SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
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Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
BIOMERICA, INC.
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(Name of Registrant as specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee Computed on Table below per Exchange Act Rules 14a-6(i)(4) and 0- 11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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BIOMERICA, INC.
1533 MONROVIA AVENUE
NEWPORT BEACH, CALIFORNIA 92663
----------------
NOTICE OF 2004 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 19, 2004
----------------
To Our Stockholders:
NOTICE IS HEREBY GIVEN that the annual meeting of the stockholders of
BIOMERICA, INC., a Delaware corporation (herein called the "Company"), will be
held at the offices of Lancer Orthodontics located at 253 Pawnee Street, San
Marcos, California 92069 on November 19, 2004 at 11:30 a.m.
At the meeting, you will be asked to consider and vote upon the
following matters:
1. The election of four directors, each to serve until the next
annual meeting of stockholders and until his or her successor
has been elected and qualified or until his or her earlier
resignation, death or removal. The Proxy Statement which
accompanies this Notice includes the names of the nominees to
be presented by the Board of Directors for election and
2. Transaction of such other business which may properly come
before the annual meeting and any adjournment thereof.
In accordance with the provisions of the Company's Bylaws, the Board of
Directors has fixed the close of business on October 4, 2004, as the record date
for the determination of the holders of the Company's common stock, $0.08 par
value entitled to notice of and to vote at said Annual Meeting. To assure that
your shares will be represented at the Annual Meeting, please complete, sign,
date and promptly return the accompanying proxy card in the enclosed envelope.
You may revoke your proxy at any time before it is voted.
By Order of the Board of Directors,
/S/ Zackary S. Irani
--------------------
ZACKARY S. IRANI, Chairman of the Board and
Chief Executive Officer
Newport Beach, California
September 28, 2004
BIOMERICA, INC.
1533 Monrovia Avenue
Newport Beach, CA 92663
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
----------------
GENERAL INFORMATION
This Proxy Statement is furnished by the Board of Directors of
BIOMERICA, INC., a Delaware corporation (together with its subsidiaries, the
"Company"), in connection with the solicitation of proxies for use at the
Company's Annual Meeting of Stockholders to be held on November 19, 2004, at the
offices of the Lancer Orthodontics, 253 Pawnee Street, San Marcos, California
92069 at 11:30 a.m., and at any and all adjournments thereof (the "Annual
Meeting"). The Annual Meeting has been called for the purposes set forth in the
accompanying Notice of the Annual Meeting of Stockholders (the "Notice"). This
Proxy Statement, and the Annual Report of the Company for the year ended May 31,
2004, will be mailed on or about October 15, 2004, to each stockholder of record
as of the close of business on October 4, 2004.
RECORD DATE AND OUTSTANDING SHARES
The close of business on October 4, 2004, has been set as the record
date for the determination of stockholders entitled to notice of and to vote at
the Annual Meeting (the "Record Date"). As of September 28, 2004, there was
outstanding and entitled to vote an aggregate of approximately 5,752,431 shares
of the Company's common stock, $0.08 par value per share (the "Common Stock"),
held of record by approximately 984 stockholders. However, brokers and other
institutions hold many shares on behalf of the Company's stockholders and the
Company has been informed that there are approximately 2,094 beneficial owners.
QUORUM
The presence at the Annual Meeting, in person or by proxy, of the
holders of a majority of the outstanding shares of Common Stock held of record
on the Record Date is necessary to constitute a quorum for the purposes of
electing directors and each other items of business. The holder of each share of
Common Stock held of record on the Record Date is entitled to vote on each
matter to be considered at the Annual Meeting.
VOTES REQUIRED
Directors shall be elected by a plurality of the affirmative votes
cast at the meeting of stockholders.
VOTING RIGHTS
Holders of our Common Stock are entitled to one vote for each share
held as of the Record Date.
EFFECT OF ABSTENTIONS AND BROKER NON-VOTES
If the stockholder or his, her or its broker marks "Abstain" on a duly
submitted proxy card representing such stockholder's shares, or if the
stockholders attend the Annual Meeting in person, but elect not to vote on a
particular proposal or proposals, then such shares will be considered present at
the meeting for purposes of determining the required quorums and will not be
taken into account in determining the outcome of the election of directors.
2
Brokers holding shares of record for customers generally are not
entitled to vote on some matters unless they receive voting instructions from
their customers. "Broker non-votes" are votes that could have been cast on the
matter in question if the brokers had received their customers' instructions,
and as to which the broker has notified the Company on a proxy form in
accordance with industry practice or has otherwise advised us that it lacks
voting authority. Shares represented by brokers' non-votes (i) will be
considered present at the meeting for purposes of determining the required
quorums and (ii) will not be taken into account in determining the outcome of
the election of directors.
All votes will be tabulated by the inspector of elections appointed for
the meeting, who will separately tabulate, for the proposal, affirmative and
negative votes, abstentions and broker non-votes.
APPRAISAL RIGHTS
Under Delaware law, stockholders are not entitled to any appraisal
rights with respect to the approval of any of the proposals described in this
Proxy Statement.
PERSONS MAKING THE SOLICITATION
The Proxy accompanying this Proxy Statement is solicited on behalf of
the Board of Directors of the Company for use at the Annual Meeting. The
solicitation of proxies is being made only by use of the mails and the cost of
preparing, assembling and mailing these proxy materials will be paid by the
Company. Following the mailing of this Proxy Statement, directors, officers and
regular employees of the Company may solicit proxies by mail, telephone,
telegraph or personal interview. Such persons will receive no additional
compensation for such services. Brokerage houses and other nominees, fiduciaries
and custodians nominally holding shares of the Company's common stock, $0.08 par
value (the "Common Stock"), of record will be requested to forward proxy
soliciting material to the beneficial owners of such shares. The Company will,
upon request, reimburse such parties for their reasonable expenses in forwarding
proxy materials to the beneficial owners.
TERMS OF THE PROXY
The enclosed Proxy indicates the matters to be acted upon at the Annual
Meeting and provides boxes to be marked to indicate the manner in which the
stockholder's shares are to be voted with respect to such matters. By
appropriately marking the boxes, a stockholder may specify whether the proxy
shall vote for or against or shall be without authority to vote the shares
represented by the Proxy. The Proxy also confers upon the proxy discretionary
voting authority with respect to such other business as may properly come before
the Annual Meeting.
If the Proxy is executed properly and is received by the proxy prior to
the Annual Meeting, the shares represented by the Proxy will be voted. Where a
stockholder specifies a choice with respect to the matter to be acted upon, the
shares will be voted in accordance with such specification. Any proxy which is
executed in such a manner as not to withhold authority to vote for the election
of the specified nominees as directors shall be deemed to confer such authority.
A Proxy may be revoked at any time prior to its exercise by giving written
notice of the revocation thereof to Ms. Janet Moore, Secretary, Biomerica, Inc.,
1533 Monrovia Avenue, Newport Beach, California 92663, by attending the meeting
and electing to vote in person, or by a duly executed Proxy bearing a later
date.
3
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of September 28, 2004 certain
information as to shares of Common Stock owned by (i) each person known to
beneficially own more than 5% of the outstanding Common Stock, (ii) each
director, including nominees for director, and each named executive officer of
the Company, and (iii) all executive officers and directors of the Company as a
group. Unless otherwise indicated, each person listed has sole voting and
investment power over the shares beneficially owned by him or her. Unless
otherwise indicated, the address of each named beneficial owner is the same as
that of the Company's principal executive offices located at 1533 Monrovia
Avenue, Newport Beach, California 92663.
SHARES PERCENTAGE
NAME OF BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER (1) OWNED OWNED
----------------------- ----------------- ------------
Janet Moore (2) 867,020 14.6%
Zackary Irani (3) 1,528,609 21.8%
Francis Capitanio(4) 116,245 2.0%
Allen Barbieri (5) 119,834 2.1%
Francis R. Cano, Ph.D. (6) 75,000 1.3%
Dr. Robert A. Orlando (7) 106,500 1.8%
Joseph L. Rink (8) 475,431 8.1%
All executive officers and directors
as a group (six persons) (9) 2,813,208 37.3%
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4
(1) Beneficial ownership is determined in accordance with Rule 13d-3 of the
Securities Exchange Act of 1934. Any shares of Common Stock that each
named person and group has the right to acquire within 60 days pursuant
to options, warrants, conversion privileges or other rights, are deemed
outstanding for purposes of computing shares beneficially owned by and
the percentage ownership of each such person and group. However, such
shares are not deemed outstanding for purposes of computing the shares
beneficially owned by or percentage ownership of any other person or
group. Percentage ownership for each named beneficial owner, and the
ownership of the directors and executive officers as a group, is based
on 5,752,431 shares outstanding as of the date of the Proxy plus the
shares the named person and group has a right to acquire within 60 days
thereafter pursuant to options, warrants, conversion privileges or
other rights and privileges.
(2) Includes 87,333 shares underlying options exercisable by Ms. Moore at
or within 60 days after the date of the Proxy; 85,910 shares underlying
warrants exercisable by The Janet Moore Trust of which Janet Moore is
the sole trustee, at or within 60 days after the date
of the Proxy; 607,527 shares owned by The Janet Moore Trust of which
Janet Moore is the sole trustee and 8,250 shares owned by Ms. Moore's
minor children.
(3) Includes 1,257,083 shares underlying options exercisable by Mr. Irani
at or within 60 days after the date of the Proxy.
(4) Includes 109,666 shares underlying options exercisable by Mr. Capitanio
at or within 60 days after the date of the Proxy.
(5) Includes 91,945 shares underlying options exercisable by Mr. Barbieri
at or within 60 days after the date of the Proxy.
(6) Includes 75,000 shares underlying options exercisable by Dr. Cano at or
within 60 days after the date of the Proxy.
(7) Includes 82,500 shares underlying options exercisable by Dr. Orlando at
or within 60 days after the date of the Proxy.
(8) Includes 142,375 shares underlying options exercisable by Mr. Rink at
or within 60 days after the date of the Proxy.
(9) Includes all information set forth in footnotes (2) through (8), above.
5
PROPOSAL NO. 1: ELECTION OF DIRECTORS
DIRECTORS
The Company's Bylaws give the Board of Directors ("the Board") the
power to set the number of directors at no less than three (3) or more than nine
(9). The size of the Company's Board is currently set at seven (7). Four (4)
directors are to be elected at the Annual Meeting to be held on November 19,
2004. The directors so elected will serve until replaced by a vote of the
stockholders. In the event that any of them should become unavailable prior to
the Annual Meeting, the Proxy will be voted for a substitute nominee or nominees
designated by the Board or the number of directors may be reduced accordingly.
The following table sets forth the name and current age of each nominee
for director, the year he or she was first elected a director and his or her
position(s) with the Company. The Company does not pay a fee to any third party
to identify potential nominees. The Board has not received during the 120-day
period between the end of the fiscal year and the date of the proxy, any
recommended nominees from a stockholder owning more than 5% of the Company's
stock for at least one year.
----------------------------- ----------- ----------- --------------------------
Director
Name Age Since Positions Held
----------------------------- ----------- ----------- --------------------------
Zackary Irani 38 1997 Chairman of the Board and
Chief Executive Officer
----------------------------- ----------- ----------- --------------------------
Janet Moore 53 1997 Secretary, Chief Financial
Officer, and Director
----------------------------- ----------- ----------- --------------------------
Allen Barbieri 46 1999 Director
----------------------------- ----------- ----------- --------------------------
Francis R. Cano, Ph.D. 59 1999 Director
----------------------------- ----------- ----------- --------------------------
Mr. Zackary Irani has been a Director of the Company, and has been
serving as the Company's Chairman of the Board and Chief Executive Officer since
April 29, 1997. Prior to that time, Mr. Irani served as the Company's Vice
President of Business Development since July 1994. He has been an employee of
the Company since 1986. Mr. Irani also serves as Chairman of the Board of Lancer
Orthodontics, Inc. and served as Lancer's Chief Executive Officer from April
1997 until April 2004.
Ms. Janet Moore has been a Director of the Company since April 29,
1997, and has been serving as the Company's Secretary and Treasurer since 1985.
She has served as the Company's Chief Financial Officer since 1999. She has been
an employee of the Company since 1976. Ms. Moore also serves as a director and
Secretary of Lancer Orthodontics, Inc.
6
Francis R. Cano, Ph.D. has served as a Director of the Company since
June 1999. Since 2003 Dr. Cano has been serving as the Chief Executive Officer
and Chairman of the Board of Vaxin, Inc. From 1996 to 1997, Dr. Cano served as
Senior Vice President - Biotechnology of BDM, an information technology company.
In 1996, Dr. Cano started the Cano Biotechnology Corp., where he worked with
vaccine leaders (Aventis), small private and public biotechnology companies,
venture groups and universities. From 1992 to 1996, he served as President and
Chief Operating Officer of Aviron, a public biotechnology company focused on
developing viral vaccines for disease prevention. Dr. Cano was also involved in
developing a vaccine business at a division of American Cynamid Corporation. Dr.
Cano also serves on the board of Lancer Orthodontics, Inc.
Mr. Allen Barbieri has served as a Director of the Company since
October 1999. Since April 2004 Mr. Barbieri has served as part-time, Chief
Executive Officer of Lancer Orthodontics, Inc. From 1999 until the present time,
Mr. Barbieri has also worked as a private investor. From 1998 to 1999, he served
as President and Chief Financial Officer of Buy.com. From 1994 until 1998 Mr.
Barbieri was President and Chief Executive Officer of Pacific National Bank.
The Board recommends a vote for the election of each of the nominated directors.
The Board of Directors regularly assesses the appropriate size of the
Board of Directors and whether any vacancies on the Board of Directors are
expected due to retirement or otherwise. In the event that vacancies are
anticipated or otherwise arise, the Board utilizes a variety of methods for
identifying and evaluating director candidates. Candidates may come to the
attention of the Committee through current directors, professional search firms,
stockholders or other persons.
Once the Board has identified a prospective nominee, the Board will
evaluate the prospective nominee in the context of the then current composition
of the Board of Directors and will consider a variety of other factors,
including the prospective nominee's business, technology and industry, finance
and financial reporting experience, and other attributes that would be expected
to contribute to an effective Board of Directors. The Board seeks to identify
nominees who possess a diligent range of experience, skills, areas of expertise,
industry knowledge and business judgment. Successful nominees should have a
history of superior performance or accomplishments in their professional
undertakings and should have the highest personal and professional ethics and
values. The Board does not evaluate stockholder nominees differently than any
other nominee.
Our Board will consider stockholder nominations for directors if we
receive timely written notice, in proper form, of the intent to make a
nomination at a meeting of stockholders. To be timely, the notice must be
received within the time frame discussed below in this Proxy Statement under the
heading "Stockholder Proposals." To be in proper form, the notice must, among
other matters, include each nominee's written consent to serve as a director if
elected, a description of all arrangements or understandings between the
nominating stockholder and each nominee and information about the nominating
stockholder and each nominee.
EXECUTIVE OFFICERS
Mr. Francis Capitanio, age 60, has served as the President of the
diagnostics division of Biomerica since July 10, 2000. Mr. Capitanio was
President and Chief Executive Officer of Kalisto Biologicals, Inc. from 1997
until 2000. From 1980 until 1996, he was President and Chief Executive Officer
of Diatech Diagnostics.
Director Not Standing for Re-election
Robert A. Orlando. M.D., Ph.D., has served as a Director of the Company
since 1986. Dr. Orlando, a graduate of the New Jersey University of Medicine
(M.D.) and the University of Chicago (Ph.D.), has served as Chief Pathologist at
Beverly Hospital in Montebello, California since 1991. Dr. Orlando also serves
as a director of Lancer Orthodontics, Inc.
7
On September 21, 2004, the Company and Board Director, Dr. Robert A.
Orlando, mutually agreed that he will not stand for re-election when his term
expires November 19, 2004, due to Dr. Orlando's time constraints. Dr. Orlando
will assume the consulting position of Medical Director for Clinical Scientific
Affairs for the Company.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Board of Directors has a standing Audit and Compensation Committee.
The Board of Directors held four meetings during the year ended May 31, 2004.
All directors except Dr Orlando attended 75% or more of the aggregate of all
meetings of the Board of Directors and the committees, if any, upon which the
directors served during the year ended May 31, 2004.
Director Independence
Our Board of Directors has determined that Dr. Francis Cano and Dr.
Robert Orlando are "independent" within the meaning of Nasdaq Marketplace Rule
4200(a)(15) as adopted by the Nasdaq Stock Market, Inc. ("Nasdaq"). Mr. Zack
Irani and Ms. Janet Moore were not deemed to be "independent" because of their
respective employment relationships with us. Mr. Allen Barbieri was deemed to be
"independent" until April 2004, at which time he became the Chief Executive
Officer of our subsidiary, Lancer Orthodontics, and therefore is now deemed not
to be independent.
COMPENSATION COMMITTEE
The Compensation Committee is responsible for assisting the Board of
Directors in discharging its responsibilities regarding the compensation of our
employees and directors. The specific duties of the Compensation Committee
include, among other matters: reviewing and approving executive compensation;
evaluating our executive officers' performance; setting the compensation levels
of our executive officers; setting our incentive compensation plans, including
our equity-based incentive plans; and making recommendations to our Board of
Directors regarding our overall compensation structure, policies and programs.
In fiscal 2004 the compensation committee was comprised of Dr. Robert Orlando
and Ms. Janet Moore. Currently, the compensation committee is comprised of Mr.
Allen Barbieri and Dr. Francis Cano. One compensation committee meeting was held
during the fiscal year ended May 31, 2004.
AUDIT COMMITTEE
The Audit Committee is responsible for overseeing our accounting and
financial reporting processes and the audits of our financial statements. In
addition, the Audit Committee assists the Board of Directors in its oversight of
our compliance with legal and regulatory requirements. The specific duties of
the Audit Committee include, among others: monitoring the integrity of our
financial process and systems of internal controls regarding finance, accounting
and legal compliance; selecting our independent auditor; monitoring the
independence and performance of our independent auditor; and providing an avenue
of communication among the independent auditor, our management and our Board of
Directors. The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and it has direct access to all
of our employees and to the independent auditor. The Audit Committee also has
the ability to retain, at our expense and without further approval of the Board
of Directors, special legal, accounting or other consultants or experts that it
deems necessary in the performance of its duties.
The Audit Committee met one time during fiscal 2004. The members of the
Audit Committee are Mr. Barbieri, Dr. Orlando and Dr. Cano. Our Board of
Directors has determined that Dr. Orlando and Dr. Cano are independent within
the meaning of Nasdaq Rule 4200(a)(15) as well as the enhanced independence
standards contained in Nasdaq Rule 4350(d) that relate specifically to members
of audit committees.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees the Company's financial reporting process
on behalf of the Board of Directors. Management has the primary responsibility
for the financial statements and the reporting process including the systems of
internal controls. In fulfilling its oversight responsibilities, the Committee
reviewed the audited financial statements in the Annual Report with management
including a discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.
8
The Committee reviewed with the independent auditors, who are
responsible for expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles, their
judgments as to the quality, not just the acceptability, of the Company's
accounting principles and such other matters as are required to be discussed
with the Committee. The Committee has discussed with the independent auditors
the auditors' independence from management and the Company including the matters
in the written disclosures required by the Independence Standards Board and
considered the compatibility of non-audit services with the auditors'
independence.
The Committee discussed with the Company's independent auditors the
overall scope and plans for their audit. The Committee meets with the
independent auditors, with and without management present, to discuss the
results of their examinations, their evaluations of the Company's internal
controls, and the overall quality of the Company's financial reporting.
In reliance on the reviews and discussions referred to above, the
Committee recommended to the Board of Directors (and the Board has approved)
that the audited financial statements be included in the Annual Report on Form
10-KSB for the year ended May 31, 2004 for filing with the Securities and
Exchange Commission. The Committee and the Board have also recommended the
selection of the Company's independent auditors.
/s/ Francis R. Cano /s/ Allen Barbieri
------------------- ------------------
/s/ Dr. Robert A. Orlando
-------------------------
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the total compensation earned by the
Chief Executive Officer and all other executive officers who earned in excess of
$100,000 per annum during the fiscal years ended May 31, 2004, 2003 and 2002.
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------------ -----------------------------------
AWARDS PAYOUTS
------------------------ ----------
RESTRICTED SECURITIES ALL
OTHER ANNUAL STOCK UNDERLYING LTIP OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) OPTIONS/ PAYOUTS COMPENSATION
POSITION YEAR ($)(1) ($) ($) ($) SARS (#) ($) $
-------------------------- ------------ ------------ ------- --------------- ----------- ------------ ---------- ------------
Zackary Irani, Chairman 2004 62,500 -0- -0- -0- -0- -0- -0-
and Chief Executive
Officer 2003 60,000 -0- -0- -0- 75,000 -0- -0-
2002 47,500 -0- -0- 20,000 65,000 -0- -0-
Francis Capitanio, President,
Diagnostics Division 2004 85,245 -0- -0- -0- -0- -0- -0-
2003 123,137 -0- -0- -0- 25,000 -0- -0-
2002 106,333 -0- -0- 6,579 21,000 -0- -0-
-------------------------- ------------ ------------ ------- --------------- ----------- ------------ ---------- -------------
9
(1) Of the salary for fiscal 2002, $41,250 was accrued and $6,250 was paid
in cash. In July 2002 Mr. Irani agreed to accept 37,778 shares of
restricted common stock of the Company in payment of $17,000 of accrued
compensation. In November 2002 Mr. Irani agreed to accept 68,182 shares
of restricted common stock of the Company in payment of $15,000 of
accrued compensation. For fiscal 2002, Mr. Irani also received $30,000
in compensation from Lancer Orthodontics, Inc., a subsidiary of the
Company, as he spends time at its facility. Of the salary for fiscal
2003, $46,668 was accrued and $13,332 was paid in cash. For fiscal
2003, Mr. Irani also received $32,885 in compensation from Lancer. Of
the salary for fiscal 2004, $56,667 was accrued and $5,833 was paid in
cash. For fiscal 2004, Mr. Irani also received $45,000 in compensation
from Lancer.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning stock options
granted in the fiscal year ended May 31, 2004, to the Company's Chief Executive
Officer and President of Diagnostics.
INDIVIDUAL GRANTS(1)
Percent of
Total
Number of Options/SARs
Securities Granted to Exercise of
Underlying Options/ Employees Base Price
Name SARs Granted (#) in Fiscal Year ($/Sh) Expiration Date
------------------- -------------------- ----------------- ----------------- ----------------
Zackary Irani -0- -0- -0- -0-
Francis Capitanio -0- -0- -0- -0-
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table presents information for the named executive
officers in the Summary Compensation Table with respect to options exercised
during fiscal 2004 and unexercised options held as of the end of the fiscal
year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
Number of Unexercised
Securities Value of
Underlying Unexercised
Shares Unexercised Options In-The-Money
Acquired Value at Fiscal Year End (#) at Fiscal Year End ($)
Name On Exercise(#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- --------------- --------------- ------------------------- -------------------------
Zackary Irani (1) -0- -0- 1,254,583/27,500 $48,050/$6,750
Francis Capitanio -0- -0- 91,667/26,333 $5,280/$2,250
------------
(1) Based on the closing price of $0.55 as of the last day of the fiscal
year ended May 31, 2004.
10
COMPENSATION OF DIRECTORS
Although not prohibited by the Company's Bylaws, directors receive no
direct payment for their services as directors, but they have been, and may in
the future be, granted options to purchase the Company's securities. The
compensation of directors is subject to review and adjustment from time to time
by the Board of Directors.
SECTION 16(a) - BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors and persons who beneficially own more
than 10% of the Company's stock, to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission.
Executive officers, directors and greater than 10% beneficial owners are
required by applicable regulations to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely upon a review of the copies of such forms furnished to the
Company and information involving securities transactions of which the Company
is aware, the Company believes that during the fiscal year ended May 31, 2004,
all Section 16(a) filing requirements applicable to its executive officers,
directors and greater than 10% beneficial stockholders were complied with.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases its primary facility under a non-cancelable
operating lease expiring October 31, 2005, with monthly lease rent of $15,000
with a 3% increase effective September 1, 2003. The facilities are owned and
operated by four of the Company's shareholders one of whom is an officer and
director. During fiscal 2004 the Company consolidated some of its operations and
the landlords agreed to take back the space no longer needed by the Company and
to reduce the rent accordingly. The landlords also agreed not to institute the
3% increase as required in the lease. The current monthly rent is $12,940. In
May and June 2003 the Company issued 60,000 shares of Biomerica restricted
common stock plus warrants to purchase an additional 60,000 shares of Biomerica
restricted common stock at the purchase price of $0.25 for payment of $15,000 in
accrued rent. Management believes there would be no significant difference in
the terms of the leases if they were with a third party. Total rent expense for
this facility was approximately $150,000 and $165,000 during the years ended May
31, 2004 and 2003, respectively.
NOTES PAYABLE -SHAREHOLDER
The Company entered into an agreement for a line of credit agreement on
September 12, 2000 with a shareholder whereby the shareholder would loan to the
Company, as needed, up to $500,000 for working capital needs. The line of credit
bore interest at 8%, was secured by accounts receivable and inventory, and
expired September 13, 2003. In March 2004 the Company signed a note payable for
the principal and interest due at that time of $313,318 and agreed to a
forbearance of any payments for the length of the agreement. A warrant for
40,000 shares of restricted common stock exercisable at a price of $.51 per
share was awarded as compensation for the forbearance. The note payable is
secured by all the Company's assets except for the Lancer common stock that it
owns. The note was due September 1, 2004. There was $313,318 of outstanding
principal and $5,356 of interest payable under this line of credit at May 31,
2004.
During 2004 and 2003, the Company incurred approximately $25,438 and
$29,466, respectively, in interest expense related to the shareholder line of
credit and loan.
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The Company and the stockholder are currently finalizing the terms of
an addendum to these agreements which provides for monthly payments of principal
and interest and an extension of the due date on the note for one year.
During 2004 and 2003, a shareholder loaned the Company $4,000 and
$10,000, respectively. During June 2003 the $10,000 loan was repaid in the form
of Company common stock at the price of $.25 per share. Interest for the fiscal
year ended May 31, 2004 was $283. At May 31, 2004, $1,555 was owed in interest
payable on the two loans.
RENT EXPENSE
Biomerica, Inc. leases facilities from a partnership owned, in part, by
an officer/director/shareholder of the Company. Rent expense of approximately
$150,000 and $165,000 was incurred during 2004 and 2003, respectively, for this
lease. A further expense of approximately $7,000 has been included in accounts
payable representing late fees and interest payable on outstanding rent. Rent
payable at May 31, 2004 was approximately $119,000 and has been included in
accounts payable in the consolidated balance sheet.
ACCRUED COMPENSATION
Two officers, who are also shareholders of the Company agreed to defer
payment of a portion of their salaries. At May 31, 2004 approximately $177,100
of deferred officer's salary is included in accrued compensation in the
accompanying consolidated financial statements.
Approximately $121,000 of the total accrued compensation is due to the
former chief executive officer's estate.
PRIVATE PLACEMENT
During fiscal 2004 the Chief Executive Officer purchased 100,000 shares
of restricted common stock with 100,000 warrants at a purchase price of $0.25
per share. The shares were paid for with $5,000 cash, $10,000 in reduction of
note payable to him and $10,000 reduction in accrued salary.
During fiscal 2003 the Chief Financial Officer agreed to purchase
18,000 shares of restricted common stock with 18,000 warrants at a purchase
price of $0.25 per share. The shares were paid for with a reduction of rent
payable due to the officer, and were issued in fiscal 2004.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Company's independent auditors for the fiscal years ended May 31,
2003 and 2002 were BDO Seidman, LLP ("BDO"). Effective May 29, 2004, the
Company, upon approval of the audit committee of the Board of Directors of the
Company, dismissed BDO. Effective May 29, 2004 the Company, upon approval of the
audit committee of the Board of Directors, approved the appointment of PKF,
Certified Public Accountants, A Professional Corporation, San Diego, as the
Company's independent auditors for the fiscal year ended May 31, 2004.
BDO last reported on the Company's financial statements on August 11,
2003. The report, which covered the two fiscal years ended May 31, 2003, was
modified for going concern. BDO expressed substantial doubt as to the Company's
ability to remain a going concern.
The auditors' report of BDO Seidman on the consolidated financial
Statements of Biomerica, Inc. and subsidiaries as of and for the years ended May
31, 2003 and 2002 contained the following paragraph:
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"The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has historically
reported net losses and negative cash flows from operations, which raise serious
liquidity concerns. Management estimates that its available cash resources as of
May 31, 2003 along with cost reductions will be sufficient to fund planned
operations through May 31, 2004. These operating and liquidity issues, amongst
other concerns, raise substantial doubt about the Company's ability to continue
as a going concern. Management's plans in regard to these matters are described
in Note 1 to the accompanying consolidated financial statements. The
consolidated financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern."
The change of independent accountants was ratified by the Board of
Directors of the Company on May 29, 2004.
During the two fiscal years ended May 31, 2003 and the subsequent
interim period through May 29, 2004, there were no disagreements between the
Company and BDO on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which, if not resolved, to
BDO's satisfaction, would have caused it to make reference to the subject matter
of the disagreement in connection with its report.
During the two fiscal years ended May 31, 2003 and subsequent interim
period through May 29, 2004, there have been no reportable events (as defined in
Regulation S-K Item 304(a)(1)(v)).
During the two fiscal years ended May 31, 2003 and the subsequent
interim period through May 29, 2004 BDO did not advise the Company that the
internal controls necessary for the Company to develop reliable financial
statements do not exist.
During the two fiscal years ended May 31, 2003 and the subsequent
interim period through May 29, 2004, BDO did not advise the Company that any
information had come to their attention which had led them to no longer be able
to rely on management's representation, or that had made BDO unwilling to be
associated with the financial statements prepared by management.
During the two fiscal years ended May 31, 2003 and the subsequent
interim period through May 29, 2004, BDO did not advise the Company that the
scope of any audit needed to be expanded significantly or that more
investigation was necessary.
During the two fiscal years ended May 31, 2003 and the subsequent
interim period through May 29, 2004, BDO did not advise the Company that there
was any information which the accountants concluded would materially impact the
fairness and reliability of either (i) a previously issued audit report or the
underlying statements, or (ii) the financial statements issued or to be issued
covering the fiscal period(s) subsequent to the date of the most recent
financial statements covered by an audit report (including information that,
unless resolved to the accountant's satisfaction, would prevent it from
rendering an unqualified audit report on those financial statements).
The Company engaged PKF, Certified Public Accountants, A Professional
Corporation (San Diego) ("PKF") as its new independent accountant on May 29,
2004. Prior to May 29, 2004, the Company had not consulted with PKF regarding
(i) the application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Company's financial statements, and no written report or oral advice was
provided to the Company by PKF concluding there was an important factor to be
considered by the Company in reaching a decision as to an accounting, auditing
or financials reporting issue; or (ii) any matter that was either the subject of
a disagreement, as that term is defined in Item 304(a)(1)(iv) of Regulation S-K
and the related instructions to Item 304 of Regulation S-K, or a reportable
event, as that term is defined in Item 304(a)(1)(iv) of Regulation S-K.
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It is expected that a representative of the independent registered
accounting firm of PKF San Diego, the Company's auditor for the fiscal year
ended May 31, 2004, and for the current fiscal year, will be present at the
Annual Meeting to respond to appropriate questions or to make a statement if he
or she so desires.
AUDIT FEES
The aggregate fees billed for professional services rendered for audit
and audit related fees of the Company's and subsidiaries' annual and quarterly
financial statements for the year ended May 31, 2004 was $123,421.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no fees billed by the principal accountants for professional
services with respect to financial information systems design and implementation
for the fiscal year ended May 31, 2004.
ALL OTHER FEES
The aggregate fees billed for services rendered during the fiscal year
ended May 31, 2004, for all other services was $260 for general consulting
services, $0 for income tax return preparation.
The audit committee has considered that the provision of the above
services has not impaired the principal accountant's ability to maintain
independence.
OTHER BUSINESS
Management is not aware of any matters to come before the Annual
Meeting other than those stated in this Proxy Statement. However, inasmuch as
matters of which management is not now aware may come before the meeting or any
adjournment thereof, the Proxy confers discretionary authority with respect to
acting thereon, and the persons named in such Proxy intend to vote, act, and
consent in accordance with their best judgment with respect thereto.
DIRECTOR ATTENDANCE AT ANNUAL MEETINGS
Our Board of Directors has adopted a policy that encourages our
directors to attend our annual stockholder meetings. The annual meeting of
stockholders held on September 2, 2003 was attended by all of our incumbent
directors.
ANNUAL REPORT
The Annual Report to Stockholders and Form 10-KSB covering the
Company's fiscal year ended May 31, 2004 are being mailed to stockholders with
this Proxy Statement. The Annual Report does not form any part of the material
for the solicitation of the Proxy.
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Our stockholders may communicate with our Board of Directors, a
committee of our Board of Directors or a director by sending a letter addressed
to the Board, a committee or a director c/o Corporate Secretary, Biomerica Inc.,
1533 Monrovia Ave, Newport Beach, California 92663. All communications will be
compiled by our corporate Secretary and forwarded to the Board of Directors, the
committee or the director accordingly.
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DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Any eligible stockholder who desires to have a proposal considered for
inclusion in our 2005 proxy solicitation materials, including director
nominations, must cause their proposals to be received in writing by our
Secretary at 1533 Monrovia Ave, Newport Beach, California 92663 no later than
January 3, 2005. The Board of Directors will review new proposals from eligible
stockholders if they are received in writing by January 3, 2005. Proposals must
be submitted in accordance with our bylaws and must comply with Securities and
Exchange Commission regulations promulgated under Rule 14a-8 of the Exchange Act
of 1934, as amended.
Any notice to the Secretary must include as to each matter the
stockholder proposes to bring before the meeting: (a) a brief description of the
business desired to be brought before the meeting and the reason for conducting
the business at the Annual Meeting, (b) the stockholder's name and address, as
they appear on our records, (c) the class and number of shares which the
stockholder beneficially owns, (d) any material interest of the stockholder in
the business requested to be brought before the meeting and (e) any other
information that is required to be provided by the stockholder pursuant to
Regulation 14A under the Securities Exchange Act of 1934 in his or her capacity
as a proponent of the stockholder proposal.
A stockholder's notice to the Secretary regarding a nomination for the
election of directors must set forth: (a) as to each person whom the stockholder
proposes to nominate for election or re-election as a director, (i) the person's
name, age, business address and residence address, (ii) the person's principal
occupation or employment, (iii) the class and number of shares of capital stock
beneficially owned by the person, and (iv) any other information relating to the
person that is required to be disclosed in solicitations for proxies for
election of directors pursuant to Regulation 14A under the Securities Exchange
Act of 1934; and (b) as to the stockholder giving the notice (i) the name and
address of the stockholder, as they appear on our records, and (ii) the class
and number of shares of stock that are beneficially owned by the stockholder on
the date of the stockholder notice. If the Board of Directors so requests, any
person nominated for election to the Board shall furnish to our Secretary the
information required to be set forth in the notice of nomination pertaining to
the nominee.
Nothing in this section shall be deemed to require us to include in our
proxy solicitation materials relating to any annual meeting any stockholder
proposal or nomination that does not meet all of the requirements for inclusion
established by the Securities and Exchange Commission.
By Order of the Board of Directors,
/S/ ZACKARY S. IRANI,
---------------------
Chairman and Chief Executive Officer
Newport Beach, California
September 28, 2004
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REVOCABLE PROXY
BIOMERICA, INC. ANNUAL MEETING OF STOCKHOLDERS
November 19, 2004
The undersigned stockholder(s) of Biomerica, Inc., a Delaware
corporation (the "Company") hereby nominates, constitutes and appoints Janet
Moore, his, her or its true and lawful agent and proxy, with full power of
substitution, to vote all the shares of stock of the Company which the
undersigned is entitled to vote at the Annual Meeting of the Company to be held
at the offices of Lancer Orthodontics, 253 Pawnee Street, San Marcos, California
92069 at 11:30 a.m., and any and all adjournments thereof, with respect to the
matters described in the accompanying Proxy Statement, and, in her discretion,
on such other matters which properly come before the Annual Meeting, as fully
and with the same force and effect as the undersigned might or could do if
personally present thereat, as follows:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
1. _________ FOR all nominees _________ WITHHOLD AUTHORITY TO VOTE
(Except as listed below) (As to all nominees)
Nominees: Dr. Francis R. Cano; Zackary Irani; Allen Barbieri;
Janet Moore.
Instructions: To withhold authority to vote for any individual
nominee, write the nominee's name in the space
provided below.
-----------------------------------------------------------
_____For ____Against ____Abstain
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND
MAY BE REVOKED PRIOR TO ITS EXERCISE.
PLEASE SIGN AND DATE ON REVERSE SIDE.
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THE PROXY CONFERS AUTHORITY TO VOTE AND UNLESS SPECIFIED OTHERWISE
SHALL BE VOTED FOR PROPOSAL 1 AND WILL BE VOTED BY THE PROXY HOLDER AT HIS, HER
OR ITS DISCRETION AS TO ANY OTHER MATTERS PROPERLY TRANSACTED AT THE MEETING.
Dated:
---------------
---------------------------------
(Please Print Name)
---------------------------------
(Signature of Stockholder)
---------------------------------
(Please Print Name)
---------------------------------
(Signature of Stockholder)
(Please date this Proxy and sign your name as it appears on your stock
certificate(s). Executors, administrators, trustees, etc., should give their
full titles. All joint owners should sign.)
I (We) do do not
------- -------
expect to attend the meeting.
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