Biomerica(BMRA) - 2025 Q4 - Annual Report

FORM 10-K Filing Information General Information Biomerica, Inc. files its annual Form 10-K for FY2025, confirming Nasdaq listing (BMRA) and non-accelerated filer status - Biomerica, Inc. is filing its Annual Report on Form 10-K for the fiscal year ended May 21, 2025[2] Securities Registered under Section 12(b) of the Exchange Act | Title of each class | Trading Symbols | Name of each exchange on which registered | | :------------------ | :-------------- | :---------------------------------------- | | Common Stock, par value $0.08 | BMRA | Nasdaq Capital Market | - The registrant is a Non-Accelerated Filer and a Smaller Reporting Company[4] - The aggregate market value of common stock held by non-affiliates as of November 30, 2024, was approximately $6.4 million, adjusted for a 1-for-8 reverse stock split effective April 21, 2025[6] Cautionary Note Regarding Forward Looking Statements This standard disclaimer warns that forward-looking statements may differ materially from actual results due to various risks - The Annual Report contains forward-looking statements regarding strategy, future operations, expenses, financial position, revenue, costs, prospects, plans, intentions, expectations, goals, and objectives[10] - Forward-looking statements are not guarantees of future performance, and actual results may differ materially due to significant known and unknown risks, uncertainties, and other factors[11] Factors Causing Material Differences Key factors causing material differences include capital, financial estimates, IP protection, competition, and regulatory issues - Key factors that could cause actual results to differ include the ability to raise additional capital, accuracy of financial estimates, intellectual property protection, competitive landscape, regulatory certifications, distributor relations, global economic and political developments, business model implementation, and retention of key personnel[13] Table of Contents This section indexes the Annual Report on Form 10-K, outlining its structure and page numbers for major sections PART I ITEM 1. BUSINESS Biomerica's business overview covers products, R&D, strategies, global operations, markets, and intellectual property BUSINESS OVERVIEW Biomerica is a global biomedical technology company developing advanced diagnostic and therapeutic products - Biomerica is a global biomedical technology company that develops, patents, manufactures, and markets advanced diagnostic and therapeutic products[19] - Diagnostic test kits analyze blood, urine, nasal, or fecal material for various diseases, food intolerances, and medical complications, aiming to enhance health and reduce healthcare costs[19] - Products are sold worldwide in clinical laboratories and point-of-care settings, with most being CE marked and/or registered with regulatory agencies, and several cleared by the U.S. FDA[20] TECHNOLOGICAL ADVANCEMENTS AND PRODUCT DEVELOPMENT The company focuses on developing accurate, simple, and rapid diagnostic tests for point-of-care and home use - A key objective is to develop and market rapid diagnostic tests that are accurate, use easily obtained patient specimens, and are simple to perform without complex instrumentation[21] - The company's rapid point-of-care tests are designed for home or physician's office use, delivering reliable results in minutes, comparable to laboratory tests[21] RESEARCH AND DEVELOPMENT R&D expenses decreased, reflecting a shift to commercialization and new applications for inFoods® technology Consolidated Research and Development Expenses | Fiscal Year Ended May 31, | Amount | | :------------------------ | :--------- | | 2025 | $1,023,000 | | 2024 | $1,491,000 | - The decrease in R&D expenses reflects a transition from intensive product development to the commercialization phase of inFoods® IBS and hp+detect™, alongside broader cost management efforts[23] - The company is pursuing additional applications for inFoods® technology for diseases like Functional Dyspepsia, Crohn's Disease, Ulcerative Colitis, GERD, Migraine Headaches, Depression, and Osteoarthritis, with patents filed globally[24] - Research led to FDA 510(k) clearance of hp+detect™, a diagnostic test for Helicobacter pylori, with commercialization activities in early stages[25] KEY PRODUCT LAUNCHES Key product launches include inFoods® IBS for IBS and FDA-cleared hp+detect™ for Helicobacter pylori - The patented diagnostic-guided therapy (DGT) product, inFoods® IBS, uses a simple blood test to identify patient-specific food triggers for IBS symptoms, offering a targeted dietary approach[26] - inFoods® product has been introduced to gastroenterology physician groups in multiple states, with positive initial feedback and ongoing expansion efforts[27] - FDA clearance for hp+detect™ was received in December 2023, a diagnostic test for Helicobacter pylori, a significant risk factor for gastric cancer, and is being marketed to laboratories[29] STRATEGIC INITIATIVES AND COST MANAGEMENT Strategic initiatives include workforce reduction and ATM offering to optimize costs and extend cash runway - Proactive steps to optimize cost structure and extend cash runway include a workforce reduction of approximately 15% during the fiscal year[30] Net Proceeds from ATM Offering | Offering | Net Proceeds | | :--------- | :----------- | | May 2024 ATM | $2,015,000 | OPERATIONS AND GLOBAL PRESENCE Biomerica's operations include Irvine headquarters, Mexicali manufacturing, and BioEurope GmbH for international sales - Biomerica is headquartered in Irvine, California, centralizing administration, finance, regulatory compliance, product development, sales, marketing, customer service, and primary manufacturing[31] - The company maintains manufacturing and assembly operations in Mexicali, Mexico, and operates BioEurope GmbH in Europe for international sales[31] PRODUCTION Production involves manufacturing diagnostic test kits in California and Mexico, with quality control and regulatory compliance - Diagnostic test kits are manufactured and/or assembled at facilities in Irvine, California, and Mexicali, Mexico, with a significant portion of packaging and assembly moved to Mexico in fiscal 2003[33] - Production involves formulating component antibodies and antigens, attaching tracers, filling components, packaging, and labeling, with continuous quality control to comply with FDA and international regulations[34] - Manufacturing operations are regulated by FDA Current Good Manufacturing Practices for medical devices, and the company maintains internal quality and Quality Systems departments to ensure compliance with FDA, CE Mark, and ISO regulations[35] MARKETS AND METHODS OF DISTRIBUTION Biomerica's markets and distribution rely on distributors, advertising, and internal sales, with significant sales concentration - Biomerica has approximately 76 current diagnostic customers, including 34 foreign distributors, 4 domestic distributors, and domestic hospitals, clinical laboratories, research institutions, and e-commerce customers[36] - Marketing relies on distributors, advertising in medical/trade journals, trade shows, direct mailings, and an internal sales staff, targeting clinical laboratories and point-of-care testing[38] Net Sales and Distributor Concentration | Fiscal Year Ended May 31, | Net Sales | Distributor Concentration (one distributor) | | :------------------------ | :----------- | :------------------------------------------ | | 2025 | $5,311,000 | 31% | | 2024 | $5,415,000 | 33% | Gross Receivables and Distributor Concentration | As of May 31, | Gross Receivables | Distributor Concentration (four distributors) | | :-------------- | :---------------- | :-------------------------------------------- | | 2025 | $757,000 | 69% (27% from North America) | | 2024 | $966,000 | 64% | BACKLOG The backlog of unshipped orders for FY2025 and FY2024 is presented, with most of the 2025 backlog for Asia Backlog of Unshipped Orders | As of May 31, | Backlog Amount | | :-------------- | :------------- | | 2025 | $1,324,000 | | 2024 | $755,000 | - The majority of the backlog as of May 31, 2025, consisted of orders intended for shipment to Asia[42] RAW MATERIALS Principal raw materials are sourced from multiple suppliers, but critical components have limited sources and vendor concentration - Principal raw materials include chemicals, serums, reagents, and packaging supplies, mostly sourced from multiple suppliers, but critical materials like antibodies have limited sources[43] Raw Material Procurement from Single Vendor | Fiscal Year Ended May 31, | Percentage of Total Raw Material Procurement | | :------------------------ | :------------------------------------------- | | 2025 | 12% (primarily commodity plastic products) | | 2024 | 16% (primarily commodity plastic products) | COMPETITION Biomerica's competitive edge relies on product distinctiveness and patents, despite larger competitors - Proprietary products with competitive advantages include EZ Detect colon disease home test, Aware Breast Self-Exam, inFoods IBS, and hp+detect for H. pylori detection[46] - Competitors vary greatly in size, with many being larger medical and pharmaceutical companies with significantly greater resources for R&D, manufacturing, advertising, and marketing[47] - Competitive edge is based on product distinctiveness, high quality, rapid test results, and a strong patent portfolio, despite limited marketing capabilities[48] GOVERNMENT REGULATION OF OUR DIAGNOSTIC BUSINESS Biomerica's medical devices are extensively regulated by FDA and European agencies, requiring compliance with various standards - The company's products are primarily medical devices and in vitro diagnostic medical devices, subject to extensive regulation by numerous governmental entities including the FDA, EPA, FTC, and European agencies[49] - Products are mainly Class I or Class II medical devices under the FDCA, requiring compliance with general controls and special controls, respectively[50] - The company's manufacturing facility is FDA-registered and subject to routine inspections for compliance with Quality System Regulation (QSR) and Medical Device Reporting (MDR)[51] - In Europe, products require a CE Mark and compliance with IVDD, MDR, and IVDR, as well as ISO 13485:2016 and EN ISO 14971:2019[52] - The company submitted a formal application to its notified body by May 26, 2025, to comply with the new EU IVDR 2017/746 Amendment Regulation (EU) 2022/112, allowing devices with IVDD CE certificates to be placed on the market until December 31, 2027[58] SEASONALITY OF BUSINESS This section states that the company's business has not experienced significant seasonal fluctuations - The company's business has not been subject to significant seasonal fluctuations[60] INTERNATIONAL BUSINESS International business revenue and risks are detailed, including reliance on independent distributors Revenue Attributable to Domestic and Foreign Customers | Region | 2025 Revenue | 2025 % | 2024 Revenue | 2024 % | | :------------ | :----------- | :----- | :----------- | :----- | | Asia | $1,718,000 | 32% | $1,881,000 | 35% | | Europe | $1,297,000 | 24% | $1,438,000 | 27% | | North America | $1,658,000 | 31% | $1,285,000 | 24% | | Middle East | $630,000 | 13% | $800,000 | 14% | | South America | $8,000 | 0% | $11,000 | 0% | | Total | $5,311,000 | 100% | $5,415,000 | 100% | - International operations face distinct risks including economic fluctuations, regulatory changes, geopolitical instability, tariffs, embargoes, import/export restrictions, and disruptions in shipping/distribution[61] - The company relies on approximately 38 independent distributors across around 30 countries for international sales, each with its own licensing requirements[62] INTELLECTUAL PROPERTY Protecting methodologies, designs, product formulations, and patents is essential for future success, utilizing legal safeguards - Protection of methodologies, designs, product formulations, manufacturing processes, diagnostic procedures, copyrights, service marks, trademarks, and trade secrets is essential for future success, utilizing various legal safeguards and contractual restrictions[63] LICENSE OF THIRD-PARTY INTELLECTUAL PROPERTY The company in-licenses third-party intellectual property and patents, typically involving royalty and other payment obligations - The company in-licenses exclusive and non-exclusive rights to third-party intellectual property and patents, typically requiring royalties and other payments[66] Royalty Expenses for ACTH Test Agreement | Fiscal Year Ended May 31, | Royalty Expense | | :------------------------ | :-------------- | | 2025 | $7,000 | | 2024 | $10,000 | BRANDS AND TRADEMARKS This section lists the company's registered and unregistered tradenames, including 'InFoods' and 'Aware' - Registered tradenames include 'InFoods' (December 2016) and 'Aware' (renewed 2021), with unregistered tradenames like 'EZ Detect,' 'EZ-H.P.,' and 'EZ-PSA'[69] PATENTS AND INFOODS TECHNOLOGY The company holds an extensive patent portfolio, including 15 pending or registered patents for inFoods® technology - The company has filed dozens of international and PCT patents, with approximately 15 pending or registered patents pertaining to the inFoods® technology platform[71] - The inFoods® technology platform is a method for diagnosing and treating symptoms of various inflammatory diseases, with the first product being inFoods® IBS[72] - Issued inFoods® IBS patents exist in the U.S., Australia, Canada, Japan (two), Korea (two), Mexico, Panama, Peru, and Singapore, with additional applications in prosecution[73] - Patents are also filed for other diseases utilizing inFoods® technology, including Functional Dyspepsia, Crohn's disease, Ulcerative Colitis, GERD, Migraine Headaches, Depression, and Osteoarthritis, as well as IT platforms and AI/ML tools for food monitoring[74] EMPLOYEES Employee count for FY2025 and FY2024 is provided, noting engagement of external experts for support Employee Count | As of May 31, | Total Employees | | :-------------- | :-------------- | | 2025 | 54 | | 2024 | 64 | - The company engages external experts (Ph.D.'s, M.D.'s) and medical institutions for technical support, regulatory guidance, marketing, financial advisory, and contract product development/manufacturing, with confidentiality agreements in place[80] CORPORATE HISTORY Biomerica, Inc.'s corporate structure is a Delaware corporation operating through two wholly-owned subsidiaries - Biomerica, Inc. is a Delaware corporation operating through two wholly-owned subsidiaries: Biomerica de Mexico (assembly and manufacturing) and BioEurope GmbH (international product distribution)[81] ITEM 1A. RISK FACTORS This section details comprehensive risks that could materially affect Biomerica's business, financial condition, and future prospects RISKS RELATED TO OUR BUSINESS This section outlines various operational, financial, market, regulatory, and intellectual property risks specific to Biomerica's business - The company has a history of operating losses and its ability to achieve future profitability is uncertain, which could lead to a decline in common stock value and necessitate additional funding[84] - There is substantial doubt about the company's ability to continue as a going concern for the next 12 months due to recurring losses and insufficient cash, requiring additional financing or operational improvements[85][86] - Operating results are subject to adverse fluctuations from factors outside control, including regulatory clearances, competition, reimbursement changes, economic conditions, and market penetration of new products[87] - The company must continuously develop and protect proprietary technology to remain competitive, requiring considerable resources with no assurance of commercial viability or market acceptance for new products like inFoods® IBS and hp+detect™[89][90][91] - Risks include the potential loss of government or regulatory certifications in various countries, especially with evolving EU IVDR requirements, which could increase compliance costs and limit sales[93] - Operating a manufacturing facility in Mexico exposes the company to international risks such as local economic/political conditions, trade restrictions, currency fluctuations, and labor shortages[94] - The use of hazardous materials in research and production presents risks of accidental contamination, injury, and significant liability, potentially exceeding insurance coverage and incurring substantial environmental compliance costs[95][96] - High reliance on a limited number of key distributors (one accounted for 31% of net sales in FY2025) makes the company vulnerable to adverse changes in these relationships or their financial condition[97][98] - International sales face risks from diverse regulatory requirements, tariffs, currency exchange fluctuations, longer payment cycles, difficulties in collecting receivables, and reduced intellectual property protection in foreign markets[99][100][101] - The financial soundness of customers, distributors, and suppliers can adversely affect operational results and financial condition, potentially impacting cash flow and product supply[104][105][106] - Managing growth strategy, including scaling operations and entering new markets, could strain resources and systems, leading to inefficiencies and adverse financial impacts[109][110] - The diagnostic products industry is highly competitive, with larger competitors possessing greater resources, which could reduce sales and margins[111][112][113] - Intellectual property risks include theft, inability to secure adequate patent protection, and third-party infringement claims, potentially leading to costly litigation, product redesigns, or royalty payments[115][116][117][118][119][120] - The company needs to raise additional funds to finance future capital and operating needs, which could dilute existing stockholders or be unavailable on favorable terms, potentially delaying or eliminating development programs[121][122][123] - Business and products are highly regulated, and failures or delays in regulatory approvals, loss of existing approvals, or changes in laws could negatively affect manufacturing and marketing[124] - Changes in government policy, such as tariffs, tax policy, or healthcare reform, could increase costs, affect sales, and negatively impact profitability[125] - Compliance with numerous laws beyond FDA regulations (e.g., environmental, data privacy) could increase costs, and non-compliance could result in fines or operational shutdowns[126] - Revenue is affected by third-party reimbursement policies; inadequate reimbursement for products, especially inFoods® IBS, could reduce demand and profitability[127] - Inability to meet unexpected increases in demand due to manufacturing problems or supply shortfalls could harm customer relationships and reputation, requiring additional capital or third-party manufacturers[128][129][130] - Claims of product defects or failure to meet performance criteria could lead to product recalls, liability claims, harm to patients, and reputational damage, potentially exceeding insurance coverage[131][132] - Clinical trials are lengthy, expensive, and uncertain, with no guarantee of positive results or timely completion, potentially affecting regulatory approvals and licensing[133][134] - Failures in information technology and storage systems, many outsourced, or data security breaches could significantly disrupt business, incur excessive costs, and lead to data loss, regulatory actions, and reputational damage[135][136][137][138][139][140] - Future success depends on retaining key technical, sales, marketing, and executive personnel, and the recent workforce reduction may increase workload and make talent retention/recruitment difficult[141][142] - Future sales of common stock to raise capital could dilute existing stockholders and depress the market price. The stock price is also subject to unpredictable market fluctuations unrelated to operating performance[143][144][145][146][147][148][149] - The ability to use federal and state net operating loss carryforwards (approximately $28.4 million and $26.9 million, respectively, as of May 31, 2025) may be limited by future income or ownership changes under IRC Sections 382 and 383[150] ITEM 1B. UNRESOLVED STAFF COMMENTS This section confirms that there are no unresolved staff comments from the SEC - There are no unresolved staff comments[151] ITEM 1C. CYBERSECURITY The company maintains an information security program to manage cybersecurity threats, with Board oversight - The company has implemented an information security program to identify, assess, and manage material risks from cybersecurity threats to its critical computer networks, hosted services, communication systems, hardware, software, and data[152][153] - Cybersecurity risk management is integrated into the broader risk management framework, with the management team working closely with the IT department and a third-party IT managed services vendor[162] - The Board of Directors oversees cybersecurity risk management, receiving regular quarterly briefings on risks and incidents from the CFO[154] ITEM 2. PROPERTIES Biomerica leases headquarters in Irvine, manufacturing in Mexicali, and an office in Lindau, Germany - The company leases approximately 22,000 square feet for its corporate headquarters in Irvine, California, with the current lease extended until August 31, 2026[156] - Biomerica de Mexico leases approximately 8,100 square feet of manufacturing space in Mexicali, Mexico, under a 10-year lease from November 2016, with a 10-year renewal option[157] - A small office is leased month-to-month in Lindau, Germany, for BioEurope GmbH[157] ITEM 3. LEGAL PROCEEDINGS No pending legal proceedings as of May 31, 2025, and management anticipates no material adverse effects from future matters - As of May 31, 2025, there were no pending legal proceedings[160] - Management believes that any future legal matters will not have a material adverse effect on the company's consolidated financial position, results of operations, or cash flows[160] ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to Biomerica, Inc. - This item is not applicable[161] PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES This section covers common stock market, holders, dividend policy, and issuer equity purchases, noting no cash dividends Market Information This section states that the company's common stock is listed for trading on the Nasdaq Capital Market under the symbol BMRA - The company's common stock is listed for trading on the Nasdaq Capital Market under the symbol BMRA[163] Holders This section reports approximately 858 holders of record for Biomerica's common stock as of August 29, 2025 - As of August 29, 2025, there were approximately 858 holders of record of Biomerica's common stock, excluding stock held in street name[164] Dividends The company has not paid cash dividends on its common stock historically and does not plan to in the foreseeable future - The company has not paid any cash dividends on its common stock in the past and does not plan to pay any in the foreseeable future, intending to retain earnings for business operations and expansion[165] Performance Graph As a smaller reporting company, Biomerica is not required to provide a performance graph - As a smaller reporting company, Biomerica is not required to provide a performance graph[166] Recent Sales of Unregistered Securities This section states that there were no recent sales of unregistered securities - There were no recent sales of unregistered securities[167] Purchases of Equity Securities by the Issuer and Affiliated Purchasers The company did not purchase any of its common stock or other securities during the fiscal year ended May 31, 2025 - The company did not purchase any of its common stock or other securities during the fiscal year ended May 31, 2025[168] ITEM 6. RESERVED This item is reserved and not required for the company - This item is reserved and not required[169] ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management discusses Biomerica's financial condition and operating results for FY2025 and FY2024, covering sales, expenses, and liquidity OVERVIEW Biomerica, a global biomedical technology company, focuses on advanced diagnostic and therapeutic products, expanding inFoods® IBS - Biomerica is a global biomedical technology company focused on developing, patenting, manufacturing, and marketing advanced diagnostic and therapeutic products, primarily for clinical laboratories and point-of-care settings[172][173][174] - Key products include the patented inFoods® IBS diagnostic-guided therapy for gastrointestinal conditions and the FDA-cleared hp+detect™ for Helicobacter pylori detection[175][176][183] - The company is expanding its inFoods® product to gastroenterology physician groups, exploring distribution/partnership opportunities, and applying for U.S. government reimbursement for inFoods® IBS[178][179][180][181] - Due to slower-than-expected product launches, significant cost-cutting measures, including a nearly 15% workforce reduction, have been implemented to extend cash runway[184] Reverse Stock Split A 1-for-8 reverse stock split became effective on April 21, 2025, retroactively adjusting all historical share and per share data - A 1-for-8 reverse stock split became effective on April 21, 2025, with common stock trading on Nasdaq on a split-adjusted basis under 'BMRA'[185] - All historical share and per share data in consolidated financial statements have been retroactively adjusted to reflect the reverse stock split[186] RESULTS OF OPERATIONS This section analyzes Biomerica's net sales, cost of sales, operating expenses, and dividend and interest income for fiscal years 2025 and 2024 Net Sales and Cost of Sales Net sales decreased by 2% in FY2025 due to reduced retail activity, partially offset by contract manufacturing and inFoods® IBS sales Net Sales Breakdown by Market | Market | 2025 Sales | 2024 Sales | Increase (Decrease) $ | Increase (Decrease) % | | :--------------------- | :----------- | :----------- | :-------------------- | :-------------------- | | Clinical lab | $3,181,000 | $3,236,000 | $(55,000) | -2% | | Over-the-counter | $1,049,000 | $1,426,000 | $(377,000) | -26% | | Contract manufacturing | $1,070,000 | $741,000 | $329,000 | 44% | | Physician's office | $11,000 | $12,000 | $(1,000) | -8% | | Total | $5,311,000 | $5,415,000 | $(104,000) | -2% | - Net sales decreased by 2% in FY2025, primarily due to reduced retail market activity and lower international over-the-counter sales, partially offset by higher contract manufacturing and inFoods® IBS sales[188] Consolidated Cost of Sales | Fiscal Year Ended May 31, | Cost of Sales | % of Net Sales | | :------------------------ | :------------ | :------------- | | 2025 | $4,813,000 | 91% | | 2024 | $4,804,000 | 89% | - Cost of sales slightly increased by 0.2% in FY2025, driven by higher contract manufacturing and inFoods® product costs, partially offset by reduced direct labor, with overall margin impacted by a shift to lower-margin sales mix[189] Operating Expenses Operating expenses, including SG&A and R&D, are summarized for fiscal years 2025 and 2024 Operating Expenses Summary | Operating Expense Category | 2025 Amount | 2025 % of Total Revenues | 2024 Amount | 2024 % of Total Revenues | Change $ | Change % | | :----------------------------------- | :---------- | :----------------------- | :---------- | :----------------------- | :----------- | :------- | | Selling, General and Administrative Expenses | $4,612,000 | 87% | $5,487,000 | 101% | $(875,000) | -16% | | Research and Development | $1,023,000 | 19% | $1,491,000 | 28% | $(468,000) | -31% | Selling, General and Administrative Expenses SG&A expenses decreased by $875,000 (16%) in FY2025, primarily due to reduced payroll, stock compensation, and marketing expenses - SG&A expenses decreased by $875,000 (16%) in FY2025, primarily due to a $351,000 reduction in payroll expenses from a July 2024 workforce reduction, a $327,000 decrease in stock compensation, and reduced marketing and sales outside services[192] Research and Development R&D expenses decreased by $468,000 (31%) in FY2025, mainly due to payroll reductions and cost savings for inFoods® R&D and hp+detect™ projects - R&D expenses decreased by $468,000 (31%) in FY2025, mainly due to a $311,000 reduction in payroll expenses following a July 2024 workforce reduction, $68,000 in cost savings for inFoods® R&D, and a $33,000 reduction in hp+detect™ project expenses as its research phase completed[193] Dividend and Interest income Dividend and interest income decreased by $266,000 in FY2025, primarily due to lower market interest rates and reduced cash balances Dividend and Interest Income | Fiscal Year Ended May 31, | Amount | | :------------------------ | :------- | | 2025 | $165,000 | | 2024 | $431,000 | - Dividend and interest income decreased by $266,000 in FY2025, primarily due to lower market interest rates on cash and cash equivalents, and a reduction in cash balances[194] LIQUIDITY, CAPITAL RESOURCES AND GOING CONCERN Liquidity, capital resources, and going concern status are discussed, highlighting insufficient cash and strategies to address needs Liquidity Summary | As of May 31, | Cash and Cash Equivalents | Working Capital | | :-------------- | :------------------------ | :-------------- | | 2025 | $2,399,000 | $3,135,000 | | 2024 | $4,170,000 | $5,527,000 | - The company's current cash and cash equivalents are insufficient to meet operating cash requirements and strategic growth objectives for the next twelve months, raising substantial doubt about its ability to continue as a going concern[195][201] - Strategies to address capital needs include increasing sales, reducing expenses (e.g., nearly 16% workforce reduction), selling non-core assets, and seeking additional debt or equity financing[196][197] - In FY2025, the company sold 440,687 shares of common stock through an ATM offering, generating net proceeds of $2,015,000, intended for general corporate purposes including sales, marketing, clinical studies, and product development[199][200] Operating Activities Cash used in operating activities decreased in FY2025 due to a lower net loss and favorable changes in inventory and accounts receivable Cash Used in Operating Activities | Fiscal Year Ended May 31, | Cash Used in Operating Activities | | :------------------------ | :-------------------------------- | | 2025 | $(3,841,000) | | 2024 | $(5,361,000) | - The decrease in cash used in operating activities in FY2025 was primarily due to a lower net loss and favorable changes in inventory and accounts receivable, partially offset by decreases in accounts payable and accrued expenses[203] Investing Activities Cash used in investing activities decreased in FY2025, solely for patent expenditures, compared to FY2024 which also included property and equipment purchases Cash Used in Investing Activities | Fiscal Year Ended May 31, | Cash Used in Investing Activities | | :------------------------ | :-------------------------------- | | 2025 | $(37,000) | | 2024 | $(115,000) | - Cash used in investing activities in FY2025 was solely for patent expenditures, a decrease from FY2024 which also included purchases of property and equipment[205] Financing Activities Financing activities provided $2,111,000 in FY2025, primarily from common stock sales, with $231,986 remaining under the 2023 Shelf Registration Cash Provided by (Used in) Financing Activities | Fiscal Year Ended May 31, | Cash Provided by (Used in) Financing Activities | | :------------------------ | :---------------------------------------------- | | 2025 | $2,111,000 | | 2024 | $(81,000) | - In FY2025, financing activities provided $2,111,000, primarily from $2,015,000 net proceeds from common stock sales and $15,000 from stock option exercises[206] - The company's 2023 Shelf Registration Statement has an offering limit of $3,315,084, with $231,986 remaining available for sale as of the filing date[208] SUBSEQUENT EVENTS Subsequent events include a $1.1 million IRS refund and $919,000 net proceeds from ATM stock sales in July and August 2025 - On July 21, 2025, the company received a cash refund of approximately $1.1 million from the IRS related to Employee Retention Credit claims[209] - In July and August 2025, the company generated approximately $919,000 in net proceeds from sales of common stock under its At-the-Market (ATM) offering program[210] OFF BALANCE SHEET ITEMS This section confirms that there were no off-balance sheet arrangements as of May 31, 2025 - There were no off-balance sheet arrangements as of May 31, 2025[211] CRITICAL ACCOUNTING ESTIMATES Key accounting estimates include allowance for doubtful accounts, revenue recognition, stock option forfeiture, inventory obsolescence, and lease valuations - Key estimates and assumptions include allowance for doubtful accounts, variable consideration in revenue recognition, stock option forfeiture rates, inventory obsolescence, and valuation of lease liabilities and right-of-use assets[212][213] REVENUE RECOGNITION Revenue from product sales is recognized at shipment, diagnostic services upon completion, and contract manufacturing as services are performed - Revenue from product sales is recognized at the time of shipment (FOB shipping point), when control transfers[215] - Revenue for diagnostic testing services is recognized once the third-party CLIA-certified lab completes test results[216] - Revenue for contract manufacturing services is recognized as the service is performed or as the project progresses[216] SHARE-BASED COMPENSATION The company follows ASC 718, using the fair-value based method for compensation, with the Black-Scholes model for options and fair value for RSUs - The company follows ASC 718, using the fair-value based method for compensation, with the Black-Scholes option-pricing model for options and fair value for RSUs[217] VALUATION OF INVENTORIES, NET Inventories are valued at the lower of cost or net realizable value, with reserves recorded for excess quantities and obsolescence - Inventories are valued at the lower of cost (specific lot identification and FIFO) or net realizable value, with valuation reserves recorded for excess quantities and obsolescence[218][219] Inventory Valuation Reserves | As of May 31, | Inventory Reserves | | :-------------- | :----------------- | | 2025 | $471,000 | | 2024 | $467,000 | RECENT ACCOUNTING PRONOUNCEMENTS The company adopted ASU 2023-07 and ASU 2023-09 with no material impact and is evaluating ASU 2024-03 - The company adopted ASU 2023-07 (Improvements to Reportable Segment Disclosures) and ASU 2023-09 (Improvements to Income Tax Disclosures) on May 31, 2025, with no material impact on consolidated financial statements[221][222] - The company is currently evaluating the effect of adopting ASU 2024-03 (Expense Disaggregation Disclosures), effective for annual periods beginning after December 15, 2026[223] ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, Biomerica, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide information under this item[224] ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA This section presents Biomerica's audited consolidated financial statements for FY2025 and FY2024, including the independent auditor's report and detailed notes INDEX TO FINANCIAL STATEMENTS This section provides a table of contents for the consolidated financial statements, including balance sheets, statements of operations, equity, cash flows, and notes - Provides a table of contents for the consolidated financial statements, including balance sheets, statements of operations and comprehensive loss, shareholders' equity, cash flows, and notes[226][254] REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Haskell & White LLP issued an unqualified opinion on the consolidated financial statements, noting substantial doubt about the company's going concern ability - Haskell & White LLP issued an unqualified opinion on the consolidated financial statements for May 31, 2025 and 2024, stating they are presented fairly in all material respects[256] - The report includes an explanatory paragraph highlighting substantial doubt about the company's ability to continue as a going concern due to recurring losses and negative cash flows[257] Critical Audit Matter The critical audit matter identified is Inventory Valuation, due to extensive use of estimates for capitalized labor, overhead, and obsolete inventories - The critical audit matter identified is Inventory Valuation, due to the extensive use of estimates for capitalized labor and overhead, and for slow-moving and obsolete inventories[263] - Audit procedures included understanding management's methodologies, testing the reasonableness of cost pools and inventory quantities, recalculating allocable rates, performing sensitivity analyses, and evaluating qualitative analyses of reserves[264] CONSOLIDATED FINANCIAL STATEMENTS This section presents the core consolidated financial statements, including balance sheets, statements of operations, shareholders' equity, and cash flows Consolidated Balance Sheets This section presents the consolidated balance sheets, detailing assets, liabilities, and shareholders' equity as of May 31, 2025 and 2024 Consolidated Balance Sheet Highlights | Item | May 31, 2025 | May 31, 2024 | | :------------------------ | :----------- | :----------- | | Cash and cash equivalents | $2,399,000 | $4,170,000 | | Total current assets | $4,875,000 | $7,731,000 | | Total Assets | $5,945,000 | $9,254,000 | | Total current liabilities | $1,740,000 | $2,204,000 | | Total Liabilities | $1,840,000 | $2,663,000 | | Total Shareholders' Equity | $4,105,000 | $6,591,000 | | Accumulated deficit | $(53,168,000) | $(48,195,000) | Consolidated Statements of Operations and Comprehensive Loss This section presents consolidated statements of operations and comprehensive loss, detailing net sales, gross profit, operating expenses, and net loss Consolidated Statements of Operations and Comprehensive Loss Highlights | Item | For the Year Ended May 31, 2025 | For the Year Ended May 31, 2024 | | :------------------------ | :------------------------------ | :------------------------------ | | Net sales | $5,311,000 | $5,415,000 | | Cost of sales | $(4,813,000) | $(4,804,000) | | Gross profit | $498,000 | $611,000 | | Total operating expense | $5,635,000 | $6,978,000 | | Loss from operations | $(5,137,000) | $(6,367,000) | | Net loss | $(4,973,000) | $(5,978,000) | | Basic net loss per common share | $(2.16) | $(2.84) | | Comprehensive loss | $(4,976,000) | $(5,970,000) | Consolidated Statements of Shareholders' Equity This section presents the consolidated statements of shareholders' equity, detailing changes in common stock, additional paid-in capital, and accumulated deficit Consolidated Statements of Shareholders' Equity Highlights | Item | Balances at May 31, 2023 | Balances at May 31, 2024 | Balances at May 31, 2025 | | :------------------------ | :----------------------- | :----------------------- | :----------------------- | | Common Stock Shares | 2,103,154 | 2,103,154 | 2,546,216 | | Common Stock Amount | $168,000 | $168,000 | $203,000 | | Additional Paid-in Capital | $53,883,000 | $54,720,000 | $57,175,000 | | Accumulated Other Comprehensive Loss | $(110,000) | $(102,000) | $(105,000) | | Accumulated Deficit | $(42,217,000) | $(48,195,000) | $(53,168,000) | | Total Stockholders' Equity | $11,724,000 | $6,591,000 | $4,105,000 | Consolidated Statements of Cash Flows This section presents consolidated statements of cash flows, detailing cash used in operating, investing, and financing activities Consolidated Statements of Cash Flows Highlights | Item | For the Year Ended May 31, 2025 | For the Year Ended May 31, 2024 | | :------------------------------------ | :------------------------------ | :------------------------------ | | Net cash used in operating activities | $(3,841,000) | $(5,361,000) | | Net cash used in investing activities | $(37,000) | $(115,000) | | Net cash provided by (used in) financing activities | $2,111,000 | $(81,000) | | Net decrease in cash and cash equivalents | $(1,770,000) | $(5,549,000) | | Cash and cash equivalents at end of year | $2,400,000 | $4,170,000 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS This section provides detailed notes to the consolidated financial statements, offering further explanation and context for the reported financial data NOTE 1: ORGANIZATION This note describes Biomerica, Inc. as a global biomedical technology company focused on diagnostic and therapeutic products, particularly for gastrointestinal diseases - Biomerica, Inc. is a global biomedical technology company focused on developing, patenting, manufacturing, and marketing advanced diagnostic and therapeutic products[275] - Primary focus is on patented diagnostic-guided therapy (DGT) products for gastrointestinal diseases like IBS, with the inFoods® IBS product designed to identify patient-specific food triggers[276] - Products are sold worldwide in clinical laboratories and point-of-care settings, with most having CE Mark clearance and/or FDA clearance for sale in the U.S[277] NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the company's significant accounting policies, including principles of consolidation, estimates, revenue recognition, and share-based compensation PRINCIPLES OF CONSOLIDATION Consolidated financial statements include Biomerica, Inc. and its wholly-owned subsidiaries, with all significant intercompany transactions eliminated - Consolidated financial statements include Biomerica, Inc. and its wholly-owned subsidiaries, BioEurope GmbH (Germany) and Biomerica de Mexico (Mexico), with all significant intercompany accounts and transactions eliminated[278] ACCOUNTING ESTIMATES Key accounting estimates include allowance for doubtful accounts, variable consideration, stock option forfeiture, inventory obsolescence, and lease valuations - Key accounting estimates include allowance for doubtful accounts, variable consideration in revenue recognition, stock option forfeiture rates, inventory obsolescence, and valuation of lease liabilities and right-of-use assets[279] REVERSE STOCK SPLIT A 1-for-8 reverse stock split became effective on April 21, 2025, retroactively adjusting all common stock and per share information - A 1-for-8 reverse stock split became effective on April 21, 2025, retroactively adjusting all common stock, per share, and related information in the financial statements[281] LIQUIDITY AND GOING CONCERN The company's liquidity and going concern status are discussed, noting recurring losses, insufficient cash, and strategies to secure additional financing - The company has incurred net losses and negative cash flows from operations, with an accumulated deficit of approximately $53.2 million as of May 31, 2025[282] Cash and Working Capital | As of May 31, | Cash and Cash Equivalents | Working Capital | | :-------------- | :------------------------ | :-------------- | | 2025 | $2,399,000 | $3,135,000 | | 2024 | $4,170,000 | $5,527,000 | - Current cash and cash equivalents are insufficient for operating and strategic growth objectives for the next 12 months, raising substantial doubt about the company's ability to continue as a going concern[286][287] - Strategies to address capital needs include increasing sales, reducing expenses, selling non-core assets, and seeking additional financing through debt or equity[287] FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts of the company's financial instruments approximate their fair values - The carrying amounts of the company's financial instruments (cash and cash equivalents, accounts receivable, and accounts payable) approximate their fair values[291] CONCENTRATION OF CREDIT RISK This section details credit risk concentration, including cash balances, distributor reliance, and raw material vendor concentration - The company maintains cash balances at financial institutions that may exceed federal insurance limits but does not believe it is exposed to significant credit risks[292] Net Sales and Distributor Concentration | Fiscal Year Ended May 31, | Net Sales | Distributor Concentration (one distributor) | | :------------------------ | :----------- | :------------------------------------------ | | 2025 | $5,311,000 | 41% (two distributors) | | 2024 | $5,415,000 | 33% (one distributor) | Gross Receivables and Distributor Concentration | As of May 31, | Gross Receivables | Distributor Concentration (four distributors) | | :-------------- | :---------------- | :-------------------------------------------- | | 2025 | $757,000 | 69% (27% from North America) | | 2024 | $966,000 | 64% | Raw Material Vendor Concentration | Fiscal Year Ended May 31, | Percentage of Raw Material Purchases from One Vendor | | :------------------------ | :--------------------------------------------------- | | 2025 | 12% | | 2024 | 16% | GEOGRAPHIC CONCENTRATION This section details the geographic concentration of inventory and property and equipment in Mexicali, Mexico Inventory and Property & Equipment in Mexicali, Mexico | As of May 31, | Gross Inventory | Property and Equipment, Net | | :-------------- | :-------------- | :-------------------------- | | 2025 | $483,000 | $10,000 | | 2024 | $537,000 | $14,000 | CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of demand deposits and money market accounts with original maturities of less than three months - Cash and cash equivalents consist of demand deposits and money market accounts with original maturities of less than three months[299] ACCOUNTS RECEIVABLE, NET The company extends unsecured credit to customers and adopted ASU 2016-13 (CECL model) for estimating expected credit losses - The company extends unsecured credit to customers, with international customers typically prepaying until a credit history is established[300] - The company adopted ASU 2016-13 (CECL model) on June 1, 2023, for estimating expected credit losses based on historical experience and current/future economic conditions[301] Allowance for Credit Losses | As of May 31, | Allowance Amount | | :-------------- | :--------------- | | 2025 | $26,000 | | 2024 | $19,000 | PREPAID EXPENSES AND OTHER Prepaid expenses and other assets are detailed, primarily consisting of prepayments for insurance and various other suppliers Prepaid Expenses and Other | As of May 31, | Amount | | :-------------- | :------- | | 2025 | $255,000 | | 2024 | $238,000 | - Prepaid expenses consist of prepayments for insurance and various other suppliers[303] INVENTORIES, NET Inventories are valued at the lower of cost or net realizable value, with periodic review for excess quantities and obsolescence - Inventories are valued at the lower of cost (specific lot identification and FIFO) or net realizable value, with periodic review for excess quantities and obsolescence[304] Net Inventories Breakdown | Item | May 31, 2025 | May 31, 2024 | | :-------------------- | :----------- | :----------- | | Raw materials | $1,071,000 | $1,519,000 | | Work in progress | $743,000 | $1,145,000 | | Finished products | $147,000 | $179,000 | | Total gross inventory | $1,961,000 | $2,843,000 | | Inventory reserve | $(471,000) | $(467,000) | | Inventories, net | $1,490,000 | $2,376,000 | PROPERTY AND EQUIPMENT, NET Property and equipment are stated at cost and depreciated over estimated useful lives of 5 to 10 years using the straight-line method - Property and equipment are stated at cost and depreciated over estimated useful lives of 5 to 10 years using the straight-line method[306][307] Depreciation and Amortization Expense on Property and Equipment | Fiscal Year Ended May 31, | Amount | | :------------------------ | :------ | | 2025 | $66,000 | | 2024 | $63,000 | INTANGIBLE ASSETS, NET Intangible assets, including patents and product rights, are amortized on a straight-line basis over estimated useful lives and evaluated for impairment - Intangible assets, including trademarks, product rights, technology rights, and patents, are amortized on a straight-line basis over estimated useful lives (up to 18 years for marketing/distribution rights, 10 years for technology use rights, 15 years for patents)[308][309] Amortization Expense for Intangible Assets | Fiscal Year Ended May 31, | Amount | | :------------------------ | :------ | | 2025 | $21,000 | | 2024 | $18,000 | - Intangible assets are evaluated for impairment qualitatively, and no impairment was identified for the years ended May 31, 2025 and 2024[310] INVESTMENTS The company has an investment of approximately $165,000 in a privately held Polish distributor, accounted for at initial cost and assessed for impairment - The company has an investment of approximately $165,000 in a privately held Polish distributor, representing approximately 6% ownership, accounted for at initial cost[311][312] - Equity holdings are assessed for impairment, and no impairment was determined as of May 31, 2025[313] SHARE-BASED COMPENSATION The company follows ASC 718 for share-based payment awards, measuring at grant-date fair value using the Black-Scholes model for options and fair value for RSUs - The company follows ASC 718, measuring share-based payment awards at grant-date fair value, using the Black-Scholes model for options and fair value for RSUs[314] Share-Based Compensation Expense | Fiscal Year Ended May 31, | Amount | | :------------------------ | :------- | | 2025 | $460,000 | | 2024 | $837,000 | Black-Scholes Option-Pricing Model Assumptions | Assumption | 2025 Range | 2024 Range | | :---------------------- | :------------------ | :------------------ | | Dividend yield | 0% | 0% | | Expected volatility | 105.90 - 117.41% | 100.54 - 111.98% | | Risk free interest rate | 3.68 - 4.52% | 4.00 - 4.59% | | Expected term | 4.69 - 6.25 years | 4.69 - 6.25 years | REVENUE RECOGNITION Revenue from product sales is recognized at shipment, diagnostic services upon completion, and contract manufacturing as performed, with variable consideration f