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~~

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

For the quarterly period ended ~~January~~July 31, ~~2018~~

2021

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

☐	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~~ PHARMA-BIO SERV, INC.
~~(State~~ (Exact Name of Registrant as Specified in Its Charter)

Delaware

20-0653570

(State or Other Jurisdiction of

Incorporation or Organization)

~~(IRS~~

(IRS Employer

Identification No.)

Pharma-Bio ~~Serv Building,~~

#Serv# 6 Road 696

Dorado, Puerto Rico

00646

(Address of Principal Executive Offices)

~~(Zip~~

(Zip Code)

Registrant’s Telephone Number, Including Area Code 787-278-2709

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:~~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 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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or 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☒~~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 Act). Yes ☐ No ☒

The number of shares of the registrant’s common stock outstanding as of ~~March 15, 2018~~September 10, 2021 was ~~23,062,531.~~

23,029,215.

PHARMA-BIO SERV, INC.

FORM 10-Q

FOR THE QUARTER ENDED ~~JANUARY~~JULY 31, ~~2018~~

2021

TABLE OF CONTENTS

	Page
PART I FINANCIAL INFORMATION

Item 1 – Financial Statements	1	1

Condensed Consolidated Balance Sheets as of ~~January~~July 31, ~~2018~~2021 and October 31, ~~2017~~2020 (unaudited)	1	1

Condensed Consolidated Statements of Operations for the three-month and nine-month periods ended ~~January~~July 31, ~~2018~~2021 and ~~2017~~2020 (unaudited)	2	2

Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~ for the three-month and nine-month periods ended ~~January~~July 31, ~~2018~~2021 and ~~2017~~2020 (unaudited)	3	3

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three-month and nine-month periods ended July 31, 2021 and 2020 (unaudited)		4

Condensed Consolidated Statements of Cash Flows for the three-month and nine-month periods ended ~~January~~July 31, ~~2018~~2021 and ~~2017~~2020 (unaudited)	4	6

Notes to Condensed Consolidated Financial Statements (unaudited)	5	7

Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations	13	14

Item 4 – Controls and Procedures	18	18

PART II OTHER INFORMATION

Item 1 – Legal Proceedings	19	19

Item 21 A – ~~Unregistered Sales of Equity Securities and Use of Proceeds~~Risk Factors	19	19

Item 6 – Exhibits		19

SIGNATURES		20



~~SIGNATURES~~		20
Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

PHARMA-BIO SERV, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

January 31,
2018*

October 31,
2017**

ASSETS:

Current assets

Cash and cash equivalents
$13,176,240
$11,751,714
Marketable securities
  25,056
  26,600
Accounts receivable
  6,053,081
  7,208,054
Other
  439,967
  550,163
Total current assets
  19,694,344
  19,536,531



Property and equipment
  2,291,912
  2,390,545
Other assets
  423,180
  422,925
Total assets
$22,409,436
$22,350,001



LIABILITIES AND STOCKHOLDERS’ EQUITY:


Current liabilities


Current portion-obligations under capital leases
$14,061
$13,949
Accounts payable and accrued expenses
  1,467,663
  1,526,904
Income taxes payable
  2,875
  2,067
Total current liabilities
  1,484,599
  1,542,920
US Tax Reform Transition Tax payable
  2,700,000
  -
Obligations under capital leases
  56,397
  59,795
Total liabilities
  4,240,996
  1,602,715



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; 23,333,083 and 23,333,083 shares issued, and 23,062,531 and 23,089,631 shares outstanding at January 31, 2018 and October 31, 2017, respectively
  2,333
  2,333
Additional paid-in capital
  1,312,864
  1,295,314
Retained earnings
  16,896,119
  19,560,131
Accumulated other comprehensive income
  218,946
  137,671

  18,430,262
  20,995,449
Treasury stock, at cost; 270,552 and 243,452 common shares held at January 31, 2018 and October 31, 2017, respectively
  (261,822)
  (248,163)
Total stockholders' equity
  18,168,440
  20,747,286
Total liabilities and stockholders' equity
$22,409,436
$22,350,001

	July 31, 2021*			October 31, 2020**
ASSETS
Current assets
Cash and cash equivalents	$	16,498,170		$	17,137,924
Accounts receivable		10,082,222			9,727,591
Current portion - promissory note receivable due from sale of assets from discontinued operations		0			1,250,000
Prepaids and other assets		818,576			468,703
Total current assets		27,398,968			28,584,218
Property and equipment, net		120,693			217,572
Operating lease right-of-use		721,564			846,714
Other assets		353,407			270,242
Total assets	$	28,594,632		$	29,918,746

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion-obligation under finance lease	$	0		$	11,640
Loans-short term portion		0			1,287,800
Current operating lease liabilities		172,957			162,917
Accounts payable and accrued expenses		1,810,987			1,938,305
Current portion of US Tax Reform Transition Tax and income taxes payable		377,511			392,131
Total current liabilities		2,361,455			3,792,793

US Tax Reform Transition Tax payable		1,850,536			2,062,024
Loans-long term portion		0			643,900
Long term portion - obligation under finance lease		0			55,439
Long-term operating lease liabilities		523,960			629,979
Other liabilities		17,950			17,950
Total liabilities		4,753,901			7,202,085
Stockholders' equity
Preferred Stock, $0.0001 par value; authorized 10,000,000 shares; none outstanding		0			0
Common Stock, $0.0001 par value; authorized 50,000,000 shares; 23,433,341 and 23,405,753 shares issued, and 23,029,215 and 23,001,627 shares outstanding at July 31, 2021 and October 31, 2020, respectively		2,343			2,341
Additional paid-in capital		1,458,244			1,423,954
Retained earnings		22,580,045			21,523,990
Accumulated other comprehensive income		194,377			160,654
		24,235,009			23,110,939
Treasury stock, at cost; 404,126 common shares held at July 31, 2021 and October 31, 2020, respectively		(394,278	)		(394,278	)
Total stockholders' equity		23,840,731			22,716,661
Total liabilities and stockholders' equity	$	28,594,632		$	29,918,746

*	Unaudited.
**	Condensed from audited financial statements.

See notes to the condensed consolidated financial statements.

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Table of Contents

PHARMA-BIO SERV, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

Three months ended January 31,

2018

2017

REVENUES
$4,212,378
$4,046,291



COST OF SERVICES
  3,129,233
  3,013,946



GROSS PROFIT
  1,083,145
  1,032,345






SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
  1,063,983
  1,416,342



INCOME (LOSS) FROM OPERATIONS
  19,162
  (383,997)



OTHER INCOME, NET
  17,849
  3,612



INCOME (LOSS) BEFORE INCOME TAX AND US TAX REFORM TRANSITION TAX EXPENSE
  37,011
  (380,385)



INCOME TAX AND US TAX REFORM TRANSITION TAX EXPENSE
  2,701,023
  1,750



NET LOSS
$(2,664,012)
$(382,135)






BASIC LOSSES PER COMMON SHARE
$(0.115)
$(0.017)



DILUTED LOSSES PER COMMON SHARE
$(0.115)
$(0.017)



WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC
  23,063,997
  23,051,349



WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED
  23,065,290
  23,088,560

	Three months ended July 31,					Nine months ended July 31,
	2021		2020			2021		2020
REVENUES	$	4,987,909	$	6,278,370		$	14,517,884	$	16,539,304

COST OF SERVICES		3,732,847		4,424,151			10,656,840		11,230,293

GROSS PROFIT		1,255,062		1,854,219			3,861,044		5,309,011

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		894,572		1,037,529			2,916,654		3,235,178

INCOME FROM OPERATIONS		360,490		816,690			944,390		2,073,833

OTHER INCOME (EXPENSE), NET		1,952,898		(30,198	)		1,976,390		63,822

INCOME BEFORE INCOME TAX		2,313,388		786,492			2,920,780		2,137,655

INCOME TAX EXPENSE		38,270		94,378			137,359		231,080

NET INCOME	$	2,275,118	$	692,114		$	2,783,421	$	1,906,575

BASIC AND DILUTED EARNINGS PER COMMON SHARE	$	0.098	$	0.030		$	0.120	$	0.083

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC		23,029,215		23,001,627			23,022,950		23,003,125

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED		23,174,605		23,032,641			23,178,091		23,030,066

See notes to the condensed consolidated financial statements.

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Table of Contents

PHARMA-BIO SERV, INC.

Condensed Consolidated Statements of Comprehensive ~~Loss~~

Income

(Unaudited)

Three months ended January 31,

2018

2017

NET LOSS
$(2,664,012)
$(382,135)



OTHER COMPREHENSIVE INCOME (LOSS), NET OF RECLASSIFICATION ADJUSTMENTS AND TAXES:


Foreign currency translation gain (loss)
  82,819
  3,701
Net unrealized gain on available-for-sale securities
  (1,544)
  1,686



TOTAL OTHER COMPREHENSIVE INCOME
  81,275
  5,387



COMPREHENSIVE LOSS
$(2,582,737)
$(376,748)

	Three months ended July 31,				Nine months ended July 31,
	2021		2020		2021		2020
NET INCOME	$	2,275,118	$	692,114	$	2,783,421	$	1,906,575

OTHER COMPREHENSIVE INCOME , NET OF RECLASSIFICATION ADJUSTMENTS AND TAXES:

Foreign currency translation gain, net of tax		5,232		78,730		33,723		37,263

TOTAL OTHER COMPREHENSIVE INCOME		5,232		78,730		33,723		37,263

COMPREHENSIVE INCOME	$	2,280,350	$	770,844	$	2,817,144	$	1,943,838

See notes to the condensed consolidated financial statements.

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Table of Contents

PHARMA-BIO SERV, INC.

Condensed Consolidated Statements of Changes in Stockholders' Equity

(Unaudited)

														Accumulated
														Other
FISCAL YEAR 2021	Common Stock				Preferred Stock				Additional Paid-in		Retained			Comprehensive Income		Treasury
	Shares		Amount		Shares		Amount		Capital		Earnings			(Loss)		Stock			Total
BALANCE AT NOVEMBER 1, 2020		23,405,753	$	2,341		-	$	0	$	1,423,954	$	21,523,990		$	160,654	$	(394,278	)	$	22,716,661

STOCK-BASED COMPENSATION		-		0		-		0		11,430		0			0		0			11,430

ISSUANCE OF COMMON STOCK PURSUANT TO THE CASHLESS EXERCISE OF STOCK OPTIONS		27,588		2		-		0		0		(2	)		0		0			0

NET INCOME		-		0		-		0		0		268,032			0		0			268,032

OTHER COMPREHENSIVE INCOME, NET OF TAX		-		0		-		0		0		0			23,752		0			23,752

CASH DIVIDEND ($0.075 PER COMMON SHARE AT RECORD DATE)		-		0		-		0		0		(1,727,364	)		0		0			(1,727,364	)

BALANCE AT JANUARY 31, 2021		23,433,341		2,343		-		0		1,435,384		20,064,656			184,406		(394,278	)		21,292,511

STOCK-BASED COMPENSATION		-		0		-		0		11,430		0			0		0			11,430

NET INCOME		-		0		-		0		0		240,271			0		0			240,271

OTHER COMPREHENSIVE INCOME, NET OF TAX		-		0		-		0		0		0			4,739		0			4,739

BALANCE AT APRIL 30, 2021		23,433,341		2,343		-		0		1,446,814		20,304,927			189,145		(394,278	)		21,548,951

STOCK-BASED COMPENSATION		-		0		-		0		11,430		0			0		0			11,430

NET INCOME		-		0		-		0		0		2,275,118			0		0			2,275,118

OTHER COMPREHENSIVE INCOME, NET OF TAX		-		0		-		0		0		0			5,232		0			5,232

BALANCE AT JULY 31, 2021		23,433,341	$	2,343		-	$	0	$	1,458,244	$	22,580,045		$	194,377	$	(394,278	)	$	23,840,731

See notes to condensed consolidated financial statements.

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Table of Contents

PHARMA-BIO SERV, INC.

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

(Unaudited)

														Accumulated
														Other
FISCAL YEAR 2020	Common Stock				Preferred Stock				Additional Paid-in		Retained			Comprehensive Income			Treasury
	Shares		Amount		Shares		Amount		Capital		Earnings			(Loss)			Stock			Total
BALANCE AT NOVEMBER 1, 2019		23,397,707	$	2,340		-	$	0	$	1,381,076	$	19,473,069		$	143,600		$	(392,579	)	$	20,607,506

STOCK-BASED COMPENSATION		-		0		-		0		11,430		0			0			0			11,430

ISSUANCE OF COMMON STOCK PURSUANT TO THE CASHLESS EXERCISE OF STOCK OPTIONS		8,046		1		-		0		0		(1	)		0			0			0

PURCHASE OF TREASURY STOCK (2,300 SHARES)		-		0		-		0		0		0			0			(1,699	)		(1,699	)

NET INCOME		-		0		-		0		0		526,900			0			0			526,900

OTHER COMPREHENSIVE LOSS, NET OF TAX		-		0		-		0		0		0			(11,734	)		0			(11,734	)

BALANCE AT JANUARY 31, 2020		23,405,753		2,341		-		0		1,392,506		19,999,968			131,866			(394,278	)		21,132,403

STOCK-BASED COMPENSATION		-		0		-		0		11,430		0			0			0			11,430

NET INCOME		-		0		-		0		0		687,561			0			0			687,561

OTHER COMPREHENSIVE LOSS, NET OF TAX		-		0		-		0		0		0			(29,733	)		0			(29,733	)

BALANCE AT APRIL 30, 2020		23,405,753		2,341		-		0		1,403,936		20,687,529			102,133			(394,278	)		21,801,661

STOCK-BASED COMPENSATION		-		0		-		0		11,430		0			0			0			11,430

NET INCOME		-		0		-		0		0		692,114			0			0			692,114

OTHER COMPREHENSIVE INCOME, NET OF TAX		-		0		-		0		0		0			78,730			0			78,730

BALANCE AT JULY 31, 2020		23,405,753	$	2,341		-	$	0	$	1,415,366	$	21,379,643		$	180,863		$	(394,278	)	$	22,583,935

See notes to condensed consolidated financial statements

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Table of Contents

PHARMA-BIO SERV, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Three months ended January 31,

2018

2017

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss
$(2,664,012)
$(382,135)
Adjustments to reconcile net loss to net cash provided by operating activities:


Stock-based compensation
  17,550
  22,050
Depreciation and amortization
  149,748
  109,460
Decrease in accounts receivable
  1,245,340
  849,170
Decrease in other assets
  121,079
  178,378
Increase (decrease) in liabilities
  2,612,143
  (591,532)
NET CASH PROVIDED BY OPERATING ACTIVITIES
  1,481,848
  185,391



CASH FLOWS FROM INVESTING ACTIVITIES:


Acquisition of property and equipment
  (51,115)
  (280,722)
NET CASH USED IN INVESTING ACTIVITIES
  (51,115)
  (280,722)



CASH FLOWS FROM FINANCING ACTIVITIES:


Repurchase of common stock
  (13,659)
  (1,882)
Payments on obligations under capital lease
  (3,286)
  (5,918)
NET CASH USED IN FINANCING ACTIVITIES
  (16,945)
  (7,800)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
  10,738
  165
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
  1,424,526
  (102,966)



CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD
  11,751,714
  13,773,582



CASH AND CASH EQUIVALENTS – END OF PERIOD
$13,176,240
$13,670,616



SUPPLEMENTAL DISCLOURES OF CASH FLOWS INFORMATION:


Cash paid during the period for:


Income taxes
$-
$40
Interest
$542
$635



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
$1,767
$14,230
Conversion of cashless exercise of options to shares of common stock and shares issued under restricted stock unit agreements
$-
$10
Disposed property and equipment with accumulated depreciation of $30,034 for the three months ended January 31, 2017
$-
$30,034

	Three months ended July 31,						Nine months ended July 31,
	2021			2020			2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	2,275,118		$	692,114		$	2,783,421		$	1,906,575
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Gain on disposition of property and equipment		0			(8,409	)		(7,404	)		(13,327	)
Stock-based compensation		11,430			11,430			34,290			34,290
Depreciation and amortization		18,183			23,203			58,438			65,814
Loans forgiveness		(1,956,291	)		0			(1,956,291	)		0
Decrease (increase) in accounts receivable		284,599			(50,706	)		(336,467	)		(1,251,494	)
Decrease (increase) in other assets		(552,175	)		(126,072	)		(302,324	)		(851,596	)
Increase (decrease) in liabilities		360,860			678,175			(429,171	)		1,287,785
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		441,724			1,219,735			(155,508	)		1,178,047

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment		(7,110	)		(10,462	)		(11,726	)		(49,336	)
Proceeds from sale of property and equipment		0			14,700			57,571			26,700
Collection from promissory note receivable		0			0			1,250,000			0
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		(7,110	)		4,238			1,295,845			(22,636	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans		0			0			0			1,931,700
Repurchase of common stock		0			0			0			(1,699	)
Payments on obligations under finance lease		0			(2,776	)		(67,079	)		(8,217	)
Cash dividends paid to shareholders		0			0			(1,727,364	)		(1,725,295	)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		0			(2,776	)		(1,794,443	)		196,489
EFFECT OF EXCHANGE RATE CHANGES ON CASH		(2,931	)		10,847			14,352			(28,033	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		431,683			1,232,044			(639,754	)		1,323,867
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD		16,066,487			15,581,997			17,137,924			15,490,174
CASH AND CASH EQUIVALENTS – END OF PERIOD	$	16,498,170		$	16,814,041		$	16,498,170		$	16,814,041

SUPPLEMENTAL DISCLOURES OF CASH FLOWS INFORMATION:
Cash paid during the period for:
Income taxes	$	67,550		$	700		$	574,757		$	212,463
Interest	$	0		$	951		$	1,404		$	2,955

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	$	0		$	1,120		$	4,046		$	4,769
Conversion of cashless exercise of options to shares of common stock and shares issued under restricted stock unit agreements	$	0		$	0		$	2		$	1
Disposed property and equipment with accumulated depreciation of $35,833 for the nine months ended July 31, 2021, and $20,670 and $38,583 for the three and nine months ended July 31, 2020, respectively.	$	0		$	26,961		$	86,000		$	51,956

See notes to the condensed consolidated financial statements.

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PHARMA-BIO SERV, INC.

Notes To Condensed Consolidated Financial Statements

~~January~~

July 31, ~~2018~~

2021

(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 Validation & Compliance Limited (“Pharma-IR”), an Irish~~ corporation, Pharma-Bio Serv SL (“Pharma-Spain”), a Spanish limited liability company, and Pharma-Bio Serv Brasil Servicos de Consultoria Ltda. (“Pharma-Brazil”), a Brazilian limited liability company. Pharma-Bio, Pharma-PR, Pharma-Serv, Scienza Labs, Pharma-US, ~~Pharma-IR,~~ Pharma-Spain and Pharma-Brazil are collectively referred to as the “Company.” The Company operates in Puerto Rico, the United States, ~~Ireland, Spain~~Europe and Brazil under the name of Pharma-Bio Serv and is engaged in providing technical compliance consulting ~~service, and microbiological and chemical laboratory testing.~~

Scienza Labs is a wholly owned subsidiary, which was organized in Puerto Rico in April 2016. As of January 31, 2018, this subsidiary was in development stage and has not incurred significant revenues or expenses.

service.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The condensed consolidated balance sheet of the Company as of October 31, ~~2017~~2020 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 ~~three~~nine months ended ~~January~~July 31, ~~2018~~2021 are not necessarily indicative of expected results for the full ~~2018~~2021 fiscal year.

The accompanying financial data as of ~~January~~July 31, ~~2018,~~2021, and for the three-month ~~period~~and nine-month periods ended ~~January~~July 31, ~~2018~~2021 and ~~2017~~2020 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, ~~2017.~~

2020.

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 available-for-sale consist of U.S. Treasury securities and an obligation from the Puerto Rico Government Development Bank valued using quoted market prices in active markets. Accordingly, these securities are categorized in Level 1.

The carrying value of the Company's financial instruments (excluding ~~marketable securities and~~ obligations under ~~capital~~finance leases), 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. Management believes, based on current rates, that the fair value of its obligations under ~~capital~~finance leases approximates the carrying amount.

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 ~~materials~~material contracts (representing approximately ~~88%~~99% of total revenues), ~~which is recognized by applying the proportional performance model, whereby revenue is recognized as performance occurs,~~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 have 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, and (3) laboratory testing revenue (representing approximately 11% of total revenues) is mainly recognized as the testing is completed and certified (normally within days of sample receipt from the customer).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 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 with original maturities of three months or less.

~~Marketable Securities~~

We consider our marketable security investment portfolio and marketable equity investments as available-for-sale and, accordingly, these investments are recorded at fair value with unrealized gains and losses generally recorded in other comprehensive income; whereas realized gains and losses are included in earnings and determined based on the specific identification method.

We review our available-for-sale securities for other-than-temporary declines in fair value below their cost basis on a quarterly basis and whenever events or changes in circumstances indicate that the cost basis of an asset may not be materially recoverable. This evaluation is based on a number of factors including, the length of time and extent to which the fair value has been less than our cost basis and adverse conditions specifically related to the security including any changes to the rating of the security by a rating agency.

Accounts Receivable

Accounts receivable are recorded at their estimated realizable value. Accounts are deemed past due when payment has not been received within the stated time period. The Company's policy is to review individual past due amounts periodically and write off amounts for which all collection efforts are deemed to have been exhausted. Due to the nature of the Company’s customers, bad debts are mainly accounted for using the direct write-off method whereby an expense is recognized only when a specific ~~account~~balance is determined to be ~~uncollectible.~~uncollectible in full. The effect of using this method approximates that of the allowance method.

However, in the event the Company determines that the collectability of any account receivable reaches a certain uncertainty threshold, the Company will provide an allowance for doubtful account to reduce said balance.

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.

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 ~~January~~July 31, ~~2018,~~2021, the Company had no significant uncertain tax positions that would be reduced as a result of a lapse of the applicable statute of limitations.

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Property and Equipment

Owned property and equipment ~~and leasehold improvements~~ are stated at cost. Vehicles under ~~capital~~finance leases are stated at the lower of fair market value or net present value of the minimum lease payments at the inception of the leases.

Depreciation ~~and amortization~~ 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. Assets under ~~capital~~finance leases ~~and leasehold improvements~~ are amortized over the ~~shorter of the estimated useful lives of the assets or the~~ lease ~~term, including renewals that have been determined to be reasonable assured. Major renewals and betterments that extend the life of the assets are capitalized, while~~term. While expenditures for repairs and maintenance are expensed when incurred. As of ~~January~~July 31, ~~2018~~2021 and October 31, ~~2017,~~2020, the accumulated depreciation ~~and amortization~~ amounted to ~~$2,443,077~~$524,094 and ~~$2,293,329,~~$501,489, respectively.

Leases

We categorize leases at their inception as either operating or finance leases. The Company leases include an operating lease for office space and a finance lease agreement for a vehicle which was disposed in April 2021. Under the operating lease, as of July 31, 2021 and October 31, 2020, the total right-of-use assets were $721,564 and $846,714, respectively. As of July 31, 2021 operating lease liabilities current and non-current were approximately $172,957 and $523,960, respectively, while as of October 31, 2020 operating lease liabilities current and non-current were approximately $162,917 and $629,979, respectively. The finance lease was included in net property and equipment, current installments of long-term debt, and long-term debt in our condensed consolidated balance sheets.

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 ~~operating properties~~long-lived assets was ~~present.~~

present as of July 31, 2021 and October 31, 2020.

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 generally 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 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.

~~Loss~~

Earnings Per Share of Common Stock

Basic ~~loss~~earnings per share of common stock is calculated by dividing net ~~loss~~earnings by the weighted average number of shares of common stock outstanding. Diluted ~~loss~~earnings 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.

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, 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 required disclosure or adjustment.

Reclassifications

Certain reclassifications have been made to the ~~January~~July 31, ~~2017~~2020 condensed consolidated financial statements to conform them to the ~~January~~July 31, ~~2018~~2021 condensed consolidated financial statements presentation. Such reclassifications do not affect net ~~loss~~income as previously reported.

Recent Accounting Pronouncements

Recent accounting pronouncements

~~In May 2014,~~ pending adoption not discussed above or in the ~~Financial Accounting Standards Board (“FASB”) issued a new accounting standard that amends the guidance~~Form 10-K for the ~~recognition of revenue from contracts with customers~~year ended October 31, 2020 are either not applicable or will not have or are not expected to transfer goods and services. The FASB has subsequently issued additional, clarifying standards to address issues arising from implementation of the new revenue standard. The new standards are required to be adopted using either a full retrospective or a modified retrospective approach. We expect to adopt this standard using the modified retrospective approach beginning with our fiscal year 2019. Based on our preliminary assessment, we currently do not anticipate a material impact to our total revenues. We continue to review the impact that this new standard will have on our consolidated financial statements.

In February 2016, the FASB issued a new accounting standard that amends the guidance for the accounting and disclosure of leases. This new standard requires that lessees recognize the assets and liabilities that arise from leases on the balance sheet and disclose qualitative and quantitative information about their leasing arrangements. The new standard is effective for interim and annual periods beginning on January 1, 2019, and may be adopted earlier. We continue to evaluate the impact that this new standard will have on our consolidated financial statements. We do not expect that this standard will have a material impact on us.

NOTE B – PROMISSORY NOTE

On September 17, 2018, the Company sold substantially all of its Lab business assets (the “Laboratory Assets”). Upon the completion of the Laboratory Assets sale, the Company received, as partial payment, a $3 million Promissory Note from the purchaser. The Promissory Note was composed of two tranches: (i) Tranche A for $2 million and secured with lab equipment and (ii) Tranche B for $1 million which was unsecured. The interest rate accrual was 3% for Tranche A and 5% for Tranche B. The Promissory Note’s final payment installment of $1,250,000 from Tranche A was collected in November 2020.

NOTE C – LOANS FORGIVENESS

On April 23, 2020, Pharma-PR, Pharma-Serv, and Pharma-US (collectively, the “Borrowers”) entered into loan agreements and related promissory notes to ~~our~~receive U.S. Small Business Administration Loans. These loans were originated pursuant to the Paycheck Protection Program (the “PPP”) established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), and in the aggregate amount of $1,931,700 (the “Loan Proceeds”). The Borrowers received the Loan Proceeds on April 23, 2020. These SBA Loans terms followed the CARES Act provisions and the corresponding regulations issued by the SBA. Under regulations established by the Small Business Administration and the CARES Act, in July 2021 the Company applied for and obtained the full forgiveness of the SBA Loans and the related accrued interests. The forgiveness of these loans and related interest for the aggregate amount of approximately $1,956,000 were recorded as other income on the Condensed Consolidated Statements of Operations ~~but expect that this standard will have a material impact to assets and liabilities on our Consolidated Balance Sheets upon adoption.~~

~~Other recently issued FASB guidance and SEC Staff Accounting Bulletins have either been implemented, are not applicable to~~for the ~~Company, or will have limited effects upon the Company’s implementation.~~

quarter ended July 31, 2021.

NOTE ~~B – MARKETABLE SECURITIES AVAILABLE FOR SALE~~

The amortized cost, gross unrealized gains, gross unrealized losses and estimated fair values of available-for-sale securities by type of security were as follows as of January 31, 2018 and October 31, 2017:

Type of security as of January 31, 2018

Amortized Cost

Gross
Unrealized Gains

Gross
Unrealized Losses

Estimated
Fair Value

U.S. Treasury securities
$4,500,000
$—
$—
$4,500,000
Other government-related debt securities:




Puerto Rico Commonwealth Government Development Bond
  40,000
  —
  (14,944)
  25,056
Total interest-bearing and available-for-sale securities
$4,540,000
$—
$(14,944)
$4,525,056

Type of security as of October 31, 2017

Amortized Cost

Gross
Unrealized Gains

Gross
Unrealized Losses

Estimated
Fair Value

U.S. Treasury securities
$4,500,000
$-
$-
$4,500,000
Other government-related debt securities:




Puerto Rico Commonwealth Government Development Bond
  40,000
  -
  (13,400)
  26,600
Total interest-bearing and available-for-sale securities
$4,540,000
$-
$(13,400)
$4,526,600

At January 31, 2018 and October 31, 2017, the above marketable securities included a 5.4% Puerto Rico Commonwealth Government Development Bank Bond in the amount of $95,000, purchased at par and maturing in August 2019.

~~The fair values of available-for-sale securities by classification in the Consolidated Balance Sheets were as follows as of January 31, 2018 and October 31, 2017:~~

Classification in the Consolidated Balance Sheets

January 31,
2018

October 31,
2017

Cash and cash equivalents
$4,500,000
$4,500,000
Marketable securities
25,056
26,600
Total available-for-sale securities
$4,525,056
$4,526,600

~~Cash and cash equivalents in the table above exclude cash in banks of approximately $8.6 million and $7.2 million as of January 31, 2018 and October 31, 2017, respectively.~~

The primary objectives of the Company’s investment portfolio are liquidity and safety of principal. Investments are made with the objective of achieving the highest rate of return consistent with these two objectives. Our investment policy limits investments to certain types of debt and money market instruments issued by institutions primarily with investment grade credit ratings and places restrictions on maturities and concentration by type and issuer.

~~NOTE C~~D - 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 is applicable to our Company commencing with our fiscal year 2018, including the Transition Tax provisions which establishes measurement dates for various computations, November 2, 2017, December 31, 2017 and October 31, 2018. The Tax Reform imposed a mandatory one-time transition tax (the “Transition Tax”) over foreign subsidiaries undistributed earnings and profits ~~(E&Ps)~~(“E&Ps”) earned prior to a date set by the statute. Based on the Company’s E&Ps, the Transition Tax ~~is estimated~~was determined to be approximately $2.7 million. ~~However, the final Transition Tax due must be assessed with our October 31, 2018 closing figures.~~ The Transition Tax liability ~~might~~must be paid over a period of eight years ~~starting on February 28,~~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.

~~The SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the~~ However, foreign subsidiaries earnings are subject to U.S. tax ~~effects~~at a reduced rate of the Tax Reform. SAB 118 provides a measurement period that should not extend beyond one year from the date of the Tax Reform enactment for companies to complete the accounting under Accounting Standards Codification 740—Income Taxes. In accordance with SAB 118, to the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete, but the company is able to determine a reasonable estimate, it must record a provisional estimate in its financial statements. As mentioned in the preceding paragraph, the Company’s accounting for certain elements of the Tax Reform is incomplete. However, the Company was able to make a reasonable estimate of the Transition Tax and recorded a provisional tax obligation of approximately $2.7 million, as reflected in the condensed consolidated financial statements. The Company is continuing to gather additional information to more precisely compute the amount of Transition Tax, and whether it will be paid over an eight-year period.

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~~fifteen-year period. The Grant 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. 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 ~~totally~~ exempt from Puerto Rico earnings distribution tax.

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 ~~39%~~37.5% as provided by the 1994 Puerto Rico Internal Revenue Code, as amended. The operations carried out in the United States by the Company’s ~~subsidiary was~~subsidiaries, is taxed in the United States at a maximum regular federal income tax rate of ~~35%. Among the Tax Reform provisions, effective with the Company’s fiscal year ending on October 31, 2018, the regular federal income tax rate was reduced to~~ 21%.

Distribution of earnings by the Puerto Rican subsidiaries to its parent are taxed at the federal level, however, the parent is able to receive a credit for the taxes paid by the subsidiary on its operations in Puerto Rico, to the extent of the federal taxes that result from those earnings. As a result, the income tax expense of the Company, under its present corporate structure, would normally be the Puerto Rico taxes on operations in Puerto Rico, federal taxes on operations in the United States, plus the earnings distribution tax in Puerto Rico from dividends paid to the Puerto Rican subsidiaries’ parent, and the parent’s federal income tax, if any, incurred upon the subsidiary’s earnings distribution.

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.

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Pharma-Spain ~~Pharma-IR, Pharma-Bio/Pharma-US, Pharma-PR and Pharma-Serv~~ ~~have~~has unused operating losses which result in a potential deferred tax asset. However, an allowance has been provided covering the total amount of such balance since it is uncertain whether the net operating losses can be used to offset future taxable income before their expiration dates. Realization of future tax benefits related to a deferred tax asset is dependent on many factors, including the company’s ability to generate taxable income. Accordingly, the income tax benefit will be recognized when realization is determined to be more probable than not. ~~These~~Pharma-Spain net operating ~~losses are~~loss is available to offset future taxable income through ~~2032 for Pharma-Spain; indefinitely for Pharma-IR; until 2037 for Pharma-Bio/Pharma-US; until 2027 for Pharma-PR and Pharma-Serv~~.

~~The statutory income tax rate differs from the effective rate, mainly due to the effect of the non-recurring Transition Tax imposed by the Tax Reform over the Company’s E&Ps.~~

2035.

The Company files income tax returns in the United States (federal and various states jurisdictions), Puerto Rico, ~~Ireland,~~ Spain and Brazil. The ~~2013 (2012~~2016 (2015 for Puerto Rico) through ~~2016~~2019 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 DE – ~~WARRANTS~~

~~On December 2014,~~EARNINGS PER SHARE

The following data shows the ~~Company entered into an agreement with a firm for providing (i) business development~~amounts used in the calculations of basic and ~~(ii) mergers~~diluted earnings per share.

	Three months ended July 31,				Nine months ended July 31,
	2021		2020		2021		2020
Net income available to common equity holders - used to compute basic and diluted earnings per share	$	2,275,118	$	692,114	$	2,783,421	$	1,906,575

Weighted average number of common shares - used to compute basic earnings per share		23,029,215		23,001,627		23,022,950		23,003,125
Effect of options to purchase common stock		145,390		31,014		155,141		26,941
Weighted average number of shares - used to compute diluted earnings per share		23,174,605		23,032,641		23,178,091		23,030,066

For the three-month and ~~acquisition services to the Company. Pursuant to the agreement terms, the Company issued warrants~~nine-month periods ended July 31, 2021 and July 31 2020, options for the purchase of ~~1,000,000 common shares at an exercise price of $1.80 per share. The underlying common~~ shares of ~~the warrants are fully vested~~80,000 and ~~expire on December 1, 2019.~~

340,000 common stock, respectively, were not considered in computing diluted earnings per share because their effect was antidilutive.

NOTE EF – ~~CAPITAL~~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.~~stock (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. The ~~program~~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. Since April 2020, the Company suspended purchases under the Repurchase Program. As of ~~January~~July 31, ~~2018 and October 31, 2017, pursuant to the program,~~2021, a total of ~~270,552 and 243,452~~341,154 shares of the Company’s common stock were purchased under the Repurchase Program for an aggregate amount of ~~$261,822 and $248,163, respectively.~~

~~NOTE F – EARNINGS (LOSSES) PER SHARE~~

~~The following data shows~~$331,306.

On January 5, 2021 the ~~amounts used in~~Board of Directors of the ~~calculations~~Company declared a cash dividend of ~~basic and diluted losses~~$0.075 per ~~share.~~

Three months
ended January 31,

2018

2017

Net loss available to common equity holders - used to compute basic and diluted earnings per share
$(2,664,012)
$(382,135)



Weighted average number of common shares - used to compute basic losses per share
  23,063,997
��23,051,349
Effect of warrants to purchase common stock
  -
  -
Effect of restricted stock units to common stock
  -
  11,224
Effect of options to purchase common stock
  1,293
  25,987
Weighted average number of shares - used to compute diluted losses per share
  23,065,290
  23,088,560

~~Warrants~~common share for shareholders of record as of the ~~purchase~~close of ~~1,000,000 shares~~business on January 25, 2021. Accordingly, an aggregate dividend payment of common stock for the three-month periods ended in January 31, 2018 and 2017 were not included in computing diluted earnings per share because their effects were antidilutive. In addition, options for the purchase of 620,000 and 570,000 shares of common stock for the three-month periods ended in January 31, 2018 and 2017, respectively, were not included in computing diluted earnings per share because their effects were also antidilutive.

$1,727,364 was paid on February 5, 2021.

NOTE G - CONCENTRATIONS OF RISK

Cash and cash equivalents

The Company’s domestic cash and cash equivalents consist of cash deposits in FDIC insured banks (substantially covered by FDIC insurance by the spread of deposits in multiple FDIC insured banks), a money market obligations trust registered under the US Investment Company Act of 1940, as amended, and U.S. Treasury securities with maturities of three months or less. In the foreign markets we serve, we also maintain cash deposits in foreign banks, which ~~tend to be not significant and~~ have no specific insurance. No losses have been experienced or are expected on these accounts.

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Accounts receivable and revenues

Management ~~deems all~~estimates that the collectability of its accounts receivable ~~to be fully collectible,~~is reasonably assured, and, as such, does not maintain any ~~allowances~~allowance for uncollectible receivables.

The Company's revenues, and the related receivables, are concentrated in the pharmaceutical industry in Puerto Rico, the United States, ~~Ireland,~~ Spain 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 ~~three~~five customers, which accounted for 10% or more of its revenues in either of the three-month and nine-month periods ended ~~January~~July 31, ~~2018~~2021 and ~~2017.~~2020. During the three months ended ~~January~~July 31, ~~2018,~~2021, revenues from these customers were ~~15.3%~~19.6%, ~~10.8%~~14.2%, 6.8%, 9.9% and ~~1.5%~~0.0%, or a total of ~~27.6%~~50.5%, as compared to ~~the percentages for~~ the same period last year of ~~9.3%~~13.3%, ~~0.0%~~9.9%, 10.3%, 4.4% and ~~13.8%~~15.7%, or a total of ~~23.1%~~53.6%, respectively. During the nine months ended July 31, 2021, revenues from these customers were 20.7%, 12.8%, 10.4%, 10.0% and 0.0%, or a total of 53.9%, as compared to the same period last year of 14.2%, 10.4%, 11.5%, 1.9% and 19.2%, or a total of 57.2%, respectively. At ~~January~~July 31, ~~2018,~~2021, amounts due from these customers represented ~~28.6%~~22.3% of the Company’s total accounts receivable balance.

~~The~~ This customer information ~~related to major customers in the above paragraph~~ 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. ~~However, at~~

At the global level, ~~four customers~~five global groups of affiliated companies accounted for 10% or more of ~~the Company’s~~its revenues in either of the three-month and nine-month periods ended ~~January~~July 31, ~~2018~~2021 and ~~2017.~~2020. During the three months ended ~~January~~July 31, ~~2018,~~2021, aggregate revenues from these global groups of affiliated companies were ~~15.3%~~19.6%, ~~10.8%~~14.2%, ~~8.0%~~7.5%,9.9% and ~~1.5%~~0.0%, or a total of ~~35.6%~~51.2%, as compared to the same period last year for ~~9.3%~~13.3%, ~~0.0%~~9.9%, ~~10.8%~~12.2%, 4.4% and ~~13.8%~~15.7%, or a total of ~~33.9%~~55.5%, respectively. During the nine months ended July 31, 2021, aggregate revenues from these global group of affiliated companies were 20.7%, 12.8%, 12.1%, 10.0% and 0.0%, or a total of 55.6%, as compared to the same period last year for 14.2%, 10.4%, 14.0%, 1.9% and 19.2%, or a total of 59.7%, respectively. At ~~January~~July 31, ~~2018~~2021, amounts due from these global groups of affiliated companies represented ~~38.9%~~24.2% of total accounts receivable balance.

As of ~~January~~July 31, ~~2018,~~2021, one of the Company’s customers (representing 4.5% of revenues during the nine months ended July 31, 2021) owes the Company approximately ~~$1.3~~$5.2 million, which represents approximately ~~7.3%~~20.7% of the Company’s total working capital. We are providing multiple services to this customer related to their construction of a manufacturing facility in Puerto Rico. From this facility the customer will do the manufacturing and distribution of an existing product and an investigational new drug to be marketed to worldwide markets, once approved by regulators. A significant portion of the customer’s funding comes from different financing sourcing. Management is actively monitoring this account and currently estimates that collectability ~~of the account~~ is reasonably assured, accordingly, no provision for losses ~~if any, have~~has been recorded in the financial ~~statements.~~

statements as of July 31, 2021.

NOTE H - SEGMENT DISCLOSURES

The Company’s segments are based on the organizational structure for which financial results are regularly evaluated by the Company’s ~~senior executive management~~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 ~~four~~three reportable segments: (i) Puerto Rico technical compliance consulting, (ii) United States technical compliance consulting, and (iii) Europe technical compliance ~~consulting, and (iv) a Puerto Rico microbiological and chemical laboratory testing division (“Lab”).~~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 earnings from operations of the Company for the three-month and nine-month periods ended in ~~January~~July 31, ~~2018~~2021 and ~~2017.~~2020. 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.

Three months ended January 31,

2018

2017

REVENUES:

Puerto Rico consulting
$2,698,365
$2,790,020
United States consulting
  286,635
  347,200
Europe consulting
  721,132
  182,424
Lab (microbiological and chemical testing)
  478,922
  641,893
Other segments¹
  27,324
  84,754
Total consolidated revenues
$4,212,378
$4,046,291



INCOME (LOSS) BEFORE TAXES:


Puerto Rico consulting
$(2,015)
$(150,840)
United States consulting
  (87,165)
  (238,643)
Europe consulting
  221,602
  (26,750)
Lab (microbiological and chemical testing)
  (106,543)
  (87,617)
Other segments¹
  11,132
  123,465
Total consolidated income before taxes
$37,011
$(380,385)

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	Three months ended July 31,					Nine months ended July 31,
	2021			2020		2021		2020
REVENUES:
Puerto Rico consulting	$	3,749,071		$	4,989,964	$	10,861,147	$	14,287,556
United States consulting		622,669			939,421		1,546,889		1,723,774
Europe consulting		579,793			310,974		1,785,115		466,924
Other segment¹		36,376			38,011		324,733		61,050
Total consolidated revenues	$	4,987,909		$	6,278,370	$	14,517,884	$	16,539,304

INCOME (LOSS) BEFORE TAXES:
Puerto Rico consulting	$	2,011,030		$	692,906	$	2,159,988	$	2,186,327
United States consulting		149,837			85,381		135,952		33,242
Europe consulting		154,937			1,781		534,981		(59,903	)
Other segment¹		(2,416	)		6,424		89,859		(22,011	)
Total consolidated income before taxes	$	2,313,388		$	786,492	$	2,920,780	$	2,137,655

_____________________

Other ~~segments represent activities that fall~~segment represents a Brazilian compliance

division which falls below the reportable threshold and are carried out in Puerto Rico, the United States and Brazil. These activities include a Brazilian compliance consulting division, technical seminars/training division, a calibrations division, and corporate headquarters, as applicable.threshold.

Long lived assets (property and ~~equipment and intangible assets)~~equipment) as of ~~January~~July 31, ~~2018~~2021 and October 31, ~~2017,~~2020, and related depreciation and amortization expense for the three and nine months ended ~~January~~July 31, ~~2018~~2021 and ~~2017,~~2020, were concentrated in the ~~Lab~~corporate headquarters in Puerto Rico. Accordingly, depreciation expense and acquisition of property and equipment, as presented in the ~~statement~~statements of cash flows are mainly related to the ~~Lab.~~

corporate headquarters.

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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 appearing in our Annual Report on Form 10-K for the year ended October 31, ~~2017.~~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, ~~2017.~~

2020.

Overview

We are a compliance and technology transfer services consulting firm ~~with a laboratory testing facility~~ 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 also provide microbiological testing services and chemical testing services through our Lab in Puerto Rico. We also provide technical training/seminars, which services are not currently significant to our operating results. 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, ~~Ireland, Spain~~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.

~~While~~

We consider our core business ~~is FDA~~to be Food and Drug Administration (“FDA”) and international agencies regulatory compliance related services, we feel that our clients are in need of other services that we can provide and allow us to present the company as a global solution provider with a portfolio of integrated services that will bring value added solutions to our customers. Accordingly, our portfolio of services includes a laboratory testing facility and a training center that provides seminars/training to the industry.

The Lab incorporates the latest technology and test methodologies meeting pharmacopoeia industry standards and regulations. It currently offers services to our core industries already serviced as well as the cosmetic and food industries.

We also provide technical seminars/training that incorporate the latest regulatory trends and standards as well as other related areas. A network of leading industry professional experts in their field, which include resources of our own, provide these seminars/training to the industry through our “Pharma Serv Academy” division. These services are provided in the markets we currently serve, as well as others, and position our Company as a key leader in the industry.

During the year ended October 31, 2015, the Company started the development of a new Puerto Rico based Calibrations Services Division that provides lab and field calibration, verification and qualification of equipment and installations, readiness audits, heating/ventilation and air conditioning ("HVAC") and clean room qualification andconsulting related services. The Company signed a three-year strategic collaboration agreement with a Spain-based company specializing in calibrations, validation, HVAC and clean room qualification services to assist the Company in the development process. The collaboration agreement terminates October 2018. The Calibrations Division development was substantially completed during the year ended October 31, 2017.

~~In April 2015, we registered in Brazil our wholly owned subsidiary, Pharma-Brazil, which started providing consulting services last year.~~

In December 2014, the Company entered into an agreement with a firm to provide (i) mergers and acquisition and (ii) business development services to the Company. These services are aimed to improve and assist the expansion of our market reach and customer base, primarily to the United States consulting business.

In line with the strategy to further penetrate the United States and Puerto Rico markets, we submit annually for renewal the certification as a "minority-controlled company" as defined by the National Minority Supplier Development Council and Growth Initiative ("NMSDC"). This certification, which has been held by us since July 2008, allows us to participate in corporate diversity programs available from various potential customers in the United States and Puerto Rico.

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.

In December 2016, the Company obtained a license from the OFAC which authorizes the Company to perform certain services and transactions with a Cuban state-run organization. The license is not transferable and expires on January 31, 2019. The Company has not generated any significant activity from this license.

~~As more fully disclosed in our Annual Report~~ ~~on Form 10-K for the year ended October 31, 2017~~, during September 2017, our Puerto Rico operations were affected by hurricanes which severely impacted Puerto Rico (“Hurricanes”). Within a few days of the last hurricane affecting Puerto Rico in September, the Company resumed operations using a diesel power generator at its Puerto Rico facilities. The Company’s electrical power and other basic utilities were restored on November 22, 2017. As of the date of this report, the majority of our clients’ businesses in Puerto Rico have been restored. The Company’s insurance provider is currently assessing the extent of the damages to our facilities, as well as the business interruption losses and additional expenses incurred by the Company until electrical power and other basic utilities were restored. Based on current accounting guidance, the insurance proceeds will be recognized upon collection, as a gain contingency.

As more fully disclosed in Note C of the Company’s condensed consolidated financial statements included herewith, the Company is subject to the recent Tax Reform provisions, including an estimated one-time non-recurring Transition Tax of $2.7 million, payable within eight years starting on February 2019. The payment will be funded from our working capital.

The following table sets forth information as to our revenue for the three-month and nine-month periods ended ~~January~~July 31, ~~2018~~2021 and ~~2017,~~2020, by geographic regions (dollars in thousands).

Three months ended January 31,

Revenues by Region:

2018

2017

Puerto Rico
$3,184
  75.6%
$3,515
  86.8%
United States
  287
  6.8%
  347
  8.6%
Europe
  721
  17.1%
  182
  4.5%
Other
  20
  0.5%
  2
  0.1%

$4,212
  100%
$4,046
  100%

	Three months ended July 31,								Nine months ended July 31,
Revenues by Region:	2021				2020				2021				2020
Puerto Rico	$	3,749	75.2	%	$	4,990	79.4	%	$	10,861	74.8	%	$	14,287	86.4	%
United States		623	12.5	%		939	15.0	%		1,547	10.7	%		1,724	10.4	%
Europe		580	11.6	%		311	5.0	%		1,785	12.3	%		467	2.8	%
Brazil		36	0.7	%		38	0.6	%		325	2.2	%		61	0.4	%
	$	4,988	100.0	%	$	6,278	100.0	%	$	14,518	100.0	%	$	16,539	100.0	%

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For the ~~three-month~~nine-month period ended ~~January~~July 31, ~~2018,~~2021, the Company’s total revenues ~~for the Company~~ were ~~$4.2 million, an increase~~approximately $14,518,000, a net decrease of ~~$0.2 million~~approximately $2,021,000 when compared to the same period last year. The Puerto Rico and US consulting markets had a revenue ~~increase is mainly attributable to~~decrease in projects ~~in the Europe consulting market for $0.5 million,~~of approximately $3,426,000 and $177,000, respectively, which were partially offset by ~~a decline~~the increase in ~~the Puerto Rico Lab~~projects revenue in Europe and ~~the consulting market~~Brazil markets of ~~$0.2 million~~approximately $1,318,000 and ~~$0.1 million,~~$264,000, respectively. ~~Other Company divisions sustained minor revenue losses or remained constant, when compared to the same period last year.~~ When compared to the same period last year, gross profit decreased by 5.5 percentage points. The net decrease in gross margin ~~increased 0.2~~ percentage points is mainly attributable to some projects in the Puerto Rico market for the nine-month period ended July 31, 2020, for which the gross margin was higher than usual. Selling, general and administrative expenses were approximately $2,917,000, a decrease of approximately $318,000. The net decrease is mainly attributable to the decrease of consulting fees and other administrative expenses of approximately $326,000 and $100,000, respectively, partially offset by an increase in non-recurring legal fees of approximately $108,000. Other income increased by approximately $1,912,000, mainly as the result of the forgiveness of principal and accrued interest of the SBA Loans for the aggregate amount of approximately $1,956,000, partially offset by the decline in interest income because of lower interest rates. These factors resulted in a net income of approximately $2,783,000 for the nine-month period ended July 31, 2021, or a increase of approximately $876,000 when compared to the same period last year.

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 ~~net increase in gross margin is mainly attributable~~extent to ~~the increase of 0.6 percentage points attained by consulting, mostly from European projects, partially offset~~which our operations will be impacted by the ~~decline of 0.4 percentage points in~~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 Lab. Lab testing volume has not increased to absorb the costs associated with the Lab expansion sustained during fiscal years 2017 and 2016. Selling, general and administrative expenses were approximately $1,064,000, a net decrease of $352,000 when compared to the same period last year. The decrease is mainly attributable to cost reduction measures geared to align our operational support expenses to the market conditions. These reductions include, among others, the closing of operational satellite offices and the net reduction of business development and global support personnel. These factors contributed to our net income before income tax and Transition Tax be approximately $37,000, an increase in earnings of approximately $417,000, when compared to the same period last year. (See “Results of Operations” below.)

~~The long-term impacts~~severity of the ~~Hurricanes,~~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 ~~highly~~ dependent on the effect the local ~~economy~~ and global economy, including any impacts of the coronavirus pandemic, changes in tax laws, ~~and healthcare reform, and~~ worldwide ~~lifescience~~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 ~~the~~ industry trends.

Results of Operations

The following table that sets forth our statements of operations for the three-month and nine-month periods ended ~~January~~July 31, ~~2018~~2021 and ~~2017,~~2020 (dollars in ~~thousands)~~thousands, and as a percentage of ~~revenue:~~

Three months ended January 31,

2018

2017

Revenues
$4,212
  100.0%
$4,046
  100.0%
Cost of services
  3,129
  74.3%
  3,014
  74.5%
Gross profit
  1,083
  25.7%
  1,032
  25.5%
Selling, general and administrative costs
  1,064
  25.2%
  1,416
  35.0%
Other income (expense), net
  18
  0.4%
  4
  0.1%
Net income (loss) before income tax and US Tax Reform Transition Tax
  37
  0.9%
  (380)
  -9.4%
Income tax and US Tax Reform Transition Tax expense
  2,701
  64.1%
  2
  0.0%
Net loss
  (2,664)
  -63.2%
  (382)
  -9.4%

revenues):

	Three months ended July 31,									Nine months ended July 31,
	2021				2020					2021				2020
Revenues	$	4,988	100.0	%	$	6,278		100.0	%	$	14,518	100.0	%	$	16,539	100.0	%
Cost of services		3,733	74.8	%		4,424		70.5	%		10,657	73.4	%		11,230	67.9	%
Gross profit		1,255	25.2	%		1,854		29.5	%		3,861	26.6	%		5,309	32.1	%
Selling, general and administrative expenses		895	17.9	%		1,038		16.5	%		2,917	20.1	%		3,235	19.6	%
Other income (expense), net		1,953	39.1	%		(30	)	(0.5	)%		1,976	13.6	%		64	0.4	%
Income before income taxes		2,313	46.4	%		786		12.5	%		2,920	20.1	%		2,138	12.9	%
Income tax expense		38	0.8	%		94		1.5	%		137	0.9	%		231	1.4	%
Net income		2,275	45.6	%		692		11.0	%		2,783	19.2	%		1,907	11.5	%

Revenues. ~~For~~Revenues for the three and nine months ended July 31, 2021 were $4,988,000 and $14,518,000, respectively, a decrease of approximately $1,290,000 and $2,021,000, or 20.5% and 12.2%, respectively, when compared to the same periods last year.

The decrease for the three months ended ~~January~~July 31, ~~2018, revenues for the Company were $4.2 million, an increase of $0.2 million~~2021, when compared to the same period last ~~year. The revenue increase~~year, is mainly attributable to ~~projects~~the decrease in ~~the Europe consulting market for $0.5 million, partially offset by a decline~~projects in the Puerto Rico, ~~Lab~~US and Brazil markets of approximately $1,241,000, 316,000 and $2,000, respectively, partially offset by the ~~consulting~~increase in project revenue in the Europe market of ~~$0.2 million and $0.1 million, respectively. Other Company divisions sustained minor revenue losses or remained constant,~~approximately $269,000.

The decrease for the nine months ended in July 31, 2021, when compared to the same period last ~~year.~~

year, is mainly attributable to a decrease in projects in the Puerto Rico and US markets of approximately $3,426,000 and $177,000, respectively, partially offset by increases in project revenue in Europe and Brazil of approximately $1,318,000, and $264,000, respectively.

Cost of Services; gross ~~margin~~profit. ~~Gross margin~~Cost of services for the three and nine months ended ~~January~~July 31, ~~2018 increased 0.2 percentage points~~2021 were approximately $3,733,000 and $10,657,000, respectively, a decrease of $691,000 and $573,000, respectively, when compared to the same ~~period~~periods last year.

Gross profit for the three and nine months ended July 31, 2021 decreased by 4.3 and 5.5 percentage points, respectively, when compared to the same periods last year. The net ~~increase~~decrease in gross ~~margin~~profit percentage points is mainly attributable to ~~the increase of 0.6 percentage points attained by consulting, mostly from European~~some projects ~~partially offset by the decline of 0.4 percentage points~~ in the ~~Lab. Lab testing volume has not increased to absorb~~Puerto Rico market for the ~~costs associated with~~three-month and nine-month periods ended July 31, 2020, which the ~~Lab expansion sustained during fiscal years 2017 and 2016 (e.g. depreciation on equipment, improvements amortization, leased space, payroll, etc.).~~

gross profit were higher than usual.

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Selling, General and Administrative Expenses. Selling, general and administrative expenses for the three and nine months ended ~~in January~~July 31, ~~2018~~2021 were approximately ~~$1.1 million,~~$895,000 and $2,917,000, respectively, a ~~net~~ decrease of ~~$0.3 million~~approximately $143,000 and $318,000 when compared to the same periods last year, respectively.

The decrease for the three months ended July 31, 2021, when compared to the same period last ~~year.~~ The decrease is mainly attributable to cost reduction measures geared to align our operational support expenses to the market conditions. These reductions include, among others, the closing of operational satellite offices and the net reduction of business development and global support personnel.

~~Income Tax and US Tax Reform Transition Tax Expense. The income tax expense~~year, is mainly attributable to the ~~effect~~decrease of consulting fees and other administrative expenses of approximately $131,000 and $23,000, respectively, partially offset by an increase in non-recurring legal fees for approximately $11,000.

The decrease for the ~~$2.7 million non-recurring Transition Tax imposed by the Tax Reform over the Company’s E&Ps.~~

~~Net Loss.~~ ~~For the three~~nine months ended ~~January~~July 31, ~~2018, our income before income tax and US Transition Tax was approximately $37,000, an improvement of $417,000~~2021, when compared to the same period last ~~year. The variance~~year, is mainly attributable to the decrease of consulting fees and other administrative expenses of approximately $326,000 and $100,000, respectively, partially offset by an increase in non-recurring legal fees for approximately $108,000.

Other Income, net. For the three-month and nine-month periods ended on July 31, 2021, other income, net was approximately $1,953,000 and $1,976,000, a ~~slight improvement~~net increase of approximately $1,983,000 and $1,912,000 when compared to the same periods last year. The net increase is mainly attributable to the forgiveness of principal and accrued interest of the SBA Loans in the aggregate amount of approximately $1,956,000, partially offset by the decline in interest income because of lower interest rates.

Net Income. Net income for the three and nine months ended July 31, 2021 was approximately $2,275,000 and $2,783,000, an increase of approximately $1,583,000 and $876,000 when compared to the same periods last year, respectively. The increase in net income is mostly attributable to the (i) decrease in revenue and related gross ~~margin, plus~~profit, (ii) partially offset by net savings on selling, general and administrative expenses, and (iii) the forgiveness of principal and accrued interest of the SBA Loans, partially offset by the decline in ~~other operational support expenses. After considering the Tax Reform $2.7 million Transition Tax, the Company sustained a net loss~~interest income because of ~~approximately $2.7 million, a decrease in earnings of $2.3 million~~lower interest rates, when compared to the same ~~period~~periods last year.

For the three and nine months ended ~~January~~July 31, ~~2018, earnings before~~2021, net income ~~tax and Transition Tax~~ per common share for both basic and diluted ~~was $0.002, a common~~were $0.098 and $0.120, an increase of $0.068 and $0.037 per share, ~~basic and diluted increase for each one of $0.018~~ when compared to the same ~~period~~periods last year. After considering income tax and the US Tax Reform Transition Tax, loss per common share for both basic and diluted was $0.115, a common share basic and diluted decrease for each one of $0.098 when compared to the same period last year.

year, respectively.

Liquidity and Capital Resources

Liquidity is a measure of our ability to meet potential cash requirements, including planned capital expenditures. As of ~~January~~July 31, ~~2018,~~2021, the Company had approximately ~~$18~~$25.0 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 ~~"Company Stock Repurchase~~"Repurchase Program"). During ~~the three-month period ended January 31, 2018,~~April 2020, the Company ~~repurchased 27,100~~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 July 31, 2021, the Company has 1,658,846 shares of ~~its~~ common ~~stock.~~

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, (including the Transition Tax).~~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 (as described above on “Results of Operations”).~~expenses. Management believes that based on the current level of working capital, operations and cash flows from operations, and the collectability of ~~high quality~~high-quality customer receivables ~~will be~~are sufficient to fund anticipated expenses and satisfy other possible long-term contractual ~~commitments for the next twelve months.~~

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 ~~locale,~~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 ~~three~~nine months ended ~~January~~July 31, ~~2018.~~

2021.

Critical Accounting Policies and Estimates

There were no material changes during the ~~three~~nine months ended ~~January~~July 31, ~~2018~~2021 to the critical accounting policies reported in our Annual Report on Form 10-K for the fiscal year ended October 31, ~~2017.~~

2020.

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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, ~~2017,~~2020, which could have a significant effect on our condensed consolidated financial statements.

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:

●

Because our business is concentrated in the lifescience 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 impacts of the Hurricanes, may affect the willingness of businesses to commence or expand operations in Puerto Rico, or may also consider closing operations located in Puerto Rico.

●

~~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 expand their Puerto Rico operations.~~

●

~~Our business and operating results may be adversely impacted if we are unable to maintain our certification as a minority-controlled company.~~

●

~~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.~~

●

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.

●

~~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.~~

●

~~Changes in public policy impacting the industries we serve could adversely affect our business.~~

●

~~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 reputation and divisions may be impacted by regulatory standards applicable to our customer products.~~

●

~~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.~~

●

~~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.~~

●

~~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.~~

●

~~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.~~

	·	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.

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Table of Contents

	·	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.

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. 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.

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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Table of Contents

PART II– OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

From time to time, we may be a party to legal proceedings incidental to our business. We do not believe that there are any 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.

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

~~(c) The following table provides information about purchases by~~1A. RISK FACTORS.

There have been no material changes to the ~~Company of its shares of common stock during~~Risk Factors previously disclosed in our Annual Report on Form 10-K for the ~~three-month period~~year ended ~~January~~October 31, ~~2018:~~

Period

Total Number of Shares
Purchased (1)

Average Price Paid per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

Maximum
Number of Shares
that May Yet Be
Purchased Under the Plans or
Programs (1)

November 1, 2017 through November 30, 2017
  27,100
$0.50
  27,100
  1,729,448
December 1, 2017 through December 31, 2017
  -
$-
  -
  1,729,448
January 1, 2018 through January 31, 2018
  -
$-
  -
  1,729,448
Total
  27,100
$0.50
  27,100

~~(1)~~

On June 13, 2014, the Board of Directors of the Company approved the Company Stock 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 will be at the discretion of the Company, subject to the requirements of the Securities Exchange Act of 1934, as amended, and related rules. The Company Stock 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 directly from directors or officers of the Company.

2020.

ITEM 6. ~~EXHIBITS~~

EXHIBITS.

(a)

Exhibits:

~~10.1~~		Consulting Agreement Amendment, dated January 8 2018, by and among Pharma-Bio Serv, Inc., Strategic Consultants International, LLC and Elizabeth Plaza, effective January 1, 2018 (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on January 8, 2018 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~~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

_________________

*	Furnished herewith.

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Table of Contents

~~———————~~

~~+ Management contracts or compensatory plans, contracts or arrangements.~~

* Furnished herewith.

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 and Vice President Finance and Administration
	(Principal Financial Officer and Principal Accounting Officer)

Dated: September 14, 2021


~~Dated: March 19, 2018~~-20-

	January 31, 2018*	October 31, 2017**
ASSETS:
Current assets
Cash and cash equivalents	$13,176,240	$11,751,714
Marketable securities	25,056	26,600
Accounts receivable	6,053,081	7,208,054
Other	439,967	550,163
Total current assets	19,694,344	19,536,531

Property and equipment	2,291,912	2,390,545
Other assets	423,180	422,925
Total assets	$22,409,436	$22,350,001

LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities
Current portion-obligations under capital leases	$14,061	$13,949
Accounts payable and accrued expenses	1,467,663	1,526,904
Income taxes payable	2,875	2,067
Total current liabilities	1,484,599	1,542,920
US Tax Reform Transition Tax payable	2,700,000	-
Obligations under capital leases	56,397	59,795
Total liabilities	4,240,996	1,602,715

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; 23,333,083 and 23,333,083 shares issued, and 23,062,531 and 23,089,631 shares outstanding at January 31, 2018 and October 31, 2017, respectively	2,333	2,333
Additional paid-in capital	1,312,864	1,295,314
Retained earnings	16,896,119	19,560,131
Accumulated other comprehensive income	218,946	137,671
	18,430,262	20,995,449
Treasury stock, at cost; 270,552 and 243,452 common shares held at January 31, 2018 and October 31, 2017, respectively	(261,822)	(248,163)
Total stockholders' equity	18,168,440	20,747,286
Total liabilities and stockholders' equity	$22,409,436	$22,350,001

	Three months ended January 31,
	2018	2017
REVENUES	$4,212,378	$4,046,291

COST OF SERVICES	3,129,233	3,013,946

GROSS PROFIT	1,083,145	1,032,345


SELLING, GENERAL AND ADMINISTRATIVE EXPENSES	1,063,983	1,416,342

INCOME (LOSS) FROM OPERATIONS	19,162	(383,997)

OTHER INCOME, NET	17,849	3,612

INCOME (LOSS) BEFORE INCOME TAX AND US TAX REFORM TRANSITION TAX EXPENSE	37,011	(380,385)

INCOME TAX AND US TAX REFORM TRANSITION TAX EXPENSE	2,701,023	1,750

NET LOSS	$(2,664,012)	$(382,135)


BASIC LOSSES PER COMMON SHARE	$(0.115)	$(0.017)

DILUTED LOSSES PER COMMON SHARE	$(0.115)	$(0.017)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC	23,063,997	23,051,349

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED	23,065,290	23,088,560

Type of security as of January 31, 2018	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Estimated Fair Value
U.S. Treasury securities	$4,500,000	$—	$—	$4,500,000
Other government-related debt securities:
Puerto Rico Commonwealth Government Development Bond	40,000	—	(14,944)	25,056
Total interest-bearing and available-for-sale securities	$4,540,000	$—	$(14,944)	$4,525,056

Type of security as of October 31, 2017	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Estimated Fair Value
U.S. Treasury securities	$4,500,000	$-	$-	$4,500,000
Other government-related debt securities:
Puerto Rico Commonwealth Government Development Bond	40,000	-	(13,400)	26,600
Total interest-bearing and available-for-sale securities	$4,540,000	$-	$(13,400)	$4,526,600

Classification in the Consolidated Balance Sheets	January 31, 2018	October 31, 2017
Cash and cash equivalents	$4,500,000	$4,500,000
Marketable securities	25,056	26,600
Total available-for-sale securities	$4,525,056	$4,526,600

	Three months ended January 31,
	2018	2017
Net loss available to common equity holders - used to compute basic and diluted earnings per share	$(2,664,012)	$(382,135)

Weighted average number of common shares - used to compute basic losses per share	23,063,997	��23,051,349
Effect of warrants to purchase common stock	-	-
Effect of restricted stock units to common stock	-	11,224
Effect of options to purchase common stock	1,293	25,987
Weighted average number of shares - used to compute diluted losses per share	23,065,290	23,088,560

	Three months ended January 31,
Revenues by Region:	2018		2017
Puerto Rico	$3,184	75.6%	$3,515	86.8%
United States	287	6.8%	347	8.6%
Europe	721	17.1%	182	4.5%
Other	20	0.5%	2	0.1%
	$4,212	100%	$4,046	100%

Period	Total Number of Shares Purchased (1)	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1)
November 1, 2017 through November 30, 2017	27,100	$0.50	27,100	1,729,448
December 1, 2017 through December 31, 2017	-	$-	-	1,729,448
January 1, 2018 through January 31, 2018	-	$-	-	1,729,448
Total	27,100	$0.50	27,100