During fiscal 2022, we completed an endpoint determination clinical trials,trial on our InFoods® IBS product. This trial was conducted at Mayo Clinics in Florida and are ultimately clearedArizona, Beth Israel Deaconess Medical Center Inc., a Harvard Medical School Teaching Hospital, University of Texas Health Science Center at Houston, Houston Methodist, the University of Michigan and other institutions. This trial monitored IBS patients over an 8-week period to determine the efficacy of our InFoods® IBS product to improve the patients’ IBS symptoms or endpoints. The top-line trial results were reported in February 2022. Multiple endpoints demonstrated statistically significant improvements, indicating that the elimination of specific foods may meaningfully reduce the symptoms of IBS in all patient subtypes (including patients with IBS-Constipation, IBS-Diarrhea & IBS-Mixed). The greatest clinical improvements, including but not limited to abdominal pain and bloating, were seen in patients diagnosed with IBS-Mixed and IBS-Constipation, in the top line data. The purpose of the endpoint study was to determine the primary symptom endpoint, or endpoints to be used in a final pivotal trial that will be conducted to attain the validation data needed to apply for sale by the U.S. Food and Drug Administration (“FDA”), we believe clearance for the revenues potentialproduct. We are now in the process of reviewing the complete dataset and selecting the target endpoint(s) to be used in the pivotal trial. We are also writing the protocols for this trial and expect to present these protocols to the CompanyFDA during fiscal 2023, with the intention of beginning the trial by the end of fiscal 2023, or May 31, 2023. The trial is significant. expected to include the large medical institution participants that conducted the endpoint trial, in addition to other new institutions and a Clinical Research Organization.

Following the successful completion and positive results from the Company’s InFoods^® IBS clinical trial we’ve seen significant interest from Gastroenterology (“GI”) physicians who would like to provide the InFoods^® IBS Product to for their patients immediately.  Therefore, while we are proceeding with the work needed to seek FDA clearance for this product, we also are currently preparing to launch the InFoods^® IBS product through a CLIA-certified, high-complexity laboratory facility and offering the product as a laboratory developed test (“LDT”). Our expectation is that we will begin to generate revenues from this product by the end of December 31, 2022. In preparation for the launch of this LDT, we are in negotiations with large physician groups that would like to offer the LDT to their IBS patients.

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

We will also continue to evaluate partnership/licensing opportunities, as they arise, with U.S. and multinational companies that could help us commercialize, or accelerate revenue growth of, the InFoods products in the United States and overseas.

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

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

Following fiscal year-end, we announced that Walmart has begun selling our Aware^® Breast Self Exam product through their on-line retailing platform, Walmart.com. We are also in final discussions with Walmart to offer this product in their U.S. based retail stores.

We have added new employees in our sales and marketing department in order to increase sales of existing products during fiscal 2022. Through these efforts, our EZ Detect colon disease home screening test and our Aware^® Breast Self Exam product are seeing an increased interest from retailers such as Walmart, distributors, and screening programs in other countries.

Due to the global 2019 SARS-CoV-2 novel coronavirus (“COVID-19”) pandemic, in March 2020 we began redirecting and focusing a majority of our resourcesdeveloping COVID-19 products to develop, test, validate, seek regulatory approval for, and sell diagnostic products that indicate if a person has been infected by COVID-19. TheseCOVID-19, or is currently infected. While we offer a COVID-19 antibody diagnostic test to determine if a person has previously been infected by the COVID-19 virus, all of our COVID-19 revenues in fiscal 2022 have come from international sales of our COVID-19 antigen tests that use a patient’s bloodnasal fluid sample to detect if the patient has certain antibodies to COVID-19 that were created as part of their body’s immune response to a COVID-19 infection, even ifis currently infected with the infection was asymptomatic. During the fourth quarter of fiscal 2020 we began marketing and selling outside of the U.S. a disposable rapid finger-prick blood test, which detects COVID-19 IgG/IgM antibodies within 10 minutes. This test is designed to be performed by trained professionals anywhere (e.g. airports, schools, work, pharmacies and doctors’ offices). Following fiscal 2020 year-end we submitted to the FDA an application under an Emergency Use Authorization (“EUA”) to sell in the U.S. a lab-scale, high throughput ELISA COVID-19 antibody test kit that would be sold to labs and hospitals to perform COVID-19 antibody testing. The Company also anticipates selling this test kit outside of the U.S. under a CE Mark (European Conformity). Initial sales for this product are expected during the Company’s second quarter of fiscal 2021 upon EUA clearance. The Company manufactures this COVID-19 ELISA test on its automated equipment at the Company’s California facility that is also used to produce serology antibody tests for other diseases. virus.

Aside from the current focus onWhile sales continue to occur in our COVID-19 products, inthe majority of our research and development efforts are focused on development and clinical trials, thecommercialization of non-COVID related products we continuesuch as our H. Pylori product, and our InFoods® IBS product.

The other existing products that contributed to sellour 2022 revenues are primarily focused on gastrointestinal diseases, food intolerances, diabetes and certain esoteric tests. These diagnostic test products utilize immunoassay technology. OurMost of our products are CE marked and/or sold for diagnostic use where they are registered by each country’s regulatory agency. In addition, some products are cleared for sale in the U.S.United States by the FDA.

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 also has also 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 (home use) and professional use (doctor’s office, clinics, etc.) rapid diagnostic products help to manage existing medical conditions and may save lives through early detection and prompt diagnosis. Typically, tests of this kind requiredrequire the services of medical technologists and sophisticated instrumentation.  Further, results are often not available until at least the following day. We believe that rapid point-of-care tests can be as accurate as laboratory tests when used properly, require limited to no instrumentation, give reliable results in minutes and can be performed with confidence in the home or the physician's office.

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Biomerica maintains its headquarters in Irvine, California, where it houses administration, product development, sales and marketing, customer services and its primary manufacturing operations. Biomerica also maintains manufacturing and assembly operations in Mexicali, Mexico, in order to reduce the cost of manufacturing and compete more effectively worldwide. The Company expendsWe expend considerable funds in research and development of certain new products that diagnose and, in certain cases, are designed to be used as a therapy for several major medical diseases. These products are both internally developed and licensed from others.  We employ experienced and highly trained technical personnel (including Ph.D.’s and scientists) to develop new products and evaluate and implement technology technical transfer activities. Our technical staff, many of whom have been previously employed at large diagnostic manufacturing companies, has extensive industry experience. We also rely on our Scientific Advisory Board of leading medical doctors and clinicians to assist in guiding our clinical studies and product development.

Biomerica maintains its headquarters in Irvine, California, where it houses administration, finance, regulatory compliance, product development, sales and marketing, customer services and its primary manufacturing operations. Biomerica maintains manufacturing and assembly operations in Mexicali, Mexico, in order to reduce the cost of manufacturing and compete more effectively worldwide. Biomerica also has a legal entity in Europe, BioEurope GmbH, for the purpose of selling certain products internationally.

Additional information about Biomerica is available on our website at www.biomerica.com. The content on any website referred to in this Form 10-K is not a part of or incorporated by reference in this Form 10-K unless expressly noted. Our Annual Report on Form 10-K, Quarterly Reports on Forms 10-Q, Current Reports on Forms 8-K, Proxy Statements and all other filings we make with the Securities and Exchange Commission (“SEC”) are available on our website, free of charge, as soon as reasonably practical after we file them with or furnish them to the SEC and are also available online at the SEC’s website at www.sec.gov.www.sec.gov.

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PRODUCTION

Most of our diagnostic test kits are manufactured and/or assembled at our facilities in Irvine, California and in Mexicali, Mexico. We established our manufacturing facility in Mexicali, Mexico in fiscal 2003 and moved a significant portion of our diagnostic packaging and assembly to that facility.

Production of diagnostic tests can involve formulating component antibodies and antigens in specified concentrations, attaching a tracer to the antigen, filling components into vials, packaging and labeling. We continually engage in quality control procedures to assure the consistency and quality of our products and to comply with applicable FDA and international regulations.

Our manufacturing operations and facilities are regulated by the FDA Good Manufacturing Practices for medical devices. We have an internal quality department that monitors and evaluates product quality and output. We also have an internal Quality Systems department whose goal is to ensure that our operating procedures are in compliance with current FDA, CE Mark and International Organization for Standardization(“ISO”) regulations. We either produce our own antibodies and antigens or purchase these materials from qualified vendors. We have alternate, approved sources for most critical raw materials and are working to procure alternate sources for the few that we do not have.

RESEARCH AND DEVELOPMENT

We are currentlyDuring most of the fiscal year, in addition to our focus on development our InFoods^® IBS product, we also focused a portion of our Research and Development (“R&D”) resources on developing several COVID-19a H. Pylori diagnostic tests, as discussed in this section below, and developing and pursuing the regulatory approval of two tests for the gastrointestinal market.test.  Our increase in research and development spending isare due to our focus on these tests and outside clinical studies intended to demonstrate the feasibility of FDA clearance for such tests. The CompanyWe also utilizesutilize technical personnel, with Ph.D. and other degrees and extensive experience in development and production of health diagnostic tests, to conduct other development activities and improve existing products, as well as explore potential new technologies that the Companywe may wish to develop and commercialize. Research and development expenses include the costs of materials, supplies, personnel, consultants, legal fees, facilities, outside clinical trial sites and equipment as well as outside contract services. Consolidated research and development expenses incurred by Biomerica for the years ended May 31, 20202022 and 20192021, aggregated $1,910,209,to approximately $1,812,000, and $1,679,098,$2,194,000, respectively. As Biomerica begins to validatemoves forward with development, validation and commercializecommercialization of additional key products that address diseases with large market opportunities, research and development expenses are expected to increase during upcoming quarters.

The Company hasWe’ve developed a unique diagnostic guideddiagnostic-guided therapy that is designed to allow physicians to identify patient-specific foods (e.g. pork, milk, onions, sugar, chickpeas, etc.), that when removed from the patient’s diet, may alleviate or improve an individual'stheir symptoms of IBS. This product is called InFoods® IBS and is currently in clinical studies at the Mayo Clinics in Florida and Arizona, Beth Israel Deaconess Medical Center Inc., a Harvard Medical School Teaching Hospital, University of Texas Health Science Center at Houston, Houston Methodist and at the University of Michigan. The United States Patent and Trademark Office (“USPTO”) has issued the Company two patents with broad claims that protect thethis InFoods® IBS product. Patents have also been issued in the countries of Australia, Japan, Korea, Mexico, and Korea.Singapore. Additional patents for thispatent application pertaining to the InFoods^® IBS product have been filed in the U.S.United States and in other countries. We are also developing and have filed patents for products that target other diseases that utilizeutilizing the InFoods® DGTInFoods^® technology platform which include:  Functional Dyspepsia, Crohn’s Disease,disease, Ulcerative Colitis, Gastroesophageal refluxReflux disease (“GERD”), Migraine Headaches, Depression and Osteoarthritis. Our first patent to be allowed for a disease/illness other than IBS was allowed in Japan in August 2021. This patent covers the use of our InFoods® technology to diagnose and treat persons suffering from depression. We are planning to pursue FDA Clearance through a De Novo submission with the FDA rather than a Premarket Approval Application (“PMA”) or 510(k) for the InFoods® IBS product.

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We areDuring the fourth quarter of fiscal 2022, we also in clinical studiessubmitted our proprietary H. Pylori test to evaluate the performance of our new and proprietary Helicobacter pylori (“H. pylori”) test.FDA for clearance through a 510(k) submission. The clinical studies are beingfor our H. Pylori were conducted at the University of Southern California (“USC”), a European University and several other U.S. locations. The Company is working to complete the analytical studies needed to prepare for submission to the FDA and plans to utilize a 510(k) clearance pathway for this test. Biomerica’s test is designed to provide highly accurate sensitivity and specificity for H. pylori testing and for monitoring of treatment.

We are planning to pursue a de novo 510(k) clearance with the FDA rather than a Premarket Approval Application (“PMA”) for the InFoods® IBS product. De novo clearance is typically faster and less expensive than the PMA route, which is the most stringent type of device marketing application required by the FDA. We are planning to submit the H. pylori product using a 510(k) application if validation testing proves effective.6

Since March 2020, we have dedicated a majority of resources to develop, test, validate, seek regulatory approval for, and sell diagnostic products that indicate if a person has been infected by COVID-19. These diagnostic tests use a patient’s blood sample to determine if the patient has certain antibodies to COVID-19 that were created as part of their body’s immune response to a COVID-19 infection. Following the end of fiscal 2020, we have also dedicated resources to developing a COVID-19 antigen test that is intended to use a patient’s nasal or saliva sample to determine if the patient has a current and ongoing COVID-19 infection. We submitted to the FDA an application under and Emergency Use Authorization (“EUA”) to sell in the U.S. a lab-scale high throughput ELISA COVID-19 antibody test kit that would be sold to labs and hospitals to perform COVID-19 antibody testing.  As part of this test we developed and are testing a whole blood collection system to allow simple whole blood sample collection from a finger stick.  We anticipate that upon FDA EUA clearance, this collection system will be marketed in the U.S. and internationally.  We also are developing and working on other COVID-19 test technologies.

Since the beginning of March 2020, the majority of our research and development resources and our regulatory clearance resources have been focused on developing, validating and registering for sale both point of care (finger-prick rapid tests), and ELISA high throughput laboratory COVID-19 antibody tests in that our primary InFoods product, InFoods® IBS , is now in clinical trials and as such requires limited research and development or regulatory resources. We expect that the majority of these Company resources will continue to be used in the foreseeable future for the development of COVID-19 tests.

MARKETS AND METHODS OF DISTRIBUTION

Biomerica has approximately 400250 current customers for its diagnostic business, of which approximately 7580 are foreign distributors, 4010 are domestic distributors and the balance are primarily domestic hospital and clinical laboratories, medical research institutions, medical schools, pharmaceutical companies, chain drugstores, wholesalers, physicians' offices, and e-commerce customers.

We employ a director of sales and marketing for Europe and South America who is headquartered in Germany.  She has 23over 20 years of experience selling and marketing diagnostic and life science products across multiple diagnostics technologies and disciplines. She possesses broad international business experience, with communication skills in German, English, Spanish, French and Portuguese, and scientific and technical understanding of gastrointestinal diagnostic products. She also has strong relationships with key strategic entities in Europe, Eastern Europe, Latin America, Canada and the U.S. whoUnited States and we believeexpect that she will continue to help Biomerica add new distributors for existing products and add new product-lines for future distribution by the Company.us.

We rely on affiliated and unaffiliated distributors, advertising in medical and trade journals, exhibitions at trade shows, 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). 

SubsequentDue to February 29, 2020, the Company’s fiscal third quarter end, the Coronavirus global pandemic, which started in China at the end of 2019, has spread throughout the world, including the U.S.The impact it willour operations have on the Company’s operations is unknown at this time. The Company hasbeen negatively impacted. We have faced disruptions in certain of the following areas, and may face further challenges from supply chain disruptions, loss of contracts and/or customers, closure of the Company’sour manufacturing or distribution facilities or of the facilities of the Company’sour suppliers, partners and customers, travel, shipping and logistical disruptions, government responses of all types, international business risks in countries where the Company makeswe make and/or sells itssell our products, loss of human capital or personnel at the Company, its partners and its customers, interruptions of production, customer credit risk, and general economic calamities. These ongoing pandemic related disruptions can materially negatively impact the Company’sour operations and financial performance and may continue to have significant material negative impacts on the Company.  us.  

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On March 17, 2020, the Company announced it had commenced shipping initial samples of its COVID-19 IgG/IgM Rapid Test (qualitative membrane-based immunoassayOur net sales were approximately $18,871,000 for the detection of IgG and IgM antibodiesfiscal 2022 compared to SARS-CoV-2 in whole blood or serum) to countries outside the U.S.$7,199,000 for evaluation.  The test is a finger-prick blood test that is designed to show results in approximately 10 minutes and can be performed by trained professionals at any location, including airports, schools, work, pharmacies and doctors’ offices. On March 16, 2020, the Company commenced shipping and fulfilling commercial orders for this Rapid Test to customers outside of the U.S primarily through distributors.  The Company has also filed for EUA clearance with the FDA to sell its ELISA COVID-19 test kit in the U.S.  Once approved, we will market this ELISA COVID-19 product directly to hospitals and clinical labs, as well as sell it through distributors. The Company continues to sell its COVID-19 IgG/IgM Rapid Tests outside of the U.S.

fiscal 2021. For the fiscal years ended May 31, 20202022 and 2019,2021, the Company had three distributors and two distributors, respectively, which accounted for a total of 57.2%65% and 46.3%60% of our net consolidated sales, respectively. Of this, for the fiscal years ended May 31, 20202022 and 2019,2021, the largest of the distributors mentioned above accounted for 25.7%55% and 36.3%33%, respectively, of net consolidated sales.

AtTotal gross receivables at May 31, 20202022 and 2019,2021 were approximately $927,000 and $2,292,000, respectively. As of May 31, 2022 and 2021, the Company had three distributorsone distributor and two distributors, respectively, which accounted for a total of 80.0%50% and 68.1%73%, respectively, of gross accounts receivable. Of the 80.0%50% as of May 31, 2020, 43.9%2022, 50% was owed by a distributor in Ecuador. Total gross receivables for fiscal 2020 and 2019 were $1,836,852 and $1,527,762, respectively.Asia.

BACKLOG

AtOn May 31, 20202022 and 2019,2021, Biomerica had a backlog of unshipped orders of approximately $727,000$754,000 and $207,000$85,000, respectively. AtOn May 31, 20202022, this consisted primarily of orders to oura distributor in Asia as well as some contract manufacturing work.Asia.

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.   However, due to the limited number of suppliers of some materials, especially those such as antibodies, there is always the possibility that the Companywe may encounter difficulty in the future obtaining key raw materials for its manufacturing processes or that such materials may be exceedingly costly. For the yearfiscal years ended May 31, 2020,2022 and 2021, the Company had one vendor, which accounted for 59.3%84% and 58%, respectively of our purchases of raw materials. For the year ended May 31, 2019, one vendor accounted for 23.8% of our purchases of raw materials.

Our inventory consists of various types of materials including antibodies, antigens, bottles, boxes, various chemicals and reagents utilized in the manufacture of our test kits as well as products in various stages of completion.

Our sourcing and receiving of raw materials have been negatively impacted due to the global COVID-19 pandemic. Many of our suppliers have been impacted by plant shut-downs, state or national mandatesmandated or recommended shut-downs, restrictions and constraints on distribution channels including ship freight, air freight and trucking, among other things. These suppliers are also experiencing their own disruptions in sourcing raw materials.  It is unclear to what extent raw material availability will be impacted in the foreseeable future, and how that will impact our production and sales.

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INFLATION

Due to the global and domestic supply chain disruptions, and overall inflationary pressures in the economy, we have experienced material increases in the cost of our raw materials and in our operating and labor costs. While we have attempted to respond by increasing the selling price of our own products, the gross margins on our products sold have been negatively impacted.

COMPETITION

Immunodiagnostic products, including COVID-19 products, are currently produced globally by hundreds of companies. Biomerica is not a significant player in the overall market.market for most of the product categories in which we compete. However, we do have certain proprietary products, such as our EZ Detect colon disease home test, the Aware Breast Self Exam product and our InFoods^® IBS that do not have significant competition from tests offered by competitors, and that do not have the features and benefits of our tests.

Our competitors vary greatly in size. Many are divisions or subsidiaries of well-established medical and pharmaceutical companies which are much larger than Biomerica and expend substantially greater amounts than we do for research and development, manufacturing, advertising, and marketing.

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The primary competitive factors affecting the sale of diagnostic products are uniqueness, technology, 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 pricing and our prompt shipment of orders. We offer a broad range of products but have had limited marketing capability. We are working on expanding thisHowever, during the past 18 months, we have expanded our sales and marketing capability, through marketing and strategic cooperation with larger companies and distributors as well asand by hiring new employees with marketing and sales expertise.

GOVERNMENT REGULATION OF OUR DIAGNOSTIC BUSINESS

Our primary business consists of selling products that are generally legally defined to be in vitro diagnostic medical devices and medical devices. As a result, we are considered to be an in vitro diagnostic medical devices and medical device manufacturer, and as such are subject to the regulations of numerous governmental entities. These agencies include the FDA, Environmental Protection Agency, Federal Trade Commission, Occupational Safety and Health Administration, U.S. Department of Agriculture ("USDA"), and Consumer Product Safety Commission.Commission, as well as European Government agencies. 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 in vitro diagnostic medical devices and medical devices, the observance of certain standards with respect to the manufacture and labeling of medical devices, the maintenance of certain records, the reporting of potential product problems, and other matters.

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 assured through general controls, such as device listing, adequate labeling, 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 Notification 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 controlscontrols’ provisions applicable to Class I devices. Class III devices are devices that generally must receive clearance prior to marketing by the FDA pursuant to a pre-market approval 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'sOur products are primarily either Class I or Class II medical devices.

Pursuant to FDA requirements, we have registered our manufacturing facility with the FDA as a medical device manufacturer and listed the medical devices we manufacture. We are also subject to inspection on a routine basis for compliance with FDA regulations. This includes the QSR, 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 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.

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In addition, our facility is required to have a California Medical Device Manufacturing License. The license is not transferable and must be renewed biannually. Approval of the license requires that we be in compliance with QSR, labeling and MDR regulations. Our current license expires on December 31, 2020. These licenses are renewed periodically, and to date we have never failed to obtain a renewal.

is valid until November 19, 2022. Through compliance with FDA and California regulations, we can market some of 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 directives of the European Union (“EU’) 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 complyingWe comply with the CE Mark directives; and In Vitro DiagnosticsDiagnostic Medical Devices Directive (“IVDD”) 98/79/EC.EC and Medical Devices Regulation 2017/745 (“MDR”). We also comply with ISO 13485 for medical devices13485:2016 Medical Devices Quality Management Systems.Systems - Requirements for Regulatory Purposes. 

At present, outside the EU the regulatory international review process varies from country to country. We in general, rely uponwork with 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 those countries. We believe that our international sales to date have been in compliance with the laws of all foreign countries in which we have made sales. Exports of most medical devices are also subject to certain FDA regulatory controls.

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The designing, development, manufacturing, marketing, post-market surveillance, distribution, advertising and labeling of Biomerica’s immunoassay in vitro diagnostic (“IVD”) medical device products are subject to regulation in the United States by the Center for Devices and Radiological Health of the FDA and state agencies.  FDA regulations require that some new products have pre-marketing clearance or approval by the FDA and require certainthese products to be manufactured in accordance with the FDA’s “Goodcurrent Good Manufacturing Practice”Practice (cGMP) regulations, to be extensively tested and to be properly labeled to disclose test results and performance claims and limitations.  After a product that is subject to FDA regulation is placed on the market, numerous regulatory requirements apply, including, for example, the requirement that we comply with recordkeeping and reporting requirements, such as the FDA’s medical device reporting regulations and reporting of corrections and removals.  The FDA enforces these requirements by inspection and marketpost -market surveillance. The last FDA announced inspection was in November 2019 and no observations were noted. Biomerica is currently registered and licensed with the State of California's Department of Health Services. The Company believesWe believe that all Biomerica products sold in the U.S.United States comply with the FDA and state regulations.

Management believes that Biomerica's Quality Management System is in material compliance with the EN ISO 13485:2016. EN ISO 13485:2016 is an internationally recognized standard in which companies establish their methods of operation and commitment to quality.  

We are an FDA regulated and ISO 13485:2016 certified In Vitro Diagnostic (“IVD”) Medical Devices company. Our goal is to provide high quality medical diagnostic products that generally meet or exceed customer requirements and comply with all applicable regulatory requirements: FDA 21 CFR Part 820 Quality Management System, EN ISO 13485:2016, Medical Devices Quality Management Systems - Requirements for Regulatory Purposes, In Vitro Diagnostic Medical Devices Directive  (“IVDD”) 98/79/EC & and Medical Device Directive 93/42/EEC,Regulation 2017/745, Guidelines related to Medical Devices DirectivesDirective/Regulation and Guidance on CE Marking, etc.  Biomerica involveinvolves its employees in a continuous improvement process to increase productivity, improve quality and maintain the suitability, adequacy, and effectiveness of our quality management system.

The new EU Medical Device Regulation (“MDR”) 2017/745 entered into force on May 25, 2017. The MDR transition period ends May 26, 2021 and will replace Medical Device Directive (“MDD”) 93/42/EEC. Manufacturers have less than one year to update their technical documentation and processes to meet the new, more stringent regulatory requirements of the European Union. Notified Bodies can begin certifying devices to the new MDR requirements once they have been designated under MDR by their Competent Authority. Our Notified Body recently became designated against MDR in July 2020.

The new EU In Vitro Diagnostic Medical Device Regulation (“IVDR”) 2017/746 entered into forcewas effective on May 25, 2017. The IVDR transition period ends May 26, 2022 and will replace IVDD 98/79/EC.2022. Manufacturers have less than two yearsneed to update their technical documentation and processes to meet the new, more stringent regulatory requirements of the European Union. Notified Bodies can begin certifying devices to the new IVDR requirements once they have been designated under IVDR by their Competent Authority. The application process for Notified Bodies to be designated against IVDR takes 12-18 months. OurSince August 19, 2021, our Notified Body is currentlyofficially designated under the IVDR and listed in the processEuropean Commission NANDO database. We are working closely with our Notified Body to update our technical documentation to comply with these new and more stringent IVDR requirements.

Per IVDR 2017/746 Amendment 2021/0323 (COD), devices with a CE certificate that was issued in accordance with IVDD may be placed on the market or put into service until May 26, 2025.

Exceptional Renewal of being designated under IVDR.CE Certificate for IVDD Quality System was granted to Biomerica. Biomerica received an extended CE Certificate on May 24, 2022, which remains effective until May 26, 2025. Biomerica has until May 26, 2025, to update the technical documentation and processes to meet the new, more stringent regulatory requirements of IVDR 2017/746.

Per IVDR 2017/746 Amendment 2021/0323 (COD), devices without a CE certificate that was issued in accordance with IVDD, for which a declaration of conformity was drawn up prior to May 26, 2022, per IVDD and for which the conformity assessment procedure pursuant to IVDR requires the involvement of a Notified Body, may be placed on the market or put into service until the following dates. Biomerica also has until the following dates to update the technical documentation and processes to meet the new, more stringent regulatory requirements of IVDR 2017/746:

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(1)May 26, 2025, for class D devices;

(2)May 26, 2026, for class C devices;

(3)May 26, 2027, for class B devices; and

(4)May 26, 2027, for class A devices placed on the market in sterile condition.

SEASONALITY OF BUSINESS

TheOur businesses of the Company and its subsidiaries have not been subject to significant seasonal fluctuations.

INTERNATIONAL BUSINESS

The following table sets forth the dollar volume of revenue attributable to sales to domestic customers and foreign customers during theour last two fiscal years for Biomerica:years:

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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, tariffs, and importembargos, trade wars, import/export restrictions, disruptions in shipping and distribution channels and drop in demand for our products due to regional or national shut-downs from the COVID-19 pandemic, and other disease outbreaks that cause patients’ fear or refusal to visit hospitals and healthcare providesproviders due to the pandemic where our products are sold and used, the erosion of economic conditions in those countries, and many other factors all could impact sales within certain foreign countries. In addition, these factors could also impact theour ability of the Company to collect foreign accounts receivable. 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 and may change without notice. Foreign sales of our diagnostic sales at Biomericaproducts are made primarily through a network of approximately 10080 independent distributors in approximately 6530 countries.

The COVID-19 related factors mentioned above have alsoand in “Risk Factors” negatively impacted domestic and international sales of our non-Covid-19non-COVID-19 products during fiscal 2022 and may continue to negatively impact our domestic and international sales into the foreseeable future.

INTELLECTUAL PROPERTY

We regard the protection of our methodologies, designs, product formulations, manufacturing processes, diagnostic procedures, copyrights, service marks, trademarks, and trade secrets as important to our future success. We rely on a combination of copyright, trademark, patent, 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, patents, trade secrets, 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.

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LICENSE OF THIRD-PARTY INTELLECTUAL PROPERTY

On occasion, we in-licensed both exclusive and non-exclusive rights to intellectual property and patents owned by third parties. These license agreements typically require royalties and other payments.

The Company hasWe have a royalty agreement in which it haswe obtained rights to manufacture and market an ACTH test (used to detect chronic metabolic conditions). Royalty expense of approximately $15,000$19,000 and $19,000,$11,000, respectively, is included in cost of sales for this agreement for the fiscal years ended May 31, 20202022 and 2019.2021. Sales of products manufactured under this agreement are non-materialnot material to total sales for the fiscal years ended May 31, 20202022 and 2019,2021, respectively. The CompanyWe may license other products or technology in the future as it deems necessary or opportunistic for conducting business.

In April 2020, we signed two license agreements with the Icahn School of Medicine at Mount Sinai, a New York not-for-profit education corporation, pertaining to certain technology that we have used to develop our ELISA COVID-19 serology test. This agreement requires a royalty payment on all sales of products that utilize the licensed technology.

In May 2020, we signed an exclusive license agreement with The Regents of the University of California, to license patents pertaining to a CRISPR-based technology that we hope tomay use to produce a more accurate rapid test for the COVID-19 virus, that could be used to test individuals to determine if they are currently infected with the COVID-19 virus. This agreement requires the payment of certain milestone payments and a royalty on all sales that utilize the licensed technology. Collaboration efforts on a CRISPR product that may be commercialized using this technology continues, however, there are no imminent plans to launch a product from this collaboration.    

Some of the products that we manufacture, sell or use may be covered by claims in issued patents held by other persons or entities, and as such, upon notice from such persons or entity we may be required to pay a license fee or may be required to cease all manufacture, sale or use of such products, which could negatively impact the Company.us. While we have not been notified of any such claims by third parties, we cannot guarantee that such claims will not be made in the future.

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BRANDS AND TRADEMARKS

We occasionally register our tradenames with the U.S. Patent and Trademark Office of Patents and Trademarks.(“USPTO”). Of note, we registered the tradename “InFoods” on December 24, 2016. Our unregistered tradenames are "EZ Detect"Detect," "EZ-H.P., "EZ-H.P." and "EZ-PSA". A trademark for "Aware" was issued and assigned in November 2001, and renewed in 2011.2011 and 2021. On January 11, 2020, the USPTO renewed the Company’sour “FORTEL” trademark for another ten years.

The laws of some foreign countries do not protect our proprietary rights to the same extent as do the laws of the U.S.United States. Effective copyright, trademark and trade secret protection may not be available in such jurisdictions.

PATENTS AND INFOODS TECHNOLOGY

The Company hasWe have filed over 100 international and PCTPatent Corporation Treaty patents and has 22have over 10 provisional and non-provisional patents currently filed with the USPTO. Some of these patent applications pertain to COVID-19 and other products. However,products, however, the majority of our patents that are pending, allowed or issued pertain to the InFoods® IBS technology platform.

Our most important family of patent applications pertains to ourInFoods® IBS InFoods^® technology platform, which is a revolutionary and disruptive new method of thediagnosing and treating symptoms of many different inflammatory diseases. Our first planned product launch using this technology is the InFoods®InFoods^® IBS product which diagnosesis designed to diagnose and treats Irritable Bowel Syndrome.treat IBS. Using a patient blood sample, a physician or lab can run our test to identify specific foods (e.g., pork, milk, shrimp, broccoli, eggs) that, if eliminated from thean IBS patient’s diet, can alleviate or reduce the individual's IBS symptoms, including, but not limited to, constipation, diarrhea, bloating, cramping, severe pain and indigestion. We have filed many patent applications with the USPTO and with other such similar agencies in other countries outside of the United States pertaining to this InFoods® IBSInFoods^®technology. These patent applications include claims that address the diagnosis and treatment of several disease states including IBS, functional dyspepsia, Crohn’s disease, ulcerative colitis, gastroesophageal reflux disease, osteoarthritis, psoriasis, migraine headaches osteoarthritis, psoriasis and others.depression. These applications include the use of this technology in both humans and animals.  The first InFoods^® patents filed by us pertained to IBS. The International Search Authority (“ISA”) has deemed that for one of Biomerica’s key patent applications pertaining to IBS, all of the International Patent Application claims for its composition and methods to identify trigger foods for IBS are novel and non-obvious.  Several of the patents pertaining to the InFoods® InFoods^® IBStechnology have been issued and many more are in active review and prosecution. 

In August 2018, we received our first patent from the Korean Intellectual Property Office, (“KIPO”) issued a Certificate of Patent (#10-1887545) covering our InFoods® IBS product (entitled “COMPOSITIONS, DEVICES, AND METHODS OF IBS SENSIVITY TESTING”). This patent wasproduct. Since then we have been granted an additional 11 patents; 3 in Japan, 2 in the first for the InFoods® patent portfolio, providing patent protection for InFoods® IBSUnited States, 2 in Korea, until November 13, 2035.1 in Singapore, 1 in Mexico, 1 in Canada, and 1 in Australia. Additionally, we have filed for over 100 international and USPTO patents.

In June 2019, we received our first issued patent from the USPTO (#15/526,240) pertaining to our InFoods® IBS product, with claims that covers the test kit that is used to determine patient food intolerances. 11

In May 2020, the Japanese Patent Office issued our first InFoods® IBS patent in that country (JP,6681907,B) which covers the compositions, devices and methods of IBS sensitivity testing.

In August 2020, we received notice of allowance from the USPTO for our second patent for the InFoods® IBS product (#16/385,322) that expands our claims to include the method for identifying and setting the antibody cut-off values for each individual food to determine if a person has an intolerance to that food.

We believe the claims in these issued InFoodsInFoods® IBS patents and claims in our pending patents that protect the use of the InFoods® IBS technology to diagnose and treat othervarious diseases, provide us with broad protections from other companies making or selling competing products in this highly disruptive new field of medicine. 

In addition to the use of our own patents, Biomerica haswe have acquired from third parties the rights to manufacture and sell certain products that are protected by patents or intellectual property owned by these third parties. In some cases, royalties are paid on the sales of these products. Biomerica anticipatesWe anticipate that itwe will license or purchase the rights to other products or technologies in the future. 

10We recently completed an endpoint determination clinical trial on our InFoods® IBS product. Our business model for this product includes the possible out-licensing of this product and the related patents to a large international life sciences or technology company that would commercialize the product or assist us with the commercialization. 

EMPLOYEES

As of May 31, 20202022 and 2019, the Company2021, we employed 45a total of 64 and 3967 employees, respectively, in the U.S.United States, Mexico, and Europe.Germany, of which 64 and 67 were full-time employees, respectively. Various employees listed in the production department also perform research and development duties as a routine function of their job. The CompanyWe occasionally employs temporary employees when needed.

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The following is a breakdown of employees by departments:

In addition, Biomerica de Mexico employs 20 people at its Mexico facility.

We also engage the services of many outside Ph.D. and’s, M.D.’s and other types of industry expert consultants and organizations as well as medical institutions for technical support, regulatory advisors, marketing and public relations advisors, financial advisors, contract product development and manufacturing organization, and other advisors on a regular basis. We try to protect the Company with the use of confidentiality, intellectual property ownership and indemnifications agreements. However, we cannot guarantee that the use of such third partiesexperts will fully protect the Company from third-party claims or from theft of our intellectual property.

ITEM 1A.   RISK FACTORS

The risks described below are not the only ones we face. Additional risks and uncertainties we are not presently aware of or that we currently believe are immaterial may also impair our business operations. Our business could be harmed by any of these risks and uncertainties. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment. In assessing these risks, you should also refer to the other information contained or incorporated by reference into this annual report on Form 10-K, including our consolidated financial statements and related notes.

RISKS RELATED TO OUR BUSINESS

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

We are susceptible to a widespread outbreakongoing outbreaks of an illness or other health issue, such as the recent COVID-19 Coronavirus outbreak first reported in Wuhan, Hubei Province, China in December 2019 and subsequently spreading throughout the world resulting in millions of confirmed cases worldwide and many deaths.outbreak. The outbreak of the COVID-19 virus has caused the various governments, including the U.S.,United States, to implement quarantines, various restrictions on travel causing airlines to suspend international and certain domestic flights, shelter in place orders and other restrictions. Governments have also implemented work restrictions that prohibit many employees from going to work, and for businesses that are allowed to remain open, many employees are electing to remain at home to avoid spread of the disease. As a result of this COVID-19 virus outbreak and potential future pandemic outbreaks, the Company faces significant risks including, but not limited to: a) supply chain disruptions making it difficult for the Company to contract and receive materials needed for production of its products, and needed to ship finished products to our end customers, b) loss of contracts and customers from the financial strains or other disruptions they are experiencing as a result of the pandemic, c) financial risks pertaining to receivables due from customers that may fall into insolvency or otherwise be unable to pay their bills, d) government responses including orders that make it difficult to remain open for business, restrict imports of raw materials or exports of finished goods, refusal to allow the Company’s product to be licensed for sale in their countries, and other seen and unforeseen actions taken by government agencies, e) absenteeism or loss of employees at the Company, or at our partner’s companies, due to health reasons or government restrictions, that are needed to develop, validate, manufacture and perform other necessary functions for our operations, f) equipment failures, loss of utilities and other disruptions that could impact our operations or render them inoperable, g) litigation or government actions against the Company pertaining to existing products and new products sold by the Company that are directed at limiting or treating the spread of the pandemic outbreak, h) a local or global recession or depression that could harm the international banking system, limit demand for all products including those made by the Company,  i) a drop in demand for our products, that are all medical related, due to patients’ reluctance or refusal to visit hospitals, labs, and doctors’ offices where our products are used due to their fear of contracting a disease, and many other seen and unforeseen events and circumstances, all of which could negatively impact the Company.

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If our COVID-19 tests are unable to gain acceptance in the market, proves to be ineffective or less effective than expected, and/or we do not receive regulatory approvals for our COVID-19 tests to be sold, our resultsWe have a history of operation could be materially harmed.operating losses.

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

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

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

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

•          our ability to manufacture and scale commercial products;

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

•          development of effective vaccines to the Covid-19 virus that reduce the need to do antibody testing;

•          mutations in the COVID-19 virus that render our tests ineffective;

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

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

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

In addition, each country in which we wish to sell these tests has its own regulatory approval requirements.  We will need to comply with the regulatory requirements of each country before we are permitted to sell in that country.have historically incurred net losses. There can be no assurance that governmental agencies, including the FDA,we will provide clearance of our COVID-19 tests togenerate net profits in future periods. Further, there can be sold in their markets.  Failure to achieve widespread market acceptance of our COVID-19 tests, or failure to achieve regulatory clearance of our COVID-19 tests, could materially harm our business, financial condition, and results of operations.  Our COVID-19 tests are new testsno assurance that only generated revenue during the last two months of our fiscal year. It is uncertain how long we will be ablecash flow positive in future periods. In the event that we fail to generate revenues from these tests, and what levelachieve profitability in future periods, the value of sales,our common stock may decline. In addition, if any, we will attain in the future.are unable to achieve or maintain positive cash flows, we would be required to seek additional funding, which may not be available on favorable terms, if at all.

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Our operating results may fluctuate adversely as a result of many factors that are outside our control, which may negatively impact our stock price.

Our operating results are dependent upon many factors that are substantially outside of our control that could materially and adversely affect our business, results of operations and financial condition.  Factors that are beyond our control and that could affect our operating results in the future include:

•regulatory clearance;

•changes in the level of competition, such as would occur if one of our competitors introduced a new, better performing or lower priced product to compete with one or more of our products;

•changes in the reimbursement systems or reimbursement amounts that end-users may rely upon in choosing to use our products;

•changes in economic conditions in our domestic and international markets, such as economic downturns, decreased healthcare spending, reduced consumer demand, inflation and currency fluctuations; changes in government laws and regulations affecting our business; reluctance for consumers to visit healthcare providers;

•lower than anticipated market penetration of our new or more recently introduced products;

•significant quantities of our product or that of our competitors in our distributors’ inventories or distribution channels;

•changes in distributor buying patterns;

•government mandated shelter-in-place or other lock-down orders;

•continued spread of the COVID-19 virus or mutations of the virus; and

•changes in the healthcare market including consolidation in our customer base.

Fluctuations in our operating results, for any reason, could cause our growth or operating results to fall below the expectationslosses as a result of investors and securities analysts.significant fixed expenses.

We base the scope of our operations and related expenses on our estimates of future revenues. A significant portion of our operating expenses are fixed, and we may not be able to rapidly adjust our expenses if our revenues fall short of our expectations. Our revenue estimates for future periods are based, among other factors, on estimated end-user demand for our products. If end-user consumption is less than estimated, revenues from our distribution partners and other distribution channels would be expected to fall short of expectations, and because such a significant portion of our costs are fixed, could result in operating losses.

Factors that are beyond our control and that could affect our operating results in the future include:

•        regulatory clearance;

•        changes in the level of competition, such as would occur if one of our competitors introduced a new, better performing or lower priced product to compete with one or more of our products;        

•        changes in the reimbursement systems or reimbursement amounts that end-users may rely upon in choosing to use our products;

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•        changes in economic conditions in our domestic and international markets, such as economic downturns, decreased healthcare spending, reduced consumer demand, inflation and currency fluctuations; changes in government laws and regulations affecting our business; reluctance for consumers to visit healthcare providers;

•        lower than anticipated market penetration of our new or more recently introduced products;

•        significant quantities of our product or that of our competitors in our distributors’ inventories or distribution channels;

•        changes in distributor buying patterns;

•        government mandated shelter-in-place or other lock-down orders;

•        continued spread of the COVID-19 virus or mutations of the virus; and

•        changes in the healthcare market including consolidation in our customer base.

To remain competitive, we must continue to develop, obtain and protect our proprietary technology rights; otherwise, we may lose market share or need to reduce prices as a result of competitors selling technologically superior products that compete with our products.products, or selling products at lower prices.

Our ability to compete successfully in the diagnostic market depends on continued development and introduction of new products, technology and the improvement of existing technology. If we cannot continue to improve upon or develop, obtain and protect our technology, our operating results could be adversely affected.

Our competitive position is heavily dependent on obtaining and protecting our own proprietary technology or obtaining licenses from others. Our ability to obtain patents and licenses, and their benefits, is uncertain.

The Company is required to obtain government or regulatory certification in many countries and the European community to sell its products in those countries or regions.  There is no assurance that the Company will be able to retain its certification in the future. This includes the possibility and risk that the Company’s products do not meet the new EU IVDR testing and documentation requirements in the future as described in the above “Research and Development” section of this document.

Significant government regulation exists in countries in which we conduct business. A large part of the Company’s sales areis to distributors in Europe, China, and other countries, which require us to maintain certain certifications to sell our products.  Failure to comply with current governmental regulations and quality assurance guidelines could cause the loss of these certifications, which could materially adversely affect the results of the Company.  Loss of certifications could lead to temporary manufacturing shutdowns, product recalls, product shortages or delays in product manufacturing and a decline in sales.

The Company maintains a manufacturing plant in Mexico which presents risks to the Company including risks associated with doing business outside the United States.

The Company has a significant investment in its manufacturing facility in Mexico through its subsidiary, Biomerica de Mexico. In addition, the Company warehouses a significant amount of its inventory at the Mexico facility. There are a number of risks associated with doing business in Mexico, including, exposure to local economic and political conditions, social unrest, including risks of terrorism or other hostilities, export and import restrictions, the potential for shortages of trained labor, and the possible effects of currency exchange rate fluctuations. These risks could lead to additional costs that we cannot foresee at this time and may materially adversely impact our business, results of operations and financial condition.

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We use hazardous materials in our research and production that may result in unexpected and substantial claims against us relating to handling, storage, or disposal.

We use hazardous materials in our research and production. The risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, the Company could be held liable for any harm or damages that result and any such liability could exceed the resources of the Company.  The Company may incur substantial costs to comply with environmental regulations.

If any governmental authorities were to impose new environmental regulations requiring compliance in addition to that required by existing regulations or alter their interpretation of the requirements of such existing regulations, such environmental and safety regulations could impair our research, development, or production efforts by imposing additional, and possibly substantial, costs, restrictions, or compliance procedures on our business. In addition, because of the nature of the penalties provided for in some of these environmental and safety regulations, we could be required to pay sizable fines, penalties, or damages in the event of noncompliance with regulations and environmental laws. Any environmental or safety violation or remediation requirement could also partially or completely shut down our research and manufacturing facilities and operations, which would have a material adverse effect on our business. The risk of accidental contamination or injury from these hazardous materials cannot be completely eliminated and exposure of individuals to these materials could result in substantial fines, penalties or damages that may not be covered by insurance.

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In order toTo remain competitive, we must expend considerable resources to research new technologies and products and develop new markets, and there is no assurance our efforts to develop new technologies, products or markets will be successful or such technologies, products or markets will be commercially viable.

We devote a significant amount of financial and other resources to researching and developing new technologies, new products, and new markets. The development, manufacture and sale of diagnostic products require a significant investment of resources. The development of new products and markets also requires a substantial investment of resources, such as new employees, offices and manufacturing facilities, consultants, and clinical trials. No assurances can be given that our efforts to develop new technologies or products will be successful, that such technologies and products will be commercially viable, or our expansion into new markets will be profitable.

There is also no guarantee that our new products, including our InFoods® IBS products, will get approval and be well accepted into the marketplace.

Our operations will be adversely affected if our operating results do not correspondingly increase with our increased expenditures or if our technology, product, and market development efforts are unsuccessful or delayed. Furthermore, our failure to successfully introduce new technologies or products and develop new markets could have a material adverse effect on our business and prospects.

We rely on a limited number of key distributors that account for a substantial majority of our total revenue. The loss of any key distributor or an unsuccessful effort by us to directly distribute our products could lead to reduced sales.

Our net sales were approximately $18,871,000 for fiscal 2022 compared to $7,199,000 for fiscal 2021. For the fiscal years ended May 31, 20202022 and 2019,2021, the Company had three and two distributors, respectively, which accounted for a total of 57.2%65% and 46.3%60% of our net sales, respectively. Of this, for the fiscal years ended May 31, 20202022 and 2019, one2021, the largest of the distributors mentioned above accounted for 25.7%55% and 36.3%33%, respectively, of net consolidated sales.

AtTotal gross receivables on May 31, 20202022 and 2019,2021 were approximately $927,000 and $2,292,000, respectively. As of May 31, 2022 and 2021, the Company had three distributorsone distributor and two distributors, respectively, which accounted for a total of 80.08%50% and 68.1%73%, respectively, of gross accounts receivable. The loss of these sales to these accounts could adversely impact the results of the Company. Of the 80.0%50% as of May 31, 2020, 43.9%2022, 50% was owed by a distributor in Ecuador. Total gross receivables for fiscal 2020 and 2019 were $1,836,852 and $1,527,762, respectively.Asia. Adverse changes in our relationships with these distributors and other partners, or adverse developments in their financial condition, performance or purchasing patterns, could adversely affect our business and consolidated financial statements.

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We extend credit to customers outside the U.S.United States which can be difficult to collect.

We extend credit to many of our customers including those outside of the U.S.United States. It is often difficult to obtain adequate credit information on these customers. Further, our ability to collect receivables from these customers through the court systems in those countries can be more difficult than here in the U.S.United States.  Our inability to collect on receivables from customers, in particular those outside of the U.S.United States could negatively impact the Company.

If we are not able to manage our growth strategy our operating results may be adversely affected.

Our business strategy contemplates further growth, which would likely result in expanding into larger facilities, expanding the scope of operating and financial systems and the geographical area of our operations, including further expansion outside the U.S.,United States, as new products and technologies are developed and commercialized or new geographical markets are entered. Because we have a small executive staff, acquisitions and other future growth may divert management’s attention from othercore aspects of our business and place a strain on existing management and our operational, financial and management information systems. Furthermore, we may expand into markets in which we have less experience or incur higher costs. Any and all of these potential growth and expansion strategies and events could impose material risks and cause the Company to incur adverse operating and financial results.

Intellectual property risks and third-party claims of infringement, misappropriation of proprietary rights or other claims against us could adversely affect our ability to market our products, require us to redesign our products or attempt to seek licenses from third parties, result in significant costs, and materially adversely affect our operating results. In addition, the defense of such claims could result in significant costs and divert the attention of our management and other key employees.

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Companies in or related to our industry often aggressively protect and pursue their intellectual property rights. There are often intellectual property risks associated with developing and producing new products and entering new markets, and we may not be able to obtain, at reasonable cost or upon commercially reasonable terms, if at all, licenses to intellectual property of others that is alleged to be part of such new or existing products.

We have hired and will continue to hire individuals or contractors who have experience in medical diagnostics and these individuals or contractors may have confidential trade secret or proprietary information of third parties. We cannot assure you that these individuals or contractors will not use this third-party information in connection with performing services for us or otherwise reveal this third-party information to us. Thus, we could be sued for misappropriation of proprietary information and trade secrets. Such claims are expensive to defend and could divert our attention and result in substantial damage awards and injunctions that could have a material adverse effect on our business, financial condition, or results of operations. In addition, to the extent that individuals or contractors apply technical or scientific information independently developed by them to our projects, disputes may arise as to the proprietary rights to such data and may result in litigation.

The defense and prosecution of patent and trade secret claims are both costly and time consuming. We or our customers may be sued by other parties that claim that our products have infringed their patents or misappropriated their proprietary rights or that may seek to invalidate one or more of our patents. An adverse determination in any of these types of disputes could prevent us from manufacturing or selling some of our products, limit or restrict the type of work that employees involved with such products may perform for us, increase our costs and expose us to significant liability. In addition, the defense of such claims could result in significant costs and divert the attention of our management and other key employees.

As a general matter, our involvement in litigation or in any claims to determine proprietary rights, as may arise from time to time, could materially and adversely affect our business, financial condition and results of operations for reasons such as:

•        pending litigation may of itself cause our distributors or end-users to reduce or terminate purchases of our products;

•        it may consume a substantial portion of our managerial and financial resources;

•        its outcome would be uncertain and a court may find any third-party patent claims valid and infringed by our products (issuing a preliminary or permanent injunction) that would require us to procure costly licensing arrangements from third parties or withdraw or recall such products from the market, redesign such products offered for sale or under development or restrict employees from performing work in their areas of expertise;

•        governmental agencies may commence investigations or criminal proceedings against our employees, former employees and us relating to claims of misappropriation or misuse of another party’s proprietary rights;

•        an adverse outcome could subject us to significant liability in the form of past royalty payments, penalties, special and punitive damages, the opposing party’s attorneys' fees, and future royalty payments significantly affecting our future earnings; and

•        failure to obtain a necessary license (upon commercially reasonable terms, if at all) upon an adverse outcome could prevent us from selling our current products or other products we may develop.

In addition to the foregoing, we may also be required to indemnify some customers, distributors, and strategic partners under our agreements with such parties if a third party alleges or if a court finds that our products or activities have infringed upon, misappropriated or misused another person’s proprietary rights. Further, our products may contain technology provided to us by other parties such as contractors, suppliers, or customers. We may have little or no ability to determine in advance whether such technology infringes the intellectual property rights of a third party. Our contractors, suppliers and licensors may not be required or financially able to indemnify us in the event that a claim of infringement is asserted against us, or they may be required to indemnify us only up to a maximum amount, above which we would be responsible for any further costs or damages.

Some of the products that we manufacture, sell or use may be covered by claims in issued patents held by other persons or entities, and as such, upon notice from such persons or entity, we may be required to pay a license fee or may be required to cease all manufacture, sale or use of such products, which could negatively impact our financial results or operations. We cannot guarantee that such claims will not be made in the future.

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We need to continue to raise additional funds to finance our future capital or operating needs, which could have adverse consequences on our operations and the interests of our stockholders.

WeAs a company focused on research and development of new products that do not yet generate revenues, we need to continue to raise funds through public or private debt or sale of equity to achieve our business strategy. When we raise funds or acquire other technologies or businesses through issuance of equity, this dilutes the interests of our stockholders. Moreover, the availability of additional capital, whether debt or equity from private capital sources (including banks) or the public capital markets, fluctuates as our financial condition and industry or market conditions in general change. There may be times when the private capital markets and the public debt or equity markets lack sufficient liquidity or when our securities cannot be sold at attractive prices, in which case we would not be able to access capital from these sources on favorable terms, if at all. We can give no assurance as to the terms or availability of additional capital.

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Our inability to raise additional funds to finance our future capital or operating needs could force us to delay, reduce or eliminate our development programs or commercialization efforts.

Costs related to development projects and approvals are hard to estimate due to factors that are unknown to us at this time. These future costs could be much higher than anticipated and current operations may notare unlikely be able to cover these costs.

Clinical trials involve a lengthy and expensive process with an uncertain outcome, and results of studies and trials may not be predictive of future trial results.

Clinical trials are expensive, time consuming and difficult to design and implement. Regulatory agencies may analyze or interpret the results differently than we do. Even if the results of our clinical trials are favorable, the clinical trials for a number of our product candidates may take a significant amount of time to complete. Regulatory authorities, including state and local authorities, may suspend, delay or terminate our clinical trials at any time, require us to conduct additional clinical trials, require a particular clinical trial to continue for a longer duration than originally planned, or require a change to our development plans such that we conduct clinical trials for a product candidate in a different order.  There is no assurance that the results of the clinical trials will be positive.  A negative clinical trial could affect our ability to obtain regulatory clearances and/or potential licensing partners.  There is also no assurance that our clinical trials will not be delayed or will be completed.  Any of the foregoing could have a material adverse effect on our business, results of operations and financial condition.

Our results of operations and financial conditions may be adversely affected by the financial soundness of our customers, distributors and suppliers.

If our customers’ or suppliers’ operating and financial performance deteriorates, or if they are unable to make scheduled payments or obtain credit, our customers may not be able to pay, or may delay payment of, accounts receivable owed to us, and our suppliers may restrict credit or impose different payment terms or reduce or terminate production of products they supply to us, or may cease all operations. Any inability of customers to pay us for our products and services, or any demands by suppliers for different payment terms, or inability for such suppliers to continue operations may adversely affect our operating results and financial condition. Additionally, both state and federal government sponsored and private payers, as a result of budget deficits or reductions, may seek to reduce their healthcare expenditures by cutting or eliminating reimbursements for, or cutting purchase of our products. Any reduction in payments by such government sponsored or private payers may adversely affect our earnings and cash flow.

We may not achieve market acceptance of our new products among healthcare providers and physicians, and this would have a negative effect on future sales.

We believe our ability to introduce new products that gain acceptance among consumers, healthcare providers and physicians is an important part of our ability to grow our revenue in future periods. However, any new products we introduce may not gain market acceptance to the extent we anticipate or project. The acceptance of which in the medical community for any of our new products is unpredictable at this time. In addition, the Company will need to spend considerable funds in order to introduce thenew products into the marketplace. Sales, if any, of these products in the future are uncertain.  In addition, our competitors may offer different products and product formats at suggested prices that are lower than for our products or whose products are more accurate than our products. We can provide no assurances that consumers and the medical community will purchase our products or that they will not prefer to purchase a competitive product. 

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The industry and market segments in which we operate are highly competitive, and intense competition with other providers of diagnostic products may reduce our sales and margins.

Our diagnostic tests compete with similar products made by our competitors. There are a large number of multinational and regional competitors making investments in competing technologies and products. We also face competition from our distributors as some have created, and others may decide to create their own products to compete with ours. A number of our competitors have a potential competitive advantage because they have substantially greater financial, technical, research and other resources, and larger, more established marketing, sales, distribution and service organizations than we have.organizations; more established relationships with healthcare professionals; and greater experience in conducting research and development, manufacturing, clinical trials, and obtaining regulatory approval for products. Moreover, some competitors offer broader product lines and have greater name recognition than we have. If our competitors’ products are more effective than ours or take market share from our products through more effective marketing or competitive pricing, our operating results could be materially and adversely affected.

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In addition, there has been a trend toward industry consolidation in our markets over the last few years. We may not be able to compete successfully in an increasingly consolidated industry. We expect this trend toward industry consolidation may continue as companies attempt to strengthen or hold their market positions in an evolving industry and as companies are acquired or are unable to continue operations.

Our business and products are highly regulated by various governmental agencies. Our results of operations would be negatively affected by failures or delays in the receipt of regulatory approvals or clearances, the loss of previously received approvals or other changes to the existing laws and regulations that adversely impact our ability to manufacture and market our products.

The testing, manufacture and sale of our products are subject to regulation by numerous governmental authorities in the U.S.,United States, principally the FDA and corresponding state and foreign regulatory agencies. Our future performance depends on, among other matters, if, when and at what cost we will receive regulatory approval for new products, and if we can continue to comply with the many regulatory requirements that enable us to manufacture and sell medical related products and tests. Regulatory review can be a lengthy, expensive and uncertain process, making the timing and costs of clearances and approvals difficult to predict. Meeting all regulatory requirements, laws and mandates, and maintaining compliance with such in order to manufacture and sell medical products can be difficult and expensive. Our results of operations would be negatively affected by failures or delays in the receipt of regulatory approvals or clearances, the loss of previously received approvals or clearances, the placement of limits on the marketing and use of our products, and restrictions on our ability to manufacture our products.

Changes in government policy could adversely affect our business and potential profitability.

Changes in government policy could have a significant impact on our business by increasing the cost of doing business, affecting our ability to sell our products and negatively impacting our profitability. Such changes could include tariffs, embargos, trade wars or modifications to existing legislation, such as U.S. tax policy, or entirely new legislation, such as the Affordable Healthcare Act ("AHA") in the U.S.United States. We cannot fully predict the many ways that healthcare reform mightin the United States and internationally, and changing trade legislation and policies could adversely affect our business. It is unclear whether and to what extent, if at all, other anticipated developments, including changes due to new presidential administration priorities, or changes resulting from healthcare reform, such as a change in the number of people with health insurance, may impact us.

We are subject to numerous government regulations in addition to FDA regulation, and compliance with laws, including changed or new laws, could increase our costs and adversely affect our operations.  There is also the risk that our facilities could fail to get the proper licensing at our next inspection or renewal.

In addition to FDA and other regulations referred to above, numerous laws relating to such matters as safe working conditions, manufacturing practices, data privacy, environmental protection, fire hazard control and disposal of hazardous or potentially hazardous substances impact our business operations. If these laws or their interpretation change or new laws regulating any of our businesses are adopted, the costs of compliance with these laws could substantially increase our overall costs. Failure to comply with any laws, including laws regulating the manufacture and marketing of our products, could result in substantial costs and loss of sales or customers. Because of the number and extent of the laws and regulations affecting our industry, and the number of governmental agencies whose actions could affect our operations, it is impossible to reliably predict the full nature and impact of future legislation or regulatory developments relating to our industry and our products. To the extent the costs and procedures associated with meeting new or changing requirements are substantial, our business, results of operations and financial condition could be adversely affected.

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Our total revenue could be affected by third-party reimbursement policies and potential cost constraints.

The end-users of our products are primarily physicians, labs, and other healthcare providers. In the U.S.,United States, healthcare providers such as hospitals and physicians who purchase diagnostic products generally rely on third-party payers, principally private health insurance plans, federal Medicare, and state Medicaid, to reimburse all or part of the cost of the procedure. Use of our products would be adversely impacted if physicians and other healthcare providers do not receive adequate reimbursement for the cost of our products by their patients’ third-party payers both in the U.S.United States and in foreign markets. Our total revenue could also be adversely affected by changes or trends in reimbursement policies of governmental or private healthcare payers. We believe that the overall escalating cost of medical products and services has led to, and will continue to lead to, increased pressures on the healthcare industry, both foreign and domestic, to reduce the cost of products and services. Given the efforts to control and reduce healthcare costs in recent years, currently available levels of reimbursement may not continue to be available in the future for our existing products or products under development. Third-party reimbursement and coverage may not be available or adequate in either the U.S.United States or foreign markets, current reimbursement amounts may be decreased in the future and future legislation, regulation or reimbursement policies of third-party payers may reduce the demand for our products or adversely impact our ability to sell our products on a profitable basis.

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Unexpected increases in, or inability to meet, demand for our products could require us to spend considerable resources to meet the demand or harm our reputation and customer relationships if we are unable to meet demand.

Our inability to meet customer demand for our products, whether as a result of manufacturing problems or supply shortfalls, could harm our customer relationships and impair our reputation within the industry. In addition, our product manufacturing of certain product lines is concentrated in our two manufacturing sites. Weather, natural disasters (including pandemics), fires, terrorism, political change, governmental restrictions or stay-at-home orders in response to natural disasters (including pandemics), failure to follow specific internal protocols and procedures, equipment malfunction, environmental factors or damage to one or more of our facilities could adversely affect our ability to manufacture our products. This, in turn, could have a material adverse effect on our business.

If we experience unexpected increases in the demand for our products, we may be required to expend additional capital resources or engage third-party manufacturers to meet these demands. These capital resources could involve the cost of new machinery or even the cost of new manufacturing facilities. In addition, engaging third-party manufacturers would increase manufacturing costs and reduce margins. This would increase our capital costs or third-party expenses, which could adversely affect our earnings and cash resources. If we are unable to develop or obtain necessary manufacturing capabilities in a timely manner or to engage third-party manufacturers to meet demand, our total revenue could be adversely affected. Failure to cost-effectively increase production volumes, if required, or lower than anticipated yields or production problems, including those encountered as a result of changes that we may make in our manufacturing processes to meet increased demand or changes in applicable laws and regulations, could result in shipment delays as well as increased manufacturing costs, which could also have a material adverse effect on our business, operating results and financial condition.

Unexpected increases in demand for our products could also require us to obtain additional raw materials in order to manufacture products to meet the demand. Some raw materials require significant ordering lead time and we may not be able to timely access sufficient raw materials in the event of an unexpected increase in demand, particularly those obtained from a sole supplier or a limited group of suppliers.

If one or more of our products is claimed to be defective or does not meet the performance criteria we claim in our marketing materials we could be subject to product recalls, claims of liability and harm to patients or users of our products, or harm to our reputation that could adversely affect our business.

A claim of a defect in the design or manufacture of our products could have a material adverse effect on our reputation in the industry and subject us to claims of liability for injuries and otherwise. Further, a claim that one of our products is defective or does not actually meet the performance criteria we claim in our marketing materials, could require a product recall or otherwise have a substantial impact on our revenues and financial performance. Any substantial underinsured loss resulting from such a claim or defect would have a material adverse effect on our operating results and financial conditions and the damage to our reputation or product lines in the industry could have a material adverse effect on our business.

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We are exposed to business risks which, if not covered by insurance, could have an adverse effect on our results of operations. We face potential product liability exposure, and, if claims brought against us are successful, we could incur substantial liabilities.

We face a number of business risks, including exposure to product liability claims, employment law claims, claims that the Company or its officers, directors or employees have engaged in illegal or wrongful acts, claims of violation of environmental laws and many other possible claims. Although we maintain insurance for a number of these risks, we may face claims for types of damages, or for amounts of damages, that are not covered by our insurance. For example, although we currently carry product liability insurance for liability losses, there is a risk that product liability or other claims may exceed the amount of our insurance coverage or may be excluded from coverage under the terms of our policy. Also, our existing insurance may not be renewed at the same cost and level of coverage as currently in effect or may not be renewed at all. Further, we do not currently have insurance against many environmental risks we confront in our business. If we are held liable for a claim against which we are not insured or for damages exceeding the limits of our insurance coverage, whether arising out of product liability matters, cybersecurity matters, or from some other matter, that claim could have a material adverse effect on our results of operations.

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We may rely on third parties to conduct or be part of our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to seek or obtain regulatory approval for or commercialize our product candidates.

We rely on third-party contract research organizations (“CROs”), Universitiesuniversities or/clinical sites (“Vendors”), to coordinate, monitor and conduct of our clinical trials and to manage, analyze and interpret data for our clinical programs. We, our Vendors, and our clinical sites are required to comply with current Good Clinical Practices(“Practices (“GCPs”), regulations and guidelines issued by the FDA and by similar governmental authorities in other countries where we are conducting clinical trials. We have an ongoing obligation to monitor the activities conducted by our Vendors and at our clinical sites to confirm compliance with these requirements. In the future, if we, our Vendors or our clinical sites fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA may require us to perform additional clinical trials before approving our marketing applications. If our Vendors do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised due to their failure to adhere to our clinical protocols, regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. As a result, our financial results and the commercial prospects for our product candidates would be harmed, our costs could increase, and our ability to generate revenue could be delayed.

Failures in our information technology and storage systems could significantly disrupt our business or force us to expend excessive costs.

We utilize complex information technology systems to support our business and store information. We cannot be sure that our systems will meet our future business needs or that necessary upgrades will operate as designed, which could result in excessive costs or disruptions in portions of our business. In particular, any disruptions, delays or deficiencies caused by our enterprise resource planning system could adversely affect our ability to process orders, ship products, provide services and customer support, send invoices and track payments, fulfill contractual obligations or otherwise operate our business. In addition, despite the implementation of security measures, information technology systems are vulnerable to damage from a variety of sources, including computer viruses, unauthorized access, telecommunications or network failures, malicious human acts, terrorism, and natural disasters. Moreover, despite network security and back-up measures, some of our servers are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptive problems. Cyber security is a great and growing risk to operating companies. Cyber-attacks may result in loss of vital Company documentation and data, or confidential third-party documents held by the Company, that are necessary for the Company to operate. Despite the precautionary measures we have taken to prevent unanticipated problems that could affect our systems, sustained or repeated system failures that interrupt our ability to generate and maintain data, could result in a material disruption in our operations.operations and material adverse financial costs to the Company. Furthermore, to the extent that any disruption or security breach resulted in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could face a variety of negative consequences, including regulatory actions or litigation, fines or penalties, adverse publicity, increased cybersecurity protection costs, and lost revenue.

There is a risk that our measures to protect our systems from cyber-attack are not sufficient to avoid attacks by new sources and methods.

Our business could be negatively affected by the loss of or the inability to hire key personnel.

Our future success depends in part on our ability to retain our key technical, sales, marketing and executive personnel and our ability to identify and hire additional qualified personnel. Competition for these personnel is intense, both in the industry in which we operate and where our operations are located. Further, we expect to grow our operations, and our needs for additional management and other key personnel are expected to increase. If we are not able to retain existing key personnel, or timely identify and hire replacement or additional qualified personnel to meet expected growth, our business could be adversely impacted. In addition, the loss of any of our key personnel, particularly key research and development personnel, could harm our business and prospects and could impede the achievement of our research and development, operation or strategic objectives.

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The Company’s lease obligations and growth expectations could create financial and operating risks.

Given the recent growth in the Company’s operations, it is uncertain the current leased facilities will be able to accommodate the Company’s operations in the future. As such, the Company may need to move to new facilities that would require the Company to seek to sublease its current facilities for the remainder of the lease(s) at a potential discount to the existing monthly lease obligation cost. Alternatively, the Company could be required to move a portion of its operations to a new facility which could be disruptive both short term and long term to the Company’s operations and create additional fixed costs.

We face risks relating to our international sales, including inherent economic, political, and regulatory risks, which could impact our financial performance, cause interruptions in our current business operations and impede our growth strategy.

Our products are primarily sold internationally, with the majority of our international sales to our distributors in Asia, Europe and South America. We currently sell and market our products through distributor organizations and sales agents which creates foreign risks include, among others:

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•compliance with multiple different registration requirements and new and changing registration requirements, our inability to benefit from registration for our products inasmuch as registrations may be controlled by a distributor, and the difficulty in transitioning our product registrations;

•compliance with complex foreign and U.S. laws and regulations that apply to our international operations, including U.S. laws such as import/export limitations, the Foreign Corrupt Practices Act, and local laws;

•tariffs or other barriers as we continue to expand into new countries and geographic regions, especially related to China as tariffs are changing constantly;

•exposure to currency exchange fluctuations against the U.S. dollar;

•longer payment cycles, generally lower average selling prices and greater difficulty in accounts receivable collection;

•lack of ability to enforce receivables collections contracts in foreign legal courts;

•reduced, or lack of, protection for, and enforcement of, intellectual property rights;

•political and economic instability in some of the regions where we currently sell our products or that we may expand into in the future;

•complex and potentially adverse tax consequences; and

•diversion to the U.S.United States of our products sold into international markets at lower prices.

Currently, most of our international sales are negotiated for and paid in U.S. dollars. Nonetheless, these sales are subject to currency risks, since changes in the values of foreign currencies relative to the value of the U.S. dollar can render our products comparatively more expensive. These exchange rate fluctuations could negatively impact international sales of our products, as could changes in the general economic conditions in those markets. In order to maintain a competitive price for our products internationally, we may have to continue to provide discounts or otherwise effectively reduce our prices, resulting in a lower margin on products sold internationally. Continued change in the values of the Euro, the Mexican peso and other foreign currencies could have a negative impact on our business, financial condition and results of operations.

In addition, we have certain supply agreements with foreign vendors whereby we share the foreign currency exchange fluctuation risk. We may, in the future, enter into similar arrangements.

Sales of our common stock in the public market could lower the market price for our common stock and adversely impact the trading price of our securities.

Future sales by the Company of a substantial number of shares of our common stock in the public market, or the perception that such sales may occur, could adversely affect the then prevailing market price of our common stock and could make it more difficult for us to raise funds in the future through a public offering of our securities.

On July 21, 2020, we filed with the SEC a new “Shelf”“shelf” registration statement on Form S-3. The new registration statement registers our common shares tothat may be issued by the Company in a maximum aggregate amount of up to $90,000,000.  Shares of our common stock may be sold from time to time under this registration statement once it is declared effective.for up to three years from the filing date. On January 22, 2021, we filed a prospectus supplement for the sale of up to $15,000,000 of shares of our common stock in an at-the-market offering under the shelf registration statement, of which approximately $9,600,000, remains available for sale under the prospectus supplement.

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The issuance of additional shares of our common stock, or issuances of additional securities, could dilute the ownership interest of our common stockholders and could depress the market price of shares of our common stock and impair our ability to raise capital through the sale of additional equity securities. We cannot predict the size of future issuances or the effect, if any, that they may have on the market price for our common stock.

We also have a number of stockholders who own large blocks of our common stock. If one or more of these stockholders were to sell large portions of their holdings in a relatively short time, for liquidity or other reasons, the prevailing market price of shares of our common stock could be negatively affected.

The price of our stock may fluctuate unpredictably in response to factors unrelated to our operating performance.

The stock market periodically experiences significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These broad market fluctuations may cause the market price of our common stock to drop. In particular, the market price of our common stock has been very volatile and unpredictable and may vary substantially in the future in response to:

•       announcements by us or our competitors concerning technological innovations;

•       introductions of new products;

•       FDA, SEC, FINRA and foreign regulatory actions against the Company;

•	announcements by us or our competitors concerning technological innovations;
•	introductions of new products;
•	FDA, SEC, Financial Industry Regulation Authority and foreign regulatory actions against the Company;
•	developments or disputes relating to patents or proprietary rights;
•	failure to meet the expectations of stock market analysts and investors;
•	the Company reporting material weakness in our internal control;
•	changes in stock market analyst recommendations regarding our common stock;
•	changes in healthcare policy in the United States or other countries;
•	lawsuits or liability claims from shareholders or other parties;
•	legal disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our product candidates, and the results of any proceedings or lawsuits, including patent or shareholder litigation;
•	sales of our common stock or other securities by us or our stockholders in the future;
•	trading volume of our common stock;
•	actual or anticipated variations in quarterly operating results;
•	publication of research reports about us or our industry or positive or negative recommendations or withdrawal of research coverage by securities analysts;
•	effects of natural or man-made catastrophic events, including widespread public health epidemics like the pandemic related to COVID-19; and
•	general stock market conditions and other factors unrelated to our operating performance.
Trading of our common stock is not significant, therefore sales of a larger volume of the stock could adversely affect the stock price.

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•       developments or disputes relating to patents or proprietary rights;

•       failure to meet the expectations of stock market analysts and investors;

•       changes in stock market analyst recommendations regarding our common stock;

•       changes in healthcare policy in the U.S. or other countries;

•          lawsuits or liability claims from shareholders or other parties; and

•       general stock market conditions and other factors unrelated to our operating performance.

A sale of a substantial number of shares of the common stock by the Company may cause the price of our common stock to decline.

Trading of our common stock is not significant, therefore sales of a larger volume of the stock could adversely affect the stock price.

As of August 26, 2016, theour Company's stock has been traded on the Nasdaq Capital Market. Trading of the Company'sour stock is limited and liquidation of the Company’s stock may be difficult as there is a limited market for the Company’sour stock.

Our ability to use our net operating loss carry forwards in the future may be subject to limitation.

Although the Company haswe have Federal income tax net operating loss carryforwards of approximately $9,213,000$17,116,000 and California state income tax net operating loss carryforwards of approximately $5,025,000,$10,805,000, use of these loss carryforwards will depend on future income in relationship to expirations dates of these carryforwards.

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We do not anticipate declaring any cash dividends onface risks related to our common stock.intellectual property including our patents (IP).

ITEM 1B.  UNRESOLVED STAFF COMMENTS

None.

ITEM 2.   PROPERTIES

The Company leases its office facilities. AtOn May 31, 2020,2022, the Company had approximately 22,000 square feet of floor space at its corporate headquarters at 17571 Von Karman Avenue in Irvine, California, 92614 which it has been leasing since 2009. The lease for its headquarters expired on August 31, 2016.  The Company had an option to extend the term of its lease for two additional sixty-month periods. On November 30, 2015, the Company exercised its option to extend its lease for an additional sixty-month period and entered into the First Amendment to Lease wherein it extended its lease until August 31, 2021. The initial base rentOn April 9, 2021, the Company exercised its second option to extend its lease for an additional five years.  When the Company extended its lease in April 2021, it was also granted an additional five- year lease extension was $21,000 per month, increasing to $23,637 through August 31, 2021.option. The current rent is currently $22,948approximately $25,000 per month and will increase on September 1, 20202022, to $23,637$26,000 per month.  The security deposit of $22,080 remains the same. is approximately $22,000.

In November 2016, the Company’s Mexican subsidiary, Biomerica de Mexico, entered into a 10-year lease for approximately 8,100 square feet of manufacturing space with initial base rent of $2,926 per month.located in Mexicali, Mexico. The Company has one 10-year option to renew at the end of the initial lease period. The current rent is currently $3,239approximately $3,400 per month.  Biomerica de Mexico also leases a smaller unit on a month-to-month basis for use in one manufacturing process. In addition, the Company leases a small office in Lindau, Germany on a month-to-month basis, as headquarters for BioEurope GmbH, its Germany subsidiary.

ITEM 3.      LEGAL PROCEEDINGS

On July 2, 2020, we received a notice of investigationThe Company is, from time to time, involved in legal proceedings, claims and subpoena to produce information and documents from the Division of Enforcement of the SEC. The subpoena seeks information and documents related to events and circumstances leading up to our March 17, 2020 announcement that we had commenced shipping samples of our COVID-19 IgG/IgM Rapid Test to countries outside of the United States, and had initiated the application process with the United States Food and Drug Administration under the COVID-19 Emergency Use Authorization for approval to market and sell the testlitigation arising in the United States. The subpoena also seeks information and documents aboutordinary course of business. While the identityamounts claimed may be substantial, the ultimate liability cannot be estimated because of any persons who were aware ofconsiderable uncertainties that exist. Therefore, it is possible the substance of the March 17, 2020 announcement prior to that date, as well as certain corporate policies and documentation. We are cooperating and intend to continue cooperating fully with the SEC’s investigation. At this time, we are unable to predict the duration, scope or outcome of this investigation.such legal proceedings, claims and litigation could have a material negative effect on quarterly or annual operating results or cash flows when resolved in a future period. However, based on facts currently available, management believes such matters will not have a material adverse effect on the Company's consolidated financial position, results of operations or cash flows.

21There were no legal proceedings pending as of May 31, 2022.

ITEM 4.      MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5.      MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

On August 2,26, 2016, the Company’s common stock became listed and began trading on the Nasdaq Capital Market stock exchange where it trades under the symbol BMRA.  Previous to that date, the Company’s stock traded on the OTC Bulletin Board.

As of May 31, 2020,August 29, 2022, the number of holders of record of Biomerica's common stock was approximately 810,800, 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 as most of the Company’s common stock is held in street name at securities brokerage firms.

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 (“Board”) intends, for the foreseeable future, to retain any earnings to finance the continued operation and expansion of the Company's business.

On June 30, 2017,We did not sell any unregistered equity securities during the Company filed an S-3 Registration Statement with the SEC primarily for the purposes of raising capital to support is research, development and intellectual property projects. The registration statement became effective on July 20, 2017. A prospectus supplement to the Form S-3 Registration Statement was filed December 4, 2017 which stated that up to $7,000,000 of funds would be raised from time to time under the Form S-3 Registration Statement through an At Market Issuance Sales Agreement (“ATM”) with B. Riley, FBR, acting as the agent for these transactions. As ofyear ended May 31, 2020, a total of approximately $6,997,935 in gross proceeds had been raised under this prospectus supplement.2022.

On March 20, 2020, the Company filed a second prospectus supplement to the base prospectus dated July 20, 2017 for purposes of raising up to $12,500,000 from time to time pursuant to the terms of the ATM. As of May 31, 2020, a total of $6,817,329 in gross proceeds had been raised under this prospectus supplement.  No additional shares will be sold under this prospectus supplement.

On July 21, 2020, the Company filed with the SEC a new “Shelf” registration statement on Form S-3 to replace the registration statement that expired the day before. The new registration statement registers common shares to be issued in a maximum aggregate amount of $90,000,000.  Our shares of common stock may be sold from time to time under this registration statement once it is declared effective.

We did not purchase any of our shares of common stock or other securities during our fiscal year ended May 31, 2020.2022.

The table below provides information relating to our equity compensation plans as of May 31, 2020:

There were no sales of unregistered equity securities during the year ended May 31, 2020 except as described in Note 5-Shareholders’ Equity- of the Consolidated Financial Statements.2022: 

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ITEM 6.      SELECTED FINANCIAL DATARESERVED

Not required.

ITEM 7.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

EXCEPT FOR HISTORICAL INFORMATION CONTAINED HEREIN, THE STATEMENTS IN THIS ANNUAL REPORT ON 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.

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

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

OverviewOVERVIEW

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

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Our primary focus is the research, development, commercialization and developmentin certain cases regulatory approval, of revolutionary, patented, diagnostic-guided therapy (“DGT”) products to treat gastrointestinal diseases, such as irritable bowel syndrome, and other inflammatory diseases. These products are directed at chronic inflammatory illnesses that are widespread and common, and as such address very large markets. IfOur InFoods® IBS product uses a simple blood sample and is designed to identify patient-specific foods that, when removed from the diet, may alleviate Irritable Bowel Syndrome (“IBS”) symptoms such as pain, bloating, diarrhea and constipation. Instead of broad and difficult to manage dietary restrictions, the InFoods® IBS product works by identifying a patient’s above normal immunoreactivity to specific foods.  A food identified as positive, and causing an abnormal immune response in the patient is simply removed from the diet to help alleviate IBS symptoms.

During fiscal 2022, we completed an endpoint determination clinical trial on our InFoods® IBS product. This trial was conducted at Mayo Clinics in Florida and Arizona, Beth Israel Deaconess Medical Center Inc., a Harvard Medical School Teaching Hospital, University of Texas Health Science Center at Houston, Houston Methodist, the University of Michigan, and other institutions. This trial monitored IBS patients over an 8-week period to determine the efficacy of our InFoods® IBS product to improve the patients’ IBS symptoms or endpoints. The top-line trial results were reported in February 2022. Multiple endpoints demonstrated statistically significant improvements, indicating that the elimination of specific foods may meaningfully reduce the symptoms of IBS in all patient subtypes (including patients with IBS-Constipation, IBS-Diarrhea & IBS-Mixed). The greatest clinical improvements, including but not limited to abdominal pain and bloating, were seen in patients diagnosed with IBS-Mixed and IBS-Constipation, in the top line data. The purpose of the endpoint study was to determine the primary symptom endpoint, or endpoints to be used in a final pivotal trial that will be conducted to attain the validation data needed to apply for U.S. Food and Drug Administration (“FDA”) clearance for the product. We are now in the process of reviewing the complete dataset and selecting the target endpoint(s) to be used in the pivotal trial. We are also writing the protocols for this trial and expect to present these DGTprotocols to the FDA during fiscal 2023, with the intention of beginning the trial by the end of fiscal 2023, or May 31, 2023. The trial is expected to include the large medical institution participants that conducted the endpoint trial, in addition to other new institutions and a Clinical Research Organization.

Following the successful completion and positive results from the Company’s InFoods^® IBS clinical trial we’ve seen significant interest from Gastroenterology (GI) physicians who would like to provide the InFoods^® IBS Product to for their patients immediately.  Therefore, while we are proceeding with the work needed to seek FDA clearance for this product, we also are currently preparing to launch the InFoods^® IBS product through a CLIA-certified, high-complexity laboratory facility and offering the product as a laboratory developed test (LDT). Our expectation is that we will begin to generate revenues from this product by the end of December 31, 2022. In preparation for the launch of this LDT, we are in negotiations with large physician groups that would like to offer the LDT to their IBS patients.

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

We will also continue to evaluate partnership/licensing opportunities, as they arise, with U.S and multinational companies that could help us commercialize, or accelerate revenue growth of, the InFoods products prove effectivein the United States and overseas.

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

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

Following fiscal year-end, we announced that Walmart has begun selling our Aware^® Breast Self Exam product through their on-line retailing platform, Walmart.com. We are also in final discussions with Walmart to offer this product in their clinical trials,U.S. based retail stores.

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We have added new employees in our sales and marketing department in order to increase sales of existing products during fiscal 2022. Through these efforts, our EZ Detect colon disease home screening test and our Aware^® Breast Self Exam product are ultimately cleared for sale by the FDA, the revenues potential to the Company is significant. seeing an increased interest from retailers such as Walmart, distributors, and screening programs in other countries

Due to the global COVID-192019 SARS-CoV-2 novel coronavirus pandemic, in March 2020 we began redirecting and focused a majority of our resourcesdeveloping COVID-19 products to develop, test, validate, seek regulatory approval for, and sell diagnostic products that indicate if a person has been exposed to COVID-19. These diagnostic tests use a patient’s blood sample to determine if the patient has certain antibodies to COVID-19 that were created as part of their body’s immune response to a COVID-19 infection. During the fiscal fourth quarter, we began marketing and selling outside of the U.S. a disposable rapid finger-prick blood test, which detects COVID-19 IgG/IgM antibodies within 10 minutes. This test is designed to be performed by trained professionals anywhere, e.g. airports, schools, work, pharmacies and doctors’ offices. Following fiscal 2020 year-end we submitted to the FDA an application under an EUA to sell in the U.S. a lab-scale, high throughput ELISA COVID-19 antibody test kit that would be sold to labs and hospitals to perform COVID-19 antibody testing. The Company also anticipates selling this test kit outside of the U.S. under a CE Mark. Initial sales for this product are expected during the Company’s second quarter of fiscal 2021 upon EUA clearance. The Company manufactures this COVID-19 ELISA test on its automated equipment at the Company’s California facility that is also used to produce serology antibody tests for other diseases. These antibody tests are designed to detect if a person has been infected by COVID-19 and mounted an immune response evenor is currently infected. While we offer a COVID-19 antibody diagnostic test to determine if a person has previously been infected by the COVID-19 virus, all our COVID-19 revenues in fiscal 2022 have come from international sales of our COVID-19 antigen tests that use a patient’s nasal fluid sample to detect if the infection was asymptomatic.patient is currently infected with the virus.

While sales continue to occur in our COVID-19 products, the majority of our research and development efforts are focused on development and commercialization of non-COVID related products such as our H. Pylori product, and our InFoods® IBS product.

The other existing products that contributed to our fiscal 2022 revenues are primarily focused on gastrointestinal diseases, food intolerances, and certain esoteric tests. These diagnostic test products utilize immunoassay technology. Most of our products are CE marked and/or sold for diagnostic use where they are registered by each country’s regulatory agency. In addition, some products are cleared for sale in the United States by the FDA.

RESULTS OF OPERATIONS

Net Sales and Cost of Sales

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

Our consolidated net sales were $6,692,711approximately $18,871,000 for fiscal 20202022 compared to $5,200,682$7,199,000 for fiscal 2019. This represents2021, an increase of $1,492,029,$11,672,000, or 28.7%162%. This increase in annual sales is primarily attributable to sales of COVID-19 tests during the last quarter of the fiscal year, which offset decreases in other product lines that were negatively impacted by the COVID-19 pandemic and related national and international mandates affecting consumers. Our consolidated net sales were $2,725,000 for the fiscal fourth quarter 2020, compared to $1,165,860 for fiscal fourth quarter of 2019.tests.

ConsolidatedOur cost of sales inwere approximately $15,894,000 for fiscal 2020 as2022 compared to $6,833,000 for fiscal 2019 increased from $3,908,668 to $4,910,935,2021, an increase of $9,061,000, or 133%. This increase was driven by $1,002,267.the cost of additional COVID-19 sales. The percentage of cost of sales relative to sales decreased from 75.2% to 73.4%in fiscal 2022 was 84%, due to various factors, primarily due to higher margins on the COVID-19 products. Ourversus 95% in fiscal 2021. In fiscal 2021, we recorded a non-recurring inventory allowance, this increased our cost of goods sold for the fiscal fourth quarter 2020 were $1,991,378, or 73.0%, comparedsales to $985,053, or 84.4%, for the fourth quarter of 2019.95%.  We don’t expect to record a significant inventory allowance in future years.

ConsolidatedOperating Expenses

The following is a summary of operating expenses:

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Selling, General and Administrative Expenses

Our selling, general and administrative costs increased inexpenses were approximately $5,699,000 for fiscal 2020 as2022 compared to $5,672,000 for fiscal 2019 from $2,025,706 to $2,274,415,2021, an increase of $27,000, or by $248,709, or 12.3%0%. The increase was due to increasesan approximate increase of $400,000 in legal andwages, $300,000 in consulting fees, personnel costs as the Company is expanding and strengthening its management team$200,000 in sales and marketing, and an increaseamortization. Which was primarily offset by a decrease of $800,000 in administrative expenses duebad debt expense related to a non-cash option expense of $156,750 in fiscal 2020 compared to $143,299specific customer charge in the prior fiscal year. Our consolidated selling, general and administrative expenses were $559,872 for the fiscal fourth quarter 2020, compared to $536,816 for the fourth quarter of 2019.2021.

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ConsolidatedOur research and development expense was $1,910,209 inexpenses were approximately $1,812,000 for fiscal 2020 as2022 compared to $1,679,098 in$2,194,000 for fiscal 2019, an increase2021, a decrease of $231,111,$382,000, or 13.8%17%, primarily as a result of increasesdecreases in costs related to the research, development and validation of COVID-19, tests,IBS and increased costs related to our clinical trials for our InFoods® IBS product.H. Pylori. See “Research and Development” for a more extensive description of the research being conducted. Our consolidated research

Interest and development expenses were $661,610 for the fourth quarter of 2020, compared to $408,810 for the fourth quarter of 2019. These costs increasedDividend Income

Interest expense decreased in fiscal 2020 due2022 to additional research on COVID-19 products.

Interest expense remained constant in fiscal 2020 at $9$0, as compared to $47$367 in fiscal 2019.2021. Interest and dividend income for those same years increaseddecreased to approximately $27,000 from $44,014$67,000, respectively. The $40,000 decrease was due to $71,193, respectively.lower dividend payment from our investment.

LIQUIDITY AND CAPITAL RESOURCES

The following are the principal sources of liquidity: