Pharma-Bio Serv, Inc. - Quarter Report: 2021 January (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

For the quarterly period ended January 31, 2021

 

or

 

 

For the transition period from _____________ to ______________

 

Commission File No. 000-50956

 

PHARMA-BIO SERV, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware	20-0653570
(State or Other Jurisdiction of Incorporation or Organization)	(IRS  Employer  Identification No.)

 

Pharma-Bio Serv Building, # 6 Road 696 Dorado, Puerto Rico	00646 (Zip Code)
(Address of Principal Executive Offices)

 

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

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

 

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically 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). Yes ☒ No ☐

 

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 ☐
	Non-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 Act). Yes ☐ No ☒

 

The number of shares of the registrant’s common stock outstanding as of March 12, 2021 was 23,029,215.

 

 

PHARMA-BIO SERV, INC.

FORM 10-Q

FOR THE QUARTER ENDED JANUARY 31, 2021

 

TABLE OF CONTENTS

 

	Page
PART I FINANCIAL INFORMATION
Item 1 – Financial Statements
Condensed Consolidated Balance Sheets as of January 31, 2021 and October 31, 2020 (unaudited)	1
Condensed Consolidated Statements of Income for the three-month periods ended January 31, 2021 and 2020 (unaudited)	2
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three-month periods ended January 31, 2021 and 2020 (unaudited)	3
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three-month periods ended January 31, 2021 and 2020 (unaudited)	4
Condensed Consolidated Statements of Cash Flows for the three-month periods ended January 31, 2021 and 2020 (unaudited)	5
Notes to Condensed Consolidated Financial Statements (unaudited)	6
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations	13
Item 4 – Controls and Procedures	17
PART II OTHER INFORMATION
Item 1 – Legal Proceedings	18
Item 1A – Risk Factors	18
Item 6 – Exhibits	18
SIGNATURES	19

 

 

 

 

 

PART I – FINANCIAL INFORMATION

 

 

PHARMA-BIO SERV, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

 

ASSETS	January 31, 2021*	October 31, 2020**
Current assets
Cash and cash equivalents	$18,988,339	$17,137,924
Accounts receivable	9,565,325	9,727,591
Current portion - promissory note receivable due from sale of assets from discontinued operations	-	1,250,000
Prepaids and other assets	385,758	468,703
Total current assets	28,939,422	28,584,218
Property and equipment	198,716	217,572
Operating lease right-of-use	790,561	846,714
Other assets	270,321	270,242
Total assets	$30,199,020	$29,918,746
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion-obligations under finance leases	$11,798	$11,640
Loans – short term portion	1,287,800	1,287,800
Current operating lease liabilities	166,637	162,917
Accounts payable and accrued expenses	1,905,687	1,938,305
Dividend payable to stockholders	1,727,364	-
Current portion of US Tax Reform Transition Tax and income taxes payable	435,847	392,131
Total current liabilities	5,535,133	3,792,793
US Tax Reform Transition Tax payable	2,062,024	2,062,024
Loans – long term portion	643,900	643,900
Long term portion – obligation under finance lease	52,430	55,439
Long term operating lease liabilities	595,072	629,979
Other liabilities	17,950	17,950
Total liabilities	8,906,509	7,202,085
Stockholders' equity
Preferred Stock, $0.0001 par value; authorized 10,000,000 shares; none outstanding	-	-
Common Stock, $0.0001 par value; authorized 50,000,000 shares; 23,433,341 and 23,405,753 shares issued, and 23,029,215 and 23,001,627 shares outstanding at January 31, 2021 and October 31, 2020, respectively	2,343	2,341
Additional paid-in capital	1,435,384	1,423,954
Retained earnings	20,064,656	21,523,990
Accumulated other comprehensive income	184,406	160,654
	21,686,789	23,110,939
Treasury stock, at cost; 404,126 common shares held at January 31, 2021 and October 31, 2020	(394,278)	(394,278)
Total stockholders' equity	21,292,511	22,716,661
Total liabilities and stockholders' equity	$30,199,020	$29,918,746

 

*	Unaudited.
**	Condensed from audited financial statements.

 

See notes to the condensed consolidated financial statements.

 

 

PHARMA-BIO SERV, INC.

Condensed Consolidated Statements of Income

(Unaudited)

 

	Three months ended January 31,
	2021	2020
REVENUES	$4,488,309	$4,613,167
COST OF SERVICES	3,173,199	3,027,275
GROSS PROFIT	1,315,110	1,585,892
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES	995,989	1,049,133
INCOME FROM OPERATIONS	319,121	536,759
OTHER INCOME, NET	2,402	45,436
INCOME BEFORE INCOME TAX	321,523	582,195
INCOME TAX EXPENSE	53,491	55,295
NET INCOME	$268,032	$526,900
BASIC AND DILUTED EARNINGS PER COMMON SHARE	$0.012	$0.023
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC	23,010,623	23,002,191
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED	23,172,348	23,018,537

 

See notes to the condensed consolidated financial statements.

 

 

PHARMA-BIO SERV, INC.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

 

	Three months ended January 31,
	2021	2020
NET INCOME	$268,032	$526,900
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation gain (loss), net of tax	23,752	(11,734)
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)	23,752	(11,734)
COMPREHENSIVE INCOME	$291,784	$515,166

 

See notes to the condensed consolidated financial statements.

 

 

PHARMA-BIO SERV, INC.

Condensed Consolidated Statements of Changes in Stockholders' Equity

(Unaudited)

 

 

							Accumulated
					Additional		Other
FISCAL YEAR 2020	Common Stock		Preferred Stock		Paid-in	Retained	Comprehensive	Treasury
	Shares	Amount	Shares	Amount	Capital	Earnings	Income (Loss)	Stock	Total
BALANCE AT NOVEMBER 1, 2019	23,397,707	$2,340	-	$-	$1,381,076	$19,473,069	$143,600	$(392,579)	$20,607,506
STOCK-BASED COMPENSATION	-	-	-	-	11,430	-	-	-	11,430
ISSUANCE OF COMMON STOCK PURSUANT TO THE CASHLESS EXERCISE OF STOCK OPTIONS	8,046	1	-	-	-	(1)	-	-	-
PURCHASE OF TREASURY STOCK (2,300 SHARES)	-	-	-	-	-	-	-	(1,699)	(1,699)
NET INCOME	-	-	-	-	-	526,900	-	-	526,900
OTHER COMPREHENSIVE LOSS, NET OF TAX	-	-	-	-	-	-	(11,734)	-	(11,734)
BALANCE AT JANUARY 31, 2020	23,405,753	$2,341	-	$-	$1,392,506	$19,999,968	$131,866	$(394,278)	$21,132,403

 

							Accumulated
					Additional		Other
FISCAL YEAR 2021	Common Stock		Preferred Stock		Paid-in	Retained	Comprehensive	Treasury
	Shares	Amount	Shares	Amount	Capital	Earnings	Income (Loss)	Stock	Total
BALANCE AT NOVEMBER 1, 2020	23,405,753	$2,341	-	$-	$1,423,954	$21,523,990	$160,654	$(394,278)	$22,716,661
STOCK-BASED COMPENSATION	-	-	-	-	11,430	-	-	-	11,430
ISSUANCE OF COMMON STOCK PURSUANT TO THE CASHLESS EXERCISE OF STOCK OPTIONS	27,588	2	-	-	-	(2)	-	-	-
NET INCOME	-	-	-	-	-	268,032	-	-	268,032
OTHER COMPREHENSIVE INCOME, NET OF TAX	-	-	-	-	-	-	23,752	-	23,752
CASH DIVIDEND ($0.075 PER COMMONSHARE AT RECORD DATE)	-	-	-	-	-	(1,727,364)	-	-	(1,727,364)
BALANCE AT JANUARY 31, 2021	23,433,341	$2,343	-	$-	$1,435,384	$20,064,656	$184,406	$(394,278)	$21,292,511

 

See notes to condensed consolidated financial statements.

 

 

PHARMA-BIO SERV, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

	Three months ended January 31,
	2021	2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$268,032	$526,900
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation	11,430	11,430
Depreciation and amortization	21,424	21,032
Decrease in accounts receivable	176,864	1,062,141
Decrease (increase) in other assets	136,466	(837,443)
Increase (decrease) in liabilities	(26,030)	730,959
NET CASH PROVIDED BY OPERATING ACTIVITIES	588,186	1,515,019
CASH FLOWS FROM INVESTING:
Acquisition of property and equipment	(2,568)	(11,326)
Collection from promissory note receivable	1,250,000	-
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	1,247,432	(11,326)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of common stock	-	(1,699)
Payments on obligations under finance lease	(2,851)	(2,702)
Cash dividends paid to shareholders	-	(1,725,295)
NET CASH USED IN FINANCING ACTIVITIES	(2,851)	(1,729,696)
EFFECT OF EXCHANGE RATE CHANGES ON CASH	17,648	(9,419)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	1,850,415	(235,422)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD	17,137,924	15,490,174
CASH AND CASH EQUIVALENTS - END OF PERIOD	$18,988,339	$15,254,752
SUPPLEMENTAL DISCLOURES OF CASH FLOWS INFORMATION:
Cash paid during the period for:
Income taxes	$-	$-
Interest	$852	$1,016
SUPPLEMENTARY SCHEDULES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Income tax withheld by clients to be used as a credit in the Company’s income tax return	$3,613	$3,649
Cash dividend declared but not paid	$1,727,364	$-
Conversion of cashless exercise of options to common stock	$2	$1

 

See notes to the condensed consolidated financial statements.

 

 

PHARMA-BIO SERV, INC.

Notes To Condensed Consolidated Financial Statements

January 31, 2021

(Unaudited)

 

NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

ORGANIZATION

 

Pharma-Bio Serv, Inc. (“Pharma-Bio”) is a Delaware corporation organized on January 14, 2004. Pharma-Bio is the parent company of Pharma-Bio Serv PR, Inc. (“Pharma-PR”), Pharma Serv, Inc. (“Pharma-Serv”), and Scienza Labs, Inc. (currently inactive) (“Scienza Labs”), each a Puerto Rico corporation, Pharma-Bio Serv US, Inc. (“Pharma-US”), a Delaware corporation, Pharma-Bio Serv SL (“Pharma-Spain”), a Spanish limited liability company, and Pharma-Bio Serv Brasil Servicos de Consultoria Ltda. (“Pharma-Brazil”), a Brazilian limited liability company. Pharma-Bio, Pharma-PR, Pharma-Serv, Scienza Labs, Pharma-US, Pharma-Spain and Pharma-Brazil are collectively referred to as the “Company.” The Company operates in Puerto Rico, the United States, Spain and Brazil under the name of Pharma-Bio Serv and is engaged in providing technical compliance consulting service.

 

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The condensed consolidated balance sheet of the Company as of October 31, 2020 is derived from audited consolidated financial statements but does not include all disclosures required by generally accepted accounting principles. The unaudited interim condensed consolidated financial statements, include all adjustments, consisting of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations and cash flows for the interim periods. The results of operations for the three months ended January 31, 2021 are not necessarily indicative of expected results for the full 2021 fiscal year.

 

The accompanying financial data as of January 31, 2021, and for the three-month period ended January 31, 2021 and 2020 has been prepared by us, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally contained in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes contained in our audited Consolidated Financial Statements and the notes thereto for the fiscal year ended October 31, 2020.

 

Consolidation

 

The accompanying condensed consolidated financial statements include the accounts of the Company and all of its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. 

 

Segments

 

The Company operates in three reportable business segments: (i) Puerto Rico technical compliance consulting, (ii) United States technical compliance consulting, and (iii) Europe technical compliance consulting. Accordingly, the accompanying condensed consolidated financial statements are presented to show these three reportable segments.

 

Use of Estimates

 

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results may differ from these estimates.

 

Fair Value of Financial Instruments

 

Accounting standards have established a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Accounting standards have established three levels of inputs that may be used to measure fair value:

 

 

Level 1:		Quoted prices in active markets for identical assets and liabilities.
Level 2:		Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3:		Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

 

The carrying value of the Company's financial instruments (excluding obligations under finance leases), cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, are considered reasonable estimates of fair value due to their liquidity or short-term nature. Management believes, based on current rates, that the fair value of its obligations under finance leases approximates the carrying amount.

 

Revenue Recognition

 

The Company records revenue under Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers. We evaluate our revenue contracts with customers based on the five-step model under ASC 606: (i) Identify the contract with the customer; (ii) Identify the performance obligations in the contract; (iii) Determine the transaction price; (iv) Allocate the transaction price to separate performance obligations; and (v) Recognize revenue when (or as) each performance obligation is satisfied.

 

Revenue is primarily derived from: (1) time and material contracts (representing approximately 99% of total revenues), and (2) short-term fixed-fee contracts or "not to exceed" contracts (representing approximately 1% of total revenues). Time and material contracts are typically based on the number of hours worked at contractually agreed upon rates. These service contracts relate to work which have no alternative use and for which the Company has an enforceable right to payment for the work completed to date. As a result, revenue is recognized over time when or as the Company transfers control of the promised products or services (known as performance obligations) to its customers. Revenue for short term fixed fee contracts or “not to exceed” contracts is recognized similarly, except that certain milestones also have to be reached before revenue is recognized. If the Company determines that a contract will result in a loss, the Company recognizes the estimated loss in the period in which such determination is made.

 

Cash Equivalents

 

For purposes of the consolidated statements of cash flows, cash equivalents include investments in a money market obligations trust that is registered under the U.S. Investment Company Act of 1940, as amended, and liquid investments with original maturities of three months or less.

 

Accounts Receivable

 

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

 

Income Taxes

 

The Company follows an asset and liability approach method of accounting for income taxes. This method measures deferred income taxes by applying enacted statutory rates in effect at the balance sheet date to the differences between the tax basis of assets and liabilities and their reported amounts on the financial statements. The resulting deferred tax assets or liabilities are adjusted to reflect changes in tax laws as they occur. A valuation allowance is provided when it is more likely than not that a deferred tax asset will not be realized.

 

The Company follows guidance from the Financial Accounting Standards Board (“FASB”) related to Accounting for Uncertainty in Income Taxes, which includes a two-step approach to recognizing, de-recognizing and measuring uncertain tax positions. As of January 31, 2021, the Company had no significant uncertain tax positions that would be reduced as a result of a lapse of the applicable statute of limitations.

 

Property and Equipment

 

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

 

Depreciation of owned assets are provided for, when placed in service, in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives, using straight-line basis. Assets under finance leases are amortized over the lease term. While expenditures for repairs and maintenance are expensed when incurred. As of January 31, 2021 and October 31, 2020, the accumulated depreciation amounted to $522,913 and $501,489, respectively.

 

Leases

 

We categorize leases at their inception as either operating or finance leases. The Company leases include an operational lease for office space and a finance lease agreement for a vehicle. The adoption of the new standard resulted in the operating lease being included in operating lease right-of-use assets, current operating lease liabilities, and long-term operating lease liabilities in our condensed consolidated balance sheets. However, the adoption of the new standard did not have an impact on the Company’s beginning balance of retained earnings, consolidated statement of operations or statement of cash flows. Finance leases are included in net property and equipment, current installments of long-term debt, and long-term debt in our condensed consolidated balance sheets. The most significant impact was the recognition of right-of-use assets and lease liabilities on account of the Company’s operating leases. As of January 31, 2021 and October 31, 2020, the total right-of-use assets related to the Company’s operating leases were $790,561 and $846,714, respectively, As of January 31, 2021 operating lease liabilities current and non-current were approximately $166,637 and $595,072, respectively, while as of October 31, 2020 operating lease liabilities current and non-current were approximately $162,917 and $629,979.

 

Impairment of Long-Lived Assets

 

The Company evaluates for impairment its long-lived assets to be held and used, and long-lived assets to be disposed of, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Based on management estimates, no impairment of the long-lived assets was present as of January 31, 2021 and October 31, 2020.

 

Stock-based Compensation

 

Stock-based compensation expense is recognized in the consolidated financial statements based on the fair value of the awards granted. Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which generally represents the vesting period, and includes an estimate of awards that will be forfeited. The Company calculates the fair value of stock options using the Black-Scholes option-pricing model at the grant date, while for restricted stock units the fair market value of the units is determined by Company’s share market value at grant date. Excess tax benefits related to stock-based compensation are reflected as cash flows from financing activities rather than cash flows from operating activities. The Company has not recognized such cash flows from financing activities since there has been no tax benefit related to the stock-based compensation.

 

Earnings Per Share of Common Stock

 

Basic earnings per share of common stock is calculated by dividing net earnings by the weighted average number of shares of common stock outstanding. Diluted earnings per share includes the dilution of common stock equivalents, which include principally shares that may be issued upon the exercise of warrants, stock option and restricted stock unit awards.

 

The diluted weighted average shares of common stock outstanding were calculated using the treasury stock method for the respective periods.

 

Foreign Operations

 

The functional currency of the Company’s foreign subsidiaries is its local currency. The assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars at exchange rates in effect at the balance sheet date. Income and expense items are translated at the average exchange rates prevailing during the period. The cumulative translation effect for subsidiaries using a functional currency other than the U.S. dollar is included as a cumulative translation adjustment in stockholders’ equity and as a component of comprehensive income.

 

The Company’s intercompany accounts are typically denominated in the functional currency of the foreign subsidiary. Gains and losses resulting from the remeasurement of intercompany receivables that the Company considers to be of a long-term investment nature are recorded as a cumulative translation adjustment in stockholders’ equity and as a component of comprehensive income, while gains and losses resulting from the remeasurement of intercompany receivables from those international subsidiaries for which the Company anticipates settlement in the foreseeable future are recorded in the consolidated statements of operations.

 

 

Subsequent Events

 

The Company has evaluated subsequent events through the filing date of this report. The Company has determined that there are no events occurring in this period that required disclosure or adjustment, except as disclosed in the accompanying condensed consolidated financial statements.

 

Reclassifications

 

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

 

Recent Accounting Pronouncements

 

Recent accounting pronouncements pending adoption not discussed above or in the Form 10-K for the year ended October 31, 2020 are either not applicable or will not have or are not expected to have a material impact on us.

 

NOTE B – PROMISSORY NOTE RECEIVABLE

 

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

 

NOTE C – LOANS

 

On April 23, 2020, Pharma-PR, Pharma-Serv, and Pharma-US (collectively, the “Borrowers”) entered into loan agreements and related promissory notes to receive U.S. Small Business Administration Loans. These loans were originated pursuant to the Paycheck Protection Program (the “PPP”) established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), and in the aggregate amount of $1,931,700 (the “Loan Proceeds”). The Borrowers received the Loan Proceeds on April 23, 2020. These SBA Loans terms follow the CARES Act provisions and the corresponding regulations issued by the SBA. Under regulations established by the Small Business Administration, the Company may seek forgiveness of the SBA Loans.

NOTE D - INCOME TAXES

 

On December 22, 2017, Public Law 115-97, commonly known as the Tax Cuts and Jobs Act of 2017 (the “Tax Reform”), was enacted. The Tax Reform imposed a mandatory one-time transition tax (the “Transition Tax”) over foreign subsidiaries undistributed earnings and profits (“E&Ps”) earned prior to a date set by the statute. Based on the Company’s E&Ps, the Transition Tax was determined to be approximately $2.7 million. The Transition Tax liability must be paid over a period of eight years which started with the Company’s second quarter of fiscal year 2019. In the past, most of these E&Ps’ were not repatriated since such E&Ps’ were considered to be reinvested indefinitely in the foreign location, therefore no US tax liability was incurred unless the E&Ps were repatriated as a dividend. After December 31, 2017, the Tax Reform has established a 100% tax exemption on the foreign-source portion of dividends received attributable to E&Ps, with certain limitations. However, foreign subsidiaries earnings are subject to U.S. tax at a reduced rate of 10.5%.

 

In June 2011, Pharma-Bio, Pharma-PR and Pharma-Serv obtained a Grant of Industrial Tax Exemption pursuant to the terms and conditions set forth in Act No. 73 of May 28, 2008 (“the Grant”) issued by the Puerto Rico Industrial Development Company (“PRIDCO”). The Grant was effective as of November 1, 2009 and covers a fifteen-year period. The Grant provides relief on various Puerto Rico taxes, including income tax, with certain limitations, for most of the activities carried on within Puerto Rico, including those that are for services to parties located outside of Puerto Rico. Industrial Development Income (“IDI”) covered under the Grant are subject to a fixed income tax rate of 4%. In addition, IDI earnings distributions accumulated since November 1, 2009 are exempt from Puerto Rico earnings distribution tax.

 

Puerto Rico operations not covered in the exempt activities of the Grant are subject to Puerto Rico income tax at a maximum tax rate of 37.5% as provided by the 1994 Puerto Rico Internal Revenue Code, as amended. The operations carried out in the United States by the Company’s subsidiaries, is taxed in the United States at a maximum regular federal income tax rate of 21%.

 

 

Deferred income tax assets and liabilities are computed for differences between the consolidated financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.

 

Pharma-Spain has unused operating losses which result in a potential deferred tax asset. However, an allowance has been provided covering the total amount of such balance since it is uncertain whether the net operating losses can be used to offset future taxable income before their expiration dates. Realization of future tax benefits related to a deferred tax asset is dependent on many factors, including the company’s ability to generate taxable income. Accordingly, the income tax benefit will be recognized when realization is determined to be more probable than not. Pharma-Spain net operating loss is available to offset future taxable income through 2035.

 

The Company files income tax returns in the United States (federal and various states jurisdictions), Puerto Rico, Ireland, Spain and Brazil. The 2016 (2015 for Puerto Rico) through 2019 tax years are open and may be subject to potential examination in one or more jurisdictions. Currently, the Company has no federal, state, Puerto Rico or foreign income tax examination.

 

NOTE E – EARNINGS PER SHARE

 

The following data shows the amounts used in the calculations of basic and diluted earnings per share.

 

	Three months ended   January 31,
	2021	2020
Net income available to common equity holders - used to compute basic and diluted earnings per share	$268,032	$526,900
Weighted average number of common shares - used to compute basic earnings per share	23,010,623	23,002,191
Effect of options to purchase common stock	161,725	16,346
Weighted average number of shares - used to compute diluted earnings per share	23,172,348	23,018,537

 

Options for the purchase of 80,000 and 340,000 shares of common stock for the three-month periods ended January 31, 2021 and 2020, respectively, were not included in computing diluted earnings per share because their effects were antidilutive.

 

NOTE F – EQUITY TRANSACTIONS

 

On June 13, 2014, the Board of Directors of the Company authorized the Company to repurchase up to two million shares of its outstanding common stock (the “Repurchase Program”). The timing, manner, price and amount of any repurchases under the Repurchase Program will be at the discretion of the Company, subject to the requirements of the Securities Exchange Act of 1934, as amended, and related rules. The Repurchase Program does not oblige the Company to repurchase any shares and it may be modified, suspended or terminated at any time and for any reason. No shares will be repurchased under the Repurchase Program directly from directors or officers of the Company. Since April 2020, the Company suspended purchases under the Repurchase Program to conserve cash due to the economic uncertainty caused by the coronavirus pandemic. As of January 31, 2021, a total of 341,154 shares of the Company’s common stock were purchased under the Repurchase Program for an aggregate amount of $331,306.

 

On January 5, 2021 the Board of Directors of the Company declared a cash dividend of $0.075 per common share for shareholders of record as of the close of business on January 25, 2021. Accordingly, an aggregate dividend payment of $1,727,364 was paid on February 5, 2021.

 

 

NOTE G - SEGMENT DISCLOSURES

 

The Company’s segments are based on the organizational structure for which financial results are regularly evaluated by the Company’s chief operating decision maker to determine resource allocation and assess performance. Each reportable segment is managed by its own management team and reports to executive management. The Company has three reportable segments: (i) Puerto Rico technical compliance consulting, (ii) United States technical compliance consulting, and (iii) Europe technical compliance consulting. These reportable segments provide services primarily to the pharmaceutical, chemical, medical device and biotechnology industries in their respective markets.

 

The following table presents information about the reported revenue from services and earnings from operations of the Company for the three-month periods ended in January 31, 2021 and 2020. There is no intersegment revenue for the mentioned periods. Corporate expenses that support the operating units have been allocated to the segments. Asset information by reportable segment is not presented, since the Company does not produce such information internally, nor does it use such data to manage its business.

 

	Three months ended January 31,
	2021	2020
REVENUES:
Puerto Rico consulting	$3,367,351	$4,180,910
United States consulting	447,411	389,361
Europe consulting	530,496	22,189
Brazil consulting	143,051	20,707
Total consolidated revenues	$4,488,309	$4,613,167
INCOME (LOSS) BEFORE TAXES:
Puerto Rico consulting	$104,412	$673,671
United States consulting	9,383	(14,641)
Europe consulting	157,503	(69,174)
Brazil consulting	50,225	(7,661)
Total consolidated income before taxes	$321,523	$582,195

 

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

 

NOTE H - CONCENTRATIONS OF RISK

 

Cash and cash equivalents

 

The Company’s domestic cash and cash equivalents consist of cash deposits in FDIC insured banks (substantially covered by FDIC insurance by the spread of deposits in multiple FDIC insured banks), a money market obligations trust registered under the US Investment Company Act of 1940, as amended, and U.S. Treasury securities with maturities of three months or less. In the foreign markets we serve, we also maintain cash deposits in foreign banks, which tend to be insignificant and have no specific insurance. No losses have been experienced or are expected on these accounts.

 

Accounts receivable and revenues

 

Management deems all of the Company's accounts receivable to be fully collectible, and, as such, does not maintain any allowances for uncollectible receivables.

 

The Company's revenues, and the related receivables, are concentrated in the pharmaceutical industry in Puerto Rico, the United States, Spain and Brazil. Although a few customers represent a significant source of revenue, the Company’s functions are not a continuous process, accordingly, the client base for which the services are typically rendered, on a project-by-project basis, changes regularly.

 

 

The Company provided a substantial portion of its services to five customers, which accounted for 10% or more of its revenues in either of the three-month periods ended January 31, 2021 and 2020. During the three months ended January 31, 2020, revenues from these customers were 19.5%, 14.9%, 10.3%, 8.8% and 0.1%, or a total of 53.6%, as compared to the percentages for the same period last year of 13.6%, 13.1%, 8.7%, 14.6% and 16.3%, or a total of 66.3%, respectively. At January 31, 2021, amounts due from these customers represented 81.8% of the Company’s total accounts receivable balance.

 

The information related to major customers in the above paragraph is based on revenues earned from said customers at the segment level because in management’s opinion contracts by segments are totally independent of each other, and therefore such information is more meaningful to the reader. However, at the global level five customers accounted for 10% or more of the Company’s revenues in either of the three-month periods ended January 31, 2021 and 2020. During the three months ended January 31, 2021, aggregate revenues from these global groups of affiliated companies were 19.5%, 17.0%, 10.3%, 8.8% and 0.1%, or a total of 55.7%, as compared to the same period last year for 13.6%, 16.0%, 8.7%, 14.6% and 16.3%, or a total of 69.2%, respectively. At January 31, 2021 amounts due from these global groups of affiliated companies represented 84.1% of total accounts receivable balance.

 

As of January 31, 2021, one of the Company’s customers (representing 8.8% of revenues during the three months ended January 31, 2021) owes the Company approximately $4.9 million, which represents approximately 20.7% of the Company’s total working capital. A significant portion of the customer’s funding comes from different financing sourcing. Management estimates that collectability of the account is reasonably assured, accordingly, no provision for losses has been recorded in the financial statements.

 

NOTE I – SUBSEQUENT EVENT

 

On February 9, 2021, Elizabeth Plaza, a former director of the Company, and Strategic Consultants International, LLC (“SCI”), an entity wholly-owned by Mrs. Plaza, filed a legal action against the Company, directors and executive officers of the Company, and the Company’s wholly-owned subsidiary Pharma-Bio Serv PR, Inc., in the Court of First Instance of the Commonwealth of Puerto Rico. The complaint alleges certain matters leading up to and in connection with the expiration of SCI’s independent contractor consulting agreement with the Company and Mrs. Plaza’s subsequent resignation from the Company’s Board of Directors. The complaint seeks injunctive relief and monetary damages. On February 19, 2021, the case was removed to the U.S. Federal District Court for Puerto Rico, pending review by such court. The Company has been granted until April 7, 2021 to respond to the complaint. The Company and its directors believe certain matters for which injunctive relief is sought have been resolved, and that regardless, all of the claims presented are without merit. The defendants intend to vigorously defend themselves against these allegations.

 

 

 

 

The following discussion of our results of operations and financial condition should be read in conjunction with the financial statements and the related notes included under Part I, Item 1 of this Quarterly Report on Form 10-Q. In addition, reference should be made to our audited Consolidated Financial Statements and notes thereto, and related Management’s Discussion and Analysis appearing in our Annual Report on Form 10-K for the year ended October 31, 2020. The following discussion includes forward-looking statements. For a discussion of important factors that could cause actual results to differ from results discussed in the forward-looking statements, see “Forward Looking Statements” below and the “Risk Factors” section in our Annual Report on Form 10-K for the year ended October 31, 2020.

 

Overview

 

We are a compliance and technology transfer services consulting firm with headquarters in Puerto Rico, servicing the Puerto Rico, United States, Europe and Brazil markets. The compliance consulting service sector in those markets consists of local compliance and validation consulting firms, United States dedicated validation and compliance consulting firms and large publicly traded and private domestic and foreign engineering and consulting firms. We provide a broad range of compliance related consulting services. We market our services to pharmaceutical, chemical, biotechnology, medical devices, cosmetics and food industries, and allied products companies in Puerto Rico, the United States, Europe and Brazil. Our consulting team includes experienced engineering and life science professionals, former quality assurance managers and directors, and professionals with bachelors, masters and doctorate degrees in health sciences and engineering.

 

We actively operate in Puerto Rico, the United States, Europe and Brazil and pursue to further expand these markets by strengthening our business development infrastructure and by constantly realigning our business strategies as new opportunities and challenges arise.

 

We market our services with an active presence in industry trade shows, professional conventions, industry publications and company provided seminars to the industry. Our senior management is also actively involved in the marketing process, especially in marketing to major accounts. Our senior management and staff also concentrate on developing new business opportunities and focus on the larger customer accounts (by number of consultants or dollar volume) and responding to prospective customers’ requests for proposals.

 

We consider our core business to be Food and Drug Administration (“FDA”) and international agencies regulatory compliance consulting related services.

 

The Company holds a tax grant issued by the Puerto Rico Industrial Development Company (“PRIDCO”), which provides relief on various Puerto Rico taxes, including income tax, with certain limitations, for most of the activities carried on within Puerto Rico, including those that are for services to parties located outside of Puerto Rico.

 

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

 

	Three months ended January 31,
Revenues by Region:	2021		2020
Puerto Rico	$3,367	75.0%	$4,181	90.6%
United States	447	10.0%	389	8.4%
Europe	531	11.8%	22	0.5%
Other	143	3.2%	21	0.5%
	$4,488	100.0%	$4,613	100.0%

 

For the three-month period ended January 31, 2021, the Company’s total revenues were approximately $4,488,000, a net decrease of approximately $125,000 when compared to the same period last year. The Puerto Rico consulting market had a revenue decrease in projects of approximately $814,000, which was partially offset by the increase in projects revenue in Europe, Brazil and the US markets of approximately $509,000, $122,000 and $58,000, respectively. When compared to the same period last year, gross margin decreased by 5.1 percentage points. The net decrease in gross margin percentage points is mainly attributable to some projects in the Puerto Rico market for the three-month period ended January 31, 2020, which the gross margin was higher than usual. Selling, general and administrative expenses were approximately $996,000, a decrease of approximately $53,000. The decrease is mainly attributable to a decrease of approximately $62,000 in consulting fees, partially offset by an increase in other administrative and general expenses. Other income declined by approximately $43,000, mainly due to the decline in interest income because of lower interest rates. These factors resulted in a net income of approximately $268,000 for the three-month period ended January 31, 2021, or a decrease of approximately $259,000 when compared to the same period last year.

 

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

 

The coronavirus pandemic, the Puerto Rico government financial crisis, the Tax Reform, other tax reforms on the markets where we do business, bio-pharmaceutical industry consolidations, trends on managing contract resources, and the Puerto Rico Act 154-2010, all pose current and future challenges which may adversely affect our future performance. We believe that our future profitability and liquidity will be dependent on the effect the local and global economy, including any impacts of the coronavirus pandemic, changes in tax laws, worldwide life science manufacturing industry consolidations, operational constraints imposed by our customers due to the coronavirus pandemic and resources management trends will have on our operations, and our ability to seek service opportunities and adapt to industry trends.

 

Results of Operations

 

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

 

	Three months ended  January 31,
	2021		2020
Revenues	$4,488	100.0%	$4,613	100.0%
Cost of services	3,173	70.7%	3,027	65.6%
Gross profit	1,315	29.3%	1,586	34.4%
Selling, general and administrative expenses	996	22.2%	1,049	22.7%
Other income, net	2	0.1%	45	0.9%
Income before income taxes	321	7.2%	582	12.6%
Income tax expense	53	1.2%	55	1.2%
Net income	268	6.0%	527	11.4%

 

Revenues. For the three-month period ended January 31, 2021, the Company’s total revenues were approximately $4,488,000, a net decrease of approximately $125,000 when compared to the same period last year. The Puerto Rico consulting market had a revenue decrease in projects for approximately $814,000, which was partially offset by the increase in projects revenue in Europe, Brazil and the US markets of approximately $509,000, $122,000 and $58,000, respectively.

 

Cost of Services; gross margin. Cost of services were approximately $3,173,000, an increase of $146,000 when compared to the same period last year. Gross margin for the three months ended January 31, 2021 decreased 5.1 percentage points when compared to the same period last year. The net decrease in gross margin percentage points is mainly attributable to some projects in the Puerto Rico market for the three-month period ended January 31, 2020, which the gross margin was higher than usual.

 

Selling, General and Administrative Expenses. Selling, general and administrative expenses were approximately $996,000 for the three-month period ended January 31, 2021, a decrease of approximately $53,000. The decrease is mainly attributable to a decrease of approximately $62,000 in consulting fees, partially offset by an increase in other administrative and general expenses.

 

Other Income, net.  For the three-month period ended on January 31, 2021, other income, net was approximately $2,000, a net decrease of approximately $43,000 when compared to the same period last year. The decrease is mainly attributable to the decline in interest income because of lower interest rates.

 

Net Income. Net income for the three months ended January 31, 2021 was approximately $268,000, a decrease of approximately $259,000 when compared to the same period last year. The decline in net income is mostly attributable to the (i) decrease in gross profit (attributable to the decrease in revenues and increase in cost of services), (ii) partial offset by net savings on selling, general and administrative expenses, and (iii) decline in interest income, when compared to the same period last year.

For the three-month period ended January 31, 2021, net income per common share for both basic and diluted was $0.012, a decline of $0.011 per share when compared to the same period last year.

 

 

Liquidity and Capital Resources

 

Liquidity is a measure of our ability to meet potential cash requirements, including planned capital expenditures. As of January 31, 2021, the Company had approximately $23.4 million in working capital.

 

On June 13, 2014, the Board of Directors of the Company authorized the Company to repurchase up to two million shares of its common stock (the "Repurchase Program"). During April 2020, the Company suspended purchases under the Repurchase Program to conserve cash due to the economic uncertainty caused by the coronavirus pandemic. We may resume repurchases in the future; however, we can provide no assurance when we will resume the Repurchase Program. As of January 31, 2021, the Company has 1,658,846 shares of common stock available for future repurchases under the Repurchase Program.

 

Our primary cash needs consist of the payment of compensation to our consulting team, overhead expenses, and statutory taxes. Additionally, we may use cash for the repurchase of our common stock under the Company Stock Repurchase Program, capital expenditures and business development expenses. Management believes that based on the current level of working capital, operations and cash flows from operations, and the collectability of high-quality customer receivables are sufficient to fund anticipated expenses and satisfy other possible long-term contractual commitments.

 

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

 

While uncertainties relating to the current local and global economic condition, competition, the industries and geographical regions served by us and other regulatory matters exist within the consulting services industry, as described above, management is not aware of any other trends or events likely to have a material adverse effect on liquidity or its financial statements.

 

Off-Balance Sheet Arrangements

 

We were not involved in any significant off-balance sheet arrangement during the three months ended January 31, 2021.

 

Critical Accounting Policies and Estimates

 

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

 

New Accounting Pronouncements

 

There were no new accounting standards issued since our filing of the Annual Report on Form 10-K for the fiscal year ended October 31, 2020, which could have a significant effect on our condensed consolidated financial statements.

 

Forward-Looking Statements

 

Our business, financial condition, results of operations, cash flows and prospects, and the prevailing market price and performance of our common stock, may be adversely affected by a number of factors, including the matters discussed below. Certain statements and information set forth in this Quarterly Report on Form 10-Q, as well as other written or oral statements made from time to time by us or by our authorized executive officers on our behalf, constitute “forward-looking statements” within the meaning of the Federal Private Securities Litigation Reform Act of 1995. These statements include all statements other than those made solely with respect to historical fact and identified by words such as “believes”, “anticipates”, “expects”, “intends” and similar expressions, but such words are not the exclusive means of identifying such statements. We intend for our forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we set forth this statement and these risk factors in order to comply with such safe harbor provisions. You should note that our forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q or when made and we undertake no duty or obligation to update or revise our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Although we believe that the expectations, plans, intentions and projections reflected in our forward-looking statements are reasonable, such statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. The risks, uncertainties and other factors that our stockholders and prospective investors should consider include the following:

 

 

 

 

Evaluation of Disclosure Controls and Procedures

 

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report.

 

Changes in Internal Control Over Financial Reporting

 

Based on an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, there has been no change in our internal control over financial reporting during our last fiscal quarter identified in connection with that evaluation that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 

 

 

 

 

 

PART II– OTHER INFORMATION

 

 

On February 9, 2021, Elizabeth Plaza, a former director of the Company, and Strategic Consultants International, LLC (“SCI”), an entity wholly-owned by Mrs. Plaza, brought a legal action against the Company, directors and executive officers of the Company, and the Company’s wholly-owned subsidiary Pharma-Bio Serv PR, Inc., in the Court of First Instance of the Commonwealth of Puerto Rico. The complaint alleges certain matters leading up to and in connection with the expiration of SCI’s independent contractor consulting agreement with the Company and Mrs. Plaza’s subsequent resignation from the Company’s Board of Directors. The complaint seeks injunctive relief and monetary damages. On February 19, 2021, the case was removed to the U.S. Federal District Court for Puerto Rico, pending review by such court. The Company has been granted until April 7, 2021 to respond to the complaint. The Company and its directors believe certain matters for which injunctive relief is sought have been resolved, and that regardless, all of the claims presented are without merit. The defendants intend to vigorously defend themselves against these allegations.

 

Also, from time to time, we may be a party to legal proceedings incidental to our business. Except as set forth above, we do not believe that there are any proceedings threatened or pending against us, which, if determined adversely to us, would have a material effect on our financial position or results of operations and cash flows.

 

Item 1A. RISK FACTORS.

 

There have been no material changes to the Risk Factors previously disclosed in our Annual Report on Form 10-K for the year ended October 31, 2020.

 

ITEM 6.  EXHIBITS

 

 

31.1		Certification of chief executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of chief financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of the chief executive officer and chief financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema
101.CAL		XBRL Taxonomy Extension Calculation Linkbase
101.DEF		XBRL Taxonomy Extension Definition Linkbase
101.LAB		XBRL Taxonomy Extension Label Linkbase
101.PRE		XBRL Taxonomy Extension Presentation Linkbase
104		Cover page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

———————

* Furnished herewith.

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

	PHARMA-BIO SERV, INC.
	/s/ Victor Sanchez
	Victor Sanchez
	Chief Executive Officer and President Europe Operations
	(Principal Executive Officer)
	/s/ Pedro J. Lasanta
	Pedro J. Lasanta
	Chief Financial Officer, Vice President Finance and Administration, and Secretary
	(Principal Financial Officer and Principal Accounting Officer)
Dated: March 17, 2021