BIOMERICA INC

Previous wording

You should read the following discussion and analysis in conjunction with our consolidated financial statements and the accompanying notes thereto included in Part II, Item 8 of this Report. This discussion and analysis contains forward-looking statements that are based on our management’s current beliefs and assumptions, which statements are subject to substantial risks and uncertainties. Our actual results may differ materially from those expressed or implied by these forward-looking statements as a result of many factors, including those discussed in “Risk Factors” included in Part I, Item 1A of this Report.

Current wording

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the accompanying notes thereto included elsewhere in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that are based on our management team’s expectations, beliefs, intentions, strategies, estimates and assumptions, which statements are subject to substantial risks and uncertainties. Our actual results may differ materially from those expressed or implied by these forward-looking statements as a result of many factors, including those discussed in the sections titled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” appearing elsewhere in this Annual Report on Form 10-K.

Previous wording

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. Our diagnostic test kits are used to analyze blood, urine, nasal or fecal material from patients in the diagnosis of various diseases, food intolerances and other medical complications, or to measure the level of specific hormones, antibodies, antigens or other substances, which may exist in the human body in extremely small concentrations. The Company’s products are designed to enhance the health and well-being of people, while reducing total healthcare costs.

Current wording

We are a global biomedical technology company that develops, patents, manufactures and markets advanced diagnostic and therapeutic products. Our diagnostic test kits are used to analyze blood, urine, nasal, or fecal material from patients in the diagnosis of various diseases, food intolerances, and other medical complications. They can also be used to measure or detect the presence and levels of specific bacteria, hormones, antibodies, antigens and other substances, which may exist in the human body in extremely small concentrations. Our products are designed to enhance the health and well-being of people, while reducing total healthcare cost.

Previous wording

Our extensive range of medical diagnostic products is sold worldwide, primarily in two markets: clinical laboratories and point-of-care settings, including physicians’ offices and over-the-counter sales at major retailers such as Walmart, CVS Pharmacy, and Amazon. Our diagnostic test kits analyze blood, urine, nasal, or fecal specimens from patients to diagnose various diseases, food intolerances, and other medical conditions. They measure or detect the presence and levels of specific bacteria, hormones, antibodies, antigens, and other substances in the body, often in extremely small concentrations. Most of our products are Conformite Europeenne(“CE”) marked and/or registered with regulatory agencies in various countries for diagnostic use, with several also cleared for sale in the United States by the FDA.

Current wording

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

Previous wording

Technological advances in medical diagnostics have enabled diagnostic tests to be performed not only in clinical laboratories but also at home and at the point-of-care in physicians’ offices. One of our key objectives has been to develop and market rapid diagnostic tests that are accurate, utilize easily obtained patient specimens, and are simple to perform without the need for complex instrumentation. Our over-the-counter (home use) and professional use (physicians’ office, clinics, etc.) rapid diagnostic test products help manage existing medical conditions and may save lives through early detection and diagnosis of specific diseases. Traditionally, such tests required the expertise of medical technologists and sophisticated equipment, with results often not available for days. We believe that rapid point-of-care tests, when properly developed and used, can be as accurate as laboratory tests. They require limited to no instrumentation, deliver reliable results in minutes, and can be performed with confidence in the home or physician’s office.

Current wording

Technological advances in medical diagnostics have enabled diagnostic tests to be performed not only in clinical laboratories but also at home and at the point-of-care in physicians’ offices. One of our key objectives has been to develop and market rapid diagnostic tests that are accurate, utilize easily obtained patient specimens, and are simple to perform without the need for complex instrumentation. Our home use (over-the-counter) and professional use (physicians’ office, clinics, etc.) rapid diagnostic test products help manage existing medical conditions and may save lives through early detection and diagnosis of specific diseases. Traditionally, such tests required the expertise of medical technologists and sophisticated equipment, with results often not available for days. We believe our rapid point-of-care tests, when properly used, can be as accurate as laboratory tests. Our products require limited to no instrumentation, deliver reliable results in minutes, and can be performed with confidence at home or in a physician’s office.

Previous wording

We invest considerable resources in the research and development of new products designed to diagnose and, in some cases, treat several major medical diseases. These products are both internally developed and obtained licensed from others. Our experienced and highly trained technical personnel, including Ph.D. holders and other scientists, are dedicated to developing new products and managing technology transfer activities. Our technical staff, many of whom have extensive experience from previous employment at large diagnostic manufacturing companies, bring a wealth of industry knowledge. Additionally, we rely on our Scientific Advisory Board, comprised of leading medical doctors and clinicians, to guide our clinical studies and product development efforts.

Current wording

We invest resources in the research and development of new products designed to diagnose and, in some cases, treat several major medical diseases. These products are either internally developed or licensed from others. Our experienced and highly trained technical personnel, including Ph.D. holders and other scientists, are dedicated to developing new products and managing technology transfer activities. Our technical staff, many of whom, have extensive experience from previous employment at large diagnostic manufacturing companies, bring a wealth of industry knowledge. Additionally, we rely on our Scientific Advisory Board, comprised of leading medical doctors and clinicians, to guide our clinical studies and product development efforts.

Previous wording

The inFoods® IBS product utilizes a simple blood test to identify patient-specific foods that, when eliminated from the diet, may alleviate IBS symptoms such as pain, bloating, diarrhea, cramping, and constipation. Unlike broad and difficult-to-manage dietary restrictions, the inFoods® IBS product pinpoints a patient’s heightened immunoreactivity to specific foods known to frequently trigger IBS symptoms. By removing the foods identified as problematic, patients can achieve relief from their IBS symptoms.

Current wording

A key outcome from our research and development efforts is our patented diagnostic-guided therapy (“DGT”) product, developed on the inFoods® technology platform. This innovative technology is designed to aid in the management of gastrointestinal conditions such as irritable bowel syndrome (“IBS”) and other inflammatory diseases. The DGT product targets chronic inflammatory illnesses that are widespread and prevalent in large markets. We have launched inFoods® IBS product, which leverages this patented technology. The inFoods® IBS product utilizes a simple blood test to identify patient-specific foods that, when eliminated from the diet, may help reduce IBS symptoms such as pain, bloating, diarrhea, cramping, and constipation. Unlike broad and difficult to manage dietary restrictions, the inFoods® IBS product pinpoints a patient’s heightened immunoreactivity to specific foods known to frequently trigger IBS symptoms. By removing the foods identified as problematic, patients can achieve relief from IBS symptoms.

Previous wording

Beyond our inFoods® product line, our additional efforts have led to a significant milestone by receiving FDA clearance in December 2023 for hp+detect™, a new diagnostic test for detecting Helicobacter pylori (“H. pylori”) bacteria in the gastrointestinal tract. H. pylori is a widespread infection, affecting an estimated 35% of the U.S. population and 45% of the population in Europe’s five largest countries. This bacterium is recognized as the strongest known risk factor for gastric cancer, which is the third most common cause of cancer-related deaths globally.

Current wording

In addition, in December 2023 we received FDA clearance for hp+detect™, a diagnostic test designed to detect Helicobacter pylori (H. pylori) bacteria in the gastrointestinal tract. H. pylori is a prevalent infection, affecting approximately 35% of the U.S. population and 45% of the population in Europe’s largest countries. This bacterium is recognized as the strongest known risk factor for gastric cancer, which remains one of the leading causes of cancer-related deaths globally. The hp+detect™ test is marketed directly to laboratories and is intended to provide physicians and medical centers with a reliable tool for diagnosing H. pylori infections and monitoring treatment effectiveness. We are actively promoting hp+detect™ to large end-customer laboratories and positioning the product for commercial adoption.

Previous wording

Due to slower-than-expected launch of the Company’s key products, inFoods® IBS and hp+detect™, the Company has initiated significant cost-cutting measures to extend its cash runway and work towards increasing revenues to cover overhead costs. These measures include a workforce reduction of nearly 15%. In addition, the Company is actively exploring strategic opportunities to enhance and create shareholder value.

Current wording

Due to the slower-than-expected launch of our key products, inFoods® IBS and hp+detect™, we have initiated significant cost-cutting measures to extend our cash runway and work towards increasing revenues to cover overhead costs. These measures include a workforce reduction of nearly 15% during this fiscal year, which incurred costs such as severance, impacting typical cost trends and margins. Additionally, we raised $2,015,000 in net proceeds from the ATM offering filed in May 2024 providing additional liquidity to support our operations. We are actively exploring strategic opportunities to enhance and create shareholder value.

Previous wording

Our selling, general, and administrative expenses were approximately $5,487,000 for fiscal 2024, compared to $6,085,000 for fiscal 2023, a decrease of $598,000, or 10%. The reduction in fiscal 2024 was primarily due to decreases of $822,000 in legal expenses, $399,000 in bad debt expenses, and $247,000 in share-based compensation. These significant operating expense reductions were partially offset by strategic investments in key areas of our business, including a $535,000 expansion of our sales team, a $136,000 increase in sales commission expenses, and a $171,000 increase in outside services for sales and administration. Despite these increases, the overall cost reductions from the previous year underscore our commitment to strategically allocating capital and maintaining financial discipline while pursuing growth opportunities.

Current wording

Our selling, general, and administrative expenses were approximately $4,612,000 for the fiscal year ended May 31, 2025, compared to $5,487,000 for the fiscal year ended May 31, 2024, a decrease of $875,000, or 16%. This reduction reflects our strategic financial management and was primarily attributable to a $351,000 decrease in payroll expenses following a reduction in force implemented in July 2024, a $327,000 decrease in stock compensation, a $66,000 decrease in marketing expenses for OTC products, and a $59,000 decrease in sales and marketing outside services. Overall, the decrease in SG&A expenses demonstrates our continued commitment to strategically allocating capital and maintaining financial discipline while pursuing growth opportunities.

Previous wording

Our research and development expenses were approximately $1,491,000 for fiscal 2024 compared to $1,584,000 for fiscal 2023, a decrease of $93,000, or 6%. The decrease in fiscal 2024 was primarily driven by a reduction in share-based compensation expenses, which decreased by $45,000, and cost optimizations in our inFoods® R&D projects, resulting in savings of $47,000. For a detailed discussion of our ongoing research initiatives and their potential market impacts, please refer to the ‘Research and Development’ section in Item 1.

Current wording

Our research and development expenses were approximately $1,023,000 for the fiscal year ended May 31, 2025, compared to $1,491,000 for the fiscal year ended May 31, 2024, a decrease of $468,000, or 31%. The decrease was primarily driven by a $311,000 reduction in payroll expenses following a reduction in force implemented in July 2024, $68,000 in cost saving related to our inFoods® research and development projects, and a $33,000 reduction in research and development hp+detect™ project expenses as the research phase was completed. For a detailed discussion of our ongoing research initiatives and their potential market impacts, please refer to the “Research and Development” section in Item 1.

Previous wording

As part of our efforts to reduce costs, we have initiated significant cost-cutting measures to extend our cash runway and work towards increasing revenues to cover overhead costs. These measures include a workforce reduction of nearly 15% and a substantial reduction in other operating expenses.

Current wording

As part of our efforts to reduce costs, we have initiated significant cost-cutting measures to extend our cash runway and work towards increasing revenues to cover overhead costs. These measures include a workforce reduction of nearly 16% and a substantial reduction in other operating expenses.

Previous wording

As part of our financing plan, on September 28, 2023, we filed a “shelf” registration statement on Form S-3 with the SEC, allowing the Company 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, the Company 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 ATM offerings, as defined in Rule 415 under the Securities Act. As part of this transaction, the Company incurred $81,000 in deferred offering costs. The amount of capital that we can raise under the ATM offering is highly dependent upon the trading volume and the trading price of our stock. The average trading volume of our stock over the last three full calendar months is approximately 229,000 shares per day and the high and low trading price of our stock during the same period of time was $1.25 and $0.50, respectively. If our stock continues to trade at low volumes and price, the amount of capital that we can raise under the ATM offering will be constrained.

Current wording

As part of our financing plan, on September 28, 2023, we filed a “shelf” registration statement on Form S-3 with the SEC, which was declared effective on September 29, 2023, allowing the Company to issue up to $20,000,000 in shares of our common stock. 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, the Company filed a prospectus supplement with the SEC, as part of this registration statement. This prospectus supplement was intended to facilitate the sale of up to $5,500,000 in common stock through ATM offerings, as defined in Rule 415 under the Securities Act. As part of this transaction, the Company incurred $81,000 in deferred offering costs during the year ended May 31, 2024. During the year ended May 31, 2025, the Company sold 440,687 shares of its common stock at prices ranging from $3.06 to $8.32 pursuant to the ATM Agreement, which resulted in gross proceeds of approximately $2,143,000 and net proceeds to the Company of $2,015,000, after deducting commissions for each sale and legal, accounting, and other fees related to offering in the amount of $128,000.

Previous wording

During fiscal 2023, cash used in operating activities was approximately $5,474,000. The primary factors that contributed to this were a loss of approximately $7,140,000, an increase in accounts receivable of $291,000, a decrease in inventory reserves of $174,000, and a decrease in accounts payable and accrued expenses of $80,000 and a decrease in lease liability of $297,000. These were partially offset by an increase in the allowance on accounts receivable of $342,000, a decrease in inventories of $534,000, and non-cash expenses of approximately $1,536,000.

Current wording

During the fiscal year ended May 31, 2025, cash used in operating activities was approximately $3,841,000 compared to $5,361,000 for the fiscal year ended May 31, 2024. The primary factors contributing to this were a loss of approximately $4,973,000, an increase in inventory reserves of $4,000, an increase in accounts receivable of $209,000, a decrease in inventories of $882,000 and a non-cash expense of approximately $944,000. These were partially offset by a decrease in accounts payable and accrued expenses of $467,000, and reduction in lease liabilities of $326,000.

Previous wording

During fiscal 2024, cash used in operating activities was approximately $5,361,000, compared to $5,474,000 for fiscal 2023. The primary factors contributing to this were a loss of approximately $5,978,000, a decrease in inventory reserves of $205,000, an increase in accounts receivable of $215,000, an increase in inventories of $115,000 and a decrease in lease liability of $297,000. These were partially offset by an increase in accounts payable and accrued expenses of $246,000, and non-cash expenses of approximately $1,211,000.

Current wording

During the fiscal year ended May 31, 2024, cash used in operating activities was approximately $5,361,000, compared to $5,474,000 for the fiscal year ended May 31, 2023. The primary factors contributing to this were a loss of approximately $5,978,000, a decrease in inventory reserves of $205,000, an increase in accounts receivable of $215,000, an increase in inventories of $115,000 and a decrease in lease liability of $297,000. These were partially offset by an increase in accounts payable and accrued expenses of $246,000, and non-cash expenses of approximately $1,211,000.

Previous wording

During fiscal 2024, cash used in investing activities was approximately $115,000, as compared to $78,000 for fiscal 2023. During fiscal 2024, the Company purchased approximately $51,000 of property and equipment and had $64,000 in expenditures related to patents. During fiscal 2023, the Company purchased approximately $64,000 of property and equipment and had $14,000 in expenditures related to patents.

Current wording

During the fiscal year ended May 31, 2025, cash used in investing activities was approximately $37,000, as compared to $115,000 for the fiscal year ended May 31, 2024. During the fiscal year ended May 31, 2025, we had $37,000 in expenditures related to patents. During the fiscal year ended May 31, 2024, we purchased approximately $51,000 of property and equipment and had $64,000 in expenditures related to patents.

Previous wording

During fiscal 2024 and 2023, the Company received approximately $0 and $9,309,000, respectively, in net proceeds from the sale of common stock. The common stock sold and issued in fiscal 2023 was issued under the Company’s shelf registration statement filed with the SEC on July 21, 2020 (the “2020 Shelf Registration Statement”) and declared effective by the SEC on September 30, 2020, and under the prospectus supplement filed with the SEC on January 22, 2021 (“2021 Prospectus Supplement”), and the prospectus supplement filed in conjunction with the Company’s underwritten public offering of common shares on March 7, 2023 (the “2023 Prospectus Supplement”) (See Shareholders’ Equity in the notes to the consolidated financial statements for further details about SEC registration statements). The 2020 Shelf Registration Statement registers common shares that may be issued by the Company in a maximum aggregate amount of up to $90,000,000. On January 22, 2021, we filed the 2021 Prospectus Supplement for the sale of up to $15,000,000 of shares of our common stock in an at-the-market offering under the 2020 Shelf Registration Statement, of which $5,290,000 was issued through March 7, 2023.

Current wording

During the fiscal years ended May 31, 2025 and 2024, we received approximately $2,015,000 and $0, respectively, in net proceeds from the sale of common stock. Our common stock sold and issued in the fiscal year ended May 31, 2025 was issued under our shelf registration statement filed with the SEC on September 28, 2023, which was declared effective on September 29, 2023 (the “2023 Registration Statement”). On May 10, 2024, the Company filed a prospectus supplement to the 2023 Registration Statement with the SEC for the sale of up to $5,500,000 in common stock through ATM offerings, as defined in Rule 415 under the Securities Act. As part of this transaction, the Company incurred $81,000 in deferred offering costs during the fiscal year ended May 31, 2024.

Previous wording

As of August 28, 2024, the date on which this Annual Report on Form 10-K for the fiscal year ended May 31, 2024, is filed with the SEC, our 2023 Registration Statement remains subject to the offering limits set forth in General Instruction I.B.6 of Form S-3 because our public float is less than $75 million. For so long as the Company’s public float is less than $75 million, the aggregate market value of securities sold by the Company under the 2023 Shelf Registration Statement pursuant to Instruction I.B.6 to Form S-3 during any 12 consecutive months may not exceed one-third of the Company’s public float. We have not sold any of our common stock pursuant to General Instruction I.B.6 of Form S-3 in the 12 calendar months preceding the date of filing this Annual Report on Form 10-K. For purposes of this limitation, the aggregate market value of our outstanding common stock held by non-affiliates, or public float, was $7,037,587, based on 15,639,082 non-restricted shares of our outstanding common stock held by non-affiliates and a price of $0.45 per share, which was the price at which our common stock was last sold on the Nasdaq Capital Market on July 2, 2024 (a date within 60 days of the date hereof), calculated in accordance with General Instruction I.B.6 of Form S-3. After giving effect to the $2,345,862 offering limit imposed by General Instruction I.B.6 of Form S-3, and after deducting the shares we sold within the preceding 12 months, as of the date of filing this Annual Report, we may sell $2,345,862 shares of our common stock at this time under the 2023 Shelf Registration Statement.

Current wording

As of August 29, 2025, the date on which this Annual Report on Form 10-K for the fiscal year ended May 31, 2025, is filed with the SEC, our 2023 Registration Statement remains subject to the offering limits set forth in General Instruction I.B.6 of Form S-3 because our public float is less than $75 million. For so long as the Company’s public float is less than $75 million, the aggregate market value of securities sold by the Company under the 2023 Shelf Registration Statement pursuant to Instruction I.B.6 to Form S-3 during any 12 consecutive months may not exceed one-third of the Company’s public float. For purposes of this limitation, the aggregate market value of our outstanding common stock held by non-affiliates, or public float, was $9,945,252, based on 2,402,235 non-restricted shares of our outstanding common stock held by non-affiliates and a price of $4.14 per share, which was the price at which our common stock was last sold on the Nasdaq Capital Market on July 24, 2025 (a date within 60 days of the date hereof), calculated in accordance with General Instruction I.B.6 of Form S-3. After giving effect to the $3,315,084 offering limit imposed by General Instruction I.B.6 of Form S-3, and after deducting the shares we sold within the preceding 12 months, as of the date of filing this Annual Report, we may sell $231,986 shares of our common stock at this time under the 2023 Shelf Registration Statement**.**

Previous wording

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.

Current wording

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

Previous wording

We record valuation reserves for inventory items with excess quantities and obsolescence exposure. These reserves are estimates of a reduction in value to reflect inventory valuation at the lower of cost or net realizable value. 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. Our inventory valuation reserves totaled $467,000 and $672,000 as of May 31, 2024 and 2023, representing approximately 16% and 25% of our inventory, respectively.

Current wording

We record valuation reserves for inventory items with excess quantities and obsolescence exposure. These reserves are estimates of a reduction in value to reflect inventory valuation at the lower of cost or net realizable value. 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. Our inventory valuation reserves totaled $471,000 and $467,000 as of May 31, 2025 and 2024, representing approximately 24% and 16% of our inventory, respectively.

Previous wording

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 the Company’s present or future consolidated financial statements.

Current wording

Recent ASU’s issued by the Financial Accounting Standards Board (“FASB”) and guidance issued by the SEC did not, or are not believed by the management to, have a material effect on the Company’s present or future consolidated financial statements.

Previous wording

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, “Improvements to Reportable Segment Disclosures.” The ASU includes enhanced disclosure requirements, primarily related to significant segment expenses that are regularly provided to and used by the chief operating decision maker (“CODM”). The amendments are to be applied retrospectively to all prior periods presented in the financial statements. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, with early adoption permitted. We are currently evaluating the effect of adopting this pronouncement on our financial statements and disclosures.

Current wording

In November 2023, the FASB issued ASU 2023-07, “Improvements to Reportable Segment Disclosures.” The ASU includes enhanced disclosure requirements, primarily related to significant segment expenses that are regularly provided to and used by the chief operating decision maker (“CODM”). The amendments are to be applied retrospectively to all prior periods presented in the financial statements. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, with early adoption permitted. The Company adopted ASU 2023-07 on May 31, 2025, and the adoption of this update did not have a material impact on the Company’s consolidated financial statements.

Previous wording

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

Current wording

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The ASU includes enhanced disclosure requirements, primarily related to the rate reconciliation and income taxes paid information. The amendments are to be applied prospectively in the financial statements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted ASU 2023-07 on May 31, 2025, and the adoption of this update did not have a material impact on the Company’s consolidated financial statements.