Quarterly Report for Quarter Ending April 30, 2026 (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, 2025. 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, 2025, our Quarterly Report on Form 10-Q for the quarter ended January 31, 2026, and this Quarterly Report on Form 10-Q.

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 held 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 that tax grant request. However, we do not anticipate any significant concerns with the Grant approval. Under ACT 20-2012, the Company obtained another tax grant from PRIDCO which, with certain limitations, also covers the services provided by the Company's Puerto Rico subsidiaries to parties located outside of Puerto Rico. The ACT 20-2012 tax grant is for a twenty-year term which ends on December 30, 2039. For additional information relating to the tax grant issued by PRIDCO, please see Note C - Income Taxes of the condensed consolidated financial statements.

The Company's headquarters office facilities lease expired on December 31, 2025. Prior to the lease's expiration, the Company vetted various technologies which resulted in the Company moving its headquarters administrative operations to a virtual landscape. The move enables us to maintain the same level of service in a more competitive manner.

Regional or global conflicts, including war and economic sanctions between nations, price inflation, pandemics, OBBBA, possible tax changes on jurisdictions where we do business, bio-pharmaceutical industry consolidations and relocations, 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 and restructurings, 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 six-month periods ended April 30, 2026 and 2025, by geographic regions (dollars in thousands, and as a percentage of total revenues).

		Three months ended April 30,																Six months ended April 30,
Revenues by Region:		2026								2025								2026								2025
Puerto Rico		$	1,451				53.7	%		$	1,170				48.4	%		$	2,615				52.3	%		$	2,273				46.5	%
United States			620				22.9	%			714				29.5	%			1,167				23.4	%			1,360				27.8	%
Europe			626				23.2	%			533				22.1	%			1,210				24.2	%			1,254				25.7	%
Other			6				0.2	%			-				0.0	%			6				0.1	%			1				0.0	%
		$	2,703				100.0	%		$	2,417				100.0	%		$	4,998				100.0	%		$	4,888				100.0	%

For the six-month period ended April 30, 2026, the Company's total revenues were approximately $5.0 million, a net increase of approximately $0.1 million when compared to the same period last year. The Puerto Rico market sustained an increase in project revenue of approximately $0.3 million, which was partially offset by a decline in project revenue in the US consulting market of approximately $0.2 million, while other markets had an insignificant variance. As depicted below, the gross profit ratio to revenue sustained no change for the six-month period ended April 30, 2026 when compared to the same period last year.

Results of Operations

The following table sets forth our statements of operations for the three-month and six-month periods ended April 30, 2026 and 2025 (dollars in thousands, and as a percentage of revenues):

		Three months ended April 30,																Six months ended April 30,
		2026								2025								2026								2025
Revenues		$	2,703				100.0	%		$	2,417				100.0	%		$	4,998				100.0	%		$	4,888				100.0	%
Cost of services			1,801				66.6	%			1,598				66.1	%			3,374				67.5	%			3,301				67.5	%
Gross profit			902				33.4	%			819				33.9	%			1,624				32.5	%			1,587				32.5	%
Selling, general and administrative expenses			757				28.0	%			917				37.9	%			1,574				31.5	%			1,777				36.4	%
Other income, net			94				3.4	%			199				8.2	%			226				4.5	%			301				6.1	%
Income (loss) before income tax			239				8.8	%			101				4.2	%			276				5.5	%			111				2.2	%
Income tax expense			6				0.2	%			6				0.3	%			10				0.2	%			7				0.1	%
Net income (loss)			233				8.6	%			95				3.9	%			266				5.3	%			104				2.1	%

Revenues. Total revenues for the three and six months ended April 30, 2026 were $2.7 and $5.0 million, respectively, an increase of approximately $0.3 and $0.1 million when compared to the same periods last year, respectively. For the three months ended April 30, 2026, when compared to the same period last year, the Puerto Rico and the European markets revenue increased by $0.3 and $0.1 million, respectively, offset by the decline in project revenue in the United States consulting market of approximately $0.1 million, while the Brazilian revenue variance was insignificant. For the six months ended April 30, 2026, when compared to the same period last year, the Puerto Rico market sustained an increase in project revenue of approximately $0.3 million, which was partially offset by a decline in project revenue in the US consulting market of approximately $0.2 million, while other markets had an insignificant variance.

Cost of Services; Gross Profit. Cost of services for the three and six months ended April 30, 2026 were $1.8 and $3.4 million, respectively, while the gross profit for the three and six months ended April 30, 2026, had a slight decrease of 0.5 percentage points and sustained no change, when compared to the same periods last year, respectively.

Selling, General and Administrative Expenses. Selling, general and administrative expenses for the three and six months ended April 30, 2026 were approximately $0.8 and $1.6 million, respectively. When compared to last year's three and six month periods ended April 30, 2025, this represents a decrease in expenses in both periods of approximately $0.2 million, which are mainly attributable to the reduction in occupancy expenses of approximately $0.1 million, plus other planned savings in general and administrative expenses.

Other Income, Net. Other income, net for the three and six months ended April 30, 2026 was approximately $0.1 and $0.2 million, respectively. These balances are mostly attributable to interest income, plus a negligible amount for the settlement of foreign exchange rates on intercompany balances.

Net Income. Net Income for the three and six months ended April 30, 2026 was approximately $0.2 and $0.3 million, respectively, an earnings increase of approximately $0.1 and $0.2 million when compared to the same periods last year, respectively.

For the three and six months ended April 30, 2026, net earnings per common share for both basic and diluted were $0.010 and $0.012, respectively, an increase of $0.006 and $0.007 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 April 30, 2026, the Company had approximately $10.2 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 six-month period ended April 30, 2026, the Company repurchased 4,300 shares of its common stock. As of April 30, 2026, the Company has 1,444,992 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 six months ended April 30, 2026.

Critical Accounting Policies and Estimates

There were no material changes during the six months ended April 30, 2026 to the critical accounting policies reported in our Annual Report on Form 10-K for the fiscal year ended October 31, 2025.

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, 2025, 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, 2025, our Quarterly Report on Form 10-Q for the quarter ended January 31, 2026, 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, 2025, our Quarterly Report on Form 10-Q for the quarter ended January 31, 2026, and this Quarterly Report on Form 10-Q.

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