Medinotec quarterly net income falls to $40.9K
The six-month period paired approximately 9% revenue growth with a 49% gross margin and negative operating cash flow.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Rhea-AI Filing Summary
Medinotec Inc. reported revenue of $3,200,603 for the three months ended August 31, 2026, versus $3,236,305 a year earlier; six-month revenue was $5,851,698 versus $5,370,331, an approximately 9% increase. The company designs and manufactures medical devices and distributes third-party products.
Net income was $40,866 for the quarter versus $346,566, and $262,880 for six months versus $460,350. Gross margin was 49% in both 2026 periods, compared with 61% for the prior-year quarter and 54% for the prior-year six months. Medinotec attributed the decline primarily to South African distribution pricing and inventory write-downs, and expects margins to remain below prior-year levels while those conditions persist. Six-month operating cash flow was negative $68,599 versus positive $464,300.
DISA Life Sciences, a distribution customer, accounted for 88% of quarterly and 86% of six-month revenue; it represented 92% of accounts receivable as of August 31, 2026. U.S. segment revenue rose 71% to $480,217 for six months, with the increase attributed mainly to Trachealator commercialization and, to a lesser extent, initial Outflo sales. The company said domestic sales volumes remain relatively low.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointSix-month revenue increased approximately 9% to $5,851,698.
- Minor pointU.S. segment revenue rose 71% to $480,217 over six months.
Negative
- Moderate pointQuarterly net income fell to $40,866 from $346,566.
- Moderate pointSix-month operating cash flow was negative $68,599, versus positive $464,300.
- Moderate pointSix-month gross margin declined to 49% from 54%.
- Moderate pointDISA Life Sciences accounted for 88% of quarterly revenue.
- Minor pointSix-month net income fell to $262,880 from $460,350.
Filing Explained
The renewed related-party lease carries a recorded $91,165 liability at August 31, 2026; common shares were unchanged from February.
This quarterly report shows Medinotec had
On
At
Cash was
Key Figures
Key Terms
gross margin financial
FDA 510(k) clearance regulatory
valuation allowance financial
weighted-average discount rate financial
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
How much U.S. revenue did MDNC report?
What are the terms of MDNC's renewed facility lease?
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
For the quarterly period ended
or
For the transition period from ________ to __________
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
|
|
| (Address of principal executive offices) |
| (Registrant's telephone number) |
| (Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol | Name of each exchange on which registered | ||
| None | N/A | N/A |
Indicate by
check mark whether the 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 for 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
Indicate by
check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 | ☐ |
| ☒ | Smaller reporting 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 Exchange Act). Yes ☐
State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: common shares as of October 8, 2026.
| 1 |
| Table of Contents |
TABLE OF CONTENTS
| Page | ||
| PART I – FINANCIAL INFORMATION | ||
| Item 1: | Consolidated Financial Statements (unaudited for period ended August 31, 2026) | 1 |
| Item 2: | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 4 |
| Item 3: | Quantitative and Qualitative Disclosures About Market Risk | 18 |
| Item 4: | Controls and Procedures | 19 |
| PART II – OTHER INFORMATION | ||
| Item 1: | Legal Proceedings | 20 |
| Item 1A: | Risk Factors | 20 |
| Item 2: | Unregistered Sales of Equity Securities and Use of Proceeds | 21 |
| Item 3: | Defaults Upon Senior Securities | 21 |
| Item 4: | Mine Safety Disclosure | 21 |
| Item 5: | Other Information | 21 |
| Item 6: | Exhibits | 21 |
| 2 |
| Table of Contents |
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Our unaudited consolidated financial statements included in this Form 10-Q are as follows:
|
Page Number |
|
| F-1 | Unaudited Consolidated Balance Sheets as of August 31, 2026 and February 28, 2026; |
| F-2 | Unaudited Consolidated Statements of Operations and Comprehensive Income/(Loss) for the three and six months ended August 31, 2026 and August 31, 2025; |
| F-3 | Unaudited Consolidated Statements of Stockholders’ Equity / (Deficit) for the three and six months ended August 31, 2026 and August 31, 2025; |
| F-4 | Unaudited Consolidated Statements of Cash Flows for the six months ended August 31, 2026 and August 31, 2025; and |
| F-5 | Notes to the Unaudited Consolidated Financial Statements. |
| 3 |
| Table of Contents |
Consolidated Financial Statements
Consolidated Balance Sheets of the Medinotec Group of Companies as of August 31, 2026 and February 28, 2026
August 31, 2026 (unaudited) $ | February 28, 2026 $ | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | ||||||||
| Accounts receivable, net of allowances | ||||||||
| Inventory | ||||||||
| Other current assets | ||||||||
| Total Current Assets | ||||||||
| Property, plant and equipment, net of accumulated depreciation | ||||||||
| Deferred tax asset | ||||||||
| Operating right-of-use asset | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders' Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued liabilities | ||||||||
| Operating lease liability, current portion | ||||||||
| Total Current Liabilities | ||||||||
| Long Term Liabilities | ||||||||
| Loans payable | ||||||||
| Operating lease liability, net of current portion | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ Equity | ||||||||
| Capital stock par value; shares authorized ; shares issued and outstanding | ||||||||
| Capital stock additional paid in capital | ||||||||
| Retained Earnings | ||||||||
| Accumulated other comprehensive income | ||||||||
| Total Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of these Consolidated financial statements.
| F-1 |
| Table of Contents |
Consolidated Statements of Operations and Comprehensive Income/ (Loss) for the Medinotec Group of Companies for the Three and Six months Ended August 31, 2026 and August 31, 2025 (Unaudited)
| Three months ended | Six months ended | |||||||||||||||
August 31, 2026 (Unaudited) $ | August 31, 2025 (*) $ | August 31, 2026 (Unaudited) $ | August 31, 2025 (*) $ | |||||||||||||
| Revenue | ||||||||||||||||
| Cost of goods sold | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Depreciation and amortization expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Research and development expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Sales and marketing expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income (loss) from operations | ||||||||||||||||
| Non operating income and expenses | ||||||||||||||||
| Interest income | ||||||||||||||||
| Other revenue/(expense) | ( | ) | ( | ) | ||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total non-operating income and expenses | ( | ) | ( | ) | ||||||||||||
| Income/(loss) before income taxes | ||||||||||||||||
| Income taxes | ||||||||||||||||
| Current income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Deferred income taxes | ( | ) | ||||||||||||||
| Net income/(loss) | ||||||||||||||||
| Other comprehensive income (loss) from operations | ( | ) | ( | ) | ||||||||||||
| Total comprehensive income (loss) | ||||||||||||||||
| Earnings Per Share: | ||||||||||||||||
| Basic | $ | $ | $ | $ | ||||||||||||
| Diluted | $ | $ | $ | $ | ||||||||||||
| Weighted-average shares outstanding: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
The accompanying notes are an integral part of these Consolidated financial statements.
* Refer to note 15 regarding reclassifications.
| F-2 |
| Table of Contents |
Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended August 31, 2026 and August 31, 2025 (Unaudited)
For the Three Months Ended August 31, 2026 and August 31, 2025 (Unaudited)
| Common Stock | Common Stock Additional Paid in Capital | |||||||||||||||||||||||
| Shares | Amount $ | Amount $ | Accumulated Comprehensive Income $ | Retained Earnings $ | Total $ | |||||||||||||||||||
| Balance, June 1, 2026 | ||||||||||||||||||||||||
| Net income (loss) for the period | ||||||||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||||||
| Net foreign currency translation adjustment | ||||||||||||||||||||||||
| Balance, August 31, 2026 | ||||||||||||||||||||||||
| Balance, June 1, 2025 | ||||||||||||||||||||||||
| Net income (loss) for the period | ||||||||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||||||
| Net foreign currency translation adjustment | ||||||||||||||||||||||||
| Issuance of common stock | ||||||||||||||||||||||||
| Balance, August 31, 2025 | ||||||||||||||||||||||||
For the Six Months Ended August 31, 2026 and August 31, 2025 (Unaudited)
| Common Stock | Common Stock Additional Paid in Capital | |||||||||||||||||||||||
| Shares | Amount $ | Amount $ | Accumulated Comprehensive Income $ | Retained Earnings $ | Total $ | |||||||||||||||||||
| Balance, March 1, 2026 | ||||||||||||||||||||||||
| Net income (loss) for the period | ||||||||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||||||
| Net foreign currency translation adjustment | ( | ) | ( | ) | ||||||||||||||||||||
| Balance, August 31, 2026 | ||||||||||||||||||||||||
| Balance, March 1, 2025 | ||||||||||||||||||||||||
| Net income (loss) for the period | ||||||||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||||||
| Net foreign currency translation adjustment | ( | ) | ( | ) | ||||||||||||||||||||
| Issuance of common stock | ||||||||||||||||||||||||
| Balance, August 31, 2025 | ||||||||||||||||||||||||
The accompanying notes are an integral part of these Consolidated financial statements.
| F-3 |
| Table of Contents |
Consolidated Statements of Cash Flows for the Six Months Ended August 31, 2026 and August 31, 2025 (unaudited)
| Six months ended (unaudited) | ||||||||
| August 31, 2026 $ | August 31, 2025 $ | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | ||||||||
| Adjustments to reconcile net income to net cash provided by / (used in) operating activities: | ||||||||
| Depreciation | ||||||||
| Foreign currency transaction gain/(loss), unrealized | ( | ) | ||||||
| Deferred income taxes and tax credits | ( | ) | ( | ) | ||||
| Provision for income taxes | ||||||||
| Provision for doubtful receivables | ||||||||
| Common stock issued for services | ||||||||
| Operating lease liability | ( | ) | ( | ) | ||||
| (Increase)/Decrease in prepayments | ( | ) | ( | ) | ||||
| (Increase)/Decrease in receivables | ( | ) | ( | ) | ||||
| (Increase)/Decrease in inventories | ( | ) | ||||||
| Increase/(Decrease) in accounts payable and accrued liabilities | ( | ) | ( | ) | ||||
| Net cash flow from operations | ||||||||
| Tax paid | ( | ) | ||||||
| TOTAL CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES | ( | ) | ||||||
| CASH FLOWS USED IN INVESTING ACTIVITIES: | ||||||||
| Payments to acquire property, plant, and equipment | ( | ) | ||||||
| TOTAL CASH FLOWS USED IN INVESTING ACTIVITIES | ( | ) | ||||||
| CASH FLOWS FROM/(USED BY) FINANCING ACTIVITIES: | ||||||||
| Repayment of debt | ( | ) | ||||||
| TOTAL CASH FLOWS FROM/(USED BY) FINANCING ACTIVITIES | ( | ) | ||||||
| OTHER ACTIVITIES: | ||||||||
| Effect of exchange rate on cash and cash equivalents | ( | ) | ( | ) | ||||
| Net decrease in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents at beginning of the period | ||||||||
| Cash and cash equivalents at end of period | ||||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Right-of-use assets obtained in exchange for operating lease liabilities | ||||||||
| Cash paid for: | ||||||||
| Income taxes | ||||||||
| Cash received for: | ||||||||
| Interest | ||||||||
Changes in operating assets and liabilities are presented exclusive of foreign-currency translation effects, which are included in effect of exchange rate on cash and cash equivalents.
The accompanying notes are an integral part of these Consolidated financial statements.
| F-4 |
| Table of Contents |
Notes to the Consolidated Financial Statements
For the period ended August 31, 2026
1. Description of Business
Medinotec Inc. is a U.S.-based company incorporated in Nevada. The Company’s primary operations are conducted through its wholly owned subsidiaries, Medinotec Capital (Pty) Ltd and DISA Medinotec (Pty) Ltd (“DISA Medinotec”), both of which are incorporated in South Africa. Medinotec Capital (Pty) Ltd serves as an investment holding company, whilst DISA Medinotec is engaged in the design, manufacture and distribution of medical devices.
The Company’s operations include the development, manufacture and commercialization of medical devices, as well as the establishment and management of related distribution channels. The Company currently has operations in South Africa and the United States, including activity conducted from our short-term office and storage space in Melville, New York.
The Company conducts sales and distribution activities in South Africa and the United States and may evaluate additional markets from time to time.
The Company’s unaudited 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. Management has concluded that there is no substantial doubt about the Company’s ability to continue as a going concern for at least twelve months from the date these financial statements are issued.
The Company received FDA 510(k) clearance through the substantial equivalence process for its Trachealator product in November 2021. The Company also received FDA 510(k) clearance for its Outflo product in March 2025.
2. Significant Accounting Policies
a. Nature of business/basis of preparation
Basis of presentation
The consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States.
The accompanying unaudited consolidated financial statements of Medinotec Inc. and its subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended August 31, 2026 are not necessarily indicative of the results that may be expected for the fiscal year ending February 28, 2027. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended February 28, 2026.
| F-5 |
| Table of Contents |
Emerging Growth Company (EGC) status
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
b. Foreign currency translation
i. Translation of foreign subsidiary
The accounts of the foreign subsidiaries are translated into U.S. dollars. Assets and liabilities are translated at period-end exchange rates and income and expense accounts are translated at average exchange rates in effect during the financial period. Translation adjustments resulting from fluctuations in the exchange rates are recorded in accumulated other comprehensive income, a separate component of stockholders' equity.
Exchange gains or losses incurred from foreign exchange currency transactions conducted by one of the Company’s operations in a currency other than the operation’s functional currency are reflected in other revenue/(expense).
ii. Exposed to currency variations in subsidiary
The primary operations and functional currency of both DISA Medinotec (Pty) Ltd and Medinotec Capital (Pty) Ltd is in South African Rand. Due to the emerging market nature of this currency the spread volatility of the currency low and high can be material during a year. The conversion of the currency from Rand to reporting currency US Dollar can cause significant up or downward trends that are recorded in reserves under the heading accumulated comprehensive income.
The functional currency as well as the reporting currency for Medinotec Incorporated is the US Dollar.
c. Cash and cash equivalents
i. Highly liquid investments
The Medinotec Group of Companies considers all highly liquid investments with a remaining maturity of three months or less at the time of purchase to be cash equivalents. These cash equivalents consist primarily of term deposits and certificates of deposit. Investments with maturities from greater than three months to one year are classified as short-term investments, while those with maturities in excess of one year are classified as long-term investments. Cash equivalents and short-term investments are stated at cost which approximates market value.
d. Accounts Receivables
i. Allowance based on a review and management evaluation
Accounts receivables are presented on the consolidated balance sheets, net of estimated uncollectible amounts. The carrying amounts of trade accounts receivable represent the maximum credit risk exposure of these assets.
| F-6 |
| Table of Contents |
In accordance with FASB ASC 326, Measurement of Credit Losses on Financial Instruments ("ASC 326"), the Company evaluates the collectability of outstanding accounts receivable balances to determine an allowance for credit losses that reflects its best estimate of the lifetime expected credit losses.
One major customer, constituted
approximately
An allowance for credit losses is calculated taking into account all accounts older than 91+ days.
e. Property, plant and equipment
i. Depreciation rates
| Plant and machinery | ||||
| Laboratory equipment | ||||
| Furniture and fixtures | ||||
| Motor vehicles | ||||
| Computer equipment | ||||
| Office equipment | ||||
| Computer software | ||||
| Leasehold improvements | ||||
| Small assets |
The Company utilizes the straight-line method of depreciation for its assets, which allows for the systematic allocation of the cost of the asset over its useful life. The primary categories of assets include plant and machinery and laboratory equipment, which are depreciated based on their estimated useful lives, typically determined by industry standards and historical experience.
To establish the depreciation rate for each asset, the Company considers several factors, including the asset's purchase price, estimated useful life, and residual value at the end of that life. Useful lives are assessed based on the nature of the asset, technological advancements, and the expected rate of wear and tear. For other supportive assets, such as computer equipment, furniture and fittings, motor vehicles, office equipment, off-the-shelf software, leasehold improvements, and smaller assets, the straight-line method is also applied. Each asset's depreciation rate is reviewed periodically and adjusted if necessary to reflect changes in usage patterns or asset conditions. This method ensures that the expense recognition of these assets is consistent with their utilization and accurately reflects the Company’s financial position.
f. Inventories
i. Valuation, costing and obsolescence
Inventories are stated at the lower of cost (weighted average) or net realizable value and consist of raw materials, work-in process and finished goods and include purchased materials, machine time, direct labor and manufacturing overheads.
Management evaluates the need to record adjustments to write down inventory to the lower of cost or net realizable value on a quarterly basis. The Company’s policy is to assess the valuation of all inventories, including raw materials, work-in-process and finished goods and it writes down its inventory for estimated obsolescence based upon the age of inventory and assumptions about future demand and usage.
g. Impairment of long-lived assets
The Company assesses long-lived assets for impairment in accordance with the provisions of Financial Accounting Standards Board ASC 360, Property, Plant and Equipment. Long-lived assets (asset group), such as property and equipment subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.
| F-7 |
| Table of Contents |
The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted future cash flows expected to result from the use and eventual disposition of the asset. The amount of impairment loss, if any, is measured as the difference between the carrying value of the asset and its estimated fair value.
Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values, and third-party independent appraisals, as considered necessary.
h. Leases
We determine if an arrangement is a lease at inception. We determine the classification of the lease, whether operating or financing, at the lease commencement date, which is the date the leased assets are made available for use. We use the non-cancelable lease term when recognizing the right-of-use (“ROU”) assets and lease liabilities, unless it is reasonably certain that a renewal or termination option will be exercised. We account for lease components and non-lease components as a single lease component. Modifications are assessed to determine whether incremental differences result in new contract terms and accounted for as a new lease or whether the additional right of use should be included in the original lease and continue to be accounted for with the remaining ROU asset.
Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease term. Lease payments consist of the fixed payments under the arrangement, less any lease incentives. Variable costs, such as common area maintenance costs and additional payments for percentage rent, are not included in the measurement of the ROU assets and lease liabilities, but are expensed as incurred. As the implicit rate of the leases is not determinable, we use an incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments in determining the present value of the lease payments. Lease expenses are recognized on a straight-line basis over the lease term. We do not recognize ROU assets on lease arrangements with a term of 12 months or less.
i. Allowance for credit losses on notes receivable
The Company maintains an allowance for credit losses on loans receivable in accordance with ASC 326, Financial Instruments—Credit Losses. This allowance reflects management’s estimate of expected credit losses over the contractual life of the loans, considering historical loss experience, current conditions, and reasonable and supportable forecasts. The estimate is developed using a combination of quantitative data and qualitative factors, including borrower creditworthiness, loan-specific risk characteristics, macroeconomic trends, and other relevant information. The allowance is adjusted through a provision for credit losses in the Company’s consolidated statements of operations, and loans are charged off against the allowance when deemed uncollectible.
j. Employee benefit plans
The Company contributes
k. Income taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.
| F-8 |
| Table of Contents |
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
The Company records interest related to unrecognized tax benefits in interest expense and penalties in general and administrative expenses.
l. Financial instruments
i. Fair Value Measurements
Fair value accounting is applied for all assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The consolidated entities follow the established framework for measuring fair value and expands disclosures about fair value measurements.
ii. Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, trade accounts receivable and loans. The Company invests its excess cash in low-risk, highly liquid money market funds and certificates of deposit with a major financial institution.
iii. Exposed to currency variations in subsidiary
The primary operations and
functional currency of a subsidiary's business is in South African Rand. Due to the emerging market nature of this currency the
spread volatility of the currency low and high can be material during a year. The conversion of the currency from Rand to reporting
currency US Dollar can cause significant up or downward trends that are recorded in reserves under the heading accumulated
comprehensive income. The effect on the reserves for the three months ended August 31, 2026 was a gain of $
iv. Interest rate Risk
Market interest rate risk may result in loss from fluctuations in the future cash flows or fair values of financial instruments. Interest rate risk is managed principally through monitoring interest rate gaps and basis risk and by having pre-approved limits for repricing bands.
Following settlement of substantially
all of the related-party loan during fiscal 2026, remaining related-party debt was $
| F-9 |
| Table of Contents |
m. Comprehensive income / (loss)
i. Comprehensive income / (loss)
Comprehensive income / (loss) consists of net income / (loss) and other gains and losses affecting stockholders’ equity that, under GAAP, are excluded from net income / (loss). Our other comprehensive income / (loss) represents foreign currency translation adjustment attributable to our operations.
Total foreign currency translation
losses for the six months ended August 31, 2026 were $
n. Revenue recognition
The Company generates revenues through two distinct revenue sources:
| i. | From the sale of Company-developed and manufactured medical devices; and |
| ii. | Through the distribution of finished products on behalf of other principals around the world into pre-agreed territories which are usually exclusive territories granted by such principal. |
The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. Revenue is recognized by applying the following five-step model:
1. identify the contract with the customer;
2. identify the performance obligations in the contract;
3. determine the transaction price;
4. allocate the transaction price to the performance obligations in the contract; and
5. recognize revenue when, or as, each performance obligation is satisfied.
Revenue from the sale of self-manufactured products
The Company develops and manufactures certain medical devices in-house. Customers are billed using prices agreed upon in the applicable customer arrangements or price lists.
Orders are generally shipped individually from the Company’s warehouse under shipping-point terms. Control of the products generally transfers to the customer when the products are shipped and delivered to the carrier at the Company’s shipping point. At that point, the customer has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the products.
Revenue is recognized in an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring the products to the customer.
Revenue from the distribution of products
The Company distributes finished products manufactured by third-party principals through a network consisting of sub-distributors and, in certain territories, a direct sales force. Customers and sub-distributors are billed using prices agreed upon in the applicable customer arrangements or price lists.
Orders are generally shipped individually from the Company’s warehouse under shipping-point terms. Control of the products generally transfers to the customer or sub-distributor when the products are shipped and delivered to the carrier at the Company’s shipping point. Sub-distributors purchase products on substantially the same basis as other customers and do not have preferential rights of return.
| F-10 |
| Table of Contents |
Revenue is recognized in an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring the products to the customer or sub-distributor.
Products delivered under consignment arrangements remain inventory of the Company and do not qualify for revenue recognition upon delivery to the consignee. Revenue from consigned products is recognized only when control transfers in accordance with the applicable consignment arrangement, generally when the product is sold to or used by the end customer, provided that the other applicable revenue-recognition criteria have been satisfied.
For both revenue streams
The Company has two reportable operating segments: Sales Outside the U.S. and Domestic Sales (U.S.). Revenue is disaggregated between these geographic segments and by principal revenue stream.
The Company does not generally recognize contract assets because customers are invoiced in connection with individual product orders and the Company’s right to consideration is not conditional on anything other than the passage of time after control transfers. Amounts received from customers before control of the related products transfers are recorded as contract liabilities and recognized as revenue when the applicable performance obligation is satisfied. The Company did not have material contract asset or contract liability balances at the reporting dates presented.
All of the Company’s revenue is recognized at a point in time. The Company does not have material revenue arrangements for which revenue is recognized over time.
The transaction price is based primarily on the price specified in the applicable customer arrangement or price list. The Company considers any variable consideration, including expected returns, rebates, discounts or similar adjustments, when determining the transaction price. Such amounts have not historically been material.
Payment Terms
Our payment terms vary per segment; export sales made from within South Africa are subject to prepayment, where accounts are granted. They generally have payment terms of 30 days from statement and sales made inside the United States are 45 to 60 days. Terms can be extended by the Company when it deems the business case and creditworthiness of the customer is strong enough. The time between a customer’s payment and the receipt of funds is not significant. The Company’s contracts with customers do not result in significant obligations associated with returns, refunds, or warranties. Payment terms are generally fixed and do not include variable revenues.
The Company sells a significant amount
to DISA Life Sciences. For the quarter ending August 31, 2026,
This table indicates the sales per revenue stream as a breakdown of the total revenue balance:
Medinotec Inc Group Consolidated Three Months Ended | Medinotec Inc Group Consolidated Six Months Ended | |||||||||||||||
| August 31, 2026 | August 31, 2025 | August 31, 2026 | August 31, 2025 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Outside of United States of America | ||||||||||||||||
| Internally Designed/Manufactured Sales | ||||||||||||||||
| Distribution Agreement Sales | ||||||||||||||||
| Sales Generated inside the United States of America | ||||||||||||||||
| Internally Designed/Manufactured Sales | ||||||||||||||||
| F-11 |
| Table of Contents |
o. Segment Reporting
Chief Operating Decision Maker (CODM)
The Company’s CODM is the Chief Executive Officer, who is responsible for strategic decision-making and resource allocation. The CEO, with support from the executive leadership team, regularly reviews financial and operational results segmented by geographic region. These reports form the basis for internal decision-making and operational management.
The Company has determined that it operates in two reportable geographic segments: Inside the United States and Outside the United States. These segments reflect the manner in which the Chief Operating Decision Maker (CODM) assesses financial performance and allocates resources.
Basis of Segmentation
Operating segments are determined based on the internal reports regularly reviewed by the CODM. Geographic segmentation reflects the Company's internal management structure and reporting lines, as operations within the United States and internationally are subject to distinct market, regulatory, and customer dynamics.
Performance Measures Reviewed by CODM
The CODM evaluates segment performance primarily using income/loss from operations, which includes revenues, cost of goods sold, and major operating expenses. This measure is reviewed regularly and is considered the most relevant indicator of segment profitability and operating efficiency. Segment results are prepared on a basis consistent with the Company’s consolidated financial statements. Accordingly, intercompany and intersegment transactions and balances are eliminated in the segment information presented.
Granular Segment Expense Reporting
To support effective decision-making, the CODM reviews segment-level performance at a more detailed level than presented in the consolidated financial statements. Specifically, the CODM receives and evaluates reports that disaggregate significant expenses such as:
| • | Selling Expenses | |
| • | Depreciation | |
| • | General and Administrative Expenses | |
| • | Research and Development Expenses |
This level of detail enables the CODM to evaluate cost drivers and profitability more effectively across geographic segments.
The following table sets forth financial information by reportable segment for the periods ending August 31, 2026 and August 31, 2025:
Income/(loss) from operations (In U.S. Dollars)
For the Three Months Ended August 31, 2026 and August 31, 2025:
| Inside the United States | Outside the United States | Total | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Revenue | ||||||||||||||||||||||||
| Cost of goods sold | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Gross profit | ||||||||||||||||||||||||
| Selling expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Depreciation expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Research and development expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Income/(loss) from operations | ( | ) | ( | ) | ||||||||||||||||||||
| Other income/(expenditure) | ( | ) | ( | ) | ||||||||||||||||||||
| Net income/(loss) | ||||||||||||||||||||||||
| F-12 |
| Table of Contents |
For the Six Months Ended August 31, 2026 and August 31, 2025:
| Inside the United States | Outside the United States | Total | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Revenue | ||||||||||||||||||||||||
| Cost of goods sold | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Gross profit | ||||||||||||||||||||||||
| Selling expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Depreciation expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Research and development expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Income/(loss) from operations | ( | ) | ( | ) | ||||||||||||||||||||
| Other income/(expenditure) | ( | ) | ( | ) | ||||||||||||||||||||
| Net income/(loss) | ||||||||||||||||||||||||
Other income/(expenditure) includes items not considered by the CODM at segment level, and consist of items such as interest income, interest expense, current income taxes and deferred income taxes.
The following table sets forth financial information by reportable segment for the periods ending August 31, 2026 and February 28, 2026:
Total Assets (In U.S. Dollars)
| Inside the United States | Outside the United States | Total | ||||||||||||||||||||||
| August 31 2026 | Feb 28 2026 | August 31 2026 | Feb 28 2026 | August 31 2026 | Feb 28 2026 | |||||||||||||||||||
| Total assets | ||||||||||||||||||||||||
The major component of total assets is "Cash" of $
p. Cost of goods sold
The cost of goods sold consists primarily of raw material purchases, manufacturing costs and employee benefits paid to operational personnel associated with the production of our medical devices.
q. General and administrative expenses
General and administrative expenses consist mostly of personnel costs, consulting fees as well as audit fees.
r. Research and development
The Company accounts for research and development (‘R&D’) costs in accordance with ASC 730, Research and Development. The Company’s R&D activities primarily relate to the development of new medical device products and significant improvements to existing products and processes, including design, development, prototyping, testing and validation activities.
| F-13 |
| Table of Contents |
In accordance with ASC 730, the Company expenses all R&D costs as incurred. This includes costs directly related to research activities, as well as expenses associated with the design, development, and testing of new products and processes.
Routine production activities, routine quality-control activities and routine modifications or improvements to existing products or processes are not classified as R&D and are accounted for in accordance with the nature of the underlying expenditure.
Materials, equipment, facilities and acquired intangible assets used in R&D activities are accounted for in accordance with ASC 730. Costs of such assets that have no alternative future use are expensed as R&D when incurred. Assets that have an alternative future use are capitalized and depreciated or amortized over their estimated useful lives, with depreciation or amortization attributable to R&D activities recognized as R&D expense.
In instances where R&D projects evolve and the nature of the expenses becomes capital in nature; the Company will evaluate these costs against the following criteria to determine if they should be capitalized:
•Technological Feasibility: The project must have reached a stage where technological feasibility has been established. This typically occurs when all necessary design, testing, and evaluation processes have been completed, and the product can be produced to meet its specifications.
•Intent to Complete: There must be a clear intention to complete the project for sale or use. This involves assessing whether the Company plans to bring the product to market and if there is a viable market for it.
• Future Economic Benefits: The project is expected to generate future economic benefits, such as revenue from product sales or cost savings from process improvements.
• Directly Attributable Costs: The costs being evaluated for capitalization must be directly attributable to the development of the product or process, including materials, labor, and overhead.
s. Interest expense
Interest expense is primarily attributable to an unsecured loan from Minoan Medical that accrued interest at the prevailing South African prime lending rate. The loan was substantially settled by August 31, 2025, after which no additional interest expense on the remaining immaterial balance was recognized. At the settlement date, the South African prime lending rate was 10.50%. Management believes the terms of the loan were market-related.
Basic Earnings Per Share (EPS)
Basic earnings (loss) per share are computed based on the weighted average number of common shares outstanding during the reporting period. This calculation provides a straightforward measure of the Company’s earnings attributable to each share.
Diluted Earnings Per Share (EPS)
The diluted earnings per share is computed by giving effect to all potentially dilutive securities outstanding for the period, by applying the treasury stock method. For periods in which we report net losses, diluted net loss per share is the same as basic net loss per share because potentially dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. There were no potentially dilutive securities outstanding or issuable as at August 31, 2026; accordingly, no additional shares have been included in the diluted earnings per share calculation.
Treasury Stock Method
For options and warrants, the Company employs the treasury stock method to calculate the dilutive effect. Under this method, it is assumed that the proceeds from the exercise of options and warrants would be used to repurchase common shares at the average market price during the period. The number of shares repurchased is then subtracted from the total number of shares that would be issued upon exercise, resulting in the net increase in shares outstanding. This method effectively illustrates the potential dilution impact of these securities on earnings per share.
| F-14 |
| Table of Contents |
u. Principles of Consolidation
i. Consolidated - all intercompany transactions eliminated
The consolidated financial statements include the accounts of Medinotec Inc., Medinotec Capital (Pty) Ltd and the financial statements of DISA Medinotec (Pty) Ltd, known as “the Company”. All intercompany transactions have been eliminated.
v. Use of estimates
The preparation of consolidated financial statements in accordance 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and may have an impact on future periods. The Company’s critical accounting estimates include the following:
• Allowance for credit losses
• Inventory: Valuation, costing and obsolescence
• Deferred tax assets
Management continually evaluates these estimates and assumptions based on historical experience and various other factors, including current market conditions. Changes in these estimates may have a material effect on the Company’s financial position and results of operations.
w. Recently issued accounting standards
In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The guidance requires additional disclosures intended to improve transparency regarding the nature of expenses included in certain income statement captions. For public business entities, the guidance is effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the effect that adoption of this guidance will have on its consolidated financial statement disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which enhances reportable segment disclosure requirements, primarily through expanded disclosures regarding significant segment expenses. The Company adopted this guidance during the year ended February 28, 2026. Adoption did not have a material effect on the Company’s consolidated financial statements, but did affect certain segment disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the transparency and usefulness of income tax disclosures, primarily through expanded rate reconciliation and income taxes paid disclosure requirements. For public business entities, the guidance is effective for annual periods beginning after December 15, 2024. For entities other than public business entities, the guidance is effective for annual periods beginning after December 15, 2025. The Company is an emerging growth company and has elected to use the extended transition period for complying with new or revised accounting standards. Accordingly, the Company expects to adopt ASU 2023-09 for the fiscal year beginning March 1, 2026. The Company is currently evaluating the impact of the guidance, but does not expect adoption to have a material effect on its consolidated financial statements. The guidance is expected to affect the presentation and content of the Company’s income tax disclosures.
| F-15 |
| Table of Contents |
3. Fair Value Measurements
The Consolidated entities report all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The authoritative guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
Level 1—Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.
Level 3—Inputs are unobservable inputs for the asset or liability.
The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest-level input that is significant to the fair value measurement in its entirety.
At August 31, 2026 and February 28, 2026, all of the Company’s cash and cash equivalents, trade accounts receivable and trade accounts payable were short term in nature, and their carrying amounts approximate fair value. Our current and long-term debt arrangements are classified as level 2 financial instruments.
4. Property, plant and equipment
Property, plant and equipment consist of the following:
August 31, 2026 (unaudited) $ | Feb 28, 2026 $ | |||||||
| Computer software | ||||||||
| Motor vehicles | ||||||||
| Plant and machinery | ||||||||
| Furniture and fittings | ||||||||
| Computer equipment | ||||||||
| Laboratory equipment | ||||||||
| Total cost | ||||||||
| Effect of foreign currency translation | ||||||||
| Total accumulated depreciation | ( | ) | ( | ) | ||||
| Total | ||||||||
Depreciation of property, plant and
equipment totaled approximately $
The Company has not acquired any property and equipment under finance leases.
| F-16 |
| Table of Contents |
Depreciation Allocation to Cost of Goods Sold:
A portion of the depreciation expense related to Property, Plant, and Equipment has been allocated to the Cost of Goods Sold. This practice is in accordance with the company's accounting policy, which recognizes a portion of the depreciation expense as part of the cost of producing goods.
The allocation of depreciation to Cost of Goods Sold is based on the estimation of the assets' usage in the production process. Manufacturing-related depreciation is allocated to inventory and cost of goods sold based on estimated use of the related assets in production.
Depreciation of $
5. Accounts receivable, net of allowances
a. Accounts receivable by period
Accounts receivable consist of the following:
August 31, 2026 (unaudited) $ | Feb 28, 2026 $ | |||||||
| Trade accounts receivable | ||||||||
| Allowance for expected credit losses | ( | ) | ( | ) | ||||
| Total | ||||||||
6. Inventories
a. Accounts by period
Inventory consists of the following:
August 31, 2026 (unaudited) $ | Feb 28, 2026 $ | |||||||
| Raw materials | ||||||||
| Work in progress | ||||||||
| Finished goods | ||||||||
| Inventory in transit | ||||||||
| Less provisions for obsolescence | ( | ) | ( | ) | ||||
| Total | ||||||||
| F-17 |
| Table of Contents |
7. Other current assets
a. Other current assets by period
Other current assets consist of the following:
August 31, 2026 (unaudited) $ | Feb 28, 2026 $ | |||||||
| Prepayments | ||||||||
| Deposits paid | ||||||||
| Other receivables | ||||||||
| Total | ||||||||
8. Loans Payable
a. Loans from related parties
August 31 2026 (unaudited) $ | Feb 28 2026 $ | |||||||
| Minoan Medical Proprietary Limited | ||||||||
| Opening balance | ||||||||
| Interest | ||||||||
| Received/Issued | ||||||||
| Repayments | ( | ) | ||||||
| Foreign exchange difference | ||||||||
| Closing balance | ||||||||
| Minoan Capital Proprietary Limited | ||||||||
| Opening balance | ||||||||
| Foreign exchange difference | ( | ) | ||||||
| Closing balance | ||||||||
| Total debt | ||||||||
Minoan Medical Proprietary Limited:
Loans payable include an unsecured
loan of $
Under the terms of the loan
agreement, the loan was repayable within
| F-18 |
| Table of Contents |
During the fiscal year ended February
28, 2026, substantially all amounts previously reflected in loans payable were extinguished through a tripartite set-off and settlement
agreement in terms of which DISA Life Sciences undertook to settle the loan payable on behalf of DISA Medinotec. As of August 31, 2026,
only an immaterial balance of $
Minoan Medical’s ultimate beneficial owner is Dr. Gregory Vizirgianakis, Chief Executive Officer of the Medinotec Group of Companies. Prior to the transfer of DISA Medinotec into the Medinotec group structure, Minoan Medical held Dr. Vizirgianakis’ medical investments and export interests, of which DISA Medinotec was one.
Minoan Capital Proprietary Limited:
This is an unsecured, interest-free loan with no fixed terms of repayment.
Minoan Medical and Minoan Capital are related parties of the Group as the CEO Dr Gregory Vizirgianakis has common control.
9. Accounts payable and accrued expenses
a. Accounts payable by period
Accounts payable consist of the following:
August 31, 2026 (unaudited) $ | Feb 28, 2026 $ | |||||||
| Trade accounts payable | ||||||||
| Accrued payroll, payroll taxes and leave pay | ||||||||
| Royalties payable | ||||||||
| Tax Liability | ||||||||
| Total | ||||||||
One major European Cardiac supplier
constitutes
10. Commitments
a. Leases and deferred rent
The Company accounts for leases under ASC 842, Leases. The Company leases office and warehouse facilities from Minoan Capital Proprietary Limited, a related party wholly owned by Dr. Gregory Vizirgianakis, the Company’s Chief Executive Officer. The previous operating lease had a contractual term from August 1, 2023 through July 31, 2026. Upon expiration of the previous lease, the Company renewed the lease for an additional three-year term commencing August 1, 2026 and expiring July 31, 2029, under substantially the same terms and conditions.
The Company is required to pay property taxes, insurance, and normal maintenance costs for certain of these facilities and is required to pay any increases over the base year of these expenses on the remainder of the Company’s facilities. Management believes the terms of the lease are consistent with market rates and were entered into at arm’s length.
| F-19 |
| Table of Contents |
Operating lease right-of-use (“ROU”)
assets and corresponding lease liabilities are recognized on the consolidated balance sheet at the commencement date based on the present
value of future lease payments. The rate implicit in the lease was not readily determinable. Accordingly, the Company used an incremental
borrowing rate of
Upon commencement of the renewed lease on August 1, 2026, the Company recognized a new operating lease ROU asset and corresponding operating lease liability based on the present value of the lease payments over the three-year lease term ending July 31, 2029.
As of August 31, 2026, the weighted-average
remaining lease term for the Company’s operating lease was approximately and the weighted-average discount rate was
Lease payments in respect of the operating
lease liability for the six months ended August 31, 2026 were $
Lease cost associated with operating leases is charged to general and administrative expenses in the Company’s consolidated financial statements.
Maturities of our operating lease liability as of August 31, 2026 were as follows:
| Amounts | ||||
| Fiscal year 2027 | ||||
| Fiscal year 2028 | ||||
| Fiscal year 2029 | ||||
| Fiscal year 2030 | ||||
| Total undiscounted lease payments: | ||||
| Less: Imputed Interest | ( | ) | ||
| Total operating lease liabilities | ||||
| Operating lease liability, net of current portion | ( | ) | ||
| Operating lease liabilities, current portion | ||||
The carrying amount of the operating right-of-use asset as of August 31, 2026 was as follows:
| Amounts | ||||
| Opening balance at March 1, 2026 | ||||
| Amortization for the 5 months ended July 31, 2026 | ( | ) | ||
| Recognition of new ROU asset on renewal of lease | ||||
| Amortization for the month ended August 31,2026 | ( | ) | ||
| Effect of foreign currency translation | ( | ) | ||
| Closing balance at August 31, 2026 | ||||
b. Litigation
From time to time, the Company may become involved in various legal proceedings in the ordinary course of its business and may be subject to third-party infringement claims.
| F-20 |
| Table of Contents |
In the normal course of business, the consolidated entities may agree to indemnify third parties with whom it enters into contractual relationships, including customers, lessors, and parties to other transactions with the Consolidated entities, with respect to certain matters. The Consolidated entities have agreed, under certain conditions, to hold these third parties harmless against specified losses, such as those arising from a breach of representations or covenants, other third-party claims that the Group’s products when used for their intended purposes infringe the intellectual property rights of such other third parties, or other claims made against certain parties. It is not possible to determine the maximum potential amount of liability under these indemnification obligations due to the Consolidated entities’ limited history of prior indemnification claims and the unique facts and circumstances that are likely to be involved in each claim.
From time to time, the Consolidated entities are subject to various claims that arise in the ordinary course of business. Management believes that any liability of the consolidated entities that may arise out of or with respect to these matters will not materially affect the financial position, results of operations, or cash flows of the Consolidated entities.
At the reporting date there is no known material litigation or claims against the Group.
11. Stockholders’ equity
a. Authorized and issued stock by period
Authorized:
As of August 31, 2026 the Company had shares of common stock authorized and available to issue for purposes of satisfying conversion of preferred stock, the exercise and future grant of common stock options, and for purposes of any future business acquisitions and transactions.
As of August 31, 2026, Medinotec Inc., the parent Company had shares of preferred stock authorized and available to issue.
This has remained unchanged from the previous financial year ending February 28, 2026.
Issued and outstanding shares:
| August 31 2026 | Feb 28 2026 | ||||||||
| Common shares | |||||||||
| Total | |||||||||
Share capital:
August 31 2026 $ | Feb 28 2026 $ | ||||||||
| Common shares | |||||||||
| Total | |||||||||
| F-21 |
| Table of Contents |
12. Income taxes
For the three months ended August
31, 2026 and 2025, our income tax provision was an expense of $
For the six months ended August 31,
2026 and 2025, our income tax provision was an expense of $
Because of the valuation allowance recorded against deferred tax assets in the United States and the geographic mix of income and losses, management has determined that a reliable estimated annual effective tax rate cannot be computed for the fiscal year. In accordance with ASC 740-270, income tax expense (benefit) for the interim periods is therefore recognized on a jurisdictional, year-to-date actual basis rather than by applying a single annual effective tax rate to consolidated pretax income.
The effective tax rate may differ from
the U.S. statutory federal income tax rate of
The effective tax rates for the three and six months ended August 31, 2026 differed from the U.S. statutory federal income tax rate primarily due to the geographic mix of income and losses between the jurisdictions in which the Company operates, foreign tax rate differentials, permanent and temporary differences, and the impact of valuation allowances on deferred tax assets.
During the three months ended August 31, 2026, the Company’s operations outside the United States generated income from operations, while its operations inside the United States generated a loss from operations. A similar geographic earnings pattern existed for the six months ended August 31, 2026.
For the three months ended August 31,
2026, outside-the-United-States income from operations was $
For the three months ended August 31,
2026, the Company recognized current income tax expense of $
The Company’s South African operations generated taxable income during the period and, accordingly, current South African income tax expense was recognized. The Company’s U.S. operations generated losses during the period. Deferred tax assets associated with U.S. net operating loss carryforwards and other deductible amounts continue to be subject to a valuation allowance because management has determined that realization of those deferred tax assets is not more likely than not.
Accordingly, losses generated by the Company’s U.S. operations reduce consolidated income before income taxes without giving rise to a corresponding income tax benefit, while taxable income generated by the Company’s South African operations remains subject to South African corporate income tax. This geographic mix of income and losses contributed to the consolidated effective tax rate exceeding the South African statutory corporate income tax rate for both the three and six months ended August 31, 2026. The effect was more pronounced during the three-month period due to the relative level of losses generated by the Company’s U.S. operations compared with income generated by its operations outside the United States.
| F-22 |
| Table of Contents |
The effective tax rates for the three and six months ended August 31, 2025 differed from the U.S. statutory federal income tax rate primarily due to the geographic mix of income and losses, foreign tax rate differentials, permanent and temporary differences, and the impact of valuation allowances on deferred tax assets. The effective tax rates for the prior-year periods were also affected by the timing of taxable and deductible temporary differences in South Africa relative to the level of consolidated pre-tax income during those periods.
The effective tax rate is impacted by several factors, including:
| 1. | U.S. federal and foreign tax rates: The statutory federal income tax rate is | |
| 2. | Permanent differences: Certain items recognized for financial reporting purposes may not be taxable or deductible for income tax purposes, or may be treated differently under the tax laws of the relevant jurisdiction. | |
| 3. | Temporary differences: Timing differences between the recognition of income and expenses for financial reporting purposes and income tax purposes affect the effective tax rate. Examples include differences relating to depreciation, accruals, provisions and deferred tax assets or liabilities. | |
| 4. | Tax credits: Tax credits, where available and applicable, may reduce the Company’s overall tax liability. | |
| 5. | Changes in tax legislation: Changes in tax laws, tax rates or interpretations in the jurisdictions in which the Company operates may affect the Company’s income tax provision. | |
| 6. | Valuation allowances: The Company evaluates the realizability of deferred tax assets, including tax loss carryforwards, based on all available positive and negative evidence, including historical results and expectations regarding future taxable income. Where management determines that realization of deferred tax assets is not more likely than not, a valuation allowance is recorded. |
As a U.S.-registered company with operations in South Africa, the Company monitors developments relating to the OECD/G20 Pillar Two global minimum tax framework, including South Africa’s implementation of global minimum tax rules. Pillar Two is generally designed to ensure that large multinational enterprise groups are subject to a minimum effective tax rate of 15% in each jurisdiction in which they operate, subject to applicable revenue thresholds, exclusions and local implementation rules. Based on management’s current assessment of the Company’s size, operations and tax profile, the Company does not currently expect Pillar Two to have a material impact on its income tax provision. Management will continue to monitor developments in the jurisdictions in which the Company operates and assess the potential impact of any enacted or substantively enacted rules on future reporting periods.
The Company will continue to monitor its effective tax rate and make adjustments as required based on changes in operations, jurisdictional profitability, valuation allowance assessments and applicable tax legislation.
| F-23 |
| Table of Contents |
13. Transactions with related parties
| Name | Relationship with the Medinotec Group of Companies | Related transactions with the Medinotec Group of Companies | Related Directors with the Medinotec Group of Companies | Related Owners with the Medinotec Group of Companies | Amounts for the six months ending August 31, 2026 |
| Minoan Medical Proprietary Limited | Medical investment company controlled by Dr Gregory Vizirgianakis | Related Party Loan |
Dr Gregory Vizirgianakis
|
Dr Gregory Vizirgianakis is the ultimate beneficial owner |
Loan payable - $
Account payable - $ |
| Minoan Capital Proprietary Limited | Property investment company controlled by Dr Gregory Vizirgianakis |
Related party loan Rental Expenses |
Dr Gregory Vizirgianakis is the ultimate beneficial owner
|
Dr Gregory Vizirgianakis is the ultimate beneficial owner |
Loan payable- $
Lease liability - $
Short-term rental expense - $ |
| Medinotec Capital Proprietary Limited | The African holding company of the Medinotec Group of Companies | Related party loan payable to Minoan Capital |
Dr Gregory Vizirgianakis Pieter van Niekerk |
Medinotec Incorporated in Nevada is the 100% ultimate parent entity | n/a |
| DISA Medinotec Proprietary Limited | The African operating and manufacturing company | Related party loan with Minoan Medical |
Dr Gregory Vizirgianakis Pieter van Niekerk |
Medinotec Incorporated in Nevada is the 100% ultimate parent entity | n/a |
| Medinotec Incorporated Nevada | Ultimate parent of Medinotec Capital and DISA Medinotec | All of the above for its related subsidiaries |
Dr Gregory Vizirgianakis Pieter van Niekerk Joseph P Dwyer Stavros Vizirgianakis Athanasios Spirakis |
This is the entity owned by the shareholders and primarily controlled by Dr Gregory Vizirgianakis and his Brother Stavros Vizirgianakis | n/a |
| Medinotec Group of Companies | The Consolidated group name of Medinotec Incorporated, Medinotec Capital Proprietary Limited and DISA Medinotec Proprietary Limited | All of the above for its related subsidiaries |
Dr Gregory Vizirgianakis Pieter van Niekerk Joseph P Dwyer Stavros Vizirgianakis Athanasios Spirakis |
This is the entity owned by the shareholders and primarily controlled by Dr Gregory Vizirgianakis and his Brother Stavros Vizirgianakis | n/a |
| F-24 |
| Table of Contents |
| Pieter van Niekerk | Chief financial officer of the Medinotec Group of Companies |
Transactions relating to mutual entities disclosed above
|
Related directorships disclosed above |
Minority Shareholder in Medinotec Inc
|
n/a |
| Gregory Vizirgianakis |
Chief Executive Officer of the Medinotec Group of Companies
Chief Executive Officer of the Minoan Group of Companies
Brother of Stavros Vizirgianakis |
Transactions relating to mutual entities disclosed above | Related directorships disclosed above | Shareholder in Medinotec Inc and Kingstyle investments. | n/a |
| Stavros Vizirgianakis |
Non-Executive director of the Medinotec Group of companies Brother of Gregory Vizirgianakis |
Transactions relating to mutual entities disclosed above | No Related other Directorships in Medinotec Group of Companies | n/a | n/a |
| Joseph Dwyer |
Non-Executive director of the Medinotec Group of companies
|
Transactions relating to mutual entities disclosed above |
No Related other Directorships in Medinotec Group of Companies
|
n/a | n/a |
| Athanasios Spirakis | Independent director of the Medinotec Group of companies | Transactions relating to mutual entities disclosed above |
No Related other Directorships in Medinotec Group of Companies
|
n/a | n/a |
|
a. Rent |
DISA Medinotec Proprietary Limited leases commercial buildings from Minoan Capital Proprietary Limited (“Minoan Capital”). Minoan Capital is owned 100% by the Chief Executive Officer of the Medinotec Group of Companies, Dr. Gregory Vizirgianakis.
Set forth below is a table showing the Consolidated entities' lease payments for the three and six months ended August 31, 2026 and August 31, 2025 with Minoan Capital:
| Three months ended (unaudited) | Six months ended (unaudited) | |||||||||||||||
| August 31, | August 31, | August 31, | August 31, | |||||||||||||
2026 $ | 2025 $ | 2026 $ | 2025 $ | |||||||||||||
| Lease payments | ||||||||||||||||
| F-25 |
| Table of Contents |
The Company rents training center facilities from Minoan Capital Proprietary Limited on a month-to-month basis. The arrangement is cancellable by either party without a more-than-insignificant termination penalty and does not provide for a committed lease term of more than 12 months. Accordingly, the arrangement qualifies as a short-term lease under ASC 842. The Company has elected to apply the short-term lease recognition exemption to this class of underlying asset and therefore does not recognize a right-of-use asset or lease liability for the arrangement. Lease payments are recognized as rental expense over the lease term as incurred.
Set forth below is a table showing the Consolidated entities' rental expenses relating to the training centre facilities the three and six months ended August 31, 2026 and August 31, 2025 with Minoan Capital:
| Three months ended (unaudited) | Six months ended (unaudited) | |||||||||||||||
| August 31, | August 31, | August 31, | August 31, | |||||||||||||
2026 $ | 2025 $ | 2026 $ | 2025 $ | |||||||||||||
| Short-term rental expense | ||||||||||||||||
Rent is comparable to rent charged for similar properties in the same relative area. The company does market research of a Minimum and a Maximum rental value within the area at every renewal of the rental agreement to ensure this is market related, this exercise is undertaken together with a registered property agent who has the appropriate knowledge of the area.
b. Loan
There is an unsecured loan from the prior parent entity of DISA Medinotec Proprietary Limited incorporated in South Africa called Minoan Medical Proprietary Limited (a related party). This loan originated to fund working capital and capex expansions of DISA Medinotec Proprietary Limited Incorporated during the developmental and startup phase.
The Consolidated entities, particularly Medinotec Inc. has the option to settle earlier in cash or any form of equivalent.
There is also an unsecured, interest free loan with no fixed terms of repayment from Minoan Capital.
Minoan Medical and Minoan Capital are related parties of the Group as the CEO Dr Gregory Vizirgianakis has common control.
14. Subsequent events
Management has evaluated subsequent events through October 8, 2026, the date the consolidated financial statements were issued, and has determined that there were no subsequent events requiring adjustment to or disclosure in the consolidated financial statements.
| F-26 |
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15. Reclassification of Financial Statement Items
Certain prior-year amounts have been reclassified to conform to the current-year presentation. These reclassifications relate to amounts previously included in general and administrative expenses that are now presented as cost of goods sold, consistent with the nature of the underlying costs. The reclassifications had no impact on the Company’s net income, cash flows, total assets, total liabilities, or stockholders’ equity.
The effect of the reclassifications was as follows:
| Three months ended August 31, 2025 | As previously reported | Reclassification | As reclassified | |||||||||
| Cost of goods sold | ||||||||||||
| Gross profit | ( | ) | ||||||||||
| General and administrative expenses | ( | ) | ||||||||||
| Total operating expenses | ( | ) | ||||||||||
| Income from operations | ||||||||||||
| Six months ended August 31, 2025 | As previously reported | Reclassification | As reclassified | |||||||||
| Cost of goods sold | ||||||||||||
| Gross profit | ( | ) | ||||||||||
| General and administrative expenses | ( | ) | ||||||||||
| Total operating expenses | ( | ) | ||||||||||
| Income from operations | ||||||||||||
| F-27 |
| Table of Contents |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Quarterly Report on Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are forward-looking statements.
These statements include, but are not limited to, statements regarding our future financial position, business strategy, product development and launches, regulatory submissions, revenue expectations, supply chain management, customer and distributor relationships, and market expansion.
They also include statements in this MD&A concerning expected gross-margin levels, the Inside-the-United-States segment’s ability to contribute operating income in fiscal 2027, U.S. commercialization of Outflo, tariff pass-through and liquidity over the next twelve months.
Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “may,” “could,” “will,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying 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 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 year ended February 28, 2026, any updates to those risks included elsewhere in this Quarterly Report on Form 10-Q, and the risks summarized below.
Readers should read this cautionary statement together with “Item 1A. Risk Factors” in this Quarterly Report, which updates the Form 10-K for U.S.–South Africa trade-policy, tariff and personnel-restriction developments.
Important factors that could cause actual results to differ materially from those in the forward-looking statements include, without 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. A single South African distribution customer, DISA Life Sciences, accounted for 88% of revenue in the three months ended August 31, 2026 and 86% in the six months then ended.
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.
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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. Products we sell in the United States are manufactured in South Africa and are exposed to existing and additional U.S. tariffs, customs delays and possible further trade-restrictive measures, as discussed in Item 1A of this Quarterly Report.
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.
Our financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles.
Business Overview
Medinotec Inc. was incorporated in the State of Nevada on April 26, 2021. Effective April 26, 2022, the Company acquired DISA Medinotec Proprietary Limited, a South African company, from Minoan Medical Proprietary Limited (“Minoan”), a South African company and the former owner of all the capital stock of DISA Medinotec Proprietary Limited. The acquisition was completed pursuant to a Share Exchange Agreement under common control with Minoan, under which the 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.
The acquisition was completed through Medinotec Capital Proprietary Limited, a South African subsidiary established by Medinotec Inc. following an initial capital contribution of $10,000 on December 18, 2021. Medinotec Capital Proprietary Limited serves as the Company’s acquisition and investment vehicle in 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.
The Trachealator
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.
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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.
Outflo Aortic Valve Dilation Balloon Catheter
The Outflo Aortic Valve Dilation Balloon Catheter is a non-occlusive perfusion balloon catheter designed for use in selected procedures involving dilation of the aortic valve while 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.
The Cape Cross PTCA Catheter
The Cape Cross PTCA Catheter is a semi-compliant coronary PTCA balloon catheter. The product has obtained CE marking and is sold in South Africa and selected international 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.
Cape Cross Non-Compliant (“NC”) Catheter
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.
The Micro CTO Catheter (Developmental)
The Company has developed a Micro CTO balloon catheter range with diameters from 0.70 mm to 1.25 mm as a size range extension to the Cape Cross PTCA 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.
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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)
The VaultSeal Balloon is a balloon product intended for use in selected gynecological procedures. The product remains in the development pipeline and is subject to research and development, testing and pre-production prototyping activities. The Company continues to evaluate the product’s regulatory pathway, commercial feasibility and timing of any potential market introduction.
Product Development Pipeline
The Company’s product development and commercialization process generally includes the following stages, although not all stages apply to every product and the timing and outcome of each stage may vary:
| 1. | Research and development | |
| 2. | Pre-production prototyping | |
| 3. | Testing and validation | |
| 4. | Production readiness | |
| 5. | Clinical evaluation, where required | |
| 6. | CE marking or MDR certification, where applicable | |
| 7. | Local marketing and sales | |
| 8. | International sales outside the United States | |
| 9. | FDA 510(k) clearance or other applicable U.S. regulatory pathway | |
| 10. | Sales in the United States |
The products described have reached the following stages:
| Trachealator: | FDA 510(k) clearance and CE marking have been obtained. The Company supplies Trachealator products to customers in the United States and selected international markets. | |
| Outflo Aortic Valve Dilation Balloon Catheter: |
FDA 510(k) clearance was obtained on March 11, 2025. Outflo is marketed in South Africa, and marketing activities in the United States commenced during the fourth quarter of fiscal 2026, with initial sales in the United States occurring during the first quarter of fiscal 2027.
| |
| Cape Cross PTCA Catheter: | The Company is pursuing FDA 510(k) clearance with the assistance of external consultants. Final submission remains pending. CE certification under the MDD has been obtained and remains valid under Regulation (EU) 2023/607. CE certification under the MDR is in progress. | |
| Cape Cross NC Catheter: | The Company is pursuing FDA 510(k) clearance with the assistance of external consultants. Final submission remains pending. CE certification under the MDD has been obtained and remains valid under Regulation (EU) 2023/607. CE certification under the MDR is in progress. |
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| Micro CTO Catheter: | Research and development, testing and pre-production prototyping have been completed. The technical file was submitted to the Notified Body in July 2023 and remains under review as of the date of this report. | |
| StaXstop Catheter: | The product remains in the development pipeline. Activities include research and development, testing, pre-production prototyping, production readiness and validation. The Company is evaluating the applicable regulatory pathway, including whether the product may qualify as a Class I 510(k)-exempt device in the United States. | |
| Septus Balloon: | The product remains in the development pipeline. Activities include research and development, testing and pre-production prototyping. | |
| Vaultseal Balloon: | The product remains in the development pipeline. Activities include research and development, testing and pre-production prototyping. |
Results of Operations for the Three and Six Months ended August 31, 2026 and August 31, 2025
Revenue
The Consolidated Medinotec Group of Companies’ revenue for the three months ended August 31, 2026 was $3,200,603, compared to $3,236,305 for the three months ended August 31, 2025, representing a decrease of $35,702, or approximately 1%. Revenue for the six months ended August 31, 2026 was $5,851,698, compared to $5,370,331 for the six months ended August 31, 2025, representing an increase of $481,367, or approximately 9%.
Operating Segments
The Group operates through two primary segments: Sales Outside the United States and Domestic Sales. These segments reflect the Company’s geographic revenue streams. Sales Outside the United States include Company-developed products and third-party products distributed by the Group, while Domestic Sales include sales of the Trachealator and Outflo products within the United States.
| 1. |
Sales Outside the United States This segment includes both the sale of the Group's in-house developed products (proprietary IP) and the distribution of third-party products. The third-party distribution component generally yields lower margins due to pricing pressures, distributor agreements and competition within the medical device distribution sector. Company-developed products have historically generated higher margins than distributed third-party products.
The performance of this segment is affected by regional demand, regulatory considerations, distributor performance and customer purchasing activity, particularly in regions such as South Africa and broader Southern Africa. |
| 2. |
Domestic Sales (United States) The Domestic Sales segment includes sales in the United States. Historically, this segment has primarily related to the Company’s Trachealator device, which is used in the respiratory market. Beginning in the first quarter of fiscal 2027, this segment also includes sales activity relating to the Company’s Outflo device, which is used in the cardiology market.
Revenue from this segment is primarily affected by sales volumes for the Trachealator and Outflo products, the Company’s sales channels, relationships with U.S. healthcare providers, and the timing and extent of adoption by healthcare institutions. |
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Sales Concentration
Sales between the Medinotec Group and DISA Life Sciences are expected to continue to represent a significant portion of the Group’s revenue, particularly within the Sales Outside the United States segment. DISA Life Sciences accounted for 88% of consolidated revenue for the three months ended August 31, 2026 (93% in the prior-year quarter) and 86% for the six months ended August 31, 2026 (89% in the prior-year period).
The Group continues to evaluate opportunities to reduce its reliance on the South African market over time by expanding into other international markets, including North America, Europe, and selected other markets. Any such expansion will depend on, among other factors, regulatory approvals, the establishment of appropriate distribution channels, market acceptance of the Group’s products, pricing, reimbursement considerations, and competition in those markets.
There is no certainty that the Group will be able to materially reduce its reliance on DISA Life Sciences or the South African market in the short-to-medium term. The timing and success of expansion into new markets are subject to a number of risks and uncertainties, including regulatory requirements, the ability to identify and establish relationships with suitable distribution partners, and the competitive conditions in each relevant market. As a result, customer concentration risk is expected to continue unless and until the Group is able to develop a more diversified revenue base.
Product Development
The Trachealator product received FDA 510(k) clearance in November 2021, allowing the Company to market and sell the product in the United States. This clearance permits the Company to market and sell the product in the United States, subject to applicable commercial, reimbursement and competitive factors.
The Group sells products through customer relationships and distribution arrangements, particularly in South Africa. In South Africa, the Group’s distribution model is supported by a sales network that services hospitals and other healthcare facilities in South Africa. A significant portion of the Group’s historical revenue has been generated through this distribution structure.
The Group continues to evaluate its sales channels in the United States, including in relation to the Trachealator and the recently launched Outflo product. The development of these sales channels remains subject to market acceptance, the establishment of appropriate commercial relationships, and other operational and regulatory considerations.
On March 11, 2025, the Group received FDA 510(k) clearance for its Outflo Aortic Dilatation Balloon Catheter. This is the Group’s second product to receive FDA 510(k) clearance. The commercial launch and market adoption of this product remain subject to normal commercial, regulatory, reimbursement, and competitive factors.
Outside the U.S. Segment
Revenues from the Group’s Outside-the-U.S. segment, which includes both Company-developed and distributed products, decreased by approximately 3% to $3,000,481 for the three months ended August 31, 2026, compared to $3,105,249 for the same period in the prior year. Given the relatively modest movement between periods, management considers segment revenue to have remained comparatively stable and within the range of expected period-to-period fluctuations.
For the six months ended August 31, 2026, revenues from the Outside-the-U.S. segment increased by approximately 6% to $5,371,481, compared to $5,089,212 for the same period in the prior year. The increase was primarily attributable to higher volumes in distribution revenue streams in South Africa, partially offset by lower sales volumes for certain internally designed and manufactured products.
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The decrease in internally designed and manufactured product sales was primarily attributable to the allocation of sales and marketing resources toward the Group’s U.S. commercialization activities, as well as market conditions in Europe, including economic slowdown and foreign currency fluctuations, which affected product sales in certain regions.
During the period, the Group continued sales and marketing activities in the Outside-the-U.S. segment, including maintaining distribution arrangements in South Africa, providing product and sales training, using customer relationship management tools, and performing market research to monitor customer requirements, market trends and competitive conditions.
These activities were intended to support existing sales channels and provide management with information regarding customer requirements and market conditions. There can be no assurance that these activities will result in increased sales, improved margins or expanded market share in future periods.
Inside the U.S. (Domestic) Segment
Revenues from the Group’s Inside-the-U.S. segment, which includes sales of Company-developed products, increased by approximately 53% to $200,122 for the three months ended August 31, 2026, compared to $131,056 for the same period in the prior year. For the six months ended August 31, 2026, revenues increased by approximately 71% to $480,217, compared to $281,119 for the same period in the prior year. The increases were primarily attributable to increased commercialization and sales activity relating to Trachealator, and to a lesser extent, initial sales associated with Outflo. Although revenue increased, sales volumes in the domestic segment remain relatively low as the Group continues to develop its U.S. commercialization activities.
During the period, the Group continued to support the U.S. segment through sales and marketing activities, including expanding sales representation in the U.S. market, conducting product demonstrations and customer outreach, providing product-related education to healthcare professionals, maintaining digital marketing activities, and obtaining feedback from customers and healthcare professionals.
These activities were intended to support awareness of the Group’s products, assist with customer engagement and provide information to management regarding customer requirements and market conditions. There can be no assurance that these activities will result in increased sales, improved margins or broader market acceptance in future periods.
Cost of Goods
The following tables compare cost of goods sold as dollar amounts and as a percentage of net sales for the three and six months ended August 31, 2026 and 2025:
| Three Months Ended (unaudited) | ||||||||
| August 31, 2026 | August 31, 2025 | |||||||
| Total cost of goods sold | $ | 1,640,706 | $ | 1,253,007 | ||||
| Three Months Ended (unaudited) | ||||||||
| August 31, 2026 | August 31, 2025 | |||||||
| Total cost of goods sold % | 51 | % | 39 | % | ||||
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| Six Months Ended (unaudited) | ||||||||
| August 31, 2026 | August 31, 2025 | |||||||
| Total cost of goods sold | $ | 2,984,136 | $ | 2,473,865 | ||||
Six Months Ended (unaudited) | ||||||||
| August 31, 2026 | August 31, 2025 | |||||||
| Total cost of goods sold % | 51 | % | 46 | % | ||||
The composition of the cost of sales figures as a percentage to the segments is as follows:
| Three Months Ended (unaudited) | ||||||||
| August 31, 2026 | August 31, 2025 | |||||||
| Outside United States of America % | 97 | % | 98 | % | ||||
| Inside the United states of America % | 3 | % | 2 | % | ||||
Six Months Ended (unaudited) | ||||||||
| August 31, 2026 | August 31, 2025 | |||||||
| Outside United States of America % | 96 | % | 97 | % | ||||
| Inside the United states of America % | 4 | % | 3 | % | ||||
For the three months ended August 31, 2026, cost of goods sold increased to $1,640,706 from $1,253,007 in the prior-year period, representing an increase of $387,699, or approximately 31%. Revenue decreased by approximately 1% over the same period. As a result, gross margin decreased to 49% of sales for the three months ended August 31, 2026, compared to 61% for the three months ended August 31, 2025.
Prior-period cost of goods sold, gross profit and gross margin have been recast to conform to the current-period presentation described in Note 15. As originally reported in the Quarterly Report on Form 10-Q for the quarter ended August 31, 2025, gross margin for that quarter was 62%.
For the six months ended August 31, 2026, cost of goods sold increased to $2,984,136 from $2,473,865 in the prior-year period, representing an increase of $510,271, or approximately 21%. Revenue increased by approximately 9% over the same period. Accordingly, gross margin decreased to 49% of sales for the six months ended August 31, 2026, compared to 54% for the six months ended August 31, 2025.
The Group’s revenue mix continued to include a significant proportion of distribution-agreement sales in South Africa. For the three months ended August 31, 2026, distribution-agreement sales outside the U.S. decreased to $2,754,176 from $2,792,849, while internally designed and manufactured sales outside the U.S. decreased to $246,305 from $312,400. Internally designed and manufactured sales inside the U.S. increased to $200,122 from $131,056.
For the six months ended August 31, 2026, distribution-agreement sales outside the U.S. increased to $4,909,827 from $4,523,120. Internally designed and manufactured sales outside the U.S. decreased to $461,654 from $566,092, while internally designed and manufactured sales inside the U.S. increased to $480,217 from $281,119.
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The decrease in gross margin was primarily attributable to changes in pricing under the Group’s distribution arrangements in South Africa and inventory write-downs recorded in the South African operations during the period. Management expects consolidated gross margin to remain below the prior-year level so long as distribution-agreement pricing in South Africa and the current mix of distribution versus internally manufactured sales persist. The Company does not expect the Inside-the-United-States segment to contribute operating income in fiscal 2027 unless U.S. revenue grows materially from the $200,122 recorded in the current quarter.
Operating Expenses
The following tables compare operating expenses for the three and six months ended August 31, 2026 and 2025:
| Three months ended (Unaudited) | ||||||||||||||||
| August 31, 2026 | August 31, 2025 | Value Change | ||||||||||||||
| $ | $ | $ | % Change | |||||||||||||
| Operating expenses | ||||||||||||||||
| Depreciation and amortization expense | 21,824 | 7,497 | 14,327 | 191 | % | |||||||||||
| General and administrative expenses | 835,893 | 706,597 | 129,296 | 18 | % | |||||||||||
| Research and development expenses | 22,076 | 66,235 | (44,159 | ) | (67 | %) | ||||||||||
| Selling expenses | 477,381 | 674,404 | (197,023 | ) | (29 | %) | ||||||||||
| Total operating expenses | 1,357,174 | 1,454,733 | (97,559 | ) | (7 | %) | ||||||||||
| Six months ended (Unaudited) | ||||||||||||||||
| August 31, 2026 | August 31, 2025 | Value Change | ||||||||||||||
| $ | $ | $ | % Change | |||||||||||||
| Operating expenses | ||||||||||||||||
| Depreciation and amortization expense | 43,106 | 15,003 | 28,103 | 187 | % | |||||||||||
| General and administrative expenses | 1,430,179 | 1,264,015 | 166,164 | 13 | % | |||||||||||
| Research and development expenses | 30,046 | 115,249 | (85,203 | ) | (74 | %) | ||||||||||
| Selling expenses | 980,636 | 696,177 | 284,459 | 41 | % | |||||||||||
| Total operating expenses | 2,483,967 | 2,090,444 | 393,523 | 19 | % | |||||||||||
For the three months ended August 31, 2026, operating expenses decreased by $97,559, or approximately 7%, to $1,357,174, compared to $1,454,733 for the same period in the prior year. The decrease was primarily attributable to lower selling and research and development expenses, partially offset by increases in general and administrative expenses and depreciation and amortization expense.
For the six months ended August 31, 2026, operating expenses increased by $393,523, or approximately 19%, to $2,483,967, compared to $2,090,444 for the same period in the prior year. The increase was primarily attributable to higher selling and general and administrative expenses, together with increased depreciation and amortization expense, partially offset by lower research and development expenses.
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Selling Expenses
Selling expenses decreased by $197,023, or approximately 29%, to $477,381 for the three months ended August 31, 2026, compared to $674,404 for the same period in the prior year. The decrease primarily reflects the timing of distributor-support costs. In the prior-year period, reimbursements relating to activities conducted throughout the six-month period were recognized principally during the three months ended August 31, 2025. During the current year, these costs were recognized more evenly as they were incurred.
For the six months ended August 31, 2026, selling expenses increased by $284,459, or approximately 41%, to $980,636, compared to $696,177 for the same period in the prior year. The increase was primarily attributable to higher distributor-support costs incurred under the Group’s distribution arrangements in the South African market.
The Group agreed to reimburse its distribution partner for a portion of that partner’s expenditure incurred in connection with the sale of third party cardiology and renal 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 expenditures incurred in supporting these sales activities.
The Group also incurs selling and marketing costs in support of its direct and distributor-based sales channels, including customer engagement, product demonstrations, market education and related sales activities. The level and classification of these costs may vary between periods depending on the timing of sales activities, marketing events, conferences, distributor arrangements and the allocation of employee time.
General and Administrative Expenses
General and administrative expenses increased by $129,296, or approximately 18%, to $835,893 for the three months ended August 31, 2026, compared to $706,597 for the same period in the prior year. For the six months ended August 31, 2026, general and administrative expenses increased by $166,164, or approximately 13%, to $1,430,179, compared to $1,264,015 for the same period in the prior year.
The increases were attributable in part to increased activity associated with the U.S. launch and commercialization of Outflo, including the employment of full-time personnel to support these activities, which significantly affected salary expenses during the period.
General and administrative expenses also include professional fees, public-company costs, compliance-related costs and other administrative expenses required to support the Group’s operations. A significant portion of the Group’s personnel and operational support functions is located outside the United States, including in South Africa, which affects the Group’s overall cost structure.
As a medical-device company, the Group incurs costs related to regulatory filings, quality systems, product compliance and other requirements applicable to the markets in which it operates. As a publicly traded company quoted on the OTCQX Market, the Group also incurs costs associated with public-company reporting, investor relations, regulatory compliance and related corporate requirements. Certain compliance costs are nonrecurring in nature, while others are expected to recur as part of the Group’s ongoing regulatory and corporate obligations.
Research and Development Expenses
Research and development expenses decreased by $44,159, or approximately 67%, to $22,076 for the three months ended August 31, 2026, compared to $66,235 for the same period in the prior year. For the six months ended August 31, 2026, research and development expenses decreased by $85,203, or approximately 74%, to $30,046, compared to $115,249 for the same period in the prior year.
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The decreases were primarily attributable to the timing of research and development activities during the respective periods. The Group’s research and development activities generally focus on product development, product improvements, process improvements, manufacturing efficiencies, regulatory readiness and selected projects that management believes are commercially relevant. Research and development expenses may fluctuate between periods depending on the timing and stage of specific projects.
Depreciation and Amortization Expense
Depreciation and amortization expense increased by $14,327, or approximately 191%, to $21,824 for the three months ended August 31, 2026, compared to $7,497 for the same period in the prior year. For the six months ended August 31, 2026, depreciation and amortization expense increased by $28,103, or approximately 187%, to $43,106, compared to $15,003 for the same period in the prior year.
The amount of depreciation recognized as an operating expense may fluctuate between periods based on the nature and use of the underlying assets and the allocation of manufacturing-related depreciation between inventory, cost of goods sold and operating expenses. The increases were also partially attributable to additional property and equipment being placed into service, including manufacturing equipment and medical simulation equipment used to support product demonstrations and training activities.
Net Income
Net income for the three months ended August 31, 2026 was $40,866, compared to $346,566 for the three months ended August 31, 2025, representing a decrease of $305,700, or approximately 88%. Income before income taxes decreased by $356,579 to $180,243, compared to $536,822 for the same period in the prior year. The decrease was primarily attributable to lower income from operations and an increase in net non-operating expenses, partially offset by lower income-tax expense.
For the six months ended August 31, 2026, net income was $262,880, compared to $460,350 for the six months ended August 31, 2025, representing a decrease of $197,470, or approximately 43%. Income before income taxes decreased by $410,852 to $388,742, compared to $799,594 for the same period in the prior year. The decrease was primarily attributable to lower income from operations, partially offset by improved net non-operating income and lower income-tax expense.
For the three months ended August 31, 2026, the Group recorded current income-tax expense of $127,942 and deferred income-tax expense of $11,435, compared to current income-tax expense of $193,942 and a deferred income-tax benefit of $3,686 for the same period in the prior year. For the six months ended August 31, 2026, the Group recorded current income-tax expense of $127,942 and a deferred income-tax benefit of $2,080, compared to current income-tax expense of $456,788 and a deferred income-tax benefit of $117,544 for the same period in the prior year.
No current income-tax expense was recognized in the three months ended May 31, 2026. The entire year-to-date current provision of $127,942 was recognized in the three months ended August 31, 2026. The six-month deferred benefit of $2,080 is the net of a first-quarter deferred benefit of $13,515 and a second-quarter deferred expense of $11,435.
The Group’s effective tax rate is affected by the geographic mix of taxable income and losses, differences between applicable statutory tax rates, temporary differences, permanent differences and valuation allowances. In particular, taxable income generated by the Group’s South African operations is subject to income tax, while no corresponding deferred tax benefit has been recognized for certain losses incurred by the U.S. parent because realization of those tax benefits is not considered more likely than not.
The effective tax rate was approximately 77% for the three months ended August 31, 2026 and 32% for the six months then ended. The three-month rate exceeds both the U.S. statutory rate of 21% and the South African statutory rate of 27% because U.S. operating losses of $349,828 reduced consolidated pretax income without producing a tax benefit, while South African taxable income continued to be taxed currently. See Note 12.
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Management considers income from operations by segment a useful measure in assessing the underlying performance of the business because this measure excludes financing income and expenses, income-tax effects and other items that may vary between periods.
Segment Contribution to Income/(loss) from operations
| Three Months Ended August 31 (unaudited) | Inside the United States ($) | Outside the United States ($) | Total ($) | |||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Income/(loss) from operations | (349,828 | ) | (213,034 | ) | 552,551 | 741,599 | 202,723 | 528,565 | ||||||||||||||||
| Six Months Ended August 31 (unaudited) | Inside the United States ($) | Outside the United States ($) | Total ($) | |||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Income/(loss) from operations | (373,835 | ) | (502,036 | ) | 757,430 | 1,308,058 | 383,595 | 806,022 | ||||||||||||||||
Inside the United States
The Inside-the-United-States segment reported a loss from operations of $349,828 for the three months ended August 31, 2026, compared to a loss from operations of $213,034 for the same period in the prior year. Although segment revenue and gross profit increased, these improvements were more than offset by higher general and administrative and selling expenses. The increase in general and administrative expenses was attributable in part to increased U.S. commercialization activity associated with Outflo, including the employment of full-time personnel to support its launch and commercialization.
For the six months ended August 31, 2026, the segment’s loss from operations decreased to $373,835 from $502,036 for the same period in the prior year. The improvement was primarily attributable to higher revenue and gross profit generated through increased U.S. commercialization activity, particularly relating to Trachealator and, to a lesser extent, Outflo. This improvement was partially offset by higher selling expenses associated with the continued development of the Group’s U.S. commercial activities.
Outside the United States
The Outside-the-United-States segment reported income from operations of $552,551 for the three months ended August 31, 2026, compared to $741,599 for the same period in the prior year. The decrease was primarily attributable to lower gross profit resulting from changes in pricing under the Group’s South African distribution arrangements and inventory write-downs recorded in the South African operations. This was partially offset by lower selling and general and administrative expenses during the quarter.
For the six months ended August 31, 2026, the segment reported income from operations of $757,430, compared to $1,308,058 for the same period in the prior year. The decrease was primarily attributable to lower gross profit and higher operating expenses, particularly selling and general and administrative expenses. Selling expenses included distributor-support costs incurred under the Group’s South African distribution arrangements.
Total income from operations was $202,723 for the three months ended August 31, 2026, compared to $528,565 for the same period in the prior year. For the six months ended August 31, 2026, total income from operations was $383,595, compared to $806,022 for the same period in the prior year. The decreases were primarily attributable to the lower contribution from the Outside-the-United-States segment. For the six-month period, this was partially offset by the reduced operating loss in the Inside-the-United-States segment.
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Liquidity and Capital Resources
As of August 31, 2026, the Company reported current assets of $6,436,639 and total assets of $6,952,807. Current liabilities at the same date were $955,281, resulting in working capital of $5,481,358. This compares with February 28, 2026, when current assets were $6,419,805 and total assets were $6,812,888, with current liabilities of $1,101,192 and working capital of $5,318,613.
Current assets remained relatively consistent with the February 28, 2026 balance. Accounts receivable increased from $2,352,474 as of February 28, 2026 to $2,618,622 as of August 31, 2026, primarily due to sales activity and the timing of customer collections. This increase was substantially offset by decreases in cash and inventory. Cash and cash equivalents decreased from $2,757,024 to $2,584,106, while inventory decreased from $1,236,373 to $1,153,731, primarily as a result of sales and usage during the period, together with inventory write-downs recorded in the South African operations.
The increase in total assets was primarily attributable to an increase in the operating right-of-use asset following the renewal of the Company’s operating lease and additions to property and equipment, partially offset by the decrease in cash and inventory. Property, plant and equipment increased from $331,346 as of February 28, 2026 to $374,808 as of August 31, 2026, while the operating right-of-use asset increased from $12,880 to $90,789.
Current liabilities decreased from $1,101,192 as of February 28, 2026 to $955,281 as of August 31, 2026. The decrease was primarily attributable to the timing and settlement of supplier payments, which resulted in accounts payable and accrued liabilities decreasing from $1,086,287 to $927,101. This decrease was partially offset by an increase in the current portion of the operating lease liability following the lease renewal.
Total liabilities decreased from $1,101,693 as of February 28, 2026 to $1,018,763 as of August 31, 2026. The decrease in accounts payable and accrued liabilities was partially offset by the recognition of the operating lease liability associated with the renewed lease. Working capital increased by $162,745 during the period, from $5,318,613 as of February 28, 2026 to $5,481,358 as of August 31, 2026, primarily due to the decrease in current liabilities.
The Company believes that funds generated from operations, together with its existing cash reserves, will be sufficient to finance its current operations and meet its obligations over the next 12 months. The Company will continue to monitor its cash requirements and may consider additional funding sources, where appropriate, to support working-capital requirements, capital expenditures, strategic opportunities or other business needs.
In allocating capital to research and development, the Company continues to follow an R&D-light approach. This approach focuses on selected projects that are closer to commercialization, process improvements, manufacturing efficiencies and regulatory expansion. The Company also uses royalty-based arrangements where appropriate, which limit direct development expenditure while allowing continued participation in selected product-development activities.
The Company also plans to undertake clinical write-ups in new territories to facilitate market entry and compliance with applicable local regulatory requirements. The timing and extent of expenditure on these activities will depend on the territories selected, applicable regulatory requirements and the progress of the related commercialization initiatives.
To support potential acquisitions, strategic partnerships, capital expenditures and selected research and development initiatives, the Company may consider additional debt or equity financing or establishing lines of credit to supplement cash flows generated from operations.
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Cash flow movements
The following table summarizes our cash flows for the periods indicated:
| Six Months Ended August 31, 2026 (unaudited) ($) | Six Months Ended August 31, 2025 (unaudited) ($) | |||||||
| Net cash provided by (used in): | ||||||||
| Operating Activities | (68,599 | ) | 464,300 | |||||
| Investing Activities | (86,985 | ) | — | |||||
| Financing Activities | — | (980,467 | ) | |||||
Cash Flows from Operating Activities
For the six months ended August 31, 2026, net cash used in operating activities was $68,599, compared with net cash provided by operating activities of $464,300 for the six months ended August 31, 2025. The change was primarily attributable to lower net income, an increase in accounts receivable, a decrease in accounts payable and accrued liabilities, and income-tax payments during the current period.
Before income-tax payments, operating activities provided net cash of $58,657 during the six months ended August 31, 2026. Income-tax payments of $127,256 resulted in net cash used in operating activities of $68,599.
Although the Company generated net income of $262,880 for the six months ended August 31, 2026, movements in accounts receivable and accounts payable and accrued liabilities, together with income-tax payments, resulted in net cash used in operating activities for the period.
Working Capital Movements
Cash flows from operating activities were significantly affected by the Company’s net income, income-tax payments and changes in working capital during the six months ended August 31, 2026.
Amounts in the bullets below are the cash-flow movements exclusive of foreign-currency translation and therefore will not equal the change in the corresponding balance-sheet captions.
· Trade receivables: Accounts receivable increased by $362,033 during the six months ended August 31, 2026, compared to an increase of $273,143 during the same period in the prior year. The current-period increase was primarily attributable to sales activity and the timing of customer collections.
· Inventory: Inventory decreased by $84,599 during the six months ended August 31, 2026, compared to an increase of $29,799 during the same period in the prior year. The decrease during the current period was primarily attributable to sales and inventory usage, together with inventory write-downs recorded in the South African operations.
· Prepayments: Prepayments increased by $5,142 during the six months ended August 31, 2026, compared to an increase of $104,528 during the same period in the prior year. The smaller current-period movement reflects the payment and subsequent amortization of prepaid expenses, including the Company’s annual insurance premium.
· Accounts payable and accrued liabilities: Accounts payable and accrued liabilities decreased by $112,183 during the six months ended August 31, 2026, compared to a decrease of $101,597 during the same period in the prior year. The decreases were primarily attributable to the timing and settlement of supplier payments.
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Overall, the change from net cash provided by operating activities of $464,300 in the prior-year period to net cash used in operating activities of $68,599 in the current period was primarily attributable to lower net income, a larger increase in accounts receivable, the decrease in accounts payable and accrued liabilities, and income-tax payments of $127,256. These outflows were partially offset by the decrease in inventory and the smaller increase in prepayments.
Cash Flows from Investing Activities
For the six months ended August 31, 2026, net cash used in investing activities was $86,985, compared to no cash flows from investing activities for the six months ended August 31, 2025. The cash used in investing activities during the current period related to purchases of property and equipment.
A significant portion of the capital expenditure during the period related to the acquisition of medical simulation equipment. This equipment is intended to support training and product-education activities, including product familiarization and the demonstration of procedures in a simulated environment.
Cash Flows from Financing Activities
For the six months ended August 31, 2026, the Company reported no cash flows from financing activities, compared to net cash used in financing activities of $980,467 for the six months ended August 31, 2025.
The cash used in financing activities during the prior-year period related to the repayment of debt. No comparable repayments, borrowings or equity-financing transactions occurred during the six months ended August 31, 2026. The loan previously outstanding to Minoan Medical was substantially settled by August 31, 2025, during the prior fiscal year, and therefore no repayments relating to this loan were made during the current period.
Off Balance Sheet Arrangements
As of August 31, 2026, there were no off-balance sheet arrangements.
Critical Accounting Estimates
There have been no material changes to the critical accounting estimates described in our Annual Report on Form 10-K for the year ended February 28, 2026. For a discussion of our critical accounting estimates, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates” in our Annual Report on Form 10-K for the year ended February 28, 2026.
Recently Issued Accounting Pronouncements
See Note 2.w. The Company adopted ASU 2023-07 in fiscal 2026. ASU 2023-09 is expected to be adopted for the fiscal year beginning March 1, 2026 under the Company’s emerging-growth-company extended transition period and is expected to affect income-tax disclosure presentation rather than recognition or measurement. ASU 2024-03 is being evaluated.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable
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Item 4. Controls and Procedures
Disclosure Controls and Procedures
We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, during the period ended August 31, 2026. The purpose of this evaluation was to ensure that information required to be disclosed by us in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of August 31, 2026, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
No change in our system of internal control over financial reporting occurred during the period covered by this report i.e. the three months ended August 31, 2026, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We are not a party to any material pending legal proceedings. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.
Item 1A: 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.
Except as described below, 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.
Deteriorating relations between the United States and South Africa could disrupt our supply chain, increase our costs and adversely affect our operations.
A significant portion of the products sold by the Company in the United States is manufactured by our South African subsidiary and exported to the United States. Accordingly, our business is exposed to changes in trade policy and relations between the governments of the United States and South Africa.
Inside-the-United-States segment revenue was $200,122 for the three months ended August 31, 2026 and $480,217 for the six months then ended. Those sales depend on the Company’s ability to export finished devices from South Africa.
On September 4, 2026, President Trump publicly stated that the United States could cease trading with countries with which it has a trade deficit if the Federal Reserve did not lower interest rates, and suggested that an embargo could be preferable to tariffs. Although these comments were not directed specifically at South Africa, the United States currently has a goods trade deficit with South Africa. No embargo or other restriction arising from these comments has been implemented, and the comments do not currently affect the Company’s operations or its ability to export products from South Africa to the United States. Nevertheless, the comments create additional uncertainty regarding future U.S. trade policy and, when considered together with broader tensions between the United States and South Africa, may indicate an increased risk of measures that could affect trade between the two countries.
In addition, in September 2026, the U.S. government announced a visa restriction policy targeting certain foreign nationals considered responsible for, or complicit in, specified South African laws and policies. The restrictions are targeted at individuals and do not currently restrict the Company’s operations or trade between the United States and South Africa. However, the announcement represents a further deterioration in relations between the two countries and may be followed by additional measures.
Further deterioration in relations or changes in U.S. trade policy could result in additional tariffs, import restrictions, increased customs scrutiny, sanctions-related measures, restrictions on travel or business activities, or, in an extreme case, an embargo or other limitation on trade between the United States and South Africa. The nature, timing, scope and duration of any such measures, and whether they would apply to the Company or its products, are uncertain.
Products the Company already ships from South Africa to the United States may be subject to existing U.S. customs duties. Any increase in those duties, or any new tariff, would raise landed cost in the United States and would reduce gross margin unless the Company is able to pass the cost through to customers.
More extensive trade restrictions could delay or prevent shipments from our South African subsidiary to the United States, disrupt product availability, reduce our competitiveness and require us to identify alternative manufacturing or supply arrangements. Such alternatives may not be available on acceptable terms, or at all, and could require regulatory approvals, additional investment and significant time to implement. Any of these developments could materially adversely affect our business, financial condition, results of operations and cash flows.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults upon Senior Securities
None
Item 4. Mine Safety Disclosure
Not applicable
Item 5. Other Information
None
Item 6. Exhibits
| Exhibit Number |
Description of Exhibit | |||
| 31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) / 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||
| 31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) / 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||
| 32.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| EX-101.INS** | XBRL Instance Document | |||
| EX-101.SCH** | XBRL Taxonomy Extension Schema Document | |||
| EX-101.CAL** | XBRL Taxonomy Extension Calculation Linkbase | |||
| EX-101.DEF** | XBRL Taxonomy Extension Definition Linkbase | |||
| EX-101.LAB** | XBRL Taxonomy Extension Labels Linkbase | |||
| EX-101.PRE** | XBRL Taxonomy Extension Presentation Linkbase | |||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
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SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Medinotec, Inc. | ||
| Date: October 8, 2026 | ||
| By: | /s/ Gregory Vizirgianakis | |
| Gregory Vizirgianakis | ||
| Title: | Chief Executive Officer and Principal Executive Officer | |
| Medinotec, Inc. | ||
| Date: October 8, 2026 | ||
| By: | /s/ Pieter van Niekerk | |
| Pieter van Niekerk | ||
| Title: | Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer | |
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