Quarterly Report for Quarter Ending FEBRUARY 28, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis in conjunction with our unaudited condensed consolidated financial statements and the accompanying notes thereto included in Part I, Item 1 of this Report and the audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended May 31, 2025 (our "2025 Annual Report").

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q ("Form 10-Q" or "Quarterly Report") contains forward-looking statements within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements in this Quarterly Report, other than statements of historical facts, including, without limitation, statements regarding our strategy, future operations, future operating expenses, future financial position, future revenue, projected costs, prospects, plans, intentions, expectations, goals and objectives may be forward-looking statements. The forward-looking statements in this Quarterly Report do not constitute guarantees of future performance, and actual results could differ materially from those expressed or implied in any forward-looking statements. In some cases, you can identify forward-looking statements by words such as "believe," "expect," "anticipate," "contemplate," "estimate," "project," "forecast," "would," "may," "should," "will," "could," "can," "potential," "possible," "proposed," "plan," "develop," "opportunity," "intend," "initiative," "target," "maintain," "continue," "strive," "progress," "aim," or the negative of these terms or other comparable expressions.

Factors, among others, that could cause actual results and events to differ materially from those expressed or implied in any forward-looking statement include:

	●	the ability to raise additional capital and continue as a going concern;
	●	the accuracy of our estimates regarding expenses, future revenue, capital requirements and the need for additional financing;
	●	the scope of protection we are able to establish and maintain for our intellectual property rights covering our products and technology;
	●	the ability to compete in our industry, including against competitors that have significantly greater financial, technical and marketing resources than we do;
	●	the ability to obtain and maintain government or regulatory certification in the countries and regions in which our products are sold;
	●	the ability to maintain sales relationships with our key distributors;
	●	the impact of global economic and political developments on our business, including rising inflation and interest rates, capital market disruptions, bank failures, government shutdowns, wars and other political disputes, economic sanctions and economic slowdowns or recessions that may result from such developments which could harm our research and development efforts as well as the value of our common stock and our ability to access capital markets;
	●	the implementation of our business model and strategic plans for our business, products, and technology;
	●	the risks related to third parties asserting intellectual property infringement claims against us;
	●	the impact of numerous laws and regulations that apply to us and compliance with these laws and regulations, as they currently exist or as modified in the future;
	●	the risks related to product recalls, claims of liability, harm to patients or users of our products; and
	●	the ability to retain the continued service of our key personnel and to identify, hire and retain additional qualified professionals.

Additional factors that might cause actual results and our current expectations and projections to differ materially include, among other things, those discussed in this Quarterly Report as well as those under the section titled "Risk Factors," and discussed elsewhere in our in our 2025 Annual Report and the other risks detailed from time-to-time in our reports and registration statements filed with the Securities and Exchange Commission ("SEC"). We intend that such forward-looking statements be subject to the safe harbors for such statements. These forward-looking statements are based on the current beliefs and expectations of our management and speak only as of the date of this Quarterly Report or, in the case of documents referred to or incorporated by reference, the date of those documents. You should not place undue reliance on these forward-looking statements, which are subject to significant known and unknown risks, uncertainties and other factors, which are in some cases, beyond our control and which could materially affect results. If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results may differ materially from current expectations and projections.

Except as required by law, we do not undertake any obligation to revise or update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

OVERVIEW

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 patient health and well-being while reducing healthcare costs.

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 Conformité Européenne ("CE") marked and/or registered with regulatory agencies in various countries for diagnostic use, with certain products approved by the U.S. Food and Drug Administration ("FDA") for sale in the United States.

TECHNOLOGICAL ADVANCEMENTS AND PRODUCT DEVELOPMENT

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 at home or in a physician's office.

RESEARCH AND DEVELOPMENT

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.

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 the inFoods® IBS product, which leverages this patented technology.

We have introduced our inFoods® IBS product to select gastroenterology ("GI") physician groups in multiple states and regions. This initial phase was focused on gathering real-world feedback, optimizing physician engagement, and validating operational processes. GI physician feedback has been generally positive, and we are continuing to expand our network by onboarding additional physician practices.

Our dedicated sales team is focused on building strong relationships within the GI segment while selectively exploring opportunities to introduce inFoods® IBS to other medical specialties, including integrated health practices and primary-care providers. These efforts are intended to lay the groundwork for broader adoption by showcasing the distinct clinical value of inFoods® IBS across multiple healthcare channels.

Concurrently, we are evaluating and working with distribution, partnership, and licensing opportunities with U.S. companies to support a scalable, broad market launch. One such distribution opportunity is the partnership previously announced with Henry Schein who is utilizing their sales force to introduce and sell the inFoods® IBS product to physicians in the U.S. Market. We expect these potential collaborations to significantly enhance the commercialization trajectory of inFoods® IBS products, both domestically and internationally.

We are currently in the process of pursuing U.S. government payment or reimbursement for the inFoods® IBS product through the Medicare system. In connection with this process, the Centers for Medicare & Medicaid Services has established and announced a national Medicare payment rate of $300 for inFoods® IBS under the Clinical Laboratory Fee Schedule, applicable to claims with dates of service beginning January 1, 2026. While the establishment of a reimbursement rate does not guarantee coverage, utilization, or payment, management believes it represents an important step toward broader market access and provides a foundation for potential increased patient access and initial claims activity. The Company has provided additional information regarding inFoods® IBS to the applicable Medicare Administrative Contractor for coverage and is awaiting response. As Medicare reimbursement becomes established, we intend to also pursue reimbursement with private payer insurance companies. To the extent patients are able to access the inFoods® IBS product at reduced out-of-pocket cost, we expect adoption and utilization to increase.

As we continue to pursue commercial opportunities in both U.S. and international markets, we remain attentive to evolving global economic conditions, including uncertainties related to international trade policies, tariffs, and supply chain dynamics, wars and other political strife. Although these factors have imposed a moderate impact on our operations to date, future changes in trade regulations, tariff structures, or logistical constraints could influence the cost, availability, or timing of materials and components used in our manufacturing processes, and our ability to sell our finished products into international markets. We continue to monitor these developments closely and are actively implementing contingency plans, including alternative sourcing strategies and supplier diversification, to support supply chain continuity, maintain operational efficiency, and help mitigate potential future impacts. We are also focusing on alternative manufacturing and shipping strategies of our products through BioEurope GmbH, our European subsidiary, and Biomerica de Mexico, our Mexican subsidiary, to mitigate some of the risk that tariffs and other policies may have on our revenues and operations.

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 highest 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 marketing hp+detect™ to large end-customer laboratories and positioning the product for commercial adoption. We recently announced that we received our first commercial order for hp+detect™ from one of the largest clinical laboratory chains operating across Europe. The initial order is for the United Kingdom market, where hp+detect™ received registration from the UK Medicines and Healthcare products Regulatory Agency (MHRA) in February 2026.

We continue to balance revenue generated from our established diagnostic products and contract manufacturing services with investments in newer diagnostic-guided therapy products, including inFoods® IBS and hp+detect™. Management believes this diversified portfolio approach supports near-term cash generation needs while advancing longer-term growth initiatives.

During the nine months ended February 28, 2026, we continued our phased commercialization strategy for our inFoods® IBS product, prioritizing targeted gastroenterology practices to validate clinical workflows, refine physician education, and gather real-world feedback. This measured approach has informed sales and marketing investments and is intended to support a scalable broader launch.

Due to the slower-than-expected launch of our key new products, inFoods^® IBS and hp+detect^™, we initiated significant cost-cutting measures to extend our cash runway and work towards increasing revenues to cover overhead costs. Additionally, during the nine months ended February 28, 2026, the Company strengthened its liquidity position through a combination of operating cost controls, and net proceeds of approximately $1,455,000 from the ATM offering. We are also actively exploring other major strategic opportunities to enhance and create shareholder value.

RESULTS OF OPERATIONS

Three months ended February 28, 2026

Net Sales and Cost of Sales

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

		Three Months Ended								Increase (Decrease)
		February 28, 2026				February 28, 2025				$				%
Clinical lab		$	621,000			$	627,000			$	(6,000	)			-1	%
Over-the-counter			197,000				170,000				27,000				16	%
Contract manufacturing			167,000				320,000				(153,000	)			-48	%
Physician's office			2,000				2,000				-				0	%
Total		$	987,000			$	1,119,000			$	(132,000	)			-12	%

Consolidated net sales were approximately $987,000 for the three months ended February 28, 2026, compared to $1,119,000 for the three months ended February 28, 2025, a decrease of approximately $132,000, or 12%. The decrease was primarily attributable to lower contract manufacturing revenue following the completion of a prior research and development project. This decrease was partially offset by increased sales in the over-the-counter product line, reflecting variability in demand from international customers. Subsequent to quarter end, the Company is currently evaluating additional contract manufacturing opportunities and has engaged in discussions with potential customers.

Consolidated cost of sales were approximately $1,031,000, or 104% of net sales, for the three months ended February 28, 2026, compared to $1,100,000, or 98% of net sales, for the three months ended February 28, 2025, a decrease of approximately $69,000, or 6%. The decrease was primarily attributable to lower contract manufacturing activity, partially offset by higher costs associated with increased over-the-counter product sales. Cost of sales as a percentage of net sales increased primarily due to product mix and lower sales volume in the current period.

Operating Expenses

The following is a summary of operating expenses:

		Three Months Ended
		February 28, 2026								February 28, 2025								Increase (Decrease)
		Operating Expense				As a % of Total Revenues				Operating Expense				As a % of Total Revenues				$				%
Selling, General and Administrative		$	1,076,000				109	%		$	1,012,000				90	%		$	64,000				6	%
Research and Development		$	178,000				18	%		$	217,000				19	%		$	(39,000	)			-18	%

Selling, General and Administrative

For the three months ended February 28, 2026, consolidated selling, general and administrative expenses were approximately $1,076,000, representing an increase of $64,000, or 6%, compared to $1,012,000 for the three months ended February 28, 2025. The increase was primarily attributable to a $60,000 increase in salaries and wages related restructuring in the sales and marketing team supporting inFoods® commercialization, a $45,000 increase in regulatory and compliance expenses, and a $15,000 increase in outside sales-related services associated with inFoods®. These increases were partially offset by a $37,000 decrease in outside administrative services and a $13,000 decrease in legal expenses. Overall, the increase reflects continued investment in commercialization activities for inFoods®, partially offset by cost management efforts in other areas.

Research and Development

For the three months ended February 28, 2026, consolidated research and development ("R&D") expenses were approximately $178,000, representing a decrease of $39,000, or 18%, compared to $217,000 for the three months ended February 28, 2025. The decrease was primarily attributable to reduced R&D activity in the current period following the completion of the hp+detect™ project, as well as lower levels of development work related to inFoods®. As a result, salaries and wages within the research and development team decreased by approximately $32,000. In addition, expenses related to clinical trial studies and laboratory supplies decreased by approximately $8,000, reflecting the completion of certain research activities.

Dividend, Interest, and Other Income (Loss)

For the three months ended February 28, 2026, dividend, interest, and other income (loss) totaled approximately $(6,000), compared to income of $43,000 for the three months ended February 28, 2025, representing a decrease of $49,000. The change was primarily attributable to lower interest income resulting from reduced cash balances and lower market interest rates.

Nine months ended February 28, 2026

Net Sales and Cost of Sales

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

		Nine Months Ended								Increase (Decrease)
		February 28, 2026				February 28, 2025				$				%
Clinical lab		$	2,321,000			$	2,683,000			$	(362,000	)			-13	%
Over-the-counter			719,000				952,000				(233,000	)			-24	%
Contract manufacturing			532,000				920,000				(388,000	)			-42	%
Physician's office			6,000				7,000				(1,000	)			-14	%
Total		$	3,578,000			$	4,562,000			$	(984,000	)			-22	%

Consolidated net sales were approximately $3,578,000 for the nine months ended February 28, 2026, compared to $4,562,000 for the nine months ended February 28, 2025, representing a decrease of approximately $984,000, or 22%. The decrease was primarily attributable to lower contract manufacturing revenue, reflecting the completion of a prior research and development project. Additional decreases were attributable to reduced retail market activity from international distributors, partially related to tariff impacts, as well as variability in clinical laboratory sales during the period. These decreases were partially offset by increased demand for the inFoods® IBS product; however, such revenues remain in the early stages of commercialization and have only partially offset offset the decline in contract manufacturing and distributor-related sales.

For the nine months ended February 28, 2026, consolidated cost of sales was approximately $3,145,000, or 88% of net sales, compared to $3,820,000, or 84% of net sales, for the nine months ended February 28, 2025, representing a decrease of approximately $675,000, or 18%. The decrease was primarily attributable to lower contract manufacturing activity, as well as reduced clinical laboratory sales. Cost of sales as a percentage of net sales increased primarily due to changes in product mix and lower overall sales volume during the current period.

Operating Expenses

The following is a summary of operating expenses:

		Nine Months Ended
		February 28, 2026								February 28, 2025								Increase (Decrease)
		Operating Expense				As a % of Total Revenues				Operating Expense				As a % of Total Revenues				$				%
Selling, General and Administrative		$	3,637,000				102	%		$	3,544,000				78	%		$	93,000				3	%
Research and Development		$	583,000				16	%		$	771,000				17	%		$	(188,000	)			-24	%

Selling, General and Administrative

For the nine months ended February 28, 2026, consolidated selling, general and administrative expenses were approximately $3,637,000, representing an increase of $93,000, or 3%, compared to $3,544,000 for the nine months ended February 28, 2025. The increase was primarily attributable to a $169,000 increase in regulatory and outside service costs, partially offset by a $99,000 decrease in sales commissions.

Research and Development

For the nine months ended February 28, 2026, consolidated R&D expenses were approximately $583,000, representing a decrease of $188,000, or 24%, compared to $771,000 for the nine months ended February 28, 2025. The decrease was primarily attributable to a $139,000 reduction in salaries and wages within the R&D team, reflecting reduced R&D activity during the current period. The reduction in R&D activity was driven by the completion of the hp+detect™ project and the transition of inFoods® IBS from development to commercialization, which also contributed to an approximately $40,000 decrease in related expenses. The reduction in R&D activity reflects the Company's transition from development to commercialization of key products.

Dividend, Interest, and Other Income

For the nine months ended February 28, 2026, dividend, interest, and other income totaled approximately $1,174,000, compared to $140,000 for the corresponding period in 2025, representing an increase of $1,034,000, or 739%. This increase was primarily attributable to $1,100,000 related to the Employee Retention Credit ("ERC"), a refundable payroll-tax credit established under the Coronavirus Aid, Relief, and Economic Security ("CARES") Act. The ERC was available to eligible employers for wages paid during calendar year 2021 in response to the global COVID-19 pandemic. This credit represents a one-time benefit that is not expected to recur in future periods.

Excluding the ERC refund, interest and dividend income decreased by approximately $49,000, primarily due to lower market interest rates during the current quarter compared to the prior quarter.

LIQUIDITY AND CAPITAL RESOURCES

The following are the principal sources of liquidity:

		February 28, 2026				May 31, 2025
Cash and cash equivalents		$	1,336,000			$	2,399,000
Working capital including cash and cash equivalents		$	2,562,000			$	3,135,000

As of February 28, 2026 and May 31, 2025, we had cash and cash equivalents of approximately $1,336,000 and $2,399,000, respectively. As of February 28, 2026 and May 31, 2025, we had working capital of approximately $2,562,000 and $3,135,000, respectively. We have experienced variability in our revenue and a reduction in our cash position in recent periods, which has impacted our liquidity.

Our ability to continue as a going concern over the next twelve months is influenced by several factors, including:

	●	Our need and ability to generate additional revenue from international opportunities and sales within the United States of existing products, and from our new product launches;
	●	Our need and ability to access the capital and debt markets to meet current obligations and fund operations;
	●	Our capacity to manage operating expenses and maintain gross margins;
	●	Our ability to retain key employees and maintain critical operations; and
	●	Certain SEC regulations that limit the amount of capital we can raise through issuance of our equity.

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

Management has analyzed our cash flow requirements through April 2027 and beyond. Based on this analysis, we believe our current cash and cash equivalents are insufficient to meet our operating cash requirements and strategic growth objectives for the next twelve months.

To address our capital needs and sustaining operations beyond the next year, we are actively pursuing strategies to increase sales, reduce expenses, sell non-core assets, seek additional financing through debt or equity, and seek other strategic alternatives.

As part of our financing plan, on September 28, 2023, we filed the Shelf Registration Statement allowing us to issue up to $20,000,000 in shares of our common stock. On May 10, 2024, the Company filed a prospectus supplement to the Shelf Registration Statement on Form S-3. This prospectus supplement was intended to facilitate the sale of up to $5,500,000 in common stock through the 2024 ATM Offering. As part of this transaction, we incurred $81,000 in deferred offering costs during the year ended May 31, 2024.

During the nine months ended February 28, 2026, we sold 414,633 shares of our common stock at prices ranging from $2.42 to $4.02 pursuant to the 2024 ATM Offering, which resulted in gross proceeds of approximately $1,495,000 and net proceeds to us of $1,455,000 after deducting commissions for each sale and legal, accounting, and other fees related to offering in the amount of $40,000.

We intend to use the net proceeds from the 2024 ATM Offering for general corporate purposes, including, but not limited to, sales and marketing activities, clinical studies and product development, acquisitions of assets, businesses, companies, or securities, capital expenditures, and working capital needs.

While we are committed to addressing our capital needs and sustaining operations beyond the next year, there is no assurance that these efforts will be successful or sufficient to meet our capital requirements. Our future viability depends on the successful execution of our strategic plans, securing additional financing, and achieving profitable operations.

Operating Activities

During the nine months ended February 28, 2026, cash used in operating activities was approximately $2,509,000. The primary drivers of this cash outflow included a net loss of approximately $2,630,000, an increase in accounts receivable of $221,000, a decrease in lease liabilities of $265,000, and a decrease in accrued compensation of $47,000. These uses of cash were partially offset by an increase in accounts payable and accrued expenses of approximately $58,000, as well as non-cash expenses of approximately $633,000. The non-cash expenses primarily consisted of depreciation and amortization, provision for expected credit losses on accounts receivable, inventory reserves, share-based compensation, and amortization of right-of-use assets.

During the nine months ended February 28, 2025, cash used in operating activities was approximately $3,180,000. The primary drivers of this cash outflow included a net loss of approximately $3,429,000, an increase in accounts receivable of $327,000, a decrease in accounts payable and accrued expenses of $506,000, and a reduction in lease liabilities of $242,000. These uses of cash were partially offset by a decrease in inventories of approximately $766,000, as well as non-cash expenses of approximately $610,000. The non-cash expenses primarily consisted of depreciation and amortization, provision for expected credit losses on accounts receivable, inventory reserves, share-based compensation, and amortization of right-of-use assets.

Investing Activities

During the nine months ended February 28, 2026, cash used in investing activities was approximately $19,000, consisting of expenditures related to patents.

During the nine months ended February 28, 2025, cash used in investing activities was approximately $37,000, consisting of expenditures related to patents.

Financing Activities

During the nine months ended February 28, 2026, net cash provided by financing activities was approximately $1,463,000, primarily attributable to gross proceeds of approximately $1,495,000 from the sale of common stock.

During the nine months ended February 28, 2025, net cash provided by financing activities was approximately $2,116,000, primarily attributable to gross proceeds of approximately $2,143,000 from the sale of common stock.

OFF BALANCE SHEET ARRANGEMENTS

There were no off-balance sheet arrangements as of February 28, 2026.

CRITICAL ACCOUNTING POLICIES

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates and assumptions may affect the reported amounts of revenues and expenses during the reporting period. We evaluate and base our estimates and assumptions on historical experience and various other factors and circumstances that we believe to be reasonable. Different assumptions or conditions may cause actual results to differ materially from these estimates. We continue to monitor significant estimates made during the preparation of our financial statements. We believe our estimates and assumptions are reasonable under the current conditions; however, actual results may differ from these estimates under different future conditions.

We believe that the estimates and assumptions that are most important to the portrayal of our financial condition and results of operations, in that they require subjective or complex judgments, form the basis for the accounting policies deemed to be most critical to us. These relate to revenue recognition, provision for expected credit losses, inventory overhead application, inventory reserves, lease liabilities and right-of-use assets. We believe estimates and assumptions related to these critical accounting policies are appropriate under the circumstances; however, should future events or occurrences result in unanticipated consequences, there could be a material impact on our future financial conditions or results of operations. There have been no significant changes to our critical accounting policies from those disclosed in our 2025 Annual Report. We suggest that our significant accounting policies be read in conjunction with this Management's Discussion and Analysis of Financial Condition and Results of Operations. Please refer to Note 2 for information on Significant Accounting Policies.