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 to aid 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. We also provide contract development and manufacturing services to third parties that utilize the technology underlying our products.

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 carry Conformité Européenne (“CE”) marking and/or are registered with regulatory agencies in various countries for diagnostic use. In addition, some products are cleared for sale in the U.S. by the U.S. Food and Drug Administration (“FDA”).

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, 2026. 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 months ended August 31, 2026 are not necessarily indicative of the results that may be expected for the fiscal year ending May 31, 2027. For further information, refer to the audited consolidated financial statements and notes thereto for the fiscal year ended May 31, 2026 included in our Annual Report on Form 10-K filed with the SEC on August 31, 2026, as amended on our Annual Report on Form 10-K/A, filed with the SEC on September 28, 2026. 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

The preparation of our consolidated financial statements in accordance with 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 estimates 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. 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 International Sales, based in Germany, who has over 25 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, the 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 an internal sales team. The two primary markets we target are clinical laboratories and patient point-of-care testing.

LIQUIDITY, CAPITAL RESOURCES, AND GOING CONCERN

We have incurred net losses and negative cash flows from operations and have an accumulated deficit of approximately $58,175,000 as of August 31, 2026. As of August 31, 2026, we had cash and cash equivalents of approximately $2,733,000 and working capital of approximately $2,572,000. As of May 31, 2026, we had cash and cash equivalents of approximately $1,308,000 and working capital of approximately $1,535,000. 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 on 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 its initial effective date. The Shelf Registration Statement reached its third anniversary on September 29, 2026 and has been replaced by a new shelf registration statement, as described below.

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, 2024, all of which had been charged against additional paid-in capital as of May 31, 2026.

On September 24, 2026, subsequent to quarter-end, we filed a replacement shelf registration statement on Form S-3 with the SEC registering up to $250,000,000 of common stock, preferred stock, debt securities and warrants, including unsold common stock carried forward from our prior shelf registration statement pursuant to Rule 415(a)(6) under the Securities Act. The replacement shelf registration statement was declared effective by the SEC on October 7, 2026. The Shelf Registration Statement does not represent committed financing. Our ability to raise capital under it is subject to applicable Form S-3 eligibility requirements and offering limitations, including General Instruction I.B.6, and market conditions.

During the three months ended August 31, 2026, we did not sell any shares of common stock pursuant to the 2024 ATM Offering. On August 26, 2026, we completed a private placement pursuant to a Securities Purchase Agreement (“SPA”) with accredited investors and issued 1,393,705 shares of our common stock at $1.60 per share, resulting in gross proceeds of approximately $2,231,000 and net proceeds after legal fees and other offering costs of approximately $2,120,000. Offering costs totaled approximately $111,000 and were accrued and unpaid as of August 31, 2026.

We intend to use the net proceeds of the August 2026 private placement and any future sales under 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.

Our ability to meet our obligations and continue as a going concern is influenced by several factors, including:

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

Management has evaluated our cash flow requirements for the twelve months following the issuance date of these financial statements. Based on this evaluation, our existing cash and cash equivalents are insufficient to fund our operations and meet our obligations during that period.

To address our capital needs and sustain 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 August 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. 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 $1,265,000 and $1,380,000 for the three months ended August 31, 2026, and 2025, respectively.

For the three months ended August 31, 2026 and 2025, we had one key customer located in Asia, which accounted for 36% and 48% of net consolidated sales, respectively.

As of August 31, 2026 and May 31, 2026, total gross receivables were approximately $938,000 and $823,000, respectively. As of those dates, we had one and three key distributors, respectively, located in Asia and North America, which accounted for 48% and 59% of gross accounts receivable, respectively.

For the three months ended August 31, 2026, we had one key vendor that accounted for 24% of purchases of raw materials. For the three months ended August 31, 2025, no vendor accounted for 10% or more of total raw material purchases.

As of August 31, 2026 and May 31, 2026, one vendor and two vendors accounted for 20% and 23%, 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 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 account for expected credit losses on accounts receivable under Accounting Standards Codification (“ASC”) 326, Financial Instruments—Credit Losses, using the current expected credit loss (“CECL”) model. Effective June 1, 2026, we adopted Accounting Standards Update (“ASU”) 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, on a prospective basis and elected the practical expedient for qualifying current accounts receivable arising from transactions accounted for under ASC 606. Under this practical expedient, we assume that current conditions as of the balance sheet date remain unchanged over the remaining life of these receivables.

We estimate expected credit losses based on historical credit loss experience adjusted for current conditions, including aging and collection trends, customer and portfolio characteristics, and customer-specific credit risks. In developing our expected credit loss estimate, we evaluate receivables collectively when they share similar risk characteristics and individually when they do not. Accounts receivable are presented net of an allowance for expected credit losses. Account balances are written off against the allowance for expected credit losses when deemed uncollectible.

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 collection of these balances and may require payment of existing invoices before shipping new sales orders.

The allowance for expected credit losses was approximately $41,000 and $38,000 as of August 31, 2026 and May 31, 2026, respectively**.**

PREPAID EXPENSES AND OTHER CURRENT ASSETS

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

As of August 31, 2026 and May 31, 2026, prepaids were approximately $145,000 and $216,000, 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 recognized 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 recognized as necessary to reduce obsolete inventory to estimated net realizable value or to specifically reserve for obsolete inventory. As of August 31, 2026, and May 31, 2026, inventory reserves were approximately $370,000 and $394,000, 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 $10,000 and $15,000 for the three months ended August 31, 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 $5,000 for the three months ended August 31, 2026, and 2025, 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 finite-lived intangible assets under ASC 360 by determining whether the carrying value of the applicable asset group can be recovered through projected undiscounted future cash flows. If the carrying amount is not recoverable, an impairment loss is recognized for the amount by which the carrying amount exceeds fair value.

During the three months ended August 31, 2026 and 2025, no impairment charges were recognized.

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 are accounted for under the measurement alternative in ASC 321 at our initial cost, minus any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar securities of the same issuer. Dividends received are recognized in dividend, interest, and 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 holding as of August 31, 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 similar security of the same issuer during the three months ended August 31, 2026 and August 31, 2025.

On May 29, 2026, we entered into a SPA to sell our entire investment in Diagnosis S.A. for an aggregate purchase price of $500,000 in a related-party transaction involving our Chief Executive Officer and other purchasers. During the year ended May 31, 2026, we increased the carrying amount of the investment from approximately $165,000 to $500,000 and recognized an unrealized holding gain of approximately $335,000 based on the executed SPA. Pending completion of the applicable share transfers and required procedures under Polish law, we received $500,000 in cash and issued a secured promissory term note to our Chief Executive Officer. The note bears interest at 8% per annum, matures on May 29, 2027, and is secured by our rights and interests in the Diagnosis S.A. shares. As of August 31, 2026, the share transfer had not been completed, and we continued to recognize the investment and the related note payable. The share transfer remains in process, subject to completion of the applicable procedures required under Polish law.

As of August 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 August 31, 2026.

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. Restricted stock awards are measured at grant-date fair value based on the fair value of our common stock. The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model with assumptions for expected volatility, expected dividends, 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 our 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, cancelled and outstanding for the three months ended August 31, 2026:

During the three months ended August 31, 2026, we recognized approximately $40,000 of share-based compensation expense related to stock options, compared to approximately $74,000 for the three months ended August 31, 2025.

During the three months ended August 31, 2026, we also issued 10,000 shares of common stock pursuant to a consulting agreement. The shares had an aggregate fair value of approximately $21,000, which was recognized as a share-based compensation expense. No shares were issued for consulting services during the three months ended August 31, 2025.

The following summary presents the restricted stock awards granted, vested, forfeited and outstanding for the three months ended August 31, 2026:

During the three months ended August 31, 2026, we recognized approximately $73,000 of share-based compensation expense related to restricted stock awards, compared to approximately $59,000 for the three months ended August 31, 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 Freight 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. Over-the-counter (“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 August 31, 2026, we had approximately $47,000 in advances from domestic customers, which are prepayments on orders for future shipments.

Disaggregation of revenue:

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

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 $206,000 and $212,000 of research and development costs during the three months ended August 31, 2026 and August 31, 2025, respectively.

INCOME TAXES

For the three months ended August 31, 2026 and 2025, we recognized income tax expense of approximately $6,000 and $3,000, respectively. These expenses consisted of state minimum taxes and miscellaneous foreign taxes.

During the three months ended August 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 enacted tax rates expected to apply when 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 maintained a full valuation allowance against the Company’s net deferred tax assets as of August 31, 2026.

Our policy is to recognize any interest and penalties related to unrecognized tax benefits as a component of income tax expense. As of August 31, 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 August 31, 2026, and August 31, 2025, advertising costs were approximately $8,000 and $9,000, 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 months ended August 31, 2026 and August 31, 2025.

RIGHT-OF-USE ASSETS AND LEASE LIABILITIES

We account for our leases in accordance with ASC 842, 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. Our 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) INCOME PER SHARE

Basic net (loss) income per share is computed as net (loss) income divided by the weighted-average number of common shares outstanding for the period. Diluted (loss) income per share reflects the potential dilution that could occur from common shares issuable upon the vesting of restricted stock units and from the exercise of stock options, and warrants using the treasury stock method, and from convertible securities using the if-converted method. The following potentially dilutive securities were excluded from the calculation of diluted (loss) income 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 asingle operating and reportable segment, which focuses 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) income 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 (loss) income 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.

RECENT ACCOUNTING PRONOUNCEMENTS

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 mandate 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 are effective for annual reporting periods beginning after December 15, 2025, including interim reporting periods within those annual reporting periods, with early adoption permitted. We adopted ASU 2025-05 effective June 1, 2026. The adoption did not have a material impact on our consolidated financial statements or related 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 its initial effective 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. The Shelf Registration Statement reached its third anniversary on September 29, 2026. See Note 7 for information regarding the filing of a replacement shelf registration statement.

During the three months ended August 31, 2026, we did not sell any shares of common stock pursuant to the 2024 ATM Offering.

On August 26, 2026, we completed a private placement pursuant to a SPA with accredited investors and issued 1,393,705 shares of our common stock at $1.60 per share, which resulted in gross proceeds of approximately $2,231,000 and net proceeds to us of $2,120,000 after deducting legal and other offering costs totaling approximately $111,000. The approximately $111,000 of offering costs were accrued and unpaid as of August 31, 2026. Accordingly, the gross proceeds were received in cash, while the offering costs reduced the net equity proceeds recorded.

NOTE 4: GEOGRAPHIC INFORMATION

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

As of August 31, 2026, and May 31, 2026, approximately $559,000 and $517,000 of our gross inventory was located in Mexicali, Mexico, respectively.

As of August 31, 2026, and May 31, 2026, approximately $6,000 and $8,000 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 August 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 is 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 August 31, 2026, 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 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 ended August 31, 2026 and August 31, 2025:

The maturities of operating lease liabilities as of August 31, 2026 are as follows:

Year Ending May 31:

The following table summarizes our other supplemental lease information for the three months ended August 31, 2026 and August 31, 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. There were no material legal proceedings pending as of August 31, 2026.

NOTE 7: SUBSEQUENT EVENTS

On September 24, 2026, we filed a registration statement on Form S-3 with the SEC covering the resale by selling stockholders of up to 1,403,705 shares of our common stock, consisting of 1,393,705 shares issued in the August 2026 private placement (the “Private Placement”) and 10,000 shares issued pursuant to a consulting agreement. We will not receive any proceeds from sales of these shares by the selling stockholders. The resale registration statement was filed pursuant to a Registration Rights Agreement entered into with the investors in connection with the Private Placement, which closed on August 26, 2026, under which we agreed to file a registration statement with the SEC covering the resale of the shares issued in the Private Placement and to use commercially reasonable efforts to cause it to become effective and remain effective for the periods specified therein.

On September 24, 2026, we also filed a replacement shelf registration statement on Form S-3 with the SEC covering the offer and sale from time to time of common stock, preferred stock, debt securities and warrants with an aggregate offering price of up to $250,000,000, subject to applicable limitations under General Instruction I.B.6 of Form S-3.

Both registration statements were declared effective by the SEC on October 7, 2026.