MDNC 10-K & 10-Q changes, risk factors and insider trading
Medinotec Inc. · OTC · Surgical & Medical Instruments & Apparatus · CIK 1931055 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “You should carefully consider the risks described below, together with all of the other information included in this Annual Report on Form 10-K, before making an investment decision regarding our securities. The occurrence of any of the following risks, or additional risks and uncertainties not presently known to us or that we currently deem immaterial, could materially and adversely affect our business, financial condition, results of operations, cash flows and the trading price of our common stock. In such a case, you may lose all or part of your investment.”
New heading “Liquidity, Capital Needs and Dilution Risk”
New heading “Customer and Geographic Concentration Risk”
New heading “Regulatory and Product Approval Risk”
New heading “South Africa-Specific Operational and Political Risks”
New heading “Geopolitical, Trade and Tariff Risks”
New heading “Dependence on Key Personnel and Founder Control”
New heading “Market and Securities Risks”
New heading “Product Development, Competition and Commercialization Risk”
New heading “Newly imposed or increased U.S. tariffs, changes in trade policy, or reduced preferential market access for South African goods may materially impact our U.S. revenue, profit margins and competitiveness.”
New heading “Geopolitical tensions, including conflict involving Iran and South Africa’s geopolitical positioning, may materially adversely affect our business, financial condition and results of operations.”
New heading “Medinotec faces heightened geopolitical and trade risks due to South African international relations, as potential revocation of AGOA benefits, increased tariffs, and stricter import regulations on South African goods could significantly impact the cost, compliance, and competitiveness of its U.S.-bound medical exports.”
New heading “South Africa’s international relations and foreign policy positioning may affect its trade relationship with the United States and other key markets. Any deterioration in those relationships could result in reduced preferential market access, increased tariffs, enhanced customs scrutiny, stricter import requirements, sanctions-related restrictions or other barriers affecting South African exports.”
New heading “We may be unable to uplist our common stock to a national securities exchange, or maintain such a listing if achieved, which could adversely affect the liquidity and price of our common stock.”
Removed heading “Risks Related to Our Business Operations”
Removed heading “Risks Related to Management, Personnel and Control Persons”
Removed heading “Risk Associated with Legal and Regulatory Matters”
Removed heading “Risks Associated with Political Instability and Regional Issues”
Removed heading “Risks Relating to Our Securities”
Removed heading “Risks Related to our Financial Position and Need for Capital”
Removed heading “The Medinotec Group of Companies may need additional financing – any limitation on our ability to obtain such additional financing could have a material adverse effect on the business, financial condition, and results of operations.”
Removed heading “We have identified material weaknesses in our internal control over financial reporting. Failure to achieve and maintain effective internal controls over financial reporting could adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner, which could have an adverse impact on our business.”
Removed heading “South Africa Specific Risk of South Africa Being Grey listed by the FATF- Financial Action Task Force”
Largest changes
“South Africa’s international relations and foreign policy positioning may affect its trade relationship with the United States and other key markets. Any deterioration in those relationships could result in reduced preferential market access, increased tariffs, enhanced customs scrutiny, stricter import requirements, sanctions-related restrictions or other barriers affecting South African exports.”see in full comparison
“We have identified material weaknesses in our internal control over financial reporting. Failure to achieve and maintain effective internal controls over financial reporting could adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner, which could have an adverse impact on our business.”see in full comparison
“Medinotec faces heightened geopolitical and trade risks due to South African international relations, as potential revocation of AGOA benefits, increased tariffs, and stricter import regulations on South African goods could significantly impact the cost, compliance, and competitiveness of its U.S.-bound medical exports.”see in full comparison
“We are working to remediate our material weaknesses as soon as practicable. Our remediation plan, which is continuing to be developed, can only be accomplished over time, and these initiatives may not accomplish their intended effects. Failure to maintain our internal control over financial reporting could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis or result in misstatements. …”see in full comparison
“Newly imposed or increased U.S. tariffs, changes in trade policy, or reduced preferential market access for South African goods may materially impact our U.S. revenue, profit margins and competitiveness.”see in full comparison
“We may be unable to uplist our common stock to a national securities exchange, or maintain such a listing if achieved, which could adversely affect the liquidity and price of our common stock.”see in full comparison
Full comparison: every changed paragraph (134)
You should carefully consider the risks described below, together with all of the other information included in this Annual Report on Form 10-K, before making an investment decision regarding our securities. The occurrence of any of the following risks, or additional risks and uncertainties not presently known to us or that we currently deem immaterial, could materially and adversely affect our business, financial condition, results of operations, cash flows and the trading price of our common stock. In such a case, you may lose all or part of your investment.
You should carefully consider the risks described
below together with all of the other information included in this Annual Report before making an investment decision with regard to our
securities. The statements contained in or incorporated herein that are not historic facts are forward-looking statements that are subject
to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking
statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed.
In that case, you may lose all or part of your investment. In addition to other information in this registration statement and in other
filings we make with the Securities and Exchange Commission, the following risk factors should be carefully considered in evaluating our
business as they may have a significant impact on our business, operating results and financial condition. If any of the following risks
actually occurs, our business, financial condition, results of operations and future prospects could be materially and adversely affected.
Because of the following factors, as well as other variables affecting our operating results, past financial performance should not be
considered as a reliable indicator of future performance and investors should not use historical trends to anticipate results or trends
in future periods.
SUMMARY OF PRINCIPAL RISK FACTORS
The following is a summary of the principal risks that could materially and adversely affect our business, financial condition, results of operations and stock price. This summary does not include every risk we face; a more complete discussion of the risks set forth below appears later in this Item 1A under the corresponding headings. You should read the full “Risk Factors” section for a more detailed discussion of these and other material risks.
Liquidity, Capital Needs and Dilution Risk
We may require additional capital to fund U.S. commercialization, product development and potential acquisitions. There can be no assurance that such financing will be available on favorable terms, or at all. Any future equity offerings would dilute existing shareholders, and our failure to obtain necessary capital could delay or prevent execution of our growth strategy.
Customer and Geographic Concentration Risk
We derive a substantial majority of our revenue from a limited number of customers and geographic markets. In particular, sales to DISA Life Sciences in South Africa represented approximately 89% of our total revenue for the fiscal year ended February 28, 2026. Any loss or material reduction in business with DISA Life Sciences, or any disruption in the South African market, would have a material adverse effect on our revenue, profitability and cash flows.
Regulatory and Product Approval Risk
Our ability to commercialize current and future products in the United States and other major markets depends on obtaining and maintaining regulatory clearances and approvals, including FDA 510(k) clearance and compliance with the EU Medical Device Regulation (MDR). Delays in, or failure to obtain, these approvals, or any subsequent product modifications that require new clearances, could prevent or significantly delay product launches, harm our reputation and materially adversely affect our growth and financial results.
South Africa-Specific Operational and Political Risks
Our primary manufacturing operations are located in South Africa, exposing us to country-specific risks including frequent load-shedding and unstable power supply, political instability, Broad-Based Black Economic Empowerment (BEE) requirements that could limit growth or talent acquisition, stringent exchange controls that may restrict or delay repatriation of funds to the United States, and potential changes in South African tax, labor or regulatory policy. Any of these factors could disrupt manufacturing, increase costs or impair our ability to fund U.S. operations.
Geopolitical, Trade and Tariff Risks
We are subject to risks arising from U.S. tariffs on South African goods, potential revocation or modification of AGOA benefits, retaliatory trade measures, and broader geopolitical tensions (including conflicts involving Iran and global shipping disruptions). These developments could materially increase our costs, reduce competitiveness in the U.S. market, disrupt supply chains and adversely affect revenue and margins.
Dependence on Key Personnel and Founder Control
Our future success depends heavily on the continued service of our founder, CEO and director Dr. Gregory Vizirgianakis and our CFO Pieter van Niekerk. In addition, Dr. Vizirgianakis and his brother Stavros together control approximately 81% of our voting power. The loss of either key executive, or any actions by the controlling shareholders that are not aligned with minority shareholders, could materially harm our business, strategy execution and governance.
Market and Securities Risks
Our common stock trades on the OTCQX and is subject to “penny stock” rules, which may limit liquidity and make it more difficult for investors to sell shares. The market price of our stock may be highly volatile, and we may be unable to uplist to a national securities exchange or maintain such a listing if achieved. These factors could result in substantial losses for investors and limit our ability to raise capital in the future.
Product Development, Competition and Commercialization Risk
Our growth depends on successfully developing and commercializing new products and line extensions. Many of these products are in the development pipeline and may never reach market, may fail to obtain regulatory approval or may not achieve commercial acceptance. We also face intense competition from much larger, well-capitalized medical device companies, which could limit our market share and profitability.
Investing in our securities involves a high degree of risk. You should carefully review the full discussion of these and other risks in the “Risk Factors” section below before making an investment decision.
The following is a condensed summary of the principal
risks associated with our business. These risks represent the key challenges and uncertainties we face, and they are described in greater
detail in the “Risk Factors” section of this report. Investing in our securities involves a high degree of risk, and the occurrence
of any of these factors could materially and adversely affect our business, financial condition, results of operations, or stock price.
Financial Risks: We carry substantial debt,
may need additional financing, and face exposure to interest rate changes, accounting rule shifts, and tax regulation updates, all of
which could impact financial flexibility and results.
Operational Challenges: Our success depends
on product development, supply chain continuity, and competitive positioning. Industry consolidation, pricing pressures, IT disruptions,
and foreign exchange volatility pose risks to our operations and profitability.
Customer and Market Exposure: We rely heavily
on a limited number of customers, including DISA Life Sciences, which increases the risk of revenue concentration. Inadequate insurance
coverage and internal control weaknesses may further exacerbate operational vulnerabilities.
Management and Governance: Our business depends
on a small number of key personnel, many of whom are located outside the U.S. Concentrated voting power among founders and limited public-company
experience heighten governance and compliance risks.
Regulatory and Legal: Delays in obtaining regulatory
approvals, potential product liability, compliance with marketing and reimbursement rules, IP protection, and evolving environmental and
data privacy laws all pose significant risks. Violations could lead to penalties or legal action.
Geopolitical and Regional Risks: Political
and economic instability in South Africa—such as load-shedding, exchange controls, and FATF grey-listing—may impair operations.
Broader geopolitical tensions and trade disputes also affect supply chains and market access. Geopolitical and trade risks due to
tariffs and trade wars.
Market and Securities Risks: Our shares trade
on the OTCQX market and are considered penny stocks, which may limit liquidity. Future equity issuances could dilute existing shareholders,
and share prices may fluctuate significantly due to external factors Details of the above risks are as follows:
Risks Related to Our Business Operations
Risks Related to Management, Personnel and Control
Persons
Risk Associated with Legal and Regulatory Matters
Risks Associated with Political Instability
and Regional Issues
Risks Relating to Our Securities
Risks Related to our Financial Position and Need
for Capital
The Medinotec Group of Companies’Companies
may substantialneed additional financing – any limitation on our ability to obtain such additional financing could have a material adverse
leverageeffect on the business, financial condition, and debtresults serviceof obligations could adversely affect the business.operations.
Our expansion plans, particularly the continued commercialization of our products in the United States (including the Trachealator and Outflo), pursuit of additional FDA 510(k) clearances, and scaling of manufacturing and regulatory compliance activities, may require additional capital. We may also need capital to operate our business in response to circumstances caused by the risks described in this report, including customer concentration, foreign exchange volatility, and South Africa-specific operational challenges.
The raising of additional capital could result in dilution to stockholders. In addition, there is no assurance that we will be able to obtain additional capital if we need it, or that if available, it will be available to us on favorable or reasonable terms. Any limitation on our ability to obtain additional capital as and when needed could have a material adverse effect on the business, financial condition and results of operations.
As of February 28, 2025, the consolidated Medinotec
Group of Companies had approximately $1,505,047 of current liability obligations and $1,033,097 of long-term liabilities outstanding.
The long-term debt relates to the non-current
portion of the operating lease liability, deferred tax liabilities as well as an unsecured loan from the related party Minoan
Medical, which was the prior shareholder of DISA Medinotec Proprietary Limited. The Medinotec Group of Companies has a period of 3 years
post the Initial Public Offer ("IPO”) date of 31 March 2023 to repay the loan, during these 3 years the loan will carry interest
at the prevailing prime lending rate of the time. The prevailing prime lending rate as of February 28, 2025, in South Africa is 11.00%.
The interest charged for the year ended
February 28, 2025, for the consolidated Medinotec Group of Companies was $176,416 and a 1% movement in the interest rates constitutes
a value of $16,038 on an annual basis.
From time to time the Group utilized trade
finance to assist with funding of orders for raw materials with longer lead and shipping times the interest spent on trade finance for
the year ended February 28, 2025 for the consolidated Medinotec Group of Companies was $28,126 and $35,317 for the year ended February
29, 2024. Trade Finance carries a charge of prime plus 1% therefore 12.00%, at February 28, 2025. A 1% movement in the interest rate would
equate to $2,344 for the year ending February 28, 2025. Trade finance is use specific and linked to inventory ordering therefore no forecast
will be disclosed for an expected change in annual utilization and the quarter and six-month sensitivity adjustments are disclosed on
the current orders financed by trade finance at the time.
As of February 28, 2025, the related party
loan for the consolidated Medinotec Group of Companies had a balance of $940,277 with an interest charge of $141,748 per annum at the
prevailing prime interest rate of 11.00% at that date. A 1% movement in the interest rates constitutes a value of $12,886.
The Medinotec Group of Companies has
the option to settle earlier, and settlement can be in cash or any form of equivalent. It is currently the intention of management to
settle the loan in equity at some point in the future, since the agreement allows the Medinotec Group Companies to settle the amounts
either in equity or in cash. If equity is used, the impact on cashflow would be zero.
If we elect to settle the loan in cash: Cash
reserves available in February 2025 in the Consolidated Medinotec Group of Companies were $2,769,686 and the loan account outstanding
at the same time was $940,277. Therefore, if settled today it would constitute 34% of available cash.
The interest
rate chargeable is a guideline determined by the South African Reserve Bank and gets utilized by financial institutions to determine the
financial gain they may derive from a loan. The Prime rate is therefore at arm’s length and justifiable rate that can be applied
to a loan within the borders of the Republic of South Africa.
OurAny potential future debt service obligations may
require us to use a portion
of the operating cash flow to pay interest and principal on indebtedness instead of for other corporate purposes,
including funding the
future expansion of the business, acquisitions, and ongoing capital expenditures, which could impede growth. If
operating cash flow and
capital resources are insufficient to service debt obligations, we may be forced to sell assets, seek additional
equity or debt financing
or to restructure our debt, which could harm long-term business prospects.
Our failure to comply with the terms of ourany indebtednesspotential
future debt obligations could also result in an event of default which, if not cured or waived, could result in the acceleration of all
its debt and impact our
ability to operate as a going concern.
The Medinotec Group of Companies may need additional
financing – any limitation on our ability to obtain such additional financing could have a material adverse effect on the business,
financial condition, and results of operations.
Our expansion plans may require additional capital
and we may need capital to operate our business in response to circumstances caused by the risks in conducting business in this industry.
The raising of additional capital could result in dilution to stockholders. In addition, there is no assurance that we will be able to
obtain additional capital if we need it, or that if available, it will be available to us on favorable or reasonable terms. Any limitation
on our ability to obtain additional capital as and when needed could have a material adverse effect on the business, financial condition
and results of operations.
Changes to existing rules or the questioning of current
practices may adversely affect our reported financial results or the way we conduct our business. The fact that we operate in multiple
territories (including the United States and haveSouth a worldwide footprintAfrica) heightens this risk in specific territories.
Many healthcare companies, including healthcare systems,
distributors, manufacturers, providers, and insurers, are consolidating or have formed strategic alliances. As the healthcare industry
consolidates, competition to provide goods and services to industry participants will become more intense. Further, this consolidation
creates larger enterprises with greater negotiating power, which they can use to negotiate price concessions. If we must reduce our prices
because of industry consolidation,concessions or ifdemand wemore losefavorable
contract customers as a result of consolidation, the business, financial condition, results of
operations and cash flows could be adversely affected.terms.
As a smaller company with limited market share, we are particularly vulnerable to these dynamics. Our business is already subject to significant price pressure in both our proprietary product lines and our distribution business. Larger consolidated customers or distributors may demand deeper discounts, volume-based rebates, or exclusive arrangements that favor our much larger, better-capitalized competitors. If we are forced to reduce our prices or lose existing distributor relationships (including our significant relationship with DISA Life Sciences) as a result of industry consolidation, our revenues, gross margins, profitability, and cash flows could be materially and adversely affected.
We believe our low-cost manufacturing base in South Africa provides some competitive advantage, but there can be no assurance that this advantage will be sufficient to offset the pricing and contracting leverage held by larger consolidated entities.
Most of our customers and the healthcare providers to whom our customers supply medical devices, rely on third-party payers, including government programs (such as Medicare and Medicaid in the United States and public healthcare funding in South Africa) and private health insurance plans, to reimburse some or all the cost of the procedures in which medical devices that incorporate components we manufacture or assemble are used.
The continuing efforts of governmental authorities,
insurance companies and other payers of healthcare costs to contain or reduce these costscosts, through mechanisms such as reduced reimbursement
rates, bundled payments, competitive tender processes, prior-authorization requirements, and value-based purchasing, could lead to patients
being unable to obtain
approval for payment from these third-party payers.payers or could cause hospitals and other providers to favor lower-cost
alternatives.
If third-party payer payment approval cannot be obtained by patients, or if providers face increased pressure to reduce procedure costs, sales of finished medical devices that include our components (including our proprietary Trachealator, Outflo, and Cape Cross products) may decline significantly. Our customers, including distributors and hospitals, may reduce or eliminate purchases of our devices in favor of lower-priced competitors. These pressures are particularly acute in the U.S. market where we are expanding commercialization efforts and in South Africa where a large portion of our current revenue is generated. The cost-containment measures that healthcare providers are instituting, both in the United States and outside of the United States, could harm our ability to maintain pricing levels, achieve anticipated sales volumes, and operate profitably.
If third-party payer payment approval cannot be obtained
by patients, sales of finished medical devices that include our components may decline significantly and our customers may reduce or eliminate
purchases of these components.
The cost-containment measures that healthcare providers
are instituting, both in the US and outside of the US could harm our ability to operate profitably.
The research, development, marketing and sale of many of our new products — including the Trachealator, Outflo, Cape Cross family, and our development pipeline (Micro CTO Catheter, StaXstop Catheter, Septus Balloon, and Vaultseal Balloon) — depends on our maintaining working relationships with healthcare professionals. Physicians, surgeons, and other key opinion leaders assist us as researchers, product consultants, clinical advisors, trainers, inventors, and public speakers. These relationships are critical for product feedback, clinical validation, surgeon training programs, endorsement, and adoption in both existing and new markets, particularly as we expand commercialization in the United States.
Management's Discussion & Analysis (MD&A)
Removed heading “Key Drivers of Revenue Growth”
Removed heading “Note Receivable”
Removed heading “Interest Expense”
Removed heading “Interest Income”
Removed heading “Allowance for credit losses on loans receivable”
Largest changes
“The Trachealator product obtained FDA approval in November 2021, which allowed the Company to sell this product into the United States of America. Since the Company had no prior sales channels or infrastructure in the United States, management found it prudent to plan a roll out of the product with a distributor that had an established network and infrastructure. For this business, the Company partnered with a company called Innovative Outcomes and entered into a revolving credit facility to a maximum of $750,000. …”see in full comparison
“Management reviews inventory for excess, slow-moving and obsolete items and records write-downs when the carrying value of inventory is not expected to be recoverable. In performing this assessment, management considers factors such as inventory age, historical usage, expected future demand, product shelf life and estimated net realizable value. Because this evaluation requires management to make assumptions about future demand and usage, actual results could differ from those estimates. …”see in full comparison
“The Company continues to monitor gross margin closely across both segments. Outside the United States, margins benefited from stronger revenue contribution and sales mix during fiscal 2026. The strengthening of the South African Rand during fiscal 2026 may also have affected margin trends compared to the prior year. The Company also continues to monitor the effect of tariffs and other input cost pressures on products sold into the United States, which may adversely affect margins if not mitigated.”see in full comparison
Full comparison: every changed paragraph (82)
Results
of Operations for the Years Ended February 28, 2026 and February 28, 2025 and February 29, 2024
For the fiscal year ended February 28, 2026, revenue was $9,729,463, compared to $9,113,607 for the fiscal year ended February 28, 2025, an increase of $615,856, or 7%. This increase was driven primarily by the expansion of the Company’s distribution business outside the United States, particularly through enhanced partnerships in South Africa that contributed to higher sales volumes in the Company’s cardiology and dialysis product lines.
Distribution agreement sales outside the United States increased by $569,469 to $8,141,634 for fiscal 2026 from $7,572,165 for fiscal 2025. The increase in these sales reflected, in part, the first full year of revenue generated under the Company’s renal dialysis distribution agreement in the South African market, which was entered into during the third quarter of fiscal 2025. Internally designed and manufactured sales outside the United States also increased by $112,632 to $975,969 for fiscal 2026 from $863,337 for fiscal 2025.
These increases were partially offset by lower internally designed and manufactured sales in the United States, which decreased by $66,245 to $611,860 for fiscal 2026 from $678,105 for fiscal 2025. Accordingly, the overall increase in revenue for fiscal 2026 was attributable primarily to stronger sales outside the United States, particularly increased distribution agreement sales in South Africa, partially offset by lower U.S. sales of internally designed and manufactured products, including Trachealator, due in part to the timing of customer orders. Management is closely monitoring performance in the United States segment and has implemented initiatives intended to improve sales performance. The Company expects these efforts, together with the fiscal 2027 launch of OutFlo in the United States market, to support revenue growth in that segment during fiscal 2027, although actual results may differ depending on customer demand, commercialization progress, market acceptance and other factors.
The Company continues to derive a substantial portion of its revenue from sales outside the United States, particularly in South Africa, and from a limited number of distribution relationships. While these results reflect improved market penetration in key markets, future performance remains subject to risks and uncertainties, including customer and geographic concentration, variability in distributor execution, the timing of customer orders, changes in market demand, and broader economic conditions. In addition, the Company monitors the effect of foreign currency fluctuations, which may affect both reported revenue and operating results from period to period.
Management expects established distribution relationships to remain an important component of revenue generation, while continuing efforts to broaden the Company’s product offering, expand sales of internally designed and manufactured products, and reduce concentration risk over time.
For the fiscal year ended February 28, 2025, the Consolidated Medinotec
Group of Companies reported revenue of $9,113,607, an increase of $4,093,216 or 81.5% compared to $5,020,391 in the prior year. This
growth was primarily driven by the full-year impact of newly established distribution agreements, the initial commercialization of
a key product in the U.S. market, and continued expansion of our global sales footprint.
Key Drivers of Revenue Growth
While our business is not subject to pronounced seasonality,
seasonality, we typically observe modest declines in sales during periods that coincide with regional holidays or extended breaks—breaks, particularly in
in markets like South Africa. These trends are known and budgeted for as part of our operating planning cycle.
TheA major component of total assets is "Cash"
of $2,757,024 for the year ending February 28, 2026 and $2,769,686 for the year ending February 28, 2025 and $2,808,910 for the year ending February 29, 2024.2025. A significant portion of this
is maintained inside the United States in USD of $2,019,628$1,816,626 for the year ending February 28, 20252026 and $2,478,434$2,019,628 for the year ending February
February28, 29, 2024.2025.
Cost of Goods Sold
For the fiscal year ended February 28, 2026, cost of goods sold was $4,601,350, compared to $4,295,118 for the fiscal year ended February 28, 2025, an increase of $306,232, or 7%. The increase in cost of goods sold was primarily attributable to higher sales volumes outside the United States, particularly increased distribution agreement sales in South Africa, partially offset by lower sales volumes in the United States.
Gross profit was $5,128,113 for fiscal 2026, compared to $4,818,489 for fiscal 2025, an increase of $309,624, or 6%. Gross margin remained stable at 53% for fiscal 2026 (fiscal 2025: 53%).
The increase in gross profit was driven primarily by the higher contribution from sales outside the United States. Outside the United States, revenue increased by $682,101 to $9,117,603 for fiscal 2026 from $8,435,502 for fiscal 2025, while cost of sales increased by $238,844 to $4,446,136 from $4,207,292. As a result, gross profit outside the United States increased by $443,257 to $4,671,467 for fiscal 2026 from $4,228,210 for fiscal 2025. This improvement reflected increased revenue contribution and a favorable sales mix, including increased distribution agreement sales and higher internally designed and manufactured sales outside the United States. The improvement was partially offset by the recognition of an inventory obsolescence provision during fiscal 2026, which increased cost of sales.
Inside the United States, revenue decreased by $66,245 to $611,860 for fiscal 2026 from $678,105 for fiscal 2025, while cost of sales increased by $67,388 to $155,214 from $87,826. As a result, gross profit inside the United States decreased by $133,633 to $456,646 for fiscal 2026 from $590,279 for fiscal 2025. The decrease in gross profit in this segment was primarily attributable to lower revenue, lower selling prices during fiscal 2026, and higher cost of sales.
On a consolidated basis, the increase in gross profit outside the United States was partially offset by the decrease in gross profit inside the United States. Although consolidated revenue increased by $615,856, cost of sales increased by $306,232, including as a result of the inventory obsolescence provision recognized during fiscal 2026. As a result, consolidated gross margin remained substantially consistent year over year.
The Company continues to monitor gross margin closely across both segments. Outside the United States, margins benefited from stronger revenue contribution and sales mix during fiscal 2026. The strengthening of the South African Rand during fiscal 2026 may also have affected margin trends compared to the prior year. The Company also continues to monitor the effect of tariffs and other input cost pressures on products sold into the United States, which may adversely affect margins if not mitigated.
For the fiscal year ended February 28, 2025, the Consolidated
Medinotec Group of Companies recorded cost of goods sold (COGS) of $4,252,821, compared to $2,577,922 for the year ended February 29,
2024. This represents a year-over-year increase of $1,674,899, in line with the significant growth in sales.
Gross profit for fiscal 2025 was $4,860,786, representing
a gross margin of 53%, compared to a gross margin of 49% in fiscal 2024. The increase in gross margin is primarily attributable to increased
sales, together with manufacturing and sales processes becoming more efficient as time progresses, as well as an improved sales mix
favoring higher-margin products. The effect of exchange rate differences on imports and exports were also more stable during the year.
• Stabilization
of Exchange Rates: The Group is exposed to foreign exchange fluctuations related to both imports and exports, which can materially affect
margins due to timing differences between procurement and sales. During fiscal 2025, exchange rates remained relatively stable, with
the South African Rand appreciating by approximately 4.6% against the U.S. Dollar. This stability helped mitigate currency-related margin
volatility.
Related Party Transactions
For the fiscal year ended February 28, 2026, operating expenses totaled $4,033,601, an increase from $1,626,990 for the fiscal year ended February 28, 2025.
For the fiscal year ended February 28, 2025, operating
expenses totaled $1,669,287, a decrease from $1,841,891 for the fiscal year ended February 29, 2024. This decrease was primarily due to
reclassification adjustments, offsetting the increased costs related to business expansion and product rollout.
· General and Administrative Expenses: General and administrative expenses increased to $2,317,229 for the year ended February 28, 2026, from $1,348,817 for the year ended February 28, 2025, an increase of $968,412. The increase was driven primarily by the introduction of indirect executive compensation, under which executives who are not directly employed by the Company are compensated for time spent managing the Company through the entities by which they are employed. This accounted for approximately $549,498 of general and administrative expense during fiscal 2026. General and administrative expenses also increased due to higher salary costs associated with the appointment of more qualified full-time staff members in the finance and research and development departments.
· Research and Development Expenses: Research and development expenses increased to $149,858 for the year ended February 28, 2026, from $91,133 for the year ended February 28, 2025, an increase of $58,725. The increase was primarily attributable to stock-based compensation granted to a physician in exchange for services rendered. The Company is also currently exploring the development of three new products, namely StaXstop, Septus Balloon and Vaultseal Balloon. Research and development spending remains modest relative to total operating expenses and continues to be focused on product opportunities that align with the Company’s existing technical and manufacturing capabilities.
· Selling Expenses: Selling expenses increased to $1,485,641 for the year ended February 28, 2026, from $113,194 for the year ended February 28, 2025, an increase of $1,372,447. The increase was driven primarily by distributor support costs incurred under the Company’s arrangements in the South African market. The Company agreed to reimburse its distribution partner for a portion of that partner’s expenditure incurred in connection with the sale of cardiology and dialysis products in South Africa. A substantial portion of these costs related to the distributor’s employee costs for its sales force, together with other variable expenditure incurred in supporting these sales activities. These distribution costs amounted to $1,320,115 for fiscal 2026, representing the majority of the increase from fiscal 2025.
· Depreciation and Amortization Expense: Depreciation and amortization expense increased modestly to $80,873 for the year ended February 28, 2026, from $73,846 for the year ended February 28, 2025. The Company allocates a portion of depreciation to products manufactured during the period, with the balance recognized in operating expenses.
General and Administrative Expenses: General
and administrative (G&A) expenses decreased significantly, although this was partially due to the reclassification of $327,950 in
expenses to revenue in the first quarter of fiscal 2025, relating to activities outside the United States. Excluding this reclassification,
G&A expenses increased by $48,036, mainly driven by the addition of payroll costs related to new distribution agreements and higher
compliance costs as the Company expanded its market presence.
Research and Development (R&D): The Company
recorded R&D expenses of $91,133 for the year ended February 28, 2025, up from $22,351 in the prior year. However, R&D spending
remains a relatively small portion of our overall operating expenses. This increase was primarily focused on perfecting existing manufacturing
processes to support the scaling of our Trachealator product and other potential product integrations. Given the nature of our operations,
the majority of our R&D efforts are directed toward refining production methods and ensuring that products can be efficiently manufactured
within our current infrastructure. We only engage in R&D for products where a working prototype and proof of concept are already in
hand, and we focus exclusively on products that align with our existing capabilities. This approach significantly reduces our R&D
costs compared to companies engaged in speculative or early-stage development.
Compliance Costs: A substantial portion of
our operating expenses relates to compliance activities required to maintain international standards, including ISO certifications and
CE/FDA product registrations. These compliance costs are essential for ensuring that our products meet regulatory requirements in the
markets where we operate. Additionally, we incur costs for maintaining distribution licenses and product registrations with local health
authorities in each country, such as the South African Health Products Regulatory Authority (SAHPRA) in South Africa. While some of these
compliance costs are one-time in nature, many will be recurring as the Company enters new territories and ensures ongoing regulatory compliance.
As we expand into more markets, particularly within the medical device industry, these compliance costs will likely increase.
Looking forward, the Company expects future operating expenses to continue to be influenced by regulatory compliance and corporate infrastructure requirements, sales and distribution support costs, and targeted research and development activities. The Company expects to continue incurring costs associated with operating in regulated markets, including product registrations, quality and compliance requirements, public company compliance and the personnel needed to support a growing business. In addition, as the Company continues to expand its distribution activities, particularly outside the United States, selling expenses may remain elevated due to distributor support costs, sales force-related expenditure and other market development costs required to support revenue growth. In addition, while R&D expenses will remain relatively modest, the Company's focus will remain on optimizing manufacturing processes, ensuring that production capabilities are aligned with increased product demand and the scalability of our operations.
Looking forward, we anticipate that future operating
expenses will grow primarily in two areas:
In addition, while R&D expenses will remain relatively
modest, the Company's focus will remain on optimizing manufacturing processes, ensuring that production capabilities are aligned with
increased product demand and the scalability of our operations.
Non-operating income and expenses totaled a net expense of $25,325 for the fiscal year ended February 28, 2026, compared to a net expense of $167,361 for the fiscal year ended February 28, 2025. The improvement was driven primarily by lower interest expense, partially offset by higher other non-operating expense.
Interest expense decreased to $87,595 for fiscal 2026 from $176,416 for fiscal 2025. The decrease was primarily attributable to lower interest incurred on the loan payable to Minoan Medical, as fiscal 2026 included interest expense on that loan only through August 31, 2025, when the outstanding balance was settled. Accordingly, interest expense for fiscal 2026 reflected only a partial year of interest on this borrowing.
Interest income increased to $71,513 for fiscal 2026 from $8,668 for fiscal 2025, primarily due to higher returns earned on cash balances during the year. Other non-operating expense was $9,243 for fiscal 2026, compared to other non-operating income of $387 for fiscal 2025.
Non-operating income and expenses for the fiscal year
ended February 28, 2025, primarily consist of interest earned on free cash and the management of liquid assets. These amounts are immaterial
relative to our core operating results and do not significantly affect the business’s overall financial performance. However, there
were some key non-operating transactions that impacted both the balance sheet and income statement during the prior fiscal year.
Note Receivable
On November 30, 2023, the Company fully
impaired its note receivable from Innovative Outcomes, which amounted to $642,012. This decision was made prudently, as the receivable
was no longer supported by any ongoing Trachealator revenue streams. While the receivable was impaired, it does not eliminate the future
liability of Innovative Outcomes to repay the amount. No interest income is recognized on the note while it remains impaired. The full
recoverability of the receivable has not yet been definitively tested.
Interest Expense
Interest expense primarily relates to the
interest on the related party loan of $141,748 and the interest paid to our logistics service provider of $28,126. These expenses are
recorded in line with the terms of the respective agreements and are consistent with prior periods.
Interest Income
Interest income for the fiscal year
was earned from two main sources: the note receivable which was impaired and a tax refund receivable. No interest income is recognized
on the impaired note receivable, although interest continues to accrue contractually in accordance with the terms of the agreement, while
interest on the tax refund receivable was earned during the prior fiscal year, contributing to the total interest income recognized.
During the fiscal year ended February 28, 2025, no interest was recognized in respect of the note receivable; while an amount of $8,668
was earned on tax refund receivable, representing a total of $8,668 interest income for the year.
The Consolidated Medinotec Group of Companies reported net
aincome of $794,502 for the fiscal year ended February 28, 2026, compared to net profitincome of $2,159,473 for the year ending February 28, 2025, compared to a net loss of $404,688 for thefiscal year ended February
28, 29,2025, 2024.a decrease of $1,364,971.
The decrease in net income was primarily attributable to the significant increase in operating expenses during fiscal 2026, which more than offset the increase in gross profit.
As discussed above, revenue and gross profit increased during the year, driven primarily by stronger sales outside the United States, particularly distribution agreement sales in South Africa. However, this improvement was more than offset by higher selling expenses, general and administrative expenses and research and development expenses.
The decrease in net income was partially mitigated by the improvement in non-operating income and expenses, primarily due to lower interest expense in fiscal 2026 following the settlement of the Minoan Medical loan on August 31, 2025. In addition, income tax expense was lower in fiscal 2026 than in the prior year. As a result, although the Company remained profitable for the year ended February 28, 2026, net income declined compared to the prior year.
This increase in net income is primarily driven
by the higher sales generated from the new cardiology distribution business in South Africa, as well as the increased sales of the Trachealator,
an internally designed and manufactured product, in the United States. The growth in both distribution revenues and the Trachealator's
success in new markets were key factors in driving this positive shift in profitability.
As of February 28, 2026, the Company had total current assets of $6,419,805 and total assets of $6,812,888. Total current liabilities as of February 28, 2026, were $1,101,192. The Company had working capital of $5,318,613 as of February 28, 2026. In comparison, as of February 28, 2025, the Company had total current assets of $6,423,186 and total assets of $6,808,973. Total current liabilities as of February 28, 2025 were $1,505,047. Consolidated, we had working capital of $4,918,139 as of February 28, 2025.
As of February 28, 2025, the Company had
total current assets of $6,423,186 and total assets of $6,808,973. Total current liabilities as of February 28, 2025, were $1,505,047.
The Company had working capital of $4,918,139 as of February 28, 2025. In comparison, as of February 29, 2024, the Company had total
current assets of $4,379,297 and total assets of $4,804,279. Total current liabilities as of February 29, 2024, were $827,453. Consolidated,
we had working capital of $3,551,844 as of February 29, 2024.
We have cash available on hand and believe
that this cash will be sufficient to fund operations and meet our obligations as they come due within one year from the date these CondensedConsolidated
Consolidated Financial Statements are issued. In the event that we do not achieve the revenue anticipated in our current operating plan, management
management has the ability and commitment to reduce operating expenses as necessary. OurThe long-term success is dependent upon ourCompany’s ability
to successfullyfund raiselonger-term operations will
depend on its ability to generate revenue, manage operating expenses, and obtain additional capital,capital marketif our existing services, increase revenues, and ultimately achieve profitable operations.required.
Our audited Consolidated Financial Statements
have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal
course of business. We received FDA 510(k) approval through the substantially equivalence
process for Class II medical devices for our
main product being the Trachealator. During the quarter ending November 30, 2023,2024, the Company
also obtained cardiologyrenal dialysis distribution revenues
in South Africa, which significantly contributed to the overall profitability of the
Company in the 20242025 fiscal year. With the research
and development phase of most products completed, we expect to see an increase in sales
being realized against the sales expenditure incurred,
as was the result in the current fiscal year.
Net cash provided by operating activities before income taxes paid was $952,541 for the fiscal year ended February 28, 2026, compared to $1,144,215 for the fiscal year ended February 28, 2025. After income taxes paid, total cash flows from operating activities were $906,798 for fiscal 2026, compared to $877,834 for fiscal 2025. Although net income declined to $794,502 from $2,159,473 in the prior year, operating cash flows remained strong.
Operational cash flow benefited from improved working capital management, including better receivables collection. These benefits were partially offset by an increase in inventory, an increase in prepayments, and a decrease in accounts payable and accrued expenses. In addition, certain tax liabilities were settled during the year through a set-off and settlement arrangement by way of reductions in trade receivables, which did not result in cash outflows by the Company. Under that arrangement, DISA Life Sciences undertook to settle tax liabilities on behalf of DISA Medinotec, with DISA Medinotec’s trade receivable balance reduced accordingly.
Net cash provided by operating activities
from continuing operations increased significantly for the fiscal year ended February 28, 2025. This improvement was primarily due to
a $2,564,161 increase in profitability, with the Group reporting net income of $2,159,473, compared to a net loss of $404,688 in the
prior year. This turnaround was mainly driven by strong growth in distribution revenue, particularly from the launch of the cardiology
distribution business in South Africa and expanded U.S. sales of the Trachealator product.
Operational cash flow also benefited from
improved working capital management, including better receivables collection and inventory optimization. Operating expenses were carefully
controlled, allowing the Group to support growth initiatives—especially in sales and marketing—while maintaining positive
cash generation from operations. Management also notes customer concentration risk, with most customers situated within the South African
segment, which should be considered in assessing the quality and stability of these cash flows.
Net cash used in investing activities was $1,363 for the fiscal year ended February 28, 2026, compared to $89,013 for the fiscal year ended February 28, 2025. Investing cash outflows in both periods related to payments to acquire property, plant and equipment. The lower cash outflow in fiscal 2026 reflects significantly reduced capital expenditure compared to the prior year.
Net cash used in investing activities
increased for the fiscal year ended February 28, 2025. This change was primarily driven by the absence of inflows from a note receivable,
which had generated positive cash flows through repayments in the prior year. In contrast, during the current year, the outstanding balance
of the note receivable increased and was subsequently impaired, resulting in no corresponding cash inflow.
Additionally, the Group increased its
investment in property, plant, and equipment (PP&E), reflecting continued expansion and operational scaling. These capital expenditures
contributed to higher cash outflows from investing activities compared to the prior year.
Cash flows used in financing activities for the fiscal year ended February 28, 2026, were $982,973, compared to $894,482 for the fiscal year ended February 28, 2025. These outflows related primarily to the repayment of debt. During fiscal 2026, a significant portion of the Company’s obligations to Minoan Medical (Pty) Ltd was settled through a non-cash tripartite set-off and settlement arrangement, pursuant to which DISA Life Sciences undertook to settle the loan payable on behalf of DISA Medinotec, with a corresponding reduction in DISA Medinotec’s trade receivable balance.
What changed in the latest 10-Q
Risk Factors
In addition to the other information set forth in this Quarterly Report on Form 10-Q, investors should carefully consider the risk factors described under “Part I – Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended February 28, 2026. The risks described in our Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, may also materially adversely affect our business, financial condition, results of operations and cash flows. There have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended February 28, 2026.
Removed heading “Risks Related to Our Potential Uplisting to a National Securities Exchange”
Removed heading “We may be unable to uplist our common stock to a national securities exchange, or maintain such a listing if achieved, which could adversely affect the liquidity and price of our common stock.”
Removed heading “We may require additional capital to meet uplisting requirements or support ongoing operations, and any financing could be dilutive, on unfavorable terms, or unavailable.”
Removed heading “Efforts to achieve an uplisting, such as financings or corporate actions, could cause stock price volatility or other adverse effects.”
Removed heading “Risks Related to International Geopolitical Conditions”
Removed heading “Geopolitical instability, labor unrest, and economic disruptions in certain foreign jurisdictions may indirectly affect our operations.”
Removed heading “Risks Related to International Military Activity and Geopolitical Developments”
Removed heading “Military activities, including joint military exercises conducted by governments, may contribute to geopolitical uncertainty and could indirectly affect global business conditions.”
Largest changes
“We intend to pursue an uplisting of our common stock to a national securities exchange, such as the Nasdaq Capital Market. However, there can be no assurance that we will meet the initial listing requirements, which include minimum thresholds for stockholders' equity, market value of unrestricted publicly held shares, bid price, number of round lot holders, and other quantitative and qualitative criteria. Recent changes to Nasdaq rules have increased emphasis on sustained pre-listing liquidity and public float for companies uplisting from OTC markets. …”see in full comparison
“We may be unable to uplist our common stock to a national securities exchange, or maintain such a listing if achieved, which could adversely affect the liquidity and price of our common stock.”see in full comparison
“Geopolitical instability, labor unrest, and economic disruptions in certain foreign jurisdictions may indirectly affect our operations.”see in full comparison
“Such developments could result in changes to international relations, trade policies, regulatory requirements, or market conditions, including potential impacts on currency volatility, transportation logistics, or cross-border commerce. For example, these activities have drawn criticism from Western governments, potentially straining South Africa’s relations with key trading partners like the United States and leading to tariffs, sanctions, or restrictions on market access (as evidenced by the recent 30% U.S. tariff on South African imports).”see in full comparison
“Military activities, including joint military exercises conducted by governments, may contribute to geopolitical uncertainty and could indirectly affect global business conditions.”see in full comparison
“We may require additional capital to meet uplisting requirements or support ongoing operations, and any financing could be dilutive, on unfavorable terms, or unavailable.”see in full comparison
Full comparison: every changed paragraph (19)
In addition to the other information set forth in this Quarterly Report on Form 10-Q, investors should carefully consider the risk factors described under “Part I – Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended February 28, 2026. The risks described in our Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, may also materially adversely affect our business, financial condition, results of operations and cash flows. There have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended February 28, 2026.
Our business faces many risks, a number of which
are described in the section captioned “Risk Factors” in our Annual Report for the year ended February 28, 2025, filed with
the SEC on May 29, 2025, in our Quarterly Report on Form 10-Q for the quarter ended May 31, 2025, filed with the SEC on July 16, 2025,
and in our Quarterly Report on From 10-Q for the quarter ended August 31, 2025, filed with the SEC on October 8, 2025. The risks
described in our Annual Report and Quarterly Report may not be the only risks we face. Other risks of which we are not yet aware, or
that we currently believe are not material, may also materially and adversely impact our business operations or financial results. If
any of the events or circumstances described in the risk factors contained in our Annual Report or Quarterly Report occur, our business,
financial condition or results of operations could be adversely impacted and the value of an investment in our securities could decline.
Investors and prospective investors should consider the risks described in our Annual Report and Quarterly Report, and the information
contained below and in the section captioned “Forward-Looking Statements” and elsewhere in this Quarterly Report before deciding
whether to invest in our securities.
Risks Related to Our Potential Uplisting to a National
Securities Exchange
We may be unable to uplist our common stock
to a national securities exchange, or maintain such a listing if achieved, which could adversely affect the liquidity and price of our
common stock.
We intend to pursue an uplisting of our common stock
to a national securities exchange, such as the Nasdaq Capital Market. However, there can be no assurance that we will meet the initial
listing requirements, which include minimum thresholds for stockholders' equity, market value of unrestricted publicly held shares, bid
price, number of round lot holders, and other quantitative and qualitative criteria. Recent changes to Nasdaq rules have increased emphasis
on sustained pre-listing liquidity and public float for companies uplisting from OTC markets. Even if we qualify initially, we may fail
to maintain continued listing standards, resulting in delisting. Failure to achieve or maintain an uplisting could limit investor interest,
reduce share liquidity, hinder capital raising, and negatively impact our stock price and overall valuation.
We may require additional capital to meet uplisting
requirements or support ongoing operations, and any financing could be dilutive, on unfavorable terms, or unavailable.
Our current cash position and operating cash flows
may not be sufficient for long-term needs, including costs related to a potential uplisting (such as audits, legal fees, and governance
enhancements). We may seek additional funding through public or private offerings of equity or debt securities. Any equity issuance would
dilute existing shareholders. Debt financing could involve restrictive covenants or high interest. There can be no assurance that financing
will be available when needed, on acceptable terms, or at all. Failure to raise capital could delay or prevent an uplisting and limit
growth initiatives.
Efforts to achieve an uplisting, such as financings
or corporate actions, could cause stock price volatility or other adverse effects.
To meet liquidity or other requirements, we may pursue
capital raises, potentially at a discount, or other measures. Private financings may involve restrictions on shares that delay their contribution
to our public float. These actions could temporarily affect our stock price or shareholder rights.
Risks Related to International Geopolitical Conditions
Geopolitical instability, labor unrest, and economic disruptions
in certain foreign jurisdictions may indirectly affect our operations.
We conduct our manufacturing operations in South Africa and
sell our products internationally. Although we do not have direct sales, operations, or customers in regions experiencing significant
instability, such as Venezuela, recent labor strikes, political instability, and economic conditions in Venezuela may contribute to broader
regional or global disruptions, including impacts on international trade relationships, energy markets, currency volatility, or global
logistics networks.
In addition, changes in diplomatic relationships, foreign policy
positions, or international regulatory frameworks involving countries experiencing political or economic instability could result in
new or expanded trade restrictions, sanctions, compliance obligations, or logistical challenges imposed by foreign governments, including
the United States. Such developments could indirectly affect the availability or cost of certain inputs, transportation services, or
third-party suppliers upon which we rely.
While we believe our current supply chain and manufacturing
operations are diversified and resilient, we cannot assure investors that future geopolitical developments will not result in increased
costs, delays, or other adverse effects on our business, financial condition, or results of operations.
Risks Related to International Military Activity and Geopolitical
Developments
Military activities, including joint military exercises
conducted by governments, may contribute to geopolitical uncertainty and could indirectly affect global business conditions.
South Africa periodically participates in joint military exercises
and other defence-related activities with foreign governments, such as recent exercises with Russia and China. While such activities
are not directed at our business and we are not involved in any military or defence operations, heightened geopolitical activity or increased
international tensions arising from military cooperation or exercises may contribute to broader uncertainty in global markets.
Such developments could result in changes to international relations,
trade policies, regulatory requirements, or market conditions, including potential impacts on currency volatility, transportation logistics,
or cross-border commerce. For example, these activities have drawn criticism from Western governments, potentially straining South Africa’s
relations with key trading partners like the United States and leading to tariffs, sanctions, or restrictions on market access (as evidenced
by the recent 30% U.S. tariff on South African imports).
Although we believe our manufacturing operations and supply
chain are appropriately structured to manage normal geopolitical risks, we cannot assure investors that increased geopolitical tensions
or related policy responses will not result in higher costs, delays, or other adverse effects on our operations, financial condition,
or results of operations.
Management's Discussion & Analysis (MD&A)
New heading “StaXstop Catheter (Developmental)”
New heading “Septus Balloon (Developmental)”
New heading “Vaultseal Balloon (Developmental)”
New heading “Segment Contribution to Income/(loss) from operations”
Removed heading “Newly Imposed U.S. Tariff on South African Imports May Materially Impact Our U.S. Revenue and Profit Margins”
Removed heading “Quarterly Performance”
Removed heading “Year-to-Date Performance”
Largest changes
“Newly Imposed U.S. Tariff on South African Imports May Materially Impact Our U.S. Revenue and Profit Margins”see in full comparison
“These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties, and other factors, many of which are beyond our control, that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these forward-looking statements. …”see in full comparison
“Regulatory, Legal and Compliance Risks: We are subject to extensive medical device, healthcare, reimbursement, product liability, intellectual property, tax, anti-corruption, data privacy and other legal and regulatory requirements, and non-compliance or adverse developments could result in delays, penalties, litigation or increased costs.”see in full comparison
“As a company that exports goods from South Africa into the United States, this tariff introduces a material cost burden to our U.S.-bound shipments. The U.S. tariff could increase cost of goods sold by 30% on approximately 5% of revenue from our Domestic Sales segment (Inside the United States), potentially reducing fiscal year gross margin by 1 to 2 percentage points if unmitigated. Unless mitigated through restructured pricing, supply chain adjustments, or diplomatic resolution, the tariff is likely to have an adverse effect on our gross margins, U.S. revenue, and overall profitability. …”see in full comparison
“Geopolitical and Regional Risks: Political and economic instability in South Africa—such as load-shedding, exchange controls, and FATF grey-listing—may impair operations. Broader geopolitical tensions and trade disputes also affect supply chains and market access. Geopolitical and trade risks due to tariffs and trade wars.”see in full comparison
“This revenue growth primarily reflects the expansion of our distribution business outside the United States, particularly through enhanced partnerships in South Africa that have driven higher sales volumes in our cardiology and dialysis product lines (as discussed in the "Outside the U.S. Segment" section below), partially offset by a 21% decline in U.S. Trachealator sales during the nine month period due to timing of customer orders. …”see in full comparison
Full comparison: every changed paragraph (182)
This Quarterly Report on Form 10-Q, including
Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations ("“MD&A"”), contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. All statements other than statements of historical fact,fact including,are withoutforward-looking limitation,statements. These statements include,
but are not limited to, statements regarding our
future financial position, business strategy, product launchesdevelopment (suchand aslaunches, the planned Q4 2026 U.S. market launch of OutFlo),regulatory
submissions, revenue growth
expectations, tariff mitigation strategies, supply chain diversification,management, customer and distributor relationships, and market expansion, are forward-looking statements.expansion. Words
such as
“anticipates,” "anticipates,"“expects,” "expects,"“intends,” "intends,"“plans,” "plans,"“believes,” "believes,"“seeks,”
“estimates,” "seeks,"
"estimates,"“may,” "may,"“could,” "could," "“will,"” and similar expressions are intended to identify
forward-looking forward-looking
statements, but arealthough not theall exclusiveforward-looking meansstatements ofcontain these identifying such statements.words.
These forward-looking statements are based on our current expectations, estimates and assumptions and are subject to risks and uncertainties, many of which are beyond our control. Actual results, performance or achievements may differ materially from those expressed or implied by these forward-looking statements.
These forward-looking statements are based
on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that
future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties,
and other factors, many of which are beyond our control, that may cause our actual results, performance, or achievements to be materially
different from any future results, performance, or achievements expressed or implied by these forward-looking statements. These risks
and uncertainties include, but are not limited to, those described in "Item 1A. Risk Factors" (including the potential adverse
impacts of the 30% U.S. tariff on South African imports), as well as our reliance on key distributors (Note 2(n)), foreign currency fluctuations
(Note 2(b)), regulatory approval delays for new products (e.g., FDA 510(k) processes), supply chain disruptions, competitive pressures
in the medical device market, and general economic conditions affecting healthcare spending. Should one or more of these risks or uncertainties
materialize, or should any of our assumptions prove incorrect, our actual results may vary in material respects from those projected in
these forward-looking statements.
These forward-looking
statements are only
predictions and involve known and unknown risks, uncertainties and other factors, including the risks described under
“Item 1A. Risk Factors” in our Annual Report on Form 10-K for the sectionyear entitledended “RiskFebruary 28, 2026, any updates to those risks
Factors”included elsewhere in this Quarterly Report on Form 10-Q, and the risks setsummarized out below, any of which may cause our or our industry’s actual results, levels of activity, performance
or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied
by these forward-looking statements.below. These risks include, by way of example and not
in limitation:
Financial, Liquidity and Dilution Risks: We may require additional financing, and future equity or debt financing may dilute existing shareholders, increase financial obligations or affect our ability to execute our business strategy.
Customer, Market and Geographic Concentration Risks: We rely on a limited number of customers, distributors and geographic markets, and any material disruption to these relationships or markets could adversely affect revenue, profitability and cash flows.
Operational and Commercial Risks: Our results depend on product development, manufacturing, supply chain continuity, commercialization efforts, distributor performance and our ability to compete effectively in the medical device market.
Regulatory, Legal and Compliance Risks: We are subject to extensive medical device, healthcare, reimbursement, product liability, intellectual property, tax, anti-corruption, data privacy and other legal and regulatory requirements, and non-compliance or adverse developments could result in delays, penalties, litigation or increased costs.
South Africa, Foreign Exchange and Trade Risks: Because a significant portion of our operations is located in South Africa, we are exposed to country-specific political, economic, infrastructure, exchange control, foreign currency, trade, tariff and related risks.
Management, Governance and Securities Risks: We depend on key personnel, have concentrated voting control, have officers and directors located outside the United States, and our common stock trades on the OTCQX market, which may involve limited liquidity and market volatility.
This list is not exhaustive. Readers should carefully consider the risk factors described in our Annual Report on Form 10-K for the year ended February 28, 2026, together with any updates included in this Quarterly Report on Form 10-Q, and should not place undue reliance on forward-looking statements.
Forward-looking statements are made as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to update or revise any forward-looking statements, whether because of new information, future events or otherwise, except as required by applicable securities laws.
Financial Risks: We carry substantial debt,
may need additional financing, and face exposure to interest rate changes, accounting rule shifts, and tax regulation updates, all of
which could impact financial flexibility and results.
Operational Challenges: Our success depends
on product development, supply chain continuity, and competitive positioning. Industry consolidation, pricing pressures, IT disruptions,
and foreign exchange volatility pose risks to our operations and profitability.
Customer and Market Exposure: We rely heavily
on a limited number of customers, including DISA Life Sciences, which increases the risk of revenue concentration. Inadequate insurance
coverage and internal control weaknesses may further exacerbate operational vulnerabilities.
Management and Governance: Our business depends
on a small number of key personnel, many of whom are located outside the U.S. Concentrated voting power among founders and limited public-company
experience heighten governance and compliance risks.
Regulatory and Legal: Delays in obtaining regulatory
approvals, potential product liability, compliance with marketing and reimbursement rules, IP protection, and evolving environmental and
data privacy laws all pose significant risks. Violations could lead to penalties or legal action.
Geopolitical and Regional Risks: Political
and economic instability in South Africa—such as load-shedding, exchange controls, and FATF grey-listing—may impair operations.
Broader geopolitical tensions and trade disputes also affect supply chains and market access. Geopolitical and trade risks due to tariffs
and trade wars.
Market and Securities Risks: Our shares trade
on the OTCQX market and are considered penny stocks, which may limit liquidity. Future equity issuances could dilute existing shareholders,
and share prices may fluctuate significantly due to external factors.
Revenue Concentration Risk: We derive a substantial
portion of our revenue from a single customer, DISA Life Sciences, which accounted for approximately 92% of our total revenue for the
nine months ended November 30, 2025. Our financial results, cash flows, and operating performance are therefore significantly dependent
on the continued business relationship with this customer. A reduction in purchases from, or the loss of, DISA Life Sciences could have
a material adverse effect on our results of operations and financial condition. While we endeavor to diversify our customer base, we may
not be able to replace this level of revenue in the near term. Investors should consider the potential impact of this customer concentration
when evaluating our business and prospects.
Newly Imposed U.S. Tariff on South African
Imports May Materially Impact Our U.S. Revenue and Profit Margins
On July 7, 2025, the President of the United
States announced a 30% tariff on all goods imported from South Africa into the United States, effective August 1, 2025. This tariff was
introduced unilaterally and is reportedly based on concerns over a perceived trade imbalance between the two nations. While the South
African government has contested the rationale behind this action and initiated negotiations, there is currently no indication that the
tariff will be lifted or reduced in the near term.
As a company that exports goods from South
Africa into the United States, this tariff introduces a material cost burden to our U.S.-bound shipments. The U.S. tariff could increase
cost of goods sold by 30% on approximately 5% of revenue from our Domestic Sales segment (Inside the United States), potentially reducing
fiscal year gross margin by 1 to 2 percentage points if unmitigated. Unless mitigated through restructured pricing, supply chain adjustments,
or diplomatic resolution, the tariff is likely to have an adverse effect on our gross margins, U.S. revenue, and overall profitability.
In addition, the tariff may reduce our competitiveness in the U.S. market and lead to delayed or reduced purchase orders from our distributors
and customers.
We are actively assessing the potential impact
of the tariff on our operations and financial results and evaluating appropriate contingency strategies, including sourcing alternatives,
pricing adjustments, and geographic diversification of revenue. However, there can be no assurance that these measures will be successful
or that the tariff will not materially and adversely affect our financial condition and results of operations.
This list is not an exhaustive list of the
factors that may affect any of our forward-looking statements. These and other factors should be considered carefully, including those
contained in our Annual Report on Form 10-K under “Risk Factors” for the year ended February 28, 2025, and readers should
not place undue reliance on our forward-looking statements. Forward-looking statements are made based on management’s beliefs, estimates
and opinions on the date the statements are made, and we undertake no obligation to update forward-looking statements if these beliefs,
estimates and opinions or other circumstances should change. Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to
conform these statements to actual results.
Our financial statements are stated in United
States dollars (US$) and are prepared in accordance with United States Generallygenerally Acceptedaccepted Accountingaccounting Principles.principles.
Medinotec Inc. was registeredincorporated in the State
of Nevada on April 26, 2021,2021. in
the State of Nevada. With an effective date ofEffective April 26, 2022, wethe Company acquired DISA Medinotec ProprietyProprietary Limited, a South African corporation,company,
from Minoan Medical Proprietary Limited ("“Minoan"”), a South African company incorporatedand inthe South Africa, andformer owner of all the capital stock
of DISA Medinotec ProprietyProprietary Limited. We accomplished theThe acquisition was completed pursuant to the terms and conditions of a Share Exchange Agreement
under common control with
Minoan, Minoanunder wherebywhich wethe Company acquired all the capital stock of DISA Medinotec Proprietary Limited in exchange for the issuance
of stock
at par value and the transfer of the outstanding loan account.
ThisThe Purchaseacquisition was concludedcompleted betweenthrough MinoanMedinotec
Capital andProprietary Limited, a local
newlySouth African subsidiary established investment vehicle ofby Medinotec Inc. calledfollowing Medinotecan Capitalinitial Proprietarycapital Limitedcontribution in South Africa after Medinotec Inc.
registered the company as a shelf company by injectingof $10,000 into it
on December 18, 2021. Medinotec Capital Proprietary Limited served
serves as the Company’s acquisition and investment vehicle forin Medinotec Inc on the continent of South
Africa.
Together, Medinotec Inc., Medinotec Capital Proprietary Limited and DISA Medinotec Proprietary Limited comprise the Medinotec group of companies.
The Company currently generates revenue from two principal sources: (1) Company-developed and manufactured medical devices and (2) the distribution of third-party medical devices under exclusive or non-exclusive distribution arrangements in defined territories. The Company’s developed products include the Trachealator, the OutFlo Aortic Valve Dilation Balloon Catheter, and the Cape Cross family of PTCA balloon catheters. The Company distributes a range of cardiology and renal dialysis products on behalf of third-party manufacturers, primarily in South Africa.
Combined these companies now form the Medinotec Group
of Companies.
The Company engages in in-house manufacturing for
products that leverage its intellectual know-how, while also utilizing cash flows generated from marketing products as distribution partners
with major players in the industry. This distribution business supports the cash flows of the internally developed products while a market
is being established for these offerings. Our internally developed products include:
The Trachealator is a non-occlusive airway dilation balloon intended for use in selected airway dilation procedures. Tracheal and bronchial stenosis can arise from several causes and may require one or more dilation procedures, depending on the patient and clinical circumstances.
The Trachealator obtained CE marking in 2019 and FDA 510(k) clearance in November 2021. The product is sold in selected markets, including parts of Europe, the Middle East, South America, Asia, South Africa and the United States.
Medical device regulatory requirements differ by jurisdiction. FDA clearance and CE marking may support regulatory submissions or market access in certain jurisdictions, but some countries require additional local registrations, testing, certifications, quality system requirements or other regulatory approvals before a product may be sold. The Company evaluates market entry requirements on a jurisdiction-by-jurisdiction basis.
For example, Australia, Japan and China have their own medical device regulatory systems through the Therapeutic Goods Administration, the Pharmaceuticals and Medical Devices Agency, and the National Medical Products Administration, respectively, and do not automatically accept CE marking or FDA clearance as a basis for market authorization.
The Trachealator has changed the way that tracheal,
and, to a degree, bronchial stenosis is managed in extremely ill patients. While there are multiple causes of tracheal stenosis, it is
estimated that thousands of cases are reported every year. Multiple, safe, serial dilatations of the trachea are often curative and the
Trachealator is currently in our management’s opinion the only device that is non-occlusive and which allows the procedure to be
done with the patient fully awake and un-sedated.
The Trachealator received the CE Mark of approval
by a European notifying body (DEKRA) in 2019. CE Marking is a qualification mandatory for any product to be sold in countries of the European
Union but widely accepted by other countries in the Middle East, South American and Asian regions. The Trachealator is currently sold
successfully in a large number of those countries.
In May of 2021 in recognition of the advancement in
technology in the device, the Trachealator was awarded a Gold Medal in the Medical Design Excellence Awards The USA recognizes only an FDA approval to accept
products into its market. This approval was obtained for the Trachealator in November 2021 through a 510(k) substantially equivalence
process for Class II medical devices and sales has since commenced in the USA.
The medical device approval process differs for specific
countries and territories in the world, and each may have additional requirements over and above CE mark and FDA. For example, Australia,
Japan and China have their own quality accreditation systems (TGF, JIS & CFDA respectively) and do not accept CE marking and/or an
FDA certificate. Applications for such accreditations will be considered to be made upon achieving a critical mass of sales in the USA
& Europe.
OutFloOutflo Aortic Valve DilatationDilation Balloon Catheter
The OutFloOutflo Aortic PerfusionValve andDilation DilatationBalloon Catheter
is a non-occlusive perfusion balloon tocatheter allowdesigned thefor expansionuse in selected procedures involving dilation of the aortic valve withoutwhile impeding the cardiac output.maintaining
perfusion.
The product is intended for use in selected procedures involving post-dilation of a prosthetic valve in TAVI procedures, where clinically appropriate.
FDA 510(k) clearance was obtained on March 11, 2025. Outflo is currently marketed and sold in South Africa, and marketing activities in the United States commenced during the fourth quarter of fiscal 2026, with the first units sold during the first quarter of fiscal 2027.
This catheter could be used to post dilate the artificial
valve in TAVI (Transcatheter Aortic Valve Implantation) without the need for pacing.
A clinical study was conducted in 2022, as part of
the development of the Technical File documentation, which is currently undergoing examination by our Notified Body (DEKRA).
Submission for FDA certification via the 510(k) substantially
equivalence process was made on May 31, 2024. FDA clearance was obtained on March 11, 2025. Management anticipates that OutFlo will be
launched to the U.S. Market in Q4 of the 2026 financial year, while the product is already in market in South Africa.
The MedinotecCape GroupCross ofPTCA CompaniesCatheter also designed and
developedis a range of semi-compliant coronary
PTCA cathetersballoon knowncatheter. asThe theproduct Capehas Cross, which attained aobtained CE Markmarking and areis marketed around
the world andsold in South Africa,Africa becomingand aselected widelyinternational used interventional balloon in the market.markets.
A PTCA catheter may be used in procedures to dilate a narrowed or blocked coronary artery. The catheter is inserted through the vascular system and positioned at the treatment site. The balloon is then inflated and deflated before the catheter is withdrawn. Depending on the clinical circumstances, a coronary stent may also be placed in the diseased area of the artery.
A PTCA catheter is inserted either from the groin
or the arm and threaded through the blood vessels, through the aorta into the heart. The cardiac surgeon and/or interventional cardiologist
will move the catheter to the blocked artery (plaque). The balloon part of the catheter is inflated to open the blockage in the artery,
after which the balloon is deflated, and the entire catheter withdrawn and removed. If this procedure is not effective enough to open
the artery, a coronary stent will be placed inside the diseased area of the artery.
The Cape Cross Non-Compliant (“NC”) Catheter is a non-compliant balloon catheter developed for post-dilation procedures. The product has obtained CE marking and is sold in South Africa and selected international markets. After placement of a stent, a non-compliant balloon catheter may be used to assist with stent apposition, depending on the clinical circumstances.
On the back of the Cape Cross, the Cape Cross NC Catheter
was developed for post dilatation purposes. The product has become a mainstay of our cardiology range. It is CE Marked and widely used
in South Africa. After a stent is placed in an artery, it is followed up by moving a NC catheter to the site where the stent was placed.
The NC catheter balloon part is then inflated inside the stent. This is done to “seat” the stent inside the artery wall. In
other words, if the stent was not optimally placed, the NC Catheter can be used to make the stent fit “snugly” against the
artery wall to avoid dislodgement and movement of the stent after placement.
WeThe haveCompany has developed a highly specific nicheMicro CTO (Chronic
Total Occlusion)balloon catheter balloon
range with diameters offrom 0.70 mm to 1.25 mm,mm as a size range extension to the current Cape Cross Rx PTCA
Balloon Catheter.
The product is intended for use in selected coronary cases involving chronic total occlusions, subject to applicable regulatory clearances, approvals or certifications. The technical file was submitted to the Company’s Notified Body at the end of July 2023 and remains under review.
The process of seeking FDA 510(k) clearance for the Cape Cross PTCA catheter range commenced in January 2024. There can be no assurance as to the timing or outcome of this process.
StaXstop Catheter (Developmental)
The StaXstop Catheter is an epistaxis catheter intended for use in the management of nasal bleeding. The product remains in the development pipeline and is subject to research and development, testing, pre-production prototyping and related product validation activities. The Company is evaluating the applicable regulatory pathway for this product, including whether it may qualify as a Class I 510(k)-exempt device in the United States.
Septus Balloon (Developmental)
The Septus Balloon is a nasal fracture balloon intended for use in selected nasal procedures. The product remains in the development pipeline and is subject to research and development, testing and pre-production prototyping activities. Further development, regulatory review and commercialization assessments will be required before the product may be marketed in applicable jurisdictions.
Vaultseal Balloon (Developmental)
MDNC insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding MDNC (13F)
None of the 59 investors we track reported a position in their latest 13F.