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 appearing in our Annual Report on Form 10-K for the year ended October 31, 2020. 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 in our Annual Report on Form 10-K for the year ended October 31, 2020.

Overview

We are a compliance and technology transfer services consulting firm with headquarters in Puerto Rico, servicing the Puerto Rico, United States, Europe and 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 Puerto Rico, the United States, Europe and 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 holds a tax grant issued by the Puerto Rico Industrial Development Company ("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 following table sets forth information as to our revenue for the three-month and six-month periods ended April 30, 2021 and 2020, by geographic regions (dollars in thousands).




                     Three months ended April 30,        Six months ended April 30,


                    2021              2020               2021              2020
Revenues by Region:
Puerto Rico          $3,745   74.3%    $5,117   90.6%    $7,112   74.6%    $9,298    90.6%
United States        477      9.4%     395      7.0%     924      9.7%     784       7.7%
Europe               675      13.4%    134      2.4%     1,205    12.7%    156       1.5%
Brazil               145      2.9%     2        0.0%     289      3.0%     23        0.2%
                     $5,042   100.0%   $5,648   100.0%   $9,530   100.0%   $10,261   100.0%

For the six-month period ended April 30, 2021, the Company's total revenues were approximately $9,530,000, a net decrease of approximately $731,000 when compared to the same period last year. The Puerto Rico consulting market had a revenue decrease in projects of approximately $2,186,000, which was partially offset by the increase in projects revenue in Europe, Brazil and the US markets of approximately $1,049,000, $266,000 and $140,000, respectively. When compared to the same period last year, gross margin decreased by 6.4 percentage points. The net decrease in gross margin percentage points is mainly attributable to some projects in the Puerto Rico market for the six-month period ended April 30, 2020, for which the gross margin was higher than usual. Selling, general and administrative expenses were approximately $2,022,000, a decrease of approximately $176,000.The net decrease is mainly attributable to the decrease of consulting fees and other administrative expenses for approximately $195,000 and $78,000, respectively, partially offset by an increase in non-recurring legal fees for approximately $97,000. Other income declined by approximately $71,000, mainly due to the decline in interest income because of lower interest rates. These factors resulted in a net income of approximately $508,000 for the six-month period ended April 30, 2021, or a decrease of approximately $706,000 when compared to the same period last year.




                                      -14-

While we have not identified any material adverse effect resulting from the coronavirus (COVID-19) pandemic, we continue to actively monitor the pandemic and any potential future impact it may have on our business and results of operations. The extent to which our operations will be impacted by the pandemic will depend largely on unknown developments which are highly uncertain and cannot be accurately predicted, including new information which may emerge concerning our customers, the severity of the pandemic and actions by government authorities to contain the outbreak or treat its impact, among other things.

The coronavirus pandemic, the Puerto Rico government financial crisis, the Tax Reform, other tax reforms on the markets where we do business, bio-pharmaceutical industry consolidations, trends on managing contract resources, and the Puerto Rico Act 154-2010, 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 the coronavirus pandemic, changes in tax laws, worldwide life science manufacturing industry consolidations, operational constraints imposed by our customers due to the coronavirus pandemic 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 that sets forth our statements of operations for the three-month and six-month periods ended April 30, 2021 and 2020 (dollars in thousands, and as a percentage of revenues):




                 Three months ended April 30,        Six months ended April 30,


                 2021              2020              2021              2020

Revenues          $5,042   100.0%   $5,648   100.0%   $9,530   100.0%   $10,261   100.0%
Cost of
services          3,751    74.4%    3,779    66.9%    6,924    72.7%    6,806     66.3%
Gross profit      1,291    25.6%    1,869    33.1%    2,606    27.3%    3,455     33.7%
Selling, general
and
administrative
expenses          1,026    20.3%    1,149    20.3%    2,022    21.2%    2,198     21.4%
Other income,
net               21       0.4%     49       0.8%     23       0.2%     94        0.9%
Income before
income taxes      286      5.7%     769      13.6%    607      6.3%     1,351     13.2%
Income tax
expense           46       0.9%     81       1.4%     99       1.0%     137       1.4%
Net income        240      4.8%     688      12.2%    508      5.3%     1,214     11.8%

Revenues. Revenues for the three and six months ended April 30, 2021 were $5,042,000 and $9,530,000, respectively, a decrease of approximately $606,000 and $731,000, or 10.7% and 7.1%, respectively, when compared to the same periods last year.

The decrease for the three months ended April 30, 2021, when compared to the same period last year, is mainly attributable to the decrease in projects in the Puerto Rico market of approximately $1,372,000, partially offset by increases in project revenue in Europe, Brazil and US of approximately $541,000, $143,000 and $82,000, respectively.

The decrease for the six months ended in April 30, 2021, when compared to the same period last year, is mainly attributable to a decrease in projects in the Puerto Rico market of approximately $2,186,000, partially offset by increases in project revenue in Europe, Brazil and US of approximately $1,049,000, $266,000 and $140,000, respectively.

Cost of Services; gross profit. Cost of services for the three and six months ended April 30, 2021 were approximately $3,751,000 and $6.924,000, respectively, a decrease of $28,000 and an increase of $118,000, respectively, when compared to the same periods last year. Gross profit for the three and six months ended April 30, 2021 decreased by 7.5 and 6.4 percentage points, respectively, when compared to the same periods last year. The net decrease in gross profit percentage points is mainly attributable to some projects in the Puerto Rico market for the three-month and six-month periods ended April 30, 2020, which the gross profit was higher than usual.

Selling, General and Administrative Expenses. Selling, general and administrative expenses for the three and six months ended April 30, 2021 were approximately $1,026,000 and $2,022,000, respectively, a decrease of approximately $123,000 and $176,000 when compared to the same periods last year, respectively.

The decrease for the three months ended April 30, 2021, when compared to the same period last year, is mainly attributable to the decrease of consulting fees and other administrative expenses for approximately $131,000 and $60,000, respectively, partially offset by an increase in non-recurring legal fees for approximately $68,000.

The decrease for the six months ended April 30, 2021, when compared to the same period last year, is mainly attributable to the decrease of consulting fees and other administrative expenses for approximately $195,000 and $78,000, respectively, partially offset by an increase in non-recurringlegal fees for approximately $97,000.

Other Income, net. For the three-month and six-month periods ended on April 30, 2021, other income, net was approximately $21,000 and $23,000, a net decrease of approximately $28,000 and $71,000 when compared to the same periods last year. The decrease is mainly attributable to the decline in interest income because of lower interest rates.




                                      -15-

Net Income.Net income for the three and six months ended April 30, 2021 was approximately $240,000 and $508,000, a decrease of approximately $448,000 and $706,000 when compared to the same periods last year, respectively. The decline in net income is mostly attributable to the (i) decrease in revenue and related gross profit, (ii) partially offset by net savings on selling, general and administrative expenses, and (iii) decline in interest income, when compared to the same periods last year.

For the three and six months ended April 30, 2021, net income per common share for both basic and diluted were $0.010 and $0.022, a decline of $0.020 and $0.031 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 April 30, 2021, the Company had approximately $23.4 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"). During April 2020, the Company suspended purchases under the Repurchase Program to conserve cash due to the economic uncertainty caused by the coronavirus pandemic. We may resume repurchases in the future; however, we can provide no assurance when we will resume the Repurchase Program. As of April 30, 2021, the Company has 1,658,846 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 Company Stock 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.

To the extent that we pursue possible opportunities to expand our operations, either by acquisition or by the establishment of operations in a new market, we will incur additional overhead, and there may be a delay between the period we commence operations and our generation of net cash flow from operations.

While uncertainties relating to the current local and global economic condition, competition, the industries and geographical regions served by us and other regulatory matters exist within the consulting services industry, as described above, 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, 2021.

Critical Accounting Policies and Estimates

There were no material changes during the six months ended April 30, 2021 to the critical accounting policies reported in our Annual Report on Form 10-K for the fiscal year ended October 31, 2020.

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, 2020, which could have a significant effect on our condensed consolidated financial statements.




                                      -16-


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 the matters discussed below. 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 the following:



?
Any outbreak of contagious diseases, or other adverse public health
developments, could have a material and adverse effect on our business
operations, financial condition and results of operations.
?
Because our business is concentrated in the life science and medical devices
industries in Puerto Rico, the United States, Europe and Brazil, any changes in
those industries or in those markets could impair our ability to generate
revenue and realize a profit.
?
Puerto Rico's economy, including its governmental financial crisis and the
impact of hurricanes or any other natural disasters, including recent
earthquakes, may affect the willingness of businesses to commence or expand
operations in Puerto Rico, or may also consider closing operations located in
Puerto Rico.
?
Because our business is dependent upon a small number of clients, the loss of a
major client could impair our ability to operate profitably.
?
Customer procurement and sourcing practices intended to reduce costs could have
an adverse effect on our margins and profitability.
?
We may be unable to pass on increased labor costs to our clients.
?
Consolidation in the pharmaceutical industry may have a harmful effect on our
business.
?
We may be held liable for the actions of our employees or contractors when on
assignment.
?
To the extent that we perform services pursuant to fixed-price or
incentive-based contracts, our cost of services may exceed our revenue on the
contract.
?
Because most of our contracts may be terminated on little or no advance notice,
our failure to generate new business could impair our ability to operate
profitably.
?
The collectability of our account receivables may be subject to our customers
funding sources.
?
Because we are dependent upon our management and technical personnel, our
ability to develop our business may be impaired if we are not able to engage
skilled personnel.
?
Our cash could be adversely affected if the financial institutions in which we
hold our cash fail.
?
We may be harmed if we do not penetrate markets and grow our current business
operations.
?
Puerto Rico government enacted ACT 154-2010 may adversely affect the willingness
of our customers to do business in Puerto Rico and consequently adversely affect
our business.
?
US Federal Tax Reform may affect the willingness of companies to continue or
expand their operations in Puerto Rico.
?
Further changes in tax laws in Puerto Rico or in other jurisdictions may
adversely impact the willingness of our customers to continue or to expand their
Puerto Rico operations.
?
Because the pharmaceutical industry is subject to government regulations,
changes in government regulations relating to this industry may affect the need
for our services.
?
Our CARES Act loan may be subject to regulatory review.
?
Since our business is dependent upon the development and enhancement of patented
pharmaceutical products or processes by our clients, the failure of our clients
to obtain and maintain patents could impair our ability to operate profitably.
?
If we are unable to protect our clients' intellectual property, our ability to
generate business will be impaired.
?
We may be subject to liability if our services or solutions for our clients
infringe upon the intellectual property rights of others.
?
Because there is a limited market in our common stock, stockholders may have
difficulty in selling our common stock and our common stock may be subject to
significant price swings.
?
Our revenues, operating results and profitability will vary from quarter to
quarter, which may result in increased volatility of our stock price.
?
The Company Stock Repurchase Program could affect the market price of our common
stock and increase its volatility.
?
The issuance of securities, whether in connection with an acquisition or
otherwise, may result in significant dilution to our stockholders.


                                      -17-

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