| Significant Accounting Policies [Text Block] | Note 2: Significant Accounting Policies Principles of Consolidation The condensed consolidated financial statements include the accounts of Biomerica, Inc. as well as the Company’s German subsidiary (BioEurope GmbH) and Mexican subsidiary (Biomerica de Mexico). All significant intercompany accounts and transactions have been eliminated in consolidation. Accounting Estimates The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reported period. Estimates that are made include the reserve for bad debt, which is estimated based on current as well as historical data with a customer; stock option forfeiture rates, which are calculated based on historical data; inventory reserves, which are based on projected and historical usage of materials; and lease liability and right-of-use assets, which are calculated based on certain assumptions such as borrowing rate, likelihood of lease extensions to occur, asset valuation, among other things; (and other items that may be necessary to estimate using current, historical and judgment based). Actual results could materially differ from those estimates. Concentration of Credit Risk The Company maintains cash balances at certain financial institutions in excess of amounts insured by federal agencies. The Company does not believe it is exposed to significant credit risks. The Company provides credit in the normal course of business to customers throughout the United States and foreign markets. At February 29, 2020 and May 31, 2019, the Company had two customers which accounted for 52.7% and two customers which accounted for 68.1%, respectively, of gross accounts receivable. The Company performs ongoing credit evaluations of its customers and requires accelerated prepayment in some circumstances. The Company had one customer which accounted for approximately 43.4% and 46.8%, of consolidated sales for the nine months ended February 29, 2020 and February 28, 2019, respectively. For the nine months ended February 29, 2020 and February 28, 2019, two vendors accounted for approximately 32.8% and 33.4%, of the purchases of raw materials, respectively. At February 29, 2020 and May 31, 2019 there were two companies which accounted for 46.1% and one company which accounted for 32.1% of accounts payable, respectively. Cash and Cash Equivalents Cash and cash equivalents consist of demand deposits and money market accounts with original maturities of less than three months. Accounts Receivable The Company extends unsecured credit to its customers on a regular basis. International accounts are required to prepay until they establish a history with the Company and at that time, they are extended credit at levels based on a number of criteria. Based on various criteria, initial credit levels for individual distributors are approved by designated officers and managers of the company. All increases in credit limits are also approved by designated upper level management. Management evaluates receivables on a quarterly basis and adjusts the allowance for doubtful accounts accordingly. Balances over ninety days old are usually reserved for unless collection is reasonably assured. Occasionally certain long-standing customers, who routinely place large orders, will have unusually large accounts receivables balances relative to the total gross accounts receivables. Management monitors the payments for these large balances closely and very often requires payment of existing invoices before shipping new sales orders. Inventories The Company values inventory at the lower of cost (determined using a combination of specific lot identification and the first-in, first-out methods) or net realizable value. Management periodically reviews inventory for excess quantities and obsolescence. Management evaluates quantities on hand, physical condition, and technical functionality as these characteristics may be impacted by anticipated customer demand for current products and new product introductions. The reserve is adjusted based on such evaluation, with a corresponding provision included in cost of sales. Abnormal amounts of idle facility expenses, freight, handling costs and wasted material are recognized as current period charges and the allocation of fixed production overhead is based on the normal capacity of the Company’s production facilities. The approximate balances of inventories are the following at: February 29, 2020 May 31, 2019 Raw materials $ 1,102,000 $ 1,208,000 Work in progress 900,000 771,000 Finished products 186,000 172,000 Total $ 2,188,000 $ 2,151,000 Reserves for inventory obsolescence are increased as necessary to reduce obsolete inventory to estimated realizable value or to specifically reserve for obsolete inventory that the Company intends to dispose of. As of February 29, 2020 and May 31, 2019, inventory reserves were approximately $55,000 and $49,000, respectively. Property and Equipment, net Property and equipment are stated at cost. Expenditures for additions and major improvements are capitalized. Repairs and maintenance costs are charged to operations as incurred. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation or amortization is removed from the accounts, and gains or losses from retirements and dispositions are credited or charged to income. Depreciation and amortization are provided over the estimated useful lives of the related assets, ranging from 5 to 10 years, using the straight-line method. Leasehold improvements are amortized over the lesser of the estimated useful life of the asset or the term of the lease. Depreciation and amortization expense on property and equipment and leasehold improvements amounted to $23,822 and $22,436 for the three months ended February 29, 2020 and February 28, 2019, respectively, and $77,641 and $78,118 for the nine months ended February 29, 2020 and February 28, 2019, respectively. Intangible Assets, net Intangible assets include trademarks, product rights, licenses, technology rights and patents, and are accounted for based on Accounting Standards Codification (“ASC”) 350 Intangibles – Goodwill and Other (“ASC 350”). In that regard, intangible assets that have indefinite useful lives are not amortized but are tested at least annually for impairment or more frequently if events or changes in circumstances indicate that the asset might be impaired. Intangible assets are being amortized using the straight-line method over the useful life, not to exceed 18 years for marketing and distribution rights, 10 years for purchased technology use rights, licenses, and 17 years for patents. Amortization amounted to $5,405 and $16,666 for the three months ended February 29, 2020 and February 28, 2019, respectively, and $17,131 and $49,996 for the nine months ended February 29, 2020 and February 28, 2019, respectively. Share-Based Compensation The Company follows the guidance of the accounting provisions of ASC 718 Share-based Compensation (“ASC 718“), which requires the use of the fair-value based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments (options). The fair value of each option award is estimated on the date of grant using the Black-Scholes valuation model that uses assumptions for expected volatility, expected dividends, expected forfeiture rate, expected term, and the risk-free interest rate. Expected volatilities are based on weighted averages of the historical volatility of the Company’s stock and other factors estimated over the expected term of the options. The expected forfeiture rate is based on historical forfeitures experienced. The expected term of options granted is derived using the “simplified method” which computes expected term as the average of the sum of the vesting term plus the contract term as historically the Company had limited activity surrounding its options. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the period of The Company has not paid dividends historically and does not expect to pay them in the future. The following summary presents the options and warrants granted, exercised, expired, cancelled and outstanding as of February 29, 2020: Exercise Price Weighted Average Option Shares Outstanding May 31, 2019 1,476,209 $ 2.07 Granted 356,000 $ 2.79 Exercised (80,375) $ 1.01 Cancelled or expired (47,500) $ 3.25 Outstanding February 29, 2020 1,704,334 $ 2.24 During the nine months ended February 29, 2020, options to purchase 80,375 shares of common stock were exercised at prices ranging from $0.82 to $1.20 per share. Proceeds to the Company were approximately $79,828. During the nine months ended February 29, 2020, the Company granted 356,000 options to purchase common stock at an average purchase price of $2.79. Revenue Recognition The Company has various contracts with customers. All of the contracts specify that revenues from product sales are recognized at the time the product is shipped, customarily FOB shipping point, at which point title passes. Revenue is recognized only when collectability is reasonably assured. The Company does not allow for returns except in the event of defective merchandise and therefore does not establish an allowance for returns. In conjunction with sales to certain customers, the Company provides free products upon attaining certain levels of purchases by the customer. The Company accounts for these free products as zero sales and recognizes the cost of the product as part of cost of sales. In addition, the Company has contracts with customers wherein they receive purchase discounts for achieving specified sales volume. The Company evaluated the status of these contracts as of February 29, 2020 and does not believe that any additional discounts will be earned through the end of fiscal 2020 or through the end of the contract periods. Disaggregation of revenue: The following is a breakdown of revenues according to markets to which the products are sold: Nine Months ended Three Months ended February 29, February 28, February 29, February 28, Clinical lab $ 2,769,000 $ 3,150,000 $ 723,000 $ 1,043,000 OTC 778,000 653,000 271,000 131,000 Physicians’ office 157,000 142,000 32,000 48,000 Contract Manufacturing 264,000 90,000 151,000 39,000 Total $ 3,968,000 $ 4,035,000 $ 1,177,000 $ 1,261,000 See note 5 for additional information regarding revenue concentrations. Investments From time-to-time, the Company makes investments in privately-held companies. The Company determines whether the fair values of any investments in privately-held entities have declined below their carrying value whenever adverse events or changes in circumstances indicate that recorded values may not be recoverable. If the Company considers any such decline to be other than temporary (based on various factors, including historical financial results, and the overall health of the investee’s industry), a write-down to estimated fair value is recorded. The Company currently has not written down the investment and no events have occurred which could indicate the carrying value to be less than the fair value. Investments represent the Company’s investment in a Polish distributor which is primarily engaged in distributing medical devices. The Company owns approximately 6% of the investee, and accordingly, applies the cost method to account for the investment. Under the cost method, investments are recorded at cost, with gains and losses recognized as of the sale date, and income recorded when received. Shipping and Handling Fees and Costs Shipping and handling fees billed to customers are required to be classified as net sales, and shipping and handling costs are required to be classified as either cost of sales or disclosed in the notes to the consolidated financial statements. The Company included shipping and handling fees billed to customers in net sales. The Company included shipping and handling costs associated with inbound freight and unreimbursed shipping to customers in cost of sales. Research and Development Research and development costs are generally expensed as incurred. Income Taxes The Company has provided a valuation allowance on deferred income tax assets of approximately $2,821,000 and $2,459,000 as of February 29, 2020 and May 31, 2019, respectively. Foreign Currency Translation The subsidiary located in Mexico operates primarily using the Mexican peso. The subsidiary located in Germany operates primarily using the U.S. dollar, with an immaterial amount of transactions occurring using the Euro. Accordingly, assets and liabilities of these subsidiaries are translated using exchange rates in effect at the end of the quarter, and revenues and costs are translated using average exchange rates for the quarter. The resulting adjustments to assets and liabilities are presented as a separate component of accumulated other comprehensive loss. Lease Liability Incentive payments received from landlords was recorded as deferred lease incentives and were amortized over the underlying lease term on a straight-line basis as a reduction of rent expense. When the terms of an operating lease provide for periods of free rent, rent concessions, and/or rent escalations, the Company established a deferred rent liability for the difference between the scheduled rent payment and the straight-line rent expense recognized. This deferred rent liability was amortized over the underlying lease term on a straight-line basis as a reduction of rent expense. During the period ended February 29, 2020, the Company adopted ASC 842, Leases. As a result, the existing deferred rent liability was netted against the Right of Use Asset which was capitalized at that time. In February 2016, the Financial Accounting Standards Board issued an accounting standards update which requires lessees to recognize most leases on the balance sheet with a corresponding right-of-use asset. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of fixed lease payments over the lease term. Leases will be classified as financing or operating which will drive the expense recognition pattern. For lessees, the statement of operations presentation and expense recognition pattern for financing and operating leases is similar to the current model for capital and operating leases, respectively. The Company has elected to exclude short-term leases. The update also requires additional disclosures that will better enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The Company adopted this guidance as of June 1, 2019, the required effective date, using the effective date transition method. As permitted under the effective date transition method, financial information and disclosure for periods prior to the date of initial application will not be updated. An adjustment to opening accumulated deficit was not required in conjunction with adoption. The adoption of this statement resulted in a right-of-use asset being recorded in the amount of $1,942,999 and a lease liability being recorded in the amount of $1,980,970. Both will be amortized over the life of the underlying leases. For additional information, see Note 6 – Leases. The Company has elected not to reassess whether expired or existing contracts contain leases, or reassess the classification of existing leases as of the adoption date. The Company leases office space and copy machines, all of which are operating leases. Most leases include the option to renew and the exercise of the renewal options is at the Company’s sole discretion. Options to extend or terminate a lease are considered in the lease term to the extent that the option is reasonably certain of exercise. The leases do not include the options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term. Net Loss Per Share Basic loss per share is computed as net loss divided by the weighted average number of common shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur from common shares issuable through stock options using the treasury stock method. The total amount of anti-dilutive options not included in the earnings per share calculation for the three and nine months ended February 29, 2020 was respectively. The total amount of anti-dilutive options not included in the earnings per share calculation for the three and nine months ended February 28, 2019 was respectively. The following table illustrates the required disclosure of the reconciliation of the numerators and denominators of the basic and diluted loss per share computations.
Nine Months Ended
Three Months Ended
February 29,
February 28,
February 29,
February 28,
2020
2019
2020
2019
Numerator:
Net loss
$
(1,852,482)
$
(1,607,730)
$
(860,926)
($678,746)
Denominator for basic loss
9,882,459
9,103,225
9,814,504
9,322,549
Effect of dilutive securities:
Options and warrants
--
--
--
--
Denominator for diluted loss
9,882,459
9,103,225
9,814,504
9,322,549
Basic net loss per common share
$
(0.19)
$
(0.18)
$
(0.09)
$
(0.07)
Diluted net loss per common share
$
(0.19)
$
(0.18)
$
(0.09)
$
(0.07) New Accounting Pronouncements On February 15, 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-02, “Reclassification of Certain Tax Effects From Accumulated Comprehensive Income” (“ASU 2018-02”). ASU 2018-02 will give companies the option to reclassify stranded tax effects caused by the newly-enacted U.S. Tax Cuts and Jobs Act (“TCJA”) from accumulated other comprehensive income (“ASCI”) to retained earnings. ASU 2018-02 was effective for all companies for the fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Management is taking the provisions of this statement into account in the preparation of the financial statements for the nine months ended February 29, 2020. The adoption of this standard has not had a significant impact on the Company’s financial statements. On June 20, 2018, the FASB issued ASU 2018-07, “Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting” (“ASU 2018-07”). ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting for share-based payments to nonemployees (for example, service providers, external legal counsel, suppliers, etc.). ASU 2018-07 was effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. During the nine months ended February 29, 2020 the Company adopted the provisions of this statement and is taking them into account in the preparation of the financial statements for the nine months ended February 29, 2020. The adoption of this standard has not had a significant impact on the Company’s financial statements. Other recent ASU's issued by the FASB and guidance issued by the Securities and Exchange Commission did not, or are not believed by management to, have a material effect on the Company’s present or future consolidated financial statements. |
