UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE FISCAL YEAR ENDED MAY 31, 2009
or
[ ] Transition Report Under Section 13 or 15(d) of The Securities Exchange
Act Of 1934
For The Transition Period From ______ To ______
COMMISSION FILE NUMBER: 0-8765
BIOMERICA, INC.
(Exact Name of registrant as specified in its charter)
DELAWARE 95-2645573
(State or other jurisdiction of (I.R.S. Employer
Incorporation of organization) Identification No.)
1533 MONROVIA AVENUE, NEWPORT BEACH, CA 92663
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER:
(949) 645-2111
Securities registered under Section 12(b) of the Exchange Act:
(TITLE OF EACH CLASS) (NAME OF EACH EXCHANGE ON WHICH REGISTERED)
--------------------- -------------------------------------------
NONE OTC-BULLETIN BOARD
Securities registered pursuant to Section 12(g) of the Act:
(TITLE OF EACH CLASS)
COMMON STOCK, PAR VALUE $0.08
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act Yes [_] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Securities Act. Yes [X] No [_]
Note - Checking the box above will not relieve any registrant required to file
reports pursuant to Section 13 or 15(d) of the Exchange Act from their
obligations under those Sections.
Indicate by check whether the registrant (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes [X] No [_]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Website, if any, every Interactive Date File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T (paragraph
232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).
Yes [_] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (paragraph 229.405 of this chapter) is not contained herein,
and no disclosure will be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is a large accelerated, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of "large accelerated filer", "accelerated filer", and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer [_] Accelerated Filer [_]
Non-Accelerated Filer [_] Smaller Reporting Company [X]
Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Act).
Yes [_] No [X]
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as the last
business day of the registrant's most recently completed second fiscal quarter
(based upon 5,302,847 shares held by non-affiliates and the closing price of
$0.43 per share for Common Stock in the over-the-counter market as of November
30, 2008): $2,280,224
Indicate the number of shares outstanding of each of the registrant's common
stock, par value $0.08, outstanding as of August 28, 2009: 6,631,039
DOCUMENTS INCORPORATED BY REFERENCE: Part III contains information incorporated
by reference to the Company's proxy statement for its 2009 Annual Meeting of
Stockholders, which will be filed not later than 120 days after the end of the
Company's fiscal year ended May 31, 2009. The Exhibit Index incorporates by
reference various documents previously filed with the Securities and Exchange
Commission.
PART I*
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS OVERVIEW
THE COMPANY
Biomerica, Inc. ("Biomerica", the "Company", "we" or "our") was incorporated in
Delaware in September 1971 as Nuclear Medical Systems, Inc.
The Company develops, manufactures, and markets medical diagnostic products
designed for the early detection and monitoring of chronic diseases and medical
conditions. Our medical diagnostic products are sold worldwide in two markets:
1) clinical laboratories and 2) point of care (physicians' offices and
over-the-counter drugstores). Our diagnostic test kits are used to analyze blood
or urine from patients in the diagnosis of various diseases and other medical
complications, or to measure the level of specific hormones, antibodies,
antigens or other substances, which may exist in the human body in extremely
small concentrations.
Technological advances in medical diagnostics have made it possible to perform
diagnostic tests within the home and the physician's office (the point of care),
rather than in the clinical laboratory. One of our objectives has been to
develop and market rapid diagnostic tests that are accurate, employ easily
obtained specimens, and are simple to perform without instrumentation. Our
over-the-counter and professional rapid diagnostic products help to manage
existing medical conditions and may save lives through early detection and
prompt diagnosis. Until recently, tests of this kind required the services of
medical technologists and sophisticated instrumentation. Frequently, results
were not available until at least the following day. We believe that rapid point
of care tests are as accurate as laboratory tests when used properly and they
require no instrumentation, give reliable results in minutes and can be
performed with confidence in the home or the physician's office.
Our clinical laboratory diagnostic products include tests for bone and anemia
conditions, gastrointestinal diseases, food intolerance, diabetes and others.
These diagnostic test kits utilize enzyme immunoassay technology. Some of these
products have not yet been submitted for clearance by the FDA for diagnostic
use, but can be sold in various foreign countries.
-1-
A significant part of Biomerica's manufacturing and assembly operations are
located in Mexicali, Mexico, in order to reduce the cost of manufacturing and
compete more effectively worldwide. Biomerica maintains its headquarters in
Newport Beach, California where it houses administration, research and
development, sales and marketing, and customer services.
Biomerica has undergone no material change in the mode of conducting its
business other than as described above and it did not dispose of any material
amount of its assets in fiscal 2009 and 2008 except for its ownership in Lancer
Orthodontics in fiscal 2008.
PRODUCTION
Most of our diagnostic test kits are processed and assembled at our facilities
in Newport Beach, California and in Mexicali, Mexico. During fiscal 2003, the
diagnostics division established a manufacturing facility in Mexicali, Mexico.
We moved a significant portion of our diagnostic production (primarily packaging
and assembly) to that facility. We sublease facilities from and subcontract with
Lancer Orthodontics (a former subsidiary) to provide labor and other services.
Production of diagnostic tests can involve formulating component antibodies and
antigens in specified concentrations, attaching a tracer to the antigen, filling
components into vials, packaging and labeling. We continually engage in quality
control procedures to assure the consistency and quality of our products and to
comply with applicable FDA regulations. In June 2008 the Company incorporated in
Mexico under the name of Biomerica de Mexico for the purpose of establishing our
own mequiladora operation in Mexico at some time in the future.
All manufacturing production is regulated by the FDA Good Manufacturing
Practices for medical devices. We have an internal quality control department
that monitors and evaluates product quality and output. We also have an internal
Quality Systems department which ensures that our operating procedures are in
compliance with current FDA, CE Mark and ISO regulations. We either produce our
own antibodies and antigens or purchase these materials from qualified vendors.
We have alternate, approved sources for raw materials procurement and we do not
believe that material availability in the foreseeable future will be a problem.
RESEARCH AND DEVELOPMENT
Biomerica is engaged in research and development to broaden its diagnostic
product line in specific areas. Research and development expenses include the
costs of materials, supplies, personnel, facilities and equipment as well as
outside contract services. Consolidated research and development expenses
incurred by Biomerica for the years ended May 31, 2009 and 2008 aggregated
$278,308 and $259,085, respectively.
MARKETS AND METHODS OF DISTRIBUTION
Biomerica has approximately 450 current customers for its diagnostic business,
of which approximately 100 are distributors and the balance are hospital and
clinical laboratories, medical research institutions, medical schools,
pharmaceutical companies, chain drugstores, wholesalers and physicians' offices.
We rely on unaffiliated distributors, advertising in medical and trade journals,
exhibitions at trade conventions, direct mailings and an internal sales staff to
market our diagnostic products. We target two main markets: (a) clinical
laboratories and (b) point of care testing (physicians' offices and
over-the-counter drug stores). Marketing plans are utilized in targeting each of
the two markets.
For the year ended May 31, 2009 the Company had two customers which accounted
for 26% of consolidated sales and during fiscal 2008 the Company had two
customers which accounted for 29% of consolidated sales.
BACKLOG
At May 31, 2009 and 2008 Biomerica had a backlog of approximately $97,000 and
$346,000 respectively.
RAW MATERIALS
The principal raw materials utilized by Biomerica consist of various chemicals,
serums, reagents and packaging supplies. Almost all of our raw materials are
available from several sources, and we are not dependent upon any single source
of supply or a few suppliers. For the years ended May 31, 2009 and 2008, no
company accounted for more than 10% of the consolidated purchases of raw
materials.
We maintain inventories of antibodies and antigens as components for our
diagnostic test kits. Some sales orders are processed on the day received while
others are processed at a later date depending on the quantity and type of
order.
-2-
COMPETITION
Immunodiagnostic products are currently produced by more than 100 companies.
Biomerica is not a significant factor in the overall market.
Our competitors vary greatly in size. Many are divisions or subsidiaries of
well-established medical and pharmaceutical concerns which are much larger than
Biomerica and expend substantially greater amounts than we do for research and
development, manufacturing, advertising and marketing.
The primary competitive factors affecting the sale of diagnostic products are
uniqueness, quality of product performance, price, service and marketing. We
believe we compete primarily on the basis of the uniqueness of our products, the
quality of our products, the speed of our test results, our patent position, our
favorable pricing and our prompt shipment of orders. We offer a broader range of
products than many competitors of comparable size, but to date have had limited
marketing capability. We are working on expanding this capability through
marketing and strategic cooperation with larger companies and distributors.
GOVERNMENT REGULATION OF OUR DIAGNOSTIC BUSINESS
As part of our diagnostic business, we sell products that are legally defined to
be medical devices. As a result, we are considered to be a medical device
manufacturer, and as such are subject to the regulations of numerous
governmental entities. These agencies include the Food and Drug Administration
the "FDA"), the United States Drug Enforcement Agency (the "DEA"), Environmental
Protection Agency, Federal Trade Commission, Occupational Safety and Health
Administration, U.S. Department of Agriculture ("USDA"), and Consumer Product
Safety Commission. These activities are also regulated by various agencies of
the states and localities in which our products are sold. These regulations
govern the introduction of new medical devices, the observance of certain
standards with respect to the manufacture and labeling of medical devices, the
maintenance of certain records and the reporting of potential product problems
and other matters.
The Food, Drug & Cosmetic Act of 1938 (the "FDCA") regulates medical devices in
the United States by classifying them into one of three classes based on the
extent of regulation believed necessary to ensure safety and effectiveness.
Class I devices are those devices for which safety and effectiveness can
reasonably be ensured through general controls, such as device listing, adequate
labeling, pre-market notification and adherence to the Quality System Regulation
("QSR") as well as Medical Device Reporting (MDR), labeling and other regulatory
requirements. Some Class I medical devices are exempt from the requirement of
Pre-Market Approval ("PMA") or clearance. Class II devices are those devices for
which safety and effectiveness can reasonably be ensured through the use of
special controls, such as performance standards, post-market surveillance and
patient registries, as well as adherence to the general controls provisions
applicable to Class I devices. Class III devices are devices that generally must
receive pre-market approval by the FDA pursuant to a pre-market approval
application to ensure their safety and effectiveness. Generally, Class III
devices are limited to life-sustaining, life-supporting or implantable devices.
However, this classification can also apply to novel technology or new intended
uses or applications for existing devices. The Company's products are primarily
either Class I or Class II medical devices. The following is a breakdown of the
Biomerica products by class:
Class I - Fortel(TM) Ovulation test, EZ-LH(TM) Rapid Ovulation test
Class II - GAP(tm) IgG H. Pylori ELISA kit, GAP (TM)IgM H. Pylori ELISA kit,
Anti-thyroglobulin ELISA kit, anti-TPO ELISA kit, PTH (intact) ELISA kit,
Calcitonin ELISA kit, Erythropoietin ELISA kit, ACTH ELISA kit, Isletest(tm) GAD
ELISA kit, IAA ELISA kit, GAP(tm) IgA H. Pylori ELISA kit, C-Peptide ELISA kit,
Myoglobin ELISA, Troponin I ELISA, HS-CRP ELISA, Allerquant (tm) Food
Intolerance Kits, Allerquant( tm) Food Additive Intolerance Kit, Gliadin IgG and
IgA kits, Transglutaminase IgA kit, Fortel Ultra Midstream (OTC and plastic
stick), EZ-HCG(tm) Rapid Pregnancy test (professional and dipstick), EZ
Detect(tm) Fecal Occult Blood test (Physician's dispenser pack and OTC),
Aware(tm) Breast Self-Examination, drugs of abuse rapid tests, EZ-HP
Professional, EZ-HP OTC, Fortel Microalbumin test, Fortel Cat Allergy Test.
Class III - Isletest(tm) ICA ELISA kit, EZ PSA (Professional and OTC).
If the FDA finds that the device is not substantially equivalent to a predicate
device, the device may be deemed a Class III device, and a manufacturer or
seller is required to file a PMA application. Approval of a PMA application for
a new medical device usually requires, among other things, extensive clinical
data on the safety and effectiveness of the device. PMA applications may take
years to be approved after they are filed, but approval is required before the
product can be sold for general use in the U.S. In addition to requiring
clearance or approval for new medical devices, FDA rules also require a new
510(k) filing and review period, prior to marketing a changed or modified
version of an existing legally marketed device, if such changes or modifications
could significantly affect the safety of effectiveness of that device. The FDA
prohibits the advertisement or promotion of any approved or cleared device for
uses other than those that are stated in the device's approved or cleared
application.
-3-
Pursuant to FDA requirements, we have registered our manufacturing facility with
the FDA as a medical device manufacturer, and listed the medical devices we
manufacture. We are also subject to inspection on a routine basis for compliance
with FDA regulations. This includes the Quality System Requirements, which
requires that we manufacture our products and maintain our documents in a
prescribed manner with respect to issues such as design controls, manufacturing,
testing and validation activities. Further, we are required to comply with other
FDA requirements with respect to labeling, and the Medical Device Reporting
(MDR) regulation which requires that we provide information to the FDA on deaths
or serious injuries alleged to have been associated with the use of our
products, as well as product malfunctions that are likely to cause or contribute
to death or serious injury if the malfunction were to recur. We believe that we
are currently in material compliance with all relevant QSR and MDR requirements.
In addition, our facility is required to have a California Medical Device
Manufacturing License. The license is not transferable and must be renewed
annually. Approval of the license requires that we be in compliance with QSR,
labeling and MDR regulations. Our license expires on March 16, 2010. These
licenses are renewed periodically, and to date we have never failed to obtain a
renewal.
Through compliance with FDA and California regulations, we can market our
medical devices throughout the United States. International sales of medical
devices are also subject to the regulatory requirements of each country. In
Europe, the regulations of the European Union require that a device have a "CE
Mark" in order to be sold in EU countries. The directive went into effect
beginning December 7, 2003. The Company has completed the process for complying
with the "CE Mark" directives, In Vitro Directive 98/79/EC, ISO 13485 for
medical devices, and Medical Device Directive 93/42/EEC. At present the
regulatory international review process varies from country to country. We, in
general, rely upon our distributors and sales representatives in the foreign
countries in which we market our products to ensure that we comply with the
regulatory laws of such countries. We believe that our international sales to
date have been in compliance with the laws of the foreign countries in which we
have made sales. Exports of most medical devices are also subject to certain FDA
regulatory controls.
The following products are FDA-cleared and may be sold to clinical laboratories,
physician laboratories and/or retail outlets in the United States as well as
internationally:
ACTH ELISA Kit
Anti-thyroglobulin ELISA kit
Anti-TPO ELISA Kit
AWARE(tm) Breast Self-Examination Kit
Calcitonin ELISA Kit
Drugs-of-Abuse Rapid Tests
Erythropoietin ELISA Kit
EZ-HCG Rapid Pregnancy Test
Fortel Microalbumin Test
EZ-LH(tm) Rapid Ovulation Test
EZ Detect(tm) Fecal Occult Blood Test (Physician's package, OTC package)
GAP IgG H.Pylori ELISA Kit
HS-CRP ELISA
Drugs-of-Abuse Rapid Tests
Myoglobin ELISA
PTH (Intact) ELISA Kit
Troponin I ELISA
The following products are not FDA-cleared. These are sold internationally and
can be sold in the U.S. "FOR RESEARCH ONLY":
Allerquant(tm) IgG Food Intolerance ELISA Kit (90-foods, 14-foods, custom kits)
Allerquant IgG Food Additives Kit
C-Peptide ELISA Kit
EZ-PSA Rapid Test
EZ-H. Pylori Rapid Test
Fortel Cat Allergy Test
Fortel Microalbumin Test
Fortel(tm) Ultra Midstream Pregnancy Test
Fortel(tm) Ovulation Test
GAP(tm) IgM H. Pylori ELISA Kit
GAP(tm) IgA H. Pylori ELISA Kit
Gliadin IgG ELISA Kit
Gliadin IgA ELISA Kit
Transglutaminase IgA ELISA Kit
Isletest(tm) GAD ELISA Kit
Isletest(tm) ICA ELISA Kit
Isletest(tm) IAA ELISA Kit
-4-
Biomerica is licensed to design, develop, manufacture and distribute IN VITRO
diagnostic and medical devices and is subject to the Code of Federal
Regulations, Section 21, parts 800 - 1299. The FDA is the governing body that
assesses and issues Biomerica's license to assure that it complies with these
regulations. Biomerica is currently licensed, and its last assessment was in
March 2006. During the inspection the FDA noted five observations that were
corrected in a timely manner. Biomerica is also registered and licensed with the
State of California's Department of Health Services. The Company believes that
all Biomerica products sold in the U.S. comply with the FDA regulations.
Biomerica's Quality Management System is in compliance with the International
Standards Organization (ISO) EN ISO 13485:2003. EN ISO 13485:2003 is an
internationally recognized standard in which companies establish their methods
of operation and commitment to quality.
SEASONALITY OF BUSINESS
The businesses of the Company and its subsidiary have not been subject to
significant seasonal fluctuations.
INTERNATIONAL BUSINESS
Most of Biomerica's property and equipment are located within Southern
California. The Company currently has a minor amount of property and equipment
located in Mexico. The following table sets forth the dollar volume of revenue
attributable to sales to domestic customers and foreign customers during the
last two fiscal years for Biomerica:
Year Ended May 31, 2009 2008
Europe $2,631,000 /53.3% $2,549,000 /51.7%
U.S. Customers 1,198,000 /24.3% 1,359,000 /27.5%
Asia 956,000 /19.4% 854,000 /17.3%
S. America 92,000 /1.9% 70,000 /1.4%
Middle East 40,000 /.8% 57,000 /1.1%
OTHER FOREIGN 18,000 /.3% 38,000 /1.0%
------------------------------------------------------------------------
Total Revenues $4,935,000 /100% $4,927,000 /100%
We recognize that our foreign sales could be subject to some special or unusual
risks, which are not present in the ordinary course of business in the United
States. Changes in economic factors, government regulations, terrorism and
import restrictions all could impact sales within certain foreign countries.
Foreign countries have licensing requirements applicable to the sale of
diagnostic products, which vary substantially from domestic requirements;
depending upon the product and the foreign country, these may be more or less
restrictive than requirements within the United States. Foreign diagnostic sales
at Biomerica are made primarily through a network of approximately 100
independent distributors in approximately 60 countries.
INTELLECTUAL PROPERTY
We regard the protection of our copyrights, service marks, trademarks and trade
secrets as important to our future success. We rely on a combination of
copyright, trademark, service mark and trade secret laws and contractual
restrictions to establish and protect our proprietary rights in products and
services. We have entered into confidentiality and invention assignment
agreements with our employees and contractors, and nondisclosure agreements with
most of our fulfillment partners and strategic partners to limit access to and
disclosure of proprietary information. We cannot be certain that these
contractual arrangements or the other steps taken by us to protect our
intellectual property will prevent misappropriation of our technology. We have
licensed in the past, and expect that we may license in the future, certain of
our proprietary rights, such as trademarks or copyrighted material, to third
parties. While we attempt to ensure that the quality of our product brands is
maintained by such licensees, we cannot be certain that such licensees will not
take actions that might hurt the value of our proprietary rights or reputation.
BRANDS, TRADEMARKS, PATENTS, LICENSES
We registered the tradenames "Fortel", "Isletest", "Nimbus" and "GAP" with the
Office of Patents and Trademarks on December 31, 1985. Our unregistered
tradenames are "EZ-Detect", "Candiquant," "Candigen", "EZ-H.P." and EZ-PSA". A
trademark for "Aware" was issued and assigned in November 2001. In addition,
Biomerica holds the following patents: Immunotherapy Agents for Treatment of IgE
Mediated Allergies and Allergen-thymic Hormone Conjugates for Treatment of IgE
-5-
Mediated Allergies, U.S. Patent #5,275,814, issued January 4, 1994 and
Diagnostic Test for Measuring Islet Cell Autoantibodies and Reagents Relating
Thereto, U.S. Patent #5,786,221, issued July 28, 1998. Biomerica has obtained
the rights to manufacture and sell certain products. In some cases royalties are
paid on the sales of these products. Biomerica anticipates that it will license
or purchase the rights to other products or technology in the future.
The laws of some foreign countries do not protect our proprietary rights to the
same extent as do the laws of the U.S. Effective copyright, trademark and trade
secret protection may not be available in such jurisdictions. Our efforts to
protect our intellectual property rights may not prevent misappropriation of our
content. In addition, there can be no assurance that Biomerica is not violating
any third party patents.
On March 27, 2009 the Company signed an Asset Purchase Agreement with a European
company for the purchase of certain technology related to the manufacture of
certain medical diagnostic tests. Consideration for this purchase was a nominal
deposit upon signing the agreement and a nominal transfer fee upon successful
commencement of production of the products. A royalty shall be paid for five
years beginning on the date of first sale of finished product derived from the
Purchased Assets.
EMPLOYEES
As of May 31, 2009 and 2008, the Company employed 33 employees of whom 2 are
part-time employees in the United States. The following is a breakdown between
departments:
2009 2008
------------
Administrative 4 5
Marketing & Sales 3 3
Research & Development 3 3
Production and Operations 23 22
-------------
Total 33 33
In addition, Biomerica contracts with Lancer for the services of 17 people at
its Mexican facility. We also engage the services of various outside Ph.D. and
M.D. consultants as well as medical institutions for technical support on a
regular basis. We are not a party to any collective bargaining agreement and
have never experienced a work stoppage. We consider our employee relations to be
good.
ITEM 1A. RISK FACTORS
Distribution - Biomerica has entered into various exclusive and non-exclusive
distribution agreements (the "Agreements") which generally specify territories
of distribution. The Agreements range in term from one to five years. Biomerica
may be dependent upon such distributors for the marketing and selling of its
products worldwide during the terms of these agreements. Such distributors are
generally not obligated to sell any specified minimum quantities of the
Company's product to keep the exclusive while non-exclusive distributors have no
minimum purchase requirements. There can be no assurance of the volume of
product sales that may be achieved by such distributors. The Company has several
large distributors which account for a significant portion of its business. The
loss of one of these distributors could adversely affect the Company's financial
results.
Government Regulation - Biomerica's immunodiagnostic products are regulated in
the United States as medical devices primarily by the FDA and as such, require
regulatory clearance or approval prior to commercialization in the United
States. Pursuant to the Federal Food, Drug and Cosmetic Act, and the regulations
promulgated thereunder, the FDA regulates, among other things, the clinical
testing, manufacture, labeling, promotion, distribution, sale and use of medical
devices in the United States. Failure of Biomerica to comply with applicable
regulatory requirements can result in, among other things, warning letters,
fines, injunctions, civil penalties, recall or seizure of products, total or
partial suspension of production, the government's refusal to grant pre-market
clearance or pre-market approval of devices, withdrawal of marketing approvals,
and criminal prosecution.
Sales of medical devices outside the United States are subject to foreign
regulatory requirements that vary widely from country to country. The time
required to obtain registrations or approvals required by foreign countries may
be longer or shorter than that required for FDA clearance or approval, and
requirements for licensing may differ significantly from FDA requirements. There
can be no assurance that Biomerica will be able to obtain regulatory clearances
for its current or any future products in the United States or in foreign
markets.
European Community - Biomerica is required to obtain certification in the
European community to sell products in those countries. The certification
requires Biomerica to maintain certain quality standards. Biomerica has been
granted certification and undergoes annual audits to assure that the Company
remains in compliance with regulations. There is no assurance that Biomerica
will be able to retain its certification in the future. The loss of business or
the ability to conduct business in Europe could materially adversely affect the
results of the Company.
-6-
Risk of Product Liability - Testing, manufacturing and marketing of Biomerica's
products entails risk of product liability. Biomerica currently has product
liability insurance. There can be no assurance, however, that Biomerica will be
able to maintain such insurance at a reasonable cost or in sufficient amounts to
protect Biomerica against losses due to product liability. An inability to
obtain sufficient insurance coverage could prevent or inhibit the
commercialization of Biomerica's products. In addition, a product liability
claim or recall could have a material adverse effect on the business or
financial condition of the Company.
Hazardous Materials - Biomerica's manufacturing and research and development
involves the controlled use of hazardous materials and chemicals. Although
Biomerica believes that safety procedures for handling and disposing of such
materials comply with the standards prescribed by state and Federal regulations,
the risk of accidental contamination or injury from these materials cannot be
completely eliminated. In the event of such an accident, the Company could be
held liable for any damages that result and any such liability could exceed the
resources of the Company. The Company may incur substantial costs to comply with
environmental regulations.
Common stock performance - The common stock of the Company is subject to
fluctuations as a result of a variety of factors including, but not limited to,
financial results, general economic conditions, fluctuations in sales volumes
and expenses, competition, and our failure to generate new products.
ITEM 2. DESCRIPTION OF PROPERTY
The Company is currently leasing its facilities on a month-to-month agreement
while it explores various other facility options. The facilities are owned and
operated by Ms. Janet Moore (an officer and director of the Company), Ilse
Sultanian, Susan Irani Rigdon and Jennifer Irani, some of whom are shareholders.
Effective May 1, 2007, the monthly rent was set at $14,000. Management believes
there would be no significant difference in the terms of the property rental if
the Company was renting from a third party. Total gross rent expense for this
facility was approximately $168,000 plus proportionate insurance and real estate
taxes per year during each of the years ended May 31, 2009 and 2008,
respectively.
On June 18, 2009, the Company entered into an agreement to lease a building in
Irvine, California, commencing September 1, 2009 and ending August 31, 2016. The
initial base rent is set at $18,490 with a security deposit of $22,080. The sum
of $40,568 was due upon execution of the lease. Management is currently working
on plans for the relocation of the Company which should take place by the end of
the calendar year.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Since June 20, 2002, the Company's stock has been quoted on the OTC Bulletin
Board under the symbol "BMRA.OB". The following table shows the high and low bid
prices for Biomerica's common stock for the periods indicated, based upon data
reported by Yahoo Finance. Such quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commissions, and may not necessarily represent
actual transactions.
Bid Prices
HIGH LOW
Quarter ended:
May 31, 2009 $0.70 $0.28
February 28, 2009 $0.60 $0.25
November 30, 2008 $0.99 $0.45
August 31, 2008 $1.05 $0.75
May 31, 2008 $1.40 $0.76
February 29, 2008 $1.55 $1.02
November 30, 2007 $1.89 $1.10
August 31, 2007 $1.50 $0.71
-7-
As of May 31, 2009, the number of holders of record of Biomerica's common stock
was approximately 880, excluding stock held in street name. The number of record
holders does not bear any relationship to the number of beneficial owners of the
Common Stock.
The Company has not paid any cash dividends on its Common Stock in the past and
does not plan to pay any cash dividends on its Common Stock in the foreseeable
future. The Company's Board of Directors intends, for the foreseeable future, to
retain any earnings to finance the continued operation and expansion of the
Company's business.
The table below provides information relating to our equity compensation plans
as of May 31, 2009:
Securities Remaining
Available for Future Issuance
Securities Number of Securities to Be Compensation Plans Under Compensation Plans
Plan Issued Upon Exercise of Weighted-Average Exercise (Excluding those Reflected in
Category Outstanding Options Price of Outstanding Options First Column)
Equity compensation
Plans approved by 1,472,675 $0.54 564,125
Securities holders
ITEM 6. SELECTED FINANCIAL DATA
None.
-8-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
EXCEPT FOR HISTORICAL INFORMATION CONTAINED HEREIN, THE STATEMENTS IN THIS FORM
10-K MAY BE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934 AND SECTION 27A OF THE SECURITIES ACT OF 1933.
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES
WHICH MAY CAUSE BIOMERICA'S RESULTS IN FUTURE PERIODS TO DIFFER MATERIALLY FROM
FORECASTED RESULTS. THESE RISKS AND UNCERTAINTIES INCLUDE, AMONG OTHER THINGS,
THE CONTINUED DEMAND FOR THE COMPANY'S PRODUCTS, AVAILABILITY OF RAW MATERIALS,
THE STATE OF THE ECONOMY, RESULTS OF RESEARCH AND DEVELOPMENT ACTIVITIES AND THE
CONTINUED ABILITY OF THE COMPANY TO MAINTAIN THE LICENSES AND APPROVALS
REQUIRED. THESE AND OTHER RISKS ARE DESCRIBED IN THE COMPANY'S ANNUAL REPORT ON
FORM 10-K AND IN THE COMPANY'S OTHER FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION.
EXCEPT AS MAY BE REQUIRED BY APPLICABLE LAW, WE MAY NOT UPDATE OR REVISE OUR
FORWARD-LOOKING STATEMENTS AND THE LACK OF SUCH UPDATE DOES NOT IMPLY THAT
ACTUAL EVENTS ARE AS ORIGINALLY EXPRESSED BY SUCH FORWARD-LOOKING STATEMENTS.
YOU SHOULD READ THE DISCLOSURES IN THIS REPORT AND OTHER REPORTS WHICH WE FILE
WITH THE SECURITIES AND EXCHANGE COMMISSION.
RESULTS OF OPERATIONS
Fiscal 2009 Compared to Fiscal 2008
Our consolidated net sales were $4,934,771 for fiscal 2009 compared to
$4,926,505 for fiscal 2008. This represents an increase of $8,266, or 0% for
fiscal 2009.
Cost of sales in fiscal 2009 as compared to fiscal 2009 increased by $174,025 or
6.2%. The percentage of cost of sales relative to sales increased from 56.7% to
60.0%, or by 3.3% due to various factors which included write-offs in fiscal
2009 of new product scrap, obsolete inventory, increased reserves for
slow-moving inventory and to lower capitalization of labor and overhead into
inventory on some work in process and finished goods.
Selling, general and administrative costs increased in fiscal 2009 as compared
to fiscal 2008 by $76,848 or 5.6%. These increases were a result of a variety of
factors which included increase in the reserve for bad debt, Sarbanes-Oxley
consulting, trade show expense, wages, option expense and startup costs for
Biomerica Europe GmbH, the Company's newly formed subsidiary.
Research and development expense was $278,308 in fiscal 2009 as compared to
$259,085 in fiscal 2008. This is an increase of $19,223, or 7.4%. The Company
continues to work on the development of several new products and anticipates
that it will increase its efforts for development and product approvals in the
next fiscal year.
Interest expense decreased from $49,542 to $27,521 in fiscal 2009 as compared to
fiscal 2008, or 44.4%. The change in interest expense resulted from the decrease
in the balance on the shareholder/note payable and the equipment loan, as well
as a decrease in the interest rate on the accrued wages payable and equipment
loan. Interest income decreased from $33,552 to $29,867, primarily due to lower
interest rates.
Other income decreased by $1,132,370 in fiscal 2009 as compared to fiscal 2008.
This decrease was a result of one-time income from the sale of the Company's
interest in Lancer Orthodontics as well as income received as a result of the
one-time sale of a warrant held in Hollister-Stier in fiscal 2008.
LIQUIDITY AND CAPITAL RESOURCES
As of May 31, 2009, the Company had cash and cash equivalents in the amount of
$1,595,823, and a short-term investment (certificate of deposit) of $100,000 as
compared to $2,022,380 of cash and cash equivalents as of May 31, 2008. As of
May 31, 2009 and 2008, the Company had working capital of $3,831,112 and
$3,428,936, respectively. In May 2008 the Company sold its investment in Lancer
Orthodontics, Inc., for a net amount of $1,083,444, which increased the cash
position of the Company. In June 2007 the Company also exercised a warrant and
sold the underlying shares that it owned in Hollister-Stier (valued on the books
at zero cost) for a net amount of $697,034. During 2009, cash used in operations
was $101,999 as compared to cash used in fiscal 2008 of $194,595. During fiscal
2009, cash used in investing activities was $215,890 as compared to cash
provided by investing activities of $1,515,695 in fiscal 2008. Cash of $85,890
and $264,783 for fiscal 2009 and 2008, respectively, was used for the purchase
of property and equipment. In fiscal 2008 proceeds from the sale of marketable
securities was $1,780,478. Cash used in financing activities in fiscal 2009 was
$106,942 as compared to cash provided by financing activities of $184,380 in
fiscal 2008. During fiscal 2009, Biomerica repaid shareholder debt of $95,936 as
compared to $61,056 in fiscal 2008. The change in cash and cash equivalents at
May 31, 2009 compared to May 31, 2008 was a decrease of $426,557.
-9-
On February 13, 2009, the Company entered into a Small Business Banking
Agreement with Union Bank of California for a one year business line (the
"Line") of credit in the amount of $400,000. The interest rate for the line of
credit is the prime rate in effect on the first day of the billing period, as
published in the Wall Street Journal Prime West Coast Edition, plus a spread of
1.00%. Minimum monthly payments will be the sum of (i) the amount of interest
charge for the billing period, plus (ii) any amount past due, plus (iii) any
fees, late charges and/or out-of-pocket expenses assessed. If the Line is not
renewed as of the last day of the term of the Line, the entire unpaid balance of
the Line, including unpaid fees and charges will be due and payable. The Company
has granted the bank security interest in the assets of the Company as
collateral.
The Company must maintain for not less than thirty consecutive days in every
calendar year, a period in which all amounts due under the revolving credit
agreements with the Bank are at a zero balance. The Company did not owe anything
on this line of credit as of May 31, 2009.
In February 2007 the Company obtained a $200,000 working capital line of credit
and was approved for a $200,000 equipment loan with Commercial Bank of
California. The credit line and the equipment loan were collateralized by
substantially all of the assets of the Company. On February 13, 2009 the Company
entered into a Small Business Bank Agreement for a Business Loan with Union Bank
for $133,000. Loan proceeds were disbursed in one single funding on March 5,
2009. The loan was used for the purpose of paying off the business loan, which
had been established with Commercial Bank, for the acquisition of manufacturing
equipment. As of May 31, 2009 and 2008, $122,781 and $162,993 was owed on the
equipment loan and there was no outstanding balance due on the working capital
line of credit, respectively. The loan is payable in thirty-six monthly payments
of approximately $4,000. The interest rate is 6.50% and the payments are to be
made by automatic deduction from the Company's Union Bank account. Initial fees
for the loan were $740.
Payments on the shareholder's note payable were made during fiscal 2009,
according to the agreement through July 31, 2008, at which time the remaining
balance on the loan was paid in full.
As of May 31, 2009, the Company no longer has a line of credit with Commercial
Bank of California.
SUBSEQUENT EVENTS
On June 18, 2009, the Company entered into an agreement to lease a building in
Irvine, California, commencing September 1, 2009 and ending August 31, 2016. The
initial base rent is set at $18,490 with a security deposit of $22,080. The sum
of $40,568 was due upon execution of the lease. Management is currently working
on plans for the relocation of the Company which should take place by the end of
the calendar year.
CRITICAL ACCOUNTING POLICIES
The discussion and analysis of our financial condition and results of operations
are based on the consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. Note 2 of the Notes to Consolidated Financial Statements describes the
significant accounting policies essential to the consolidated financial
statements. The preparation of these financial statements requires estimates and
assumptions that affect the reported amounts and disclosures.
In general, the critical accounting policies that may require judgments or
estimates relate specifically to the Allowance for Doubtful Accounts, Inventory
Reserves for Obsolescence and Declines in Market Value, Impairment of Long-Lived
Assets, Stock Based Compensation, and Income Tax Accruals.
We believe the following to be critical accounting policies as they require more
significant judgments and estimates used in the preparation of our consolidated
financial statements.
Revenues from product sales are recognized at the time the product is shipped,
customarily FOB shipping point, at which point title passes. An allowance is
established if necessary for estimated returns as revenue is recognized.
The Allowance for Doubtful Accounts is established for estimated losses
resulting from the inability of our customers to make required payments. The
assessment of specific receivable balances and required reserves is performed by
management and discussed with the audit committee. We have identified specific
customers where collection is not probable and have established specific
reserves, but to the extent collection is made, the allowance will be released.
Additionally, if the financial condition of our customers were to deteriorate,
resulting in an impairment of their ability to make payments, additional
allowances may be required.
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Reserves are provided for excess and obsolete inventory, which are estimated
based on a comparison of the quantity and cost of inventory on hand to
management's forecast of customer demand. Customer demand is dependent on many
factors and requires us to use significant judgment in our forecasting process.
We must also make assumptions regarding the rate at which new products will be
accepted in the marketplace and at which customers will transition from older
products to newer products. Once a reserve is established, it is maintained
until the product to which it relates is sold or otherwise disposed of, even if
in subsequent periods we forecast demand for the product.
Historically we were in a loss position for tax purposes, and established a
valuation allowance against deferred tax assets, as we did not believe it was
likely that we would generate sufficient taxable income in future periods to
realize the benefit of our deferred tax assets. Although the Company has
achieved net income in increasing amounts over the last four fiscal years,
predicting future taxable income is difficult, and requires the use of
significant judgment. Due to the fact that many factors can influence
profitability, management determined at May 31, 2008, that $170,000 of
previously allowed for deferred tax assets should be released, which resulted in
an income tax benefit of $170,000 being recognized. Management has determined
that the tax asset should be increased to $238,000 as of May 31, 2009.
Management will re-evaluate this determination periodically.
FACTORS THAT MAY AFFECT FUTURE RESULTS
You should read the following factors in conjunction with the factors discussed
elsewhere in this and our other filings with the Securities and Exchange
Commission and in materials incorporated by reference in these filings. The
following is intended to highlight certain factors that may affect the financial
condition and results of operations of Biomerica, Inc. and are not meant to be
an exhaustive discussion of risks that apply to companies such as Biomerica,
Inc. Like other businesses, Biomerica, Inc. is susceptible to macroeconomic
downturns in the United States or abroad, as were experienced in recently, that
may affect the general economic climate and performance of Biomerica, Inc. or
its customers.
Aside from general macroeconomic downturns, the additional material factors that
could affect future financial results include, but are not limited to: Terrorist
attacks and the impact of such events; diminished access to raw materials that
directly enter into our manufacturing process; shipping labor disruption or
other major degradation of the ability to ship out products to end users;
inability to successfully control our margins which are affected by many factors
including competition and product mix; protracted shutdown of the U.S. border
due to an escalation of terrorist or counter terrorist activity; any changes in
our business relationships with international distributors or the economic
climate they operate in; any event that has a material adverse impact on our
foreign manufacturing operations may adversely affect our operations as a whole;
failure to manage the future expansion of our business could have a material
adverse affect on our revenues and profitability; possible costs in complying
with government regulations and the delays in receiving required regulatory
approvals or the enactment of new adverse regulations or regulatory
requirements; numerous competitors, some of which have substantially greater
financial and other resources than we do; potential claims and litigation
brought by patients or medical professionals alleging harm caused by the use of
or exposure to our products; quarterly variations in operating results caused by
a number of factors, including business and industry conditions; difficulties
encountered during the impending move of the Company's operations to its new
facility and other factors beyond our control. All these factors make it
difficult to predict operating results for any particular period.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements--an amendment of ARB No. 51. This statement
applies to all entities that prepare consolidated financial statements, except
for non-profit organizations, but will affect only those entities that have an
outstanding noncontrolling interest in one or more subsidiaries or that
deconsolidate a subsidiary. SFAS No. 160 is effective for annual periods
beginning December 15, 2008. The Company does not believe that the adoption of
SFAS No. 160 will have a material impact on its financial statements.
In December 2007, the FASB issued SFAS No. 141R, Business Combinations. SFAS
141R establishes a defined measurement period that governs the time period
within which the business combination must be reported. In addition, the revised
standard significantly expands the scope of disclosure requirements. SFAS No.
141R is effective for annual periods beginning after December 15, 2008. The
Company does not believe that the adoption of SFAS No. 141R will have a material
impact on its financial statements.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities-an Amendment of FASB Statement No. 133. This
Statement requires qualitative disclosures about objectives and strategies for
using derivatives, quantitative disclosures about fair value amounts of and
gains and losses on derivative instruments, and disclosures about credit-risk-
related contingent features in derivative agreements. SFAS No. 161 is effective
for financial statements issue years and interim periods beginning after
November 15, 2008. The Company does not believe that the adoption of SFAS No.
161 will have a material impact on its financial statements.
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In May, 2009 the FASB issued SFAS No. 165, "Subsequent Events". This statement
established general standards of accounting for disclosure of events that occur
after the balance sheet date but before financial statement are issued or are
available to be issued. It requires the disclosure date through which an entity
has evaluated subsequent events and the basis for that date. This would alert
all users of financial statements that an entity has not evaluated subsequent
events after that in the set of financial statements being presented. This
statement is effective for interim and annual periods ending after June 15,
2009. The Company does not believe that the adoption of SFAS No. 165 will have a
material impact on its financial statements.
The FASB issued SFAS No. 168, "The FASB Accounting Standards Codification
(Codification) and the Hierarchy of Generally Accepted Accounting Principles- a
replacement of Financial Statement No. 162". On the effective date of the
statement, The FASB Accounting Standards Codification will become the source of
authoritative U.S. generally accepted accounting principles (GAAP) recognized by
the FASB to be applied by nongovernmental entities. This statement is effective
for financial statements issued for interim and periods ending after September
15, 2009. The Company does not believe that the adoption of SFAS No. 168 will
have a material impact on its financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Exhibit 99.3, "Biomerica, Inc. and Subsidiary Consolidated Financial Statements"
is incorporated herein by this reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. DISCLOSURE CONTROLS AND PROCEDURES
Attached as exhibits to this Form 10-K are certifications of our Chief Executive
Officer ("CEO") and Chief Financial Officer ("CFO") that are required in
accordance with Rule 13a-14 of the Exchange Act. This "Disclosure Controls and
Procedures" section includes information concerning the controls and controls
evaluation referred to in the certifications.
EVALUATION OF DISCLOSURE CONTROLS
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 on that evaluation the Chief Executive Officer and Chief Financial
Officer concluded 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.
For the reasons discussed in "Management's Report on Internal Control over
Financial Reporting" below, Company management, including the Chief Executive
Officer and Chief Financial Officer concluded that, as of May 31, 2009, the
Company's internal control over financial reporting was effective. Management
has concluded that the consolidated financial statements included in this annual
report present fairly, in all material respects, the Company's financial
position, results of operations, and cash flows for the periods presented in
conformity with accounting principles generally accepted in the United States of
America.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There have been no changes in our internal control over financial reporting
identified in connection with the evaluation that occurred during the last
fiscal quarter that has materially affected, or that is reasonably likely to
affect, our internal control over financial reporting.
-12-
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Company management is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rule 13a-15(f) under the
Securities Exchange Act of 1934. The Company's internal control over financial
reporting is designed to provide reasonable assurance to the Company's
management and Board of Directors regarding the reliability of financial
reporting and the preparation and fair presentation of financial statements for
external purposes in accordance with generally accepted accounting principles.
A Company's internal control over financial reporting includes those policies
and procedures that (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company's assets that could have a
material effect on the financial statements.
The effectiveness of any system of internal control over financial reporting is
subject to inherent limitations, including the exercise of judgment in
designing, implementing, operating and evaluating the controls and procedures.
Because of these inherent limitations, internal control over financial reporting
cannot provide absolute assurance regarding the reliability of financial
reporting and may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
Company management, with the participation of the Chief Executive Officer and
the Chief Financial Officer, evaluated the effectiveness of the Company's
disclosure controls and procedures as defined in Rules 13(a)-15(e) and
15(d)-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. In making this
assessment, Management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control -
Integrated Framework. Based on this assessment, management, with the
participation of the Chief Executive Officer and Chief Financial Officer,
believes that, as of May 31, 2009, the Company's internal control over financial
reporting was effective based on those criteria.
Company management will continue to monitor and evaluate the effectiveness of
its disclosure controls and procedures and its internal controls over financial
reporting on an ongoing basis and are committed to taking further action and
implementing improvements, as necessary and as funds allow.
Note: This 10-K does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the Company's
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the Company to provide only management's
report in this 10-K.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
This information is incorporated by reference to the Company's proxy statement
for its 2009 Annual Meeting of Stockholders, which will be filed not later than
120 days after the end of the Company's fiscal year ended May 31, 2009.
ITEM 11. EXECUTIVE COMPENSATION
This information is incorporated by reference to the Company's proxy statement
for its 2009 Annual Meeting of Stockholders, which will be filed not later than
120 days after the end of the Company's fiscal year ended May 31, 2009.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This information is incorporated by reference to the Company's proxy statement
for its 2009 Annual Meeting of Stockholders, which will be filed not later than
120 days after the end of the Company's fiscal year ended May 31, 2009.
-13-
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In fiscal 2003, Biomerica entered into an agreement with Lancer whereby
Biomerica agreed to pay an initial shelter fee of $5,000 with additional monthly
payments of $2,875 for use of the Lancer de Mexico facilities to produce and
manufacture Biomerica products. The monthly payments are due as long as
Biomerica produces its products at the Lancer de Mexico facility. At May 31,
2009, Biomerica has paid all applicable shelter fees.
Other information regarding related transactions is incorporated by reference to
the Company's proxy statement for its 2009 Annual Meeting of Stockholders, which
will be filed not later than 120 days after the end of the Company's fiscal year
ended May 31, 2009.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The aggregate fees billed for professional services by PKF in 2009 and 2008 were
as follows:
2009 2008
---- ----
Audit fees $72,182(1) $58,198(2)
Audit related fees -- --
Tax fees 6,043 9,874
ALL OTHER FEES 784 3,792
---------------------------------------------------------
Total $79,009 $71,864
(1) Also includes fees to be billed in fiscal 2010 for fiscal 2009.
(2) Also includes fees to be billed in fiscal 2009 for fiscal 2008.
Audit Fees consist of the aggregate fees billed for professional services
rendered for the audit of our annual financial statements, the audit of our
subsidiary's financial statements, the reviews of the financial statements
included in our Forms 10-Q and for any other services that are normally provided
by PKF in connection with our statutory and regulatory filings or engagements.
Audit Related Fees consist of the aggregate fees billed for professional
services rendered for assurance and related services that were reasonably
related to the performance of the audit or review of our financial statements
and the financial statements of our subsidiary that were not otherwise included
in Audit Fees.
Tax Fees consist of the aggregate fees billed for professional services rendered
for tax compliance, tax advice and tax planning. Included in such Tax Fees were
fees for preparation of our tax returns and consultancy and advice on other tax
planning matters.
All Other Fees consist of the aggregate fees billed for products and services
provided by PKF and not otherwise included in Audit Fees, Audit Related fees or
Tax Fees.
POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES
The Audit Committee has the responsibility of appointing the independent audit
firm and overseeing their work. The Audit Committee pre-approves all audit and
related services. Should the audit committee pre-approve any services other than
audit and related services, it evaluates whether the services would compromise
the auditor's independence.
Of the services provided in fiscal 2009 and 2008, all fees and services were
pre-approved by the audit committee.
PART IV
ITEM 15. EXHIBITS LIST AND REPORTS ON FORM 8-K
EXHIBIT NO. DESCRIPTION
3.1 Certificate of Incorporation of Registrant filed with the
Secretary of the State of Delaware on September 22, 1971
(incorporated by reference to Exhibit 3.1 filed with Amendment
No. 1 to Registration Statement on Form S-1, Commission File
No. 2-83308).
3.2 Certificate of Amendment to Certificate of Incorporation of
Registrant filed with the Secretary of the State of Delaware
on February 6, 1978 (incorporated by reference to Exhibit 3.1
filed with Amendment No. 1 to Registration Statement on Form
S-1, Commission File No. 2-83308).
-14-
3.3 Certificate of Amendment to Certificate of Incorporation of
Registrant filed with the Secretary of the State of Delaware
on February 4, 1983 (incorporated by reference to Exhibit 3.1
filed with Amendment No. 1 to Registration Statement on Form
S-1, Commission File No. 2-83308).
3.4 Certificate of Amendment to Certificate of Incorporation of
Registrant filed with the Secretary of the State of Delaware
on January 19, 1987 (incorporated by reference to Exhibit 3.4
filed with Form 8 Amendment No. 1 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended May 31, 1987).
3.5 Certificate of Amendment of Certificate of Incorporation of
Registrant filed with the Secretary of the State of Delaware
on November 4, 1987 (incorporated by reference to Exhibit 3.1
filed with Amendment No. 1 to Registration Statement on Form
S-1, Commission File No. 2-83308).
3.6 Bylaws of the Registrant (incorporated by reference to Exhibit
3.2 filed with Amendment No. 1 to Registration Statement on
Form S-1, Commission File No. 2-83308).
3.7 Certificate of Amendment of Certificate of Incorporation of
Registrant filed with the Secretary of the State of Delaware
on December 20, 1994 (incorporated by reference to Exhibit 3.7
filed with Registrant's Annual Report on Form 10-KSB for the
fiscal year ended May 31, 1995).
3.8 First Amended and Restated Certificate of Incorporation of
Biomerica, Inc. filed with the Secretary of State of Delaware
on August 1, 2000 (incorporated by reference to Exhibit 3.8
filed with the Registrant's Annual Report on Form 10-KSB for
the fiscal year ended May 31, 2000).
4.1 Specimen Stock Certificate of Common Stock of Registrant
(incorporated by reference to Exhibit 4.1 filed with
Registrant's Registration Statement on Form SB-2, Commission
No. 333-87231 filed on September 16, 1999).
10.3 1999 Stock Incentive Plan of Registrant (incorporated by
reference to Exhibit 10.1 to Registration Statement on Form
S-8 filed with the Securities and Exchange Commission on March
29, 2000 and on May 30 , 2007).
10.4 1995 Stock Option and Common Stock Plan of Registrant
(incorporated by reference to Exhibit 4.3 to Registration
Statement on Form S-8 filed with the Securities and Exchange
Commission on January 20, 1996).
10.5 1991 Stock Option and Restricted Stock Plan of Registrant
(incorporated by reference to Exhibit 4.1 to Registration
Statement on Form S-8 filed with the Securities and Exchange
Commission on April 6, 1992).
10.31 Loan Modification, Forbearance and Security Agreement
(incorporated by reference to the Company's February 29, 2004
Form 10-QSB filed April 14, 2004).
10.32 Promissory Note (incorporated by reference to the Company's
February 29, 2004 Form 10-QSB filed April 14, 2004).
10.33 Second Amendment of the Note, Loan and Modification Agreement
(incorporated by reference to the Company's February 28, 2007
Form 10-QSB filed April 16, 2007).
10.34 Commercial Security Agreement (loan #0100000250) with
Commercial Bank of California dated February 20, 2007
(incorporated by reference to the Company's February 28, 2007
Form 10-QSB filed April 16, 2007).
10.35 Promissory Note (loan #0100000250) dated February 20, 2007
with Commercial Bank of California (incorporated by reference
to the Company's February 28, 2007 Form 10-QSB filed April 16,
2007).
10.36 Promissory Note (loan #0100000251) dated February 20, 2007
with Commercial Bank of California (incorporated by reference
to the Company's February 28, 2007 Form 10-QSB filed April 16,
2007).
10.37 Subordination Agreement (loan #0100000250) dated February 20,
2007 with Commercial Bank of California and Janet Moore,
Trustee of the Janet Moore Trust (incorporated by reference to
the Company's February 28, 2007 Form 10-QSB filed April 16,
2007).
10.38 Business Loan Agreement with Commercial Bank of California
(incorporated by reference to the Company's February 28, 2007
Form 10-QSB filed April 16, 2007).
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10.39 Small Business Banking Agreement (Business Line of Credit
Number 0366422012) with Union Bank (incorporated by reference
to the Company's February 28, 2009 Form 10Q filed April 14,
2009).
10.40 Small Business Banking Agreement (Business Loan Number
0366422020) with Union Bank (incorporated by reference to the
Company's February 28, 2009 Form 10Q filed April 14, 2009).
23.1 Consent of Independent Registered Public Accounting Firm
(PKF).
31.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99.3 Biomerica, Inc. and Subsidiary Consolidated Financial
Statements For The Years Ended May 31, 2009 and 2008 and
Independent Registered Public Accounting Firm's Report.
(b) Reports on Form 8-K.
None.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BIOMERICA, INC.
Registrant
By: /s/ Zackary S. Irani
---------------------
Zackary S. Irani,
Chief Executive Officer
Dated: 8/29/09
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated:
Signature and Capacity
/s/ Zackary S. Irani Date: 8/29/09
--------------------
Zackary S. Irani
Director, Chief Executive Officer
/s/ Janet Moore Date: 8/29/09
----------------
Janet Moore,
Secretary, Director, Chief Financial Officer
/s/ Francis R. Cano, PH.D. Date: 8/29/09
--------------------------
Francis R. Cano, Ph.D.
Director
/s/ Allen Barbieri Date: 8/29/09
---------------------
Allen Barbieri
Director
/s/ Jane Emerson, M.D., PH.D. Date: 8/29/09
--------------------------------
Jane Emerson,
M.D.,Ph.D. Director
/s/ John Roehm Date: 8/29/09
----------------
John Roehm
Director
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