Quarterly Report for Quarter Ending July 31, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion of our results of operations and financial condition should be read in conjunction with the financial statements and the related notes included under Part I, Item 1 of this Quarterly Report on Form 10-Q. In addition, reference should be made to our audited Consolidated Financial Statements and notes thereto, and related Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in our Annual Report on Form 10-K for the year ended October 31, 2024. The following discussion includes forward-looking statements. For a discussion of important factors that could cause actual results to differ from results discussed in the forward-looking statements, see "Forward Looking Statements" below and the "Risk Factors" section of our Annual Report on Form 10-K for the year ended October 31, 2024.

Overview

We are a compliance and technology transfer services consulting firm with headquarters in Puerto Rico, servicing the Puerto Rico, United States and Europe markets, with limited presence in the Brazil market. The compliance consulting service sector in those markets consists of local compliance and validation consulting firms, United States dedicated validation and compliance consulting firms and large publicly traded and private domestic and foreign engineering and consulting firms. We provide a broad range of compliance-related consulting services. We market our services to pharmaceutical, chemical, biotechnology, medical devices, cosmetics and food industries, and allied products companies. Our consulting team includes experienced engineering and life science professionals, former quality assurance managers and directors, and professionals with bachelors, masters and doctorate degrees in health sciences and engineering.

We actively operate in Puerto Rico, the United States, Europe and, to a lesser extent, Brazil and pursue to further expand these markets by strengthening our business development infrastructure and by constantly realigning our business strategies as new opportunities and challenges arise.

We market our services with an active presence in industry trade shows, professional conventions, industry publications and company provided seminars to the industry. Our senior management is also actively involved in the marketing process, especially in marketing to major accounts. Our senior management and staff also concentrate on developing new business opportunities and focus on the larger customer accounts (by number of consultants or dollar volume) and responding to prospective customers' requests for proposals.

We consider our core business to be Food and Drug Administration ("FDA") and international agencies regulatory compliance consulting related services.

The Company maintained a tax grant issued by PRIDCO, which provided relief on various Puerto Rico taxes, including income tax, with certain limitations, for most of the activities conducted within Puerto Rico, including those that are for services to parties located outside of Puerto Rico. The grant was effective as of November 1, 2009, and covered a fifteen-year period, which ended on October 31, 2024. Under the provisions of Puerto Rico Acts 60-2019 and 73-2008, we have requested PRIDCO renegotiation of the tax grant for an additional term of fifteen years. As of the date of this filing, we have not received a status update from PRIDCO for this request, accordingly, although we do not anticipate problems with the Grant approval, we cannot provide assurance on the outcome for our renegotiation application. For additional information relating to the tax grant issued by PRIDCO, please see Note C - Income Taxes of the condensed consolidated financial statements.

Regional or global conflicts, including war or economic sanctions between nations, price inflation, pandemics, the TCJA and OBBBA, possible tax changes on jurisdictions where we do business, bio-pharmaceutical industry consolidations and the trends on managing contract resources, all pose current and future challenges which may adversely affect our future performance. We believe that our future profitability and liquidity will be dependent on the effect the local and global economy, including any impacts of regional or global conflicts, price inflation, pandemics, changes in tax laws, worldwide life science manufacturing industry consolidations, operational constraints imposed by our customers due to pandemics and resources management trends, will have on our operations, and our ability to seek service opportunities and adapt to industry trends.

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The following table sets forth information as to our revenue for the three-month and nine-month periods ended July 31, 2025 and 2024, by geographic regions (dollars in thousands, and as a percentage of total revenues).

		Three months ended July 31,																Nine months ended July 31,
Revenues by Region:		2025								2024								2025								2024
Puerto Rico		$	1,204				61.3	%		$	1,454				60.1	%		$	3,477				50.7	%		$	4,307				60.0	%
United States			643				32.8	%			737				30.5	%			2,003				29.2	%			2,423				33.8	%
Europe			99				5.0	%			224				9.3	%			1,353				19.8	%			360				5.0	%
Other			17				0.9	%			3				0.1	%			18				0.3	%			86				1.2	%
		$	1,963				100.0	%		$	2,418				100.0	%		$	6,851				100.0	%		$	7,176				100.0	%

For the nine-month period ended July 31, 2025, the Company's total revenues were approximately $6.9 million, a net decrease of approximately $0.3 million when compared to the same period last year. The European market sustained an increase in project revenue of approximately $1.0 million, which was offset by project revenue decline in the Puerto Rico, US and Brazil consulting markets of approximately $0.8, $0.4 and $0.1 million, respectively. As depicted below, when compared to the same period last year, gross profit increased by 6.6 percentage points. The net increase in gross profit percentage points is mainly attributable to the improvement of margins in Puerto Rico and United States consulting markets, plus a high margin yielding project within the European market.

Results of Operations

The following table sets forth our statements of operations for the three-month and nine-month periods ended July 31, 2025 and 2024 (dollars in thousands, and as a percentage of revenues):

		Three months ended July 31,																Nine months ended July 31,
		2025								2024								2025								2024
Revenues		$	1,963				100.0	%		$	2,418				100.0	%		$	6,851				100.0	%		$	7,176				100.0	%
Cost of services			1,389				70.8	%			1,783				73.7	%			4,690				68.5	%			5,387				75.1	%
Gross profit			574				29.2	%			635				26.3	%			2,161				31.5	%			1,789				24.9	%
Selling, general and administrative expenses			888				45.2	%			1,017				42.1	%			2,665				38.9	%			2,923				40.7	%
Other income, net			105				5.4	%			92				3.8	%			406				5.9	%			393				5.5	%
Loss before income tax			(209	)			-10.6	%			(290	)			-12.0	%			(98	)			-1.4	%			(741	)			-10.3	%
Income tax expense (credit)			(5	)			-0.2	%			19				0.8	%			2				0.0	%			53				0.7	%
Net loss			(204	)			-10.4	%			(309	)			-12.8	%			(100	)			-1.4	%			(794	)			-11.0	%

Revenues. Total revenues for the three and nine months ended July 31, 2025 were approximately $2.0 and $6.9 million, respectively. For the three and nine months ended July 31, 2025, this represents a net decrease of approximately $0.4 and $0.3 million when compared to the same periods last year, respectively. For the three months ended July 31, 2025 the Puerto Rico, United States and European consulting markets had a decline in projects revenue of approximately $0.2, $0.1 and $0.1 million, respectively. For the nine months ended July 31, 2025, the European market sustained an increase in project revenue of approximately $1.0 million, which was offset by project revenue decline in the Puerto Rico, US and Brazil consulting markets of approximately $0.8, $0.4 and $0.1 million, respectively.

Cost of Services; Gross Profit. Cost of services for the three and nine months ended July 31, 2025 were $1.4 and $4.7 million, respectively, a decrease of $0.4 and $0.7 million, when compared to the same periods last year, respectively. Gross profit for the three and nine months ended July 31, 2025, when compared to the same periods last year, increased by 2.9 and 6.6 percentage points, respectively. The net increase in gross profit percentage points is mainly attributable to the improvement of margins in Puerto Rico and United States consulting markets, plus a high margin yielding project within the European market.

Selling, General and Administrative Expenses. Selling, general and administrative expenses for the three and nine months ended July 31, 2025 were approximately $0.9 and $2.7 million, respectively. For the three and nine months ended July 31,2025, this represents a decline in expenses $0.1 and $0.3 million when compared to the same periods last year, respectively. The decline is attributable to planned savings in general and administrative expenses.

Other Income, Net. Other income, net for the three and nine months ended July 31, 2025 was approximately $0.1 and $0.4 million, respectively. These balances are mostly attributable to interest income, plus the settlement of foreign exchange rates on intercompany balances of approximately $0.1 million during the nine months ended July 31, 2025.

Net Loss.Net Loss for the three and nine months ended July 31, 2025 was approximately $0.2 and $0.1 million, respectively, an earnings increase of approximately $0.1 and $0.7 million when compared to the same periods last year, respectively.

For the three and nine months ended July 31, 2025, net loss per common share for both basic and diluted were $0.009 and $0.004, respectively, an increase of $0.005 and $0.031 per share when compared to the same periods last year, respectively.

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Liquidity and Capital Resources

Liquidity is a measure of our ability to meet potential cash requirements, including planned capital expenditures. As of July 31, 2025, the Company had approximately $11.5 million in working capital.

On June 13, 2014, the Board of Directors of the Company authorized the Company to repurchase up to two million shares of its common stock (the "Repurchase Program"). The Repurchase Program does not have an expiration date. During the nine-month period ended July 31, 2025, the Company repurchased 37,701 shares of its common stock. As of July 31, 2025, the Company has 1,463,742 shares of common stock available for future repurchases under the Repurchase Program.

Our primary cash needs consist of the payment of compensation to our consulting team, overhead expenses, and statutory taxes. Additionally, we may use cash for the repurchase of our common stock under the Repurchase Program, capital expenditures and business development expenses. Management believes that based on the current level of working capital, operations and cash flows from operations, and the collectability of high-quality customer receivables are sufficient to fund anticipated expenses and satisfy other possible long-term contractual commitments for and beyond the next twelve months.

While uncertainties relating to the current local and global economic conditions, competition, the industries and geographical regions served by us and other regulatory matters exist within the consulting services industry, as described in this Quarterly Report on Form 10-Q, management is not aware of any other trends or events likely to have a material adverse effect on liquidity or its financial statements.

Off-Balance Sheet Arrangements

We were not involved in any significant off-balance sheet arrangement during the nine months ended July 31, 2025.

Critical Accounting Policies and Estimates

There were no material changes during the nine months ended July 31, 2025 to the critical accounting policies reported in our Annual Report on Form 10-K for the fiscal year ended October 31, 2024.

New Accounting Pronouncements

There were no new accounting standards issued since our filing of the Annual Report on Form 10-K for the fiscal year ended October 31, 2024, which could have a significant effect on our condensed consolidated financial statements.

Forward-Looking Statements

Our business, financial condition, results of operations, cash flows and prospects, and the prevailing market price and performance of our common stock, may be adversely affected by a number of factors, including but not limited to, the factors set forth in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended October 31, 2024, our Quarterly Report on Form 10-Q for the quarter ended January 31, 2025 and April 30, 2025, and this Quarterly Report on Form 10-Q. Certain statements and information set forth in this Quarterly Report on Form 10-Q, as well as other written or oral statements made from time to time by us or by our authorized executive officers on our behalf, constitute "forward-looking statements" within the meaning of the Federal Private Securities Litigation Reform Act of 1995. These statements include all statements other than those made solely with respect to historical fact and identified by words such as "believes," "anticipates," "expects," "intends" and similar expressions, but such words are not the exclusive means of identifying such statements. We intend for our forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we set forth this statement and these risk factors in order to comply with such safe harbor provisions. You should note that our forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q or when made and we undertake no duty or obligation to update or revise our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Although we believe that the expectations, plans, intentions and projections reflected in our forward-looking statements are reasonable, such statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. The risks, uncertainties and other factors that our stockholders and prospective investors should consider include, but are not limited to, those set forth in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended October 31, 2024.

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