SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] Annual Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934 For The Fiscal Year Ended May 31, 2019 or [ ] Transition Report Under Section 13 or 15(d) of The Securities Exchange Act Of 1934 For The Transition Period From ______ To ______ Commission File Number: 0-8765 BIOMERICA, INC. | --- | --- | |-------------------------------------------------------------------------------------------------------------------------- ...

Part I - Financial Information [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) The company experienced decreased net sales and increased net loss, with negative operating cash flow offset by financing activities [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Net sales decreased by **9.0%** to **$4.03 million** for nine months, with net loss doubling to **$1.61 million**; Q3 also saw sales decline and net loss more than double Statement of Operations Highlights (Unaudited) | Metric | Nine Months Ended Feb 28, 2019 | Nine Months Ended Feb 28, 2018 | YoY Change | Three Months Ended Feb 28, 2019 | Three Months Ended Feb 28, 2018 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Net Sales** | $4,034,822 | $4,433,785 | -9.0% | $1,261,161 | $1,375,666 | -8.3% | | **Gross Profit** | $1,111,207 | $1,486,133 | -25.2% | $365,924 | $465,371 | -21.4% | | **Loss from Operations** | ($1,647,971) | ($837,612) | +96.7% | ($707,248) | ($322,846) | +119.1% | | **Net Loss** | ($1,607,730) | ($798,211) | +101.4% | ($678,746) | ($322,491) | +110.3% | | **Diluted Net Loss per Share** | ($0.18) | ($0.09) | +100.0% | ($0.07) | ($0.04) | +75.0% | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to **$5.07 million**, cash to **$0.92 million**, with increased liabilities and shareholders' equity at **$3.95 million** Balance Sheet Summary (Unaudited) | Account | Feb 28, 2019 | May 31, 2018 | | :--- | :--- | :--- | | **Current Assets** | | | | Cash and cash equivalents | $917,935 | $1,204,903 | | Total current assets | $4,329,331 | $4,484,029 | | **Total Assets** | **$5,067,927** | **$5,222,582** | | **Current Liabilities** | | | | Accounts payable and accrued expenses | $889,702 | $686,956 | | Total current liabilities | $1,113,456 | $896,808 | | **Total Shareholders' Equity** | **$3,954,471** | **$4,325,774** | [Consolidated Statements of Shareholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Shareholders%27%20Equity) Shareholders' equity decreased from **$4.33 million** to **$3.95 million**, primarily due to a **$1.61 million** net loss, partially offset by stock sales - Net proceeds from the sale of common stock amounted to **$1,011,636** for the nine months ended February 28, 2019[10](index=10&type=chunk) - The net loss of **$1,607,730** was the primary driver for the reduction in total shareholders' equity during the period[10](index=10&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities increased to **$1.26 million**, offset by **$1.10 million** from financing, resulting in a **$0.29 million** net cash decrease Cash Flow Summary (Unaudited) | Cash Flow Activity | Nine Months Ended Feb 28, 2019 | Nine Months Ended Feb 28, 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | ($1,257,708) | ($852,168) | | Net cash used in investing activities | ($119,173) | ($74,303) | | Net cash provided by financing activities | $1,097,298 | $304,347 | | **Net decrease in cash** | **($286,968)** | **($628,432)** | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, customer/vendor concentrations, geographic sales, capital raising, and a subsequent patent allowance - The company has significant customer concentration, with one customer accounting for **46.8%** of consolidated sales for the nine months ended February 28, 2019[16](index=16&type=chunk) - The company is raising capital through an 'At Market Issuance Sales Agreement', receiving **$1,011,636** in net proceeds during the nine months ended February 28, 2019[31](index=31&type=chunk) - Subsequent to the quarter end, the USPTO issued a Notice of Allowance for a patent related to the company's InFoods® products for Irritable Bowel Syndrome (IBS)[33](index=33&type=chunk) Revenues by Geographic Region (Nine Months Ended Feb 28) | Region | 2019 | 2018 | | :--- | :--- | :--- | | Asia | $1,973,000 | $2,112,000 | | Europe | $1,330,000 | $1,562,000 | | United States | $423,000 | $533,000 | | Middle East | $180,000 | $115,000 | | South America | $129,000 | $106,000 | | **Total** | **$4,035,000** | **$4,434,000** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Sales decreased due to lower contract manufacturing and international sales; net loss increased from higher cost of sales and **38.9%** R&D expense rise [Results of Operations](index=17&type=section&id=Results%20of%20Operations) Net sales decreased by **9.0%** to **$4.03 million** due to lower contract manufacturing and international sales; R&D expenses rose **38.9%** - The **9.0%** decrease in net sales for the nine-month period was primarily due to lower contract manufacturing sales and lower sales to China and Europe[34](index=34&type=chunk) - Cost of sales as a percentage of sales increased from **66.5%** to **72.5%** for the nine-month period, attributed to increased material costs and fixed costs relative to lower sales[35](index=35&type=chunk) - Research and development expenses increased by **38.9%** for the nine-month period due to expenditures on new products, higher patent legal fees for international filings, and clinical studies[35](index=35&type=chunk) [Liquidity and Capital Resources](index=18&type=section&id=Liquidity%20and%20Capital%20Resources) Cash was **$0.92 million** and working capital **$3.22 million**; operations are funded by an 'At Market Issuance Sales Agreement' that raised **$1.01 million** - The company is funding its R&D and operational needs through an 'At Market Issuance Sales Agreement'[35](index=35&type=chunk) Liquidity Position | Metric | Feb 28, 2019 | May 31, 2018 | | :--- | :--- | :--- | | Cash and cash equivalents | $917,935 | $1,204,903 | | Working capital | $3,215,875 | $3,587,221 | [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=19&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, the company is exempt from providing quantitative and qualitative disclosures about market risk - As a smaller reporting company, Biomerica is exempt from providing quantitative and qualitative disclosures about market risk[38](index=38&type=chunk) [Item 4. Controls and Procedures](index=19&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective at a 'reasonable assurance' level, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at the 'reasonable assurance' level[39](index=39&type=chunk) - No changes in internal control over financial reporting occurred during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, internal controls[39](index=39&type=chunk) Part II - Other Information [Item 1. Legal Proceedings](index=20&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no legal proceedings - There are no legal proceedings to report[40](index=40&type=chunk) [Item 1A. Risk Factors](index=20&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks including competition, new product development, regulatory approvals, supply chain, key personnel, and customer concentration - Key business risks include competition, the need for new product development, reliance on government regulatory approvals, and potential supply chain disruptions[40](index=40&type=chunk) - The company notes a concentration of sales with certain distributors, and the loss of these distributors could lead to significantly reduced sales[40](index=40&type=chunk) [Item 2. Unregistered Sales of Equity Securities & Use of Proceeds](index=20&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20%26%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities - There were no unregistered sales of equity securities or use of proceeds to report[41](index=41&type=chunk) [Item 5. Other Information](index=20&type=section&id=Item%205.%20Other%20Information) The Annual Meeting of Stockholders was held on December 12, 2018, with results detailed in a Form 8-K filing - The Annual Meeting of Stockholders was held on December 12, 2018[42](index=42&type=chunk) [Item 6. Exhibits](index=21&type=section&id=Item%206.%20Exhibits) Exhibits include Sarbanes-Oxley Act certifications from the CEO and CFO, and interactive data files (XBRL) - Exhibits filed with the report include Sarbanes-Oxley Act certifications from the CEO and CFO, and interactive data files (XBRL)[44](index=44&type=chunk)

PART I: Financial Information [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The company reported increased net losses for both periods, with total assets slightly up and cash used in operations significantly higher [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Net sales decreased and net loss widened for both periods, with the six-month net loss nearly doubling Consolidated Statement of Operations Highlights (Unaudited) | Metric | Three Months Ended Nov 30, 2018 | Three Months Ended Nov 30, 2017 | Six Months Ended Nov 30, 2018 | Six Months Ended Nov 30, 2017 | | :--- | :--- | :--- | :--- | :--- | | **Net Sales** | $1,500,791 | $1,613,636 | $2,773,661 | $3,058,119 | | **Gross Profit** | $408,060 | $506,191 | $745,283 | $1,020,762 | | **Loss from Operations** | ($485,937) | ($288,738) | ($940,723) | ($514,766) | | **Net Loss** | ($477,244) | ($268,661) | ($928,984) | ($475,720) | | **Basic & Diluted Net Loss per Share** | ($0.05) | ($0.03) | ($0.10) | ($0.06) | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets slightly increased to $5.43 million, driven by higher accounts receivable, while cash decreased and equity modestly rose Consolidated Balance Sheet Highlights | Metric | Nov 30, 2018 (Unaudited) | May 31, 2018 (Audited) | | :--- | :--- | :--- | | **Cash and cash equivalents** | $1,124,914 | $1,204,903 | | **Accounts receivable, net** | $1,260,547 | $799,940 | | **Inventories, net** | $2,115,041 | $2,178,777 | | **Total current assets** | $4,687,511 | $4,484,029 | | **Total Assets** | $5,428,762 | $5,222,582 | | **Total current liabilities** | $1,016,750 | $896,808 | | **Total Shareholders' Equity** | $4,412,012 | $4,325,774 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities significantly increased, largely offset by financing activities, leading to an overall cash decrease Consolidated Statement of Cash Flows Highlights (Unaudited) | Metric | Six Months Ended Nov 30, 2018 | Six Months Ended Nov 30, 2017 | | :--- | :--- | :--- | | **Net cash used in operating activities** | ($1,001,068) | ($363,350) | | **Net cash used in investing activities** | ($85,017) | ($52,923) | | **Net cash provided by financing activities** | $1,011,902 | $13,789 | | **Net decrease in cash and cash equivalents** | ($79,989) | ($407,652) | | **Cash and cash equivalents at end of period** | $1,124,914 | $817,810 | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies, customer and vendor concentrations, recent equity financing, geographic sales, and subsequent stock option grants - The company faces **significant customer and vendor concentration risk**, with **one customer accounting for 44.7% of sales** and **two vendors for 33.8% of raw material purchases** for the six months ended November 30, 2018[14](index=14&type=chunk) - The company raised approximately **$927,600 in net proceeds** from its At Market Issuance Sales Agreement to fund research and development and operations[32](index=32&type=chunk) Revenues by Geographic Region (Six Months Ended Nov 30) | Region | 2018 | 2017 | | :--- | :--- | :--- | | United States | $282,000 | $325,000 | | Asia | $1,320,000 | $1,494,000 | | Europe | $914,000 | $1,069,000 | | South America | $127,000 | $103,000 | | Middle East | $131,000 | $61,000 | | **Total** | **$2,774,000** | **$3,058,000** | - Subsequent to quarter end, the company granted **385,000 stock options**, sold **33,390 common shares for $87,332 net proceeds**, and saw **2,000 option exercises**[35](index=35&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=14&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a 9.3% net sales decrease, increased cost of sales, higher R&D expenses, and plans for continued equity financing - Net sales for the six months ended November 30, 2018, **decreased by 9.3% to $2.77 million** from $3.06 million, primarily due to lower contract manufacturing and reduced sales to China and Europe[39](index=39&type=chunk) - As of November 30, 2018, the company had a sales order backlog of approximately **$798,000**, expected to be shipped in the third fiscal quarter[39](index=39&type=chunk) - Cost of sales as a percentage of sales **increased from 66.6% to 73.1%** for the six-month period, driven by higher material costs, scrap, and fixed costs relative to lower sales[39](index=39&type=chunk) - Research and development expenses for the six-month period **increased by 37.8% ($212,164)**, primarily due to higher legal expenses for intellectual property filings[41](index=41&type=chunk) - The company's working capital was **$3.67 million** as of November 30, 2018, with management planning to raise additional funds via its At Market Issuance Agreement for operations and R&D[42](index=42&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=16&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, the company is not required to provide market risk disclosures - As a smaller reporting company, Biomerica is **not required to provide quantitative and qualitative disclosures about market risk**[44](index=44&type=chunk) [Controls and Procedures](index=16&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes in internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were **effective at the 'reasonable assurance' level**[45](index=45&type=chunk) - **No material changes** in internal control over financial reporting occurred during the last fiscal quarter[45](index=45&type=chunk) PART II: Other Information [Legal Proceedings](index=16&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no legal proceedings during the period - **No legal proceedings** are reported[46](index=46&type=chunk) [Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) The company highlights risks including competitive pressures, regulatory dependency, supply chain interruptions, and financial risks from sales concentration - Key business risks include the ability to **remain competitive**, **develop new products**, and **obtain necessary funding** for development[46](index=46&type=chunk) - The business is subject to **significant regulation**, where delays or failures in obtaining approvals could negatively impact operations[46](index=46&type=chunk) - Operational risks include **interruptions in raw material supply**, **loss of key personnel**, and **competition from larger companies** with greater financial resources[46](index=46&type=chunk)[47](index=47&type=chunk) - Financial risks include **concentration of sales with certain distributors**, potentially leading to reduced sales if lost, and **high accounts receivable balances** from these customers[47](index=47&type=chunk) [Unregistered Sales of Equity Securities & Use of Proceeds](index=17&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20%26%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities or use of proceeds during the period - **No unregistered sales of equity securities or use of proceeds** were reported[48](index=48&type=chunk) [Other Information](index=17&type=section&id=Item%205.%20Other%20Information) The Annual Meeting of Stockholders was held on December 12, 2018, with results detailed in a Form 8-K filing - The Annual Meeting of Stockholders was held on **December 12, 2018**[48](index=48&type=chunk) [Exhibits](index=17&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the report, including Sarbanes-Oxley certifications and interactive data files - Exhibits filed include **CEO and CFO certifications** under Sarbanes-Oxley Act sections and **XBRL interactive data files**[49](index=49&type=chunk)