UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT
OF 1934
FOR THE FISCAL YEAR ENDED MAY 31, 2001 COMMISSION FILE NUMBER: 0-8765
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BIOMERICA, INC.
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(Small Business Issuer in its Charter)
DELAWARE 95-2645573
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1533 MONROVIA AVENUE, NEWPORT BEACH, CA 92663
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(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number: (949) 645-2111
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Securities registered under Section 12(b) of the Exchange Act:
(Title of each class) (Name of each exchange on which registered)
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NONE NASDAQ
Securities registered under Section 12(g) of the Exchange Act:
(Title of each class)
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COMMON STOCK, PAR VALUE $0.08
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES[x] NO[_]
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Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained herein, and will not be contained, to the best of issuer's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.
[X]
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State issuer's revenues for its most recent fiscal year: $8,939,522.
State the aggregate market value of the voting and non-voting stock held by non-
affiliates of the issuer (based upon 4,223,822 shares held by non-affiliates and
the closing price of $0.70 per share for Common Stock in the over-the-counter
market as of September 4, 2001): $2,970,475.
Number of shares of the issuer's common stock, par value $0.08, outstanding as
of August 21, 2001: 5,036,754 shares.
DOCUMENTS INCORPORATED BY REFERENCE: The issuer's proxy statement for its 2001
Annual Meeting of Stockholders is incorporated into Part III hereof. Also
incorporated by reference are the Annual Reports on Form 10-KSB for the fiscal
year ended May 31, 2001, for Lancer Orthodontics, Inc. and Allergy Immuno
Technologies, Inc.
Transitional Small Business Disclosure Format YES [_] NO [X]
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2
PART I*
ITEM 1. DESCRIPTION OF BUSINESS
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THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 PROVIDES A "SAFE HARBOR"
FOR FORWARD-LOOKING STATEMENTS. CERTAIN INFORMATION CONTAINED HEREIN (AS WELL
AS INFORMATION INCLUDED IN ORAL STATEMENTS OR OTHER WRITTEN STATEMENTS MADE OR
TO BE MADE BY BIOMERICA) CONTAINS STATEMENTS THAT ARE FORWARD-LOOKING, SUCH AS
STATEMENTS RELATING TO ANTICIPATED FUTURE REVENUES OF THE COMPANY AND SUCCESS
OF CURRENT PRODUCT OFFERINGS. SUCH FORWARD-LOOKING INFORMATION INVOLVES
IMPORTANT RISKS AND UNCERTAINTIES THAT COULD SIGNIFICANTLY AFFECT ANTICIPATED
RESULTS IN THE FUTURE, AND ACCORDINGLY, SUCH RESULTS MAY DIFFER MATERIALLY
FROM THOSE EXPRESSED IN ANY FORWARD-LOOKING STATEMENTS MADE BY OR ON BEHALF OF
BIOMERICA. THE POTENTIAL RISKS AND UNCERTAINTIES INCLUDE, AMONG OTHERS,
FLUCTUATIONS IN THE COMPANY'S OPERATING RESULTS. THESE RISKS AND UNCERTAINTIES
ALSO INCLUDE THE SUCCESS OF THE COMPANY IN RAISING NEEDED CAPITAL, THE ABILITY
OF THE COMPANY TO MAINTAIN REQUIREMENTS TO BE LISTED ON NASDAQ, THE CONTINUAL
DEMAND FOR THE COMPANY'S PRODUCTS, COMPETITIVE AND ECONOMIC FACTORS OF THE
MARKETPLACE, AVAILABILITY OF RAW MATERIALS, HEALTH CARE REGULATIONS AND THE
STATE OF THE ECONOMY. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON
THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF, AND
THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE THESE FORWARD-LOOKING
STATEMENTS.
BUSINESS
OVERVIEW
THE COMPANY
Biomerica, Inc. ("Biomerica", the "Company", "we" or "our") was
incorporated in Delaware in September 1971 as Nuclear Medical Systems, Inc. We
changed our corporate name in February 1983 to NMS Pharmaceuticals, Inc., and in
November 1987 to Biomerica, Inc. We have three subsidiaries, Lancer
Orthodontics, Inc. ("Lancer"), an international manufacturer of orthodontics
products, Allergy Immuno Technologies, Inc.("AIT"), which is engaged in
providing specialized laboratory testing services and ReadyScript, Inc.
("ReadyScript"), which developed a wireless handheld point of care system for
physicians. All subsidiaries are majority-controlled subsidiaries.
In June 1999, we raised $2 million in equity to develop the infrastructure
of our e-health business, now incorporated as ReadyScript, Inc. Since that time
we used the proceeds for developing an on-line drugstore and ReadyScript's
infrastructure (a wireless medication management system that enables physicians
to wirelessly transmit legible, pre-qualified formulary- compliant prescription
orders directly to the patient's choice of pharmacy).
In August 2000 operations of the online drugstore, the BigRx.com, were shut
down due to insignificant revenue and non-performance by the other party of a
third party backend processing agreement. The Company adopted a formal plan in
April 2001 to discontinue operations of its ReadyScript subsidiary. The sale of
some of the ReadySript assets is being discussed with various parties. The
subsidiary is being reported in the financial statements as a discontinued
operation because it is no longer an operating entity.
3
OUR MEDICAL DEVICE BUSINESS
Our existing medical device business is conducted through three companies:
(1) Biomerica, Inc., engaged in the diagnostic products market; (2) Lancer
Orthodontics, Inc., engaged in orthodontic products market; and (3) Allergy
Immuno Technologies, Inc., engaged in allergy-related testing services market.
BIOMERICA - DIAGNOSTIC PRODUCTS
Biomerica develops, manufactures, and markets medical diagnostic products
designed for the early detection and monitoring of chronic diseases and medical
conditions. The Company's medical diagnostic products are sold into three
markets: 1) clinical laboratories, 2) physicians offices and 3) over-the-counter
(drugstores). Our diagnostic test kits are used to analyze blood or urine from
patients in the diagnosis of various diseases and other medical complications,
or to measure the level of specific hormones, antibodies, antigens or other
substances which may exist in the human body in extremely small concentrations.
Technological advances in medical diagnostics have made it possible to
perform diagnostic tests within the home and the physician's office, rather than
in the clinical laboratory. One of our main objectives has been to develop and
market rapid diagnostic tests that are accurate, employ easily obtained
specimens, and are simple to perform without instrumentation. Our
over-the-counter and professional rapid diagnostic products help to manage
existing medical conditions and may save lives through prompt diagnosis and
early detection. Until recently, tests of this kind required the services of
medical technologists and sophisticated instrumentation. Frequently, results
were not available until at least the following day. We believe that such tests
are as accurate as laboratory tests when used properly, require no
instrumentation, give reliable results in minutes and can be performed with
confidence in the home or the physician's office. The majority of our
over-the-counter tests are FDA cleared.
Our clinical laboratory diagnostic products include tests for thyroid
conditions, yeast infections, H. pylori, and others. These diagnostic test kits
utilize enzyme immunoassay or radioimmunoassay technology. Some of these
products have not yet been submitted for clearance by the FDA for diagnostic
use, but can be sold in various foreign countries.
LANCER ORTHODONTICS, INC. -- ORTHODONTIC PRODUCTS
Lancer is engaged in developing, manufacturing, and selling orthodontic
Products. Its products are sold worldwide through a direct sales force and
distributors.
Lancer's product line includes preformed bands, direct bonding pads,
various brackets, buccal tubes, arch wires, lingual attachments and related
accessories. The foregoing are assembled to standard prescriptions or the
specifications of private label customers. Lancer also markets products which
are purchased and resold to orthodontists, including sealants, adhesives,
elastomerics, headgear cases, retainer cases, orthodontic wire, and preformed
arches.
4
Most of Lancer's manufacturing and shipping operations are located in
Mexicali, Mexico, in order to reduce the cost of manufacturing and compete more
effectively worldwide. Lancer maintains its headquarters in San Marcos,
California where it houses administration, engineering, sales and marketing, and
customer services.
ALLERGY IMMUNO TECHNOLOGIES, INC. -- ALLERGY SERVICES
AIT has been providing clinical testing services to doctors, clinics and
drug firms in specialized areas of allergy and immunology. AIT also owns four
patents covering several inventions relating to the therapeutic treatment of
allergy.
AIT employs one medical technologist and has received assistance in the
past from Biomerica whose operations are adjacent to that of AIT.
DISCONTINUED OPERATIONS
The Company's fiscal 2001 and 2000 losses were partially the result of its
investment in ReadyScript. The ReadyScript subsidiary was a development-stage
enterprise and required the raising of a significant amount of capital to fund
its short-term working capital needs. The ReadyScript operations were
discontinued in May 2001. The net assets and operating results of ReadyScript
are shown separately in the accompanying consolidated financial statements as
discontinued operations and are held for sale. Prior periods have been restated
to reflect the results of ReadyScript as discontinued.
PRODUCTION
All of our diagnostic test kits are processed and assembled at our
facilities in Newport Beach, California. Production of diagnostic tests involve
formulating component antibodies and antigens in specified concentrations,
attaching a tracer to the antigen, filling components into vials, packaging and
labeling. We continually engage in quality control procedures to assure the
consistency and quality of our products and to comply with applicable FDA
regulations.
All manufacturing production is regulated by the FDA Good Manufacturing
Practices for medical devices. We have an internal quality control unit that
monitors and evaluates product quality and output. In addition, we employ a
qualified external quality assurance consultant who monitors procedures and
provides guidance in conforming with the Good Manufacturing Practices
regulations. We either produce our own antibodies and antigens or purchase these
materials from qualified vendors. We have alternate, approved sources for raw
materials procurement and we do not believe that material availability in the
foreseeable future will be a problem.
5
Lancer currently utilizes a manufacturing subcontractor to provide
manufacturing services to Lancer through its affiliated entities located in
Mexicali, B.C., Mexico. The current agreement allows for the pass through of
actual costs plus a weekly administrative fee. This gives Lancer greater control
over all costs associated with the manufacturing operation. During 1999, Lancer
extended the Manufacturing Agreement through October 2000. Lancer has retained
an option to convert the manufacturing operation to a wholly owned subsidiary at
any time without penalty.
Lancer is in the process of converting Mexican assets and obligations to
its own division, a Mexican corporation named Lancer Orthodontics de Mexico
(Lancer de Mexico). This division will administer services previously provided
by an independent manufacturing contractor. A new lease was negotiated effective
April 1, 2001, for the 16,000 square foot facility used for Lancer's Mexican
operations. Utility and Mexican vendor obligations have been converted to the
Lancer de Mexico name. This conversion will eliminate the expense of an
administrative fee and is expected to provide better control in meeting
obligations.
Should Lancer discontinue operations in Mexico, it is responsible for
accumulated employee seniority obligations as prescribed by Mexican law. At May
31, 2001, this obligation was approximately $361,000. Such obligation is
contingent in nature and accordingly has not been accrued in Lancer's financial
statements.
RESEARCH AND DEVELOPMENT
Biomerica is engaged in research and development to broaden its diagnostic
product line in specific areas. Research and development expenses include the
costs of materials, supplies, personnel, facilities and equipment. Lancer is
engaged in development programs to improve and expand its orthodontic products
and production techniques. Lancer consults frequently with practicing
orthodontists.
Research and development expenses incurred by Biomerica for the years ended
May 31, 2001 and 2000 aggregated approximately $322,000 and $465,000,
respectively. These expenses included approximately $72,000 and $184,000 for
fiscal 2001 and 2000, respectively, for Lancer's product development.
MARKETS AND METHODS OF DISTRIBUTION
Biomerica has approximately 300 current customers for its diagnostic
business, of which approximately 60 are distributors and the balance are
hospital and clinical laboratories, medical research institutions, medical
schools, pharmaceutical companies, chain drugstores, wholesalers and physicians'
offices.
We rely on unaffiliated distributors, advertising in medical and trade
journals, exhibitions at trade conventions, direct mailings and an internal
sales staff to market our diagnostic products. We target three main markets: (a)
clinical laboratories, (b) physicians' offices, and (c) over-the-counter drug
stores. Separate marketing plans are utilized in targeting each of the three
markets.
6
Lancer sells its products directly to orthodontists through company-paid
sales representatives in the United States. At the end of its fiscal year,
Lancer had seven sales representatives, all in the United States, all of whom
are employees of Lancer.
In selected foreign countries, Lancer sells its products directly to
orthodontists through its international marketing division. Lancer also sells
its products through distributors in certain foreign countries and to other
companies on a private label basis. Lancer has entered into a number of
distributor agreements whereby it granted the marketing rights to its products
in certain sales territories in Mexico, Central America, South America, Europe,
Canada, Australia, and Japan. The distributors complement the international
marketing department which was established in 1982 and currently employs three
people.
Lancer also markets products which are purchased and resold to
orthodontists, including sealants, adhesives, elastomerics, headgear cases,
retainer cases, orthodontic wire, and preformed arches.
The loss of any one or a few customers would not have a material adverse
effect upon our revenues.
BACKLOG
At May 31, 2001 and 2000 Biomerica had a backlog of $80,000 and $0,
respectively and Allergy Immuno Technologies, Inc. had no backlog of product
orders. As of May 31, 2001 and 2000, Lancer had a backlog of $167,000 and
$146,000, respectively.
RAW MATERIALS
The principal raw materials utilized by us consist of various chemicals,
serums, reagents, radioactive isotopes 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.
We maintain inventories of antibodies and antigens as components for our
diagnostic test kits. Due to a limited shelf life on some products such as the
RIA kits, finished kits are prepared as required for immediate delivery of
pending and anticipated orders. Sales orders are normally processed on the day
of receipt.
The principal raw materials used by Lancer in the manufacture of its
products include: stainless steel, which is available from several commercial
sources; nickel titanium, which is available from three sources; and lucolux
translucent ceramic, which is currently only available from one source, General
Electric, and is purchased on open account. Ceramic material similar to General
Electric's lucolux translucent ceramic is available from other sources. Lancer
had no difficulty in obtaining an adequate supply of raw materials during its
2001 fiscal year, and does not anticipate that there will be any interruption or
cessation of supply in the future.
7
COMPETITION
Immunodiagnostic products are currently produced by more than 100
companies, a majority of which are located within the United States. Biomerica
and its subsidiaries are not a significant factor in the market.
Our competitors vary greatly in size. Many are divisions or subsidiaries of
well-established medical and pharmaceutical concerns which are much larger than
Biomerica and expend substantially greater amounts than we do for research and
development, manufacturing, advertising and marketing.
The primary competitive factors affecting the sale of diagnostic products
are uniqueness, quality of product performance, price, service and marketing.
The prices for our products compare favorably with those charged by most of our
competitors.
We believe we compete primarily on the basis of our reputation for the
quality of our products, the speed of our test results, the unique niches we
fill in the market, our patent position, and our prompt shipment of orders. We
offer a broader range of products than many competitors of comparable size, but
to date have had limited marketing capability. We are working on expanding this
capability through strategic cooperations with larger companies and
distributors.
Lancer encounters intense competition in the sale of orthodontic products.
Lancer's management believes that Lancer's seven major competitors are: Unitek,
a subsidiary or division of 3M; "A" Company and Ormco, subsidiaries or divisions
of Sybron; RMO Inc., a private company; American Orthodontics, a private
company; GAC, a private company; and Dentaurum, a foreign company. Lancer
estimates that these seven competitors account for approximately 80% of the
orthodontic products manufactured and sold in the United States. Lancer's
management also believes that each of these seven competitors is larger than
Lancer, has more diversified product lines and has financial resources exceeding
those of Lancer. While there is no assurance that Lancer will be successful in
meeting the competition of these seven major competitors or other competitors,
Lancer has, in the past, successfully competed in the orthodontic market and has
achieved recognition of both its name and its products.
With respect to AIT, the independent clinical laboratory industry in the
U.S. and in California is highly competitive and fragmented. According to one
industry source, there are approximately 4,500 independent clinical laboratories
in the U.S. AIT is not a significant factor in the market.
GOVERNMENT REGULATION OF OUR DIAGNOSTIC BUSINESS
As part of our diagnostic business, we sell products that are legally
defined to be medical devices. As a result, we are considered to be a medical
device manufacturer, and as such are subject to the regulations of numerous
governmental entities. These agencies include the Food and Drug Administration
(the "FDA"), the United States Drug Enforcement Agency (the "DEA"),
Environmental Protection Agency, Federal Trade Commission, Occupational Safety
and Health Administration, U.S. Department of Agriculture ("USDA"), and Consumer
Product Safety Commission. These activities are also regulated by various
agencies of the states and localities in which our products are sold. These
regulations govern the introduction of new medical devices, the observance of
certain standards with respect to the manufacture and labeling of medical
devices, the maintenance of certain records and the reporting of potential
product problems and other matters.
8
The Food, Drug & Cosmetic Act of 1938 (the "FDCA") regulates medical
devices in the United States by classifying them into one of three classes based
on the extent of regulation believed necessary to ensure safety and
effectiveness. Class I devices are those devices for which safety and
effectiveness can reasonably be ensured through general controls, such as device
listing, adequate labeling, pre-market notification and adherence to the Quality
System Regulation ("QSR") as well as Medical Device Reporting (MDR), labeling
and other regulatory requirements. Some Class I medical devices are exempt from
the requirement of Pre-Market Approval ("PMA") or clearance. Class II devices
are those devices for which safety and effectiveness can reasonably be ensured
through the use of special controls, such as performance standards, post-market
surveillance and patient registries, as well as adherence to the general
controls provisions applicable to Class I devices. Class III devices are devices
that generally must receive pre-market approval by the FDA pursuant to a
pre-market approval application to ensure their safety and effectiveness.
Generally, Class III devices are limited to life-sustaining, life-supporting or
implantable devices. However, this classification can also apply to novel
technology or new intended uses or applications for existing devices.
If the FDA finds that the device is not substantially equivalent to a
predicate device, the device is deemed a Class III device, and a manufacturer or
seller is required to file a PMA application. Approval of a PMA application for
a new medical device usually requires, among other things, extensive clinical
data on the safety and effectiveness of the device. PMA applications may take
years to be approved after they are filed. In addition to requiring clearance or
approval for new medical devices, FDA rules also require a new 510(k) filing and
review period, prior to marketing a changed or modified version of an existing
legally marketed device, if such changes or modifications could significantly
affect the safety or effectiveness of that device. The FDA prohibits the
advertisement or promotion or any approved or cleared device for uses other than
those that are stated in the device's approved or cleared application.
Pursuant to FDA requirement, 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, unless the device is a Class
I exempt device, requires that we manufacture our products and maintain our
documents in a prescribed manner with respect to issues such as design controls,
manufacturing, testing and validation activities. Further, we are required to
comply with other FDA requirements with respect to labeling, and the MDR
regulation which requires that we provide information to the FDA on deaths or
serious injuries alleged to have been associated with the use of our products,
as well as product malfunctions that are likely to cause or contribute to death
or serious injury if the malfunction were to recur. We believe that we are
currently in material compliance with all relevant QSR and MDR requirements.
In addition, our facility is required to have a California Medical Device
Manufacturing License. The license is not transferable and must be renewed
annually. Approval of the license requires that we be in compliance with QSR,
labeling and MDR regulations. Our license expires on March 16, 2002. We are also
registered with the Department of Health and Human Services, Public Health
Service of the FDA as a Device establishment. This registration expires on
February 28, 2002. We also hold two radioactive materials licenses from the
State of California (both expiring on June 20, 2002), and two permits from the
USDA, one expiring on January 28, 2002 and the other expiring on June 30, 2002.
These licenses are renewed periodically, and to date we have never failed to
obtain a renewal.
9
Through compliance with FDA and California regulations, we can market our
medical devices throughout the United States. International sales of medical
devices are also subject to the regulatory requirements of each country. In
Europe, the regulations of the European Union require that a device have a "CE
Mark" in order to be sold in EU countries. The directive goes into effect
beginning March 2003. The Company has begun the process of complying with the
"CE Mark" directives and believes it will be in full compliance by the time the
directive becomes effective. At present the regulatory international review
process varies from country to country. We, in general, rely upon our
distributors and sales representatives in the foreign countries in which we
market our products to ensure that we comply with the regulatory laws of such
countries. We believe that our international sales to date have been in
compliance with the laws of the foreign countries in which we have made sales.
Exports of most medical devices are also subject to certain FDA regulatory
controls.
Lancer is licensed to design, manufacture, and sell orthodontic appliances
and is subject to the Code of Federal Regulations, Section 21, parts 800-1299.
The FDA is the governing body that assesses and issues Lancer's license to
assure that it complies with these regulations. Lancer is currently licensed,
and its last assessment was in November 1997. Also, Lancer is registered and
licensed with the state of California's Department of Health Services.
Effective June 18, 1998, fifteen major European countries are requiring a
CE (European Community) certification to sell products within their countries.
In order to obtain this CE certification Lancer retained British Standards
Institution (BSI) to evaluate Lancer's quality system. Lancer's quality system
is imaged under International Standards Organization (ISO) 9002. ISO 9002 is an
internationally recognized standard in which companies establish their methods
of operation and commitment to quality. There are 20 clauses for which Lancer
has developed standard operating procedures in accordance with these ISO 9002
requirements.
EN 46002 is the medical device directive (MDD) for the European Community.
Strict standards and clauses within the MDD are required to be implemented to
sell within the European Community. In order for Lancer's medical devices to be
sold within the European Community with the CE Mark, Lancer must fully comply
with the EN 46002 requirements. Lancer has also constructed a technical file
that gives all certifications and risk assessments for Lancer's products as a
medical device (the "Product Technical Files").
With ISO 9002, EN 46002, and the Product Technical Files, Lancer applied
for and was granted certification under ISO 9002, EN 46002, and CE.
AIT currently holds an annually renewed clinical laboratory license with
the Department of Health Services, State of California. The current license
expires December 31, 2001. AIT also holds a clinical laboratory license from the
state of Florida. This current license expires November 11, 2001 and is renewed
every two years. AIT holds a CLIA Certificate of Compliance, which is a
requirement of the Federal government for clinical laboratories. This
certificate expires in February 2002 and is renewed every two years. Although
AIT has never failed to obtain renewals, its business operations would be
materially and adversely affected if it were unable to do so.
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SEASONALITY OF BUSINESS
The business of the Company and its subsidiaries has not been subject to
significant seasonal fluctuations.
FOREIGN BUSINESS
All of our fixed assets, excluding some of Lancer, are located within
southern California. The following table sets forth the dollar volume of revenue
attributable to sales to domestic customers and foreign customers during the
last two fiscal years for the Biomerica and its consolidated subsidiaries:
Year Ended May 31,
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2001 2000
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U.S. Customers $4,700,000/52.6% $4,431,000/55.3%
Asia 221,000/2.5% 349,000/ 4.4%
Europe 2,207,000/24.7% 1,683,000/21.0%
S. America 558,000/6.2% 543,000/ 6.8%
Other foreign 1,254,000/14.0% 1,008,000/12.6%
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Total Revenues $8,940,000/100% $8,014,000/100%
We recognize that our foreign sales could be subject to some special or
unusual risks which are not present in the ordinary course of business in the
United States. Changes in economic factors, government regulations and import
restrictions all could impact sales within certain foreign countries. Foreign
countries have licensing requirements applicable to the sale of diagnostic
products which vary substantially from domestic requirements; depending upon the
product and the foreign country, these may be more or less restrictive than
requirements within the United States. We cannot predict the impact that
conversion to the Euro in the European countries may have on Biomerica, if any.
Foreign diagnostic sales are made primarily through a network of over 60
independent distributors in approximately 40 countries.
INTELLECTUAL PROPERTY
We regard the protection of our copyrights, service marks, trademarks and
trade secrets as critical to our future success. We rely on a combination of
copyright, trademark, service mark and trade secret laws and contractual
restrictions to establish and protect our proprietary rights in products and
services. We have entered into confidentiality and invention assignment
agreements with our employees and contractors, and nondisclosure agreements with
most of our vendors, 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
11
licensed in the past, and expect that we may license in the future, certain of
our proprietary rights, such as trademarks or copyrighted material, to third
parties. While we attempt to ensure that the quality of our product brands is
maintained by such licensees, we cannot be certain that such licensees will not
take actions that might hurt the value of our proprietary rights or reputation.
BRANDS, TRADEMARKS, PATENTS
We registered the tradenames "Fortel," "Isletest," "Nimbus" and "GAP" with
the Office of Patents and Trademarks on December 31, 1985. Our unregistered
tradenames are "EZ-Detect," "CAST," "COT," "EquistiK," "FelistiK," "Tri-Level
Controls," "Tru-Level Controls," "T-Marker Controls," "AllerHalt," "Candiquant,"
"Candigen," "EZ-H.P." and "EZ-PSA."
Allergy Immuno Technologies, Inc. has four patents pertaining to its
discoveries for allergy treatment. These are:
1. Immunotherapy agents for treatment of IgE mediated allergies; U.S.
Patent #5,116,612, issued May 6, 1992.
2. Liposome containing immunotherapy agents for treatment of IgE medicated
allergies, U.S. Patent #5,049,390, issued September 17, 1991.
3. Immunotherapy agents for treatment of IgE mediated allergies, U.S.
Patent #4,946,945, issued August 7, 1990.
4. Allergen-thymic hormone conjugates for treatment of IgE mediated
allergies, U.S. Patent #5,275,814, issued January 4, 1994.
On April 4, 1989, Lancer was granted a patent on its CounterForce design of
a nickel titanium orthodontic archwire. On August 1, 1989, Lancer was granted a
patent on its bracket design used in the manufacturing of Sinterline and
Intrigue orthodontic brackets. On September 17, 1996, Lancer was granted a
patent on its method of laser annealing marking of orthodontic appliances. On
March 4, 1997, Lancer was granted a patent on an orthodontic bracket and method
of mounting. All of the patents are for a duration of 17 years. Lancer has
entered into license agreements expiring in 2006 whereby, for cash
consideration, the counter party has obtained the rights to manufacture and
market certain products patented by Lancer. Lancer has also entered into a
number of license and/or royalty agreements pursuant to which it has obtained
rights to certain of the products which it manufactures and/or markets. The
patents and agreements have had a favorable effect on Lancer's image in the
orthodontic marketplace and Lancer's sales.
Lancer has made a practice of selling its products under trademarks and of
obtaining protection for those trademarks in the United States and certain
foreign countries. Lancer considers these trademarks to be of importance in the
operation of its business.
The laws of some foreign countries do not protect our proprietary rights to
the same extent as do the laws of the U.S. Effective copyright, trademark and
trade secret protection may not be available in such jurisdictions. Our efforts
to protect our intellectual property rights may not prevent misappropriation of
our content.
12
EMPLOYEES
As of August 14, 2001, the Company and its subsidiaries employed 73 full-
time employees and 9 part-time employees. Lancer, through its Mexican
subcontractor, utilizes the services of approximately 129 people in Mexico. We
also engage the services of various outside Ph.D. and M.D. consultants as well
as medical institutions for technical support on a regular basis. We are not a
party to any collective bargaining agreement and have never experienced a work
stoppage. We consider our employee relations to be good.
ITEM 2. DESCRIPTION OF PROPERTY
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During fiscal 1993 we leased approximately 21,000 square feet of space in
Newport Beach, California for a term which expired May 31, 1998. Pursuant to the
prior lease and the current month-to-month tenancy, we pay an annual base rent,
set initially at $143,880 and adjusted annually to reflect cost of living
increases, plus all real estate taxes and insurance costs. In fiscal 1999 a
portion of the rent was paid through the issuance of shares of our restricted
common stock to JSJ Management and another individual. During fiscal 2001 the
Company paid a total of $169,440 in rent for approximately 24,500 square feet of
space. These facilities were used for diagnostic test kit research and
development, manufacturing, marketing, administration, and our ReadyScript
operations. The ReadyScript subsidiary still owed $12,500 in back rent as of May
31, 2001.
The facilities are leased from Mrs. Ilse Sultanian and JSJ Management. Ms.
Janet Moore, an officer, director and shareholder of our Company, is a partner
in JSJ Management.
AIT currently leases approximately 1,600 square feet at the above facility
for $1,400 per month. These properties are leased by AIT on a month-to-month
basis from Mrs. Sultanian and JSJ Management.
Lancer leases its main facility under a non-cancelable operating lease
expiring December 31, 2003, as extended, which requires monthly rentals that
increase annually, from $2,900 per month in 1994 to $6,317 per month in 2004.
The lease expense is being recognized on a straight-line basis over the term of
the lease. The excess of the expense recognized over the cash paid aggregates
$11,032 at May 31, 2001, and is included in accrued liabilities in the
accompanying balance sheet. Total rental expense for this facility for each of
the years ended May 31, 2001 and 2000 was approximately $69,000.
Lancer has entered into a non-cancelable operating lease for its Mexico
facility which expires in March 2006 and requires average monthly rentals of
approximately $6,000. Total expense for this facility for the years ended May
31, 2001 and 2000, was approximately $74,000.
At May 31, 2001, future aggregate minimum lease payments for Lancer are as
follows:
Years ending
------------
May 31, 2002 $133,543
May 31, 2003 136,397
May 31, 2004 106,511
May 31, 2005 62,292
Thereafter 51,910
Total $490,653
13
We believe that our facilities and equipment are in suitable condition and
are adequate to satisfy the current requirements of our Company and our
subsidiaries.
ITEM 3. LEGAL PROCEEDINGS
-----------------
Inapplicable.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
-------------------------------------------------
Inapplicable.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
--------------------------------------------------------
Biomerica's common stock is traded on the NASDAQ SmallCap Stock Market
under the symbol "BMRA".
The following table shows the high and low bid prices for Biomerica's
common stock over the last two years based upon data reported by NASDAQ. Prices
shown represent quotations by dealers, and do not reflect markups, markdowns or
commissions.
Bid Prices
--------------------------------
High Low
-------------- ----------------
Quarter ended:
May 31, 2001 . . . . . . . . . . . . . . $1.25 $0.656
February 28, 2001 . . . . . . . . . . . . $0.969 $0.313
November 30, 2000 . . . . . . . . . . . . $1.75 $0.75
August 31, 2000 .. . . . . . . . . . . . $1.875 $1.25
May 31, 2000 . . . . . . . .............. $4.375 $1.438
February 29, 2000........................ $4.563 $2.031
November 30, 1999........................ $4.25 $2.00
August 31, 1999.......................... $3.75 $1.875
As of August 21, 2001, the number of holders of record of Biomerica's
common stock was approximately 1,222, excluding stock held in street name.
14
No dividends have been declared or paid by Biomerica. We intend to employ
all available funds for development of our business and, accordingly, do not
intend to pay cash dividends in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 PROVIDES A "SAFE
HARBOR" FOR FORWARD-LOOKING STATEMENTS. CERTAIN INFORMATION CONTAINED HEREIN (AS
WELL AS INFORMATION INCLUDED IN ORAL STATEMENTS OR OTHER WRITTEN STATEMENTS MADE
OR TO BE MADE BY BIOMERICA) CONTAINS STATEMENTS THAT ARE FORWARD-LOOKING, SUCH
AS STATEMENTS RELATING TO ANTICIPATED FUTURE REVENUES OF THE COMPANY AND SUCCESS
OF CURRENT PRODUCT OFFERINGS. SUCH FORWARD-LOOKING INFORMATION INVOLVES
IMPORTANT RISKS AND UNCERTAINTIES THAT COULD SIGNIFICANTLY AFFECT ANTICIPATED
RESULTS IN THE FUTURE, AND ACCORDINGLY, SUCH RESULTS MAY DIFFER MATERIALLY FROM
THOSE EXPRESSED IN ANY FORWARD-LOOKING STATEMENTS MADE BY OR ON BEHALF OF
BIOMERICA. THE POTENTIAL RISKS AND UNCERTAINTIES INCLUDE, AMONG OTHERS,
FLUCTUATIONS IN THE COMPANY'S OPERATING RESULTS. THESE RISKS AND UNCERTAINTIES
ALSO INCLUDE THE SUCCESS OF THE COMPANY IN RAISING NEEDED CAPITAL, THE ABILITY
OF THE COMPANY TO MAINTAIN REQUIREMENTS TO BE LISTED ON NASDAQ, THE CONTINUAL
DEMAND FOR THE COMPANY'S PRODUCTS, COMPETITIVE AND ECONOMIC FACTORS OF THE
MARKETPLACE, AVAILABILITY OF RAW MATERIALS, HEALTH CARE REGULATIONS AND THE
STATE OF THE ECONOMY. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE
FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF, AND THE
COMPANY UNDERTAKES NO OBLIGATION TO UPDATE THESE FORWARD-LOOKING STATEMENTS.
RESULTS OF OPERATIONS
We currently have three subsidiaries, Lancer Orthodontics, Inc. ("Lancer"),
which is engaged in manufacturing, sales and development of orthodontic
products, Allergy Immuno Technologies, Inc. ("AIT"), which is engaged in
providing specialized testing services to pharmaceutical companies and
physicians and has obtained four patents related to allergy treatment therapies,
and ReadyScript, which developed an innovative point-of-care, wireless handheld
technology solutions for the healthcare industry. We own approximately 30.78% of
the outstanding stock of Lancer and 74.6% of the outstanding stock of AIT. We
exercise effective control of 51.19% over Lancer via voting agreements with
certain shareholders. ReadyScript is a 88.9% owned subsidiary of Biomerica. As a
result of our control and ownership, our financial statements are consolidated
with those of Lancer, AIT and ReadyScript. Both Lancer and AIT are public
companies. The common stock of Lancer is traded on the bulletin board system
under the symbol "LANZ," and the common stock of AIT is traded in the pink
sheets under the symbol "ALIM."
In August 2000 operations of the online drugstore, the BigRx.com, were shut
down due to insignificant revenue and non-performance by the other party of a
third party backend processing agreement. The ReadyScript subsidiary was a
development-stage enterprise and required the raising of a significant amount of
capital to fund its short-term working capital needs. The ReadyScript operations
were discontinued in May 2001. The sale of some of the ReadyScript assets is
being discussed with various parties. The subsidiary is being reported in the
financial statements as a discontinued operation because it is no longer an
operating entity.
15
Fiscal 2001 Compared to Fiscal 2000
Our consolidated net sales were $8,939,522 for fiscal 2001 compared to
$8,013,921 for fiscal 2000. This represents an increase of $925,601, or 11.5%
for fiscal 2001. Of the total consolidated net sales for fiscal 2001, $5,927,603
is attributable to Lancer, $100,270 to AIT and $2,911,649 to Biomerica. Lancer's
sales increased by $277,091, Biomerica showed a sales increase of $628,216 and
AIT had an increase of $20,294. The increase at Lancer was attributable to an
increase in European sales. The increase in sales at Biomerica was in large part
due to an increase of sales in the over-the-counter market domestically.
Cost of sales in fiscal 2001 as compared to fiscal 2000 increased by
$526,248 or 9.4%. Lancer's cost of sales as a percentage of sales decreased from
68.4% to 67.4% in fiscal 2001 as compared to fiscal 2000. The decrease was
primarily attributable to product mix. Biomerica had a decrease in cost of goods
as a percentage of sales from 72.0% to 70.4% in fiscal 2001 as compared to
fiscal 2000 due to a more profitable sales mix offset by a write-down for
obsolete inventory and scrap of approximately $150,000. AIT had a decrease in
cost of goods as a percentage of sales of 118.0% to 86.7% primarily due to lower
material costs.
Selling, general and administrative costs decreased in fiscal 2001 as
compared to fiscal 2000 by $712,152 or 18.3%. Lancer had a decrease of $144,652
in these costs due to decreases in labor costs and travel expenses, partially
offset by increases in bad debt expense and other expenses. Biomerica had a
decrease in fiscal 2001 as compared to fiscal 2000 of $535,427, primarily due to
warrant expenses incurred in fiscal 2000. AIT had decreased costs of $32,073 due
to higher legal and accounting costs related to new SEC filing requirements in
fiscal 2000.
Research and development expense decreased in fiscal 2001 as compared to
fiscal 2000 by $142,916 or 30.7%. Of this, Lancer had a decrease of $112,744, as
a result of the termination of the dental amalgam development. Biomerica had an
increase in research and development expenses of $22,828 primarily due to the
expenses related to consulting services. AIT had a decrease of $52,600 as a
result of termination of a research project.
Interest expense, which was incurred primarily by Lancer, increased in
fiscal 2001 as compared to fiscal 2000 by $1,996 or 10.2% due to borrowings
against the line of credit to finance development costs and an increase in the
interest rate.
Other income net, decreased by $70,636 or 59.7% in fiscal 2001 as compared
to fiscal 2000. A decrease of $225,900 is attributable to Lancer due to income
received in the prior fiscal year from an insurance claim for inventory theft.
An increase of $152,478 was attributable to Biomerica due to the sale of
marketable securities offset by lower interest and dividend income. An increase
of $3,722 was attributable to AIT due to income realized from the sale of land
this fiscal year.
As of May 31, 2001, Biomerica had net tax operating loss carryforwards of
approximately $9,466,000 and investment tax and research and development credits
of approximately $45,000, which are available to offset future federal tax
liabilities. These carryforwards expire at varying dates from 2001 to 2021. As
of May 31, 2001, Biomerica has net operating tax loss carryforwards of
approximately $2,127,000 available to offset future state income tax
liabilities, which expire through 2011. As of May 31, 2001, Lancer had net
16
operating loss carryforwards of approximately $2,049,000 and business tax
credits of approximately $98,000 available to offset future Federal tax
liabilities. The Lancer carryforwards expire through 2021. As of May 31, 2001,
AIT had net tax operating loss carryforwards of $1,931,000 and business tax
credits of approximately $29,000 to offset future Federal tax liabilities. The
carryforwards expire at varying dates through 2021. AIT also had net tax
operating loss carryforwards of approximately $580,000 to offset future
California taxable income, expiring at varying dates through 2011.
Liquidity and Capital Resources
As of May 31, 2001, we had cash and available for sale securities of
$136,299 (see Note 1 of Notes to Consolidated Financial Statements) and current
working capital of $2,944,596. Of the current working capital, $2,697,500 is
attributable to the Lancer subsidiary, which is restricted from distribution to
Biomerica as a result of Lancer's line of credit agreement. The Company's fiscal
2001 losses were substantially the result of its investment in ReadyScript,
which has been reported as a discontinued operation. During 2001, cash provided
by operations was $108,955. During 2000, the Company used cash flows from
operations of $723,997. Cash provided by investing activities was $50,532,
partially due to the sale of marketable securities and land. The Company
generated cash flow from financing activities of $339,662 during fiscal 2001,
primarily due to two private placements and a shareholder loan at Biomerica.
This compares to cash provided by financing activities of $1,889,295 in 2000
primarily a result of the sale of common stock net of offering proceeds.
The Company has suffered substantial recurring losses from operations over
the last couple of years. The Company has funded its operations through debt and
equity financings and may have to do so in the future.
ReadyScript was discontinued in May 2001. ReadyScript was a primary contri-
butor to the Company's losses. The Company also plans to reduce operating costs
through certain cost reduction efforts and concentrate on its core business in
Lancer and Biomerica to increase sales. There can be no assurances that the
Company will be able to become profitable, generate positive cash flow from
operations or sustain the necessary equity or debt financing to fund operations
in the future.
At May 31, 2001, Lancer had a $300,000 line of credit with a bank.
Borrowings are made at prime plus 1.25% (8.25% at May 31, 2001) and are limited
to specified percentages of eligible accounts receivable. The unused portion
available to Lancer under the line of credit at May 31, 2001 was $160,000. The
line of credit expired on September 10, 2001. As of May 31, 2001, there was
$140,000 outstanding under the line of credit.
The line of credit is collateralized by substantially all the assets of
Lancer, including inventories, receivables, and equipment. The lending agreement
for the line of credit requires, among other things, that Lancer maintain a
tangible net worth ratio of no more than 1 to 1, and a current ratio in excess
of 2 to 1, and prohibits the advancing of funds to Biomerica. Lancer is not
required to maintain compensating balances in connection with this lending
agreement. Lancer was in violation of certain of its debt covenants at May 31,
2001. Lancer is currently in discussions with a new lender to replace its
existing line of credit. Management believes it will be successful in such
discussions, however, there can be no assurance of this success nor that
management would be successful in finding a replacement lender with acceptable
terms.
17
Biomerica, Inc. entered into an agreement, in substance, for a line of
credit on September 12, 2000 with a shareholder whereby the shareholder will
loan to the Company, as needed, up to $500,000 for working capital needs. The
line of credit bears interest at 8%, is secured by Biomerica accounts receivable
and inventory and was due to expire September 12, 2001. On September 12, 2001
the line of credit was extended until September 13, 2002 at an interest rate of
8% and is secured by accounts receivable and inventory. The unused portion
available under the line of credit at May 31, 2001, was approximately $405,000.
During June and July 2001 the Company borrowed an additional $130,000 on the
line of credit; therefore, the unused portion of the line of credit as of
September 10, 2001, is $275,000.
The Company has been notified by Nasdaq that it has failed to maintain the
listing requirement that its minimum bid price be $1.00 or more and that it must
regain compliance by October 4, 2001, or it will be subject to delisting. The
Company will be subject to that and other continuing requirements to be listed
on the Nasdaq SmallCap Market. There can be no assurance that the Company can
continue to meet such requirements. The price and liquidity of the Common Stock
may be materially adversely affected if the Company is unable to meet such
requirements in the future.
Recent Accounting Pronouncements:
In June 1998, the Financial Accounting Standards Board issued Statement of
Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities." This statement establishes accounting and reporting
standards for derivative instruments and requires recognition of all derivatives
as assets or liabilities in the statement of financial position and measurement
of those instruments at fair value. SFAS No. 133, as amended by SFAS No. 137, is
effective for all fiscal quarters of fiscal years beginning after June 15, 2000.
The Company currently does not engage in derivative or hedging activities, and
accordingly, believes that there will be no impact to its consolidated financial
statements upon implementation in the Company's fiscal year 2002.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB
101"). SAB 101 summarizes certain areas of the Staff's views in applying
accounting principles generally accepted in the United States of America to
revenue recognition in financial statements. The Company believes that its
current revenue recognition policies comply with SAB 101.
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141 ("SFAS 141"), "Business
Combinations", which eliminates the pooling method of accounting for business
combinations initiated after June 30, 2001. In addition, SFAS 141 addresses the
accounting for intangible assets and goodwill acquired in a business
combination. This portion of SFAS 141 is effective for business combinations
completed after June 30, 2001. The Company does not expect SFAS 141 will have a
material impact on the Company's financial position or results of operations.
In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 142 ("SFAS 142"), "Goodwill and Intangible Assets", which revises the
accounting for purchased goodwill and intangible assets. Under SFAS 142,
goodwill and intangible assets with indefinite lives will no longer be amor-
tized and will be tested for impairment annually. SFAS 142 is effective for
fiscal years beginning after December 15, 2001, with earlier adoption per-
mitted. The Company has not yet determined the impact on the Company's fin-
ancial position or results of operations as a result of the future adoption of
SFAS 142.
18
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
Exhibit 99.1, "Biomerica, Inc. and Subsidiaries Consolidated Financial
Statements" is incorporated herein by this reference.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
---------------------------------------------------------------
Inapplicable.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE
REGISTRANT; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
-------------------------------------------------------------------
This information is incorporated by reference to the Company's proxy
statement for its 2001 Annual Meeting of Stockholders which will be filed not
later than 120 days after the end of the Company's fiscal year ended May 31,
2001.
ITEM 10. EXECUTIVE COMPENSATION
----------------------
This information is incorporated by reference to the Company's proxy
statement for its 2001 Annual Meeting of Stockholders which will be filed not
later than 120 days after the end of the Company's fiscal year ended May 31,
2001.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
This information is incorporated by reference to the Company's proxy
statement for its 2001 Annual Meeting of Stockholders which will be filed not
later than 120 days after the end of the Company's fiscal year ended May 31,
2001.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
This information is incorporated by reference to the Company's proxy
statement for its 2001 Annual Meeting of Stockholders which will be filed not
later than 120 days after the end of the Company's fiscal year ended May 31,
2001.
19
ITEM 13. EXHIBITS LIST AND REPORTS ON FORM 8-K
-------------------------------------
(a) EXHIBITS
--------
EXHIBIT NO. DESCRIPTION
3.1 Certificate of Incorporation of Registrant filed with the
Secretary of the State of Delaware on September 22, 1971
(incorporated by reference to Exhibit 3.1 filed with Amendment
No. 1 to Registration Statement on Form S-1, Commission File
No. 2-83308).
3.2 Certificate of Amendment to Certificate of Incorporation of
Registrant filed with the Secretary of the State of Delaware on
February 6, 1978 (incorporated by reference to Exhibit 3.1
filed with Amendment No. 1 to Registration Statement on Form S-
1, Commission File No. 2-83308).
3.3 Certificate of Amendment to Certificate of Incorporation of
Registrant filed with the Secretary of the State of Delaware on
February 4, 1983 (incorporated by reference to Exhibit 3.1
filed with Amendment No. 1 to Registration Statement on Form S-
1, Commission File No. 2-83308).
3.4 Certificate of Amendment to Certificate of Incorporation of
Registrant filed with the Secretary of the State of Delaware on
January 19, 1987 (incorporated by reference to Exhibit 3.4
filed with Form 8 Amendment No. 1 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended May 31, 1987).
3.5 Certificate of Amendment of Certificate of Incorporation of
Registrant filed with the Secretary of the State of Delaware on
November 4, 1987 (incorporated by reference to Exhibit 3.1
filed with Amendment No. 1 to Registration Statement on Form S-
1, Commission File No. 2-83308).
3.6 Bylaws of the Registrant (incorporated by reference to Exhibit
3.2 filed with Amendment No. 1 to Registration Statement on
Form S-1, Commission File No. 2-83308).
3.7 Certificate of Amendment of Certificate of Incorporation of
Registrant filed with the Secretary of the State of Delaware on
December 20, 1994 (incorporated by reference to Exhibit 3.7
filed with Registrant's Annual Report on Form 10-KSB for the
fiscal year ended May 31, 1995).
3.8 First Amended and Restated Certificate of Incorporation Of
Biomerica, Inc. filed with the Secretary of State of Delaware
on August 1, 2000 (incorporated by reference to Exhibit 3.8
filed with the Registrant's Annual Report on Form 10-KSB for
the fiscal year ended May 31, 2000).
4.1 Specimen Stock Certificate of Common Stock of Registrant
(incorporated by reference to Exhibit 4.1 filed with
Registrant's Registration Statement on Form SB-2, Commission
No. 333-87231 filed on September 16, 1999).
20
10.2 Lancer purchase agreement and warrants (incorporated by
reference to Exhibit 10.10 filed with Registrant's Annual
Report on Form 10-K for the fiscal year ended May 31, 1989).
10.3 1999 Stock Incentive Plan of Registrant (incorporated by
reference to Exhibit 10.1 to Registration Statement on Form S-8
filed with the Securities and Exchange Commission on March 29,
2000).
10.4 1995 Stock Option and Common Stock Plan of Registrant
(incorporated by reference to Exhibit 4.3 to Registration
Statement on Form S-8 filed with the Securities and Exchange
Commission on January 20, 1996).
10.5 1991 Stock Option and Restricted Stock Plan of Registrant
(incorporated by reference to Exhibit 4.1 to Registration
Statement on Form S-8 filed with the Securities and Exchange
Commission on April 6, 1992).
10.6 Stock Purchase Agreement by and between Biomerica, Inc.,
RidgeRose Capital Partners, LLC and Zackary Irani and Janet
Moore dated June 11, 1999 (incorporated by reference to Exhibit
10.10 filed with Form 8-K on July 7, 1999).
10.7 Stock Purchase Agreement by and between Biomerica, Inc. and
Zackary Irani and Janet Moore dated June 11, 1999 (incorporated
by reference to Exhibit 10.11 filed with Form 8-K on July 7,
1999).
10.8 Back-end Processing Agreement by and between TheBigStore.com,
Inc. and Biomerica, Inc. and dated June 11, 1999 (incorporated
by reference to Exhibit 10.12 filed with Form 8-K on July 7,
1999).
10.9 Common Stock Purchase Warrant granted to TheBigStore.com, Inc.
dated June 11, 1999 (incorporated by reference to Exhibit 10.13
filed with Form 8-K on July 7, 1999).
10.10 Common Stock Purchase Warrant granted to RJM Consulting, LLC
dated June 11, 1999 (incorporated by reference to Exhibit 10.14
filed with Form 8-K on July 7, 1999).
10.11 Non-Qualified Option Agreement by and between Zackary Irani and
the Company dated June 10, 1999 (incorporated by reference to
Exhibit 10.15 filed with Form 8-K on July 7, 1999).
10.12 Non-Qualified Option Agreement by and between Janet Moore and
the Company dated June 10, 1999 (incorporated by reference to
Exhibit 10.16 filed with Form 8-K on July 7, 1999).
10.13 Non-Qualified Option Agreement by and between Philip Kaplan,
M.D. and the Company dated June 10, 1999 (incorporated by
reference to Exhibit 10.17 filed with Form 8-K on July 7,
1999).
10.14 Non-Qualified Option Agreement by and between Robert A.
Orlando, M.D., Ph.D. and the Company dated June 10, 1999
(incorporated by reference to Exhibit 10.18 filed Form 8-K on
July 7, 1999).
21
10.15 Strategic Marketing Agreement entered into as of the 2nd day of
September, 1999 by and between TheBigHub.com, Inc., a Florida
corporation and Biomerica, Inc. (incorporated by reference to
Exhibit 10.16 filed with Registrant's Registration Statement on
Form SB-2, Commission No. 333-87231 filed on September 16,
1999).
10.16 First Amendment to Back-End Processing Agreement entered into
as of September 2, 1999 whereby TheBigStore.com, Inc., a
Delaware corporation and Biomerica amend the Back-End Agreement
dated June 11, 1999 (incorporated by reference to Exhibit 10.17
filed with Registrant's Registration Statement on Form SB-2,
Commission No. 333-87231 filed on September 16, 1999).
10.17 Private Placement Memorandum of Biomerica, Inc. dated June 9,
1999 offering 400,000 shares of its Common Stock at $5.00 per
share (incorporated by reference to Exhibit 10.18 filed with
Registrant's Registration Statement on Form SB-2, Commission
No. 333-87231 filed on September 16, 1999).
10.18 Employment Agreement entered into as of August 30, 1999 by and
between the Internet division of Biomerica, Inc. and Steven J.
Goto (incorporated by reference to Exhibit 10.19 filed with
Registrant's Registration Statement on Form SB-2, Commission
No. 333-87231 filed on September 16, 1999).
10.19 Employment Offer Letter dated August 12, 1999 from Biomerica,
Inc. to Pete McKinley to join the Internet division of
Biomerica, Inc. (incorporated by reference to Exhibit 10.20
filed with Registrant's Registration Statement on Form SB-2,
Commission No. 333-87231 filed on September 16, 1999).
10.20 Employment Offer Letter dated August 12, 1999 from Biomerica,
Inc. to Richard Jay, Pharm.D. to join the Internet division of
Biomerica, Inc. (incorporated by reference to Exhibit 10.21
filed with Registrant's Registration Statement on Form SB-2,
Commission No. 333-87231 filed on September 16, 1999).
10.21 Amendment to Lease Extension/Lease Term effective January 1,
1999, whereby Lancer Orthodontics, Inc. and L&T Corporation, a
California corporation entered into an amendment and extension
to the terms of that certain lease agreement dated November 4,
1993 for the premises located at 253 Pawnee Street, Suite A,
San Marcos, California 92069 (incorporated by reference to
Exhibit 10.22 filed with Registrant's Registration Statement on
Form SB-2, Commission No. 333-87231 filed on September 16,
1999).
10.22 Sublease Agreement entered into by and between Eagleson de
California S.A. de C.V. and Lancer Orthodontics, Inc.
commencing on November 1, 1998 covering approximately 16,000
square feet located in the Industrial Park at Ave. Saturno No.
20 and of certain improvements constructed on the land as
detailed in that certain sublease between the parties dated
April 1, 1996 (incorporated by reference to Exhibit 10.23 filed
with Registrant's Registration Statement on Form SB-2,
Commission No. 333-87231 filed on September 16, 1999).
22
10.23 Fifth Revision to Manufacturing Shelter Agreement effective
November 1, 1998, whereby Lancer Orthodontics, Inc. and
Eagleson Industries, Inc. revised and amended that certain
Manufacturing Shelter Agreement entered into on May 11, 1990,
revised on June 20, 1991, December 2, 1992, July 1, 1994 and
April 1, 1996 (incorporated by reference to Exhibit 10.24 filed
with Registrant's Registration Statement on Form SB-2,
Commission No. 333-87231 filed on September 16, 1999).
10.24 Technical Skills Consulting Agreement entered into on January
1, 1999 by and between Lancer Orthodontics, Inc. and Alejandro
Carnero, a non-resident alien, independent contractor and
citizen of the Republic of Mexico (incorporated by reference to
Exhibit 10.25 filed with Registrant's Registration Statement on
Form SB-2, Commission No. 333-87231 filed on September 16,
1999).
10.25 Product Development and Marketing Agreement entered into as of
August 3, 1998 by and between Lancer Orthodontics, Inc. and AG
Metals, Inc., a Nevada corporation (incorporated by reference
to Exhibit 10.26 filed with Registrant's Registration Statement
on Form SB-2, Commission No. 333-87231 filed on September 16,
1999).
10.26 Agreement between Lancer Orthodontics, Inc. and Gary Weikel, an
individual, incorporating by reference that certain Product
Development and Marketing Agreement of even date between Lancer
Orthodontics, Inc. and AG Metals, Inc. (incorporated by
reference to Exhibit 10.27 filed with Registrant's Registration
Statement on Form SB-2, Commission No. 333-87231 filed on
September 16, 1999).
16.1 Letter on Change of Certifying Accountant (incorporated by
reference to Exhibit A to Form 8-K filed with the Securities
and Exchange Commission on May 24, 1993).
16.2 Letter on change of certifying accountant (incorporated by
reference to Exhibit A to Form 10-QSB/A filed with the
Securities and Exchange Commission on April 14, 1999).
21.1 Subsidiaries of Registrant (incorporated by reference to
Exhibit 21.1 to Form 10-KSB filed with the Securities and
Exchange Commission on September 14, 1999).
27.1 Financial Data Schedule.
99.1 Biomerica, Inc. and Subsidiaries Consolidated Financial
Statements For The Years Ended May 31, 2001 and 2000 and
Independent Auditors' Report.
(b) Reports on Form 8-K
-------------------
Biomerica filed a report on Form 8-K with the Securities and Exchange
Commission on July 7, 1999.
23
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BIOMERICA, INC.
Registrant
By /s/ Zackary S. Irani
-----------------------------
Zackary S. Irani, Chief Executive
Officer
Dated: 9/12/01
-------
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated:
Signature and Capacity
/s/ Zackary S. Irani Date: 9/12/01
------------------------------------
Zackary S. Irani
President, Director, Chief Executive
Officer
/s/ Janet Moore Date: 9/12/01
------------------------------------
Janet Moore, Secretary
Director, Chief Financial Officer
/s/ Robert Orlando Date: 9/12/01
------------------------------------
Robert Orlando, M.D., Ph.D.
Director
/s/ Carlos St. Aubyn Beharie Date: 9/12/01
------------------------------------
Carlos St. Aubyn Beharie
Director
/s/ David Burrows Date: 9/12/01
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David Burrows
Director
/s/ Francis R. Cano
------------------------------------ Date: 9/12/01
Francis R. Cano
Director
/s/ Allen Barbieri Date: 9/12/01
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Allen Barbieri
Director
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