What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-08-29 compared with 2024-08-28 · 259 added, 249 removed, 107 unchanged (83% of the section changed)

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

should read the following discussion and analysis in conjunction with our consolidated financial statements and the accompanying notes

thereto included in Part II, Item 8 of this 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.

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 this Report.

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

technology company that develops, patents, manufactures and markets advanced diagnostic and therapeutic products.

Our diagnostic test

kits are used to analyze blood, urine, nasal or fecal material from patients in the diagnosis of various diseases, food intolerances

and other medical complications, or to measure the level of specific hormones, antibodies, antigens or other substances, which may exist

in the human body in extremely small concentrations.

The Company’s products are designed to enhance the health and well-being of

people, while reducing total healthcare costs.

should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated

financial statements and the accompanying notes thereto included elsewhere in this Annual Report on Form 10-K.

This discussion and analysis

contains forward-looking statements that are based on our management team’s expectations, beliefs, intentions, strategies, estimates

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 the sections titled

“Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” appearing elsewhere in this Annual

Report on Form 10-K.

are a global biomedical technology company that develops, patents, manufactures and markets advanced diagnostic and therapeutic products.

Our diagnostic test kits are used to analyze blood, urine, nasal, or fecal material from patients in the diagnosis of various diseases,

food intolerances, and other medical complications.

They can also be used to measure or detect the presence and levels of specific bacteria,

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

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

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

clinical laboratories and point-of-care settings.

including physicians’ offices and over-the-counter sales at major retailers such as Walmart, CVS Pharmacy, and Amazon.

Our diagnostic

test kits analyze blood, urine, nasal, or fecal specimens from patients to diagnose various diseases, food intolerances, and other medical

They measure or detect the presence and levels of specific bacteria, hormones, antibodies, antigens, and other substances

in the body, often in extremely small concentrations.

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 for sale in the United States by the FDA.

to the global SARS-CoV-2 novel coronavirus (“COVID-19”) pandemic, we began developing, marketing, and selling COVID-19 diagnostic tests

in March 2020.

We started selling these tests in fiscal 2021, generating significant revenues during fiscal 2021 and 2022.

experienced a substantial drop in sales in fiscal 2023, followed by no sales of our COVID-19-related products in fiscal 2024 due to falling

Consequently, our COVID-19 product sales have caused significant fluctuations in our revenues over the past four years.

contrast, our non-COVID-19 products, which accounted for approximately 100% and 96% of our revenues during the fiscal years ended May

31, 2024, and 2023, respectively, and have been our core focus.

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 U.S.

Food and Drug Administration (“FDA”) for sale in the United States.

Technological

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are accurate, utilize easily obtained patient specimens, and are simple to perform without the need for complex instrumentation.

over-the-counter (home use) and professional use (physicians’ office, clinics, etc.) rapid diagnostic test products help manage existing

medical conditions and may save lives through early detection and diagnosis of specific diseases.

Traditionally, such tests required

the expertise of medical technologists and sophisticated equipment, with results often not available for days.

We believe that rapid

point-of-care tests, when properly developed and used, can be as accurate as laboratory tests.

They require limited to no instrumentation,

deliver reliable results in minutes, and can be performed with confidence in the home or physician’s office.

invest considerable resources in the research and development of new products designed to diagnose and, in some cases, treat several

major medical diseases.

These products are both internally developed and obtained licensed from others.

Our experienced and highly trained

technical personnel, including Ph.D.

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

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

bring a wealth of industry knowledge.

Additionally, we rely on our Scientific Advisory Board, comprised of leading medical doctors and

clinicians, to guide our clinical studies and product development efforts.

key outcome of our recent research and development efforts is our patented diagnostic-guided therapy (“DGT”) product, developed on the

inFoods ® technology platform.

This innovative product is designed to treat gastrointestinal conditions such as irritable

bowel syndrome (“IBS”) and other inflammatory diseases, targeting chronic inflammatory illnesses that are widespread and prevalent

in large markets.

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

inFoods® IBS product utilizes a simple blood test to identify patient-specific foods that, when eliminated from the diet, may alleviate

IBS symptoms such as pain, bloating, diarrhea, cramping, and constipation.

home use (over-the-counter) and professional use (physicians’ office, clinics, etc.) rapid diagnostic test products help manage

existing medical conditions and may save lives through early detection and diagnosis of specific diseases.

Traditionally, such tests

required the expertise of medical technologists and sophisticated equipment, with results often not available for days.

We believe our

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

Our products require limited to no instrumentation,

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

invest resources in the research and development of new products designed to diagnose and, in some cases, treat several major medical

These products are either internally developed or licensed from others.

Our experienced and highly trained technical personnel,

including Ph.D.

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

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

a wealth of industry knowledge.

Additionally, we rely on our Scientific Advisory Board, comprised of leading medical doctors and clinicians,

to guide our clinical studies and product development efforts.

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

on the inFoods® technology platform.

This innovative technology is designed to aid in the management of gastrointestinal conditions

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

The DGT product targets chronic inflammatory illnesses

that are widespread and prevalent in large markets.

We have launched 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

By removing the foods identified as problematic, patients can achieve relief from their IBS symptoms.

have launched our inFoods® product across numerous gastroenterology (“GI”) physician groups in various states and regions, including

collaboration with one of the largest GI groups in the U.S.

Feedback from GI specialty physicians have generally been positive, and we

are actively expanding our network by onboarding additional physician practices.

These GI practices are beginning to prescribe inFoods®

IBS to their patients.

Our dedicated sales team is deepening relationships within the GI segment and strategically targeting opportunities

to introduce inFoods® to other medical specialties.

By leveraging their expertise and building strong partnerships, our sales team

is now working to engage with key physician groups outside the GI field such as integrated health practices and primary-care general

practitioners.

These efforts aim to broaden our market reach and enhance the overall adoption of inFoods® across various healthcare

sectors and to capitalize on the distinct advantages of inFoods® for a strong foundation of meaningful growth in the future.

also continuing to evaluate distribution, partnership and licensing opportunities with U.S.

and multinational companies, which have the

potential to significantly aid in the commercialization and accelerated growth of inFoods® products both domestically and internationally.

our inFoods ® product line, our additional efforts have led to a significant milestone by receiving FDA clearance in December

2023 for hp+detect ™ , a new diagnostic test for detecting Helicobacter pylori (“H.

pylori”) bacteria in the gastrointestinal

pylori is a widespread infection, affecting an estimated 35% of the U.S.

population and 45% of the population in Europe’s

five largest countries.

This bacterium is recognized as the strongest known risk factor for gastric cancer, which is the third most common

cause of cancer-related deaths globally.

hp+detect ™ test provides physicians and medical centers with a reliable tool for diagnosing H.

pylori infections and

monitoring the effectiveness and safety of treatments.

The diagnostic test is marketed directly to laboratories, where patient samples

are analyzed, and diagnoses are made.

To support the launch and distribution of hp+detect ™ , we are actively promoting

the test to large end-customer labs.

This strategic initiative aims to enhance patient care by enabling timely and accurate detection

pylori infections.

to slower-than-expected launch of the Company’s key products, inFoods ® IBS and hp+detect ™ , the

Company has initiated significant cost-cutting measures to extend its cash runway and work towards increasing revenues to cover overhead

These measures include a workforce reduction of nearly 15%.

In addition, the Company is actively exploring strategic opportunities

to enhance and create shareholder value.

By removing the foods identified as problematic, patients can achieve relief from IBS symptoms.

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

including collaboration with one of the largest GI groups in the U.S.

This initial phase was focused on gathering real-world feedback,

optimizing physician engagement, and validating operational processes.

GI physician feedback has been generally positive, and we are

continuing to expand our network by onboarding additional physician practices.

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

inFoods® 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 channels.

Concurrently,

we are evaluating distribution, partnership, and licensing opportunities with U.S.

companies to support a scalable, broad market launch.

These potential collaborations could significantly enhance the commercialization trajectory of inFoods® products, both domestically

and internationally.

are currently in the process of applying for US government payment or reimbursement for the inFoods IBS product through the Medicare

If the Company is successful in attaining reimbursement, we will move forward with applying for reimbursement of this product

by private payer insurance companies.

If patients are able to attain and use our inFoods IBS® product at no cost, or with a small

co-payment, we believe this will dramatically increase our revenues from this product.

we continue 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.

Although 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 processes.

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 our European subsidiary (BioEurope), and our Mexican subsidiary

(BioMexico), to mitigate some of the risk these 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.

pylori is a prevalent infection, affecting approximately 35% of the U.S.

and 45% of the population in Europe’s largest countries.

This bacterium is recognized as the strongest known risk factor for gastric

cancer, which remains one of the leading causes of cancer-related deaths globally.

The hp+detect™ test is marketed directly to

laboratories and is intended to provide physicians and medical centers with a reliable tool for diagnosing H.

pylori infections and monitoring

treatment effectiveness.

We are actively promoting hp+detect™ to large end-customer laboratories and positioning the product for

commercial adoption.

to the slower-than-expected launch of our key products, inFoods ® IBS and hp+detect ™ , we have initiated

significant cost-cutting measures to extend our cash runway and work towards increasing revenues to cover overhead costs.

These measures

include a workforce reduction of nearly 15% during this fiscal year, which incurred costs such as severance, impacting typical cost trends

Additionally, we raised $2,015,000 in net proceeds from the ATM offering filed in May 2024 providing additional liquidity

to support our operations.

We are actively exploring strategic opportunities to enhance and create shareholder value.

April 21, 2025 (the “Effective Date”), we filed a Certificate of Amendment to our Second Amended and Restated Certificate

of Incorporation with the Secretary of State of the State of Delaware, to effect a 1-for-8 reverse stock split (the “Reverse Stock

Split”) of our Common Stock.

Beginning with the opening of trading on the Effective Date, our common stock began trading on Nasdaq

on a split-adjusted basis under the same symbol, “BMRA.” As a result of the Reverse Stock Split, every 8 shares of our common

stock issued and outstanding were automatically combined and converted into 1 validly issued, fully paid and non-assessable share of

common stock.

In lieu of any fractional shares, stockholders who would otherwise have been entitled to receive a fractional share instead

had their interests automatically rounded up to the next whole share, after aggregating all the fractional interests of a holder resulting

from the Reverse Stock Split.

Reverse Stock Split did not change the number of authorized shares of our common stock or preferred stock as set forth in our Certificate

of Incorporation, as amended.

All historical share and per share data for the periods presented in our consolidated financial statements,

including for periods ending prior to the Effective Date, has been adjusted to reflect the 1-for-8 Reverse Stock Split on a retroactive

basis as if the Reverse Stock Split occurred as of the earliest period presented.

OF OPERATIONS

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Physician’s office

fiscal 2024, our net sales were approximately $5,415,000, representing an increase of $76,000, or 1%, compared to $5,339,000 for

When comparing fiscal 2024 net sales excluding COVID-19 test sales from fiscal 2023, there is an increase of $290,000,

This growth was primarily attributable to the $257,000 increase in OTC Product sales that were within the UAE market,

reflecting stronger demand and expanded distribution channels in the region.

Additionally, a $131,000 increase in revenues from

Contract Manufacturing projects contributed positively to our overall sales performance.

These increases were partially offset by a

$214,000 decline in sales of COVID-19 tests as the global pandemic situation stabilized.

cost of sales for fiscal 2024 was approximately $4,804,000, or 89% of net sales, compared to $4,893,000, or 92% of net sales, for fiscal

2023, reflecting a slight decrease of $89,000, or 2%.

The decrease was primarily driven by a $171,000 reduction due to the absence

of COVID-related sales.

However, this decline was partially offset by a $32,000 increase in OTC product costs and a $56,000 rise in contract

manufacturing costs, reflecting higher sales in both categories during fiscal year 2024.

the fiscal year ended May 31, 2025, our net sales were approximately $5,311,000, representing a decrease of $104,000, or 2%, compared

to $5,415,000 for the fiscal year ended May 31, 2024.

The decrease was primarily driven by reduced retail market activity, lower international

over-the-counter sales due to potential tariff impacts, and volatility in clinical laboratory demand.

These declines were partially offset

by higher contract manufacturing billings and increased demand for our inFoods® IBS product.

cost of sales for the fiscal year ended May 31, 2025 was approximately $4,813,000, or 91% of net sales, compared to $4,804,000, or 89%

of net sales, for the fiscal year ended May 31, 2024, reflecting a slight increase of $9,000, or 0.2%.

The increase was primarily attributable

to higher contract manufacturing costs, driven by increased sales in this category, as well as higher costs associated with our inFoods®

These increases were partially offset by a reduction in direct labor costs.

The overall margin impact also reflected a shift

in sales mix, with lower over-the-counter sales, which typically generate higher margins in the retail market.

following is a summary of operating expenses:

Year Ended May 31,

Increase (Decrease)

Operating Expense

Ended May 31,

Total Revenues

Operating Expense

Total Revenues

Selling, General and Administrative Expenses

Research and Development

General and Administrative Expenses

selling, general, and administrative expenses were approximately $5,487,000 for fiscal 2024, compared to $6,085,000 for fiscal 2023,

a decrease of $598,000, or 10%.

The reduction in fiscal 2024 was primarily due to decreases of $822,000 in legal expenses, $399,000 in bad debt expenses, and $247,000 in share-based compensation.

These significant operating expense reductions were partially offset by

strategic investments in key areas of our business, including a $535,000 expansion of our sales team, a $136,000 increase in sales commission expenses, and a $171,000 increase

in outside services for sales and administration.

Despite these increases, the overall cost reductions from the previous year underscore our commitment to

strategically allocating capital and maintaining financial discipline while pursuing growth opportunities.

and Development

research and development expenses were approximately $1,491,000 for fiscal 2024 compared to $1,584,000 for fiscal 2023, a decrease

of $93,000, or 6%.

The decrease in fiscal 2024 was primarily driven by a reduction in share-based compensation expenses, which

decreased by $45,000, and cost optimizations in our inFoods ® R&D projects, resulting in savings of $47,000.

detailed discussion of our ongoing research initiatives and their potential market impacts, please refer to the ‘Research and

Development’ section in Item 1.

General and Administrative Expenses

selling, general, and administrative expenses were approximately $4,612,000 for the fiscal year ended May 31, 2025, compared to $5,487,000

for the fiscal year ended May 31, 2024, a decrease of $875,000, or 16%.

This reduction reflects our strategic financial management and

was primarily attributable to a $351,000 decrease in payroll expenses following a reduction in force implemented in July 2024, a $327,000

decrease in stock compensation, a $66,000 decrease in marketing expenses for OTC products, and a $59,000 decrease in sales and marketing

outside services.

Overall, the decrease in SG&A expenses demonstrates our continued commitment to strategically allocating capital

and maintaining financial discipline while pursuing growth opportunities.

and Development

research and development expenses were approximately $1,023,000 for the fiscal year ended May 31, 2025, compared to $1,491,000 for the

fiscal year ended May 31, 2024, a decrease of $468,000, or 31%.

The decrease was primarily driven by a $311,000 reduction in payroll

expenses following a reduction in force implemented in July 2024, $68,000 in cost saving related to our inFoods® research and development

projects, and a $33,000 reduction in research and development hp+detect™ project expenses as the research phase was completed.

For a detailed discussion of our ongoing research initiatives and their potential market impacts, please refer to the “Research

and Development” section in Item 1.

and Interest income

and interest income for fiscal 2024 and 2023 was approximately $431,000 and $133,000, respectively.

The $298,000 increase was primarily

driven by higher market interest rates on our cash and cash equivalents.

and interest income was approximately $165,000 for the fiscal year ended May 31, 2025, compared to $431,000 for the fiscal year ended

May 31, 2024.

The decrease of $266,000 was primarily attributable to lower market interest rates on our cash and cash equivalents, as

well as a reduction in cash and cash equivalent balances.

CAPITAL RESOURCES AND GOING CONCERN

following are the principal sources of liquidity:

Year Ended May 31,

Cash and cash equivalents

Working capital including cash and cash equivalents

of May 31, 2024 and 2023, the Company had cash and cash equivalents of approximately $4,170,000 and $9,719,000, respectively.

31, 2024 and 2023, the Company had working capital of approximately $5,527,000 and $10,852,000, respectively.

Ended May 31,

and cash equivalents

capital including cash and cash equivalents

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

need and ability to generate additional revenue from international opportunities and our

new product launches;

need and ability to generate additional revenue from international opportunities and our new product launches;

need to access the capital and debt markets to meet current obligations and fund operations;

capacity to manage operating expenses and maintain gross margins as we grow;

ability to retain key employees and maintain critical operations with a substantially reduced

ability to retain key employees and maintain critical operations with a substantially reduced workforce;

SEC regulations that limit the amount of capital the Company can raise through issuance of its equity.

has analyzed the Company’s cash flow requirements through August 2026 and beyond.

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expenses, sell non-core assets, seek additional financing through debt or equity, and seek other strategic alternatives.

As part of our efforts to reduce costs, we have initiated

significant cost-cutting measures to extend our cash runway and work towards increasing revenues to cover overhead costs.

These measures

include a workforce reduction of nearly 15% and a substantial reduction in other operating expenses.

As part of our financing plan, on September 28, 2023,

we filed a “shelf” registration statement on Form S-3 with the SEC, allowing the Company to issue up to $20,000,000 in common

Under this registration statement, shares of our common stock may be sold from time to time for up to three years from the filing

On May 10, 2024, the Company filed a prospectus supplement with the SEC, as part of the registration statement filed on September

28, 2023, which was declared effective on September 29, 2023.

This supplement was intended to facilitate the sale of up to $5,500,000

in common stock through ATM offerings, as defined in Rule 415 under the Securities Act.

As part of this transaction, the Company incurred

$81,000 in deferred offering costs.

The amount of capital that we can raise under the ATM offering is highly dependent upon the trading volume and the

trading price of our stock.

The average trading volume of our stock over the last three full calendar months is approximately 229,000

shares per day and the high and low trading price of our stock during the same period of time was $1.25 and $0.50, respectively.

stock continues to trade at low volumes and price, the amount of capital that we can raise under the ATM offering will be constrained.

The Company intends to use the net proceeds from

this offering for general corporate purposes, including, but not limited to, sales and marketing activities, clinical studies and product

development, acquisitions of assets, businesses, companies, or securities, capital expenditures, and working capital needs.

committed to these plans, there is no assurance that these efforts will be successful or sufficient to meet our capital requirements.

part of our efforts to reduce costs, we have initiated significant cost-cutting measures to extend our cash runway and work towards increasing

revenues to cover overhead costs.

These measures include a workforce reduction of nearly 16% and a substantial reduction in other operating

part of our financing plan, on September 28, 2023, we filed a “shelf” registration statement on Form S-3 with the SEC, which

was declared effective on September 29, 2023, allowing the Company to issue up to $20,000,000 in shares of our common stock.

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

2024, the Company filed a prospectus supplement with the SEC, as part of this registration statement.

This prospectus supplement was

intended to facilitate the sale of up to $5,500,000 in common stock through ATM offerings, as defined in Rule 415 under the Securities

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

the year ended May 31, 2025, the Company sold 440,687 shares of its common stock at prices ranging from $3.06 to $8.32 pursuant to the

ATM Agreement, which resulted in gross proceeds of approximately $2,143,000 and net proceeds to the Company of $2,015,000, after deducting

commissions for each sale and legal, accounting, and other fees related to offering in the amount of $128,000.

Company intends to use the net proceeds from this offering for general corporate purposes, including, but not limited to, sales and marketing

activities, clinical studies and product development, acquisitions of assets, businesses, companies, or securities, capital expenditures,

and working capital needs.

we are committed to these plans, there is no assurance that these efforts will be successful or sufficient to meet our capital requirements.

factors raise substantial doubt about the Company’s ability to continue as a going concern.

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addition, our business is subject to additional risks and uncertainties, including, but not limited to, those described in Item 1A.

fiscal 2024, cash used in operating activities was approximately $5,361,000, compared to $5,474,000 for fiscal 2023.

factors contributing to this were a loss of approximately $5,978,000, a decrease in inventory reserves of $205,000, an increase in

accounts receivable of $215,000, an increase in inventories of $115,000 and a decrease in lease liability of $297,000.

These were partially offset by an increase in accounts

payable and accrued expenses of $246,000, and non-cash expenses of approximately $1,211,000.

fiscal 2023, cash used in operating activities was approximately $5,474,000.

The primary factors that contributed to this were a

loss of approximately $7,140,000, an increase in accounts receivable of $291,000, a decrease in inventory reserves of $174,000, and

a decrease in accounts payable and accrued expenses of $80,000 and a decrease in lease liability of $297,000.

These were partially offset by an increase in the allowance on

accounts receivable of $342,000, a decrease in inventories of $534,000, and non-cash expenses of approximately

fiscal 2024, cash used in investing activities was approximately $115,000, as compared to $78,000 for fiscal 2023.

During fiscal 2024,

the Company purchased approximately $51,000 of property and equipment and had $64,000 in expenditures related to patents.

During fiscal

2023, the Company purchased approximately $64,000 of property and equipment and had $14,000 in expenditures related to patents.

used in financing activities for fiscal 2024 was approximately $81,000, compared to cash provided by financing activities of

$9,390,000 in fiscal 2023.

In fiscal 2024, the Company did not receive any proceeds from the exercise of stock options, whereas in

fiscal 2023, the Company received approximately $81,000 from such exercises.

fiscal 2024 and 2023, the Company received approximately $0 and $9,309,000, respectively, in net proceeds from the sale of common stock.

The common stock sold and issued in fiscal 2023 was issued under the Company’s shelf registration statement filed with the SEC

on July 21, 2020 (the “2020 Shelf Registration Statement”) and declared effective by the SEC on September 30, 2020, and under

the prospectus supplement filed with the SEC on January 22, 2021 (“2021 Prospectus Supplement”), and the prospectus supplement

filed in conjunction with the Company’s underwritten public offering of common shares on March 7, 2023 (the “2023 Prospectus

Supplement”) (See Shareholders’ Equity in the notes to the consolidated financial statements for further details about SEC

registration statements).

The 2020 Shelf Registration Statement registers common shares that may be issued by the Company in a maximum

aggregate amount of up to $90,000,000.

On January 22, 2021, we filed the 2021 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 2020 Shelf Registration Statement, of which $5,290,000 was issued

through March 7, 2023.

March 2023, we terminated the at-the-market offering and sold 3,333,333 shares of our common stock in a firm commitment public offering

under the 2020 Shelf Registration Statement at a price to the public of $2.40 per share, for total

gross proceeds of $8,000,000, before deducting underwriting discounts and commissions and other offering-related expenses payable by

the fiscal year ended May 31, 2025, cash used in operating activities was approximately $3,841,000 compared to $5,361,000 for the fiscal

year ended May 31, 2024.

The primary factors contributing to this were a loss of approximately $4,973,000, an increase in inventory reserves

of $4,000, an increase in accounts receivable of $209,000, a decrease in inventories of $882,000 and a non-cash expense of approximately

These were partially offset by a decrease in accounts payable and accrued expenses of $467,000, and reduction in lease liabilities

the fiscal year ended May 31, 2024, cash used in operating activities was approximately $5,361,000, compared to $5,474,000 for the fiscal

year ended May 31, 2023.

The primary factors contributing to this were a loss of approximately $5,978,000, a decrease in inventory reserves

of $205,000, an increase in accounts receivable of $215,000, an increase in inventories of $115,000 and a decrease in lease liability

These were partially offset by an increase in accounts payable and accrued expenses of $246,000, and non-cash expenses of

approximately $1,211,000.

the fiscal year ended May 31, 2025, cash used in investing activities was approximately $37,000, as compared to $115,000 for the fiscal

year ended May 31, 2024.

During the fiscal year ended May 31, 2025, we had $37,000 in expenditures related to patents.

the fiscal year ended May 31, 2024, we purchased approximately $51,000 of property and equipment and had $64,000 in expenditures related

provided financing activities was approximately $2,111,000 for the fiscal year ended May 31, 2025, compared to cash used in financing

activities of $81,000 in the fiscal year ended May 31, 2024.

In fiscal year end May 31, 2025, we received net proceeds of $2,015,000

from the sale of our common stock and $15,000 from the exercise of stock options.

In addition, the Company recorded a non-cash reclassification

of $84,000 in deferred offering costs during the same period.

By contrast, in the fiscal year ended May 31, 2024, our financing activities

primarily consisted of $81,000 in payments for deferred offering costs.

the fiscal years ended May 31, 2025 and 2024, we received approximately $2,015,000 and $0, respectively, in net proceeds from the sale

of common stock.

Our common stock sold and issued in the fiscal year ended May 31, 2025 was issued under our shelf registration statement

filed with the SEC on September 28, 2023, which was declared effective on September 29, 2023 (the “2023 Registration Statement”).

On May 10, 2024, the Company filed a prospectus supplement to the 2023 Registration Statement with the SEC for the sale of up to $5,500,000

in common stock through ATM offerings, as defined in Rule 415 under the Securities Act.

As part of this transaction, the Company incurred

$81,000 in deferred offering costs during the fiscal year ended May 31, 2024.

of August 29, 2025, the date on which this Annual Report on Form 10-K for the fiscal year ended May 31, 2025, is filed with the SEC,

our 2023 Registration Statement remains subject to the offering limits set forth in General Instruction I.B.6 of Form S-3 because our

public float is less than $75 million.

For so long as the Company’s public float is less than $75 million, the aggregate market

value of securities sold by the Company under the 2023 Shelf Registration Statement pursuant to Instruction I.B.6 to Form S-3 during

any 12 consecutive months may not exceed one-third of the Company’s public float.

We have not sold any of our common stock pursuant

to General Instruction I.B.6 of Form S-3 in the 12 calendar months preceding the date of filing this Annual Report on Form 10-K.

purposes of this limitation, the aggregate market value of our outstanding common stock held by non-affiliates, or public float, was

$7,037,587, based on 15,639,082 non-restricted shares of our outstanding common stock held by non-affiliates and a price of $0.45 per

share, which was the price at which our common stock was last sold on the Nasdaq Capital Market on July 2, 2024 (a date within 60 days

of the date hereof), calculated in accordance with General Instruction I.B.6 of Form S-3.

After giving effect to the $2,345,862 offering

limit imposed by General Instruction I.B.6 of Form S-3, and after deducting the shares we sold within the preceding 12 months, as of

the date of filing this Annual Report, we may sell $2,345,862 shares of our common stock at this time under the 2023 Shelf Registration

part of our ongoing efforts to reduce costs, we have implemented significant cost-cutting measures, including a workforce reduction of

nearly 15% in July 2024.

our 2023 Registration Statement remains subject to the offering limits set forth in General Instruction I.B.6 of Form S-3 because

our public float is less than $75 million.

For so long as the Company’s public float is less than $75 million, the aggregate

market value of securities sold by the Company under the 2023 Shelf Registration Statement pursuant to Instruction I.B.6 to Form S-3

during any 12 consecutive months may not exceed one-third of the Company’s public float.

For purposes of this limitation, the aggregate market value of our outstanding common stock held by non-affiliates, or

public float, was $9,945,252, based on 2,402,235 non-restricted shares of our outstanding common stock held by non-affiliates and a

price of $4.14 per share, which was the price at which our common stock was last sold on the Nasdaq Capital Market on July 24,

2025 (a date within 60 days of the date hereof), calculated in accordance with General Instruction I.B.6 of Form S-3.

effect to the $3,315,084 offering limit imposed by General Instruction I.B.6 of Form S-3, and after deducting the shares we sold within the

preceding 12 months, as of the date of filing this Annual Report, we may sell $231,986 shares of our common stock at this time under the

2023 Shelf Registration Statement .

July 21, 2025, the Company received a cash refund of approximately $1.1 million from the Internal Revenue Service (IRS) related to previously

filed claims for the Employee Retention Credit (ERC), a refundable payroll tax credit under the Coronavirus Aid, Relief, and Economic

Security (CARES) Act.

This amount was recorded and collected subsequent to year-end.

July and August 2025, the Company completed sales of its common stock under its At-the-Market (“ATM”) offering program, generating

net proceeds of approximately $919,000 subsequent to year-end.

BALANCE SHEET ITEMS

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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.

These relate to revenue recognition, inventory overhead application, inventory reserve 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 conditions 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

Please refer to Note 2 of the Company’s consolidated financial statements for information on Significant

Accounting Policies.

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, inventory overhead application, inventory reserve 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 conditions or results of operations.

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 of the Company’s consolidated financial statements for information

on Significant Accounting Policies.

Company has various contracts with customers, and these contracts specify the recognition of revenue based on the nature of the transaction.

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services related to contract manufacturing, revenue is recognized when the service has been performed.

Services for some contract work

Services for some contract works

are invoiced and recognized as the project progresses.

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customer demand for current products and new product introductions.

Our inventory valuation reserves totaled $467,000 and $672,000

as of May 31, 2024 and 2023, representing approximately 16% and 25% of our inventory, respectively.

The reserve is adjusted based on such evaluation, with a corresponding

provision included in cost of sales.

Abnormal amounts of idle facility expenses, freight, handling costs and wasted material are recognized

as current period charges and the allocation of fixed production overhead is based on the normal capacity of the production facilities.

Our inventory valuation reserves totaled $471,000 and $467,000 as of May 31, 2025 and 2024, representing approximately 24% and 16% of

our inventory, respectively.

ACCOUNTING PRONOUNCEMENTS

ASU’s issued by the FASB and guidance issued by the SEC did not, or are not believed by the management to, have a material effect

on the Company’s present or future consolidated financial statements.

June 2016, the FASB issued ASU 2016-13.

This ASU requires the measurement of all expected credit losses for financial assets, including

trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

The guidance was initially effective for the Company for annual reporting periods beginning after December 15, 2019, and interim periods

within those fiscal years.

In November 2019, the FASB issued ASU 2019-10, “Financial Instruments - Credit Losses (Topic 326), Derivatives

and Hedging (Topic 815), and Leases (Topic 842):

Effective Dates,” which, among other things, defers the effective date of ASU

2016-13 for public filers that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December

15, 2022, including interim periods within those years.

Early adoption is permitted.

The Company adopted ASU 2016-03 on June 1, 2023,

and the adoption of this update did not have a material impact on the Company’s condensed consolidated financial statements.

November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, “Improvements to Reportable Segment

Disclosures.” The ASU includes enhanced disclosure requirements, primarily related to significant segment expenses that are regularly

provided to and used by the chief operating decision maker (“CODM”).

The amendments are to be applied retrospectively to all prior periods

presented in the financial statements.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, with early adoption

We are currently evaluating the effect of adopting this pronouncement on our financial statements and disclosures.

ASU’s issued by the Financial Accounting Standards Board (“FASB”) and guidance issued by the SEC did not, or are not

believed by the management to, have a material effect on the Company’s present or future consolidated financial statements.

November 2023, the FASB issued ASU 2023-07, “Improvements to Reportable Segment Disclosures.” The ASU includes enhanced disclosure

requirements, primarily related to significant segment expenses that are regularly provided to and used by the chief operating decision

maker (“CODM”).

The amendments are to be applied retrospectively to all prior periods presented in the financial statements.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, with early adoption permitted.

The Company adopted ASU 2023-07

on May 31, 2025, and the adoption of this update did not have a material impact on the Company’s consolidated financial statements.

December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740):

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with early adoption permitted.

We are currently evaluating the effect of adopting this pronouncement on our financial statements and

The Company adopted ASU 2023-07 on May 31, 2025, and the adoption of this update did not have a material

impact on the Company’s consolidated financial statements.

November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation

Disclosures (Subtopic 220-40)”.

The ASU includes enhanced disclosure requirements, which mandates enhanced transparency in financial

statements by requiring detailed disclosures of specific expenses like inventory purchases, employee compensation, depreciation, and

intangible asset amortization.

ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting

periods within annual reporting periods beginning after December 15, 2027.

Early adoption is permitted.

We are currently evaluating the

effect of adopting this pronouncement on our financial statements and disclosures.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information

under this item.

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 7. Management’s Discussion and Analysis