NEOGEN CORP - Annual Report: 2022 (Form 10-K)

Forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, are made throughout this Annual Report on Form including statements relating to management’s expectations regarding new product introductions; the adequacy of our sources for certain components, raw materials and finished products; and our ability to utilize certain inventory. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” “seeks,” “estimates,” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are intended to provide our current expectations or forecasts of future events; are based on current estimates, projections, beliefs, and assumptions; and are not guarantees of future performance. Actual events or results may differ materially from those described in the forward-looking statements. There are a number of important factors, including competition, recruitment and dependence on key employees, impact of weather on agriculture and food production, effects of the ongoing pandemic on our business, global business disruption caused by the Russian invasion in Ukraine and related sanctions, results of operations, liquidity, financial condition and stock price, inflation, supply chain, identification and integration of acquisitions, research and development risks, patent and trade secret protection, government regulation, risks related to completion of the 3M transaction, and other risks detailed in item 1A. RISK FACTORS in this Form and from time to time in the Company’s reports on file at the Securities and Exchange Commission (SEC), that could cause Neogen Corporation’s results to differ materially from those indicated by such forward-looking statements.

In addition, any forward-looking statements represent management’s views only as of the day this Annual Report on Form was first filed with the Securities and Exchange Commission and should not be relied upon as representing management’s views as of any subsequent date. While management may elect to update forward-looking statements at some point in the future, it specifically disclaims any obligation to do so, even if its views change.

As used in this Annual Report on Form the terms “Neogen,” “the Company,” “we,” “us,” and “our” refer to Neogen Corporation and, where appropriate, its consolidated subsidiaries, unless the context indicates otherwise.

Neogen Corporation and subsidiaries develop, manufacture and market a diverse line of products and services dedicated to food and animal safety. Our Food Safety segment consists primarily of diagnostic test kits and complementary products (e.g., culture media) sold to food producers and processors to detect dangerous and/or unintended substances in human food and animal feed, such as foodborne pathogens, spoilage organisms, natural toxins, food allergens, genetic modifications, ruminant meat speciation, drug residues, pesticide residues and general sanitation concerns. Our diagnostic test kits are generally easier to use and provide greater accuracy and speed than conventional diagnostic methods. The majority of the test kits are disposable, immunoassay and DNA detection products that rely on proprietary antibodies and RNA and DNA testing methodologies to produce rapid and accurate test results. Our expanding line of food safety products also includes genomics-based diagnostic technology, and advanced software systems that help testers to objectively analyze and store their results and perform analysis on the results from multiple locations over extended periods.

Neogen Corporation was formed as a Michigan corporation in June 1981 and operations began in 1982. Our principal executive offices are located at 620 Lesher Place, Lansing, Michigan 48912-1595 and our telephone number is

Neogen’s Annual Report on Form Quarterly Reports on Form Current Reports on Form and amendments to those reports are available free of charge via our website () as soon as reasonably practicable after such information is filed with, or furnished to, the United States Securities and Exchange Commission. The content of our website or the website of any third party that may be noted herein is not incorporated by reference in this Form

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AccuClean, AccuPoint, AccuScan, Acumedia, Agri-Screen, Alert, ANSR , BetaStar, BioLumix , Ceralpha, Colitag, F.A.S.T., GeneQuence, GENE-TRAK, Harlequin, , Lab M, Right Now, Megazyme, Megazyme (design) , MPNPlate, MPNTray, NeoCare, NeoColumn, NeoNet, NeoSeek, , Penzyme, Raptor, Reveal, Soleris, µPREP, Veratox, Simple. Accurate. Supported. Food Safety Solutions

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, , AluShield, AquaPrime, Assault, Barnstorm, BioCres 50, BioPhene, BioQuat, BotVax, Breeder-Sleeve, Calf Eze, Chem-Tech, Ltd., Chem-Tech’s CT logo (with circle), , COMPANION, , Cykill, D3 Needles, DC&R, DeciMax, , Dr. Frank’s, , DX3, , ElectroJac, ELISA Technologies (design), EqStim, EquiSleeve, Bond, Catch, Farm-Foam, Farmphene, , Defense, Ultra, Fura-Zone, GenQuat, Horse Sense, Ideal, ImmunoRegulin, Iodis, Jolt, , , MACLEOD, Maxi Sleeve, MaxKlor, MegaShot, Viroxide Super, Neogen Viroxide Super and flask (design), NFZ, Nu Dyne, PanaKare, Pantek, Paradefense, ParlorMint, Parvosol, Peraside, Place Pack, PolyPetite, PolyShield, PolySleeve, Preserve, Preserve International, Preserve International(design), Prima, Prima Marc,

Prima-Shot, Prima Tech, , , Promar, , 6 MIL, Protectus, Provecta Advanced, Prozap, Prozap (stylized mark w/fancy Z), , Ramik, RenaKare, Rodex, , Siloxycide, Spectrasol, Squire, Standguard, Starlicide, , SureBond, SureKill, , Synergize, Tetrabase, Tetracid, Tetradyne, ThyroKare, , Paradefense, Turbocide, Turbocide Gold, Uniprim, , , , , War Paint,

Deoxi, Envigor, GeneSeek, Genomic Profiler, Genomic Insight for Personalized Care, Igenity, Infiniseek, SeekGain, SeekSire, Skimseek, Early Warning

BioSentry barn logo, BioSentry chicken logo, BioSentry pig logo, Circular design, TurboCide (stylized), D3 color mark – red

Neogen operates in two business areas: the Food Safety and the Animal Safety segments. See the “Notes to Consolidated Financial Statements” section of this Form for financial information about our business segments and international operations.

Neogen’s Food Safety segment is primarily engaged in the production and marketing of diagnostic test kits and complementary products marketed to food and feed producers and processors to detect dangerous and/or unintended substances in food and animal feed, such as foodborne pathogens, spoilage organisms, natural toxins, food allergens, genetic modifications, ruminant meat speciation, drug residues, pesticide residues and general sanitation concerns. Our test kits are used to detect potential hazards or unintended substances in food and animal feed by testers ranging from small local grain elevators to the largest, best-known food and feed processors in the world, and numerous regulatory agencies. Neogen’s products include tests for:

Grain producers and processors of all types and sizes use our Veratox, Agri-Screen, Reveal, Reveal Q+ and Reveal Q+ MAX tests to detect the presence of mycotoxins, including aflatoxin, aflatoxin M1, deoxynivalenol, fumonisin, ochratoxin, zearalenone, toxin and ergot alkaloid, to help ensure product safety and quality in food and animal feed.

The world’s largest producers of cookies, crackers, candy, ice cream and many other processed foods use our Veratox, Alert, Reveal, Reveal and BioKits testing products to help protect their food-allergic customers from the inadvertent contamination of products with food allergens, including but not limited to peanut, milk, egg, almond, gliadin (gluten), soy, hazelnut and coconut residues.

Dairy processors are the primary users of Neogen’s BetaStar diagnostic tests to detect the presence of veterinary antibiotics in milk. The presence of these drugs above a certain level in milk is a public health hazard and an economic risk to producers as it limits the milk’s further processing.

Meat and poultry processors, seafood processors, fruit and vegetable producers and many other market segments are the primary users of Neogen’s ANSR and Reveal tests for foodborne bacteria, including O157:H7, , and. Neogen’s ANSR pathogen detection system is an isothermal amplification reaction test method that exponentially amplifies the DNA of any bacteria present in food and environmental samples to detectable levels in 10 minutes. Combined with ANSR’s single enrichment step, Neogen’s pathogen detection method provides results in a fraction of the time of other molecular detection methods. Our Right Now test detects the pathogen in less than 60 minutes without sample enrichment. Reveal’s lateral flow device combines an immunoassay with chromatography for a rapid and accurate result.

Neogen’s Soleris products are used by food processors to identify the presence of spoilage organisms (e.g., yeast and mold) and other microbiological contamination in food. The systems measure microbial growth by monitoring biochemical reactions that generate a color change in the media as microorganisms grow. The sensitivity of the system allows detection in a fraction of the time needed for traditional methods, with less labor and handling time. In July 2020, we launched Soleris NG, a next generation version of the platform, which features enhanced hardware and software for results that are easier to analyze and audit. Our NeoSeek genomics services utilize a novel application of metagenomics to determine all bacteria in a sample, without introducing biases from culture media, and without the need to generate a bacterial isolate for each possible microbe in a sample.

Neogen manufactures and markets our AccuPoint Advanced rapid sanitation test to detect the presence of adenosine triphosphate (ATP), a chemical found in all living cells. This and inexpensive test uses bioluminescence to quickly determine if a contact surface has been completely sanitized. When ATP comes into contact with reagents contained in the test device, a reaction takes place that produces light. More light is indicative of higher levels of ATP and a need for more thorough sanitation. In May 2021, we launched AccuPoint Advanced NG, a next generation version, designed to be simpler to use, and provide results that are easier to analyze. Our worldwide customer base for ATP sanitation testing products includes food and beverage processors, the food service and healthcare industries, as well as many other users.

Neogen’s specialty products for the seafood market include tests for histamine, a highly allergenic substance that occurs when certain species of fish begin to decay; sulfite, an effective but potentially allergenic shrimp preservative; and shellfish toxins. Neogen’s Reveal lateral

Neogen offers the food and beverage industries, including water companies, several platforms for performing the microbial analysis of water. This includes Neogen’s filter tests, which are a combination of Neogen Filter membrane filtration and Neogen Culture Media ampouled media, and an Colitag product. With Colitag, after an incubation period, the sample changes color in the presence of coliforms and fluoresces in the presence of .

Neogen Culture Media, formerly Neogen’s Acumedia and Lab M products, offers culture media and prepared media for varied purposes, including traditional bacterial testing and the growth of beneficial bacteria, such as cultures for sausages and beer. Our customers for culture media also include commercial and research laboratories and producers of pharmaceuticals, cosmetics and veterinary vaccines.

Through the December 2020 acquisition of Ireland-based Megazyme, Ltd., Neogen supplies diagnostic kits and specialty enzymes used worldwide by quality control laboratories in the food, animal feed and beverage industries. Megazyme’s validated assays and reagents are used across various food industries such as the grain, wine and dairy markets, to measure dietary fibers, complex carbohydrates, simple sugars and organic acids, such as lactose.

Our food safety and risk management Neogen Analytics, delivers a comprehensive Environmental Monitoring Program (EMP) automation solution for food companies. The software reduces risk by increasing visibility to food safety testing results, elevating the ability to enforce and improve food safety standards. Neogen Analytics builds upon innovative technologies like our AccuPoint Advanced Next Generation and ANSR systems, offering floor plan mapping, smart test scheduling, easily filtered and auditable data management, and corrective actions.

Neogen offers food safety analysis services in the U.S., United Kingdom (U.K.) and India. These laboratories offer a variety of tests for the food and feed industries.

Our test kits are generally based on internally developed technology, licensed technology, or technology that is acquired as a result of acquisitions. In fiscal 2022, the Food Safety segment incurred expense totaling $1,779,000 for royalties for licensed technology used in our products, including expense of $800,000 for allergen products and $494,000 for the pathogen product line. Generally, royalty rates are in the range of 2% to 10% of revenues on products containing the licensed technology. Some licenses involve technology that is exclusive to Neogen’s use, while others are and involve technology licensed to multiple licensees.

Neogen markets a broad line of veterinary instruments and animal health delivery systems under the Ideal brand name. Approximately 250 different products are offered, many of which are used to deliver animal health products, such as antibiotics and vaccines. Ideal’s D3 Needles are stronger than conventional veterinary needles and are uniquely detectable by metal detectors at meat processing facilities — a potential market advantage in the safety-conscious beef and swine industries. Neogen’s Prima Tech product line consists of highly accurate devices used by farmers, ranchers and veterinarians to inject animals, provide topical applications and to use for oral administration. The Prima Tech line also includes products used in artificial insemination in the swine industry, animal identification products and handling equipment.

Animal Safety’s NeogenVet product line provides innovative, value-added, high quality products to the veterinary market. Top NeogenVet products include PanaKare, a digestive aid that serves as a replacement therapy where digestion of protein, carbohydrate and fat is inadequate due to exocrine pancreatic insufficiency; Natural Vitamin which aids in the prevention and treatment of vitamin deficiencies in swine, cattle and sheep; RenaKare, a supplement for potassium deficiency in cats and dogs; and ThryroKare, a supplement used as replacement therapy for dogs with diminished thyroid function. Other products sold under the NeogenVet brand include and Liver 7, which are used in the treatment and prevention of nutritional deficiencies. Neogen also markets Uniprim, a veterinary antibiotic, and, through the Company’s September 2021 acquisition of CAPInnoVet, Inc., several companion animal parasiticides.

Neogen’s BotVax B vaccine has successfully protected thousands of horses and foals against Type B botulism, commonly known as Shaker Foal Syndrome. Our product is the only USDA-approved vaccine for the prevention of Type B botulism in horses. Years of research and many thousands of doses have proven Neogen’s EqStim immunostimulant to be safe and effective as a veterinarian-administered adjunct to conventional treatment of equine bacterial and viral respiratory infections. The Company’s ImmunoRegulin product uses similar immunostimulant technology to aid in the treatment of pyoderma (a bacterial skin inflammation) in dogs.

Animal Safety products offered by Neogen to the retail (OTC) market include Ideal brand veterinary instruments packaged for the retail market. OTC products also include an oral electrolyte replacer for performance horses, and Fura-Zone, for the prevention and treatment of surface bacterial infections in wounds, burns and cutaneous ulcers. Hoof care, disposables and artificial insemination supplies are marketed to the dairy and veterinary industries.

Neogen’s comprehensive line of proven rodenticides, sold under brand names such as Ramik and Havoc, effectively address rodent problems of any size and serve as a critical component of an overall biosecurity plan for animal protein production operations. Neogen offers several rodenticide active ingredients including diphacinone, bromethalin, brodifacoum and zinc phosphide, formulated with food grade ingredients to generate the highest acceptance and most palatable bait possible.

Used in animal and food production facilities, Neogen’s cleaners and disinfectants, including 904 Disinfectant, Synergize, BioPhene, Neogen Viroxide Super, and Companion, prevent disease outbreaks. The products are also used in the veterinary clinic market to maintain sanitary conditions and limit the potential hazards of bacteria, fungi and viruses. Neogen’s water line cleaner and disinfectant products, including Peraside, NeoKlor, AquaPrime and Siloxycide, are used to clean water lines and provide continuous disinfection of a livestock facility’s water supply.

Neogen’s highly effective insecticides utilize environmentally friendly technical formulas, and several are approved for use in food establishments and by pest control professionals in a wide range of environments. The Company’s Prozap insecticide brand is used in the large animal production industry, particularly with dairy and equine producers. Neogen’s SureKill line of products is used by professionals to control a variety of insects and the Company’s StandGuard solution, acquired in July 2020, is used for horn fly and lice control in beef cattle.

Neogen Genomics, formerly known as GeneSeek, provides value-added services to leading agricultural genetics providers, large national cattle associations, companion animal breed registries and direct to consumer canine genetic test providers, university researchers, and numerous commercial beef and dairy cattle, swine, sheep and poultry producers. With genomics laboratories and the comprehensive bioinformatics to interpret genomics test results, Neogen Genomics offers identity and trait determination and analysis. Our technology employs high-density DNA genotyping and genomic sequencing for identity and trait analysis in a variety of important animal and agricultural plant species. Our extensive bioinformatics database identifies and predicts an animal’s positive or negative traits based on DNA test results. This information has helped livestock producers increase the speed of genetic improvement in their herds and overall performance and quality of their animals. Neogen’s December 2021 acquisition of Genetic Veterinary Sciences, Inc. expanded the Company’s portfolio through the addition of a number of genetic tests for companion animals, including dogs, cats and birds.

Neogen’s line of approximately 100 drug detection immunoassay test kits is sold worldwide for the detection of approximately 300 abused and therapeutic drugs in farm animals and racing animals, and for the detection of drug residues in meat and meat products. The test kits are also used for human forensic toxicology drug screening applications. This line includes tests for narcotics, analgesics, stimulants, depressants, tranquilizers, anesthetics, steroids and diuretics. Neogen also has several products used by researchers for the detection of biologically active substances.

Neogen Europe, Ltd., headquartered in Ayr, Scotland, sells products and services to our network of customers and distributors throughout the United Kingdom (U.K.), Europe, the Middle East and Africa. Customers in the U.K., France, Germany, Italy, the Netherlands and the United Arab Emirates (U.A.E.) are served by our employees. In other regions, customers are generally serviced by distributors managed by Neogen Europe personnel.

Neogen Latinoamérica is headquartered near Mexico City and Neogen Guatemala is located in Guatemala City. Combined, the two businesses distribute Neogen’s products throughout Mexico and Central America. Neogen Latinoamérica manages our business activities throughout the region by marketing to animal and crop producers and food processors, utilizing our direct sales representatives to sell food safety products and genomics services, while marketing cleaners, disinfectants, rodenticides and other animal safety products primarily through distributors.

These three countries provide Neogen with a physical presence in the important agricultural Southern Cone region of South America, which has large beef and dairy populations with significant export markets. The operations are managed through Neogen’s Latin American operations and offer direct sales of Neogen food safety, animal safety and genomics products into Argentina, Uruguay and Chile.

Neogen do Brasil, headquartered near São Paulo, distributes Neogen’s products throughout Brazil. Brazil is a world leader in the export of numerous food commodities, including beef, poultry, soybeans, coffee, corn, sugar and orange juice, and this operation gives us direct sales representation to these important markets. Neogen do Brasil management is also responsible for manufacturing, marketing and sales for Rogama, located in Pindamonhangaba, Brazil. This company operates a genomics testing laboratory (formerly named Deoxi) and develops, manufactures and markets rodenticides and insecticides. Rogama offers more than 70 registered pest control products to Brazil’s agronomic, professional and retail markets.

Our Chinese subsidiary, located in Shanghai, employs sales representatives who sell directly to Chinese customers. China’s burgeoning middle class, with its rapidly growing demand for higher quality meat and dairy products, makes the country a growth opportunity for Neogen’s products and services — both for animal production on the country’s farms, and in processing plants throughout China’s food production and distribution channels. The business also operates a genomics testing laboratory. We utilize both direct sales representatives and distributors to sell our complete portfolio in this growing market.

This business operates an accredited laboratory which performs food safety and water quality testing for food producers, major hotels and restaurants in its home region, as well as safety and quality analysis for the country’s expanding nutraceutical market, and growing food export businesses. The laboratory is located in Kochi, in the state of Kerala, which is India’s leading region for the export of spices, tea, and fresh fruits and vegetables. Neogen India is also responsible for sales of our food safety and animal safety products to customers and distributors in India and nearby countries.

Neogen Australasia operates a genomics testing laboratory, focusing on the sheep and cattle markets in Australia and New Zealand, and also directly markets and sells our food and animal safety products in those countries.

This business operates a genomics testing laboratory in Edmonton, Alberta.

Outside of our physical locations, Neogen uses our own sales managers in both the Food Safety and Animal Safety segments to work closely with and coordinate the efforts of a network of approximately 600 distributors in more than 100 countries. The distributors provide local training and technical support, perform market research and promote Company products within designated countries around the world.

Manufacturing of diagnostic tests for the detection of natural toxins, pathogens, food allergens, dairy antibiotics, spoilage organisms and pesticides, final kit assembly, quality assurance and shipping takes place at our facilities in Lansing, Michigan. Proprietary monoclonal and polyclonal antibodies for Neogen’s diagnostic kits are produced on a regular schedule in our immunology laboratories in Lansing. Generally, final assembly and shipment of diagnostic test kits to customers in Europe is performed in our Ayr, Scotland facility. Most of the Company’s food safety

diagnostic instruments and readers are produced by third-party vendors to our specifications, quality tested in Lansing, and then shipped to customers. Culture media products are manufactured in an facility in Lansing and in Heywood and Liverpool, England. Products are blended following strict formulations or custom blended to customer specifications and shipped directly to customers from Lansing and the United Kingdom. The Heywood location produces prepared media plates, sterile liquid media, and other related products in ready to use format for food testing laboratories across the U.K. and western Europe. Enzyme substrates are manufactured at Megazyme in Bray, Ireland.

Manufacturing of animal health products, pharmacological diagnostic test kits and test kits for drug residues takes place in our facilities in Lexington, Kentucky. In general, manufacturing operations including reagent manufacturing, quality assurance, final kit assembly and packaging are performed by Neogen personnel. Certain animal health products and veterinary instruments that are purchased finished or that are toll manufactured by third party vendors are warehoused and shipped from our Lexington facilities. Some veterinary instruments are produced in our facilities in Lansing, and are generally then shipped to Lexington for distribution to customers. Manufacturing and shipment of devices used for animal injections, topical applications and oral administration occurs in Kenansville, North Carolina.

Neogen maintains a Lansing-based USDA-approved manufacturing facility devoted to the production of the biologic products EqStim and ImmunoRegulin. seed cultures are added to media and then subjected to several stages of further processing resulting in a finished product that is filled and packaged within the facility. Our BotVax B vaccine is also produced in the Lansing facility utilizing Type B botulism seed cultures and a traditional fermentation process. All completed biologic products are then shipped to Neogen’s Lexington facilities where they are inventoried prior to distribution to customers.

Neogen offers agricultural genomics laboratory services and bioinformatics at our locations in Nebraska, Washington, Scotland, Brazil, Australia, China and Canada. Through our laboratory services and bioinformatics (primarily in beef and dairy cattle, pigs, sheep, poultry, horses and dogs), Neogen Genomics allows our customers to speed genetic improvement efforts, as well as identify economically important diseases.

Manufacturing of rodenticides and/or cleaners and disinfectants takes place in the following locations: Wisconsin, Tennessee, California, England and Brazil. Manufacturing of rodenticides consists of blending technical material (active ingredient) with bait consisting principally of various grains. Certain cleaners and disinfectants are manufactured in Neogen facilities, while others are purchased from other manufacturers for resale, or toll manufactured by third parties.

Neogen manufactures insecticides and other pesticides at its facilities in Iowa and Brazil.

Neogen purchases component parts and raw materials from more than 1,000 suppliers. Though many of these items are purchased from a single source to achieve the greatest volume discounts, we believe we have identified acceptable alternative suppliers for most of our key components and raw materials where it is economically feasible to do so. There can be no assurance that we would avoid a disruption of supply in the event a supplier discontinues shipment of product. Shipments of higher volume products are generally accomplished within a turnaround time. Our backlog of unshipped orders at any given time has historically not been significant.

Neogen’s veterinary vaccine products and some pharmaceutical products require government approval to allow for lawful sales. The vaccine products are approved by the U.S. Department of Agriculture, Center for Veterinary Biologics and the pharmaceutical products are approved by the FDA. The products, and the facilities in which they are manufactured, are in a position of good standing with both agencies. We have no warning letters based on any review of these products or facility inspections, no recalls on any of these products, and are not aware of any reason why we could not manufacture and market such products in the future.

. We have established our One Neogen Pillars of Trust which are the principles that guide our decision making every day: • Openness • Honesty • Credibility • Respect • Service. We value responsibility, consistency and integrity. Our Code of Conduct contains general guidelines for conducting business ethically.

We strive to create an environment where colleagues feel valued and cared for and understand the important role we play in embracing diversity to improve the quality of our innovation, collaboration and relationships. We are dedicated to executing on our diversity, equity and inclusion initiatives.

We employ a variety of career development, employee benefits, policies and compensation programs designed to attract, develop and retain our colleagues. Employee benefits and policies are designed for diverse needs. We have internal programs designed to develop and retain talent, including career planning, leadership development programs, performance management and training programs.

. We strive to support our colleagues’ well-being and enable them to achieve their best at work and at home. Our compensation and benefits programs are designed to be competitive and support colleague well-being including physical and mental health, financial wellness, and family resources.

. We are committed to ensuring a safe working environment for our colleagues. Our sites have injury prevention programs, and we strive to build on our safety culture. Our procedures emphasize the need for the cause of injuries to be investigated and for action plans to be implemented to mitigate potential recurrence. Our safety programs have resulted in strong safety performance.

Investing in our securities involves a variety of risks and uncertainties, known and unknown, including, among others, those discussed below. Each of the following risks should be carefully considered, together with all the other information included in this Annual Report on Form including our consolidated financial statements and the related notes and in our other filings with the SEC. Furthermore, additional risks and uncertainty not presently known to us or that we currently believe to be immaterial may also adversely affect our business. Our business, results of operations, financial condition and cash flow could be materially and adversely affected by any of these risks or uncertainties.

On December 13, 2021, Neogen, 3M and Garden SpinCo, a newly formed subsidiary of 3M created to carve out 3M’s Food Safety business, entered into a number of agreements pursuant to which, among other things, 3M’s Food Safety business will combine with Neogen in a Reverse Morris Trust transaction, intended to be 3M and its shareholders for U.S. federal income tax purposes. Immediately following the transaction, Garden SpinCo stockholders will own, in the aggregate, approximately 50.1% of the issued and outstanding shares of Neogen common stock and Neogen shareholders will own, in the aggregate, approximately 49.9% of the issued and outstanding shares of Neogen common stock. The transaction implies an enterprise value for 3M’s Food Safety business of approximately $3.4 billion based on Neogen’s stock price at July 22, 2022, including $1 billion in new debt to be incurred by 3M’s Food Safety business. 3M’s Food Safety business will fund to 3M consideration valued at approximately $1 billion, subject to closing and other adjustments.

Immediately following the merger with Garden SpinCo, the Neogen shareholders will own, in the aggregate, approximately 49.9% of the issued and outstanding shares of Neogen common stock. Consequently, Neogen’s shareholders, as a group, will be substantially diluted in the transaction and have less ability to exercise influence over the management and policies of Neogen following the merger than immediately prior to the transaction.

Since March 2020, the pandemic has negatively impacted the global economy, disrupted global supply chains, and created significant volatility and disruption of financial markets.

The extent of the impact of the pandemic on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, continues to depend on many factors outside our control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, related restrictions on travel and transports, the development and availability of effective treatments and vaccines, the imposition of protective public safety measures including lockdowns, and the impact of the pandemic on the global economy and consumer demand.

The situation regarding the pandemic continues to evolve, and future strains of the virus may impact us. To the extent the pandemic adversely affects our business, results of operations, financial condition and stock price, it may also have the effect of heightening many of the other risks described in this section.

We rely on our information systems’ infrastructure to integrate departments and functions, to enhance our ability to service customers, to improve our control environment and to manage our cost reduction initiatives. If a security breach or cyberattack of our IT networks and systems occurs, our operations could be interrupted. Any issues involving our critical business applications and infrastructure may adversely impact our ability to manage our operations and the customers we serve. Although we have controls and security measures in place to prevent such attacks, experienced computer hackers are increasingly organized and sophisticated. Malicious attack efforts operate on a large scale and sometimes offer targeted attacks as a service. In addition, the techniques used to access or sabotage networks change frequently and generally are not recognized until launched against a target.

We rely on several information systems throughout our company, as well as those of our third-party business partners, to provide access to our products and services, keep financial records, analyze results of operations, process customer orders, manage inventory, process shipments to customers, store confidential or proprietary information and operate other critical functions. Although Neogen employs system backup measures and engages in information system redundancy planning and processes, such measures, as well as our current disaster recovery plan, may be ineffective or inadequate to address all vulnerabilities. Further, our information systems and our business partners’ and suppliers’ information systems may be vulnerable to attacks by hackers and other security breaches, including computer viruses and malware, through the internet (including via devices and applications connected to the internet), email attachments and persons with access to these information systems, such as our employees or third parties with whom we do business. As information systems and the use of software and related applications by us, our business partners, suppliers and customers become more cloud-based, there has been an increase in global cybersecurity vulnerabilities and threats, including more sophisticated and targeted cyber-related attacks that pose a risk to the security of our information systems and networks and the confidentiality, availability and integrity of data and information.

Our facilities and our distribution systems are subject to catastrophic loss due to fire, flood, terrorism or other natural or disasters. If any of our facilities were to experience a catastrophic loss, it could disrupt our operations, delay production, shipments and revenue and result in significant expenses to repair or replace the facility and/or distribution system. If such a disruption were to occur, we could breach agreements, our reputation could be harmed, and our business and operating results could be adversely affected. Although we carry insurance for property damage and business interruption, we do not carry insurance or financial reserves for interruptions or potential losses arising from terrorism. Economic conditions and uncertainties in global markets may adversely affect the cost and other terms upon which we are able to obtain third party insurance. If we are unable to obtain sufficient and cost-effective third-party insurance coverage, or to the extent we have elected to self-insure, we may be at greater risk that our operations will be harmed by a catastrophic loss.

Our growth strategy includes significant investment in and expenditures for product development. To execute this strategy, we are continually developing new products for which we believe there should be significant market demand. We cannot assure that we will successfully develop commercially viable products, that the products will be developed on a timely basis to meet market demand or that the relevant market will be properly identified. Our competitors may also adapt more quickly, and deliver superior technologies, price and/or service to better fit our customers’ requirements. If we expend substantial resources in developing an unsuccessful product, whether that lack of success is the result of our production of a product, a misidentified market, or a competitor’s superior ability to meet our customers’ requirements, operating results could be adversely affected.

The trading price of our common stock may be volatile. Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as other general economic, market or political conditions, could reduce the market price of our common stock rapidly and unexpectedly, despite our operating performance. Factors that may impact the market price of our common stock include the factors described in this “Risk Factors” section and elsewhere in this Form as well as:

From time to time, we have received notices alleging that our products infringe third-party proprietary rights. Whether the manufacture, sale or use of current products, or whether any products under development would, upon commercialization, infringe any patent claim cannot be known with certainty unless and until a court interprets the patent claim in the context of litigation. When an infringement allegation is made against us, we may seek to invalidate the asserted patent claim and/or to allege of the asserted patent claim. For us to invalidate a U.S. patent claim, we would need to rebut the presumption of validity afforded to issued patents in the U.S. with clear and convincing evidence of invalidity, which is a high burden of proof. The outcome of infringement litigation is subject to substantial uncertainties, and also the testimony of experts as to technical facts upon which experts may reasonably disagree. Our defense of an infringement litigation lawsuit could result in significant expense. Regardless of the outcome, infringement litigation could significantly disrupt our marketing, development and commercialization efforts, divert management’s attention and consume our financial resources. In the event that we are found to infringe any valid claim in a patent held by a third party, we could, among other things, be required to:

Any development or acquisition of products, technology or licenses could require the expenditure of substantial time and other resources and could have a material adverse effect on our business and financial results. If we are required to, but cannot, obtain a license to valid patent rights held by a third party, we would likely be prevented from commercializing the relevant product, or from further manufacture, sale or use of the relevant product.

The Company’s business is subject to external conditions, such as tax rates, tax laws and regulations, changing political environments in the U.S. and foreign jurisdictions that impact tax examination, assessment and enforcement approaches. In addition, changes in tax laws including further regulatory developments arising from U.S. tax reform legislation and/or regulations around the world could result in a tax expense or benefit recorded to the Company’s consolidated statement of earnings. In connection with guidance such as the Base Erosion and Profit Shifting (BEPS) Integrated Framework provided by Organization for Economic Cooperation and Development (OECD), determination of multi-jurisdictional taxation rights and the rate of tax applicable to certain types of income may be subject to potential change. Due to uncertainty of the regulation changes and other factors stated above, it is currently not possible to assess the ultimate impact of these actions on our financial statements.

The graph below matches Neogen Corporation’s cumulative total shareholder return on common stock with the cumulative total returns of the NASDAQ Composite index and the NASDAQ Medical Equipment index. The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from 5/31/2017 to 5/31/2022.

As we continue to monitor the ongoing pandemic, our top priority remains protecting the health and safety of our employees, their families, and those in our communities. Safety guidelines and procedures have been developed for employees and these policies are regularly monitored and updated by our internal Emergency Response Team.

In fiscal 2022, including new strains of the virus such as Delta and Omicron, continued to impact our business operations and financial results. A number of our food safety diagnostic product lines have been negatively impacted due to decreased demand in many of our customers’ businesses around the world, particularly those serving restaurants, bars and other institutional food service markets. Many of our markets across the world are recovering, but the pandemic has continued to adversely impact our customers and ultimately, our revenues. We have also experienced supply chain difficulties including vendor disruptions, border closures, shipping issues and significantly increased shipping costs; labor shortages and higher labor costs, as we have had to use staffing agencies and increase our base pay in many areas of the Company to fill open positions; and restricted travel, which hinders our ability to connect with customers.

Overall, the impact of remains uncertain and ultimately depends on the length and severity of the pandemic, inclusive of the introduction of new strains of the virus; government actions taken in response; vaccination rates and effectiveness; the impact of vaccination requirements; extent of protection provided by prior viral infection; and the macroeconomic environment. We will continue to evaluate the nature and extent to which will impact our business, supply chain, including labor availability and attrition, consolidated results of operations, financial condition, and liquidity; we expect it to impact us through at least the end of our fiscal year ending May 31, 2023.

The discussion and analysis of our financial condition and results of operations are based on the consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires that management make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, management evaluates the estimates, including but not limited to, those related to receivable allowances, inventories and intangible assets. These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Though the impact of the pandemic to our business and operating results presents additional uncertainty, we continue to use the best information available to inform our critical accounting estimates. Actual results may differ from these estimates under different assumptions or conditions.

Our wholly owned foreign subsidiaries are comprised of Neogen Europe, Quat-Chem Ltd, Abbott Analytical Limited, Delf (UK) Limited, Delf-Chem Solutions Limited, Megazyme Ltd, Megazyme IP, Neogen Italia S.r.l., Neogen do Brasil, Rogama Industria e Comercio Ltda, Neogen Latinoamérica, Neogen Guatemala, Neogen Argentina, Neogen Uruguay, Neogen Chile SpA, Neogen Technology Co (Shanghai), Neogen Food and Animal Security (India), Neogen Canada, Neogen Canada Properties LLC and Neogen Australasia Pty Limited. Based on historical experience, as well as management’s future plans, earnings from these subsidiaries are expected to be indefinitely for future expansion and working capital needs. Furthermore, our domestic operations have historically produced sufficient operating cash flow to mitigate the need to remit foreign earnings. On an annual basis, we evaluate the current business environment and whether any new events or other external changes might require a of the decision to indefinitely foreign earnings. It is not practicable to determine the income tax liability that would be payable if such earnings were not reinvested indefinitely.

Sales in this category increased 4% in fiscal 2022, with a 6% increase in sales of natural toxin test kits and a 9% increase in sales of our allergens product line partially offset by a 33% decrease in sales of drug residue test kits, as we are discontinuing sales of certain lower margin products due to competitive market pressure.

Sales in this category increased 7% in fiscal 2022 compared to the prior year. Sales of our AccuPoint sanitation monitoring product line increased 12% aided by strong sales of our new reader. Sales of our Listeria Right Now product increased 25%, while sales of products to detect spoilage organisms in processed foods increased 4%.

Sales in this category increased 23% in fiscal 2022 compared to fiscal 2021; excluding sales from the December 2020 acquisition of Megazyme, sales increased 11%. Sales of Neogen Culture Media products rose 16% as our new workflow, One Broth One Plate, continued to drive growth and increased sales to commercial labs in the U.K.; a large sale to a domestic vaccine manufacturer in the first quarter also contributed to the current year growth.

Revenues of products in this category sold through our Food Safety operations increased 11% in fiscal 2022 compared to fiscal 2021. Excluding revenues from the November 2020 acquisition of Delf and Abbott Analytical, the growth was 3%. The increase was primarily due to continued strength in sales of cleaners and disinfectants to Asia resulting from the African swine fever outbreak in that region increasing demand, and higher sales to a U.K.-based toll manufacturer.

Sales of genomics services sold through our Food Safety operations increased 11% in fiscal 2022 compared to the prior year, primarily due to increased beef business in Brazil and higher sample volumes from a large customer in China.

Sales in this category decreased 1% in fiscal 2022 compared to the same period in the prior year, primarily due to the loss of hair testing business with a large U.S. commercial laboratory that moved to a different testing platform.

Revenues in this category increased 33% in fiscal 2022 compared to fiscal 2021, led by a large increase in sales of veterinary instruments, including needles and syringes, resulting from recently won private label business.

Sales of these products increased 11% in fiscal 2022 compared to fiscal 2021; excluding the contribution of parasiticides from the September 2021 acquisition of CAPInnoVet, revenues in this category rose 6%. Growth in our biologics, small animal supplements and wound care product lines were partially offset by a large decline in sales of dairy supplies due to the June 2020 termination of an agreement under which we distributed these types of products for a large manufacturer of dairy equipment.

Sales in this category increased 8% in fiscal 2022, compared to the prior year. Insecticide sales increased 32%, led by strong demand in the farm and home channels, and cleaners and disinfectants sales rose 6%. These increases were partially offset by a 4% decline in rodenticide sales due to increased rodent pressure in the prior year, which resulted in a difficult comparison.

Sales in this category increased 11% in fiscal 2022 compared to fiscal 2021; excluding the December 2021 acquisition of Genetic Veterinary Sciences, the organic increase was 5%. The growth was led by increases in beef and sheep testing in Australia, due to improved market conditions, and higher sample volumes from domestic dairy and beef cattle and poultry customers. The increase was partially offset by a decline in domestic companion animal revenues due to a difficult comparison from strong prior year sales growth.

The pandemic, which began in the second half of fiscal 2020, continued to cause difficult operating conditions in many of our key market segments in fiscal 2021. Shelter in place orders across the U.S. and in most of our international markets, the closure or reduced output of businesses due to quarantine and/or local legislation, disruption in the supply chain resulting from reduction in demand and shipping issues, and the inability of some markets to react quickly to these changes, each disrupted our revenues.

Sales in this category increased 1% in fiscal 2021, with a 6% increase in sales of natural toxin test kits and a 5% increase in our allergens product line partially offset by a 30% decrease in sales of drug residue test kits. Sales of drug residue test kits have continued to decline as we ended an exclusive distributor agreement in Europe and faced competitive pressure and lower demand due to poor economic conditions.

Sales in this category increased 5% in fiscal 2021 compared to the prior year. Sales of products to detect spoilage organisms in processed foods increased 19% in fiscal 2021, resulting from sales of our new instrument (Soleris NG), which launched in the first quarter, and increased consumables sales from new instrument placements. Sales of our AccuPoint sanitation monitoring product line were flat as many customers were shut down or operating at reduced capacity for a portion of the year, resulting in use of less consumables. A next generation reader for this product line was launched late in the fourth quarter; there will be significant sales and marketing focus on this product line in fiscal 2022. Sales of test kits to detect pathogens decreased 2%, as lower sales of ANSR equipment were only partially offset by increases from our Right Now test kit, which grew 21% in fiscal 2021.

Sales in this category increased 28% in fiscal 2021 compared to fiscal 2020. Excluding sales from the December 2020 acquisition of Megazyme, sales increased 18%. This category includes sales of acquired inventory of manufactured products from our new businesses in Italy and the South American southern cone countries; these sales are not expected to continue long-term. This category also includes sales of veterinary instruments transferred to our U.K. sales team in fiscal 2021. Sales of Neogen Culture Media increased 1% as new business gained in the U.S. from a vaccine manufacturer offset the loss of some business due to competitor pricing.

Revenues of products in this category sold through our Food Safety operations increased 12% in fiscal 2021 compared to fiscal 2020, due primarily to continued strength in cleaners and disinfectant sales in China resulting from increased demand due to the African swine fever outbreak in that country and the pandemic. We also benefitted from strong sales of hand and skin sanitizing products at our U.K.-based Quat-Chem location in the first quarter of this fiscal year.

Sales of genomics services sold through our Food Safety operations increased 12% in fiscal 2021 compared to the prior year, primarily due to higher sales in the Chinese porcine and bovine markets.

Sales in this category decreased 10% in fiscal 2021 compared to the same period in the prior year, primarily the result of lower forensic drug test kit sales to large commercial labs in the U.S. as the pandemic created less demand for testing; a reduction in sales of products to the U.S. horse racing industry in the U.S. also contributed to the decline, as racing activity was down.

Revenues in this category increased 12% in fiscal 2021 compared to fiscal 2020. Veterinary instruments sales increased 16% for the year, led by increases in detectable needles and syringes as we gained new customers and market share from a key competitor. Partially offsetting this increase was a 9% decline in protective wear sales, as gloves were on backorder for much of the current year due to COVID related demand.

Sales of these products increased 26% in fiscal 2021 compared to fiscal 2020; this category includes sales of food safety products sold through our Australian operation, the result of a February 2020 acquisition of a distributor. Excluding these sales, revenues in this category increased 21%. Sales of our small animal supplements, vitamin injectables, and joint pain products benefitted from growth in veterinary markets, as the pandemic has led to an increase in pet ownership, particularly dogs and cats. Additionally, sales rose for our equine supplements and antibiotics, due to strong demand in these markets. This category also includes sales of our thyroid treatment for dogs, which became available for sale late in the fourth quarter. Partially offsetting these gains was a 49% decline in sales of dairy supplies due to the June 2020 termination of an agreement in which we distributed these products for a large manufacturer of dairy equipment.

Sales in this category increased 13% in fiscal 2021, compared to the prior year. Rodenticide sales increased 42% as rodent pressure in certain areas of the U.S. increased significantly. Insecticide sales rose 15%, due in part to our acquisition of the StandGuard product line for fly control on July 31, 2020; organic sales in this category increased 7%. Cleaners and disinfectants sales decreased 15% resulting from lower sales of water treatment products and the transfer of a product line to our U.K. operation; additionally, opportunistic sales of sanitizing products in the fourth quarter of the prior year, due to extremely high demand early in the pandemic, did not continue at those levels in fiscal 2021.

Sales in this category increased 14% in fiscal 2021 compared to fiscal 2020. The growth was led by strong increases to the U.S. and Australian companion animal markets, driven by increased pet adoption and higher consumer spending on pets during the pandemic. Gains in the commercial beef and beef association markets in the U.S., Canada and Australia also contributed to the growth, as well as the recent launch of a new high-density chip for white leg shrimp.

– Our overall gross margin increased 20 basis points in fiscal 2022, primarily from a product mix shift to higher margin products in the Animal Safety segment. Partially offsetting this were higher raw material and freight costs within each segment, which resulted from continued supply chain disruptions, inflationary pressure, and ongoing issues related to and its variants across most of our markets. The Company has taken pricing actions where appropriate in response to these cost increases.

– Our overall gross margin declined 100 basis points in fiscal 2021 as pressure on the worldwide supply chain caused by the pandemic resulted in increased overhead costs; in particular, freight costs on inventory purchases increased 53% in fiscal 2021 compared to the prior year. Additional cost increases resulted from personnel costs, in part from the increased volumes, but also due to labor

shortages, contracted services primarily related to our recently launched instruments, and higher health insurance costs domestically, as employees and their families utilized elective medical services postponed from the fourth quarter of fiscal 2020 due to To a lesser extent, the shift in mix within the Food Safety segment towards products with lower gross margins negatively impacted the consolidated gross margin percentage.

Food Safety margins increased 100 basis points in fiscal 2022, due to a product mix shift within the segment toward higher sales of diagnostic test kits in fiscal 2022; gross margin was also aided by a full year of sales of food quality products and enzymes from the Megazyme acquisition.

Food Safety margins decreased 220 basis points in fiscal 2021, primarily due to higher sales of equipment such as the Soleris NG, which was launched in the current year and has lower gross margins than our diagnostic test kits, and cleaners and disinfectants sold through our China location, which reports through the Food Safety segment. We were also negatively impacted by increased freight, labor and other overhead costs throughout the segment.

Animal Safety gross margins decreased by 50 basis points in fiscal 2022, primarily due to significant product cost increases and international freight charges. Negative mix effects occurred from lower sales of higher margin rodenticide products and companion animal services.

Animal Safety gross margins increased by 30 basis points, primarily from strong sales of higher margin rodenticide and companion animal products and cost efficiencies; somewhat offsetting these gains, gross margin in this segment was negatively impacted by higher freight costs as rates to bring product into inventory rose significantly during the year, from both domestic and international sources.

– The $11.2 million, or 15%, increase in sales and marketing expenses in fiscal 2022 resulted primarily from increases in employee compensation expenses such as salaries, bonuses, and commissions, and shipping expense, both reflecting the increase in revenues. Travel, meals and entertainment, and tradeshow expense were also higher, with customer-facing activities increasing significantly, the result of the easing of COVID-19 restrictions.

– The $3.8 million, or 5%, increase in sales and marketing expenses in fiscal 2021 resulted primarily from increases in employee compensation expenses such as salaries, bonuses, and commissions, reflecting the increase in sales for the year, as well as increased headcount as we returned to normal staffing levels. In addition, shipping costs rose in line with revenues, health insurance costs rose as employees and their families resumed receiving medical treatment and procedures which had been deferred in the fourth quarter of the prior fiscal year. Advertising and outside services also increased to support the launch of a number of new products during the year, most notably the Soleris NG and AccuPoint NG readers. Partially offsetting these increases was $3 million in decreased spending for travel and meals and entertainment for the year, the result of travel restrictions and reductions in sales activities in most of our markets for the majority of the year. Travel and in person customer meetings did begin to pick up in some geographic areas in the second half of fiscal 2021 as restrictions were eased.

In fiscal 2022, we spent $25.6 million on strategic consulting, legal and other professional fees related to due diligence, negotiation of terms and integration planning for our proposed transaction to combine with 3M’s Food Safety business. Excluding these costs, the increase in general and administrative expense in fiscal 2022 was 12%. Other increases in the current year included compensation related costs due to increased headcount and improved operating performance, incremental amortization expenses from recent acquisitions, higher levels of depreciation and related software and licensing costs from continued investments in information technology infrastructure and applications.

In fiscal 2021, we spent $3.1 million on strategic consulting, legal and other professional fees related to acquisition activity for businesses which we were ultimately not successful in acquiring. Excluding these costs, the increase in general and administrative expense in fiscal 2021 was 8%. Other increases in the current year included compensation increases due to increased headcount, including the addition of a number of senior management positions, incremental amortization expenses resulting from recent acquisitions, and higher levels of depreciation and related software and licensing costs from continued investments in information technology infrastructure and applications. Increases in this cost category resulting from the Megazyme acquisition totaled $957,000.

The 5% increase in research and development expenses in fiscal 2022 was primarily the result of increased compensation expense, resulting from scheduled annual increases and additional headcount, and increases in contracted services related to new product development. These increases were partially offset by a decrease in external reader development costs; these projects were completed in the prior fiscal year.

The 10% increase in research and development expenses in fiscal 2021 was primarily the result of increased compensation expense, resulting from scheduled annual increases and additional headcount from the Megazyme acquisition, project expense relating to new product innovation, spending with outside partners on the new readers launched in this fiscal year, and testing and approval costs for new product development.

Other Income (Expense) for the previous three fiscal years consisted of the following:

This report includes certain financial information of Neogen that differs from what is reported in accordance with GAAP. These financial measures consist of EBITDA, Adjusted EBITDA and Adjusted EBITDA margin. These financial measures are included in this report because management believes that they provide investors with additional useful information to measure the performance of Neogen, and because these financial measures are frequently used by securities analysts, investors and other interested parties as common performance measures to compare results or estimate valuations across companies in Neogen’s industries.

These financial measures are presented for informational purposes only. EBITDA, Adjusted EBITDA and Adjusted EBITDA margin are not recognized terms under GAAP and should not be considered in isolation or as a substitute for, or superior to, net income (loss), operating income, cash flow from operating activities or other measures of financial performance. This information does not purport to represent the results Neogen would have achieved had any of the transactions for which an adjustment is made occurred at the beginning of the periods presented or as of the dates indicated. This information is inherently subject to risks and uncertainties. It may not give an accurate or complete picture of Neogen’s financial condition or results of operations for the periods presented and should not be relied upon when making an investment decision.

These financial measures have limitations as analytical tools. For example, for EBITDA-based metrics:

You should compensate for these limitations by relying primarily on the financial statements of Neogen and using these financial measures only as a supplement to evaluate Neogen’s performance.

For each of these financial measures below, we are providing a reconciliation of the differences between the measure and the most directly comparable GAAP measure.

On May 31, 2022, we had $44.5 million in cash and cash equivalents, $336.6 million in marketable securities, and net working capital of $549.0 million. For the year ended May 31, 2022, cash generated from operating activities was $68.0 million, compared to $81.1 million generated in fiscal 2021; proceeds from stock option exercises provided an additional $7.9 million of cash. For the same period, additions to property, equipment and other assets were $24.4 million and business acquisitions used cash of $38.7 million. We have a financing agreement with a bank providing for an unsecured revolving line of credit of $15.0 million, which expires on November 30, 2023. Upon close of the 3M Food Safety transaction, this credit facility will terminate and be replaced with a larger, revolving facility. There were no advances against this line of credit during fiscal years 2022, 2021 and 2020, and no balance outstanding at May 31, 2022 and 2021.

As of May 31, 2022, we have the following contractual obligations due by period:

The response to this item is submitted in a separate section of this report starting on page

An evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule (e) under the Securities Exchange Act of 1934) as of May 31, 2022. Based on and as of the time of such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed in the reports that are filed or submitted under the Securities and Exchange Act of 1934 is appropriately recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure the information required to be disclosed in the reports that are filed or submitted under the Securities Exchange Act of 1934 is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules and Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, an evaluation was conducted as to the effectiveness of internal control over financial reporting as of May 31, 2022, based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, management concluded that internal control over financial reporting was effective as of May 31, 2022. The effectiveness of internal control over financial reporting as of May 31, 2022 has been audited by BDO USA, LLP, an independent registered public accounting firm, as stated in its attestation report, which is included on the following page and is incorporated into this Item 9A by reference.

We have adopted a Code of Conduct that applies to our directors, executive officers and employees. This Code of Conduct is available on our website at . We intend to satisfy the disclosure requirement regarding any amendment to, or a waiver from, a provision of the code of conduct for our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, by posting such information on our website.

The information required by this Item, and pursuant to Regulation 14A of the Exchange Act, is incorporated by reference from the section entitled “Proposal 3 Ratification of the Appointment of the Company’s Independent Registered Public Accounting Firm” in the Company’s definitive Proxy Statement to be filed within 120 days of May 31, 2022.

(a) (1) and (2) and (c). The response to this portion of ITEM 15 is submitted as a separate section of this report starting on page

Annual Report on Form