UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One) |
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 2013 |
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OR |
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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Commission File Number: 0-8765 |
BIOMERICA, INC.
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(Exact name of registrant as specified in its charter)
Delaware 95-2645573
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17571 Von Karman Avenue, Irvine, CA 92614
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (949) 645-2111
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(Former name, former address and former fiscal year, if changed since last report.)
(TITLE OF EACH CLASS) (NAME OF EACH EXCHANGE ON WHICH REGISTERED)
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Common, par value $.08 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 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 [X] No [_]
Indicate by check mark whether the registrant is a large accelerated, an accelerated filer, a non-accelerated filer, or a smaller reporting company. 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]
Indicate the number of shares outstanding of each of the registrant's common stock, as of the latest practicable date: 7,291,214 shares of common stock, par value $0.08, as of January 14, 2014.
BIOMERICA, INC. | ||
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INDEX | ||
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PART I | Financial Information |
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Item 1. | Financial Statements: |
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| Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income (unaudited) Three and Six Months Ended November 30, 2013 and 2012 | 1 |
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| Condensed Consolidated Balance Sheets (unaudited) November 30, 2013 and (audited) May 31, 2013 | 2 |
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| Condensed Consolidated Statements of Cash Flows (unaudited) - Six Months Ended November 30, 2013 and 2012 | 3 |
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| Notes to Condensed Consolidated Financial Statements (unaudited) | 4 - 8 |
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Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 9 - 10 |
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Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 10 |
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Item 4. | Controls and Procedures | 10 |
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| PART II Other Information |
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Item 1. | Legal Proceedings | 11 |
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| 11 |
Item 1A. | Risk Factors |
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Item 2. | Unregistered Sales of Equity Securities & Use of Proceeds | 11 |
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Item 3. | Defaults upon Senior Securities | 11 |
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Item 4. | Mine Safety Disclosures | 11 |
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Item 5. | Other Information | 11 |
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Item 6. | Exhibits | 12 |
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| Signatures | 13 |
PART I - FINANCIAL INFORMATION
SUMMARIZED FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BIOMERICA, INC. AND SUBSIDIARIES | ||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||
AND COMPREHENSIVE (LOSS) INCOME (UNAUDITED) | ||||||||||||
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Six Months Ended |
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Three Months Ended | ||||||||
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November 30, |
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November 30, | |||||||||
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| 2013 |
| 2012 |
| 2013 |
| 2012 | ||||
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Net sales |
| $ | 1,948,580 |
| $ | 3,585,719 |
| $ | 934,841 |
| $ | 1,883,771 |
Cost of sales |
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| (1,432,645) |
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| (2,084,259) |
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| (679,197) |
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| (1,114,560) |
Gross profit |
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| 515,935 |
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| 1,501,460 |
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| 255,644 |
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| 769,211 |
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Operating Expenses: |
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Selling, general and administrative |
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| 709,160 |
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| 738,094 |
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| 366,357 |
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| 405,968 |
Research and development |
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| 228,046 |
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| 203,722 |
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| 136,789 |
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| 115,741 |
Total operating expenses |
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| 937,206 |
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| 941,816 |
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| 503,146 |
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| 521,709 |
(Loss) income from operations |
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| (421,271) |
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| 559,644 |
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| (247,502) |
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| 247,502 |
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Other Income (Expense): |
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Dividend and interest income |
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| 10,199 |
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| 2,243 |
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| 4,145 |
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| 1,127 |
Interest expense |
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| - |
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| (308) |
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| - |
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| - |
Total other income |
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| 10,199 |
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| 1,935 |
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| 4,145 |
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| 1,127 |
(Loss) income before income tax |
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| (411,072) |
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| 561,579 |
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| (243,357) |
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| 248,629 |
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Provision for income taxes |
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| - |
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| (33,029) |
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| - |
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| (11,710) |
Net (loss) income |
| $ | (411,072) |
| $ | 528,550 |
| $ | (243,357) |
| $ | 236,919 |
Basic net (loss) income per common share |
| $ | (0.06) |
| $ | 0.08 |
| $ | (0.03) |
| $ | 0.03 |
Diluted net (loss) income per common share |
| $ | (0.06) |
| $ | 0.07 |
| $ | (0.03) |
| $ | 0.03 |
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Weighted average number of common and common |
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equivalent shares: |
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Basic |
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| 7,277,659 |
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| 6,959,224 |
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| 7,278,967 |
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| 6,966,185 |
Diluted |
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| 7,277,659 |
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| 7,282,202 |
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| 7,278,967 |
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| 7,385,139 |
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Net (loss) income |
| $ | (411,072) |
| $ | 528,550 |
| $ | (243,357) |
| $ | 236,919 |
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Other comprehensive loss, net of tax: |
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Foreign currency translation |
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| (14) |
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| (554) |
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| 77 |
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| (473) |
Comprehensive (loss) income |
| $ | (411,086) |
| $ | 527,996 |
| $ | (243,280) |
| $ | 236,446 |
The accompanying notes are an integral part of these statements.
1
The following summary presents the options and warrants granted, exercised, expired, cancelled and outstanding as of November 30, 2013:
| Option | Exercise | |||
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Outstanding May 31, 2013 |
| 846,500 |
| $ | 0.47 |
Granted |
| 52,000 |
| $ | 0.84 |
Exercised |
| (4,500) |
| $ | 0.40 |
Cancelled or expired |
| (10,000) |
| $ | 0.43 |
Outstanding November 30, 2013 |
| 884,000 |
| $ | 0.49 |
On June 10, 2013, the Board granted a stock option to purchase 20,000 shares of the Companys common stock at the purchase price of $0.83 per share.
On November 13, 2013, the Board granted stock options to purchase 32,000 shares of the Companys common stock at the purchase price of $0.84 per share.
In June 2013, options to exercise 2,000 shares of the Companys common stock were exercised at the exercise price of $0.38 per share. Net proceeds to the Company were $760.
In September 2013, options to exercise 2,500 shares of the Companys common stock were exercised at the exercise prices of $0.45 and $0.38 per share.
In December 2013, options to exercise 12,000 shares of the Companys common stock were exercised at the exercise price of $0.38 per share.
Revenue Recognition
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 when necessary for estimated returns as revenue is recognized. In conjunction with sales to certain customers, the Company provides free products upon attaining certain levels of purchases by the customer. The Company accounts for these free products in accordance with ASC 605-50 Revenue Recognition Customer Payments and Incentives and recognizes the cost of the product as part of cost of sales.
Investments
From time-to-time, the Company makes investments in privately-held companies. The Company determines whether the fair values of any investments in privately-held entities have declined below their carrying value whenever adverse events or changes in circumstances indicate that recorded values may not be recoverable. If the Company considers any such decline to be other than temporary (based on various factors, including historical financial results, and the overall health of the investees industry), a write-down to estimated fair value is recorded. The Company currently has not written down the investment and no events have occurred which could indicate the carrying value to be less than the fair value. Investments represent the Companys investment in a Polish distributor which is primarily engaged in distributing medical devices. The Company owns approximately 6% of the investee, and accordingly, applies the cost method to account for the investment. Under the cost method, investments are recorded at cost, with gains and losses recognized as of the sale date, and income recorded when received.
6
LIQUIDITY AND CAPITAL RESOURCES
As of November 30, 2013 and May 31, 2013, the Company had cash and cash equivalents in the amount of $1,647,559 and $2,469,796 and working capital of $4,298,533 and $4,693,462, respectively.
During the six months ended November 30, 2012 the Companys operations used cash of $740,148 as compared to cash generated of $396,998 in the same period of the prior fiscal year. Cash used by operations in fiscal 2014 was a result of a net loss of $411,072, payment of accounts payable of $65,525, increases in inventory of $321,700 of inventory, and payout of accrued compensation of $87,358. In addition to this there were non-cash charges of approximately $97,352 for depreciation and amortization expense. Cash used in investing activities in the six months ended November 30, 2013 was $83,855 as compared to $242,416 in the six months ended November 30, 2012. Cash provided by financing activities in the six months ended November 30, 2013 was $1,780 as compared to cash used of $37,001 in the six months ended November 30, 2012. Cash provided by financing activities for the six months ended November 30, 2013, was a result of the exercise of stock options, whereas cash used of $37,001 in the prior fiscal year was due to the payment of $43,000 on the line of credit which was offset by $5,999 for the exercise of stock options.
On February 13, 2009, the Company renewed the line of credit (the "Line") with its bank which has a borrowing limit of $400,000. The Line is secured by substantially all of the Companys assets, bears interest at 1.0% plus the Wall Street Journal Prime West Coast Edition prime rate and expires February 24, 2014. The balance at November 30, 2013 and May 31, 2013 was $0.
OFF BALANCE SHEET ARRANGEMENTS - None.
CRITICAL ACCOUNTING POLICIES
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 in the circumstances; however, actual results may differ from these estimates under different future conditions.
We believe that the estimates and assumptions that are most important to the portrayal of our financial condition and results of operations, in that they require subjective or complex judgments, form the basis for the accounting policies deemed to be most critical to us. These relate to revenue recognition, bad debts, inventory overhead application, and inventory reserve. 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 Managements Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Item 4. CONTROLS AND PROCEDURES
Our management evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of the end of the period covered by this report. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The disclosure controls and procedures have been designed to provide reasonable assurance of achieving their objectives and the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective at the "reasonable assurance" level. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that we file and submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms; and (2) accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
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.
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PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS. None.
Item 1A. RISKS FACTORS.
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 recent history 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 effect on our revenues and profitability; possible costs or difficulty in complying with government regulations and the delays in receiving required regulatory approvals or the enactment of new adverse regulations or regulatory requirements; numerous competitors, some of which have substantially greater financial and other resources than we do; potential claims and litigation brought by patients or medical professionals alleging harm caused by the use of or exposure to our products; quarterly variations in operating results caused by a number of factors, including business and industry conditions; concentrations of sales with certain distributors, which have been increasing, could adversely affect the results of the Company if the Company were to lose the sales of that distributor and other factors beyond our control; high balances carried on accounts receivables from concentrated customers; and the costs of recalls, should such occasion arise. All these factors make it difficult to predict operating results for any particular period.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. None.
Item 3. DEFAULTS UPON SENIOR SECURITIES. None.
Item 4. MINE SAFETY DISCLOSURES. None.
Item 5. OTHER INFORMATION.
We held our Annual Meeting of Stockholders on December 11, 2013, to consider and vote on the matters listed below. The proposals are described in detail in the Proxy Statement filed with the Securities and Exchange Commission on September 28, 2013. The final voting results from the meeting are set forth below.
Proposal 1: Election of Directors
Based on the following votes, the individuals named below were each elected to serve as our directors until our next Annual Meeting of Stockholders.
Name Votes For Votes Withheld
Zackary Irani 2,976,867 86,697
Janet Moore 2,989,363 74,204
Allen Barbieri 3,037,863 25,704
Dr. Francis Cano 3,037,863 25,704
Dr. Jane Emerson 3,035,538 28,029
Proposal 2: Ratification of Selection of Independent Auditors
Based on the following votes, the selection of PKF Certified Public Accountants, A Professional Corporation as our independent registered public accounting firm for the 2014 fiscal year was ratified.
Votes For Votes Against Abstentions Broker Non-Votes
5,600,998 47,811 9,287 1,046,278
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Item 6. EXHIBITS.
The following exhibits are filed or furnished as part of this quarterly report on Form 10-Q:
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Exhibit No. |
| Description | ||
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| 31.1 | * |
| Certification Pursuant to Section 302 of the Sarbanes-Oxley Act Zackary S. Irani |
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| 31.2 | * |
| Certification Pursuant to Section 302 of the Sarbanes-Oxley Act Janet Moore |
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| 32.1 | * |
| Certification Pursuant to Section 906 of the Sarbanes-Oxley Act Zackary S. Irani |
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| 32.2 | * |
| Certification Pursuant to Section 906 of the Sarbanes-Oxley Act Janet Moore
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| 101 | Interactive data files pursuant to Rule 405 Regulation S-T, as follows: | ||
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| 101.INS-XBRL Instance Document | ||
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| 101.SCH-XBRL Taxonomy Extension Schema Document | ||
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| 101.CAL-XBRL Taxonomy Extension Calculation Linkbase Document | ||
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| 101.DEFXBRL Taxonomy Extension Definition Linkbase Document | ||
101.LAB-XBRL Taxonomy Extension Label Linkbase Document | ||||
101.PRE-XBRL Taxonomy Extension Presentation Linkbase Document | ||||
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* | Filed herewith | |||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has fully caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| BIOMERICA, INC. | |
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Date: January 14, 2014 |
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| By: | /S/ Zackary S. Irani |
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| Zackary S. Irani |
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| Chief Executive Officer |
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| (Principal Executive Officer) |
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Date: January 14, 2014 |
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| By: | /S/ Janet Moore |
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| Janet Moore |
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| Chief Executive Officer |
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| (Principal Financial Officer) |
13