Net Sales/Revenues
For the three month period ending January 31, 2020 ("3rd Quarter"), the net
sales decreased 21.7%, or $81,076, and decreased 9.6%, or $98,249, during the
nine month period ending January 31, 2020, as compared to net sales for the
comparative periods ending in 2019. The decrease in sales during the three and
nine month periods ending January 31, 2020 is primarily the result of lower
HemoTemp®II sales. At January 31, 2020 there were no back orders.
In addition, during the 3rd Quarter the Company had $629 of miscellaneous
revenues and $1,889 for the nine month period ending January 31, 2020 primarily
from interest income and leasing a portion of its storage space to an unrelated
party.
Costs and Expenses
General
The operating expenses of the Company during the 3rd Quarter decreased overall
by 2.8%, or $5,261, as compared to the 3rd quarter in 2019. The operating
expenses of the Company decreased by 1.9% or $11,163 for the nine month period
ending January 31, 2020, as compared to the nine month period ending January 31,
2019, primarily due to a decrease in legal fees and employee health insurance
costs.
Cost of Sales
The cost of sales during the 3rdQuarter increased by $849, and increased by
$4,778 during the nine month period ending January 31, 2020 as compared to these
expenses during the same periods ending in 2019. The increase in the cost of
sales during the 3rd Quarter was primarily due to higher freight charge
revenues, which are offset against other expenses included in cost of sales. The
increase for the nine month period ending January 31, 2020 was due to an
increase in the cost of health insurance allocated to manufacturing, higher
freight charges and certain raw materials. As a percentage of sales, the cost of
sales were 38.2% during the 3rd Quarter, 29.6% for the comparative quarter
ending in 2019, and 35.5% during the nine month period ending January 31, 2020
compared to 31.6% in 2019. 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 $2,767, or 6.4%, during the 3rd Quarter
as compared to the same quarter in 2019. These costs increased by $6,032, or
5.0%, during the nine month period ending January 31, 2020 as compared to the
same period in 2019. The overall cost in research and development expense
increased during the nine months due to higher employee costs and increased FDA
user fees.
Marketing Expenses
Marketing expenses for the 3rd Quarter decreased by $200, or .43%, as compared
to the quarter ending January 31, 2019. These costs decreased by $2,606, or
1.8%, during the nine month period ending January 31, 2020 as compared to the
same period in 2019. The decrease is primarily due to lower health care costs
allocated to marketing activities.
General and Administrative Expenses
General and administrative costs for the 3rdQuarter decreased by $7,828, or
7.9%, as compared to the 3rd quarter ending January 31, 2019, primarily due to
lower legal fees, timing on accounting costs, and employee health care costs.
General and administrative costs have decreased overall by $14,589, or 4.6%,
during the nine month period ending January 31, 2020, as compared to the same
periods in 2019, primarily due to lower legal fees and employee health care
costs.
Net Income
The Company realized a net loss of $2,020 during the 3rd Quarter as compared to
a net income of $53,364 for the comparative quarter in the prior year primarily
due to lower sales during the 3rd quarter. The Company also realized a net
income of $23,548 for the nine month period ending January 31, 2020 as compared
to a net income of $89,741 during the same period in 2019. This decrease in net
income is due to an overall decrease in sales, while the operating expenses of
the Company have not materially changed.
Assets/Liabilities
General
Since April 30, 2019, the Company's assets have decreased by $58,879 and
liabilities have decreased by $82,427. 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 January 31, 2020 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 since April 30, 2006 could not 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, as of April 30, 2006,
all of the amount owed by FKSI to the Company was reclassified 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 $9,216 and $18,341 for the nine months ending January 31, 2020 and
2019 respectively.
Current Assets/Liabilities Ratio
The ratio of current assets to current liabilities, 22.5 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 nine month period ending January 31, 2020, the Company experienced an
increase in working capital of $103,941. This is primarily due to the Company's
increase in cash, 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 finished inventory and raw materials to meet the delivery requirements
of customers and thus, inventory represents a material 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 accounts receivable,
based on past experience, the Company believes that uncollectable accounts
receivable will not have a significant effect on future liquidity.
Cash provided by operating activities was $67,353 during the nine month period
ending January 31, 2020. Cash used for investing activities was $962 during this
same period. Except for its operating working capital, limited equipment
purchases and patent expenses, 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 activities during the nine month periods
ending January 31, 2020 or 2019.
As of January 31, 2020, the Company had $1,668,338 of current assets available.
Of this amount, $57,271 was prepaid expenses, $146,112 was inventory, $218,439
was net trade receivables and $1,246,516 was cash. The Company's available cash
and cash flow from operations is considered adequate to fund the short-term
operating 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. There is a risk financing may be necessary to fund long-term
capital needs of the Company.
Effects of Inflation. With the exception of inventory and labor costs 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 3rd 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:
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 collectability 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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