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

Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Quarterly Report on Form 10-Q, including Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"), contains 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. All statements other than statements of historical fact, including, without limitation, statements regarding our future financial position, business strategy, product launches (such as the planned Q4 2026 U.S. market launch of OutFlo), revenue growth expectations, tariff mitigation strategies, supply chain diversification, and market expansion, are forward-looking statements. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," "may," "could," "will," and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements.

These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties, and other factors, many of which are beyond our control, that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those described in "Item 1A. Risk Factors" (including the potential adverse impacts of the 30% U.S. tariff on South African imports), as well as our reliance on key distributors (Note 2(n)), foreign currency fluctuations (Note 2(b)), regulatory approval delays for new products (e.g., FDA 510(k) processes), supply chain disruptions, competitive pressures in the medical device market, and general economic conditions affecting healthcare spending. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, our actual results may vary in material respects from those projected in these forward-looking statements.

We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws.

These forward-looking statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors" and the risks set out below, any of which may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks include, by way of example and not in limitation:

Financial Risks: We carry substantial debt, may need additional financing, and face exposure to interest rate changes, accounting rule shifts, and tax regulation updates, all of which could impact financial flexibility and results.

Operational Challenges: Our success depends on product development, supply chain continuity, and competitive positioning. Industry consolidation, pricing pressures, IT disruptions, and foreign exchange volatility pose risks to our operations and profitability.

Customer and Market Exposure: We rely heavily on a limited number of customers, including DISA Life Sciences, which increases the risk of revenue concentration. Inadequate insurance coverage and internal control weaknesses may further exacerbate operational vulnerabilities.

Management and Governance: Our business depends on a small number of key personnel, many of whom are located outside the U.S. Concentrated voting power among founders and limited public-company experience heighten governance and compliance risks.

Regulatory and Legal: Delays in obtaining regulatory approvals, potential product liability, compliance with marketing and reimbursement rules, IP protection, and evolving environmental and data privacy laws all pose significant risks. Violations could lead to penalties or legal action.

Geopolitical and Regional Risks: Political and economic instability in South Africa-such as load-shedding, exchange controls, and FATF grey-listing-may impair operations. Broader geopolitical tensions and trade disputes also affect supply chains and market access. Geopolitical and trade risks due to tariffs and trade wars.

Market and Securities Risks: Our shares trade on the OTCQX market and are considered penny stocks, which may limit liquidity. Future equity issuances could dilute existing shareholders, and share prices may fluctuate significantly due to external factors.

Revenue Concentration Risk: We derive a substantial portion of our revenue from a single customer, DISA Life Sciences, which accounted for approximately 93% of our total revenue for the three and six months ended August 31, 2025. Our financial results, cash flows, and operating performance are therefore significantly dependent on the continued business relationship with this customer. A reduction in purchases from, or the loss of, DISA Life Sciences could have a material adverse effect on our results of operations and financial condition. While we endeavor to diversify our customer base, we may not be able to replace this level of revenue in the near term. Investors should consider the potential impact of this customer concentration when evaluating our business and prospects.

Newly Imposed U.S. Tariff on South African Imports May Materially Impact Our U.S. Revenue and Profit Margins

On July 7, 2025, the President of the United States announced a 30% tariff on all goods imported from South Africa into the United States, effective August 1, 2025. This tariff was introduced unilaterally and is reportedly based on concerns over a perceived trade imbalance between the two nations. While the South African government has contested the rationale behind this action and initiated negotiations, there is currently no indication that the tariff will be lifted or reduced in the near term.

As a company that exports goods from South Africa into the United States, this tariff introduces a material cost burden to our U.S.-bound shipments. The U.S. tariff could increase cost of goods sold by 30% on approximately 5% of revenue from our Domestic Sales segment (Inside the United States), potentially reducing fiscal year gross margin by 1 to 2 percentage points if unmitigated. Unless mitigated through restructured pricing, supply chain adjustments, or diplomatic resolution, the tariff is likely to have an adverse effect on our gross margins, U.S. revenue, and overall profitability. In addition, the tariff may reduce our competitiveness in the U.S. market and lead to delayed or reduced purchase orders from our distributors and customers.

We are actively assessing the potential impact of the tariff on our operations and financial results and evaluating appropriate contingency strategies, including sourcing alternatives, pricing adjustments, and geographic diversification of revenue. However, there can be no assurance that these measures will be successful or that the tariff will not materially and adversely affect our financial condition and results of operations.

This list is not an exhaustive list of the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully, including those contained in our Annual Report on Form 10-K under "Risk Factors" for the year ended February 28, 2025, and readers should not place undue reliance on our forward-looking statements. Forward-looking statements are made based on management's beliefs, estimates and opinions on the date the statements are made, and we undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

Business Overview

Medinotec Inc. was registered on April 26, 2021, in the State of Nevada. With an effective date of April 26, 2022, we acquired DISA Medinotec Propriety Limited, a South African corporation, from Minoan Medical Proprietary Limited ("Minoan"), a company incorporated in South Africa, and owner of all the capital stock of DISA Medinotec Propriety Limited. We accomplished the acquisition pursuant to the terms and conditions of a Share Exchange Agreement under common control with Minoan whereby we acquired all the capital stock of DISA Medinotec Proprietary Limited in exchange for the issuance of stock at par value and the transfer of the outstanding loan account.

This Purchase was concluded between Minoan and a local newly established investment vehicle of Medinotec Inc. called Medinotec Capital Proprietary Limited in South Africa after Medinotec Inc. registered the company as a shelf company by injecting $10,000 into it on December 18, 2021. Medinotec Capital Proprietary Limited served as the acquisition vehicle for Medinotec Inc on the continent of Africa.

Combined these companies now form the Medinotec Group of Companies.

The Company engages in in-house manufacturing for products that leverage its intellectual know-how, while also utilizing cash flows generated from marketing products as distribution partners with major players in the industry. This distribution business supports the cash flows of the internally developed products while a market is being established for these offerings. Our internally developed products include:

The Trachealator

The Trachealator has changed the way that tracheal, and, to a degree, bronchial stenosis is managed in extremely ill patients. While there are multiple causes of tracheal stenosis, it is estimated that thousands of cases are reported every year. Multiple, safe, serial dilatations of the trachea are often curative and the Trachealator is currently in our management's opinion the only device that is non-occlusive and which allows the procedure to be done with the patient fully awake and un-sedated.

The Trachealator received the CE Mark of approval by a European notifying body (DEKRA) in 2019. CE Marking is a qualification mandatory for any product to be sold in countries of the European Union but widely accepted by other countries in the Middle East, South American and Asian regions. The Trachealator is currently sold successfully in a large number of those countries.

In May of 2021 in recognition of the advancement in technology in the device, the Trachealator was awarded a Gold Medal in the Medical Design Excellence Awards

The USA recognizes only an FDA approval to accept products in its market. This approval was obtained for the Trachealator in November 2021 through a 510(k) substantially equivalence process for Class II medical devices and sales has since commenced in the USA.

The medical device approval process differs for specific countries and territories in the world, and each may have additional requirements over and above CE mark and FDA. For example, Australia, Japan and China have their own quality accreditation systems (TGF, JIS & CFDA respectively) and do not accept CE marking and/or an FDA certificate. Applications for such accreditations will be considered to be made upon achieving a critical mass of sales in the USA & Europe.

The Cape Cross PTCA Catheter

The Medinotec Group of Companies also designed and developed a range of semi-compliant coronary PTCA catheters known as the Cape Cross, which attained a CE Mark and are marketed around the world and in South Africa, becoming a widely used interventional balloon in the market.

A PTCA catheter is inserted either from the groin or the arm and threaded through the blood vessels, through the aorta into the heart. The cardiac surgeon and/or interventional cardiologist will move the catheter to the blocked artery (plaque). The balloon part of the catheter is inflated to open the blockage in the artery, after which the balloon is deflated, and the entire catheter withdrawn and removed. If this procedure is not effective enough to open the artery, a coronary stent will be placed inside the diseased area of the artery.

Cape Cross Non-Compliant ("NC") Catheter

On the back of the Cape Cross, the Cape Cross NC Catheter was developed for post dilatation purposes. The product has become a mainstay of our cardiology range. It is CE Marked and widely used in South Africa. After a stent is placed in an artery, it is followed up by moving a NC catheter to the site where the stent was placed. The NC catheter balloon part is then inflated inside the stent. This is done to "seat" the stent inside the artery wall. In other words, if the stent was not optimally placed, the NC Catheter can be used to make the stent fit "snugly" against the artery wall to avoid dislodgement and movement of the stent after placement.

OutFlo Aortic Valve Dilatation Balloon Catheter

The OutFlo Aortic Perfusion and Dilatation Catheter is a non-occlusive perfusion balloon to allow the expansion of the aortic valve without impeding the cardiac output.

This catheter could be used to post dilate the artificial valve in TAVI (Transcatheter Aortic Valve Implantation) without the need for pacing.

A clinical study was conducted in 2022, as part of the development of the Technical File documentation, which is currently undergoing examination by our Notified Body (DEKRA).

Submission for FDA certification via the 510(k) substantially equivalence process was made on May 31, 2024. FDA clearance was obtained on March 11, 2025. Management anticipates that OutFlo will be launched to the U.S. Market in Q4 of the 2026 financial year, while the product is already in market in South Africa.

The Micro CTO Catheter (Developmental)

We have developed a highly specific niche CTO (Chronic Total Occlusion) catheter balloon range with diameters of 0.70 to 1.25 mm, as a size range extension to the current Cape Cross Rx PTCA Balloon Catheter.

These micro-balloon catheters address an extremely specific market need for difficult coronary cases and will further cement our position as one of the premier specialized coronary balloon catheter manufacturers. The Technical File was submitted to our Notified Body at the end of July 2023 and is currently undergoing examination.

The process of obtaining FDA clearance for the full range of Cape Cross PTCA catheters via the 510(k) substantial equivalence process commenced in January 2024 and the expected submission date is February 2025.

Product Development Pipeline

The following distinct and finite developmental phases / stages are applicable to all our product pipeline, namely:

1)

R&D

2)

Pre-production prototyping

3)

Testing

4)

Production

5)

Clinical trials

6)

MDR/CE Mark accreditation

7)

Local marketing & selling

8)

International sales outside the US

9)

FDA 510 (k) approval

10)

Sales to the United States.

The products described have reached the following stages:

	Trachealator:	The company is pleased to report that sales are increasing to both private and academic hospitals throughout the United States of America. FDA listing and CE registration was obtained.
	Cape Cross PTCA Catheter:	Application for FDA 510(k) clearance in progress with external consultants. Final submission pending. CE certification under the MDD has been obtained, and is still valid under Regulation (EU) 2023/607. CE certification under the MDR is in progress.
	Cape Cross NC Catheter:	Application for FDA 510(k) clearance in progress with external consultants. Final submission pending. CE certification under the MDD has been obtained, and is still valid under Regulation (EU) 2023/607. CE certification under the MDR is in progress.
	OutFlo Aortic Valve Dilatation Balloon Catheter:	FDA clearance was obtained during the previous quarter, on March 11, 2025. Planned U.S. market launch in the fourth quarter of this financial year.
	Micro CTO Catheter:	R&D, Testing, Pre-Production Prototyping, Clinical Trials MDR/CE Mark accreditation application was submitted in July 2023.
	StaXstop Catheter:	Developmental / Pipeline: An epistaxis catheter - R&D, Testing, Pre-Production Prototyping, Testing, Production, Clinical Trials - FDA 510(k) exempted (Class I product)
	Septus Balloon:	Developmental / Pipeline: A nasal fracture balloon - R&D Testing, Pre-Production Prototyping, Testing, Clinical Trials.
	Vaultseal Balloon:	Developmental / Pipeline: A gynae vaginal vault sealing balloon: R&D Testing, Pre-Production Prototyping, Testing, Clinical Trials.

Results of Operations for the Three and Six Month Periods ended August 31, 2025 and August 31, 2024

Revenue

For the quarter ended August 31, 2025, consolidated revenue for the Medinotec Group of Companies reached $3,236,305, an increase of 79% ($1,432,285) from $1,804,020 in the comparable prior-year period. For the six months ended August 31, 2025, consolidated revenue was $5,370,331, compared to $3,055,897 in the corresponding period of the previous year, an increase of 76%.

This revenue growth primarily reflects the expansion of our distribution business outside the United States, particularly through enhanced partnerships in South Africa that have driven higher sales volumes in our cardiology and dialysis product lines (as discussed in the "Outside the U.S. Segment" section below), partially offset by a 20% decline in U.S. Trachealator sales during the quarter due to timing of customer orders. While these results demonstrate improved market penetration, they remain subject to material uncertainties that could impact future performance, including the 30% U.S. tariff on South African imports effective August 1, 2025 (see Item 1A. Risk Factors), which is expected to increase costs for our U.S.-bound shipments and potentially compress gross margins in the Domestic Sales segment (8% of YTD revenue) by 10-15 percentage points in upcoming periods absent mitigation measures. Additionally, foreign currency fluctuations, such as the 5% strengthening of the South African Rand against the U.S. dollar during the period, have partially offset cost pressures but could reverse and adversely affect reported results if the Rand weakens. Management continues to monitor these trends and pursue diversification strategies to reduce concentration risks.

Operating Segments

The Group operates through two primary segments: Sales Outside the United States and Domestic Sales. These segments represent the core of our business, with the former covering both in-house developed products and complementary products distributed on behalf of third parties, and the latter focusing on our proprietary Trachealator product within the United States. We also plan to launch our OutFlo Aortic Valve Dilatation Balloon in the Domestic Sales segment during the fourth quarter of the current fiscal year and the first quarter of the next fiscal year, further expanding our U.S. product offering.

1.

Sales Outside the United States This segment includes both the sale of the Group's in-house developed products (proprietary IP) and the distribution of third-party products. The third-party distribution component generally yields thinner margins due to pricing pressures, distributor agreements, and competition within the medical device distribution sector. However, the in-house products provide higher margins, driven by the value proposition of our proprietary technologies.

	-	The performance of this segment is strongly influenced by regional demand, regulatory considerations, and the success of our distributor partnerships, particularly in regions such as South Africa and broader Southern Africa.
	-	Industry Trends: According to Grand View Research, the global medical device market is expected to grow at a CAGR of 5.6% from 2024 to 2029, driven by rising healthcare expenditures, demographic shifts, and a growing need for medical devices in emerging markets. This trend supports the Group's growth strategy for expanding our footprint in these markets and capitalizing on the increasing demand for both proprietary and third-party products.

2.

Domestic Sales (United States) The Domestic Sales segment primarily focuses on our Trachealator product, which serves the respiratory market in the U.S. This product is a leading solution for tracheal stenosis, and we continue to see significant adoption within key healthcare institutions across the country.

	-	Revenue from this segment is primarily driven by increasing market penetration of the Trachealator, aided by favorable clinical outcomes, strategic sales channels, and strong relationships with U.S. healthcare providers. The U.S. market remains our second-largest by revenue, after South Africa, and continues to show robust growth potential as demand for respiratory solutions rises, particularly in the wake of heightened awareness and treatment focus of respiratory diseases.
	-	Industry Trends: The U.S. medical device market is projected to grow at a CAGR of 4.3% from 2024 to 2029, according to IBISWorld, driven by advances in minimally invasive technologies and increasing health spending. With an aging population and rising incidences of chronic respiratory conditions, the demand for innovative solutions such as the Trachealator is expected to continue to rise, benefiting the Group's domestic sales efforts.

Sales Concentration

Sales between the Medinotec Group and DISA Life Sciences are expected to remain strong, driven by DISA's well-established and extensive distribution network in South Africa. This partnership continues to be a key pillar of our revenue stream, particularly within the Sales Outside the United States segment, where South Africa represents a significant portion of our sales.

However, as part of our broader growth strategy, the Group is committed to reducing its reliance on the South African market by diversifying into more developed international markets. We aim to expand our footprint in regions such as North America, Europe, and select other promising markets, which present significant opportunities for growth and greater stability. The Group's proprietary products offer strong potential in these regions, particularly in the U.S. and European markets, where demand for advanced minimal invasive medical devices is increasing.

Despite these efforts, there is no certainty that we will be able to significantly reduce our dependency on DISA Life Sciences for customer accounts in the short-to-medium term. Expansion into new markets comes with inherent risks, including the need for regulatory approvals, the challenge of building new distribution networks, and the competitive landscape in each region. These factors may delay or impede our ability to diversify successfully. As such, the risk of customer concentration will likely persist unless we are able to effectively address these challenges and build a more balanced and diversified revenue base.

Product Development

The Trachealator product received FDA clearance in November 2021, allowing the Company to market and sell this innovative product within the United States. This regulatory milestone is a significant achievement, as it not only expands the product's reach to a larger and more developed market but also strengthens the Group's position in the highly competitive U.S. medical device landscape.

Among Medinotec's most valuable assets are its long-term customer relationships, as well as its robust distribution and marketing network. These factors have played a key role in the success of the Group's operations, particularly in South Africa, where our distribution partnership is supported by a team of over 100 sales representatives. This dedicated sales force covers approximately 60% of hospital operating room floors in South Africa on a weekly basis, ensuring that our products are consistently visible and accessible to key medical professionals. This successful distribution model has been pivotal in driving adoption and product penetration.

The Group now plans to replicate this proven model in the U.S. market, leveraging the FDA clearance of the Trachealator and OutFlo and the strength of our established sales force. This expansion into the U.S. is an important step in our strategy to build a broader, more diversified revenue base and to tap into the significant growth opportunities within the North American healthcare market.

On March 11, 2025, the Group received FDA 510(k) clearance for its OutFlo Aortic Dilatation Balloon Catheter. This marks the Group's second FDA-cleared product in the North American market. The clearance and upcoming commercial launch of this product are expected to further expand Medinotec's portfolio and strengthen its position in the competitive cardiovascular market in North America, which remains a key strategic growth area.

Outside the U.S. Segment

Revenues from the Group's Outside the U.S. segment, which includes both our proprietary and distributed products, showed substantial growth for the three months ended August 31, 2025. Revenue increased by 89%, reaching $3,105,249 for the three-month period, compared to $1,641,038 for the same period in the prior year. Similar growth occurred over the six months ended August 31, 2025, with revenue reaching $5,089,212 compared to $2,757,142 for the same period in the prior year, an increase of 85%. This growth was primarily driven by the addition of new distribution revenue streams in South Africa and increased sales efforts for our in-house developed products.

Our sales and marketing initiatives in this segment aimed to drive growth. These efforts included:

	1.	Strategic Partnerships: We successfully established new distribution agreements with key partners in South Africa, leveraging their established networks to enhance our market penetration and expand the reach of our products across both public and private healthcare systems. This partnership has played a pivotal role in increasing sales in the region and strengthening our market presence.
	2.	Sales Training and Development: A critical component of our sales strategy involved the implementation of comprehensive training programs for our sales representatives. These programs focused on improving product knowledge, refining sales techniques, and equipping our team with the tools to better engage healthcare professionals. By investing in our salesforce, we aim to enhance product adoption and foster stronger relationships with healthcare providers.
	3.	Targeted Marketing Campaigns: We launched tailored marketing campaigns that highlighted the unique benefits of our products to healthcare professionals. These campaigns utilized a mix of digital marketing, trade shows, and direct outreach to hospitals and healthcare facilities. These efforts were designed to raise awareness and drive demand for our products, particularly in emerging markets.
	4.	Customer Relationship Management (CRM): To further strengthen our customer engagement, we invested in CRM tools to better track and manage customer interactions. This has enabled us to deliver personalized communications and follow-up, improving customer satisfaction and fostering long-term relationships with key healthcare providers.
	5.	Market Research and Trends Analysis: Ongoing market research was conducted to identify emerging trends, shifting customer needs, and competitive landscape changes. This research has informed our product development and marketing strategies, ensuring that our offerings remain aligned with market demand and that we continue to deliver value to our customers.

Inside the U.S. (Domestic) Segment

Revenues from the Group's U.S. segment, which includes sales of our in-house developed products, decreased by 20% for the three months ended August 31, 2025, totaling $131,056 for the three-month period. This compares to $162,982 for the same period in the prior year. Revenue for the six month period ended August 31, 2025 totaled $281,119, compared to $298,755 for the same period in the prior year, which is a decrease of 6%. These decreases were primarily attributable to changes in customer ordering patterns, and a moderation in demand compared to the prior-year periods.

Cost of Goods Sold

The following tables compare cost of goods sold as dollar amounts and as a percent of net sales for the three and six months ended August 31, 2024 and 2023:

		For the Three Months Ended								For the Six Months Ended
		August 31, 2025				August 31, 2024				August 31, 2025				August 31, 2024
Total cost of goods sold		$	1,234,132			$	970,608			$	2,442,827			$	1,622,207

		For the Three Months Ended								For the Six Months Ended
		August 31, 2025				August 31, 2024				August 31, 2025				August 31, 2024
Total cost of goods sold %			38	%			54	%			45	%			53	%

The composition of the cost of sales figure as a % to the segments is as follows

		For the Three Months Ended								For the Six Months Ended
		August 31, 2025				August 31, 2024				August 31, 2025				August 31, 2024
Outside United States of America %			98	%			98	%			97	%			98	%
Inside the United states of America %			2	%			2	%			3	%			2	%

For the three months ended August 31, 2025, Cost of Goods Sold increased to $1,234,132 from $970,608 in the prior-year period, driven by the factors described below. As a result, gross margin contracted to 62% of sales, versus 46% in the three months ended August 31, 2024. For the 6 month period ended August 31, 2025, Cost of Goods sold increased to $2,442,827 from $1,622,207 for the same period in the prior fiscal year. Gross margin for the six-month period was 55%, compared to 47% in the prior-year period.

Gross margin showed a modest improvement compared to the prior year; however, the overall sales mix between proprietary and distribution products remained largely consistent, and the increase is considered immaterial and within our expectations

During the quarter and for the six months, the South African rand ("ZAR") strengthened against the U.S. dollar. Because a substantial portion of our cost of goods sold is denominated in ZAR, this currency appreciation increased the U.S.-dollar equivalent of those local costs, further compressing our gross margin.

Operating Expenses

Operating expenses for the three months ending August 31, 2025 were $1,473,608, compared with $397,665 in the prior-year period. For the six months ending August 31, 2025, operating expenses were $2,121,482, compared with $728,776 in the prior year period. The increases in both periods primarily reflect investments in growth initiatives, including sales and marketing, as well as higher compliance-related costs.

One of the major components that affects the operating expenses is the cost of compliance for the business which is included in the General and Administrative line item. Certain costs are once off in nature and others will be recurring.

		Three months ended (Unaudited)
		August 31, 2025				August 31, 2024				Value Change
		$				$				$				% Change
Operating expenses
Depreciation and amortization expense			7,497				19,522				(12,025	)			(62	%)
General and administrative expenses			725,472				353,808				371,664				105	%
Research and development expenses			66,235				1,892				64,343				3401	%
Sales and marketing expenses			674,404				22,443				651,961				2905	%
Total operating expenses			1,473,608				397,665				1,075,943				271	%

		Six months ended (Unaudited)
		August 31, 2025				August 31, 2024				Value Change
		$				$				$				% Change
Operating expenses
Depreciation and amortization expense			15,003				37,438				(22,435	)			(60	%)
General and administrative expenses			1,295,053				631,014				664,039				105	%
Research and development expenses			115,249				16,873				98,376				583	%
Sales and marketing expenses			696,177				43,451				652,726				1502	%
Total operating expenses			2,121,482				728,776				1,392,706				191	%

Depreciation and amortization expense decreased by $12,025 for the quarter and by $22,435 for the six month period ending August 31, 2025. This decrease is primarily attributable to the allocation of depreciation to products manufactured during the period. These assets, which include both equipment and intangible assets, have contributed to the rise in depreciation costs as they are progressively utilized in the production process. Total depreciation for the quarter, including amounts allocated to manufactured products, was $24,348, for the three-month period ending August 31, 2025. Of the $24,348 depreciation for the second quarter of fiscal 2026, $7,497 is included under operating expenses, and $16,851 has been allocated to cost of goods sold. This allocation reflects the capital investment in our manufacturing operations and is consistent with the company's efforts to scale production and improve operational efficiency.

General and administrative expenses as a total increased by $371,664 for the three months ended August 31, 2025 compared to the same period in the prior year. For the six months ended August 31, 2025, general and administrative expenses increased by $664,039 compared to the same period in the prior year.

General and administrative expenses increased during the period primarily due to the allocation of executive time to the Company's operations. These executives are permanently employed by the Company's distributor, and the distributor recovers the cost of their services through product pricing. A portion of this cost, determined on a pro rata basis relative to time spent on the Company's activities, is allocated to the Company. This has resulted in a monthly charge of $50,000, which has been incurred and recognized since March 2025.

Additionally, general and administrative expenses include non-cash share-based compensation of $54,495 granted to Mr. Joe Dwyer, Chairman of the Audit Committee, in recognition of services rendered. Further increases to general and administrative expenditure is attributable to ordinary increases in line with increased revenue.

General and administrative expenses per segment are allocated as follows:

		Three Months Ended August 31 (unaudited)
		Inside the United States ($)								Outside the United States ($)								Total ($)
		2025				2024				2025				2024				2025				2024
General and administrative expenses			236,068				140,727				489,404				213,081				725,472				353,808

		Six Months Ended August 31 (unaudited)
		Inside the United States ($)								Outside the United States ($)								Total ($)
		2025				2024				2025				2024				2025				2024
General and administrative expenses			621,910				273,123				673,143				357,891				1,295,053				631,014

The company's strategy of leveraging less expensive, high-quality talent abroad is yielding positive results. This approach not only enhances our cost efficiency but also reinforces our commitment to maintaining a skilled workforce that is essential for driving our operations.

The remaining portion of general and administrative expenses is primarily compliance obligations, which are critical for a medical device company operating in a highly regulated market. These costs encompass regulatory filings, quality assurance initiatives, and other compliance measures necessary to meet industry standards. As a publicly traded entity, we also incur specific expenses related to our quotation on the OTCQX markets. These expenses cover regulatory compliance, investor relations, and reporting requirements that are vital for maintaining transparency and accountability as a public enterprise. It is important to note that these public-related expenses are specific to our operations within the United States.

Collectively, these factors highlight the significance of stringent compliance and operational readiness within our cost structure, ensuring that we meet both regulatory requirements and the expectations of our stakeholders.

Research and development (R&D) expenses increased by $64,343 for the quarter ending August 31, 2025, and by $98,376 for the six months ending August 31,2025. This increase reflects our ongoing commitment to enhancing product performance and operational efficiencies. The increase also includes a once-off share-based compensation expense of $54,495 granted in June 2025 to a researching physician in recognition of services rendered.

We adopt an R&D-light approach, focusing on commercially viable projects that prioritize higher returns on investment. This strategy ensures that our resources are allocated to projects with a higher likelihood of success, minimizing the risks associated with long-term, high-cost initiatives. Our R&D efforts are primarily directed towards process improvements and manufacturing efficiencies rather than more speculative, high-risk developments. By paying R&D royalties and selecting projects that are closer to commercialization, we optimize our R&D expenditures and ensure a more predictable path to market.

Sales and marketing expenses for the three months ended August 31, 2025, were $651,961 higher than in the prior-year period, with an increase of $652,726 for the six-month period ended August 31, 2025, compared with the prior year. These increases primarily reflect higher selling costs associated with new product launches and, more broadly, increased selling expenses in line with higher revenue.

While we've shifted towards a distributor model in many regions, we continue to deliver products directly to customers in order to preserve our strong relationships and ensure that we maintain direct contact with clients, particularly in the U.S. market. This direct engagement remains a priority as it strengthens customer loyalty and provides valuable insights for future product development.

The significant increase in sales and marketing expenses can also be attributed to the timing of conferences and marketing events, which can vary from year to year and create discrepancies when comparing expenses across periods.

It is also important to note that our flat organizational structure allows for flexibility in staff roles. Sales personnel are able to transition into operational and manufacturing positions, and vice versa. While this adaptability provides a competitive advantage by allowing us to optimize staff allocation based on business needs, it can lead to variability in quarter-over-quarter and year-over-year comparisons across different expense categories.

Net Income

Net income for the three months ended August 31, 2025, was $346,566, compared with $284,749 for the same period in the prior year. For the six months ended August 31, 2025, net income was $460,350, compared with $371,953 in the prior-year period. The increases primarily reflect higher sales.

Included in net income is the contribution to income or loss from operations by segment for the three and six months ended August 31, 2025. This metric is considered the most operationally driven indicator to illustrate the impact of each segment on net income. By focusing on the contribution from operations, segment performance can be assessed independently, providing insight into each segment's efficiencies and profitability. This approach supports a clearer understanding of the operational health of the business and informs future strategic decisions.

Segment Contribution to Income/(loss) from operations

		Three Months Ended August 31 (unaudited)
		Inside the United States ($)								Outside the United States ($)								Total ($)
		2025				2024				2025				2024				2025				2024
Income/(loss) from operations			(213,034	)			(5,151	)			741,599				440,898				528,565				435,747

		Six Months Ended August 31 (unaudited)
		Inside the United States ($)								Outside the United States ($)								Total ($)
		2025				2024				2025				2024				2025				2024
Income/(loss) from operations			(502,036	)			(27,191	)			1,308,058				732,106				806,022				704,915

The loss-making nature of the Inside the United States segment, in contrast to the profitability of the segment outside the United States, can be attributed to the differing phases of business maturity. The Inside the USA segment is currently in an active build-up phase, reflecting its less mature status, while the segment outside the USA has reached a more established stage of development.

Furthermore, the Inside the USA territory incurs higher operating and running costs compared to the segment outside the USA. This disparity in expenses provides a competitive advantage for the outside USA segment, where highly skilled South African professionals can be engaged at a lower cost than would be required for similar services within the USA. As a result, the outside USA segment benefits from a more favorable cost structure, contributing to its profitability while the Inside USA segment continues to develop.

Liquidity and Capital Resources

As of August 31, 2025, the Company reports current assets of $5,978,678 and total assets of $6,371,882. Current liabilities at the same date were $1,534,089, resulting in working capital of $4,444,589. This compares with February 28, 2025 when current assets were $6,423,186 and total assets were $6,808,973 with current liabilities of $1,505,047 and working capital of $4,918,139. The growth in total assets reflects improved liquidity primarily driven by revenue growth, from enhanced sales and marketing efforts in both domestic and international markets. The movement in current assets and working capital since year-end primarily reflects the recovery of accounts receivable during the period. This occurred alongside continued repayments on the related party loan in a high interest environment. The Company believes its current liquidity position is sufficient to meet its operating requirements for at least the next 12 months.

In terms of capital allocation for research and development (R&D), we adopt an R&D-light approach. This strategy focuses on commercially viable projects, prioritizing investments that promise higher returns. Our R&D efforts are primarily centered on process improvement and manufacturing efficiencies rather than high-risk initiatives. By opting to pay R&D royalties and focus on select projects that are closer to commercialization, we ensure a higher likelihood of success. This approach also minimizes resource allocation to less promising ventures.

Looking ahead, we plan to undertake clinical write-ups in new territories to facilitate market entry and compliance with local regulations. We do not anticipate exceeding $50,000 for these activities, maintaining a disciplined approach to expenses while capitalizing on growth opportunities.

To further support potential acquisitions, strategic partnerships, capital expenditures, and the expansion of our R&D initiatives, we may consider seeking additional debt or equity financing or establishing lines of credit to supplement cash flows from operations. This proactive approach will enable us to leverage our financial position for sustainable growth and innovation.

Cash flow movements

The following table summarizes our cash flows from continuing operations for the periods indicated:

		Six Months Ended August 31, 2025 (unaudited) ($)				Six Months Ended August 31, 2024 (unaudited) ($)
Net cash provided by (used in):
Operating Activities			464,300				654,609
Investing Activities			-				(17,733	)
Financing Activities			(980,467	)			(733,871	)

Cash flows from Operating Activities

Our net cash provided by operating activities of $464,300 for the six months ended August 31, 2025, compared to $645,609 provided in the prior-year period. The decrease primarily reflects higher working capital requirements during the period, including timing differences in collections and payments. Additionally, cash flows used in operating activities include a $104,528 increase in prepaid expenses, reflecting our annual insurance premium and various compliance-related payments made during the period. These working-capital movements more than offset operating earnings for the six-month period, resulting in a lower net cash inflow compared to the prior year. Overall, this level of cash flow remains consistent with the Company's expectations for normal operating activities.

Profitability Improvement

During this period, we reported an increase in profitability with a net profit after tax of $460,350, compared to a profit of $371,953 in the same period last year. This shift was largely driven by robust sales growth in our Outside the USA segment, specifically within our newly acquired cardiology and dialysis distribution business, which commenced operations in the third quarter of 2023 in South Africa. The expansion in this segment has been instrumental in driving our revenue upward and enhancing our overall profitability.

Working Capital Movements

In addition to the improvement in profitability, the remaining increase in cash generated from operations was influenced by favorable movements in working capital. We effectively managed our trade receivables, inventory, and accounts payable to support the revenue growth in the cardiology distribution business.

	•	Trade Receivables: Cash flows from trade receivables decreased by $273,143 for the six months ended August 31, 2025, compared to an increase of $124,112 for the same period in the prior year. The decrease primarily reflects higher revenues during the period, which led to an increase in outstanding receivables at period-end. As a result, cash collections lagged behind sales, contributing to the reduction in net cash provided by operating activities from receivables.
	•	Inventory Management: We optimized our inventory levels to align with increased demand, ensuring that we maintain sufficient inventory without overcommitting resources. Inventories increased by $29,799 for the six months ended August 31, 2025 compared to an increase of $343,462 for the same period in the previous year.
	•	Accounts Payable: Accounts payable and accrued expenses increased by $101,597 for the six months ended August 31, 2025, compared with an increase of $572,147 in the prior-year period. The smaller increase in accounts payable and accrued expenses for the six months ended August 31, 2025, compared to the prior-year period, reflects improved cash management and timing of payments to vendors. While we continue to use extended payment terms strategically to preserve liquidity, the lower increase indicates that a portion of payables from prior periods has been settled, and that growth in procurement-related obligations was more closely aligned with operational needs during the current period.

Furthermore, the company's ability to maintain strong relationships with suppliers and customers is critical in ensuring a steady flow of cash. Our commitment to direct customer engagement, even as we utilize distributors, helps preserve these relationships, facilitating smoother transactions and improved cash flow stability.

Overall, the combination of increased profitability, operational efficiencies, effective management of payment timing, and strong supplier relationships has positioned us well to enhance our cash flows from operating activities. We remain committed to sustaining this positive momentum as we continue to expand our market presence and drive growth in our key business segments.

Cash flows from Investing Activities

For the six months ended August 31, 2025, we report no cash flows from investing activities, compared to $17,733 used in the prior period. The cash flows used in investing activities in the prior period relate to the purchase of property, plant and equipment, of which none occurred in the first two quarters of fiscal 2026.

Cash flow from Financing Activities

For the six months ended August 31, 2025, we report cash flows used in financing activities of $980,467, compared with cash used of $733,871 in the prior period ending August 31, 2024. This change was primarily driven by significant repayment of the related party loan during the current period, compared with the previous period.

The repayment of the related party loan is indicative of our improved financial stability and a commitment to reducing leverage, which represents a positive development for the business. By lowering our debt obligations, we enhance our balance sheet, reduce interest expenses, and position ourselves for better cash flow in the long term. This proactive management of debt not only strengthens our financial position but also enhances our financial flexibility, allowing us to allocate resources more effectively toward growth initiatives, operational improvements, and strategic investments.

Additionally, the decrease in reliance on external financing to fund operations suggests that our core business activities are generating sufficient cash flow. This transition reflects a healthier financial foundation and fosters greater confidence among investors and stakeholders regarding our sustainability and growth prospects.

Overall, we believe these developments underscore our strategic focus on long-term value creation and position us favorably for future growth opportunities.

Income Taxes

Income taxes for the six months ended August 31, 2025 included $456,788 current income taxes and $117,544 deferred income taxes. The change in deferred taxes from a liability of $80,124 at February 28, 2025 to an asset of $34,366 at August 31, 2025 reflects the realization of a temporary difference that arose at the end of fiscal year 2025 due to the timing of taxation on income outside of the U.S. Segment, which had led to the recognition of the deferred tax liability. Prior to this, the trend was that the company carried a deferred tax asset. The swing back to the deferred tax asset in the current period represents a return to the normal deferred tax asset position.

Off Balance Sheet Arrangements

As of August 31, 2025, there were no off-balance sheet arrangements.

Critical Accounting Policies

In December 2001, the SEC requested that all registrants list their most "critical accounting polices" in the Management Discussion and Analysis. The SEC indicated that a "critical accounting policy" is one which is both important to the portrayal of a company's financial condition and results, and requires management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. There have been no material changes to our critical accounting policies as described in the footnotes to our financial statements included in our annual report on Form 10-K for the year ended February 28, 2025; however, we consider our critical accounting policies to be those related to revenue from the revenue of self-manufactured products, revenue from the distribution of products, allowance for note receivable impairment, and inventories valuation, costing and obsolescence.

Recently Issued Accounting Pronouncements

The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company's Consolidated results of operation, financial position or cash flow.