What changed in this filing

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Item 1A. Risk Factors

2022-08-29 compared with 2021-08-27 · 31 added, 44 removed, 273 unchanged (22% of the section changed)

6 unchanged sentences

Our business could be adversely affected by the effects of widespread public health epidemics .

We are susceptible to ongoing outbreaks of an illness or other health issue, such as the recent COVID-19 Coronavirus outbreak, including outbreaks of variants of the COVID-19 virus such as the “Delta” variant.

The outbreak of the COVID-19 virus caused the various governments, including the U.S., to implement quarantines, various restrictions on travel causing airlines to suspend international and certain domestic flights, shelter in place orders and other restrictions.

We are susceptible to ongoing outbreaks of illness or other health issue, such as the recent COVID-19 Coronavirus outbreak.

The outbreak of the COVID-19 virus caused various governments, including the United States, to implement quarantines, various restrictions on travel and shelter in place orders and other restrictions.

Governments have also implemented work restrictions that prohibit many employees from going to work, and for businesses that are allowed to remain open, many employees are electing to remain at home to avoid spread of the disease.

As a result of this COVID-19 virus outbreak and potential future pandemic outbreaks, the Company faces significant risks including, but not limited to:

a) supply chain disruptions making it difficult for the Company to contract and receive materials needed for production of its products, and needed to ship finished products to our end customers, b) loss of contracts and customers from the financial strains or other disruptions they are experiencing as a result of the pandemic, c) financial risks pertaining to receivables due from customers that may fall into insolvency or otherwise be unable to pay their bills, d) government responses including orders that make it difficult to remain open for business, restrict imports of raw materials or exports of finished goods, refusal to allow the Company’s product to be licensed for sale in their countries, and other seen and unforeseen actions taken by government agencies, e) absenteeism or loss of employees at the Company, or at our partner’s companies, due to health reasons or government restrictions, that are needed to develop, validate, manufacture and perform other necessary functions for our operations, f) equipment failures, loss of utilities and other disruptions that could impact our operations or render them inoperable, g) litigation or government actions against the Company pertaining to existing products new products sold by the Company that are directed at limiting or treating the spread of the pandemic outbreak, h) a local or global recession or depression that could harm the international banking system, limit demand for all products including those made by the Company, i) a drop in demand for our products, that are all medical related, due to patients’ reluctance or refusal to visit hospitals, labs, and doctors’ offices where our products are used due to their fear of contracting a disease, and many other seen and unforeseen events and circumstances, all of which could negatively impact the Company.

As a result of this COVID-19 outbreak and potential future pandemic outbreaks, the Company faces significant risks including, but not limited to:

a) supply chain disruptions making it difficult for the Company to contract and receive materials needed for production of its products, and needed to ship finished products to our end customers, b) loss of contracts and customers from the financial strains or other disruptions they are experiencing as a result of the pandemic, c) financial risks pertaining to receivables due from customers that may fall into insolvency or otherwise be unable to pay their bills, d) government responses including orders that make it difficult to remain open for business, restrict imports of raw materials or exports of finished goods, refusal to allow the Company’s product to be licensed for sale in their countries, and other seen and unforeseen actions taken by government agencies, e) absenteeism or loss of employees at the Company, or at our partner’s companies, due to health reasons or government restrictions, that are needed to develop, validate, manufacture and perform other necessary functions for our operations, f) equipment failures, loss of utilities and other disruptions that could impact our operations or render them inoperable, g) litigation or government actions against the Company pertaining to existing products and new products sold by the Company that are directed at limiting or treating the spread of the pandemic outbreak, h) a local or global recession or depression that could harm the international banking system, limit demand for all products including those made by the Company, i) a drop in demand for our products, that are all medical related, due to patients’ reluctance or refusal to visit hospitals, labs, and doctors’ offices where our products are used due to their fear of contracting a disease, and many other seen and unforeseen events and circumstances, all of which could negatively impact the Company.

We have a history of operating losses.

51 unchanged sentences

The risk of accidental contamination or injury from these hazardous materials cannot be completely eliminated and exposure of individuals to these materials could result in substantial fines, penalties or damages that may not be covered by insurance.

In order to remain competitive, we must expend considerable resources to research new technologies and products and develop new markets, and there is no assurance our efforts to develop new technologies, products or markets will be successful or such technologies, products or markets will be commercially viable.

To remain competitive, we must expend considerable resources to research new technologies and products and develop new markets, and there is no assurance our efforts to develop new technologies, products or markets will be successful or such technologies, products or markets will be commercially viable.

We devote a significant amount of financial and other resources to researching and developing new technologies, new products, and new markets.

2 unchanged sentences

No assurances can be given that our efforts to develop new technologies or products will be successful, that such technologies and products will be commercially viable, or our expansion into new markets will be profitable.

There is also no guarantee that our new products, including our InFoods®

IBS products, will get approval and be well accepted into the marketplace.

There is also no guarantee that our new products, including our InFoods® IBS products, will get approval and be well accepted into the marketplace.

Our operations will be adversely affected if our operating results do not correspondingly increase with our increased expenditures or if our technology, product, and market development efforts are unsuccessful or delayed.

2 unchanged sentences

The loss of any key distributor or an unsuccessful effort by us to directly distribute our products could lead to reduced sales.

For the fiscal years ended May 31, 2021 and 2020, the Company had two distributors and three distributors, respectively, which accounted for a total of 60% and 57% of our net consolidated sales, respectively.

Of this, for the fiscal years ended May 31, 2021 and 2020, the largest of the distributors mentioned above accounted for 33% and 26%, respectively, of net consolidated sales.

At May 31, 2021 and 2020, the Company had two distributors and three distributors, respectively, which accounted for a total of 73% and 80%, respectively, of gross accounts receivable.

Of the 73% as of May 31, 2021, 41% was owed by a distributor in China.

Total gross receivables at May 31, 2021 and 2020 were $2,292,466 and $1,836,852, respectively.

Our net sales were approximately $18,871,000 for fiscal 2022 compared to $7,199,000 for fiscal 2021.

For the fiscal years ended May 31, 2022 and 2021, the Company had two distributors, which accounted for a total of 65% and 60% of our net sales, respectively.

Of this, for the fiscal years ended May 31, 2022 and 2021, the largest of the distributors mentioned above accounted for 55% and 33%, respectively, of net sales.

Total gross receivables on May 31, 2022 and 2021 were approximately $927,000 and $2,292,000, respectively.

As of May 31, 2022 and 2021, the Company had one distributor and two distributors, respectively, which accounted for a total of 50% and 73%, respectively, of gross accounts receivable.

Of the 50% as of May 31, 2022, 50% was owed by a distributor in Asia.

Adverse changes in our relationships with these distributors and other partners, or adverse developments in their financial condition, performance or purchasing patterns, could adversely affect our business and consolidated financial statements.

We extend credit to customers outside the U.S.

which can be difficult to collect.

We extend credit to many of our customers including those outside of the U.S.

We extend credit to customers outside the United States which can be difficult to collect.

We extend credit to many of our customers including those outside of the United States.

It is often difficult to obtain adequate credit information on these customers.

Further, our ability to collect receivables from these customers through the court systems in those countries can be more difficult than here in the U.S.

Our inability to collect on receivables from customers, in particular those outside of the U.S.

could negatively impact the Company.

Further, our ability to collect receivables from these customers through the court systems in those countries can be more difficult than here in the United States.

Our inability to collect on receivables from customers, in particular those outside of the United States could negatively impact the Company.

If we are not able to manage our growth strategy our operating results may be adversely affected.

Our business strategy contemplates further growth, which would likely result in expanding into larger facilities, expanding the scope of operating and financial systems and the geographical area of our operations, including further expansion outside the U.S., as new products and technologies are developed and commercialized or new geographical markets are entered.

Our business strategy contemplates further growth, which would likely result in expanding into larger facilities, expanding the scope of operating and financial systems and the geographical area of our operations, including further expansion outside the United States, as new products and technologies are developed and commercialized or new geographical markets are entered.

Because we have a small executive staff, acquisitions and other future growth may divert management’s attention from core aspects of our business and place a strain on existing management and our operational, financial and management information systems.

5 unchanged sentences

We have hired and will continue to hire individuals or contractors who have experience in medical diagnostics and these individuals or contractors may have confidential trade secret or proprietary information of third parties.

We cannot assure you that these individuals or contractors will not use this third-party information in connection with performing services for us or otherwise reveal this third-party information to us.

We cannot assure that these individuals or contractors will not use this third-party information in connection with performing services for us or otherwise reveal this third-party information to us.

Thus, we could be sued for misappropriation of proprietary information and trade secrets.

56 unchanged sentences

Our results of operations would be negatively affected by failures or delays in the receipt of regulatory approvals or clearances, the loss of previously received approvals or other changes to the existing laws and regulations that adversely impact our ability to manufacture and market our products.

The testing, manufacture and sale of our products are subject to regulation by numerous governmental authorities in the U.S., principally the FDA and corresponding state and foreign regulatory agencies.

The testing, manufacture and sale of our products are subject to regulation by numerous governmental authorities in the United States, principally the FDA and corresponding state and foreign regulatory agencies.

Our future performance depends on, among other matters, if, when and at what cost we will receive regulatory approval for new products, and if we can continue to comply with the many regulatory requirements that enable us to manufacture and sell medical related products and tests.

5 unchanged sentences

Such changes could include tariffs, embargos, trade wars or modifications to existing legislation, such as U.S.

tax policy, or entirely new legislation, such as the Affordable Healthcare Act in the U.S.

We cannot predict the many ways that healthcare reform in the U.S.

and internationally, and changing trade legislation and policies could adversely affect our business.

tax policy, or entirely new legislation, such as the Affordable Healthcare Act in the United States.

We cannot predict the many ways that healthcare reform in the United States and internationally, and changing trade legislation and policies could adversely affect our business.

It is unclear whether and to what extent, if at all, other anticipated developments, including changes due to new presidential administration priorities, or changes resulting from healthcare reform, such as a change in the number of people with health insurance, may impact us.

8 unchanged sentences

The end-users of our products are primarily physicians, labs, and other healthcare providers.

In the U.S., healthcare providers such as hospitals and physicians who purchase diagnostic products generally rely on third-party payers, principally private health insurance plans, federal Medicare and state Medicaid, to reimburse all or part of the cost of the procedure.

Use of our products would be adversely impacted if physicians and other healthcare providers do not receive adequate reimbursement for the cost of our products by their patients’ third-party payers both in the U.S.

and in foreign markets.

In the United States, healthcare providers such as hospitals and physicians who purchase diagnostic products generally rely on third-party payers, principally private health insurance plans, federal Medicare, and state Medicaid, to reimburse all or part of the cost of the procedure.

Our total revenue could also be adversely affected by changes or trends in reimbursement policies of governmental or private healthcare payers.

1 unchanged sentence

Given the efforts to control and reduce healthcare costs in recent years, currently available levels of reimbursement may not continue to be available in the future for our existing products or products under development.

Third-party reimbursement and coverage may not be available or adequate in either the U.S.

or foreign markets, current reimbursement amounts may be decreased in the future and future legislation, regulation or reimbursement policies of third-party payers may reduce the demand for our products or adversely impact our ability to sell our products on a profitable basis.

Third-party reimbursement and coverage may not be available or adequate in either the United States or foreign markets, current reimbursement amounts may be decreased in the future and future legislation, regulation or reimbursement policies of third-party payers may reduce the demand for our products or adversely impact our ability to sell our products on a profitable basis.

Unexpected increases in, or inability to meet, demand for our products could require us to spend considerable resources to meet the demand or harm our reputation and customer relationships if we are unable to meet demand.

11 unchanged sentences

Some raw materials require significant ordering lead time and we may not be able to timely access sufficient raw materials in the event of an unexpected increase in demand, particularly those obtained from a sole supplier or a limited group of suppliers.

If one or more of our products is claimed to be defective, or does not meet the performance criteria we claim in our marketing materials we could be subject to product recalls, claims of liability and harm to our reputation that could adversely affect our business.

If one or more of our products is claimed to be defective or does not meet the performance criteria we claim in our marketing materials we could be subject to product recalls, claims of liability and harm to patients or users of our products, or harm to our reputation that could adversely affect our business.

A claim of a defect in the design or manufacture of our products could have a material adverse effect on our reputation in the industry and subject us to claims of liability for injuries and otherwise.

11 unchanged sentences

If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to seek or obtain regulatory approval for or commercialize our product candidates.

We rely on third-party contract research organizations (“CROs”), universities or/clinical sites (“Vendors”), to coordinate, monitor and conduct of our clinical trials and to manage data for our clinical programs.

We, our Vendors, and our clinical sites are required to comply with current Good Clinical Practices (“GCPs”), regulations and guidelines issued by the FDA and by similar governmental authorities in other countries where we are conducting clinical trials.

38 unchanged sentences

• complex and potentially adverse tax consequences;

• diversion to the U.S.

of our products sold into international markets at lower prices.

• diversion to the United States of our products sold into international markets at lower prices.

Currently, most of our international sales are negotiated for and paid in U.S.

11 unchanged sentences

Shares of our common stock may be sold from time to time under this registration statement for up to three years from the filing date.

On January 22, 2021, we filed a prospectus supplement for the sale of up to $15,000,000 of shares of our common stock in an at-the-market offering under the shelf registration statement, of which $12,984,273, remains available for sale under the prospectus supplement.

On January 22, 2021, we filed a prospectus supplement for the sale of up to $15,000,000 of shares of our common stock in an at-the-market offering under the shelf registration statement, of which approximately $9,600,000, remains available for sale under the prospectus supplement.

The issuance of additional shares of our common stock, or issuances of additional securities, could dilute the ownership interest of our common stockholders and could depress the market price of shares of our common stock and impair our ability to raise capital through the sale of additional equity securities.

11 unchanged sentences

failure to meet the expectations of stock market analysts and investors;

the Company reporting material weakness in our internal control;

changes in stock market analyst recommendations regarding our common stock;

• changes in healthcare policy in the U.S.

or other countries;

changes in healthcare policy in the United States or other countries;

lawsuits or liability claims from shareholders or other parties;

11 unchanged sentences

Although we have Federal income tax net operating loss carryforwards of approximately $17,116,000 and California state income tax net operating loss carryforwards of approximately $10,805,000, use of these loss carryforwards will depend on future income in relationship to expirations dates of these carryforwards.

We do not anticipate declaring any cash dividends on our common stock.

We have never declared or paid cash dividends on our common stock and do not plan to pay any cash dividends in the near future.

Our current policy is to retain all funds and any earnings for use in the operation and expansion of our business.

As a result, capital appreciation, if any, of our common stock will be the sole source of gain for the foreseeable future.

Further, we may in the future become subject to contractual restrictions on, or prohibitions against, the payment of dividends.

Consequently, in the foreseeable future, gains will likely only be experienced from investments in our common stock if the price of our common stock increases.

There is no guarantee that our common stock will appreciate in value or even maintain the price at which shares were purchased, and returns may not be realized on investments in our common stock.

We face risks related to our intellectual property including our patents (IP).

We rely on IP for the current products we sell and for the new products in research, development and in clinical trials.

While the Company tries to protect its IP with confidentiality agreements and internal policies, we still face risks that our IP will be stolen or otherwise misappropriated, by parties inside or outside of the U.S.

Further, we have filed over 100 patents around the world on much of the research and development done by the Company, and the proposed products to come from this research.

7 unchanged sentences

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-K

Item 1A. Risk Factors