Net Sales/Revenues
For the three month period ending October 31, 2019 ("2nd Quarter"), the net
sales decreased 4.91%, or $16,126, and decreased 2.66%, or $17,173, during the
six month period ending October 31, 2019, as compared to net sales for the
comparative periods ending in 2018. This decrease in sales is primarily the
result of a decrease in the sales of HemoTemp®, HemoTemp®II and TempTrend®
products. As of October 31, 2019, the Company had no back orders.
In addition to the above, the Company had $630 and $1,260 of other miscellaneous
revenues primarily from interest income and leasing a portion of its storage
space to a third party during the three and the six month periods ending October
31, 2019, respectively.
Costs and Expenses
General
The operating expenses of the Company during the 2nd Quarter decreased overall
by 2.26%, or $4,172, and decreased by 1.53%, or $5,901, for the six month period
ending October 31, 2019, as compared to the same periods ending in 2018. The
decrease during the 2ndQuarter and for the six month period ending October 31,
2019 was due to a decrease in legal and advertising fees.
Cost of Sales
The overall cost of sales during the 2nd Quarter increased by $668 and increased
by $3,928 during the six month period ending October 31, 2019 as compared to the
same periods ending in 2018. For the six months ended October 31, 2019, the
increase was due to higher employee costs and higher raw material costs. As a
percentage of sales, the cost of sales were 34.76% during the 2nd Quarter and
32.85% for the comparative quarter ending in 2018; and 34.29% during the six
month period ending October 31, 2019 compared to 32.77% in 2018. It is not
anticipated that the cost of sales as a percentage of sales will materially
change in the near future.
Research and Development Expenses
Research and Development costs increased $264, or .68%, during the 2nd Quarter
as compared to the same quarter in 2018. These costs increased by $3,265, or
4.31%, during the six month period ending October 31, 2019 as compared to the
same period in 2018. This increase was primarily due to higher employee costs.
Marketing Expenses
Marketing expenses for the 2nd Quarter decreased by $4,499, or 9.32%, as
compared to the quarter ending October 31, 2018 and decreased by $2,405 or
2.56%, during the six month period ending October 31, 2019 compared to the
six-month period ending October 31, 2018. The change in marketing expenses for
the six-month period ending October 31, 2019 compared to the six-month period
ending October 31, 2018 was primarily due to lower advertising fees and lower
health insurance costs.
General and Administrative Expenses
General and administrative costs increased by $63, or .06%, in the 2nd Quarter,
and decreased by $6,761, or 3.15%, during the six month period ending October
31, 2019, as compared to the same periods in 2018. This overall decrease for the
six months ending October 31, 2019 was due primarily to lower legal fees and a
decrease in healthcare costs. Except for unforeseen items and ordinary cost
increases, it is unlikely general and administrative expenses will materially
change during the remainder of Fiscal 2020.
Net Income
The Company realized a net income of $16,990 during the 2nd Quarter as compared
to a net income of $25,997 for the comparative quarter in the prior year. The
Company also realized a net income of $25,568 for the six month period ending
October 31, 2019 as compared to a net income of $36,376 during the same period
in 2018. The decrease in net income is a result of decreased net sales for the
six month period ending October 31, 2019.
Assets /Liabilities
General
Since April 30, 2019, the Company's assets have decreased by $37,878 and
liabilities have decreased by $63,446. The overall decrease in assets and
liabilities is primarily due to the changes in the accounting treatment for
leases, which include amortization of the right of use asset and payments
against the lease liability.
Related Party Transactions
The Company was owed $19,699 by F.K. Suzuki International, Inc. ("FKSI"), an
affiliate, at October 31, 2019 and April 30, 2019. This account primarily
represents common expenses which were previously charged by the Company to FKSI
for reimbursement. No interest is received or accrued by the Company.
Collectability of the amounts due from FKSI cannot be assured without the
liquidation of all or a portion of its assets, including a portion of its common
stock of the Company. As a result, the amount owed by FKSI to the Company is
classified as a reduction of FKSI's capital in the Company.
A board member provides a variety of legal services to the Company in his
capacity as a partner in a law firm. Fees for such legal services were
approximately $7,585 and $14,811 for the six months ended October 31, 2019 and
2018, respectively.
Current Assets/Liabilities Ratio
The ratio of current assets to current liabilities, 17.9 to 1, has increased
compared to 10.5 to 1 at April 30, 2019, primarily due to higher cash balances
and lower accrued liabilities and lower operating lease liability. The Company
anticipates the ratio of current assets to current liabilities will remain
substantially at its current level as a result of the change in accounting
methods, subject to other normal fluctuations. In order to maintain or improve
the Company's asset/liabilities ratio, the Company's operations must remain
profitable.
Liquidity and Capital Resources
During the six month period ending October 31, 2019, the Company experienced an
increase in working capital of $79,777. This was primarily due to higher cash
balances and lower accrued liabilities and lower operating lease liability.
The Company has attempted to conserve working capital whenever possible. To this
end, the Company attempts to keep inventory at minimum levels. The Company
believes that it will be able to maintain adequate inventory to supply its
customers on a timely basis by careful planning and forecasting demand for its
products. However, the Company is nevertheless required to carry a minimum
amount of inventory to meet the delivery requirements of customers and thus,
inventory represents a substantial portion of the Company's investment in
current assets.
The Company presently grants payment terms to customers and dealers. Although
the Company experiences varying collection periods of its account receivable,
the Company believes that uncollectable accounts receivable will not have a
significant effect on future liquidity.
The cash provided by operating activities was $44,045 during the six month
period ending October 31, 2019. There was no cash used in investing activities.
Except for its operating capital, limited equipment purchases and patent
prosecution costs, management is not aware of any other material capital
requirements or material contingencies for which it must provide. There were no
cash flows from financing or investing activities during the six month period
ending October 31, 2019.
As of October 31, 2019, the Company had $1,663,155 of current assets available.
Of this amount, $39,836 was prepaid expenses, $156,959 was inventory, $242,190
was net trade receivables and $1,224,170 was cash. The Company's available cash
and cash flow are considered adequate to fund the short-term capital needs of
the Company. The Company does not have a working line of credit, and does not
anticipate obtaining a working line of credit in the near future. Thus there is
a risk additional financing may be necessary to fund long-term capital needs of
the Company, although there is no such currently known long-term capital needs
other than operations.
Effects of Inflation. With the exception of inventory, labor costs and product
sales prices increasing with inflation, inflation has not had a material effect
on the Company's revenues and income from continuing operations in the past
three years. Inflation is not expected to have a material effect in the
foreseeable future.
Critical Accounting Policies and Estimates. On December 12, 2001, the SEC issued
FR-60 "Cautionary Advice Regarding Disclosure About Critical Accounting
Policies." FR-60 is an intermediate step to alert companies to the need for
greater investor awareness of the sensitivity of financial statements to the
methods, assumptions, and estimates underlying their preparation, including the
judgments and uncertainties affecting the application of those policies and the
likelihood that materially different amounts would be reported under different
conditions or using different assumptions.
The Company's significant accounting policies are disclosed in Note 2 to the
Financial Statements for the 2nd Quarter. See "Financial Statements." Except as
noted below, the impact on the Company's financial position or results of
operation would not have been materially different had the Company reported
under different conditions or used different assumptions. The policies which may
have materially affected the financial position and results of operations of the
Company if such information had been reported under different circumstances or
assumptions are: none.
Use of Estimates. Preparation of financial statements and 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 as of the date of the Financial Statements and the reported amounts
of revenues and expenses during the reporting period. The financial condition of
the Company and results of operations may differ from the estimates and
assumptions made by management in preparation of the Financial Statements
accompanying this report.
Allowance for Bad Debts. The Company periodically performs credit evaluations of
its customers and generally does not require collateral to support amounts due
from the sale of its products. The Company maintains an allowance for doubtful
accounts based on its best estimate of accounts receivable.
Forward-Looking Statements
This report may contain statements which, to the extent they are not recitations
of historical fact, constitute "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Such
forward-looking statements involve risks and uncertainties. Actual results may
differ materially from such forward-looking statements for reasons including,
but not limited to, changes to and developments in the legislative and
regulatory environments effecting the Company's business, the impact of
competitive products and services, changes in the medical and laboratory
industries caused by various factors, risks inherit in marketing new products,
as well as other factors as set forth in this report. Thus, such forward-looking
statements should not be relied upon to indicate the actual results which might
be obtained by the Company. No representation or warranty of any kind is given
with respect to the accuracy of such forward-looking information. The
forward-looking information has been prepared by the management of the Company
and has not been reviewed or compiled by independent public accountants.
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