BIOMERICA INC Commitments Disclosure

NOTE 9: COMMITMENTS AND CONTINGENCIES

 

OPERATING LEASES

 

The Company leases facilities in Irvine, California and Mexicali, Mexico.

 

As of May 31, 2025, the Company had approximately 22,000 square feet of floor space at its corporate headquarters at 17571 Von Karman Avenue in Irvine, California. This facility includes administration, research and development, certain manufacturing, shipping and inventory storage. The lease for its headquarters expires in August 2026. The Company has the option to extend the lease for an additional five-year term. The Company made a security deposit of approximately $22,000.

 

In November 2016, the Company’s Mexican subsidiary, Biomerica de Mexico, entered into a 10-year lease for approximately 8,100 square feet of manufacturing space. The Company has one 10-year option to renew at the end of the initial lease period. Biomerica de Mexico also leases a smaller unit on a month-to-month basis for use in one manufacturing process.

 

In addition, the Company leases a small office in Lindau, Germany on a month-to-month basis, as headquarters for BioEurope GmbH, its Germany subsidiary.

 

For purposes of determining straight-line rent expense, the lease term is calculated from the date the Company first takes possession of the facility, including any periods of free rent and any renewal options periods that the Company is reasonably certain of exercising. The Company’s office and equipment leases generally have contractually specified minimum rent and annual rent increases are included in the measurement of the right-of-use asset and related lease liabilities. Additionally, under these lease arrangements, the Company may be required to pay directly, or reimburse the lessors, for some maintenance and operating costs. Such amounts are generally variable and therefore not included in the measurement of the right-of-use asset and related lease liabilities but are instead recognized as variable lease expense in the consolidated statements of operations and comprehensive loss when they are incurred.

 

 

The following table presents information on our operating leases for the years ended May 31, 2025 and 2024:

 SCHEDULE OF OPERATING LEASES

		2025				2024
		For the Year Ended May 31,
		2025				2024
Operating lease cost		$	353,000			$	353,000
Variable lease cost			11,000				11,000
Short-term lease cost			11,000				14,000
Total lease cost		$	375,000			$	378,000

 

The future minimum lease payments of the Company’s operating lease liabilities by fiscal year are as follows:

 

 SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS 

Year Ending May 31,
		Operating Leases
2026		$	375,000
2027			101,000
Total minimum future lease payments			476,000
Less: imputed interest			18,000
Total operating lease liabilities		$	458,000

 

The following table summarizes the Company’s other supplemental lease information for the years ended May 31, 2025 and 2024:

 SCHEDULE OF OTHER SUPPLEMENTAL LEASE INFORMATION

		2025				2024
		For the Year Ended May 31,
		2025				2024
Cash paid for operating lease liabilities		$	366,000			$	356,000
Weighted-average remaining lease term (years)			1.23				2.27
Weighted-average discount rate			6.50	%			6.50	%

 

The Company also has various insignificant leases for office equipment.

 

RETIREMENT SAVINGS PLAN

 

Effective September 1, 1986, the Company established a 401(k) plan for the benefit of its employees. The plan permits eligible employees to contribute to the plan up to the maximum percentage of total annual compensation allowable under the limits of IRC Sections 415, 401(k) and 404. The Company, at the discretion of its Board of Directors, may make contributions to the plan in amounts determined by the Board each year. No contributions by the Company have been made since the plan’s inception.

 

LITIGATION

 

The Company is, from time to time, involved in legal proceedings, claims, and litigation arising in the ordinary course of business. While the amounts claimed may be substantial, the ultimate liability cannot presently be determined because of considerable uncertainties that exist. Therefore, it is possible the outcome of such legal proceedings, claims, and litigation could have a material effect on quarterly or annual operating results or cash flows when resolved in a future period. However, based on facts currently available, management believes such matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

 

There were no legal proceedings pending as of May 31, 2025.

 

CONTRACT AND LICENSING AGREEMENTS

 

The Company has one royalty agreement in which it has obtained rights to manufacture and market certain products for the life of the products. Royalty expenses of approximately $7,000 and $10,000 is included in cost of sales for the agreement for each of the years ended May 31, 2025 and 2024, respectively. Sales of products manufactured under these agreements comprise approximately 1% of total sales for the years ended May 31, 2025 and 2024, respectively. The Company may license other products or technology in the future as it deems necessary for conducting business. The Company has other royalty agreements; however, they are not considered material.