BIOMERICA INC

YEARS ENDED MAY 31, 2026 AND 2025

NOTE 1: ORGANIZATION

Biomerica, Inc. 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. We also provide contract development and manufacturing services. 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”), and other inflammatory diseases. These products are directed at chronic inflammatory illnesses that are widespread, common, and address very large markets. Our inFoods® IBS product uses a simple blood sample and is designed to identify patient-specific foods that, when removed from the diet, may alleviate IBS symptoms such as pain, bloating, diarrhea, and constipation. Instead of broad and difficult to manage dietary restrictions, the inFoods® IBS product works by identifying specific foods that may be causing an abnormally high immune response in the patient, which in turn can lead to abdominal pain and cramping, bloating, diarrhea and constipation. A food identified as positive, which is causing an abnormal immune response in the patient, is simply removed from the diet to help alleviate IBS symptoms.

Our existing medical diagnostic products are sold worldwide primarily in two markets: (i) clinical laboratories and (ii) point-of-care (physicians’ offices and over-the-counter). Most of our products have been granted Conformité Européenne (“CE”) marked regulatory clearance for sale throughout Europe, and/or are sold for diagnostic use where they are registered by each country’s regulatory agency. In addition, some products are cleared for sale in the United States by the FDA.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements for the years ended May 31, 2026 and 2025, include the accounts of Biomerica, Inc. (“Biomerica”) as well as its wholly-owned German subsidiary (“BioEurope GmbH”) and Mexican subsidiary (“Biomerica de Mexico”). All significant intercompany accounts and transactions have been eliminated in consolidation.

ACCOUNTING ESTIMATES

The preparation of our consolidated financial statements in accordance with generally accepted accounting principles in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as the disclosure of contingent assets and liabilities as of the date of the financial statements. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. 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 condition or results of operations.

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REVERSE STOCK SPLIT

Effective April 21, 2025 (the “Effective Date”), our board of directors approved a one-for-eight reverse stock split of our outstanding shares of common stock (the “Reverse Stock Split”). Each 8 shares of our common stock, par value of $0.08 per share, issued and outstanding immediately prior to the Reverse Stock Split automatically reclassified, combined, converted and changed into one fully paid and non-assessable share of common stock. Beginning with the opening of trading on the Effective Date, our common stock began trading on Nasdaq on a split-adjusted basis under the same symbol, “BMRA.” In addition, a proportionate adjustment was made to the per share exercise price and the number of shares issuable upon the exercise of all outstanding options entitling the holders to purchase shares of our common stock and upon the vesting of restricted stock units. No fractional shares were issued as a result of the Reverse Stock Split. Instead, our stockholders who otherwise would have been entitled to a fraction of a share received a full share of common stock. The Reverse Stock Split did not change the number of authorized shares of our common stock or preferred stock as set forth in our Certificate of Incorporation, as amended. All common stock, per share and related information presented in the accompanying consolidated financial statements for periods prior to the date of the Reverse Stock Split, have been retroactively adjusted to reflect the Reverse Stock Split.

LIQUIDITY AND GOING CONCERN

We have incurred net losses and negative cash flows from operations and as of May 31, 2026, have an accumulated deficit of approximately $56,943,000. As of May 31, 2026, we had cash and cash equivalents of approximately $1,308,000 and working capital of approximately $1,535,000.

On September 28, 2023, we filed a new “shelf” registration statement on Form S-3 with the SEC, to replace the expiring S-3 that was filed in July 2020, which was declared effective on September 29, 2023, allowing us to issue up to $20,000,000 in common shares. Under this 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 with the SEC to facilitate the sale of up to $5,500,000 in common stock through the 2024 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, 2024, all of which were fully expensed as of May 31, 2026.

During the year ended May 31, 2026, we sold 580,452 shares of our common stock at prices ranging from $2.20 to $4.02 pursuant to the 2024 ATM Offering, which resulted in gross proceeds of approximately $1,874,000 and net proceeds to us of $1,827,000 after deducting commissions for each sale and legal, accounting, and other fees related to offering in the amount of $47,000. As part of this transaction, we expensed $7,000 in deferred offering costs during the year ended May 31, 2026.

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.

As of May 31, 2026 and 2025, we had cash and cash equivalents of approximately $1,308,000 and $2,399,000, respectively. As of May 31, 2026 and 2025, we had working capital of approximately $1,535,000 and $3,135,000, respectively.

Our ability to continue as a going concern over the next year 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 financing, and achieving profitable operations.

Management has analyzed our cash flow requirements through August 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 from the date these consolidated financial statements are issued.

To address our capital needs and sustain operations beyond the next year, we are actively pursuing strategies to increase sales, reduce expenses, sell non-core assets, seek additional financing through debt or equity, and seek other strategic alternatives (see Note 11 below). While we are committed to these plans, there is no assurance that these efforts will be successful or sufficient to meet our capital requirements.

Our consolidated financial statements as of May 31, 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.

FAIR VALUE OF FINANCIAL INSTRUMENTS

We have financial instruments whereby the fair market value of the financial instruments could be different than the amount recorded on a historical basis. Our consolidated financial instruments consist of its cash equivalents, accounts receivable, and accounts payable. The carrying amounts of our financial instruments approximate their fair values. We also maintain an investment in a privately held company (see Note 11 below).

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 risks.

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 some circumstances.

Our net sales were approximately $4,453,000 for fiscal 2026, compared to $5,311,000 for fiscal 2025. For the fiscal years ended May 31, 2026, and 2025, one distributor accounted for 31% of our net sales.

Total gross receivables as of May 31, 2026, and 2025 were approximately $823,000 and $757,000, respectively. As of May 31, 2026, and 2025, we had three and four distributors, respectively, that accounted for a total of 59% and 69% of gross accounts receivable, respectively. Of the 59% as of May 31, 2026,34% was owed by two distributors in North America.

For the fiscal year ended May 31, 2026, purchases from one vendor accounted for approximately 12% of our raw material purchases, compared to approximately 12% for the fiscal year ended May 31, 2025.

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GEOGRAPHIC CONCENTRATION

As of May 31, 2026 and 2025, approximately $517,000 and $483,000, respectively, of Biomerica’s gross inventory was located in Mexicali, Mexico.

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

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, NET

We extend unsecured credit to customers as part of our standard business practices. International customers are typically required to prepay until a credit history has been established, at which point credit levels are determined based on various criteria. Initial credit limits for distributors are approved by designated officers or managers, while any increases require authorization from upper-level management.

We apply Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments – Credit Losses” codified as Accounting Standards Codification (“ASC”) 326, which became effective 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 ninety days old were usually reserved for 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, as well as current economic and business conditions, and anticipated future economic events that may impact collectability. In developing its expected credit loss estimate, we evaluated the appropriate grouping of financial assets based upon its 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 who routinely place large orders will have unusually large receivable balances relative to the total gross receivables. Management monitors the payments for these large balances closely and very often requires payment of existing invoices before shipping new sales orders.

As of May 31, 2026 and 2025, we have established an allowance of approximately $38,000 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 utilized.

As of May 31, 2026 and 2025, prepaids were approximately $216,000 and $255,000, respectively, comprised 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 methods) or net realizable value. Management periodically reviews inventory for excess quantities and obsolescence. Management evaluates quantities on hand, physical condition, and technical functionality as these characteristics may be impacted by anticipated customer demand for current products and new product introductions. The reserve is adjusted based on such evaluation, with a corresponding provision included in cost of sales. Abnormal amounts of idle facility expenses, freight, handling costs, and wasted material are recognized as current period charges and the allocation of fixed production overhead is based on the normal capacity of the production facilities.

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The following is a summary of approximate net inventories:

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 May 31, 2026 and 2025, inventory reserves were approximately $394,000 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 on property and equipment amounted to approximately $57,000 and $66,000 for the years ended May 31, 2026 and 2025, respectively.

INTANGIBLE ASSETS, NET

Intangible assets include trademarks, product rights, technology rights, and patents, and are accounted for based on Accounting Standards Codification (“ASC”), ASC 350 “Intangibles – Goodwill and Other” (“ASC 350”). In that regard, intangible assets that have indefinite useful lives are not amortized but are tested at least annually for impairment or more frequently if events or changes in circumstances indicate that the asset might be impaired.

Intangible assets are amortized on a straight-line basis over their estimated useful lives, not to exceed 18 years for marketing and distribution rights and 10 years for purchased technology use rights. Patents are amortized over their individual useful lives, which average approximately 15 years. Amortization expense was approximately $20,000 and $21,000 for the fiscal years ended May 31, 2026 and 2025, respectively. Intangible assets are evaluated for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable.

We assess the recoverability of these intangible assets by determining whether the amortization of the asset’s balance over its remaining life can be recovered through projected undiscounted future cash flows. We use a qualitative assessment to determine whether there was any impairment. There wasno impairment of intangible assets for the years ended May 31, 2026, and 2025.

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 our products sold. We invested approximately $165,000 into the Polish distributor and own approximately 6% of the investee.

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 dividend and interest income.

We evaluate the investment at each reporting date for impairment and for observable transactions that may indicate a change in its carrying amount.

On May 29, 2026, we entered into a Securities Purchase Agreement with our Chief Executive Officer and other purchasers to sell our entire investment in Diagnosis S.A. for an aggregate purchase price of $500,000. Accordingly, the proposed sale constitutes a related-party transaction. The transaction was reviewed and approved by the Nominating and Corporate Governance Committee and the Board of Directors prior to May 31, 2026. Management determined that the executed Securities Purchase Agreement represented an observable price change in an orderly transaction involving the identical investment for purposes of ASC 321. Accordingly, we increased the carrying amount of the Diagnosis S.A. investment from approximately $165,000 to $500,000 as of May 31, 2026 and recorded an unrealized holding gain of approximately $335,000 for the fiscal year ended May 31, 2026.

In connection with the proposed sale, we received $500,000 in cash and issued a secured promissory term note to our Chief Executive Officer (see Note 10 below).

As of May 31, 2026, the carrying amount of our investment in Diagnosis S.A. was approximately $500,000. Cumulative upward adjustments were approximately $335,000, andno cumulative impairment or downward adjustments had been recognized as of May 31, 2026.

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SHARE-BASED COMPENSATION

We follow the guidance of ASC 718, “Share-based Compensation,” which requires the use of the fair-value based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments. We grant stock options and restricted stock awards under our equity incentive plans. We measure all share-based payment awards at their grant-date fair value. Restricted stock awards are valued based on the fair value of our common stock on the date of grant. 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 paid dividends historically and do not expect to pay them 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 its options. The risk-free rate is based on the United States 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.

We expensed approximately $476,000 and $460,000 of share-based compensation during the years ended May 31, 2026 and 2025, respectively.

In applying the Black-Scholes option-pricing model, the following assumptions used were in the valuation of awards issued for years ended May 31, 2026 and 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 FOB shipping point, which is when the transfer of control of goods has occurred and title passes. 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 drug stores, e-commerce customers, and distributors, while physicians’ office products are sold to physicians and distributors. We 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 andthe test results are made available to the ordering physician on behalf of the patient.

For services related to contract manufacturing, revenue is recognized when the service has been performed. Services for some contract work are invoiced and recognized as the project progresses.

As of May 31, 2026 and 2025, we had approximately $83,000 and $55,000 of advances from domestic customers, respectively, which are prepayments on orders for future shipments.

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Disaggregation of revenue:

The following is a breakdown of revenues according to markets to which the products are sold:

See Note 8 for additional information regarding geographic revenue concentrations.

SHIPPING AND HANDLING FEES

We include shipping and handling fees billed to customers in net sales and the related shipping and handling costs in cost of sales.

RESEARCH AND DEVELOPMENT

Research and development costs are expensed as incurred. The Company expensed approximately $788,000 and $1,023,000 of research and development costs during the years ended May 31, 2026 and 2025, respectively.

INCOME TAXES

We account for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”). Deferred tax assets and liabilities arise from temporary differences between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements that will result in taxable or deductible amounts in future years and the benefits of net operating loss and tax credit carryforwards. These temporary differences and the benefits of net operating loss and tax credit carryforwards are measured using enacted tax rates. A valuation allowance is recorded to reduce deferred tax assets to the extent that management considers it is more likely than not that a deferred tax asset will not be realized. In determining the valuation allowance, we consider factors such as the reversal of deferred income tax assets, projected taxable income, and the character of income tax assets and tax planning strategies. A change to these factors could have an impact on the estimated valuation allowance and income tax expense. As of May 31, 2026, in accordance with ASC 740, we have a valuation allowance for all of its net deferred tax assets. During the year ended May 31, 2026, this valuation allowance was increased to $12,676,000, which fully covers the net deferred tax asset of $12,676,000.

We account for its uncertain tax provisions by using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not, based solely on the technical merits, that the position will be sustained in an audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the appropriate amount of the benefit to recognize. The amount of benefit to recognize is measured as the maximum amount which is more likely than not to be realized. The tax position is derecognized when it is no longer more likely than not capable of being sustained. On subsequent recognition and measurement, the maximum amount which is more likely than not to be recognized at each reporting date will represent our best estimate, given the information available at the reporting date, although the outcome of the tax position is not absolute or final. We elected to follow an accounting policy to classify accrued interest related to liabilities for income taxes within the “Interest expense” line and penalties related to liabilities for income taxes within the “Other expense” line of the consolidated statements of operations and comprehensive loss.

During the year ended May 31, 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 our deferred tax assets as of May 31, 2026.

Our policy is to recognize any interest and penalties related to unrecognized tax benefits as a component of income tax expense. For the year ended May 31, 2026 and 2025, we hadno accrued interest or penalties related to uncertain tax positions.

ADVERTISING COSTS

We report the cost of all advertising as expense in the period in which those costs are incurred. Advertising costs were approximately $35,000 for the years ended May 31, 2026 and 2025.

FOREIGN CURRENCY TRANSLATION

The subsidiary located in Mexico operates primarily using the Mexican peso. The subsidiary located in Germany operates primarily using the United States dollar, with an immaterial amount of transactions occurring using the Euro. Accordingly, assets and liabilities of these subsidiaries are translated using exchange rates in effect at the end of the year, and revenues and costs are translated using average exchange rates for the year. The resulting adjustments to assets and liabilities are presented as a separate component of accumulated other comprehensive loss. There are no foreign currency transaction gains or losses that are included in the consolidated statements of operations and comprehensive loss for the years ended May 31, 2026 and 2025.

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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 leases 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. For additional information, see Note 9-Commitments and Contingencies.

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 through 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 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 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. The measure of profit or loss of the operating segment is net loss as reported in the consolidated financial statements included in this annual report.

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 for the years ended May 31, 2026 and 2025 consisted of the following:

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Dividend, interest, and other income for the year ended May 31, 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”) Act. 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.

REPORTING COMPREHENSIVE LOSS

Comprehensive loss represents net loss and any revenues, expenses, gains and losses that, under GAAP, are excluded from net loss and recognized directly as a component of shareholders’ equity. Items of other comprehensive loss consist solely of foreign currency translation adjustments for the years ended May 31, 2026 and 2025.

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 enhances income tax disclosures, primarily related to the rate reconciliation and income taxes paid. The amendments are effective for public business entities for annual periods beginning after December 15, 2024 and are applied prospectively, with retrospective application permitted. We adopted ASU 2023-09 during the fiscal year ended May 31, 2026. The adoption did not have a material impact on our consolidated financial statements but resulted in additional income taxdisclosures(see Note 7 below).

In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,” as subsequently clarified by ASU 2025-01. The amendments require additional disclosure of certain expense categories, including purchases of inventory, employee compensation, depreciation, intangible asset amortization and other specified expenses included within relevant income statement captions. For public business entities, the amendments are effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. We are currently evaluating the effect of adopting this guidance on our disclosures.

In July 2025, the FASB issued ASU 2025-05, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets.” The amendments provide a practical expedient for all entities when estimating expected credit losses on current accounts receivable and current contract assets arising from transactions accounted for under Topic 606. The amendments are effective for annual reporting periods beginning after December 15, 2025, including interim periods within those annual reporting periods, with early adoption permitted. The Company may adopt the guidance beginning in fiscal 2027 and is currently evaluating the potential impact on its consolidated financial statements and disclosures.

In December 2025, the FASB issued ASU 2025-11, “Interim Reporting (Topic 270): Narrow-Scope Improvements.” The amendments clarify and consolidate interim disclosure requirements and establish a disclosure principle regarding events and changes occurring since the most recent annual reporting period that have a material effect on an entity. For public business entities, the amendments 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 guidance on our interim financial statement disclosures.

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NOTE 3: PROPERTY AND EQUIPMENT, NET

The following is an approximate breakdown of property and equipment, net of accumulated depreciation:

NOTE 4: INTANGIBLE ASSETS, NET

The following is an approximate breakdown of intangible assets, net of accumulated amortization:

Expected amortization of intangible assets for the years ending May 31:

NOTE 5: ACCOUNTS PAYABLE AND ACCRUED EXPENSES

The following is an approximate breakdown of accounts payable and accrued expenses balances:

As of May 31, 2026, we had two vendors that accounted for 23% of accounts payable. As of May 31, 2025, we had two vendors that accounted for 20% of accounts payable.

NOTE 6: SHAREHOLDERS’ EQUITY

STOCK OPTION AND RESTRICTED STOCK PLANS

In December 2014, we adopted and our shareholders approved the 2014 Stock Incentive Plan (the “2014 Plan”). Subsequently, in December 2017, we adopted and our shareholders approved the 2017 Stock Incentive Plan (the “2017 Plan”). In February 2020, the Board approved the 2020 Stock Incentive Plan (the “2020 Plan”), which was approved by our shareholders on December 11, 2020. In April 2023, the Board approved our 2023 Stock Incentive Plan (the “2023 Plan”), which was approved by our shareholders on December 7, 2023. In 2024, the Company adopted the 2024 Stock Incentive Plan (the “2024 Plan”). On October 8, 2025, the Board approved an amendment to the 2024 Plan to increase the number of shares authorized for issuance thereunder by 200,000 shares, subject to shareholder approval. The amendment was approved by our shareholders on December 12, 2025, increasing the total number of shares reserved for issuance under the 2024 Plan from 200,000 to 400,000 shares.

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The Equity Incentive Plans provide that non-qualified options and incentive stock options and restricted stock may be granted to directors, affiliates, employees, or consultants of the Company. The Equity Incentive Plans authorize awards representing up to 112,500,112,500,150,000, and 400,000 shares of the Company’s common stock to be issued under the 2017 Plan, 2020 Plan, 2023 Plan, and 2024 Plan, respectively. The amended 2024 Plan provides for an aggregate of up to 400,000 shares of common stock reserved and available for issuance. Awards granted under the Equity Incentive Plans typically vest over 4 years. Options granted under the Equity Incentive Plans will be granted at prices not less than 80% of the then fair market value of the common stock and will expire not more than 10 years after the date of grant. The 2017 Plan expires in December 2026, the 2020 Plan expires in December 2030, the 2023 Plan expires in December 2033, and 2024 Plan expires in December 2034.

Share-based compensation expense for the years ended May 31, 2026 and 2025 is as follows:

Activity as to aggregate stock options outstanding is as follows:

The weighted average grant date fair value of options granted during 2026 and 2025 were $2.37 and $2.33, respectively.

Share-based compensation expense recognized related to stock options for the years ended May 31, 2026 and 2025 is $237,000 and $396,000, respectively.

Activity as to Restricted Stock Awards outstanding is as follows:

Share-based compensation expense recognized related to restricted stock awards for the years ended May 31, 2026 and 2025 are $239,000 and $64,000, respectively.

As of May 31, 2026, total share-based compensation expense related to non-vested stock option awards not yet recognized totaled approximately$383,000 and total share-based compensation expense related to non-vested restricted stock awards not yet recognized totaled approximately $309,000. The weighted-average period over which these amounts are expected to be recognized is 2.75 years and 2.06 years, respectively. The weighted average remaining contractual term of options that were exercisable on May 31, 2026 was 4.66 years. The weighted average remaining contractual term of options that were vested, exercisable, or expected to vest on May 31, 2026 was 5.86 years.

COMMON STOCK ACTIVITY

On September 28, 2023, we filed a “shelf” registration statement on Form S-3 with the SEC, allowing us to issue up to $20,000,000 in common shares. Under this 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 with the SEC, as part of the registration statement filed on September 28, 2023, which was declared effective on September 29, 2023. This supplement was intended to facilitate the sale of up to $5,500,000 in common stock through the 2024 ATM offerings, as defined in Rule 415 under the Securities Act.

During the year ended May 31, 2026, we sold 580,452 shares of our common stock at prices ranging from $2.20 to $4.02 pursuant to the 2024 ATM Offering, which resulted in gross proceeds of approximately $1,874,000 and net proceeds to us of $1,827,000 after deducting commissions for each sale and legal, accounting, and other fees related to offering in the amount of $47,000. As part of this transaction, we expensed $7,000 in deferred offering costs during the year ended May 31, 2026.

PREFERRED STOCK ACTIVITY

There was no preferred stock activity for the years ended May 31, 2026 and 2025.

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NOTE 7: INCOME TAXES

Provision for income taxes for the years ended May 31, 2026 and 2025 consists of the following:

Provision for income taxes differs from the amounts computed by applying the United States Federal income tax rate applicable for each year (21% for 2026 and 2025) to pretax income as a result of the following:

The tax effect of significant temporary differences is presented below:

We have provided a valuation allowance of approximately $12,676,000 and $11,748,000 as of May 31, 2026 and 2025, respectively. The net change in the valuation allowance for the years ended May 31, 2026 and 2025 was an increase of $928,000 and $1,379,000, respectively. We have recorded a full valuation allowance against its United States and foreign deferred tax assets in each of the years ended May 31, 2026 and 2025 because our management believes that it is more likely than not that these assets will not be realized.

On May 31, 2026, we have Federal income tax net operating loss carryforwards of approximately $32,381,000. On May 31, 2026, we have California state income tax net operating loss carryforwards of approximately $30,381,000. For tax reporting purposes, operating loss carryforwards are available to offset future taxable income; such carryforwards expire in varying amounts beginning in 2030 for federal and state purposes. Federal net operating losses beginning in 2018 have no expiration date.

We adopted ASU 2023-09 on a prospective basis for the year ended May 31, 2026 and have included the following table as a result of our adoption, which presents income taxes paid (net of refunds received) for the year ended May 31, 2026:

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As of May 31, 2026, we have Federal research and development tax credit carryforward of approximately $988,000. The Federal credits begin to expire in 2028. We also had similar credit carryforwards for state purposes of $643,000 on May 31, 2026, which do not expire.

Pursuant to Internal Revenue Code (“IRC”) Sections 382 and 383, annual use of our net operating loss (“NOL”) and credit carryforwards may be limited by statute because of a cumulative change in ownership of more than 50%. Pursuant to Sections 382 and 383 of the IRC, the annual use of our NOLs and credit carryforwards would be limited if there is a cumulative change of ownership (as that term is defined in Section 382(g) of the IRC of greater than 50% in a three-year period). Management has not performed an analysis to determine if we have had a cumulative change in ownership of greater than 50%.

For the year ended May 31, 2026, we performed an analysis and have not identified any uncertain tax positions as defined under ASC 740. Should such position be identified in the future, and should we owe interest and penalties as a result of this, these would be recognized as interest expense and other expense, respectively, in the consolidated financial statements. We are generally no longer subject to any income tax examinations by US federal or state tax authorities for years before fiscal 2022.

The 2017 Tax Cuts and Jobs Act (“TCJA”) changed the treatment of Section 174 research and experimental costs beginning January 1, 2022. Historically, taxpayers had the option of expensing Section 174 costs currently or amortizing over five years. The TCJA provision required taxpayers to capitalize such costs and amortize over five years for research conducted domestically or fifteen years if conducted outside of the United States.

The One Big Beautiful Bill Act (“OBBBA”) was signed by President Trump on July 4, 2025. OBBBA generally removes the capitalization requirement for domestic research and development expenditures, allowing us the option to expense Section 174 costs again. We do not expect this change in law to have any material effect on our consolidated financial statements.

NOTE 8: GEOGRAPHIC INFORMATION

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

NOTE 9: COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

On May 31, 2026, we had approximately 22,000 square feet of floor space at our corporate headquarters at 17571 Von Karman Avenue in Irvine, California, which we have been leasing since 2009. This facility includes administration, research and development, certain manufacturing, shipping and inventory storage. In May 2026, we exercised the additional five-year extension option and entered into a lease extension agreement with the landlord, extending the lease for an additional five-year term commencing September 1, 2026, and expiring August 31, 2031. The monthly base rent at the commencement of the extended term will be approximately $28,400 and is subject to scheduled increases during the lease term.

In November 2016, our Mexican subsidiary, Biomerica de Mexico, entered into a 10-year lease for approximately 8,100 square feet of manufacturing space located in Mexicali, Mexico. The lease includes an option to renew for an additional 10-year term. As of May 31, 2026, management determined that exercise of the renewal option was reasonably certain and, accordingly, the additional 10-year renewal period was included in the lease term used to measure the related right-of-use asset and lease liability. As of the date of this Annual Report, documentation formalizing the renewal had not yet been executed with the landlord. The current rent is approximately $4,300 per month. Biomerica de Mexico also leases a smaller unit on a month-to-month basis for use in one manufacturing process. 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 options periods that we are reasonably certain of exercising. 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 some 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 consolidated statements of operations and comprehensive loss when they are incurred.

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The following table presents information on our operating leases for the years ended May 31, 2026 and 2025:

The future minimum lease payments of our operating lease liabilities by fiscal year are as follows:

The following table summarizes our other supplemental lease information for the years ended May 31, 2026 and 2025:

We also have various insignificant leases for office equipment.

RETIREMENT SAVINGS PLAN

Effective September 1, 1986, we established a 401(k) plan for the benefit of our employees. The plan permits eligible employees to contribute to the plan up to the maximum percentage of total annual compensation allowable under the limits of IRC Sections 415, 401(k) and 404. We, at the discretion of our Board of Directors, may make contributions to the plan in amounts determined by the Board each year. We have not made contributions since the plan’s inception.

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 legal proceedings pending as of May 31, 2026.

CONTRACT AND LICENSING AGREEMENTS

We have one royalty agreement in which we have obtained rights to manufacture and market certain products for the life of the products. Royalty expenses of approximately $7,000 are included in cost of sales for the agreement for each of the years ended May 31, 2026 and 2025, respectively. Sales of products manufactured under these agreements comprise approximately 0.2% and 1.0% of total sales for the years ended May 31, 2026 and 2025, respectively. We may license other products or technology in the future as we deem necessary for conducting business. We have other royalty agreements; however, they are not considered material.

NOTE 10: RELATED-PARTY NOTE PAYABLE

On May 29, 2026, in connection with the Securities Purchase Agreement described in Note 2, we received $500,000 in cash and issued a secured promissory term note in the principal amount of $500,000 to our Chief Executive Officer, who is also a purchaser in the proposed sale of our investment in Diagnosis S.A.

The note bears interest at 8% per annum and matures on May 29, 2027. Principal and accrued interest are payable at maturity, and the note may be prepaid at any time without penalty or premium. The note is secured by our ownership interest in 78,750 shares of Diagnosis S.A.

Under the original terms of the note, upon completion of the transfer of the Diagnosis S.A. shares, the outstanding principal would be deemed satisfied, and the accrued interest would be forgiven, except that we would be required to pay an amount equal to a minimum of 60 days of interest on the original principal balance.

As of May 31, 2026, the share transfer had not been completed. Accordingly, the outstanding principal balance of $500,000 was classified as a current related-party secured promissory note payable in the accompanying consolidated balance sheet. Accrued interest was approximately $216 as of May 31, 2026.

NOTE 11: SUBSEQUENT EVENTS

On December 12, 2025, our stockholders approved an amendment to our Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 25,000,000 to 300,000,000 shares. On June 10, 2026, we filed the Certificate of Amendment with the Secretary of State of the State of Delaware, at which time the amendment became effective. Following the effectiveness of the amendment, we are authorized to issue 300,000,000 shares of common stock and 5,000,000 shares of preferred stock.

On August 20, 2026, we entered into entered into a Securities Purchase Agreement (the “B. Riley Purchase Agreement”) with certain institutional and individual investors identified on the signature pages thereto, which included among others B. Riley Principal Capital, LLC and all the members of our Board of Directors and our Chief Executive Officer (collectively, the “Purchasers”), pursuant to which we agreed to issue and sell an aggregate of 1,393,705 shares of our common stock, par value $0.08 per share (the “Shares”), at a purchase price of $1.60 per Share, for aggregate gross proceeds of approximately $2,230,000 (the “Private Placement”). The closing of the Private Placement occurred on August 26, 2026 (the “Closing Date”). The Shares have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and were offered and sold in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated thereunder.

In connection with the Private Placement, on August 20, 2026, we entered into a Registration Rights Agreement with the Purchasers (the “Registration Rights Agreement”), pursuant to which we agreed to file with the Securities and Exchange Commission (the “SEC”) a registration statement to register and provide for the resale of the Shares and to use commercially reasonable efforts to cause such registration statement to become effective and remain effective for the periods specified therein. We are required to file such registration statement within 30 calendar days of the Closing Date and to use its commercially reasonable efforts to have such registration statement declared effective within 30 calendar days of the closing date (or 60 calendar days in the event of a “full review” by the SEC). If we fail to satisfy certain filing or effectiveness obligations under the Registration Rights Agreement, we are obligated to pay the Purchasers liquidated damages equal to 1.0% of the aggregate purchase price paid by such Purchaser, subject to a maximum aggregate cap of 5.0% of such Purchaser’s subscription amount.

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