and 2021 ~~(restated)~~	3

	Condensed Consolidated Statements of Cash Flows (unaudited) – ~~Nine~~Three Months Ended ~~February 28,~~August 31, 2022 and 2021 ~~(restated)~~	4

	Notes to Condensed Consolidated Financial Statements (unaudited)	5 - 1413

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1413 - 1816

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	1817

Item 4.	Controls and Procedures	1817

PART II	Other Information

Item 1.	Legal Proceedings	1817

Item 1A.	~~Risk~~Risks and Uncertainties	1917

Item 5.	Other Information	1917

Item 6.	Exhibits	2018

	Signatures	2119

Table of Contents

PART I - FINANCIAL INFORMATION

SUMMARIZED FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BIOMERICA, INC. AND SUBSIDIARIES

BIOMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

February 28,
2022
(Unaudited)

May 31,
2021

Assets

Current Assets:

Cash and cash equivalents

$
10,173,808

$
4,199,311
Accounts receivable, less allowance for doubtful accounts
      of $20,293 and $837,415 as of February 28, 2022 and May 31, 2021, respectively

1,158,738

1,455,051
Inventories, net

3,231,430

3,206,255
Prepaid expenses and other

667,129

370,290
Total current assets

15,231,105

9,230,907

Property and equipment, net of accumulated depreciation and amortization
      of $2,046,612 and $1,972,357 as of February 28, 2022 and May 31, 2021, respectively

263,048

310,520

Right of use assets, net of accumulated amortization
      of $658,773 and $469,077 as of February 28, 2022 and May 31, 2021, respectively

1,367,863

1,553,081

Investments

165,324

165,324

Intangible assets, net of accumulated amortization
      of $49,253 and $126,769 as of February 28, 2022 and May 31, 2021, respectively

386,013

294,830

Other assets

146,980

264,151
Total Assets

$
17,560,333

$
11,818,813

Liabilities and Shareholders' Equity

Current Liabilities:

Accounts payable and accrued expenses

$
2,608,840

$
583,380
Accrued compensation

537,284

388,896
Advances from customers

3,213,052

-
Lease liability, current portion

338,744

327,944
Total current liabilities

6,697,920

1,300,220
Lease liability, net of current portion

1,104,611

1,291,570
Total Liabilities

7,802,531

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 February 28, 2022 and
May 31, 2021

-

-
Preferred stock, undesignated, 0 par value,
4,428,571 shares authorized, NaN issued and outstanding as of February 28, 2022 and
May 31, 2021

-

-
Common stock, $0.08 par value,
25,000,000 shares authorized, 12,851,924 and 12,307,157 issued and outstanding at
February 28, 2022 and May 31, 2021, respectively

1,028,152

984,571
Additional paid-in-capital

42,108,865

38,836,743
Accumulated other comprehensive loss

(60,857)

(47,956)
Accumulated deficit

(33,318,358)

(30,546,335)
Total Shareholders' Equity

9,757,802

9,227,023
Total Liabilities and Shareholders' Equity

$
17,560,333

$
11,818,813

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

~~The accompanying notes are an integral part of these statements.~~

	August 31, 2022		May 31, 2022
	August 31, 2022		May 31, 2022
Assets

Current Assets:
Cash and cash equivalents	$	6,075,037	$	5,916,983
Accounts receivable, less allowance for doubtful accounts of $383,106 and $153,231 as of August 31, 2022 and May 31, 2022, respectively		932,273		773,818
Inventories, net of inventory reserves of $981,814 and $845,549 as of August 31, 2022 and May 31, 2022, respectively		1,921,734		2,416,447
Prepaid expenses and other		238,762		320,283
Total current assets		9,167,806		9,427,531

Property and equipment, net of accumulated depreciation and amortization of $1,325,561 and $1,305,360 as of August 31, 2022 and May 31, 2022, respectively		227,908		214,487

Right of use assets, net of accumulated amortization of $791,859 and $724,802 as of August 31, 2022 and May 31, 2022, respectively		1,234,777		1,301,834

Investments		165,324		165,324

Intangible assets, net of accumulated amortization of $21,271 and $18,994 as of August 31, 2022 and May 31, 2022, respectively		160,750		169,516

Other assets		93,509		95,588
Total Assets	$	11,050,074	$	11,374,280

Liabilities and Shareholders' Equity

Current Liabilities:
Accounts payable and accrued expenses	$	671,240	$	972,372
Accrued compensation		591,948		646,944
Advance from customers		150,523		50,670
Lease liability, current portion		343,889		341,296
Total current liabilities		1,757,600		2,011,282
Lease liability, net of current portion		970,890		1,038,284
Total Liabilities		2,728,490		3,049,566

Commitments and contingencies (Notes 5 and 6)

Shareholders' Equity:

Common stock, $0.08 par value, 25,000,000 shares authorized, 13,406,901 and 12,867,924 issued and outstanding at August 31, 2022 and May 31, 2022, respectively		1,072,550		1,029,432
Additional paid-in-capital		44,484,752		42,446,597
Accumulated other comprehensive loss		(86,463)		(73,936)
Accumulated deficit		(37,149,255)		(35,077,379)
Total Shareholders' Equity		8,321,584		8,324,714
Total Liabilities and Shareholders' Equity	$	11,050,074	$	11,374,280

The accompanying notes are an integral part of these statements.

Table of Contents

BIOMERICA, INC. AND SUBSIDIARIES

BIOMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS (UNAUDITED)

Three Months Ended
February 28,
Nine Months Ended
February 28,
2022
2021
(As Restated)
2022
2021
(As Restated)
Net sales

$
7,660,501

$
3,628,638

$
13,569,188

$
6,144,970
Cost of sales

(5,987,277)

(3,702,069)

(11,213,175)

(5,791,593)
Gross profit (loss)

1,673,224

(73,431)

2,356,013

353,377
Operating expenses:

Selling, general and administrative
1,323,725
1,527,947
3,618,258
4,238,737
Research and development

456,998

563,967

1,515,384

1,892,033
Total operating expense

1,780,723

2,091,914

5,133,642

6,130,770

Loss from operations

(107,499)

(2,165,345)

(2,777,629)

(5,777,393)

Other income:
Dividend and interest income

6,019

37,687

19,740

53,761
Loss before income taxes

(101,480)

(2,127,658)

(2,757,889)

(5,723,632)
(Provision) benefit for income taxes

(2,688)

3,117

(14,134)

(11,401)
Net loss

$
(104,168)

$
(2,124,541)

$
(2,772,023)

$
(5,735,033)
Basic net loss per common share

$
(0.01)

$
(0.18)

$
(0.22)

$
(0.49)
Diluted net loss per common share

$
(0.01)

$
(0.18)

$
(0.22)

$
(0.49)
Weighted average number of common and
common equivalent shares:

Basic

12,820,481

11,905,492

12,611,760

11,802,803

Diluted

12,820,481

11,905,492

12,611,760

11,802,803

Net loss
$
(104,168)
$
(2,124,541)
$
(2,772,023)
$
(5,735,033)

Other comprehensive loss, net of tax:
Foreign currency translation

(2,538)

(5,437)

(12,901)

(8,687)
Comprehensive loss
$
(106,706)
$
(2,129,978)
$
(2,784,924)
$
(5,743,720)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS (UNAUDITED)

	Three Months Ended
	August 31, 2022		August 31, 2021
Net sales	$	1,637,435	$	1,261,787
Cost of sales		(1,692,390)		(1,350,757)
Gross loss		(54,955)		(88,970)

Operating expenses:
Selling, general and administrative		1,653,821		1,069,855
Research and development		361,171		381,544
Total operating expenses		2,014,992		1,451,399

Loss from operations		(2,069,947)		(1,540,369)

Other income:
Dividend and interest income		28		6,805
Interest expense		-		-
Total other income		28		6,805

Loss before income taxes		(2,069,919)		(1,533,564)

Provision for income taxes		(1,957)		(9,017)

Net loss	$	(2,071,876)	$	(1,542,581)

Basic net loss per common share	$	(0.16)	$	(0.12)

Diluted net loss per common share	$	(0.16)	$	(0.12)

Weighted average number of common and common equivalent shares:
Basic		13,100,407		12,426,784

Diluted		13,100,407		12,426,784

Net loss	$	(2,071,876)	$	(1,542,581)

Other comprehensive loss, net of tax:
Foreign currency translation		(12,527)		(5,613)

Comprehensive loss	$	(2,084,403)	$	(1,548,194)

The accompanying notes are an integral part of these statements.

~~The accompanying notes are an integral part of these statements.~~

Table of Contents

BIOMERICA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)

BIOMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)

For the Nine Months Ended February 28, 2021 (As Restated)

Common Stock

Series A 5% Convertible
Preferred Stock

Additional

Accumulated
Other
Comprehensive

Accumulated

Shares
Amount

Shares

Amount

Paid-in Capital

Loss

Deficit

Total
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
81,750

6,540

-

-

89,915

-

-

96,455
Net proceeds from ATM
158,889

12,711

-

-

998,764

-

-

1,011,475
Foreign currency translation
-

-

-

-

-

(8,687)

-

(8,687)
Conversion of preferred to common stock
321,429

25,714

(321,429)

(25,714)

-

-

-

-
Compensation expense in connection with options granted
-

-

-

-

1,022,320

-

-

1,022,320
Net loss
-

-

-

-

-

-

(5,735,033)

(5,735,033)



Balances, February 28, 2021, restated
12,302,157
$
984,170

-
    $
-

$
38,499,055

$
(48,528)

$
(28,835,114)

$
10,599,583

For the Nine Months Ended February 28, 2022

Common Stock

Series A 5% Convertible
Preferred Stock

Additional

Accumulated
Other
Comprehensive

Accumulated

Shares
Amount

Shares

Amount

Paid-in Capital

Loss

Deficit

Total
Balances, May 31, 2021
12,307,157
$
984,571

-
$
-

$
38,836,743

$
(47,956)

$
(30,546,335)

$
9,227,023

Exercise of stock options
23,500

1,880

-

-

37,295

-

-

39,175
Net proceeds from ATM
521,267

41,701

-

-

2,275,459

-

-

2,317,160
Foreign currency translation
-

-

-

-

-

(12,901)

-

(12,901)
Compensation expense in connection with options granted
-

-

-

-

959,368

-

-

959,368
Net loss
-

-

-

-

-

-

(2,772,023)

(2,772,023)

Balances, February 28, 2022
12,851,924
$
1,028,152

-
$
-

$
42,108,865

$
(60,857)

$
(33,318,358)

$
9,757,802

~~The accompanying notes are an integral part of these statements.~~

For the Three Months Ended August 31, 2021

						Accumulated Other Comprehensive Loss
	Common Stock			Additional Paid-in Capital				Accumulated Deficit
	Shares	Amount		Additional Paid-in Capital				Accumulated 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)
Stock option expense	-		-		319,622		-		-		319,622
Net loss	-		-		-		-		(1,542,581)		(1,542,581)
Balances, August 31, 2021	12,510,210	$	1,000,815	$	39,944,726	$	(53,569)	$	(32,088,916)	$	8,803,056

For the Three Months Ended August 31, 2022

						Accumulated Other Comprehensive Loss
	Common Stock			Additional Paid-in Capital				Accumulated Deficit
	Shares	Amount		Additional Paid-in Capital				Accumulated Deficit		Total

Balances, May 31, 2022	12,867,924	$	1,029,432	$	42,446,597	$	(73,936)	$	(35,077,379)	$	8,324,714
Exercise of stock options	15,000		1,200		12,750		-		-		13,950
Net proceeds from ATM	523,977		41,918		1,721,650		-		-		1,763,568
Foreign currency translation	-		-		-		(12,527)		-		(12,527)
Stock option expense	-		-		303,755		-		-		303,755
Net loss	-		-		-		-		(2,071,876)		(2,071,876)
Balances, August 31, 2022	13,406,901	$	1,072,550	$	44,484,752	$	(86,463)	$	(37,149,255)	$	8,321,584

The accompanying notes are an integral part of these statements.

Table of Contents

BIOMERICA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

BIOMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

Nine Months Ended
February 28,

2021
(As Restated)

2022

Cash flows from operating activities:

Net loss

$
(2,772,023)

$
(5,735,033)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization

102,272

94,550
Change in allowance on accounts receivable

(817,122)

578,438
Inventory reserve

270,805

1,437,547
Stock option expense

959,368

1,022,320
Amortization of right-of-use asset

189,696

173,919
Changes in assets and liabilities:

Accounts receivable

1,113,435

(690,691)
Inventories

(295,980)

(1,446,766)
Prepaid expenses and other

(296,839)

734,966
Reduction in lease liability

(180,637)

(156,384)
Other assets

117,171

(114,664)
Accounts payable and accrued expenses

2,025,460

(230,575)
Accrued compensation

148,388

88,309
Advances from customers

3,213,052

-
Net cash provided by (used in) operating activities

3,777,046

(4,244,064)

Cash flows from investing activities:

Increase in intangibles

(113,436)

(116,881)
Purchases of property and equipment

(32,547)

(106,760)
Net cash used in investing activities

(145,983)

(223,641)

Cash flows from financing activities:

Proceeds from sale of common stock, net

2,317,160

1,011,475
Proceeds from exercise of stock options

39,175

96,455
Net cash provided by financing activities

2,356,335

1,107,930

Effect of exchange rate changes in cash

(12,901)

(8,687)
Net increase (decrease) in cash and cash equivalents

5,974,497

(3,368,462)

Cash and cash equivalents at beginning of period

4,199,311

8,641,027

Cash and cash equivalents at end of period

$
10,173,808

$
5,272,565

Supplemental Disclosure of Cash Flow Information:

Cash paid during the period for:

Income taxes

$
13,334

$
13,730

Non-cash investing and financing activities:

Increase in right-of-use asset due to lease extension or establishment

$
4,478

$
-
Increase in lease liability due to lease extension or establishment

$
4,478

$
-

~~The accompanying notes are an integral part of these statements.~~

	Three Months Ended
	August 31, 2022		August 31, 2021
Cash flows from operating activities:
Net loss	$	(2,071,876)	$	(1,542,581)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		28,971		34,722
Provision for allowance on accounts receivable		229,875		(94,891)
Inventory reserve		136,265		179,744
Stock option expense		303,755		319,622
Amortization of right-of-use asset		67,057		62,897
Changes in assets and liabilities:
Accounts receivable		(388,330)		777,752
Inventories		358,448		164,732
Prepaid expenses and other		81,521		55,069
Reduction in lease liability		(64,801)		(55,649)
Other assets		2,076		(2,431)
Accounts payable and accrued expenses		(301,132)		58,024
Accrued compensation		(54,996)		118,826
Advance from customers		99,853		-
Net cash (used in) provided by operating activities		(1,573,314)		75,836

Cash flows from investing activities:
Expenditures related to intangibles		-		(72,375)
Purchases of property and equipment		(33,623)		(5,141)
Net cash used in investing activities		(33,623)		(77,516)

Cash flows from financing activities:
Gross proceeds from sale of common stock		1,810,927		838,333
Costs from sale of common stock		(47,359)		(37,622)
Proceeds from exercise of stock options		13,950		3,895
Net cash provided by financing activities		1,777,518		804,606

Effect of exchange rate changes in cash		(12,527)		(5,613)
Net increase in cash and cash equivalents		158,054		797,313

Cash and cash equivalents at beginning of year		5,916,983		4,199,311

Cash and cash equivalents at end of the period	$	6,075,037	$	4,996,624

Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Income taxes	$	1,957	$	9,017

Non-cash investing and financing activities:
Write off of intangible assets, cost	$	6,489	$	-
Write off of intangible assets, accumulated amortization	$	850	$	-

The accompanying notes are an integral part of these statements.

Table of Contents

BIOMERICA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1: BASIS OF PRESENTATION

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

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

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

Due to the global 2019 SARS-CoV-2 novel coronavirus pandemic, in March 2020 we began developing COVID-19 products to indicate if a person has been infected by COVID-19 or is currently infected. While ~~the Company does offer~~we initially offered a COVID-19 antibody diagnostic test to determine if a person has previously been infected by the COVID-19 virus, all of our COVID-19 revenues in fiscal 2022 and 2023 have come from international sales of our COVID-19 antigen tests that use a patient’s nasal fluid sample to detect if the patient is currently infected with the virus. Due to falling demand, less than 12% of our revenues during the three months ended August 31, 2022 were from sales of our COVID-19 related products.

~~The other~~Our non-COVID-19 products ~~we sell~~that accounted for over 88% of our revenues during the three months ended August 31, 2022, are primarily focused on gastrointestinal diseases, food intolerances, 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.~~United States by the FDA.

The ~~information set forth in these condensed~~unaudited consolidated financial statements isherein have been prepared by management pursuant to the rules and regulations of the United States Securities and Exchange Commission ("SEC"). The accompanying interim unaudited consolidated financial statements have been prepared under the presumption that users of the interim financial information have either read or have access to the audited consolidated financial statements for the latest fiscal year ended May 31, 2022. Accordingly, certain information and ~~reflects all adjustments which,~~note disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, ~~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~~adjustments considered necessary for a fair presentation have been included. Operating results for the three months ended August 31, 2022 are not necessarily indicative of ~~financial position,~~the results ~~of operations, and cash flows in conformity with accounting principles generally accepted in~~that may be expected for the ~~United States of America. All adjustments that were made are of a normal recurring nature.~~

~~The unaudited, condensed~~fiscal year ending May 31, 2023. For further information, refer to the audited consolidated financial statements and notes ~~are presented as permitted by~~thereto for the ~~requirements for Form 10-Q and do not contain certain information~~fiscal year ended May 31, 2022 included in the annual financial statements and notes. The condensed consolidated balance sheet data as of May 31, 2021 was derived from restated, audited financial statements. The accompanying interim condensed consolidated financial statements should be read in conjunction with the financial statements and related notes included in theCompany's Annual Report on Form 10-K filed with the ~~Securities and Exchange Commission (“SEC”)~~SEC on August ~~27, 2021 for~~29, 2022. Management has evaluated all subsequent events and transactions through the ~~fiscal year ended May 31, 2021, which have been restated as described in our Form 10-K/A as filed on October 14, 2021. The results~~date of ~~operations for the interim periods are not necessarily indicative of results to be achieved for the full fiscal year.~~filing this report.

~~CORRECTION OF AN ERROR~~

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 periods ended February 28, 2021, were materially misstated; accordingly, we have restated the prior period financial statements. ~~See Note 8 to these Financial Statements.~~

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NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

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

ACCOUNTING ESTIMATES

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

MARKETS AND METHODS OF DISTRIBUTION

Due to the Coronavirus global pandemic, and the economic disruptions that have followed, the Company’s operations have been negatively impacted.The Company has faced disruptions in certain of the following areas, and may face further challenges from supply chain disruptions, cost inflation, loss of contracts and/or customers, closure of the 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 have materially negatively impacted the Company’s operations and financial performance and may continue to have significant material negative impacts on the Company.

LIQUIDITY

The Company has incurred net losses and negative cash flows from operations and has an accumulated deficit of approximately ~~$33.3~~$37.1 million as of ~~February 28,~~August 31, 2022. Management expects to continue to incur significant costs as it advances its clinical trials and product development activities. As of August 31, 2022, the Company had cash and cash equivalents of approximately $6,075,000 and working capital of approximately $7,410,000.

On July 21, 2020, the Company filed with the SEC a “shelf” registration statement on Form S-3. The registration statement registers common shares that may be issued by the Company in a maximum aggregate amount of up to $90,000,000. Shares of the Company’s common stock may be sold from time to time under this registration statement for up to three years from the filing date. On January 22, 2021, the Company filed a prospectus supplement for ~~purposes~~the sale of ~~raising~~ up to $15,000,000 toof shares of our common stock in an at-the-market offering (“ATM Offering”) under the ~~base prospectus filed with the SEC on July 21, 2020 and included in the~~shelf 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~~of which approximately $9,600,000, remains available for sale under the prospectus ~~supplement may be sold pursuant to the terms of an At-The- Market Issuance Sales Agreement between the Company and B. Riley Securities, Inc., as sales agent, the ATM Agreement.~~supplement.

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

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

During the quarter ended August 31, 2022, the Company sold 523,977 shares of its common stock at prices ranging from $3.15 to $3.55 under its ATM Offering which resulted in gross proceeds of approximately $1,811,000 and net proceeds to the Company approximately of $1,764,000 after deducting commissions for each sale and legal, accounting, and other fees related to the ATM Offering.

As a result of cash and cash equivalents on hand at ~~February 28,~~August 31, 2022, and the ability to raise additional funds, including through the ATM ~~Agreement~~Offering noted above,management believes the Company has sufficient funds to operate through ~~May~~at least November 2023.

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CONCENTRATION OF CREDIT RISK

The Company maintains cash balances at certain financial institutions in excess of amounts insured by federal agencies. As of ~~February 28,~~August 31, 2022, the Company had approximately ~~$9,765,000~~$5,834,000 of uninsured cash. The Company does not believe it is exposed to any significant credit risks.

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Consolidated net sales were approximately $1,637,000 for the three months ended August 31, 2022, as compared to $1,262,000 for the three months ended August 31, 2021. For the ~~nine~~three months ended ~~February 28,~~August 31, 2022 and 2021, the Company had ~~three~~ ~~and~~ two key customers who are located in foreign countries which accounted for ~~75%~~64% and ~~66%~~60% of net consolidated sales, respectively.

~~At February 28,~~Total gross receivables on August 31, 2022 and May 31, 2022 were approximately $1,315,000 and $927,000, respectively. On August 31, 2022 and May 31, ~~2021,~~2022, the Company had ~~one~~two and ~~two~~one key customers who are located in foreign countries which accounted for a total of 67% and ~~73%~~50%, respectively, of gross accounts receivable.

For the ~~nine~~three months ended ~~February 28,~~August 31, 2022 and 2021, the Company had one key vendor which accounted for ~~85%~~9% and ~~62%~~17% of the purchases of raw materials, respectively. As of ~~February 28,~~August 31, 2022 and May 31, ~~2021,~~2022, the Company had one and two key ~~vendor~~vendors which accounted for ~~80%~~11% and ~~17%~~69%, respectively, of accounts payable.

CASH AND CASH EQUIVALENTS

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

ACCOUNTS RECEIVABLE

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

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

~~The~~As of August 31, 2022 and May 31, 2022, the Company has established a reserve of approximately ~~$20,000~~$383,000 and $153,000, respectively, for doubtful ~~accounts~~ ~~as of~~ ~~February 28, 2022.~~accounts.

PREPAID EXPENSES AND OTHER

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

As of ~~February 28,~~August 31, 2022 and May 31, ~~2021,~~2022, theprepaid expenses and other were approximately ~~$667,000~~$239,000 and $~~370,000,~~320,000, respectively~~. The prepaid expenses and other balance were~~, composed of prepayments to ~~raw materials suppliers,~~ insurance and various other suppliers.

INVENTORIES, NET

The Company values inventory at the lower of cost (determined using a combination of specific lot identification and the first-in, first-out methods) or net realizable value. Management periodically reviews inventory for excess quantities and obsolescence. Management evaluates quantities on hand, physical condition, and technical functionality as these characteristics may be impacted by anticipated customer demand for current products and new product introductions. The ~~inventory~~ reserve ~~(as described below)~~ 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.

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Net inventories are approximately the following:

	February 28, 2022		May 31, 2021		August 31, 2022		May 31, 2022
Raw materials	$	1,360,000	$	1,583,000	$	1,732,000	$	1,717,000
Work in progress		714,000		1,006,000		723,000		763,000
Finished products		1,157,000		617,000		449,000		782,000
Total	$	3,231,000	$	3,206,000
Total gross inventory					$	2,904,000	$	3,262,000
Inventory reserves						(982,000)		(846,000)
Net inventory					$	1,922,000	$	2,416,000

Reserves for inventory obsolescence are recorded as necessary to reduce obsolete inventory ~~carrying value~~ to estimated net realizable value or to specifically reserve for obsolete ~~inventory that the Company intends to dispose of.~~inventory. As of ~~February 28,~~August 31, 2022, and May 31, ~~2021,~~2022, inventory reserves were approximately ~~$1,888,000~~$982,000 and ~~$1,617,000,~~$846,000, respectively. Of the inventory reserve as of February 28, 2022, approximately $1,686,000 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.

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PROPERTY AND EQUIPMENT, NET

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

Depreciation and amortization are provided over the estimated useful lives of the related assets, ranging from 5 to 10 years, using the straight-line method. Leasehold improvements are amortized over the lesser of the estimated useful life of the asset or the term of the lease. Depreciation and amortization expense on property and equipment were approximately ~~$26,000~~$20,000 and $28,000 for the three months ended ~~February 28,~~August 31, 2022 and 2021, ~~and approximately $80,000~~ ~~and $78,000 for the nine months ended February 28, 2022 and 2021,~~respectively.

INTANGIBLE ASSETS, NET

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

Intangible assets are being amortized using the straight-line method over the useful life, not to exceed 18 years for marketing and distribution rights, 10 years for purchased technology use rights, and 20 years for patents. Amortization expense was approximately ~~$8,000~~$9,000 and ~~$4,000~~$7,000 for the three months ended ~~February 28, 2022 and 2021 and approximately $22,000 and $16,000 for the nine months ended February 28,~~August 31, 2022 and 2021, respectively.

The Company assesses the recoverability of these intangible assets by determining whether the amortization of the asset’s balance over its remaining life can be recovered through projected undiscounted future cash flows. The Company uses a qualitative assessment to determine whether there was any impairment. NoAs of August 31, 2022 and 2021, an impairment adjustment was ~~required as~~made of ~~February 28, 2022 or 2021.~~$6,000 and $0, respectively.

INVESTMENTS

From time-to-time, the Company makes investments in ~~privately-held~~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 ~~equity~~ investment in a ~~Polish-based distribution company~~Polish distributor, which is primarily engaged in distributing medical products and devices, including those manufactured by the Company, and in certain cases, manufacturing the products they sell. The Company currently has not written down the investment and has no information that would indicate the carrying value is greater than the fair value.devices. The Company owns approximately 6% of the investee and invested approximately $165,000 into the Polish ~~distribution company, and accordingly, applies~~distributor.

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

The Company assesses its equity holdings for impairment whenever events or changes in circumstances indicate that the carrying value of an equity holding may not be recoverable. Management reviewed the underlying net assets of the Company's equity method holding as of August 31, 2022 and determined that the ~~sale date, and income recorded when received.~~Company's proportionate economic interest in the entity indicates that the equity holding was not impaired. There were no observable price changes in orderly transactions for identical or a similar holding or security of the Company’s Cost Method Holding during the period ended August 31, 2022.

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SHARE-BASED COMPENSATION

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

~~Table~~The Company expensed approximately $304,000 and $320,000 of ~~Contents~~stock-based compensation during the three months ended August 31, 2022 and 2021, respectively.

The following summary presents the options ~~and warrants~~ granted, exercised, expired, canceled and outstanding for the ~~nine~~three months ended ~~February 28,~~August 31, 2022:

	Option Shares	Exercise Price Weighted Average		Option Shares	Exercise Price Weighted Average
Outstanding May 31, 2021	2,081,366	$	3.59
Outstanding May 31, 2022				2,321,616	$	3.72
Granted	307,000		4.44	146,000		3.37
Exercised	(23,500)		1.71	(15,000)		0.95
Cancelled or expired	(28,750)		3.49	(64,000)		4.78
Outstanding February 28, 2022	2,336,116	$	3.72
Outstanding August 31, 2022				2,388,616	$	3.69

During the ~~nine~~three months ended ~~February 28,~~August 31, 2022, options to purchase ~~23,500~~15,000 shares of common stock were exercised at prices ranging from ~~$1.20~~$0.82 to ~~$3.62.~~$1.20. Total net proceeds to the Company were ~~$39,175.~~approximately $14,000.

During the ~~nine~~three months ended ~~February 28,~~August 31, 2022, the Company granted ~~307,000~~146,000 options to purchase common stock at an average purchase price of ~~$4.44.~~$3.37, with the majority of those options issued to the Company’s new Chief Commercial Officer, who is managing the commercialization and roll-out of the InFoods IBS test.

REVENUE RECOGNITION

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

The Company does not typically allow for returns from international customers except in the event of defective merchandise and therefore does not establish an allowance for returns. The Company does allow for a return merchandise allowance of approximately one percent of sales to certain domestic retailers. This allowance reduces revenue recognition by approximately one percent, and is included in sales discounts. In addition, the Company has contracts with customers wherein they receive purchase discounts for achieving specified sales volumes. The Company evaluated the status of these contracts ~~as of February 28,~~during the three months ended August 31, 2022 and 2021, and does not believe that any additional discounts will be given through the end of the contract periods.

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

~~During the quarter ended February 28,~~As of August 31, 2022, the Company had approximately ~~$3,213,000~~$151,000 of advances from certain foreign customers. The majority of these advances are prepayments on orders that are expected to ship during our ~~fourth~~second quarter ended ~~May 31,~~November 30, 2022.

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Disaggregation of revenue:

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

	Three Months Ended February 28,				Nine Months Ended February 28,				Three Months Ended August 31,
	2022		2021		2022		2021		2022		2021
Physician's office	$	6,518,000	$	2,384,000	$	10,134,000	$	2,735,000
Clinical lab		731,000		967,000		2,259,000		2,441,000	$	1,146,000	$	886,000
Over-the-counter		244,000		148,000		857,000		605,000		213,000		79,000
Physician's office										183,000		257,000
Contract manufacturing		167,000		130,000		319,000		364,000		95,000		40,000
Total	$	7,660,000	$	3,629,000	$	13,569,000	$	6,145,000	$	1,637,000	$	1,262,000

See Note 4 for additional information regarding revenue concentrations.

SHIPPING AND HANDLING FEES

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

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RESEARCH AND DEVELOPMENT

Research and development costs are expensed as incurred. The Company expensed approximately ~~$457,000~~$361,000 and $~~564,000~~382,000 of research and development costs during the three months ended ~~February 28, 2022 and 2021 and approximately $1,515,000 and $1,892,000 during the nine months ended February 28,~~August 31, 2022 and 2021, respectively.

INCOME TAXES

The Company has provided a full valuation allowance on deferred income tax assets of approximately ~~$6,479,000~~$7,402,000 and ~~$5,904,000~~$6,967,000 as of ~~February 28,~~August 31, 2022 and May 31, 2022, respectively.

ADVERTISING COSTS

The Company reports the cost of advertising as expense in the period in which those costs are incurred. Advertising costs were approximately $18,000 and $8,000 for the three months ended August 31, 2022 and 2021, respectively.

FOREIGN CURRENCY TRANSLATION

The subsidiary located in Mexico operates primarily using the Mexican peso. The subsidiary located in Germany operates primarily using the U.S. dollar, with an immaterial amount of transactions occurring using the Euro. Accordingly, assets and liabilities of these subsidiaries are translated using exchange rates in effect at the end of the period, and revenues and costs are translated using average exchange rates for the period. The resulting translation adjustments to assets and liabilities are presented as a separate component of accumulated other comprehensive loss. There are no ~~adjustments to~~ foreign currency ~~loss~~transactions that are included in the consolidated statements of operations for the three ~~and nine~~ months ended ~~February 28,~~August 31, 2022 and 2021.

RIGHT-OF-USE ASSETS AND LEASE LIABILITY

~~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~~our obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of fixed lease payments over the lease term. Leases are classified as financing or operating which will drive the expense recognition pattern. The Company has elected to exclude short-term leases. The Company leases office space and copy machines, all of which are operating ~~leases. 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.

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NET LOSS PER SHARE

Basic loss per share is computed as net loss divided by the weighted average number of common shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur from common shares issuable through stock options, warrants and other convertible securities using the treasury stock method. The total amount of anti-dilutive stock options not included in the loss per share calculation at ~~February 28,~~August 31, 2022 and 2021 was ~~2,336,116~~2,388,616 and ~~1,360,192,~~2,081,116, respectively.

RECENT ACCOUNTING PRONOUNCEMENTS

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

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." This ASU will require the measurement of all expected credit losses for financial assets, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The guidance was initially effective for the Company for annual reporting periods beginning after December 15, 2019, and interim periods within those fiscal years. In November 2019, the FASB issued ASU 201·9- 10, "Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates," which, among other things, defers the effective date of ASU 2016-13 for public filers that are considered smaller reporting companies as defined by the Securities and Exchange Commission to fiscal years beginning after December 15, 2022, including interim periods within those years. Early adoption is permitted. The Company is currently reviewing the requirements of this ASU to determine its impact on the Company’s consolidated results of operations and financial position.

RECLASSIFICATIONS

Certain comparative figures in the August 31, 2021 condensed consolidated statement of operations have been reclassified to conform to the current period presentation.

NOTE 3: SHAREHOLDERS’ EQUITY

Stock option expense during the ~~nine~~three months ended ~~February 28,~~August 31, 2022 and 2021 was approximately ~~$959,000~~$304,000 and ~~$1,022,000 (as restated, see Note 8 to these Financial Statements),~~$320,000, respectively.

During the ~~nine~~three months ended ~~February 28,~~August 31, 2022, the Company sold ~~521,267~~523,977 shares of its common stock at prices ranging from ~~$4.02~~$3.15 to ~~$5.63~~$3.55 under its ~~January 22, 2021 prospectus supplement~~Form S-3 Registration Statement and ~~the~~ ATM ~~Agreement (see Note 2 to these Financial Statements)~~Offering which resulted in gross proceeds of approximately ~~$2,402,000~~$1,811,000 and net proceeds to the Company of approximately ~~$2,317,000~~$1,764,000 after deducting commissions for each sale and legal, accounting, and other fees related to the ~~filing of the Form S-3.~~ATM Offering.

~~Table of Contents~~

NOTE 4: GEOGRAPHIC INFORMATION

The Company operates as 1one segment. Geographic information regarding net sales is approximately as follows:

	Three Months Ended February 28,				Nine Months Ended February 28,				Three Months Ended August 31,
	2022		2021		2022		2021		2022		2021
Revenues from sales to unaffiliated customers:
Asia	$	4,877,000	$	756,000	$	8,925,000	$	1,653,000	$	814,000	$	675,000
Europe		2,416,000		2,611,000		3,683,000		3,781,000		552,000		471,000
North America		286,000		133,000		820,000		374,000		268,000		105,000
South America		81,000		64,000		87,000		146,000		3,000		3,000
Middle East		-		65,000		54,000		191,000		-		8,000
	$	7,660,000	$	3,629,000	$	13,569,000	$	6,145,000	$	1,637,000	$	1,262,000

As of ~~February 28,~~August 31, 2022, and May 31, ~~2021,~~2022, approximately ~~$142,000~~$725,000 and ~~$803,000~~$621,000 of Biomerica’s gross inventory was located in Mexicali, Mexico, respectively.

As of ~~February 28,~~August 31, 2022, and May 31, ~~2021,~~2022, approximately ~~$19,000~~$20,000 and ~~$25,000~~$17,000 of Biomerica’s property and equipment, net of accumulated depreciation and amortization, was located in Mexicali, Mexico, respectively.

Table of Contents

NOTE 5: LEASES

The Company leases its facilities. On ~~June 18, 2009,~~August 31, 2022, the Company ~~entered into an agreement to lease a building~~had approximately 22,000 square feet of floor space at its corporate headquarters at 17571 Von Karman Avenue in Irvine, ~~California.~~California, which it has been leasing since 2009. The lease ~~commenced September 1, 2009 and ended~~for its headquarters expired on August 31, 2016. The Company had an option to extend the term of its lease for two additional sixty-month periods. On November 30, 2015, the Company exercised its option to extend its lease for an additional sixty-month period and entered into the First Amendment to Lease wherein it ~~exercised its option to extend~~extended its lease until ~~August 31, 2021. 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~~years. When the Company extended its lease in April 2021, it was also granted an additional ~~five years~~five-year lease extension ~~option through August 2031.~~option. The current rent is ~~currently $25,588~~approximately $26,000 per month. The security deposit ~~of $22,078 remains the same.~~ is approximately $22,000.

In November 2016, the Company’s Mexican subsidiary, Biomerica de Mexico, entered into a ~~ten-year~~10-year lease for approximately ~~8,104~~8,100 square feet ~~at a monthly rent~~ of ~~$2,926.~~manufacturing space. The Company has one 10-year option to renew at the end of the initial lease period. The ~~yearly rate~~current rent 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 $3,438. Biomerica, Inc. is not a guarantor of such lease.approximately $3,400 per month. Biomerica de Mexico also leases a smaller unit on a month-to-month basis for use in one manufacturing process.

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

~~Rent~~Total gross rent expense in the ~~U.S.~~United States for the ~~nine~~three months ended ~~February 28,~~August 31, 2022 and 2021 was approximately ~~$230,000~~$78,000 and ~~$227,000,~~$78,000, respectively. Rent expense for the Mexico facility for the ~~nine~~three months ended ~~February 28,~~August 31, 2022 and 2021 was approximately ~~$31,000.~~$11,000 and $10,000, respectively.

For purposes of determining straight-line rent expense, the lease term is calculated from the date the Company first takes possession of the facility, including any periods of free rent and any renewal ~~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 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 Consolidated Statements of Operations and Comprehensive Loss when they are incurred.

Supplemental cash flow information related to leases for the ~~nine~~three months ended ~~February 28,~~August 31, 2022:

Operating cash flows from operating leases

$
252,252

Right-of-use assets obtained in exchange for
new operating lease liabilities

$
-

Weighted average remaining lease term (in years)

4.53

Weighted average discount rate

6.50
%

~~Table of Contents~~
Operating cash flows from operating leases
$
86,000
Right-of-use assets obtained in exchange for
new operating lease liabilities
$
-
Weighted average remaining lease term (in years)
4.02
Weighted average discount rate
6.50%

The approximate maturity of lease liabilities as of ~~February 28,~~August 31, 2022 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.

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.

~~During~~On September ~~2021,~~29, 2022, the Company ~~determined~~announced that ~~errors were included in the previously issued financial statements as described below. As a result, we restated our financial statements for the periods ended February 28, 2021.~~its Aware® Breast Self Exam device and EZ Detect Colon Disease test are being sold on Amazon and fulfilled by Amazon.

~~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 and vesting had occurred, which resulted in an understatement of stock compensation expense. Additionally, our calculation expensed all issued options 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 cash, revenues or other aspects of ongoing operations.

~~The~~ ~~restatement for the quarter ended February 28, 2021 resulted in no changes in the provision for income taxes.~~

~~The effect of the restatement on the consolidated statement of operations for the three months ended February 28, 2021 is as follows:~~

~~The effect of the restatement on the consolidated statement of operations for the nine months ended February 28, 2021 is as follows:~~

~~The effect of the restatement on the consolidated statement of cash flows for the period ended February 28, 2021 is as follows:~~

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

You should read the following discussion and analysis in conjunction with our unaudited condensed consolidated financial statements and the accompanying notes thereto included in Part ~~II,~~I, Item 81 of this ~~Report.~~Report and the audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended May 31, 2022 (our 2022 Annual Report). This discussion and analysis contains forward-looking statements that are based on our management’s current beliefs and assumptions, which statements are subject to substantial risks and uncertainties. Our actual results may differ materially from those expressed or implied by these forward-looking statements as a result of many factors, including those discussed in “Risk Factors” included in Part I, Item 1A of ~~this~~our 2022 Annual Report.

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

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

~~We recently~~During fiscal 2022, we completed an endpoint determination clinical trial on our InFoods® IBS product. This trial was conducted at the Mayo ~~Clinics~~Clinic centers in Florida and Arizona, Beth Israel Deaconess Medical Center Inc., a Harvard Medical School Teaching Hospital, University of Texas Health Science Center at Houston, Houston Methodist, the University of Michigan, and other institutions. This trial monitored IBS patients over an 8-week period to determine the efficacy of our InFoods® IBS product to improve the patients’ IBS ~~symptoms.~~symptoms or endpoints. The top-line trial results were reported in February 2022. Multiple endpoints demonstrated statistically significant improvements, indicating that the elimination of specific foods may meaningfully reduce the symptoms of IBS in all patient subtypes (including patients with IBS-Constipation, IBS-Diarrhea & IBS-Mixed). The greatest clinical improvements, including but not limited to abdominal pain and bloating, were seen in patients diagnosed with IBS-Mixed and IBS-Constipation, in the top line data. The purpose of the endpoint study was to validate efficacy, and determine the primary symptom endpoint, or endpoints to be used in a final pivotal trial that will be conducted to attain the validation data needed to apply for ~~FDA~~U.S. Food and Drug Administration (“FDA”) clearance for the product. We are now in the process of reviewing the complete ~~data-set~~dataset and selecting the target endpoint(s) to be used in the pivotal trial. We are also ~~writing~~preparing the protocols for this trial and expect to present these protocols to the FDA ~~over the next several months,~~during fiscal 2023, with the intention of beginning the trial ~~in calendar year 2022.~~by June 30, 2023. The trial is expected to include the large medical institution participants that conducted the endpoint trial, in addition to other new institutions and a ~~Clinical Research Organization.~~ clinical research organization.

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

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

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

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

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

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

Our non-COVID-19 products that accounted for over 88% of our revenues during the three months ended August 31, 2022, are primarily focused on gastrointestinal diseases, food intolerances, and certain esoteric tests. These diagnostic test products utilize immunoassay technology. Most of our products are CE marked and/or sold for diagnostic use where they are registered by each country’s regulatory agency. In addition, some products are cleared for sale in the ~~U.S.~~United States by the FDA.

~~We also recently added several new employees in our sales and marketing department in order to increase sales of existing products~~ ~~during fiscal 2022. Through~~ ~~these efforts, our EZ Detect colon disease home screening test is seeing a significant increased interest from retailers such as Walmart, distributors, and screening programs in other countries.~~

~~As disclosed in Note 8 of Item 1 to these unaudited condensed consolidated financial statements, during the fiscal quarter ended~~ ~~November 30, 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 nine months ended February 28, 2021, 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 nine months ended February 28, 2021 have been restated.

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

Consolidated net sales were approximately ~~$7,660,000~~$1,637,000 for the three months ended ~~February 28,~~August 31, 2022, as compared to ~~$3,629,000~~$1,262,000 for the three months ended ~~February 28, 2021.~~August 31, 2021, ~~This represents~~ an increase of approximately ~~$4,031,000~~$375,000, or ~~111%~~30%. ~~The~~This increase for the three months ended ~~February 28,~~August 31, 2022, ~~as compared to the three months ended February 28, 2021,~~ was driven primarily ~~due to the sale of~~by demand for our ~~COVID-19 product to distributors~~clinical lab products in Asia and ~~Europe.~~OTC products in the United States. Periodic and infrequent orders may cause volatility in quarterly sales.

Consolidated cost of sales ~~was~~were approximately ~~$5,987,000~~$1,692,000, or ~~78% of net sales, for~~ ~~the three months ended February 28, 2022,~~ as ~~compared to $3,702,000 or 102%~~103% of net sales, for the three months ended ~~February 28, 2021.~~ ~~This represents~~August 31, 2022, as compared to $1,351,000, or 107% of net sales, for the three months ended August 31, 2021, an increase of approximately ~~$2,285,000~~$342,000, or ~~62%~~25%. The increase for the three months ended ~~February 28,~~August 31, 2022, ~~as compared to the three months ended February 28, 2021,~~ was driven primarily ~~due to the sale~~by an increase in volume of our ~~COVID-19~~food intolerance product ~~to distributors in Asia~~ and ~~Europe.~~

Consolidated selling, general and administrative expenses were approximately ~~$1,324,000~~$1,654,000 for the three months ended ~~February 28,~~August 31, 2022, as compared to ~~$1,528,000~~$1,070,000 for the three months ended ~~February 28, 2021. This represents a decrease~~August 31, 2021, an increase of approximately ~~$204,000~~$584,000, or ~~13%~~55%.The ~~decrease~~increase in the three months ended ~~February 28,~~August 31, 2022, was primarily due to ~~a reduction of~~approximate increases in bad debt expense ~~partially offset by increases in~~of $300,000, compensation of $73,000, and ~~outside services expense.~~legal expense of $65,000.

Consolidated research and development expenses were approximately ~~$457,000~~$361,000 for the three months ended ~~February 28,~~August 31, 2022, as compared to ~~$564,000~~$381,000 for the three months ended ~~February 28, 2021.~~August 31, 2021, ~~This represents~~ a decrease of approximately $~~107,000~~20,000, or ~~19%~~5%. The decrease in the three months ended ~~February 28,~~August 31, 2022, was primarily due to a ~~result of decreases~~reduction in ~~costs related to the research, development, and validation of~~ COVID-19 ~~tests.~~research.

As of ~~February 28,~~August 31, 2022 and May 31, ~~2021, we~~2022, the Company had cash and cash equivalents of approximately~~$10,174,000~~ $6,075,000 and $~~4,199,000,~~5,917,000, ~~respectively,~~respectively. As of August 31, 2022 and May 31, 2022, the Company had working capital of approximately ~~$8,533,000~~$7,410,000 and ~~$7,931,000,~~$7,416,000, respectively. ~~As a result~~We believe that the aggregate of our existing cash and cash equivalents ~~on hand~~ is sufficient to meet our operating cash requirements and strategic objectives for growth for at ~~February 28, 2022,~~ ~~and~~least the next year. To satisfy our ~~ability~~capital requirements beyond the next year, including ongoing future operations, we may seek to raise additional ~~funds~~financing through debt and equity financings, including use of our ATM ~~Agreement, management believes we have sufficient funds to operate through the next twelve months or more.~~offering.

~~Cash~~During the three months ended August 31, 2022, cash used in operating activities was approximately $1,573,000. The primary factors that contributed to this was a loss of approximately $2,072,000, non-cash expenses of $766,000, primarily associated with stock-based compensation, account receivables provision, and inventory reserves. This was partially offset by changes in asset and liability accounts of $(267,000).

During the three months ended August 31, 2021, cash provided by operating activities ofwas approximately ~~$3,777,000 during the nine months ended February 28, 2022, reflects~~$76,000. The primary factors that contributed to this was a ~~net~~ loss of approximately ~~$2,772,000 and~~$1,543,000, non-cash ~~adjustments~~expenses of ~~$705,000~~ $502,000, primarily associated with depreciation, amortization, stock-based compensation, adjustments to allowance for doubtful accounts, and inventory reserves. In addition, we realized an increase in net working capital of approximately $5,844,000 primarily driven by an increase in advances from customers and accounts payable. For the nine months ended February 28, 2021, cash used by operating activities of approximately $4,244,000 reflects a net loss of $5,735,000 and non-cash adjustments of $3,307,000 primarily associated with depreciation, amortization, stock-based compensation and inventory ~~reserves. The non-cash adjustments were partially offset by~~reserves. In addition, we benefited from a ~~decline~~decrease in ~~net working capital~~accounts receivable of ~~approximately $1,816,000 primarily driven by an increase~~$778,000, and changes in ~~inventory.~~other asset and liability accounts of $339,000.

~~Cash~~During the three months ended August 31, 2022, cash used in investing activities was approximately $34,000 for purchases of property and equipment.

During the ~~nine~~three months ended ~~February 28, 2022,~~August 31, 2021, cash used in investing activities was approximately ~~$33,000~~$78,000 for purchases of property and equipment, and ~~$113,000 for increased intangibles. Cash used in investing~~ ~~activities for the nine months ended February 28, 2021,~~ ~~was~~ ~~approximately $107,000 for~~ ~~purchases of property and equipment~~ ~~and $117,000 for~~ ~~increased intangibles.~~

~~Cash~~During the three months ended August 31, 2022, cash provided by financing activities ~~for~~ ~~the nine months ended February 28, 2022,~~was approximately ~~$2,356,000~~$1,778,000 which was a result of ~~stock option exercises of $39,000 and~~ net proceeds from the sale of common stock of ~~$2,317,000. Cash~~$1,764,000, and stock option exercises of $14,000.

During the three months ended August 31, 2021, cash provided by financing activities ~~for the nine months ended February 28, 2021,~~ was approximately ~~$1,108,000~~$805,000 which was a result of ~~stock option exercises of $96,000 and~~net proceeds from the sale of ~~comment~~common stock of ~~$1,011,000.~~$801,000, and stock option exercises of $4,000.

There were no off-balance sheet arrangements as of ~~February 28,~~August 31, 2022.

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 under the current conditions; however, actual results may differ from these estimates under different future conditions.

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

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 the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of the end of the period covered by this report. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The disclosure controls and procedures have been designed to provide reasonable assurance of achieving their objectives and the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective at the "reasonable assurance" level. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that we file and submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms; and (2) accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

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

An investment in our common stock involves risks. Before making an investment decision, you should carefully consider all the information within this Quarterly Report, including the information contained in Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," as well as in our condensed consolidated financial statements and the related notes contained in Part I, Item 1 within this Quarterly Report. In addition, you should carefully consider the risks and uncertainties described in Part I, Item 1A, “Risk Factors,” of our ~~2021~~2022 Annual Report on Form ~~10-K/A,~~10-K, as well as in our other public filings with the SEC. If any of the identified risks are realized, our business, results of operations, financial condition, liquidity, and prospects could be materially and adversely affected. In that case, the trading price of our common stock may decline, and you could lose all or part of your investment. In addition, other risks of which we are currently unaware, or which we do not currently view as material, could have a material adverse effect on our business, results of operations, financial condition, and prospects.

During the ~~nine~~three months ended ~~February 28,~~August 31, 2022, there were no material changes to the risks and uncertainties described in Part I, Item 1A, “Risk Factors,” of our ~~2021~~2022 Annual Report on Form ~~10-K/A.~~10-K.

~~See Note 8~~On October 11, 2022, the board of directors of the Company approved and adopted the Amended and Restated Bylaws of the Company, which became effective the same day, in order to, among other things (i) update the ~~Financial Statements~~name of the Company from “Nuclear Medical Systems, Inc.” to “Biomerica, Inc.”, (ii) change the annual meeting date from October 15 to any such date that the Board shall fix each year, (iii) change the voting standard for ~~discussion~~all matters other than election of ~~our prior period financial restatements.~~directors from a plurality vote to a majority vote, (iv) update the requirements for the list of stockholders, (v) revise the indemnification provisions, and (vi) add new forum selection provisions.

19The preceding summary of the Amended and Restated Bylaws is qualified in its entirety by reference to, and should be read in connection with, the complete copy of the Amended and Restated Bylaws filed herewith as Exhibit 3.1.

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.

Less than 1 year	$	349,000
1 to 2 years		359,000
2 to 3 years		370,000
3 to 4 years		381,000
4 to 5 years		201,000
Total undiscounted lease payments		1,660,000
Less imputed interest		217,000
Total operating lease liabilities	$	1,443,000

Less than 1 year	$	354,000
1 to 2 years		364,000
2 to 3 years		375,000
3 to 4 years		387,000
4 to 5 years		8,000
Total undiscounted lease payments		1,488,000
Less imputed interest		173,000
Total operating lease liabilities	$	1,315,000

	As Previously Reported		Adjustments		As Restated
Cost of sales	$	3,667,143	$	34,926	$	3,702,069
Gross Profit		(38,505)		(34,926)		(73,431)

Operating Expenses:
Selling, general and administrative		1,278,393		249,554		1,527,947
Research and development		563,216		751		563,967
Total operating expense		1,841,609		250,305		2,091,914

Loss from operations		(1,880,114)		(285,231)		(2,165,345)

Loss before income taxes		(1,842,427)		(285,231)		(2,127,658)

Net loss	$	(1,839,310)	$	(285,231)	$	(2,124,541)

Basic net loss per common share	$	(0.15)	$	(0.03)	$	(0.18)

Diluted net loss per common share	$	(0.15)	$	(0.03)	$	(0.18)

Comprehensive loss	$	(1,844,747)	$	(285,231)	$	(2,129,978)

	As Previously Reported		Adjustments		As Restated
Cost of sales	$	5,639,103	$	152,490	$	5,791,593
Gross Profit		505,867		(152,490)		353,377

Operating Expenses:
Selling, general and administrative		3,697,804		540,933		4,238,737
Research and development		1,824,312		67,721		1,892,033
Total operating expense		5,522,116		608,654		6,130,770

Loss from operations		(5,016,249)		(761,144)		(5,777,393)

Loss before income taxes		(4,962,488)		(761,144)		(5,723,632)

Net loss	$	(4,973,889)	$	(761,144)	$	(5,735,033)

Basic net loss per common share	$	(0.42)	$	(0.07)	$	(0.49)

Diluted net loss per common share	$	(0.42)	$	(0.07)	$	(0.49)

Comprehensive loss	$	(4,982,576)	$	(761,144)	$	(5,743,720)

		Three Months Ended February 28,
		Three Months Ended February 28,								Three Months Ended August 31,
	2022			2021			Increase (Decrease)			2023			2022			Increase (Decrease)
	Operating Expense		As a % of Total Revenues	Operating Expense		As a % of Total Revenues	$		%	Operating Expense		As a % of Total Revenues	Operating Expense		As a % of Total Revenues	$		%
Selling, General and Administrative Expenses	$	1,324,000	17%	$	1,528,000	42%	$	(204,000)	-13%	$	1,654,000	101%	$	1,070,000	85%	$	584,000	55%
Research and Development	$	457,000	6%	$	564,000	16%	$	(107,000)	-19%	$	361,000	22%	$	381,000	30%	$	(20,000)	-5%

BIOMERICA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
	February 28, 2022 (Unaudited)
			May 31, 2021
			May 31, 2021
Assets

Current Assets:
Cash and cash equivalents	$	10,173,808	$	4,199,311
Accounts receivable, less allowance for doubtful accounts of $20,293 and $837,415 as of February 28, 2022 and May 31, 2021, respectively		1,158,738		1,455,051
Inventories, net		3,231,430		3,206,255
Prepaid expenses and other		667,129		370,290
Total current assets		15,231,105		9,230,907

Property and equipment, net of accumulated depreciation and amortization of $2,046,612 and $1,972,357 as of February 28, 2022 and May 31, 2021, respectively		263,048		310,520

Right of use assets, net of accumulated amortization of $658,773 and $469,077 as of February 28, 2022 and May 31, 2021, respectively		1,367,863		1,553,081

Investments		165,324		165,324

Intangible assets, net of accumulated amortization of $49,253 and $126,769 as of February 28, 2022 and May 31, 2021, respectively		386,013		294,830

Other assets		146,980		264,151
Total Assets	$	17,560,333	$	11,818,813

Liabilities and Shareholders' Equity

Current Liabilities:
Accounts payable and accrued expenses	$	2,608,840	$	583,380
Accrued compensation		537,284		388,896
Advances from customers		3,213,052		-
Lease liability, current portion		338,744		327,944
Total current liabilities		6,697,920		1,300,220
Lease liability, net of current portion		1,104,611		1,291,570
Total Liabilities		7,802,531		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 February 28, 2022 and May 31, 2021		-		-
Preferred stock, undesignated, 0 par value, 4,428,571 shares authorized, NaN issued and outstanding as of February 28, 2022 and May 31, 2021		-		-
Common stock, $0.08 par value, 25,000,000 shares authorized, 12,851,924 and 12,307,157 issued and outstanding at February 28, 2022 and May 31, 2021, respectively		1,028,152		984,571
Additional paid-in-capital		42,108,865		38,836,743
Accumulated other comprehensive loss		(60,857)		(47,956)
Accumulated deficit		(33,318,358)		(30,546,335)
Total Shareholders' Equity		9,757,802		9,227,023
Total Liabilities and Shareholders' Equity	$	17,560,333	$	11,818,813

BIOMERICA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)

For the Nine Months Ended February 28, 2021 (As Restated)

	Common Stock			Series A 5% Convertible Preferred Stock			Additional		Accumulated Other Comprehensive		Accumulated
	Shares	Amount		Shares		Amount	Paid-in Capital		Loss		Deficit			Total
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	81,750		6,540	-		-		89,915		-		-		96,455
Net proceeds from ATM	158,889		12,711	-		-		998,764		-		-		1,011,475
Foreign currency translation	-		-	-		-		-		(8,687)		-		(8,687)
Conversion of preferred to common stock	321,429		25,714	(321,429)		(25,714)		-		-		-		-
Compensation expense in connection with options granted	-		-	-		-		1,022,320		-		-		1,022,320
Net loss	-		-	-		-		-		-		(5,735,033)		(5,735,033)

Balances, February 28, 2021, restated	12,302,157	$	984,170	-	$	-	$	38,499,055	$	(48,528)	$	(28,835,114)	$	10,599,583

For the Nine Months Ended February 28, 2022

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

Exercise of stock options	23,500		1,880	-		-		37,295		-		-		39,175
Net proceeds from ATM	521,267		41,701	-		-		2,275,459		-		-		2,317,160
Foreign currency translation	-		-	-		-		-		(12,901)		-		(12,901)
Compensation expense in connection with options granted	-		-	-		-		959,368		-		-		959,368
Net loss	-		-	-		-		-		-		(2,772,023)		(2,772,023)

Balances, February 28, 2022	12,851,924	$	1,028,152	-	$	-	$	42,108,865	$	(60,857)	$	(33,318,358)	$	9,757,802

Operating cash flows from operating leases	$	252,252
Right-of-use assets obtained in exchange for new operating lease liabilities	$	-
Weighted average remaining lease term (in years)		4.53
Weighted average discount rate		6.50	%

Operating cash flows from operating leases	$	86,000
Right-of-use assets obtained in exchange for new operating lease liabilities	$	-
Weighted average remaining lease term (in years)		4.02
Weighted average discount rate		6.50%

	Three Months Ended February 28,,				Increase (Decrease)				Three Months Ended August 31,				Increase (Decrease)
	2022		2021		$		%		2022		2021		$		%
Physician's office	$	6,518,000	$	2,384,000	$	4,134,000		173%
Clinical lab		731,000		967,000		(236,000)		-24%	$	1,146,000	$	886,000	$	260,000		29%
Over-the-counter		244,000		148,000		96,000		65%		213,000		79,000		134,000		170%
Contract manufacturing		167,000		130,000		37,000		28%
Physician's office										183,000		257,000		(74,000)		-29%
Contract Manufacturing										95,000		40,000		55,000		138%
Total	$	7,660,000	$	3,629,000	$	4,031,000		111%	$	1,637,000	$	1,262,000	$	375,000		30%

Exhibit No.				Description

	3.1		*	Amended and Restated Bylaws of the Company

	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.INS-XBRL Instance Document
101.SCH-XBRL Taxonomy Extension Schema Document 101.CAL-XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF–XBRL Taxonomy Extension Definition Linkbase Document 101.LAB-XBRL Taxonomy Extension Label Linkbase Document 101.PRE-XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibits 101) * Filed herein.

	BIOMERICA, INC.

Date: ~~April 14,~~October 13, 2022
	By:	/S/ Zackary S. Irani
		Zackary S. Irani
		Chief Executive Officer
		(Principal Executive Officer)

Date: ~~April 14,~~October 13, 2022
	By:	/S/ Steve Sloan
		Steve Sloan
		Chief Financial Officer
		(Principal Financial Officer)