BIOMERICA INC

**NOTE 1: BASIS OF PRESENTATION **

Biomerica, Inc. (“Biomerica,” “us,” “we,” “our,” or the “Company”) and its subsidiaries (which includes wholly-owned subsidiaries, Biomerica de Mexico and BioEurope GmbH) is a global biomedical technology company that develops, patents, manufactures and markets advanced diagnostic and therapeutic products used at the point-of-care (physicians’ offices and over-the-counter through drugstores and online) and in hospital/clinical laboratories for detection and/or treatment of medical conditions and diseases. Our diagnostic test products utilize immunoassay technology to analyze blood, urine, nasal, or fecal material from patients in the diagnosis of various diseases, food intolerances and other medical complications, and to measure the level of specific hormones, antibodies, antigens, or other substances, which may exist in the human body in extremely small concentrations. Our other existing products are primarily focused on gastrointestinal diseases, food intolerances, and certain esoteric tests. Our products are designed to enhance the health and well-being of people, while reducing total healthcare costs.

Our primary focus is the research, development, commercialization and in certain cases regulatory approval, of patented, diagnostic-guided therapy (“DGT”) products to treat gastrointestinal diseases, such as irritable bowel syndrome (“IBS”). These products are directed at chronic inflammatory illnesses that are widespread, common, and address very large markets. Instead of broad and difficult to manage dietary restrictions, our inFoods® IBS product uses a simple blood sample and is designed to identify patient-specific foods that may be causing an abnormally high immune response in the patient, that when removed from the diet may alleviate IBS symptoms such as abdominal pain and cramping, bloating, diarrhea and constipation. Foods identified as causing an abnormal immune response (i.e., a positive result) are removed from the patient’s diet to help alleviate IBS symptoms.

Our range of medical diagnostic products is sold worldwide primarily in two markets: clinical laboratories and point-of-care (physicians’ offices). Most of our products are Conformite Europeenne (“CE”) marked and/or registered with regulatory agencies in various countries for diagnostic use, with some approved by the U.S. Food and Drug Administration (“FDA”) for sale in the United States.

The unaudited condensed consolidated financial statements herein have been prepared by management pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The accompanying unaudited condensed consolidated financial statements have been prepared under the presumption that users of the interim financial information have either read or have access to the audited consolidated financial statements for the latest fiscal year ended May 31, 2025. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three and nine months ended February 28, 2026 are not necessarily indicative of the results that may be expected for the fiscal year ending May 31, 2026. For further information, refer to the audited consolidated financial statements and notes thereto for the fiscal year ended May 31, 2025 included in our Annual Report on Form 10-K filed with the SEC on August 29, 2025, as amended on our Annual Report on Form 10-K/A, filed with the SEC on September 26, 2025. Management has evaluated all subsequent events and transactions through the date of filing this report.

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The condensed consolidated financial statements include the accounts of Biomerica, Inc. and its wholly owned subsidiaries, BioEurope GmbH and Biomerica de Mexico. All significant intercompany accounts and transactions have been eliminated in consolidation.

ACCOUNTING ESTIMATES

In order to prepare our consolidated financial statements in conformity with GAAP, we must make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Different assumptions or conditions may cause actual results to differ materially from these estimates. We monitor significant estimates made during the preparation of our financial statements on an ongoing basis. We believe our estimates and assumptions are reasonable under the current conditions; however, actual results may differ from these estimates under different future conditions.

We believe that the estimates and assumptions that are most important to the portrayal of our financial condition and results of operations, in that they require subjective or complex judgments, form the basis for the accounting policies deemed to be most critical to us. These relate to revenue recognition, provision for expected credit losses on accounts receivable, inventory overhead application, inventory reserves, and share based compensation. We believe estimates and assumptions related to these critical accounting policies are appropriate under the circumstances; however, should future events or occurrences result in unanticipated consequences, there could be a material impact on our future financial conditions or results of operations. We suggest that our significant accounting policies be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Quarterly Report on Form 10-Q.

MARKETS AND METHODS OF DISTRIBUTION

The majority of our revenues come from the sale of products we manufacture in the United States and Mexico, with certain raw materials sourced from the United States, Asia and other regions. Our diagnostic business serves a diverse customer base that includes both domestic and international distributors, as well as hospitals, clinical laboratories, medical research institutions, pharmaceutical companies, drugstores, wholesalers, physicians’ offices, and e-commerce customers. A significant portion of our revenues are derived from international sales.

We employ a Director of Sales and Marketing, based in Germany, who has over 20 years of experience in diagnostics and life sciences. This individual’s international business experience and multilingual capabilities have facilitated strong relationships across Europe, Eastern Europe, Middle East, Latin America, Canada, and the United States. We are also pursuing new opportunities through the addition of distributors and product lines in these regions.

We market our diagnostic products through distributors, advertising in medical and trade journals, trade show exhibitions, direct mailings, and through a small internal sales team. The two primary markets we target are clinical laboratories and patient point-of-care testing.

LIQUIDITY AND GOING CONCERN

We have incurred net losses and negative cash flows from operations and have an accumulated deficit of approximately $55,798,000 as of February 28, 2026. As of February 28, 2026, we had cash and cash equivalents of approximately $1,336,000 and working capital of approximately $2,562,000. As of May 31, 2025, we had cash and cash equivalents of approximately $3,058,000 and working capital of approximately $3,135,000. We continue to experience recurring losses and negative cash flows from operations. Based on our current operating plan, we believe that our existing cash and cash equivalents will be insufficient to fund our operations and meet our obligations for the next twelve months from the issuance date of these financial statements.

On September 28, 2023, we filed a “shelf” registration statement on Form S-3 with the SEC, (the “Shelf Registration Statement”), which was declared effective on September 29, 2023, to replace the expiring “shelf” registration statement on Form S-3 that was filed in July 21, 2020, as amended on September 20, 2020, allowing us to issue up to $20,000,000 in shares of our common stock. Under the Shelf Registration Statement, shares of our common stock may be sold from time to time for up to three years from the filing date.

On May 10, 2024, we filed a prospectus supplement to the Shelf Registration Statement with the SEC to facilitate the sale of up to $5,500,000 in common stock through at-the-market (“ATM”) offerings, as defined in Rule 415 under the Securities Act (the “2024 ATM Offering”). As part of this transaction, we incurred $81,000 in deferred offering costs during the year ended May 31, 2025.

During the nine months ended February 28, 2026, we sold 414,633 shares of our common stock at prices ranging from $2.42 to $4.02 pursuant to the 2024 ATM Offering, which resulted in gross proceeds of approximately $1,495,000 and net proceeds to us of $1,455,000 after deducting commissions for each sale and legal, accounting, and other fees related to offering in the amount of $40,000.

We intend to use the net proceeds from any funds raised through the 2024 ATM Offering for general corporate purposes, including, but not limited to, sales and marketing activities, clinical studies and product development, acquisitions of assets, businesses, companies, or securities, capital expenditures, and working capital needs.

Management assesses whether we have sufficient liquidity to fund our costs for the next twelve months from each financial statement issuance date to determine if there is a substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern over the next twelve months is influenced by several factors, including:

These factors raise substantial doubt about our ability to continue as a going concern. Our future viability depends on the successful execution of our strategic plans, securing additional near-term financing, and achieving profitable operations.

Management has analyzed our cash flow requirements through April 2027 and beyond. Based on this analysis, we believe our current cash and cash equivalents are insufficient to meet our operating cash requirements and strategic growth objectives for the next twelve months.

To address our capital needs and sustaining operations through the next year and beyond, we are actively pursuing strategies to increase sales, reduce expenses, sell non-core assets, seek additional financing through debt or equity issuance, and seek other strategic alternatives. If we are unable to generate sufficient cash flows from operations or obtain additional financing, we may be required to delay or reduce certain operating activities and expenditures.

While we are committed to these plans, there can be no assurance that these efforts will be successful or sufficient to meet our near-term capital requirements, or to enable the Company to continue as a going concern.

Our condensed consolidated financial statements as of February 28, 2026, were prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. Our continuance as a going concern is dependent upon our ability to obtain additional operating capital and achieve revenues and attain profitability. We intend to finance our future development activities and our working capital needs primarily from the sale of equity and debt securities, combined with additional funding from other sources. However, there can be no assurance that future funding will be available to us when needed on terms that are acceptable to us, or at all or that we will be successful in these endeavors.

CONCENTRATION OF CREDIT RISK

We maintain cash balances at certain financial institutions in excess of amounts insured by federal agencies. From time to time, we have uninsured balances. We do not believe we are exposed to any significant credit risk.

We provide credit in the normal course of business to customers throughout the United States and in foreign markets. We perform ongoing credit evaluations of our customers and require accelerated prepayment in certain circumstances.

Consolidated net sales were approximately $987,000 and $1,119,000 for the three months ended February 28, 2026, and 2025, respectively, and approximately $3,578,000 and $4,562,000 for the nine months ended February 28, 2026 and 2025, respectively.

For the three months ended February 28, 2026, we had three key customers located in Asia, the Middle East, and the United States, which accounted for 50% of net consolidated sales. For the three months ended February 28, 2025, we had three key customers located in the United States, the Middle East, and Asia, which accounted for 61% of net consolidated sales. For the nine months ended February 28, 2026, we had one key customer located in Asia that accounted for 36% of net consolidated sales. For the nine months ended February 28, 2025, we had one key customer located in Asia that accounted for 35% of net consolidated sales.

As of February 28, 2026 and May 31, 2025, total gross receivables were approximately $978,000 and $757,000, respectively. As of those dates, we had three and four key customers, respectively, located in Asia, the Middle East, the United States, and Europe, which accounted for 51% and 69% of gross accounts receivable, respectively.

For the three months ended February 28, 2026, we had two key vendors that accounted for 36% of purchases of raw materials. For the three months ended February 28, 2025, we had two key vendors that accounted for 39% of purchases of raw materials. For the nine months ended February 28, 2026, no vendor accounted for 10% or more of total raw material purchases. For the nine months ended February 28, 2025, one vendor accounted for 11% of purchases of raw materials.

As of February 28, 2026 and May 31, 2025, we had one key vendor which accounted for 10% and 20% respectively, of accounts payable.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of demand deposits and money market accounts with original maturities of less than three months.

ACCOUNTS RECEIVABLE

We extend unsecured credit to our customers on a regular basis. International accounts are usually required to prepay until they establish a history with us, at which time they may be extended credit. Our designated officers and managers apply various criteria to establish initial credit levels for individual distributors. All increases in credit limits are also approved by designated upper-level management.

We adopted Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (codified as Accounting Standards Codification (“ASC”) 326) on June 1, 2023. ASC 326 adds to U.S. GAAP the current expected credit loss (“CECL”) model, a measurement model based on expected losses rather than incurred losses. Prior to the adoption of ASC 326, we evaluated receivables on a quarterly basis and adjusted the allowance for doubtful accounts accordingly. Balances over 90 days old were usually reserved unless collection was reasonably assured. Under the application of ASC 326, our historical credit loss experience provides the basis for the estimation of expected credit losses, together with current economic and business conditions and reasonable and supportable forecasts that may impact collectability. In developing our expected credit loss estimate, we evaluated the appropriate grouping of financial assets based upon our evaluation of risk characteristics, including consideration of the types of products and services sold. Account balances are written off against the allowance for expected credit losses after all means of collection have been exhausted and the potential for recovery is considered remote.

Occasionally, certain long-standing customers that routinely place large orders may have receivable balances that are significant relative to total gross receivables. Management closely monitors collections on these balances and may require payment of outstanding invoices prior to shipping new sales orders.

As of February 28, 2026 and May 31, 2025, we have established a reserve of approximately $37,000 and $26,000, respectively, for credit losses.

PREPAID EXPENSES AND OTHER

We occasionally prepay for items such as inventory, insurance, and other items. These items are reported as prepaid expenses and other, until either the inventory is physically received, or the insurance and other items are expensed.

As of February 28, 2026 and May 31, 2025, prepaids were approximately $201,000 and $255,000, respectively, composed of prepayments to insurance and various other suppliers.

INVENTORIES, NET

We value inventory at the lower of cost (determined using a combination of specific lot identification and the first-in, first-out method) or net realizable value. Management periodically reviews inventory for excess quantities and obsolescence. In evaluating inventory, management considers quantities on hand, physical condition, and technical functionality, as these characteristics may be impacted by anticipated customer demand for existing products and new product introductions. The inventory reserve is adjusted based on this evaluation, with a corresponding provision recorded in cost of sales. Abnormal amounts of idle facility expenses, freight, handling costs, and wasted materials are recognized as current period charges. The allocation of fixed production overhead is based on the normal capacity of the production facilities.

Net inventories are comprised of approximately the following:

Reserves for inventory obsolescence are recorded as necessary to reduce obsolete inventory to estimated net realizable value or to specifically reserve for obsolete inventory. As of February 28, 2026, and May 31, 2025, inventory reserves were approximately $398,000 and $471,000, respectively.

PROPERTY AND EQUIPMENT, NET

Property and equipment are stated at cost. Expenditures for additions and major improvements are capitalized. Repairs and maintenance costs are charged to operations as incurred. When property and equipment are sold, retired or otherwise disposed of, the related cost and accumulated depreciation or amortization are removed from the accounts, and gains or losses from sales, retirements and dispositions are credited or charged to income.

Depreciation and amortization are provided over the estimated useful lives of the related assets, ranging from 5 to 10 years, using the straight-line method. Leasehold improvements are amortized over the lesser of the estimated useful life of the asset or the term of the lease. Depreciation and amortization expense related to property and equipment was approximately $14,000 and $17,000 for the three months ended February 28, 2026 and 2025, respectively, and approximately $44,000 and $50,000 for the nine months ended February 28, 2026 and 2025, respectively.

INTANGIBLE ASSETS, NET

Intangible assets include trademarks, product rights, technology rights, and patents, and are accounted for in accordance with ASC 350,Intangibles—Goodwill and Other. Intangible assets with indefinite useful lives are not amortized but are tested annually for impairment, or more frequently if events or changes in circumstances indicate that the asset may be impaired.

Intangible assets with finite useful lives are amortized using the straight-line method over their estimated useful lives, not to exceed 18 years for marketing and distribution rights and 10 years for purchased technology rights. Patents are amortized over their respective estimated useful lives, which average approximately 15 years. Amortization expense was approximately $6,000 and $5,000 for the three months ended February 28, 2026, and 2025, respectively. For the nine months ended February 28, 2026, and February 28, 2025, the expenses were approximately $16,000 and $14,000, respectively. Amortizing intangible assets are tested for impairment if management determines that events or changes in circumstances indicate that the asset might be impaired.

We assess the recoverability of these intangible assets by determining whether the carrying value of the asset can be recovered through projected undiscounted future cash flows over its remaining useful life. We use a qualitative assessment to evaluate whether impairment exists.

During the nine months ended February 28, 2026 and 2025, there wereno impairment charges recorded.

INVESTMENTS

We have made investments in a privately held Polish distributor, which is primarily engaged in distributing medical products and devices, including the distribution of the products sold by us. We invested approximately $165,000 into the Polish distributor and own approximately 6% of the Polish distributor.

Equity holdings in nonmarketable unconsolidated entities in which we are not able to exercise significant influence (“Cost Method Holdings”) are accounted for at our initial cost, minus any impairment (if any), plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar holding or security of the same issuer. Dividends received are recorded as other income.

We assess our equity holdings for impairment whenever events or changes in circumstances indicate that the carrying value of an equity holding may not be recoverable. Management reviewed the underlying net assets of our equity method holding as of February 28, 2026 and determined that our proportionate economic interest in the entity indicates that the equity holding was not impaired. There were no observable price changes in orderly transactions for identical or a similar holding or security of our Cost Method Holdings during the nine months ended February 28, 2026 and February 28, 2025.

SHARE-BASED COMPENSATION

We follow the guidance of ASC 718,Share-based Compensation, which requires the use of a fair value-based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments (options). We grant stock options and restricted stock under our equity incentive plans. We measure all share-based payment awards at their grant-date fair value. The fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model that uses assumptions for expected volatility, expected dividends, expected forfeiture rate, expected term, and the risk-free interest rate. We have not historically paid dividends and do not expect to pay dividends in the foreseeable future. Expected volatilities are based on weighted averages of the historical volatility of our common stock estimated over the expected term of the options. The expected forfeiture rate is based on historical forfeitures experienced. The expected term of options granted is derived using the “simplified method” which computes expected term as the average of the sum of the vesting term plus the contract term as historically we had limited exercise activity surrounding such options. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the period of the expected term. The grant date fair value of the award is recognized under the straight-line attribution method.

The following summary presents the options granted, exercised, expired, canceled and outstanding for the nine months ended February 28, 2026:

During the three months ended February 28, 2026, we recognized approximately $58,000 of share-based compensation expense related to stock options, compared to approximately $91,000 for the three months ended February 28, 2025. For the nine months ended February 28, 2026, share-based compensation expense related to stock options was approximately $204,000, compared to approximately $323,000 for the nine months ended February 28, 2025.

The following summary presents the restricted stock awards granted, vested, forfeited and outstanding for the nine months ended February 28, 2026:

During the three months ended February 28, 2026, we recognized approximately $76,000 of share-based compensation expense related to restricted stock awards, compared to approximately $29,000 for the three months ended February 28, 2025.

For the nine months ended February 28, 2026, we recognized approximately $181,000 of share-based compensation expense related to restricted stock awards, compared to approximately $29,000 for the nine months ended February 28, 2025.

REVENUE RECOGNITION

We have various contracts with customers, and these contracts specify the recognition of revenue based on the nature of the transaction.

Revenues from product sales are recognized at the time the product is shipped, customarily Free on Board (“FOB”) shipping point, which is when control of the goods transfers and title passes to the customer. This applies to clinical lab products sold to domestic and international distributors, including hospitals, clinical laboratories, medical research institutions, medical schools, and pharmaceutical companies. OTC products are sold directly to e-commerce customers and distributors, while physicians’ office products are sold to physicians and distributors. We generally do not allow returns except in cases of defective merchandise, and therefore, do not establish an allowance for returns. Additionally, we have contracts with customers that provide purchase discounts contingent on achieving specified sales volumes. These contracts are regularly evaluated, and we do not anticipate granting any discounts through the end of the contract period.

For diagnostic testing services sold directly to patients or physician offices that require processing by a third-party CLIA-certified lab, we recognize revenue once the lab has completed the test results.

For services related to contract manufacturing, revenue is recognized when the service has been performed. For certain contracts, revenue is recognized over time as services are performed, measured based on progress toward completion.

As of February 28, 2026, we had approximately $30,000 in advance from domestic customers, which are prepayments on orders for future shipments.

Disaggregation of revenue:

See Note 4 for additional information regarding geographic revenue concentrations.

SHIPPING AND HANDLING FEES

We include shipping and handling fees billed to customers in net sales.

RESEARCH AND DEVELOPMENT

Research and development costs are expensed as incurred. We recognized approximately $178,000 and $217,000 of research and development costs during the three months ended February 28, 2026 and February 28, 2025, respectively, and approximately $583,000 and $771,000 of research and development costs for the nine months ended February 28, 2026 and February 28, 2025, respectively.

INCOME TAXES

For the three months ended February 28, 2026, we had an income tax expense of approximately $8,000. For the nine months ended February 28, 2026, we had an income tax expense of approximately $17,000. These expenses consisted of state minimum taxes and miscellaneous foreign taxes.

During the three and nine months ended February 28, 2026, we had a net operating loss (“NOL”) that generated deferred tax assets for NOL carryforwards. Deferred income tax assets and liabilities are recognized for temporary differences between the financial statements and income tax carrying values using tax rates in effect for the years such differences are expected to reverse. Due to uncertainties surrounding our ability to generate future taxable income and consequently realize such deferred income tax assets, we have determined that it is more likely than not that these deferred tax assets will not be realized. Accordingly, we have established a full valuation allowance against the Company’s net deferred tax assets as of February 28, 2026.

Our policy is to recognize any interest and penalties related to unrecognized tax benefits as a component of income tax expense. For the nine months ended February 28, 2026, we had no accrued interest or penalties related to uncertain tax positions.

ADVERTISING COSTS

We report the cost of advertising as an expense in the period in which those costs are incurred. For the three months ended February 28, 2026, and February 28, 2025, advertising costs were approximately $8,000 and $4,000, respectively. For the nine months ended February 28, 2026, and February 28, 2025, advertising costs were approximately $25,000 and $30,000, respectively.

FOREIGN CURRENCY TRANSLATION

Biomerica de Mexico, our subsidiary located in Mexico, operates primarily using the Mexican peso. BioEurope GmbH, our subsidiary located in Germany operates primarily using the U.S. dollar, with an immaterial amount of transactions occurring in Euros. Accordingly, assets and liabilities of these subsidiaries are translated using exchange rates in effect at the end of the period, and revenues and costs are translated using average exchange rates for the period. The resulting translation adjustments to assets and liabilities are presented as a separate component of accumulated other comprehensive loss. There are no foreign currency transactions that are included in the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended February 28, 2026 and February 28, 2025.

RIGHT-OF-USE ASSETS AND LEASE LIABILITIES

In February 2016, the Financial Accounting Standards Board (“FASB”) issued an accounting standard update which requires lessees to recognize most lease liabilities on the balance sheet with a corresponding right-of-use asset. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of fixed lease payments over the lease term. Leases are classified as financing or operating which will drive the expense recognition pattern. We have elected to exclude short-term leases. We lease office space and copy machines, all of which are operating leases. Most leases include the option to renew and the exercise of the renewal options is at our sole discretion. Options to extend or terminate a lease are considered in the lease term to the extent that the option is reasonably certain of exercise. The leases do not include the options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term.

NET LOSS PER SHARE

Basic loss per share is computed as net loss divided by the weighted average number of common shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur from common shares issuable upon the vesting of restricted stock awards and from the exercise of stock options, warrants and other convertible securities using the treasury stock method. The following potentially dilutive securities were excluded from the calculation of diluted loss per share because their effect would have been anti-dilutive:

SEGMENT REPORTING

We define our segments on the basis in which internally reported financial information is reviewed by the Chief Operating Decision Maker (the “CODM”) to analyze financial performance, make decisions, and allocate resources. We manage our operations as a single operating and reportable segment, which focus on the development, manufacture, marketing, and sale of diagnostic products. As all material financial information is included in the consolidated results we have identified one reportable segment. The CODM uses net income (loss) and cash flow information to evaluate performance, including detailed cost information as part of the budget and forecasting process and considers budget-to-actual variances on a regular basis when making decisions about the allocation of operating and capital resources. We measure segment profit or loss in net income (loss) as reported in the consolidated financial statements.

The accounting policies used in the segment reporting are the same as those described in the summary of significant accounting policies. Our CODM is the Chief Executive Officer.

Our reportable segment product sales, net and net loss during the three and nine months ended February 28, 2026 and 2025 consisted of the following:

Dividend, interest, and other income (loss) for the nine months ended February 28, 2026, included $1,100,000 related to the Employee Retention Credit (“ERC”), a refundable payroll-tax credit established under the Coronavirus Aid, Relief, and Economic Security (“CARES”). We account for ERC claims in accordance with ASC 450-30, “Gain Contingencies,” and therefore recognize income only when all related contingencies have been resolved and receipt of the refund is realized or realizable. The ERC relates to qualified wages paid during calendar year 2021 under the COVID-19 pandemic relief programs and represents a one-time, non-recurring item that will not impact future reporting periods.

RECENT ACCOUNTING PRONOUNCEMENTS

Recent ASU’s issued by the FASB and guidance issued by the SEC did not, or are not believed by the management to, have a material effect on our present or future consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The ASU includes enhanced disclosure requirements, primarily related to the rate reconciliation and income taxes paid information. The amendments are to be applied prospectively in the financial statements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the effect of adopting this pronouncement on our financial statements and disclosures.

In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40)”. The ASU includes enhanced disclosure requirements, which mandates enhanced transparency in financial statements by requiring detailed disclosures of specific expenses like inventory purchases, employee compensation, depreciation, and intangible asset amortization. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. We are currently evaluating the effect of adopting this pronouncement on our financial statements and disclosures.

In July 2025, the FASB issued Update ASU 2025-05, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets”. This ASU provides targeted amendments to clarify the measurement of expected credit losses for accounts receivable and contract assets and introduces a practical expedient and related accounting policy election for certain entities. The amendments will be effective for annual reporting periods beginning after December 15, 2025, with early adoption permitted. We are currently evaluating the effect of adopting this pronouncement on our financial statements and disclosures.

In December 2025, the FASB issued Update ASU 2025-11, “Interim Reporting (Topic 270): Narrow-Scope Improvements”. This ASU clarifies and improves existing interim reporting guidance by consolidating disclosure requirements within Topic 270 and introducing a disclosure principle requiring entities to disclose events and changes occurring after the most recent annual reporting period that are expected to have a material effect on the entity’s financial condition or results of operations. The ASU does not introduce significant changes to recognition or measurement guidance. The amendments in this Update are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the effect of adopting this pronouncement on our financial statements and disclosures.

NOTE 3: SHAREHOLDERS’ EQUITY

On September 28, 2023, we filed the Shelf Registration allowing us to issue up to $20,000,000 of equity value in shares of common stock. Under the Shelf Registration Statement, shares of our common stock may be sold from time to time for up to three years from the filing date. On May 10, 2024, we filed a prospectus supplement to the Shelf Registration Statement with the SEC. This prospectus supplement was intended to facilitate the sale of up to $5,500,000 in common stock through the 2024 ATM Offering.

During the nine months ended February 28, 2026, we sold 414,633 shares of our common stock at prices ranging from $2.42 to $4.02 pursuant to the 2024 ATM Offering, which resulted in gross proceeds of approximately $1,495,000 and net proceeds to us of $1,455,000 after deducting commissions for each sale and legal, accounting, and other fees related to the offering in the amount of $32,000, as well as $8,000 of previously capitalized deferred offering costs.

NOTE 4: GEOGRAPHIC INFORMATION

We operate asone segment. Geographic information regarding net sales is approximately as follows:

As of February 28, 2026, and May 31, 2025, approximately $484,000 and $483,000 of our gross inventory was located in Mexicali, Mexico, respectively.

As of February 28, 2026, and May 31, 2025, approximately $8,000 and $10,000 of our property and equipment, net of accumulated depreciation and amortization, was located in Mexicali, Mexico, respectively.

NOTE 5: LEASES

We lease facilities in Irvine, California and Mexicali, Mexico.

As of February 28, 2026, we had approximately 22,000 square feet of floor space at the Company’s corporate headquarters at 17571 Von Karman Avenue in Irvine, California. This facility includes administration, research and development, certain manufacturing, shipping and inventory storage. The lease for our headquarters expires in August 2026. As of the date of this filing, we are evaluating our options, including potential renewal or relocation, and no final decision has been made. We have the option to extend the lease for an additional five-year term. We made a security deposit of approximately $22,000.

In November 2016, Biomerica de Mexico, our Mexican subsidiary, entered into a 10-year lease for approximately 8,100 square feet of manufacturing space. This lease includes one 10-year option to renew at the end of the initial lease term. Biomerica de Mexico also leases a smaller unit on a month-to-month basis for use in one manufacturing process. As of the date of this filing, we are evaluating our options, including potential renewal or relocation, and no final decision has been made.

In addition, we lease a small office in Lindau, Germany on a month-to-month basis, which serves as the headquarters of BioEurope GmbH, our German subsidiary.

For purposes of determining straight-line rent expense, the lease term is calculated from the date we first take possession of the facility, including any periods of free rent and any renewal option periods that we are reasonably certain to exercise. Our office and equipment leases generally have contractually specified minimum rent, and annual rent increases are included in the measurement of the right-of-use asset and related lease liabilities. Additionally, under these lease arrangements, we may be required to pay directly, or reimburse the lessors, for certain maintenance and operating costs. Such amounts are generally variable and, therefore, not included in the measurement of the right-of-use asset and related lease liabilities but are instead recognized as variable lease expense in the condensed consolidated statements of operations and comprehensive loss when they are incurred.

The following table presents information on our operating leases for the three months and nine months ended February 28, 2026 and February 28, 2025:

The approximate maturity of lease liabilities as of February 28, 2026 are as follows:

The following table summarizes our other supplemental lease information for the nine months ended February 28, 2026 and February 28, 2025:

We also have various insignificant leases for office equipment.

NOTE 6: COMMITMENTS AND CONTINGENCIES

LITIGATION

We are, from time to time, involved in legal proceedings, claims, and litigation arising in the ordinary course of business. While the amounts claimed may be substantial, the ultimate liability cannot presently be determined because of considerable uncertainties that exist. Therefore, it is possible the outcome of such legal proceedings, claims, and litigation could have a material effect on quarterly or annual operating results or cash flows when resolved in a future period. However, based on facts currently available, management believes such matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

There were no material legal proceedings pending as of February 28, 2026.

NOTE 7: SUBSEQUENT EVENTS

Subsequent to February 28, 2026, the Company issued an aggregate of 60,825 shares of its common stock. As a result, the number of shares of the Company’s common stock outstanding was 3,090,269 as of April 13, 2026. These issuances are reflected in the number of shares outstanding disclosed on the cover page of this Quarterly Report on Form 10-Q but are not reflected in the accompanying condensed consolidated financial statements.