Pharma-Bio Serv 10Q 2024 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2024

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to ______________

Commission File No. 000-50956

PHARMA-BIO SERV, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

20-0653570

(State or Other Jurisdiction of

Incorporation or Organization)

(IRS Employer

Identification No.)

Pharma-Bio Serv

# 6 Road 696

Dorado, Puerto Rico

00646

(Address of Principal Executive Offices)

(Zip Code)

787-278-2709

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s common stock outstanding as of September 10, 2024 was 22,958,143.

PHARMA-BIO SERV, INC.

FORM 10-Q

FOR THE QUARTER ENDED JULY 31, 2024

TABLE OF CONTENTS

	Page
PART I FINANCIAL INFORMATION

Item 1 – Financial Statements

Condensed Consolidated Balance Sheets as of July 31, 2024 and October 31, 2023 (unaudited)		3

Condensed Consolidated Statements of Operations for the three-month and nine-month periods ended July 31, 2024 and 2023 (unaudited)		4

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three-month and nine-month periods ended July 31, 2024 and 2023 (unaudited)		5

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three-month and nine-month periods ended July 31, 2024 and 2023 (unaudited)		6

Condensed Consolidated Statements of Cash Flows for the three-month and nine-month periods ended July 31, 2024 and 2023 (unaudited)		8

Notes to Condensed Consolidated Financial Statements (unaudited)		9

Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations		16

Item 4 – Controls and Procedures		19

PART II OTHER INFORMATION

Item 1 – Legal Proceedings		20

Item 1A – Risk Factors		20

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds		20

Item 6 – Exhibits		21

SIGNATURES		22

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PHARMA-BIO SERV, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

ASSETS	July 31, 2024*			October 31, 2023**
Current assets
Cash and cash equivalents	$	6,520,182		$	10,446,054
Marketable securities		6,342,094			4,531,164
Accounts receivable		2,599,159			3,940,845
Prepaids and other assets		474,103			483,034
Total current assets		15,935,538			19,401,097

Property and equipment, net		18,194			32,849
Operating lease right-of-use		239,183			356,450
Other assets		125,594			111,665
Total assets	$	16,318,509		$	19,902,061

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current operating lease liabilities	$	161,914		$	152,474
Accounts payable and accrued expenses		1,112,376			1,467,425
Current portion of US Tax Reform Transition Tax and income taxes payable		624,986			533,782
Total current liabilities		1,899,276			2,153,681

US Tax Reform Transition Tax payable		660,903			1,427,560
Long-term operating lease liabilities		71,362			194,035
Total liabilities		2,631,541			3,775,276

Stockholders' equity
Preferred Stock, $0.0001 par value; authorized 10,000,000 shares; none outstanding		-			-
Common Stock, $0.0001 par value; authorized 50,000,000 shares; 23,519,672 and 23,512,880 shares issued, and 22,958,143 and 22,963,451 shares outstanding at July 31, 2024 and October 31, 2023, respectively		2,352			2,351
Additional paid-in capital		1,641,322			1,596,922
Retained earnings		12,337,859			14,853,826
Accumulated other comprehensive income		253,278			210,266
		14,234,811			16,663,365
Treasury stock, at cost; 561,529 and 549,429 common shares held at July 31, 2024 and October 31, 2023, respectively		(547,843	)		(536,580	)
Total stockholders' equity		13,686,968			16,126,785
Total liabilities and stockholders' equity	$	16,318,509		$	19,902,061

*	Unaudited.
**	Condensed from audited financial statements.

See notes to the condensed consolidated financial statements.

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PHARMA-BIO SERV, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

	Three months ended July 31,					Nine months ended July 31,
	2024			2023		2024			2023
REVENUES	$	2,418,163		$	4,577,167	$	7,175,967		$	13,378,665

COST OF SERVICES		1,782,779			3,027,160		5,386,499			9,242,059

GROSS PROFIT		635,384			1,550,007		1,789,468			4,136,606

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		1,017,166			1,089,541		2,922,925			2,967,430

INCOME (LOSS) FROM OPERATIONS		(381,782	)		460,466		(1,133,457	)		1,169,176

OTHER INCOME, NET		91,592			126,985		392,858			566,146

INCOME (LOSS) BEFORE INCOME TAX		(290,190	)		587,451		(740,599	)		1,735,322

INCOME TAX EXPENSE		19,004			61,209		53,131			377,994

NET INCOME (LOSS)	$	(309,194	)	$	526,242	$	(793,730	)	$	1,357,328

BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE	$	(0.014	)	$	0.023	$	(0.035	)	$	0.059

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC		22,961,534			22,965,496		22,964,239			22,962,113

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED		22,961,534			22,984,558		22,977,254			22,991,372

See notes to the condensed consolidated financial statements.

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PHARMA-BIO SERV, INC.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

	Three months ended July 31,						Nine months ended July 31,
	2024			2023			2024			2023
NET INCOME (LOSS)	$	(309,194	)	$	526,242		$	(793,730	)	$	1,357,328

OTHER COMPREHENSIVE INCOME (LOSS)

Foreign currency translation:
Net unrealized gain (loss)		(12,840	)		(42,466	)		(16,489	)		151,785
Intercompany balances foreign exchange settlement, included in net income (loss)		42,576			17,857			59,501			(168,231	)

TOTAL OTHER COMPREHENSIVE INCOME (LOSS)		29,736			(24,609	)		43,012			(16,446	)

COMPREHENSIVE INCOME (LOSS)	$	(279,458	)	$	501,633		$	(750,718	)	$	1,340,882

See notes to the condensed consolidated financial statements.

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PHARMA-BIO SERV, INC.

Condensed Consolidated Statements of Changes in Stockholders' Equity

(Unaudited)

														Accumulated
									Additional					Other
FISCAL YEAR 2024	Common Stock				Preferred Stock				Paid-in		Retained			Comprehensive		Treasury
(THREE MONTHS ENDED JULY 31, 2024)	Shares		Amount		Shares		Amount		Capital		Earnings			Income (Loss)		Stock			Total
BALANCE AT APRIL 30, 2024		23,519,672	$	2,352		-	$	-	$	1,626,522	$	12,647,053		$	223,542	$	(546,096	)	$	13,953,373

STOCK-BASED COMPENSATION		-		-		-		-		14,800		-			-		-			14,800

PURCHASE OF TREASURY STOCK (2,500 SHARES)		-		-		-		-		-		-			-		(1,747	)		(1,747	)

NET LOSS		-		-		-		-		-		(309,194	)		-		-			(309,194	)

OTHER COMPREHENSIVE INCOME, NET OF TAX		-		-		-		-		-		-			29,736		-			29,736

BALANCE AT JULY 31, 2024		23,519,672	$	2,352		-	$	-	$	1,641,322	$	12,337,859		$	253,278	$	(547,843	)	$	13,686,968

														Accumulated
									Additional					Other
FISCAL YEAR 2024	Common Stock				Preferred Stock				Paid-in		Retained			Comprehensive		Treasury
(NINE MONTHS ENDED JULY 31, 2024)	Shares		Amount		Shares		Amount		Capital		Earnings			Income (Loss)		Stock			Total
BALANCE AT NOVEMBER 1, 2023		23,512,880	$	2,351		-	$	-	$	1,596,922	$	14,853,826		$	210,266	$	(536,580	)	$	16,126,785

STOCK-BASED COMPENSATION		-		-		-		-		44,400		-			-		-			44,400

ISSUANCE OF COMMON STOCK PURSUANT TO THE CASHLESS EXERCISE OF STOCK OPTIONS		6,792		1		-		-		-		(1	)		-		-			-

PURCHASE OF TREASURY STOCK (12,100 SHARES)		-		-		-		-		-		-			-		(11,263	)		(11,263	)

NET LOSS		-		-		-		-		-		(793,730	)		-		-			(793,730	)

OTHER COMPREHENSIVE INCOME, NET OF TAX		-		-		-		-		-		-			43,012		-			43,012

CASH DIVIDEND ($0.075 PER COMMON SHARE AT RECORD DATE)		-		-		-		-		-		(1,722,236	)		-		-			(1,722,236	)

BALANCE AT JULY 31, 2024		23,519,672	$	2,352		-	$	-	$	1,641,322	$	12,337,859		$	253,278	$	(547,843	)	$	13,686,968

See notes to condensed consolidated financial statements.

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PHARMA-BIO SERV, INC.

Condensed Consolidated Statements of Changes in Stockholders' Equity (continued)

(Unaudited)

													Accumulated
									Additional				Other
FISCAL YEAR 2023	Common Stock				Preferred Stock				Paid-in		Retained		Comprehensive			Treasury
(THREE MONTHS ENDED JULY 31, 2023)	Shares		Amount		Shares		Amount		Capital		Earnings		Income (Loss)			Stock			Total
BALANCE AT APRIL 30, 2023		23,512,880	$	2,351		-	$	-	$	1,581,439	$	14,374,732	$	246,315		$	(530,705	)	$	15,674,132

STOCK-BASED COMPENSATION		-		-		-		-		14,799		-		-			-			14,799

PURCHASE OF TREASURY STOCK (5,100 SHARES)		-		-		-		-		-		-		-			(5,083	)		(5,083	)

NET INCOME		-		-		-		-		-		526,242		-			-			526,242

OTHER COMPREHENSIVE LOSS, NET OF TAX		-		-		-		-		-		-		(24,609	)		-			(24,609	)

BALANCE AT JULY 31, 2023		23,512,880	$	2,351		-	$	-	$	1,596,238	$	14,900,974	$	221,706		$	(535,788	)	$	16,185,481

														Accumulated
									Additional					Other
FISCAL YEAR 2023	Common Stock				Preferred Stock				Paid-in		Retained			Comprehensive			Treasury
(NINE MONTHS ENDED JULY 31, 2023)	Shares		Amount		Shares		Amount		Capital		Earnings			Income (Loss)			Stock			Total
BALANCE AT NOVEMBER 1, 2022		23,457,515	$	2,346		-	$	-	$	1,551,838	$	15,267,470		$	238,152		$	(502,236	)	$	16,557,570

STOCK-BASED COMPENSATION		-		-		-		-		44,400		-			-			-			44,400

ISSUANCE OF COMMON STOCK PURSUANT TO THE CASHLESS EXERCISE OF STOCK OPTIONS		55,365		5		-		-		-		(5	)		-			-			-

PURCHASE OF TREASURY STOCK (34,600 SHARES)		-		-		-		-		-		-			-			(33,552	)		(33,552	)

NET INCOME		-		-		-		-		-		1,357,328			-			-			1,357,328

OTHER COMPREHENSIVE LOSS, NET OF TAX		-		-		-		-		-		-			(16,446	)		-			(16,446	)

CASH DIVIDENDS ($0.075 PER COMMON SHARE AT RECORD DATE)		-		-		-		-		-		(1,723,819	)		-			-			(1,723,819	)

BALANCE AT JULY 31, 2023		23,512,880	$	2,351		-	$	-	$	1,596,238	$	14,900,974		$	221,706		$	(535,788	)	$	16,185,481

See notes to condensed consolidated financial statements.

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PHARMA-BIO SERV, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Three months ended July 31,						Nine months ended July 31,
	2024			2023			2024			2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(309,194	)	$	526,242		$	(793,730	)	$	1,357,328
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Stock-based compensation		14,800			14,799			44,400			44,400
Depreciation and amortization		4,589			11,400			17,383			40,694
Amortization of operating lease right-of-use		39,806			36,832			117,267			108,682
Reinvested interests		(73,171	)		(34,734	)		(281,258	)		(178,038	)
Decrease (increase) in accounts receivable		15,744			380,213			1,367,567			453,235
Decrease (increase) in other assets		(17,860	)		(148,841	)		36,029			(238,542	)
Increase (decrease) in liabilities		(345,041	)		170,854			(1,152,784	)		(5,235	)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		(670,327	)		956,765			(645,126	)		1,582,524

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment		(1,908	)		-			(2,728	)		(8,831	)
Marketable securities settlement (investment), net		3,691,849			(6,176,052	)		(1,529,672	)		(11,536,558	)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		3,689,941			(6,176,052	)		(1,532,400	)		(11,545,389	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of common stock		(1,747	)		(5,083	)		(11,263	)		(33,552	)
Cash dividends paid to shareholders		-			-			(1,722,236	)		(1,723,819	)
NET CASH USED IN FINANCING ACTIVITIES		(1,747	)		(5,083	)		(1,733,499	)		(1,757,371	)

EFFECT OF EXCHANGE RATE CHANGES ON CASH		(7,094	)		(2,500	)		(14,847	)		127,091
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		3,010,773			(5,226,870	)		(3,925,872	)		(11,593,145	)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD		3,509,409			8,096,454			10,446,054			14,462,729
CASH AND CASH EQUIVALENTS – END OF PERIOD	$	6,520,182		$	2,869,584		$	6,520,182		$	2,869,584

SUPPLEMENTAL DISCLOURES OF CASH FLOWS INFORMATION:
Cash paid during the period for:
Income taxes	$	234,941	$	-	$	661,224	$	312,155
Interest	$	-	$	-	$	-	$	-

SUPPLEMENTARY SCHEDULES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Income tax withheld by clients to be used as a credit in the Company’s income tax return	$	3,719	$	-	$	50,713	$	15,309
Conversion of cashless exercise of options to shares of common stock and shares issued under restricted stock unit agreements	$	-	$	-	$	1	$	5

See notes to the condensed consolidated financial statements.

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PHARMA-BIO SERV, INC.

Notes To Condensed Consolidated Financial Statements

July 31, 2024

(Unaudited)

NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Pharma-Bio Serv, Inc. (“Pharma-Bio”) is a Delaware corporation organized on January 14, 2004. Pharma-Bio is the parent company of Pharma-Bio Serv PR, Inc. (“Pharma-PR”), Pharma Serv, Inc. (“Pharma-Serv”), and Scienza Labs, Inc. (currently inactive) (“Scienza Labs”), each a Puerto Rico corporation, Pharma-Bio Serv US, Inc. (“Pharma-US”), a Delaware corporation, Pharma-Bio Serv SL (“Pharma-Spain”), a Spanish limited liability company, and Pharma-Bio Serv Brasil Servicos de Consultoria Ltda. (currently insignificant) (“Pharma-Brazil”), a Brazilian limited liability company. Pharma-Bio, Pharma-PR, Pharma-Serv, Scienza Labs, Pharma-US, Pharma-Spain and Pharma-Brazil are collectively referred to as the “Company.” The Company operates in Puerto Rico, the United States, Europe and Brazil under the name of Pharma-Bio Serv and is engaged in providing technical compliance consulting service.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The condensed consolidated balance sheet of the Company as of October 31, 2023 is derived from audited consolidated financial statements but does not include all disclosures required by generally accepted accounting principles. The unaudited interim condensed consolidated financial statements, include all adjustments, consisting of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations and cash flows for the interim periods. The results of operations for the nine months ended July 31, 2024 are not necessarily indicative of expected results for the full 2024 fiscal year.

The accompanying financial data as of July 31, 2024, and for the three-month and nine-month periods ended July 31, 2024 and 2023 has been prepared by us, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally contained in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes contained in our audited Consolidated Financial Statements and the notes thereto for the fiscal year ended October 31, 2023.

Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and all of its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Segments

The Company operates in three reportable business segments: (i) Puerto Rico technical compliance consulting, (ii) United States technical compliance consulting, and (iii) Europe technical compliance consulting. Accordingly, the accompanying condensed consolidated financial statements are presented to show these three reportable segments.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results may differ from these estimates.

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Fair Value of Financial Instruments

Accounting standards have established a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Accounting standards have established three levels of inputs that may be used to measure fair value:

Level 1:	Quoted prices in active markets for identical assets and liabilities.
Level 2:	Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3:	Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

Marketable securities consist of U.S. Treasury securities, which are categorized in Level 1 and have a short-term maturity.

The carrying value of the Company's financial instruments, cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, are considered reasonable estimates of fair value due to their liquidity or short-term nature.

Revenue Recognition

The Company records revenue under Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers. We evaluate our revenue contracts with customers based on the five-step model under ASC 606: (i) Identify the contract with the customer; (ii) Identify the performance obligations in the contract; (iii) Determine the transaction price; (iv) Allocate the transaction price to separate performance obligations; and (v) Recognize revenue when (or as) each performance obligation is satisfied.

Revenue is primarily derived from: (1) time and material contracts (representing approximately 99% of total revenues), and (2) short-term fixed-fee contracts or "not to exceed" contracts (representing approximately 1% of total revenues). Time and material contracts are typically based on the number of hours worked at contractually agreed upon rates. These service contracts relate to work which has no alternative use and for which the Company has an enforceable right to payment for the work completed to date. As a result, revenue is recognized over time when or as the Company transfers control of the promised products or services (known as performance obligations) to its customers. Revenue for short term fixed fee contracts or “not to exceed” contracts is recognized similarly, except that certain milestones also have to be reached before revenue is recognized. If the Company determines that a contract will result in a loss, the Company recognizes the estimated loss in the period in which such a determination is made.

Cash Equivalents

For purposes of the consolidated statements of cash flows, cash equivalents include investments in a money market obligations trust that is registered under the U.S. Investment Company Act of 1940, as amended, and liquid investments, including US Treasury securities, with original maturities of three months or less.

Accounts Receivable

Accounts receivable are reported net of an allowance for credit losses. The Company maintains an allowance for credit losses to provide for estimated amounts of receivables that will not be collected. This estimation is based on historical collection experience, the age of the receivables, an assessment of the creditworthiness of customers, and current economic conditions. The allowance for credit losses is subject to estimation uncertainty. If actual future uncollectible amounts differ from estimates, future provisions for credit losses may be affected. The allowance is increased by provisions charged to credit loss expense and reduced by charge-offs of uncollectible accounts. As of July 31, 2024 and October 31, 2023, the allowance for credit losses was approximately $5.3 million, and there were no charges to expense or charge-offs of uncollectible accounts during the nine months ended July 31, 2024 and the year ended October 31, 2023. The existing allowance is mostly related to an account that is being litigated, which was fully allowed in 2021.

Income Taxes

The Company follows an asset and liability approach method of accounting for income taxes. This method measures deferred income taxes by applying enacted statutory rates in effect at the balance sheet date to the differences between the tax basis of assets and liabilities and their reported amounts on the financial statements. The resulting deferred tax assets or liabilities are adjusted to reflect changes in tax laws as they occur. A valuation allowance is provided when it is more likely than not that a deferred tax asset will not be realized.

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The Company follows guidance from the Financial Accounting Standards Board (“FASB”) related to Accounting for Uncertainty in Income Taxes, which includes a two-step approach to recognizing, de-recognizing and measuring uncertain tax positions. As of July 31, 2024, the Company had no significant uncertain tax positions that would be reduced as a result of a lapse of the applicable statute of limitations.

Leases

The Company follows accounting standards issued by the FASB for the accounting and disclosure of leases. Under those standards, assets and liabilities that arise from leases are recognized on the balance sheet, and the leases are categorized at their inception as either operating or finance leases.

Operating lease right-of-use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments under the lease. Lease recognition occurs at the commencement date, and lease liability amounts are based on the present value of lease payments made during the lease term, based on a discount rate of 8%.

Property and Equipment

Owned property and equipment are stated at cost. Depreciation of owned assets are provided for, when placed in service, in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives, using straight-line basis. Expenditures for repairs and maintenance are expensed when incurred. As of July 31, 2024 and October 31, 2023, the accumulated depreciation amounted to $654,960 and $635,009, respectively.

Impairment of Long-Lived Assets

The Company evaluates for impairment its long-lived assets to be held and used, and long-lived assets to be disposed of, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Based on management estimates, no impairment of the long-lived assets was present as of July 31, 2024 and October 31, 2023.

Stock-based Compensation

Stock-based compensation expense is recognized in the consolidated financial statements based on the fair value of the awards granted. Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which represents the vesting period, and includes an estimate of awards that will be forfeited. The Company calculates the fair value of stock options using the Black-Scholes option-pricing model at the grant date, while for restricted stock units the fair market value of the units is determined by the Company’s share market value at grant date. Excess tax benefits related to stock-based compensation are reflected as cash flows from financing activities rather than cash flows from operating activities. The Company has not recognized such cash flows from financing activities since there has been no tax benefit related to the stock-based compensation.

Earnings (Loss) Per Share of Common Stock

Basic earnings (loss) per share of common stock is calculated by dividing net earnings (loss) by the weighted average number of shares of common stock outstanding. Diluted earnings (loss) per share includes the dilution of common stock equivalents, which include principally shares that may be issued upon the exercise of warrants, stock option and restricted stock unit awards.

The diluted weighted average shares of common stock outstanding were calculated using the treasury stock method for the respective periods.

Foreign Operations

The functional currency of the Company’s foreign subsidiaries is its local currency. The assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars at exchange rates in effect at the balance sheet date. Income and expense items are translated at the average exchange rates prevailing during the period. The cumulative translation effect for subsidiaries using a functional currency other than the U.S. dollar is included as a cumulative translation adjustment in stockholders’ equity and as a component of comprehensive income (loss).

The Company’s intercompany accounts are typically denominated in the functional currency of the foreign subsidiary. Gains and losses resulting from the remeasurement of intercompany receivables that the Company considers to be of a long-term investment nature are recorded as a cumulative translation adjustment in stockholders’ equity and as a component of comprehensive income (loss), while gains and losses resulting from the remeasurement of intercompany receivables from those international subsidiaries for which the Company anticipates settlement in the foreseeable future are recorded in the consolidated statements of operations.

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Subsequent Events

The Company has evaluated subsequent events through the filing date of this report. The Company has determined that there are no events occurring in this period that require disclosure or adjustment.

Reclassifications

Certain reclassifications have been made to the July 31, 2023 condensed consolidated financial statements to conform them to the July 31, 2024 condensed consolidated financial statements presentation. Such reclassifications do not affect net income as previously reported.

Recent Accounting Pronouncements

The FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses, “Topic 326”, an amendment on measurement of credit losses on financial assets held by at each reporting date. The guidance requires the use of a new current expected credit loss (CECL) model in estimating allowances for doubtful accounts with respect to accounts receivable. The CECL model requires that the Company estimate its lifetime expected credit loss with respect to these receivables and record allowances that, when deducted from the balance of the receivables, represent the estimated net amounts expected to be collected. Effective January 1, 2023, the Company adopted ASU No. 2016-13 and the adoption of this standard did not have a significant impact on the Company's financial statements.

Recent accounting pronouncements pending adoption not discussed above or in the Form 10-K for the year ended October 31, 2023, are either not applicable or will not have or are not expected to have a material impact on the Company.

NOTE B – MARKETABLE SECURITIES

Marketable securities consist of short-term U.S. Treasury securities with maturities over three months, which are held until maturity and accordingly, are measured at cost plus accreted interest income.

NOTE C - INCOME TAXES

On December 22, 2017, Public Law 115-97, commonly known as the Tax Cuts and Jobs Act of 2017 (the “Tax Reform”), was enacted. The Tax Reform imposed a mandatory one-time transition tax (the “Transition Tax”) over foreign subsidiaries undistributed earnings and profits (“E&Ps”) earned prior to a date set by the statute. Based on the Company’s E&Ps, the Transition Tax was determined to be approximately $2.7 million. The Transition Tax liability must be paid over a period of eight years which started with the Company’s second quarter of fiscal year 2019. In the past, most of these E&Ps were not repatriated since such E&Ps were considered to be reinvested indefinitely in the foreign location, therefore no US tax liability was incurred unless the E&Ps were repatriated as a dividend. After December 31, 2017, the Tax Reform has established a 100% tax exemption on the foreign-source portion of dividends received attributable to E&Ps, with certain limitations. However, foreign subsidiaries earnings are subject to U.S. tax at a reduced rate of 10.5%.

In June 2011, Pharma-Bio, Pharma-PR and Pharma-Serv obtained a Grant of Industrial Tax Exemption pursuant to the terms and conditions set forth in Act No. 73 of May 28, 2008 (“the Grant”) issued by the Puerto Rico Industrial Development Company (“PRIDCO”). The Grant was effective as of November 1, 2009, and covers a fifteen-year period. The Grant provides relief on various Puerto Rico taxes, including income tax, with certain limitations, for most of the activities carried within Puerto Rico, including those that are for services to parties located outside of Puerto Rico. Industrial Development Income (“IDI”) covered under the Grant are subject to a fixed income tax rate of 4%. In addition, IDI earnings distributions accumulated since November 1, 2009 are exempt from Puerto Rico earnings distribution tax. Under provisions of Puerto Rico Acts 60-2019 and 73-2008, the Company has requested PRIDCO the renegotiation of the Grant for an additional term of fifteen years.

Puerto Rico operations not covered in the exempt activities of the Grant are subject to Puerto Rico income tax at a maximum tax rate of 37.5% as provided by the 1994 Puerto Rico Internal Revenue Code, as amended. The operations carried in the United States by the Company’s subsidiaries, is taxed in the United States at a maximum regular federal income tax rate of 21%. The Spanish subsidiary operations in Spain are taxed at a regular income tax rate of 25%.

Deferred income tax assets and liabilities are computed for differences between the consolidated financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Realization of future tax benefits related to a deferred tax asset is dependent on many factors. Accordingly, the income tax benefit will be recognized when realization is determined to be more probable than not.

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The Company files income tax returns in the United States (federal and various states jurisdictions), Puerto Rico, Spain and Brazil. The 2019 (2018 for Puerto Rico) through 2023 tax years are open and may be subject to potential examination in one or more jurisdictions. Currently, the Company has no federal, state, Puerto Rico or foreign income tax examination.

NOTE D – EARNINGS (LOSS) PER SHARE

The following data shows the amounts used in the calculations of basic and diluted earnings (losses) per share.

	Three months ended July 31,					Nine months ended July 31,
	2024			2023		2024			2023
Net income (loss) available to common equity holders - used to compute basic and diluted earnings per share	$	(309,194	)	$	526,242	$	(793,730	)	$	1,357,328

Weighted average number of common shares - used to compute basic earnings per share		22,961,534			22,965,496		22,964,239			22,962,113
Effect of options to purchase common stock		-			19,062		13,015			29,259
Weighted average number of shares - used to compute diluted earnings per share		22,961,534			22,984,558		22,977,254			22,991,372

For the three-month and nine-month periods ended July 31, 2024, options for the purchase of 393,350 and 213,350 shares of common stock, respectively, and options for the purchase of 223,350 shares of common stock for the three-month and nine-month periods ended July 31, 2023, were not considered in computing diluted earnings (loss) per share because their effect was antidilutive.

NOTE E – EQUITY TRANSACTIONS

On June 13, 2014, the Board of Directors of the Company authorized the Company to repurchase up to two million shares of its outstanding common stock under the Company Stock Repurchase Program (the “Repurchase Program”). The timing, manner, price and amount of any repurchases under the Repurchase Program will be at the discretion of the Company, subject to the requirements of the Securities Exchange Act of 1934, as amended, and related rules ("Exchange Act Rules"). The Repurchase Program does not oblige the Company to repurchase any shares and it may be modified, suspended or terminated at any time and for any reason. No shares will be repurchased under the Repurchase Program directly from directors or officers of the Company. As of July 31, 2024 and October 31, 2023, a total of 498,557 and 486,457 shares of the Company’s common stock were purchased under the Repurchase Program for an aggregate amount of $484,871 and $473,608, respectively.

On December 15, 2023, the Board of Directors of the Company declared a cash dividend of $0.075 per common share for shareholders of record as of the close of business on January 30, 2024. Accordingly, an aggregate dividend payment of $1,722,236 was paid on February 15, 2024.

NOTE F - SEGMENT DISCLOSURES

The Company’s segments are based on the organizational structure for which financial results are regularly evaluated by the Company’s chief operating decision maker to determine resource allocation and assess performance. Each reportable segment is managed by its own management team and reports to executive management. The Company has three reportable segments: (i) Puerto Rico technical compliance consulting, (ii) United States technical compliance consulting, and (iii) Europe technical compliance consulting. These reportable segments provide services primarily to the pharmaceutical, chemical, medical device and biotechnology industries in their respective markets.

The following table presents information about the reported revenue from services and income (loss) from operations of the Company for the three-month and nine-month periods ended on July 31, 2024 and 2023. There is no intersegment revenue for the mentioned periods. Corporate expenses that support the operating units have been allocated to the segments. Asset information by reportable segment is not presented, since the Company does not produce such information internally, nor does it use such data to manage its business.

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	Three months ended July 31,						Nine months ended July 31,
	2024			2023			2024			2023
REVENUES:
Puerto Rico consulting	$	1,454,200		$	2,004,993		$	4,307,471		$	6,135,456
United States consulting		737,275			1,234,509			2,422,716			3,504,031
Europe consulting		224,360			1,337,665			360,001			3,732,944
Other		2,328			-			85,779			6,234
Total consolidated revenues	$	2,418,163		$	4,577,167		$	7,175,967		$	13,378,665

INCOME (LOSS) FROM OPERATIONS:
Puerto Rico consulting	$	(132,158	)	$	102,584		$	(429,713	)	$	146,719
United States consulting		(196,665	)		85,079			(479,396	)		163,388
Europe consulting		(48,239	)		281,030			(230,839	)		898,624
Other		(4,720	)		(8,227	)		6,491			(39,555	)
Total consolidated income (loss) from operations		(381,782	)		460,466			(1,133,457	)		1,169,176
OTHER INCOME, NET		91,592			126,985			392,858			566,146
Total consolidated income (loss) before income tax	$	(290,190	)	$	587,451		$	(740,599	)	$	1,735,322

Long lived assets (property and equipment) as of July 31, 2024 and October 31, 2023, and related depreciation and amortization expense for the three and nine months ended July 31, 2024 and 2023, were concentrated in the corporate headquarters in Puerto Rico. Accordingly, depreciation expense and acquisition of property and equipment, as presented in the consolidated statements of cash flows are related to the corporate headquarters. Certain reclassifications were made to the income (loss) from operations segment information for the three and nine months ended July 31, 2023 to conform them to the July 31, 2024 presentation. These reclassifications are aimed to improve the cost allocations based on actual facts and circumstances, and do not affect total consolidated income (loss) before income tax as previously reported.

NOTE G - CONCENTRATIONS OF RISK

Cash and Cash Equivalents, and Marketable Securities

As of July 31, 2024, the Company’s domestic cash and cash equivalents consist of cash deposits in FDIC-insured banks and money market mutual funds registered under the US Investment Company Act of 1940, as amended, and U.S. Treasury securities with maturities of 90 days or less. In the foreign markets we serve, we also maintain cash deposits in foreign banks, which have no specific insurance. As of July 31, 2024, uninsured foreign bank balances are approximately $0.5 million. No significant losses have been experienced or are expected on any of the cash or cash equivalents.

The Company’s marketable securities consist of low-risk U.S. Treasury securities whose maturities are 91 days to one year.

Accounts receivable and revenues

The Company's revenues, and the related receivables, are concentrated in the pharmaceutical industry in Puerto Rico, the United States, Europe and Brazil. Although a few customers represent a significant source of revenue, the Company’s functions are not a continuous process, accordingly, the client base for which the services are typically rendered, on a project-by-project basis, changes regularly.

The Company provided a substantial portion of its services to four customers, which accounted for 10% or more of its revenues in either of the three-month and nine-month periods ended July 31, 2024 and 2023. During the three months ended July 31, 2024, revenues from these customers were 18.1%, 15.9%, 1.9% and 0.0%, or a total of 35.9%, as compared to the same period last year of 11.0%, 8.4%, 23.9% and 14.7%, or a total of 58.0%, respectively. During the nine months ended July 31, 2024, revenues from these customers were 18.9%, 15.9%, 0.6% and 0.0%, or a total of 35.4%, as compared to the same period last year of 11.5%, 9.2%, 14.9% and 11.2%, or a total of 46.8%, respectively. For the three months ended July 31, 2024 and 2023, these customers represented for the Puerto Rico, United States and Europe consulting reportable segments 18.1%, 15.9% and 1.9%, as compared to 11.0%, 8.4% and 38.6%, respectively. For the nine months ended July 31, 2024 and 2023, these customers represented for the Puerto Rico, United States and Europe consulting reportable segments 18.9%, 15.9% and 0.6%, as compared to 11.5%, 9.2% and 26.1%, respectively. On July 31, 2024, amounts due from these customers represented 31.4% of the Company’s total accounts receivable balance. This customer information is based on revenues earned from said customers at the segment level because in management’s opinion contracts by segments are totally independent of each other, and therefore such information is more meaningful to the reader.

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At the global level, four global groups of affiliated companies accounted for 10% or more of its revenues in either of the three-month and nine-month periods ended July 31, 2024 and 2023. During the three months ended July 31, 2024, aggregate revenues from these global groups of affiliated companies were 18.1%, 17.8%, 1.9% and 0.0%, or a total of 37.8%, as compared to the same period last year for 11.0%, 9.9%, 23.9% and 14.7%, or a total of 59.5%, respectively. During the nine months ended July 31, 2024, aggregate revenues from these global group of affiliated companies were 18.9%, 18.3%, 0.6% and 0.0%, or a total of 37.8%, as compared to the same period last year for 11.5%, 11.3%, 14.9% and 11.2%, or a total of 48.9%, respectively. For the three months ended July 31, 2024 and 2023, these customers represented for the Puerto Rico, United States and Europe consulting reportable segments 20.0%, 15.9% and 1.9%, as compared to 12.5%, 8.4% and 38.6%, respectively. For the nine months ended July 31, 2024 and 2023, these customers represented for the Puerto Rico, United States and Europe consulting reportable segments 21.3%, 15.9% and 0.6%, as compared to 13.6%, 9.2% and 26.1%, respectively. At July 31, 2024, amounts due from these global groups of affiliated companies represented 33.2% of total accounts receivable balance.

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ITEM 2. 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, 2023. 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, 2023, our Quarterly Report on Form 10-Q for the quarters ended January 31, 2024 and April 30, 2024, 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, Europe and the Brazil markets. 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 in Puerto Rico, the United States, Europe and Brazil. 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 a number of markets. We intend to further penetrate these markets by strengthening our business development infrastructure and by constantly realigning our business strategies as new opportunities and challenges arise. Furthermore, for fiscal year 2024, we continued to invest in additional business development resources and data research and automation marketing tools to take advantage of significant opportunities in underserved markets. We believe these investments will further develop our business strategy, minimize occasional revenue fluctuations, and deliver on our commitment of delivering premium quality and professional consulting services in the markets that need our knowledge, expertise, and skills.

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 holds a tax grant issued by PRIDCO, which provides relief on various Puerto Rico taxes, including income tax, with certain limitations, for most of the activities carried on 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 covers a fifteen-year period, ending on October 31, 2024. Under 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 from PRIDCO for this request, accordingly, 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.

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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, 2024 and 2023, 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:	2024				2023				2024				2023
Puerto Rico	$	1,454	60.1	%	$	2,005	43.8	%	$	4,307	60.0	%	$	6,135	45.9	%
United States		737	30.5	%		1,234	27.0	%		2,423	33.8	%		3,504	26.2	%
Europe		224	9.3	%		1,338	29.2	%		360	5.0	%		3,733	27.9	%
Other		2	0.1	%		-	0.0	%		86	1.2	%		6	0.0	%
	$	2,418	100.0	%	$	4,577	100.0	%	$	7,176	100.0	%	$	13,378	100.0	%

For the nine-month period ended July 31, 2024, the Company’s total revenues were approximately $7.2 million, a net decrease of approximately $6.2 million when compared to the same period last year. The European, Puerto Rico and United States consulting markets had a decline in projects revenue of approximately $3.3, $1.8 and $1.1 million, respectively. As depicted below, when compared to the same period last year, gross profit decreased by 6.0 percentage points. The net decline in gross profit percentage points is mainly attributable to the closure in fiscal year 2023 of high margin yielding projects within the European market.

Regional or global conflicts, including war or economic sanctions between nations, price inflation, pandemics, 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.

Results of Operations

The following table sets forth our statements of operations for the three-month and nine-month periods ended July 31, 2024 and 2023 (dollars in thousands, and as a percentage of revenues):

	Three months ended July 31,									Nine months ended July 31,
	2024					2023				2024					2023
Revenues	$	2,418		100.0	%	$	4,577	100.0	%	$	7,176		100.0	%	$	13,378	100.0	%
Cost of services		1,783		73.7	%		3,027	66.1	%		5,387		75.1	%		9,242	69.1	%
Gross profit		635		26.3	%		1,550	33.9	%		1,789		24.9	%		4,136	30.9	%
Selling, general and administrative expenses		1,017		42.1	%		1,090	23.8	%		2,923		40.7	%		2,967	22.2	%
Other income, net		92		3.8	%		127	2.7	%		393		5.5	%		566	4.2	%
Income (loss) before income tax		(290	)	(12.0	)%		587	12.8	%		(741	)	(10.3	)%		1,735	12.9	%
Income tax expense		19		0.8	%		61	1.3	%		53		0.7	%		378	2.8	%
Net income (loss)		(309	)	(12.8	)%		526	11.5	%		(794	)	(11.0	)%		1,357	10.1	%

Revenues. Revenues for the three and nine months ended July 31, 2024 were $2.4 and $7.2 million, respectively. For the three and nine months ended July 31, 2024, this represents a net decrease of approximately $2.2 and $6.2 million when compared to the same periods last year, respectively. For the three months ended July 31, 2024 the European, Puerto Rico and United States consulting markets had a decline in projects revenue of approximately $1.1, $0.6 and $0.5 million, respectively, while for the nine months ended July 31, 2024 the decline was approximately $3.3, $1.8 and $1.1 million, respectively.

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Cost of Services; Gross Profit. Cost of services for the three and nine months ended July 31, 2024 were $1.8 and $5.4 million, respectively, a decrease of $1.2 and $3.9 million, when compared to the same periods last year, respectively. Gross profit for the three and nine months ended July 31, 2024, when compared to the same periods last year, declined by 7.6 and 6.0 percentage points, respectively. The net decline in gross profit percentage points is mainly attributable to the closure in fiscal year 2023 of high margin yielding projects within the European market.

Selling, General and Administrative Expenses. Selling, general and administrative expenses for the three and nine months ended July 31, 2024 were approximately $1.0 and $2.9 million, respectively, representing no material change when compared to the same periods last year. However, the Company has made investments in business development human capital and industry activities aimed to achieve growth in targeted markets. These investments were funded with expense savings within this caption area.

Other Income, Net. Other income, net for the three and nine months ended July 31, 2024 was approximately $0.1 and $0.4 million, respectively. These balances are mostly attributable to interest income, partially offset by a negligible amount in the settlement of foreign exchange rates on intercompany balances.

Net Income (Loss). Net loss for the three and nine months ended July 31, 2024 was approximately $0.3 and $0.8 million, respectively, an earnings decline of approximately $0.8 and $2.2 million when compared to the same periods last year, respectively.

For the three and nine months ended July 31, 2024, net loss per common share for both basic and diluted were $0.014 and $0.035, respectively, a decrease of $0.037 and $0.094 per share when compared to the same periods last year, respectively.

Liquidity and Capital Resources

Liquidity is a measure of our ability to meet potential cash requirements, including planned capital expenditures. As of July 31, 2024, the Company had approximately $14.0 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, 2024, the Company repurchased 12,100 shares of its common stock. As of July 31, 2024, the Company has 1,501,443 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.

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, 2024.

Critical Accounting Policies and Estimates

There were no material changes during the nine months ended July 31, 2024 to the critical accounting policies reported in our Annual Report on Form 10-K for the fiscal year ended October 31, 2023.

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, 2023, which could have a significant effect on our condensed consolidated financial statements.

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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, 2023, our Quarterly Reports on Form 10-Q for the quarters ended January 31, 2024 and April 30, 2024, 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, 2023, our Quarterly Reports on Form 10-Q for the quarters ended January 31, 2024 and April 30, 2024, and this Quarterly Report on Form 10-Q.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that 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 Quarterly Report on Form 10-Q.

Changes in Internal Control Over Financial Reporting

Based on an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, there has been no change in our internal control over financial reporting during our last fiscal quarter identified in connection with that evaluation that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II– OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

From time to time, we may be a party to legal proceedings incidental to our business. Currently, there are no proceedings threatened or pending against us, which, if determined adversely to us, would have a material effect on our financial position or results of operations and cash flows.

On March 15, 2023, the Company’s subsidiaries Pharma-Bio Serv PR, Inc., Pharma Serv, Inc. and Scienza Labs, Inc., filed a complaint against Romark Global Pharma, LLC, Romark Properties, LLC, Romark Biosciences, LLC and Romark Holdings, LLC (collectively, “Romark”) with the Commonwealth of Puerto Rico Court of First Instance San Juan Superior Section. The complaint sets forth a breach of contract by Romark for lack of payment of $5,246,782 for services rendered by the Company’s subsidiaries, plus interest pursuant to the specific terms of the agreements signed between the parties. On April 26, 2023, the Company’s subsidiaries requested from the Court an entry of default against Romark for the full amount owed to the Company’s subsidiaries. On April 27, 2023, the Court granted such request and made the entry of default against Romark, which default was granted following Romark’s failure to timely answer the complaint. On November 7^th, 2023 the Company’s subsidiaries filed a motion requesting the entry of summary judgment. On November 13, 2023, a judgment was entered by the Court ordering Romark to pay jointly all monetary amounts claimed by the Company’s subsidiaries, plus interests to be counted from the judgment date at an annual rate of 9.25%. The Company’s subsidiaries will continue to pursue the collection from Romark. However, we cannot guarantee a successful outcome in collecting any of the funds owed to the Company’s subsidiaries. No further losses are expected to be incurred in relation to this matter.

ITEM 1A. RISK FACTORS.

There have been no material changes to the risk factors included in our Annual Report on Form 10-K for the year ended October 31, 2023.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

(c) The following table provides information about purchases by the Company of its shares of common stock during the three-month period ended July 31, 2024:

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ⁽¹⁾		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs ⁽¹⁾
May 1, 2024 through May 31, 2024		500	$	0.70		500		1,503,443
June 1, 2024 through June 30, 2024		2,000	$	0.70		2,000		1,501,443
July 1, 2024 through July 31, 2024		-	$	-		-		1,501,443
Total		2,500	$	0.70		2,500

(1)

On June 16, 2014, the Company announced that the Board of Directors of the Company approved the Repurchase Program authorizing the Company to repurchase up to two million shares of its outstanding common stock. The timing, manner, price and amount of any repurchases under the Repurchase Program will be at the discretion of the Company, subject to the requirements of the Exchange Act Rules. The Repurchase Program does not oblige the Company to repurchase any shares and it may be modified, suspended or terminated at any time and for any reason. The Repurchase Program has no expiration date. No shares will be repurchased under the Repurchase Program directly from directors or officers of the Company.

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ITEM 6. EXHIBITS.

(a) Exhibits:

10.1+		Amendment to Pharma-Bio Serv, Inc. 2014 Long-Term Incentive Plan. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 2, 2024, and incorporated herein by reference).

31.1		Certification of chief executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of chief financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of the chief executive officer and chief financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema

101.CAL		XBRL Taxonomy Extension Calculation Linkbase

101.DEF		XBRL Taxonomy Extension Definition Linkbase

101.LAB		XBRL Taxonomy Extension Label Linkbase

101.PRE		XBRL Taxonomy Extension Presentation Linkbase

104		Cover page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

———————

*	Furnished herewith.
+	Management Compensatory Plan

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	PHARMA-BIO SERV, INC.

	/s/ Victor Sanchez
	Victor Sanchez
	Chief Executive Officer and President Europe Operations
	(Principal Executive Officer)

	/s/ Pedro J. Lasanta
	Pedro J. Lasanta
	Chief Financial Officer, Vice President Finance and Administration, and Secretary
	(Principal Financial Officer and Principal Accounting Officer)

Dated: September 16, 2024

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Pharma-Bio Serv (PBSV) 10-Q2024 Q3 Quarterly report

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