The report presents the financial statements of the company for the quarter ended May 31, 2025. The company reported a net sales revenue of $X, with a gross profit of $Y and an operating income of $Z. The company’s cash and cash equivalents stood at $X, with accounts receivable and payable of $Y and $Z, respectively. The company’s inventory turnover was X days, and its accounts receivable days outstanding was Y days. The company’s cost of goods sold was $X, with a cost of goods sold percentage of Y%. The company’s operating expenses were $X, with a research and development expense of $Y and a selling, general, and administrative expense of $Z. The company’s net income was $X, with a basic and diluted earnings per share of $Y and $Z, respectively. The company’s cash flow from operations was $X, with a cash flow from investing activities of $Y and a cash flow from financing activities of $Z.
OVERVIEW
We are a global biomedical technology company that develops, patents, manufactures and markets advanced diagnostic and therapeutic products. Our diagnostic test kits are used to analyze various patient samples to diagnose diseases, food intolerances, and other medical conditions. Our products are designed to enhance health and well-being while reducing healthcare costs.
Our extensive range of medical diagnostic products is sold worldwide, primarily in clinical laboratories and point-of-care settings like physicians’ offices and over-the-counter retail stores. Most of our products are approved for diagnostic use in various countries, including FDA clearance for sale in the United States.
Technological advances have enabled diagnostic tests to be performed at home and in physicians’ offices, not just in clinical labs. One of our key objectives is to develop and market rapid diagnostic tests that are accurate, use easily obtained patient samples, and are simple to perform without complex instrumentation. Our home use and professional use rapid diagnostic tests help manage existing conditions and enable early detection of diseases.
We invest in research and development of new products to diagnose and, in some cases, treat major medical diseases. Our experienced technical personnel, including Ph.D. holders and scientists, develop new products and manage technology transfer. We also rely on our Scientific Advisory Board of leading medical experts to guide our clinical studies and product development.
A key recent development is our patented diagnostic-guided therapy (DGT) product, developed on the inFoods® technology platform. This innovative product is designed to treat gastrointestinal conditions like irritable bowel syndrome (IBS) by identifying patient-specific trigger foods. By eliminating these foods, patients can achieve relief from their IBS symptoms.
We have also achieved a milestone with the development of hp+detect™, a diagnostic test to detect the Helicobacter pylori (H. pylori) bacteria, a major risk factor for gastric cancer. The test is marketed directly to laboratories to provide timely and accurate diagnoses.
Due to slower-than-expected launches of inFoods® IBS and hp+detect™, the company has initiated significant cost-cutting measures, including a 15% workforce reduction, to extend its cash runway and work towards increasing revenues to cover overhead costs. The company is also actively exploring strategic opportunities to enhance shareholder value.
RESULTS OF OPERATIONS
Net Sales and Cost of Sales:
Metric | Three Months Ended August 31, 2024 | Three Months Ended August 31, 2023 | Increase (Decrease) |
---|---|---|---|
Clinical lab | $1,278,000 | $1,289,000 | $(11,000) (-1%) |
Over-the-counter | $187,000 | $303,000 | $(116,000) (-38%) |
Contract manufacturing | $339,000 | $117,000 | $222,000 (190%) |
Physician’s office | $3,000 | $4,000 | $(1,000) (-25%) |
Net Sales | $1,807,000 | $1,713,000 | $94,000 (5%) |
For the three months ended August 31, 2024, consolidated net sales were approximately $1,807,000, compared to $1,713,000 in the same period of 2023, an increase of $94,000 or 5%. This growth was driven by a $222,000 increase in contract manufacturing, partially offset by a $116,000 decline in over-the-counter retail sales.
Consolidated cost of sales for the three months ended August 31, 2024 was approximately $1,518,000, or 84% of net sales, compared to $1,301,000, or 76% of net sales, in the same period of 2023, an increase of $217,000 or 17%. This was primarily due to the growth in contract manufacturing sales and one-time severance expenses related to a workforce reduction, which negatively impacted gross margins by 12%.
Operating Expenses:
Metric | Three Months Ended August 31, 2024 | As a % of Total Revenues | Three Months Ended August 31, 2023 | As a % of Total Revenues | Increase (Decrease) |
---|---|---|---|---|---|
Selling, General and Administrative Expenses | $1,360,000 | 75% | $1,172,000 | 68% | $188,000 (16%) |
Research and Development | $297,000 | 16% | $472,000 | 28% | $(175,000) (-37%) |
Selling, General and Administrative Expenses increased by $188,000 or 16% due to one-time severance expenses and the addition of a new sales force.
Research and Development expenses decreased by $175,000 or 37% due to a decline in R&D wages from the workforce reduction and a deliberate reduction in clinical trial expenses.
Interest and Dividend Income decreased by $67,000 or 54% due to lower market interest rates and decreased cash balances.
LIQUIDITY, CAPITAL RESOURCES AND GOING CONCERN
As of August 31, 2024, the company had cash and cash equivalents of $2,820,000 and working capital of $4,294,000.
The company’s ability to continue as a going concern is influenced by several factors:
Management believes the current cash and cash equivalents are insufficient to meet operating requirements and strategic growth objectives for the next 12 months. To address capital needs and sustain operations, the company is pursuing strategies to increase sales, reduce expenses, sell non-core assets, seek additional financing, and explore strategic alternatives.
As part of the financing plan, the company filed a shelf registration statement to issue up to $20 million in common stock, including a $5.5 million at-the-market (ATM) offering. However, the amount of capital that can be raised through the ATM is highly dependent on the company’s stock trading volume and price, which have been low.
These factors raise substantial doubt about the company’s ability to continue as a going concern. The company’s future viability depends on the successful execution of its strategic plans, securing additional financing, and achieving profitable operations.
OFF BALANCE SHEET ARRANGEMENTS
There were no off-balance sheet arrangements as of August 31, 2024.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of the company’s financial statements requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. The most critical accounting policies relate to revenue recognition, bad debts, inventory overhead application, inventory reserves, lease liabilities, and right-of-use assets. The company believes these policies and the underlying estimates and assumptions are reasonable under the circumstances; however, actual results may differ under different future conditions.