What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-04-12 compared with 2024-01-16 · 188 added, 168 removed, 106 unchanged (77% of the section changed)

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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, 2023 (our 2023 Annual Report) .

This discussion

and analysis contains forward-looking statements that are based on our management’s current beliefs and assumptions, which statements

are subject to substantial risks and uncertainties.

Our actual results may differ materially from those expressed or implied by these

forward-looking statements as a result of many factors, including those discussed in “Risk Factors” included in Part I, Item

1A of our 2023 Annual Report.

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, 2023 (our 2023 Annual Report).

This discussion and analysis contains forward-looking

statements that are based on our management’s current beliefs and assumptions, which statements are subject to substantial risks

and uncertainties.

Our actual results may differ materially from those expressed or implied by these forward-looking statements as a

result of many factors, including those discussed in “Risk Factors” included in Part I, Item 1A of our 2023 Annual Report.

and its subsidiaries (which includes wholly-owned subsidiaries, Biomerica de Mexico and BioEurope GmbH), is a biomedical technology

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enhance the health and well-being of people, while reducing total healthcare costs.

primary focus is the research, development, commercialization and in certain cases regulatory approval, of patented,

diagnostic-guided therapy (“DGT”) products to treat gastrointestinal diseases, such as irritable bowel syndrome

(“IBS”), and other inflammatory diseases.

These inFoods based products are directed at chronic inflammatory illnesses

that are widespread and common, and as such address very large markets.

Our inFoods IBS product uses a simple blood sample to

identify patient-specific foods that, when removed from the patient’s diet, may alleviate IBS symptoms such as pain, bloating,

diarrhea, and constipation.

Instead of broad and difficult to manage dietary restrictions, the inFoods IBS product works by

identifying a patient’s above normal immunoreactivity to a panel of specific foods that have been shown to often be

problematic to IBS suffers.

A food identified as positive, and causing an abnormally high immune response in the patient is simply

removed from the diet to help alleviate IBS symptoms.

primary focus is the research, development, commercialization and in certain cases regulatory approval, of patented, diagnostic-guided

therapy (“DGT”) products to treat gastrointestinal diseases, such as irritable bowel syndrome (“IBS”), and other

inflammatory diseases.

These inFoods based products are directed at chronic inflammatory illnesses that are widespread and common, and

as such address very large markets.

Our inFoods IBS product uses a simple blood sample to identify patient-specific foods that, when

removed from the patient’s diet, may alleviate IBS symptoms such as pain, bloating, diarrhea, and constipation.

Instead of broad

and difficult to manage dietary restrictions, the inFoods IBS product works by identifying a patient’s above normal immunoreactivity

to a panel of specific foods that have been shown to often be problematic to IBS suffers.

A food identified as positive, and causing

an abnormally high immune response in the patient is simply removed from the diet to help alleviate IBS symptoms.

fiscal 2022, we completed an endpoint determination clinical trial on our inFoods IBS product.

This trial was conducted at Mayo

Clinics in Florida and Arizona, Beth Israel Deaconess Medical Center Inc., a Harvard Medical School Teaching Hospital, University of

Texas Health Science Center at Houston, Houston Methodist, the University of Michigan, and other institutions.

This double blinded,

placebo-controlled trial monitored IBS patients over an 8-week treatment period to determine the efficacy of our inFoods IBS product

to improve the patients’ IBS symptoms or endpoints.

The trial was designed to determine the difference in the improvement in

IBS symptoms for patients in the treatment arm, versus patients in the placebo arm of the trial.

The top-line trial results were

reported in February 2022.

Multiple endpoints demonstrated statistically significant improvements for participants in the treatment

arm, indicating that the elimination of specific foods may meaningfully reduce the symptoms of IBS in each patient subtype

(including patients with IBS-Constipation, IBS-Diarrhea & IBS-Mixed).

The greatest clinical improvements, including but not

limited to abdominal pain and bloating, were seen in patients diagnosed with IBS-Mixed and IBS Constipation, in the top line data.

The purpose of the endpoint study was designed to provide efficacy data for the product, and to determine the primary symptom

endpoint, or endpoints to be used in a possible final pivotal trial that would be conducted to attain the validation data needed to

apply for U.S.

This trial was conducted at Mayo Clinics

in Florida and Arizona, Beth Israel Deaconess Medical Center Inc., a Harvard Medical School Teaching Hospital, University of Texas Health

Science Center at Houston, Houston Methodist, the University of Michigan, and other institutions.

This double blinded, placebo-controlled

trial monitored IBS patients over an 8-week treatment period to determine the efficacy of our inFoods IBS product to improve the patients’

IBS symptoms or endpoints.

The trial was designed to determine the difference in the improvement in IBS symptoms for patients in the

treatment arm, versus patients in the placebo arm of the trial.

The top-line trial results were reported in February 2022.

Multiple endpoints

demonstrated statistically significant improvements for participants in the treatment arm, indicating that the elimination of specific

foods may meaningfully reduce the symptoms of IBS in each patient subtype (including patients with IBS-Constipation, IBS-Diarrhea &

The greatest clinical improvements, including but not limited to abdominal pain and bloating, were seen in patients diagnosed

with IBS-Mixed and IBS Constipation, in the top line data.

The purpose of the endpoint study was designed to provide efficacy data for

the product, and to determine the primary symptom endpoint, or endpoints to be used in a possible final pivotal trial that would be conducted

to attain the validation data needed to apply for U.S.

Food and Drug Administration (“FDA”) product clearance.

We are continuing to review and refine the

complete dataset and have selected the final endpoint that we would intend to use in a possible final pivotal trial.

No date has yet

been set for commencing this final trial.

In fiscal 2023, we worked to set up the inFoods IBS test to be performed

in a CLIA certified, and College of American Pathologists (“CAP”) accredited high-complexity laboratory facility and offered

as a laboratory developed test (“LDT”).

During the quarter ended February 28, 2023, the CLIA lab completed all validation

testing necessary for the inFoods IBS product to be offered as an LDT, and patient samples are now being run at the lab.

In late fiscal

2023, we trial launched this product with one large GI physician group that is now offering this product to their patients.

During fiscal

2024, we are working to optimize the process for GI physicians to order the inFoods IBS test, send patient blood samples to the CLIA lab,

and receive the test results for their patients.

We believe ease of order and workflow for physicians, with easy to understand and actionable

results for patients, is critical to our success.

We have also recently hired an internal sales force to sign up additional GI physician

groups who are interested in offering this product to their patients.

As such, we are expecting growth in revenues from the launch of

our inFoods IBS product in coming quarters.

are also beginning the work of selecting and validating one new disease (such as ulcerative colitis or migraines), where there is

evidence that certain foods can trigger or contribute to the symptoms found in these indications.

We expect any new disease we

target will follow a similar development pathway as inFoods IBS in simultaneously seeking FDA clearance of the product while

also launching the product as an LDT.

are also evaluating and pursuing partnership/licensing opportunities with U.S.

and multinational companies that could help us commercialize,

or accelerate revenue growth of, the inFoods products in the United States and overseas.

We are continuing

to review and refine the complete dataset and have selected the final endpoint that we would intend to use in a possible final pivotal

No date has yet been set for commencing this final trial.

fiscal 2023, we worked to set up the inFoods IBS test to be performed in a CLIA certified, and College of American Pathologists (“CAP”)

accredited high-complexity laboratory facility and offered as a laboratory developed test (“LDT”).

During the quarter ended

February 28, 2023, the CLIA lab completed all validation testing necessary for the inFoods IBS product to be offered as an LDT, and patient

samples are now being run at the lab.

In late fiscal 2023, we trial launched this product with one large GI physician group that is now

offering this product to their patients.

During fiscal 2024, we have successfully

launched the inFoods IBS test with numerous GI physician groups across multiple states and regions.

While our initial efforts have

yielded success within the GI specialty, we are keenly aware of the opportunity to expand across the application of our product to

other physician segments.

We are convinced that forming

partnerships in these other segments is the most effective strategy for market penetration.

Currently, we are engaging in

discussions with several potential partners.

This strategy enables our newly formed sales team to focus on building strong

relationships within the GI segment, capitalizing on the distinct advantages of the inFoods IBS product.

In tandem with our

expansion efforts, we are drawing from key learnings from the initial launch to enhance the ordering experience.

We are now driving

improvements to optimize the process for physicians to order the inFoods IBS test, send patient blood samples to the CLIA lab, and

receive the test results for their patients.

These improvements are directly informed by our experience and feedback from the field,

ensuring a smoother and more efficient experience for both physicians and patients.

With these strategic initiatives in place,

grounded in our understanding of market dynamics and user needs, we anticipate continued growth in revenues from the rollout of our

inFoods IBS product in the coming quarters.

are also beginning the work of selecting and validating one new disease (such as ulcerative colitis or migraines), where there is evidence

that certain foods can trigger or contribute to the symptoms found in these indications.

We expect any new disease we target will follow

a similar development pathway as inFoods IBS in simultaneously seeking FDA clearance of the product while also launching the product

existing medical diagnostic products are sold worldwide primarily in two markets:

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a patient’s body, stools, or blood, often in extremely small concentrations.

to the global 2019 SARS-CoV-2 novel coronavirus pandemic, in March 2020 we began developing COVID-19 products to indicate

if a person has been infected by COVID-19 or is currently infected.

to the global 2019 SARS-CoV-2 novel coronavirus pandemic, in March 2020 we began developing COVID-19 products to indicate if a person

has been infected by COVID-19 or is currently infected.

We began selling these COVID-19 related diagnostic tests during fiscal 2021,

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Due to falling

demand, there were no sales of our COVID-19 related products in the three months ended November 30, 2023.

As such, our COVID-19

product sales have caused significant swings in our revenues over the past nine quarters.

Pylori diagnostic test that indicates if a patient is infected with

Pylori bacteria.

Pylori infection is extremely common, and if left untreated, can lead to ulcers and possibly stomach cancers.

On December 18, 2023, the Company received FDA clearance for the H.

Pylori product to be sold in the US.

Subsequently, we have now begun

marketing the product in the U.S.

We have also begun discussions with international distributors for this product and expect to

see revenues both in the U.S.

market and through these international channels during 2024.

demand, there were no sales of our COVID-19 related products in the three months ended February 29, 2024.

As such, our COVID-19 product

sales have caused significant swings in our revenues over the last four years.

newly developed H.

pylori diagnostic test is a pivotal addition to our product portfolio, offering vital insights into patients’

pylori infection status.

This bacterium’s prevalence underscores the critical need for accurate diagnosis, given its potential

to precipitate ulcers and, in severe cases, stomach cancers if left untreated.

Additionally,

on December 18, 2023, we achieved a significant milestone with FDA clearance for the H.

pylori diagnostic test, paving the way for its

commercialization in the United States.

Leveraging this regulatory approval, we have initiated marketing efforts targeting the U.S.

poised to capitalize on the pressing demand for reliable diagnostic solutions.

Furthermore, recognizing the global significance of H.

pylori infection, we have initiated discussions with international distributors to expand our market reach beyond U.S.

traction in both domestic and international markets, we expect a favorable revenue trajectory during 2024.

majority of our research and development efforts are focused on development and commercialization of products such as our H.

pylori product,

improving and expanding the inFoods IBS product, developing other new products that utilize the inFoods platform, and developing

new diagnostic products with outside medical diagnostic companies that we intend to manufacture for them.

improving and expanding the inFoods IBS product, developing other new products that utilize the inFoods platform, and developing new

diagnostic products with outside medical diagnostic companies that we intend to manufacture for them.

existing products that contributed to our fiscal 2024 revenues are primarily focused on gastrointestinal diseases, food intolerances,

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OF OPERATIONS

Three months ended November 30, 2023

months ended February 29, 2024

Sales and Cost of Sales

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

Three Months Ended November 30,

Three Months Ended

Increase (Decrease)

February 29, 2024

February 28, 2023

Over-the-counter

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Physician’s office

net sales were approximately $1,567,000 for the three months ended November 30, 2023, as compared to $1,482,000 for the three months

ended November 30, 2022, an increase of approximately $85,000, or 6%.

This increase for the three months ended November 30, 2023, was

driven primarily by larger sales in the food intolerance products and increased contract manufacturing billings.

Periodic and infrequent

orders may cause volatility in quarterly sales.

cost of sales were approximately $1,242,000, or 79% of net sales, for the three months ended November 30, 2023, as compared to $1,130,000,

or 76% of net sales, for the three months ended November 30, 2022, an increase of approximately $112,000, or 10%.

The increase for the

three months ended November 30, 2023, was driven primarily by correlated increased sales for the quarter.

net sales were approximately $1,017,000 for the three months ended February 29, 2024, as compared to $1,111,000 for the three months

ended February 28, 2023, a decrease of approximately $94,000, or 8%.

This decrease for the three months ended February 29, 2024, was

primarily attributed to reduced sales in food intolerance products.

Sales in this segment are subject to periodic and infrequent orders,

contributing to potential volatility in quarterly sales.

cost of sales were approximately $1,166,000, or 115% of net sales, for the three months ended February 29, 2024, as compared to $991,000,

or 89% of net sales of net sales, for the three months ended February 28, 2023, an increase of approximately $175,000, or 18%.

for the three months ended February 29, 2024 was predominantly driven by the complexities of international shipping logistics, rather

than fluctuations in material and labor costs associated with our product.

following is a summary of operating expenses:

Three Months Ended November 30,

Three Months Ended

February 29, 2024

February 28, 2023

Increase (Decrease)

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General and Administrative Expenses

selling, general and administrative expenses were approximately $1,521,000 for the three months ended November 30, 2023, as compared

to $1,556,000 for the three months ended November 30, 2022, a decrease of approximately $35,000, or 2%.

For the three months ended

November 30, 2023, the decrease was primarily due to an approximate $209,000 reduction in bad debt expense related to a customer in

Vietnam, a $158,000 decrease in share-based compensation expenses, and a $128,000 decrease in legal expenses.

These decreases were

partially offset by a $160,000 increase in marketing expenses for the recent CVS retail launch, a $124,000 increase in salaries and wages for the sales and

marketing team, and a $92,000 increase in expenses for marketing outside services.

selling, general and administrative expenses were approximately $1,508,000 for the three months February 29, 2024, as compared to $1,379,000

for the three months ended February 28, 2023, an increase of approximately $129,000, or 9%.

For the three months ended February 29, 2024,

the increase was primarily driven by the establishment of a new sales force, resulting in a rise in total salaries and marketing expenses

amounting to $212,000.

However, these increases were partially offset by a decrease in legal expenses of $87,000.

and Development

research and development expenses were approximately $412,000 for the three months ended November 30, 2023, as compared to $462,000 for

the three months ended November 30, 2022, a decrease of approximately $50,000, or 11%.

The decrease in the three months ended November

30, 2023, was primarily due to an approximate decrease of $59,000 in inFoods research expenses.

research and development expenses were approximately $343,000 for the three months ended February 29, 2024, as compared to $392,000 for

the three months ended February 28, 2023, a decrease of approximately $49,000, or 13%.

The reduction in expenses for the three months

ended February 29, 2024, was primarily driven by a reduction of salary and compensation costs for the research and development team.

and Dividend Income

and dividend income were approximately $109,000 for the three months ended November 30, 2023, as compared to $41,000 for the three months

ended November 30, 2022, an increase of $68,000, or 166%.

and dividend income were approximately $86,000 for the three months ended February 29, 2024, as compared to $36,000 for the three months

ended February 28, 2023, an increase of $50,000, or 139%.

The increase was primarily driven by higher market interest rates on our cash

and cash equivalents.

months ended November 30, 2023

months ended February 29, 2024

Sales and Cost of Sales

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

Six Months Ended November 30,

Nine Months Ended

Increase (Decrease)

February 29, 2024

February 28, 2023

Over-the-counter

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Physician’s office

net sales were approximately $3,281,000 for the six months ended November 30, 2023, as compared to $3,119,000 for the six months ended

November 30, 2022, an increase of approximately $162,000, or 5%.

This increase for the six months ended November 30, 2023, was primarily

driven by an increase in demand for our food intolerance products and contract manufacturing billings, which was partially offset by

a reduction in Physician’s office sales associated with COVID products.

Periodic and infrequent orders may cause volatility in

quarterly sales.

cost of sales were approximately $2,541,000, or 77% of net sales, for the six months ended November 30, 2023, as compared to $2,822,000,

or 90% of net sales, for the six months ended November 30, 2022, a decrease of approximately $281,000, or 10%.

The decrease for the

six months ended November 30, 2023, was primarily driven by a $90,000 increase in salary and wages for the production team, that

was more than offset by a $332,000 decrease in costs associated with reduced sales of our COVID-19 products.

net sales were approximately $4,299,000 for the nine months ended February 29, 2024, as compared to $4,231,000 for the nine months ended

February 28, 2023, an increase of approximately $68,000, or 2%.

This increase for the nine months ended February 29, 2024, shows growth

across all non-COVID product lines underscoring the Company’s resilience despite the absence of COVID-related sales compared to

the previous year.

growth was primarily attributed to an increase in sales of our food intolerance products, EZ Detect, Aware, and contract manufacturing

Notably, this growth highlights the effectiveness of our post-pandemic strategic initiatives focusing on our diverse product

cost of sales were approximately $3,708,000, or 86% of net sales, for the nine months ended February 29, 2024, as compared to $3,814,000,

or 90% of net sales, for the nine months ended February 28, 2023, a decrease of approximately $106,000, or 3%.

The decrease for the nine

months ended February 29, 2024, was primarily driven by a $160,000 decrease in costs associated with reduced sales of our COVID-19 products.

following is a summary of operating expenses:

Six Months Ended November 30,

Nine Months Ended

February 29, 2024

February 28, 2023

Increase (Decrease)

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General and Administrative Expenses

selling, general and administrative expenses were approximately $2,696,000 for the six months ended November 30, 2023, as compared

to $3,210,000 for the six months ended November 30, 2022, a decrease of approximately $514,000, or 16%.

For the six months ended

November 30, 2023, the decrease was primarily due to an approximate $429,000 reduction in bad debt expense related to a customer in

Vietnam, a $327,000 decrease in share-based compensation expenses, and a $297,000 decrease in legal expenses.

These decreases were

partially offset by a $160,000 increase in marketing expenses for the recent CVS retail launch, a $174,000 increase in salaries and wages for the sales and

marketing team, and a $61,000 increase in expenses for marketing outside services.

selling, general and administrative expenses were approximately $4,204,000 for the nine months ended February 29, 2024, as compared to

$4,589,000 for the nine months ended February 28, 2023, a decrease of approximately $385,000, or 8%.

The decrease in the nine months

ended February 29, 2024, was primarily driven by reductions of $384,000 in legal expenses, and $330,000 in share-based compensation expenses.

these operating expense reductions were partially offset by investments in key areas of our business.

This included an increase in marketing

expenses for the recent CVS Pharmacy retail launch and the expansion of our sales team.

Despite these increases, overall cost reductions

compared to last year demonstrate our focus on strategically allocating our capital and maintaining financial discipline while pursuing

growth opportunities.

and Development

research and development expenses were approximately $883,000 for the six months ended November 30, 2023, as compared to $823,000 for

the six months ended November 30, 2022, an increase of approximately $60,000, or 7%.

The increase for the six months ended November 30,

2023, was primarily due to an increase in salaries and wages of $104,000, partially offset by a decrease in share-based compensation

expenses of $21,000 and lab supplies expenses of $15,000.

research and development expenses were approximately $1,226,000 for the nine months ended February 29, 2024, as compared to $1,215,000

for the nine months ended February 28, 2023, an increase of approximately $11,000, or 1%.

The increase for the nine months ended February

29, 2024, was primarily driven by salaries and wages of $80,000, partially offset by a decrease in share-based compensation expenses

of $32,500 and lab supplies expenses of $22,800.

have taken proactive measures to address the increased expenses in research and development.

Over the last three months, we have worked

on cost optimization resulting in reductions in salaries and compensation costs of $63,000 per quarter.

and Dividend Income

and dividend income were approximately $231,000 for the six months ended November 30, 2023, as compared to $41,000 for the six months

ended November 30, 2022, an increase of $190,000, or 463%.

and dividend income were approximately $317,000 for the nine months ended February 29, 2024, as compared to $77,000 for the nine months

ended February 28, 2023, an increase of $240,000, or 312%.

The increase was primarily driven by higher market interest rates on our cash

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following are the principal sources of liquidity:

November 30, 2023

February 29, 2024

Cash and cash equivalents

Working capital including cash and cash equivalents

of November 30, 2023 and May 31, 2023, the Company had cash and cash equivalents of approximately $7,134,000 and $9,719,000, respectively.

As of November 30, 2023 and May 31, 2023, the Company had working capital of approximately $8,443,000 and $10,852,000, respectively.

of February 29, 2024 and May 31, 2023, the Company had cash and cash equivalents of approximately $5,319,000 and $9,719,000, respectively.

As of February 29, 2024 and May 31, 2023, the Company had working capital of approximately $6,855,000 and $10,852,000, respectively.

We believe that the aggregate of our existing cash and cash equivalents is sufficient to meet our operating cash requirements and strategic

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To satisfy our capital requirements, including ongoing future operations, beyond next

year, we are working on increasing sales, reducing expenses and may seek to raise additional financing through debt and equity financing.

the six months ended November 30, 2023, cash used in operating activities was approximately $2,516,000.

year, we are working on increasing sales, reducing expenses and may seek to raise additional financing through debt or equity financing.

the nine months ended February 29, 2024, cash used in operating activities was approximately $4,317,000.

The primary factors that contributed

to this was a loss of approximately $2,639,000, non-cash expenses of $294,000, primarily associated

with depreciation and amortization, provision for allowance on accounts receivable, inventory reserves, share-based compensation, and

amortization of right-of-use assets .

to this was a loss of approximately $4,557,000, non-cash expenses of $723,000, primarily associated with depreciation and amortization,

provision for allowance on accounts receivable, inventory reserves, share-based compensation, and amortization of right-of-use assets.

This was partially offset by changes in asset and liability accounts of approximately $483,000.

the six months ended November 30, 2022, cash used in operating activities was approximately $2,786,000.

the nine months ended February 28, 2023, cash used in operating activities was approximately $4,511,000.

The primary factors that contributed

to this was a loss of approximately $3,698,000, non-cash expenses of $1,101,000, primarily associated

with share-based compensation and provision for allowance on accounts receivable .

This was partially offset by changes in asset

and liability accounts of approximately $189,000.

the six months ended November 30, 2023, cash used in investing activities was approximately $27,000 for purchases of property and equipment,

to this were a net loss of approximately $5,348,000, partially offset by non-cash expenses of $1,100,000, primarily associated with stock-based

compensation and account receivables provisions.

the nine months ended February 29, 2024, cash used in investing activities was approximately $27,000 for purchases of property and equipment,

and $64,000 in expenditures related to patents.

the six months ended November 30, 2022, cash used in investing activities was approximately $58,000 for purchases of property and equipment.

the six months ended November 30, 2023, cash provided by financing activities was $0, with no net proceeds from the sale of common stock

the nine months ended February 28, 2023, cash used in investing activities was approximately $64,000 for purchases of property and equipment.

the nine months ended February 29, 2024, cash provided by financing activities was $0, with no net proceeds from the sale of common stock

or from stock option exercises.

the six months ended November 30, 2022, cash provided by financing activities was approximately $2,015,000 which was a result of net

the nine months ended February 28, 2023, cash provided by financing activities was approximately $2,040,000 which was a result of net

proceeds from the sale of common stock of $1,961,000, and stock option exercises of $79,000.

BALANCE SHEET ARRANGEMENTS

were no off-balance sheet arrangements as of November 30, 2023.

were no off-balance sheet arrangements as of February 29, 2024.

ACCOUNTING POLICIES

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future conditions.

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.

relate to revenue recognition, bad debts, 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;

should future events or occurrences result in unanticipated consequences, there could be a material impact on our future financial condition

or results of operations.

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.

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, credit losses, inventory overhead application, inventory reserves, right-of-use

assets and lease liabilities and share-based compensation.

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 condition or results of operations.

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.

Our critical accounting policies are discussed in our Annual Report on Form 10-K for the fiscal year ended May 31, 2023.

Our critical accounting policies are

discussed in our Annual Report on Form 10-K for the fiscal year ended May 31, 2023.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis