Biomerica(BMRA) - 2026 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents Biomerica, Inc.'s unaudited condensed consolidated financial statements for the three months ended August 31, 2025, and comparative periods, including key financial statements and explanatory notes Condensed Consolidated Balance Sheets (unaudited) – August 31, 2025 and May 31, 2025 The condensed consolidated balance sheets show an increase in total assets and shareholders' equity, primarily driven by an increase in cash and accounts receivable, while total liabilities decreased slightly | Metric | August 31, 2025 | May 31, 2025 | Change ($) | Change (%) | | :-------------------------------- | :-------------- | :----------- | :--------- | :--------- | | Cash and cash equivalents | $3,053,000 | $2,399,000 | $654,000 | 27.26% | | Accounts receivable, net | $1,205,000 | $731,000 | $474,000 | 64.84% | | Total current assets | $5,899,000 | $4,875,000 | $1,024,000 | 21.01% | | Total Assets | $6,854,000 | $5,945,000 | $909,000 | 15.29% | | Total current liabilities | $1,693,000 | $1,740,000 | $(47,000) | -2.70% | | Total Liabilities | $1,699,000 | $1,840,000 | $(141,000) | -7.66% | | Total Shareholders' Equity | $5,155,000 | $4,105,000 | $1,050,000 | 25.58% | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (unaudited) – Three Months Ended August 31, 2025 and 2024 The company reported a net income of $2,000 for the three months ended August 31, 2025, a significant improvement from a net loss of $1,316,000 in the prior year, primarily due to a substantial increase in other income, largely from an Employee Retention Credit refund | Metric | Three Months Ended August 31, 2025 | Three Months Ended August 31, 2024 | Change ($) | Change (%) | | :------------------------------------ | :--------------------------------- | :--------------------------------- | :--------- | :--------- | | Net sales | $1,380,000 | $1,807,000 | $(427,000) | -23.63% | | Cost of sales | $(956,000) | $(1,518,000) | $562,000 | -37.02% | | Gross profit | $424,000 | $289,000 | $135,000 | 46.71% | | Total operating expense | $1,542,000 | $1,657,000 | $(115,000) | -6.94% | | Loss from operations | $(1,118,000) | $(1,368,000) | $250,000 | -18.27% | | Total other income | $1,123,000 | $56,000 | $1,067,000 | 1905.36% | | Income (loss) before income taxes | $5,000 | $(1,312,000) | $1,317,000 | -100.38% | | Net income (loss) | $2,000 | $(1,316,000) | $1,318,000 | -100.15% | | Basic net income (loss) per common share | $0.00 | $(0.63) | $0.63 | -100.00% | | Diluted net income (loss) per common share | $0.00 | $(0.63) | $0.63 | -100.00% | - Net sales decreased by 23.63% YoY to $1,380,000, while gross profit increased by 46.71% YoY to $424,000 due to a larger decrease in cost of sales[14] - Other income saw a substantial increase of $1,067,000, primarily driven by a $1,100,000 Employee Retention Credit (ERC) refund[14][81][120] Condensed Consolidated Statements of Shareholders' Equity (unaudited) – Three Months Ended August 31, 2025 and 2024 Shareholders' equity increased significantly for the three months ended August 31, 2025, primarily due to net proceeds from common stock sales and share-based compensation, contrasting with a net loss in the prior year | Metric | August 31, 2025 | May 31, 2025 | Change ($) | | :-------------------------------- | :-------------- | :----------- | :--------- | | Common Stock Shares | 2,815,410 | 2,546,216 | 269,194 | | Common Stock Amount | $225,000 | $203,000 | $22,000 | | Additional Paid-in Capital | $58,198,000 | $57,175,000 | $1,023,000 | | Accumulated Deficit | $(53,166,000) | $(53,168,000)| $2,000 | | Total Stockholders' Equity | $5,155,000 | $4,105,000 | $1,050,000 | - Net proceeds from sales of common stock contributed $912,000 to shareholders' equity for the three months ended August 31, 2025[19][84] - Share-based compensation added $133,000 to shareholders' equity for the three months ended August 31, 2025[19] Condensed Consolidated Statements of Cash Flows (unaudited) – Three Months Ended August 31, 2025 and 2024 Cash and cash equivalents increased significantly for the three months ended August 31, 2025, primarily driven by cash provided by financing activities, which offset cash used in operating activities | Metric | Three Months Ended August 31, 2025 | Three Months Ended August 31, 2024 | Change ($) | | :------------------------------------ | :--------------------------------- | :--------------------------------- | :--------- | | Net cash used in operating activities | $(268,000) | $(1,344,000) | $1,076,000 | | Net cash provided by financing activities | $920,000 | $0 | $920,000 | | Net increase (decrease) in cash and cash equivalents | $654,000 | $(1,350,000) | $2,004,000 | | Cash and cash equivalents at end of period | $3,053,000 | $2,820,000 | $233,000 | - Cash used in operating activities decreased significantly from $(1,344,000) in 2024 to $(268,000) in 2025, a 79.9% improvement[22] - Financing activities provided $920,000 in cash in 2025, primarily from common stock sales, compared to no cash from financing in 2024[22][135] Notes to Condensed Consolidated Financial Statements (unaudited) These notes provide essential context for the financial statements, detailing business operations, accounting policies, liquidity, and specific financial items, including ASC 326 adoption and ERC recognition NOTE 1: BASIS OF PRESENTATION Biomerica, Inc. is a global biomedical technology company focused on diagnostic and therapeutic products, with unaudited interim financial statements prepared in accordance with SEC rules and GAAP - Biomerica, Inc. is a global biomedical technology company developing, patenting, manufacturing, and marketing advanced diagnostic and therapeutic products[24] - Primary focus is on diagnostic-guided therapy (DGT) products for gastrointestinal diseases, such as the inFoods® IBS product[25] - Products are sold worldwide in clinical laboratories and point-of-care markets, with some CE marked and/or FDA cleared[26] NOTE 2: SIGNIFICANT ACCOUNTING POLICIES This note outlines significant accounting policies, critical estimates, and revenue recognition, highlighting ongoing operating losses and 'going concern' doubt, which management addresses through cost reduction and capital raising strategies - The company has incurred recurring operating losses and negative cash flows, with an accumulated deficit of approximately $53,200,000 as of August 31, 2025, raising substantial doubt about its ability to continue as a going concern[34][40] - Management is actively pursuing strategies to increase sales, reduce expenses, sell non-core assets, and seek additional financing to address capital needs[39] - The company sold 258,569 shares of common stock through an ATM offering, generating net proceeds of $912,000 during the three months ended August 31, 2025, for general corporate purposes[36][37] Net Sales by Market (Three Months Ended August 31) | Market | 2025 ($) | 2024 ($) | Change ($) | Change (%) | | :------------------ | :------- | :------- | :--------- | :--------- | | Clinical lab | 1,024,000| 1,278,000| (254,000) | -19.87% | | Contract manufacturing | 192,000 | 339,000 | (147,000) | -43.36% | | Over-the-counter | 161,000 | 187,000 | (26,000) | -13.90% | | Physician's office | 3,000 | 3,000 | 0 | 0.00% | | Total | 1,380,000| 1,807,000| (427,000)| -23.63%| - The company adopted ASC 326 (CECL model) for credit losses on June 1, 2023, establishing a reserve of approximately $64,000 for credit losses as of August 31, 2025[49][50] Inventory Composition (August 31, 2025 vs. May 31, 2025) | Inventory Type | August 31, 2025 ($) | May 31, 2025 ($) | | :--------------- | :------------------ | :--------------- | | Raw materials | 976,000 | 1,071,000 | | Work in progress | 816,000 | 743,000 | | Finished products| 159,000 | 147,000 | | Total gross inventory | 1,951,000 | 1,961,000 | | Inventory reserves | (478,000) | (471,000) | | Net inventory | 1,473,000 | 1,490,000 | - Share-based compensation expense for stock options was $74,000 for the three months ended August 31, 2025, down from $77,000 in the prior year. Restricted stock awards expense was $59,000 for the three months ended August 31, 2025, with no expense in the prior year[64][65] - Revenue from product sales is recognized at the time of shipment (FOB shipping point), and diagnostic testing services revenue is recognized upon completion of test results by a third-party lab[67][68] - Research and development costs decreased by 29% to $212,000 for the three months ended August 31, 2025, compared to $297,000 in the prior year[72] - The company recognized $3,000 in income tax expense for state minimum and foreign miscellaneous taxes, and has a full valuation allowance against deferred tax assets due to uncertainties in generating future taxable income[73] - Operating lease costs were $88,000 for both periods, with a weighted-average remaining lease term of 1.02 years and a weighted-average discount rate of 5.78% as of August 31, 2025[92] NOTE 3: SHAREHOLDERS' EQUITY This note details changes in shareholders' equity, highlighting capital raised through the 2024 ATM Offering and net proceeds from common stock sales - The company filed a 'shelf' registration statement on Form S-3, effective September 29, 2023, allowing issuance of up to $20,000,000 in common stock[83] - During the three months ended August 31, 2025, 258,569 shares of common stock were sold via the 2024 ATM Offering, yielding gross proceeds of $939,000 and net proceeds of $912,000[84] NOTE 4: GEOGRAPHIC INFORMATION The company operates as a single segment but provides disaggregated revenue information by geographic region, showing a decline in sales across all major regions for the three months ended August 31, 2025 Revenues from Sales to Unaffiliated Customers by Region (Three Months Ended August 31) | Region | 2025 ($) | 2024 ($) | Change ($) | Change (%) | | :------------- | :------- | :------- | :--------- | :--------- | | Asia | 670,000 | 817,000 | (147,000) | -17.99% | | Europe | 305,000 | 470,000 | (165,000) | -35.11% | | North America | 318,000 | 427,000 | (109,000) | -25.53% | | Middle East | 85,000 | 90,000 | (5,000) | -5.56% | | South America | 2,000 | 3,000 | (1,000) | -33.33% | | Total | 1,380,000| 1,807,000| (427,000)| -23.63%| - Approximately $480,000 of gross inventory and $9,000 of net property and equipment were located in Mexicali, Mexico, as of August 31, 2025[85][86] NOTE 5: LEASES The company leases facilities in Irvine, California, and Mexicali, Mexico, as well as a small office in Lindau, Germany. Lease liabilities are recognized on the balance sheet, with operating lease costs remaining stable year-over-year - The company leases approximately 22,000 square feet for its corporate headquarters in Irvine, California, with the lease expiring in August 2026 and an option for a five-year extension[89] - Biomerica de Mexico leases 8,100 square feet of manufacturing space under a 10-year lease with a 10-year renewal option[90] Lease Costs (Three Months Ended August 31) | Lease Cost Type | 2025 ($) | 2024 ($) | | :---------------- | :------- | :------- | | Operating lease cost | 88,000 | 88,000 | | Variable lease cost | 3,000 | 2,000 | | Short-term lease cost | - | 2,000 | | Total lease cost | 91,000 | 92,000 | NOTE 6: COMMITMENTS AND CONTINGENCIES The company is occasionally involved in legal proceedings but had no pending matters as of August 31, 2025, with management believing future outcomes will not materially affect its financial position - No legal proceedings were pending as of August 31, 2025[94] - Management believes that any potential future legal outcomes will not have a material adverse effect on the company's consolidated financial position, results of operations, or cash flows[94] NOTE 7: SUBSEQUENT EVENTS There were no subsequent events to report after the period ended August 31, 2025, through the filing date of the report - No subsequent events were reported[95] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial condition and results for the three months ended August 31, 2025, covering operations, product development, revenues, expenses, liquidity, and 'going concern' strategies Forward-Looking Statements This section cautions that the report contains forward-looking statements regarding future performance and financial position, subject to risks and uncertainties that could cause actual results to differ materially - The report contains forward-looking statements that are not guarantees of future performance and actual results may differ materially[97] - Key factors influencing actual results include the ability to raise capital, accuracy of estimates, intellectual property protection, competition, regulatory certifications, distributor relations, global economic impacts, and retention of key personnel[98][100] Overview Biomerica is a global biomedical technology company specializing in advanced diagnostic and therapeutic products, enhancing health and reducing healthcare costs through worldwide sales - Biomerica is a global biomedical technology company that develops, patents, manufactures, and markets advanced diagnostic and therapeutic products[100] - Products are sold worldwide in clinical laboratories and point-of-care settings, with many being CE marked and/or FDA cleared[102] Technological Advancements and Product Development The company focuses on developing rapid, accurate, and easy-to-use diagnostic tests for point-of-care and home use, aiming to provide quick and reliable results without complex instrumentation - 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[103] - The company believes its rapid point-of-care tests can be as accurate as laboratory tests, delivering reliable results in minutes[103] Research and Development Biomerica invests in R&D for new diagnostic and therapeutic products, notably its patented inFoods® IBS platform, expanding commercialization efforts and recently receiving FDA clearance for hp+detect™ - A key outcome of R&D is the patented diagnostic-guided therapy (DGT) product, inFoods® IBS, designed to identify patient-specific foods that trigger IBS symptoms[105] - The company is expanding inFoods® IBS to GI physician groups and exploring distribution, partnership, and licensing opportunities[107][109] - In December 2023, the company received FDA clearance for hp+detect™, a diagnostic test for Helicobacter pylori bacteria[112] - Due to slower-than-expected product launches, the company initiated significant cost-cutting measures and raised $912,000 in net proceeds from an ATM offering to extend cash runway[113] Results of Operations The company experienced a 24% decrease in net sales for the three months ended August 31, 2025, but gross profit improved, operating expenses decreased, and a substantial ERC refund led to net income Net Sales and Cost of Sales Net sales decreased by 24% to $1,380,000, primarily due to reduced retail activity, lower international OTC sales, and decreased contract manufacturing demand. Despite this, gross profit increased by 47% due to a larger reduction in cost of sales, driven by changes in product mix, improved efficiency, and reduced labor costs Net Sales by Market (Three Months Ended August 31) | Market | August 31, 2025 ($) | August 31, 2024 ($) | Change ($) | Change (%) | | :------------------ | :------------------ | :------------------ | :--------- | :--------- | | Clinical lab | 1,024,000 | 1,278,000 | (254,000) | -20% | | Contract manufacturing | 192,000 | 339,000 | (147,000) | -43% | | Over-the-counter | 161,000 | 187,000 | (26,000) | -14% | | Physician's office | 3,000 | 3,000 | - | 0% | | Total | 1,380,000 | 1,807,000 | (427,000)| -24% | - Consolidated net sales decreased by $427,000 (24%) to $1,380,000 for the three months ended August 31, 2025, compared to the same period in 2024[115] - Cost of sales decreased by $562,000 (37%) to $956,000, improving gross margin due to lower contract manufacturing costs and reduced direct labor[116] Operating Expenses Total operating expenses decreased by 7% year-over-year, with SG&A decreasing due to RIF and lower stock-based compensation, and R&D decreasing due to payroll reductions and cost savings Operating Expenses (Three Months Ended August 31) | Expense Type | 2025 ($) | 2025 (% of Total Revenues) | 2024 ($) | 2024 (% of Total Revenues) | Change ($) | Change (%) | | :-------------------------------- | :------- | :------------------------- | :------- | :------------------------- | :--------- | :--------- | | Selling, General and Administrative | 1,330,000| 96% | 1,360,000| 75% | (30,000) | -2% | | Research and Development | 212,000 | 15% | 297,000 | 16% | (85,000) | -29% | - SG&A expenses decreased by $30,000 (2%) due to a $65,000 reduction in salaries/wages from a RIF, a $68,000 decrease in stock-based compensation, and a $43,000 decrease in legal expenses, partially offset by a $131,000 increase in professional service fees for ERC filings[118] - R&D expenses decreased by $85,000 (29%) due to a $60,000 reduction in payroll from a RIF and $23,000 in cost savings on inFoods® R&D projects[119] Interest, Dividend Income and Other Income Other income increased substantially by $1,067,000, primarily due to a $1,100,000 cash refund from the IRS for the Employee Retention Credit (ERC), a one-time, non-recurring benefit - Interest, dividend, and other income increased by $1,067,000 to $1,123,000 for the three months ended August 31, 2025[120] - The increase was primarily driven by a $1,100,000 cash refund from the IRS related to the Employee Retention Credit (ERC) for calendar year 2021, which is a one-time, non-recurring item[120] Liquidity, Capital Resources and Going Concern The company's current cash is insufficient for operating requirements and growth, raising 'going concern' doubt, which management addresses through sales increases, expense reductions, and additional financing, including ATM offerings Liquidity Metrics | Metric | August 31, 2025 ($) | May 31, 2025 ($) | | :-------------------------------- | :------------------ | :--------------- | | Cash and cash equivalents | 3,053,000 | 2,399,000 | | Working capital | 4,206,000 | 3,135,000 | - 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 the company's ability to continue as a going concern[123][125][130] - Strategies to address capital needs include increasing sales, reducing expenses, selling non-core assets, and seeking additional debt or equity financing[124] - The company raised $912,000 in net proceeds from the 2024 ATM Offering during the three months ended August 31, 2025, intended for general corporate purposes[127][129] Operating Activities Cash used in operating activities significantly decreased to $268,000 for the three months ended August 31, 2025, a substantial improvement from $1,344,000 in the prior year, primarily due to net income and changes in working capital - Cash used in operating activities was approximately $268,000 for the three months ended August 31, 2025, compared to $1,344,000 in the prior year[131][132] - Key factors contributing to cash used in operating activities in 2025 included a net income of $2,000, an increase in accounts receivable of $512,000, and decreases in accrued compensation and lease liabilities, partially offset by non-cash expenses and decreases in inventories and prepaid expenses[131] Investing Activities The company did not acquire any new property, equipment, or patents during the three months ended August 31, 2025, or the same period in 2024 - No new property, equipment, or patents were acquired during the three months ended August 31, 2025, or 2024[133] Financing Activities Cash provided by financing activities was $920,000 for the three months ended August 31, 2025, entirely from the net proceeds of common stock sales through the ATM offering, a significant change from no financing activities in the prior year - Cash provided by financing activities was approximately $920,000 for the three months ended August 31, 2025[135] - This cash was generated from gross proceeds of $939,000 from common stock sales, offset by $19,000 in costs[135] - There was no cash provided by financing activities in the comparable period of 2024[135] Off Balance Sheet Arrangements The company reported no off-balance sheet arrangements as of August 31, 2025 - There were no off-balance sheet arrangements as of August 31, 2025[136] Critical Accounting Policies and Estimates The preparation of financial statements requires significant estimates and assumptions for revenue recognition, bad debts, inventory, and leases, with no significant changes to critical accounting policies from the prior annual report - Critical accounting policies and estimates include revenue recognition, bad debts, inventory overhead application, inventory reserves, lease liabilities, and right-of-use assets[138] - No significant changes to critical accounting policies were reported from the 2025 Annual Report[138] Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Biomerica, Inc. is exempt from providing quantitative and qualitative disclosures about market risk - As a smaller reporting company, Biomerica, Inc. is exempt from providing quantitative and qualitative disclosures about market risk[139] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of August 31, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective at a reasonable assurance level as of August 31, 2025[141] - No material changes in internal control over financial reporting occurred during the quarter ended August 31, 2025[142] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is involved in legal proceedings in the ordinary course of business but had no pending matters as of August 31, 2025, with management believing future outcomes will not materially affect its financial position - No legal proceedings were pending as of August 31, 2025[144] - 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[144] Item 1A. Risks Factors Investing in the company's common stock involves risks, and no material changes to previously disclosed risk factors occurred during the three months ended August 31, 2025 - Investing in the company's common stock involves certain risks, detailed in this report and the 2025 Annual Report[145] - No material changes to the risk factors described in the 2025 Annual Report occurred during the three months ended August 31, 2025[146] Item 5. Other Information Dr. Jane Emerson will step down as a Board member, effective November 1, 2025, with no disagreement with the company cited as the reason - Dr. Jane Emerson will step down as a Board member, effective November 1, 2025[147] - Her resignation was not due to any disagreement with the company's operations, policies, or practices[147] Item 6. Exhibits This section lists the exhibits filed or furnished as part of the quarterly report on Form 10-Q, including certifications and interactive data files - The report includes certifications from the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2)[148] - Interactive data files (XBRL) are furnished as Exhibit 101 and its sub-components, along with a Cover Page Interactive Data File (Exhibit 104)[148] Signatures The report was signed by Zackary S. Irani, Chief Executive Officer, and Gary Lu, Chief Financial Officer, on October 14, 2025 - The report was signed by Zackary S. Irani, CEO, and Gary Lu, CFO, on October 14, 2025[150]