What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-04-13 compared with 2026-01-14 · 249 added, 214 removed, 158 unchanged (75% of the section changed)

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statement include:

the ability to raise additional

capital and continue as a going concern;

to raise additional capital and continue as a going concern;

the accuracy of our estimates

regarding expenses, future revenue, capital requirements and needs for additional financing;

regarding expenses, future revenue, capital requirements and the need for additional financing;

the scope of protection

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the ability to obtain and

maintain government or regulatory certification in the countries and regions we sell products in;

maintain government or regulatory certification in the countries and regions in which our products are sold;

the ability to maintain

relations 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, 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;

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

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continued service of our key personnel and to identify, hire and retain additional qualified professionals.

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 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.

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.

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.

as required by law, we do not undertake any obligation to revise or update publicly any forward-looking

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hormones, antibodies, antigens and other substances, which may exist in the human body in extremely small concentrations.

are designed to enhance the health and well-being of people, while reducing total healthcare cost.

range of medical diagnostic products is sold worldwide, primarily in two markets:

clinical laboratories and point-of-care settings (physicians’ offices).

Most of our products are Conformite Europeenne (“CE”) marked and/or registered with regulatory agencies in various

countries for diagnostic use, with several also cleared by the FDA for sale in the

United States.

are designed to enhance patient health and well-being while reducing healthcare costs.

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

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We believe our

rapid point-of-care tests, when properly used, can often be as accurate as laboratory tests.

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 with confidence at home or in a physician’s office.

deliver reliable results in minutes, and can be performed at home or in a physician’s office.

AND DEVELOPMENT

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holders and other scientists, are dedicated to developing new products and managing technology transfer activities.

technical staff, many of whom, have extensive experience from previous employment at large diagnostic manufacturing companies, bring

a wealth of industry knowledge.

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 advise on our clinical studies and product development efforts.

to guide our clinical studies and product development efforts.

key outcome from our research and development efforts is our patented diagnostic-guided therapy (“DGT”) product,

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gastrointestinal conditions such as irritable bowel syndrome (“IBS”) and other inflammatory diseases.

target chronic inflammatory illnesses that are widespread and prevalent in large markets.

We have launched our inFoods® IBS

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.

The inFoods® IBS product utilizes a simple blood test to identify

patient-specific foods that, when eliminated from the diet, may help reduce IBS symptoms such as pain, bloating, diarrhea, cramping,

and constipation.

Unlike broad and difficult to manage dietary restrictions, the inFoods® IBS product pinpoints a

patient’s heightened immunoreactivity to specific foods known to frequently trigger IBS symptoms.

By removing the foods

identified as problematic, patients can achieve relief from IBS symptoms.

have introduced our inFoods® IBS product to select gastroenterology (“GI”) physician groups in multiple states and regions.

including in collaboration with one of the largest GI physician groups in the United States.

This initial phase was focused on gathering

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positive, and we are continuing to expand our network by onboarding additional physician practices.

dedicated sales team is focused on building strong relationships within the GI segment while selectively exploring opportunities to introduce

our inFoods® IBS products 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® across multiple healthcare

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.

efforts are intended to lay the groundwork for broader adoption by showcasing the distinct clinical value of inFoods® IBS across

multiple healthcare channels.

Concurrently,

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are currently in the process of pursuing U.S.

government payment or reimbursement for the inFoods® IBS product through the Medicare

In connection with this process, the Centers for Medicare & Medicaid Services has established a reimbursement price applicable to this product.

While the establishment of a reimbursement price does

not guarantee coverage, utilization, or payment, management believes it represents an important step toward broader market access.

Medicare reimbursement is achieved, 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.

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.

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.

these factors have not had a material 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

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

these 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

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.

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.

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commercial adoption.

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™.

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.

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 while advancing longer-term growth initiatives.

the six months ended November 30, 2025, 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.

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 six months ended November 30, 2025, the Company strengthened its liquidity position through a combination of operating cost

controls, net proceeds of approximately $1,395,000 from the ATM offering.

We are also actively exploring other strategic

opportunities to enhance and create shareholder value.

approach supports near-term cash generation needs while advancing longer-term growth initiatives.

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.

measured approach has informed sales and marketing investments and is intended to support a scalable broader launch.

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.

OF OPERATIONS

months ended November 30, 2025

months ended February 28, 2026

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 28, 2026

February 28, 2025

Over-the-counter

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Physician’s office

net sales were approximately $1,210,000 for the three months ended November 30, 2025, as compared to $1,636,000 for the three months

ended November 30, 2024, representing a decrease of approximately $426,000, or 26%.

The decrease was primarily attributable to lower

sales of Aware® products in the Middle East market, as well as reduced contract manufacturing billings and clinic laboratory sales,

which were impacted by the timing and periodic nature of customer orders.

cost of sales was approximately $1,159,000, or 96% of net sales, for the three months ended November 30, 2025, as compared to $1,199,000,

or 73% of net sales, for the three months ended November 30, 2024, representing a decrease of approximately $40,000, or 3%.

was primarily attributable to lower sales volumes during the current quarter compared to the prior year same period, as well as lower

inventory write-offs and production adjustments.

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.

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

Cost of sales as a percentage of net sales increased primarily due to product mix and lower sales volume in the current period.

following is a summary of operating expenses:

Three Months Ended November 30,

Three Months Ended

February 28, 2026

February 28, 2025

Increase (Decrease)

Operating Expense

Total Revenues

As a % of Total Revenues

Operating Expense

Total Revenues

Selling, General and Administrative Expenses

As a % of Total Revenues

Selling, General and Administrative

Research and Development

General and Administrative Expenses

the three months ended November 30, 2025, consolidated selling, general, and administrative expenses amounted to approximately $1,231,000,

compared to $1,173,000 for the corresponding period in 2024, an increase of $58,000 or 5%.

The increase was primarily attributable to

a $71,000 increase in salaries and wages primarily associated with a new hire in the sales and marketing team, a $67,000 increase in

credit loss expense related to aged receivables, and a $34,000 increase in outside sales-related services related to inFoods®.

These increases were partially offset by a $42,000 decrease in stock-based compensation within the administrative team, primarily due

to changes in the Company’s stock price, and a $72,000 decrease in sales commissions resulting from lower sales volumes in the

Middle East market.

General and Administrative

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

and Development

the three months ended November 30, 2025, consolidated research and development (“R&D”) expenses totaled approximately

$193,000, representing a decrease of 25% from $257,000 in the same period of 2024.

The decrease was primarily attributable to a $46,000

reduction in R&D wages, reflecting fewer labor hours allocated to R&D, as well as a $17,000 decrease resulting from reduced participation

in charitable sponsorships during the current period.

Dividend, Interest, and Other Income

the three months ended November 30, 2025, dividend, interest, and other income totaled approximately $58,000, compared to $40,000

for the corresponding period in 2024, representing an increase of $18,000, or 45%.

This increase was primarily attributable to

dividend distributions received from an investment holding entity during the current period.

months ended November 30, 2025

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.

Interest, and Other Income (Loss)

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.

months ended February 28, 2026

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 28, 2026

February 28, 2025

Over-the-counter

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Physician’s office

the six months ended November 30, 2025, consolidated net sales reached approximately $2,590,000, compared to $3,444,000 for the same

period in 2024, representing a decrease of approximately $854,000, or 25%.

The decrease was primarily attributable to lower clinic laboratory

sales, which experienced volatility due to the periodic and infrequent nature of customer orders, as well as reduced contract manufacturing

billings and lower OTC sales driven by decreased sales in the Middle East market.

the six months ended November 30, 2025, consolidated cost of sales was approximately $2,113,000, or 82% of net sales, compared to $2,720,000,

or 79% of net sales, for the same period in 2024, representing a decrease of $607,000, or 22%.

The decrease was primarily attributable

to lower sales volumes across the clinical laboratory, OTC, and contract manufacturing businesses, which resulted in lower labor costs

and reduced cost allocations.

In addition, lower levels of aged inventory during the current period led to a decrease in inventory write-offs.

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.

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%.

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.

following is a summary of operating expenses:

Six Months Ended November 30,

Nine Months Ended

February 28, 2026

February 28, 2025

Increase (Decrease)

Operating Expense

Total Revenues

As a % of Total Revenues

Operating Expense

Total Revenues

Selling, General and Administrative Expenses

As a % of Total Revenues

Selling, General and Administrative

Research and Development

General and Administrative Expenses

the six months ended November 30, 2025, consolidated selling, general, and administrative expenses totaled approximately $2,561,000,

compared to $2,533,000 for the same period in 2024, representing an increase of approximately $28,000, or 1%.

The increase was primarily

attributable to a $114,000 increase in outside administrative services associated with tax credit advisory services provided for ERC,

a $66,000 increase in stock-based compensation within the sales and marketing organization related to a new hire during the current period,

compared to workforce reductions in the prior year period, and a $55,000 increase in credit loss expense under CECL related to aged receivables,

for which payment plans have been established.

These increases were partially offset by an $88,000 decrease in sales commissions resulting

from reduced sales volumes in the Middle East market, a $73,000 decrease in salaries and wages within the sales and marketing team,

and a $51,000 decrease in stock-based compensation expense within the administrative team.

General and Administrative

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.

and Development

the six months ended November 30, 2025, consolidated R&D expenses totaled approximately $405,000, representing a decrease of $149,000,

or 27% from $554,000 in the same period of 2024.

The decrease was primarily attributable to a $106,000 reduction in R&D salaries

and wages, reflecting fewer labor hours allocated to R&D as the business progressed into later, commercialization focused development

phases, as well as a $36,000 decrease in R&D expenses related to inFoods® during the current period.

Dividend, Interest, and Other Income

the six months ended November 30, 2025, dividend.

interest, and other income totaled approximately $1,180,000, compared to $97,000

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.

Interest, and Other Income

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%.

The increase was primarily attributable to a

$1,100,000 cash refund received from the Internal Revenue Service (IRS) on July 21, 2025, related to previously filed claims for the

ERC, a refundable payroll tax credit established under the CARES Act.

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

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expected to recur in future periods.

the ERC refund, interest and dividend income decreased by approximately $29,000, primarily due to lower market interest rates during

the current quarter compared to the prior year.

AND CAPITAL RESOURCES AND GOING CONCERN

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.

AND CAPITAL RESOURCES

following are the principal sources of liquidity:

November 30, 2025

February 28, 2026

Cash and cash equivalents

Working capital including cash and cash equivalents

of November 30, 2025 and May 31, 2025, we had cash and cash equivalents of approximately $2,543,000 and $2,399,000, respectively.

of November 30, 2025 and May 31, 2025, we had working capital of approximately $3,592,000 and $3,135,000, respectively.

of February 28, 2026 and May 31, 2025, we had cash and cash equivalents of approximately $1,336,000 and $2,399,000, respectively.

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.

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 our new product launches;

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 as we grow;

Our ability to retain key employees and maintain critical

operations with a substantially reduced workforce;

Certain SEC regulations that limit the amount of capital

we can raise through issuance of its 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.

has analyzed our cash flow requirements through November 2026 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.

address our capital needs and sustain operations beyond the next year, we are actively pursuing strategies to increase sales, reduce

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;

Certain SEC regulations

that limit the amount of capital we can raise through issuance of our equity.

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.

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.

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.

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.

the six months ended November 30, 2025, we sold 391,125 shares of its common stock at prices ranging from $3.34 to $4.02 pursuant

to the 2024 ATM Offering, which resulted in gross proceeds of approximately $1,432,000 and net proceeds to us of $1,395,000 after deducting

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.

part of this transaction, we incurred $81,000 in deferred offering costs during the year ended May 31, 2024.

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.

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and working capital needs.

we are committed to addressing our capital needs and sustain operations beyond the next year, there is no assurance that these efforts will be successful or sufficient to meet our capital requirements.

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 financing, and achieving profitable operations.

the six months ended November 30, 2025, cash used in operating activities was approximately $1,259,000.

The primary factors that contributed

to this were a loss of approximately $1,318,000, an increase in accounts receivable of $285,000, decrease in lease liabilities of $175,000,

decrease in accrued compensation of $110,000.

These outflows were partially offset by a decrease in prepaid expenses and other of $78,000,

an increase in accounts payable and accrued expenses of $70,000, and non-cash expenses of approximately $488,000.

the six months ended November 30, 2024, cash used in operating activities was approximately $2,135,000.

The primary factors that contributed

to this were a loss of approximately $2,266,000, an increase in accounts receivable of $387,000, and a decrease in accounts payable and

accrued expenses of $290,000.

These outflows were partially offset by a decrease in inventories of $585,000 and non-cash expenses of

approximately $439,000.

the six months ended November 30, 2025, cash used in investing activities was $0.

the six months ended November 30, 2024, cash used in investing activities was $33,000 for expenditures related to patents.

the six months ended November 30, 2025, cash provided by financing activities amounted to $1,402,000, primarily resulting from gross

proceeds of approximately $1,432,000 from the sale of common stock.

the six months ended November 30, 2024, cash provided by financing activities amounted to $380,000, primarily resulting from gross proceeds

of $392,000 from the sale of common stock.

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.

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.

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.

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

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

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

BALANCE SHEET ARRANGEMENTS

were no off-balance sheet arrangements as of November 30, 2025.

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

ACCOUNTING POLICIES

14 unchanged sentences

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 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.

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.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this

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