BIOMERICA INC: Non-dependence on previous financial statements, audits or interim review (form 8-K)

Item 4.02, Non-Use of Previously Published Financial Statements or Related Audit Report or Completed Interim Review.

Biomerica, Inc. (the “Company”) has determined that the calculation and expense of non-cash stock-based compensation related to issued stock options, as presented in the Company’s consolidated financial statements , have been significantly undervalued on the basis of the application of generally accepted accounting principles in United States. The Company has historically reported stock-based compensation expense at the vesting dates, rather than prorating the expense over the vesting period. The Company also used an incorrect method to calculate the estimate of forfeiture of issued stock options. The stock-based compensation expense shown in the statement of operations is a non-cash charge that affects the accumulated deficit (losses) and additional paid-up capital on the balance sheet. However, this does not affect the cash position, revenues or other aspects of the day-to-day operations of the Company.

These errors related to non-cash stock-based compensation expense were identified by management during the implementation of a new stock option accounting software system. To confirm these findings, the Company’s audit committee retained the services of a third-party accounting consulting firm, to work with management and the Company’s independent and registered audit firm, PKF San Diego, LLP (PKF), in order to determine the degree of impact on the historical financial statements of the Company.

This review found no indication that these errors were the result of bypassing controls or improper conduct within the Company. The methodology for calculating expenditure based on Company actions and actual expenditure reported each year had been fully disclosed and reviewed by PKF, as part of their annual audits.

Following this review process, the September 29, 2021, the audit committee and management, in consultation with PKF and legal advisers, have determined that the company’s prior audited consolidated financial statements and the related audit report included in the company’s annual report on Form 10- K for the year ended May 31, 2021, as well as the interim consolidated financial statements of the Company included in the quarterly reports of the Company on Form 10-Q for the periods ended August 31, 2020, November 30, 2020 and February 28, 2021 should no longer be invoked. As soon as possible, the Company intends to file an amended annual report on Form 10-K for the fiscal year ended. May 31, 2021, to correct the impacted financial statements. The Company also intends to restate the quarterly consolidated financial statements for fiscal 2021 referred to above when included in the quarterly reports on Form 10-Q for comparable periods in fiscal 2022.

As such, the Company provides for the following adjustments to its Form 10-K for fiscal year 2021:

1) for the year ended 2021, an additional non-cash charge of $ 900,000 To
$ 1,100,000, increasing the net losses for the year of ($ 6,469,036) to between ($ 7,369,000) and ($ 7,569,000), and increasing the accumulated deficit (losses) and paid-up capital each of $ 900,000 To $ 1,100,000; and

2) for the fiscal year ended in 2020, an additional non-cash charge of $ 300,000 To
$ 390,000, increasing the net losses for the year of ($ 2,339,054) to between ($ 2,640,000) and ($ 2,730,000), and increasing the accumulated deficit (losses) and paid-up capital each of $ 300,000 To $ 390,000.

The Company also anticipates that in order to adjust non-cash stock-based compensation expense reported incorrectly in years prior to fiscal 2020, it will make a one-time adjustment to its consolidated balance sheet for the fiscal year ended. May 31, 2019, of $ 750,000 To $ 950,000. This adjustment will increase the accumulated deficit (losses) by ($ 19,587,678) to between ($ 20,337,000) and ($ 20,537,000) and will increase the additional paid-up capital by $ 22,830,006 to between $ 23,580,000 To $ 23,780,000 for the year ended May 31, 2019.

Although it is expected that these corrective actions will be adequate, the Company intends to seek advice from the Chief Accountant’s Office and
Corporate Finance Division to United States Securities Commission, in order to determine whether other information or changes in the historical financial statements of the Company may be necessary to accurately reflect these corrections.

                           Forward-Looking Statements

Except for the statements of historical fact contained herein, the information presented in this current report on Form 8-K constitutes “forward-looking statements” as that term is used in applicable securities laws. Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “potential”, “expected”, “estimates”. “,” Foresees “,” intends “,” anticipates “,” believes “or” plans “, or the negative aspects thereof or variations of these words and phrases or statements that certain actions, events or results “will”, “should”, “may”, “could”, “would”, “could” or “will be taken”, “occur” or “be achieved” or the negative of these terms or terminology comparable. Forward-looking statements include statements regarding the Company’s intention to restate its prior financial statements and estimated adjustments to the restated financial statements. There can be no assurance that the management of the Company, the audit committee or the firm of Independent registered accountants will not come to any conclusions regarding the tax act of the restatement that are different from management’s preliminary estimates or will not identify additional issues or other considerations relating to the restatement and the audit and review process or that such issues will not require adjustments additional to the Company’s previous financial results. All of these statements are subject to risks and uncertainties which may cause actual results to differ materially from those shown herein. These risks and uncertainties include, but are not limited to, the risk that additional information may arise from the oversight of the audit committee, the risk that the process of preparing and auditing the financial statements or other subsequent events necessitate the Company to make adjustments, the time and effort required to complete the restatement of the financial reports, the ramifications of the Company’s potential inability to file the required reports in a timely manner, the risk of identifying weaknesses in controls internal Company on the Company’s financial reports or the Company’s ability to remedy these weaknesses, the risk of litigation or government investigations or proceedings relating to these matters, and the risk of potential negative effects on the business, the results of operations, financial condition and share price of the Company as a result of the restatement and correction process. Other risks are described in more detail in the documents filed by the Company with the Security and Trade Commission. These forward-looking statements are expressly qualified in their entirety by these cautionary statements. In addition, the Company assumes no responsibility for the accuracy or completeness of these forward-looking statements. Forward-looking statements included in this current report on Form 8-K are made as of the date of this current report on Form 8-K and the Company does not undertake to publicly update or revise any forward-looking statements, as of the date of this current report on Form 8-K. except those required by applicable law.


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