Executive Summary

Revenue surged to $2.00M in Q3 FY2024 (quarter ended Nov 30, 2023), up 416% year over year from $0.39M, and up 471% sequentially from $0.35M, driven primarily by the launch of cardiology distribution revenues in South Africa and continued Trachealator uptake; however, gross margin compressed to 43.1% as the mix shifted toward lower‑margin distribution sales .
Operating income turned positive to $0.26M, but the company reported a net loss of $(0.49)M due to a non‑cash $0.63M impairment of a note receivable related to its prior U.S. distribution strategy shift (Innovative Outcomes) .
Revenue concentration intensified: 79% of Q3 revenue came from a single South African sub‑distributor (DISA Lifesciences), while U.S. revenue remained modest at $0.13M (≈7% of total) .
No formal quantitative guidance and no earnings press release or call transcript were filed; Street consensus from S&P Global was not available for this microcap OTC issuer, so no beat/miss framing is possible (consensus unavailable). We view near‑term stock catalysts as: additional distribution wins in South Africa, U.S. Trachealator adoption, resolution/recovery on the impaired note, and 510(k) milestones for Cape Cross catheters .

What Went Well and What Went Wrong

What Went Well

Cardiology distribution ramp: Q3 revenue reached $2.00M, with $1.34M from “Distribution Agreement Sales” outside the U.S., materially expanding the top line .
Operating leverage: Income from operations improved to $0.26M as the higher revenue base absorbed fixed costs, despite higher G&A tied to the distribution build‑out .
Management on execution: “Revenue increased…due to new distribution agreements… [and] increased [Trachealator] sales in the United States” (MD&A) .

What Went Wrong

Gross margin compression: GM fell to 43.1% in Q3 (vs 82.6% in Q2 and 76.3% in Q1) as higher‑volume distribution sales carry structurally lower margins than internally‑manufactured products .
Impairment charge: A $0.63M provision for impairment of the Innovative Outcomes note flipped Q3 to a net loss despite positive operating income, highlighting execution risk in U.S. channel strategies .
Concentration and controls: 79% of Q3 revenue from a single customer (DISA Lifesciences) and ongoing material weaknesses in internal controls (segregation of duties, policies, GAAP/SEC expertise) remain investor concerns .

Financial Results

Quarterly trend (oldest → newest):

Metric	Q1 FY2024 (May 31, 2023)	Q2 FY2024 (Aug 31, 2023)	Q3 FY2024 (Nov 30, 2023)
Revenue ($)	$416,208	$350,792	$2,002,547
Cost of Goods Sold ($)	$98,498	$60,988	$1,138,628
Gross Profit ($)	$317,710	$289,804	$863,919
Gross Margin (%)	76.3% (calc)	82.6% (calc)	43.1% (calc)
Income from Operations ($)	$40,850	$55,735	$257,910
Net Income (Loss) ($)	$22,288	$(33,164)	$(492,371)
Basic EPS ($)	$0.00	$0.00	$(0.04)

Q3 YoY comparison:

Metric	Q3 FY2023 (Nov 30, 2022)	Q3 FY2024 (Nov 30, 2023)
Revenue ($)	$387,989	$2,002,547
Gross Profit ($)	$223,304	$863,919
Income from Operations ($)	$25,499	$257,910
Net Income (Loss) ($)	$(36,341)	$(492,371)
Basic EPS ($)	$(0.00)	$(0.04)

Segment revenue (geography) – quarterly trend:

Segment Revenue ($)	Q1 FY2024 (May 31, 2023)	Q2 FY2024 (Aug 31, 2023)	Q3 FY2024 (Nov 30, 2023)
Inside U.S.	$174,920	$109,374	$131,225
Outside U.S.	$241,288	$241,418	$1,871,322
Total	$416,208	$350,792	$2,002,547

Q3 revenue mix (selected KPIs):

KPI	Q3 FY2024
Distribution Agreement Sales (Outside U.S.)	$1,344,803
Internally Designed/Manufactured Sales (Outside U.S.)	$526,519
U.S. Revenue (Internally Designed/Manufactured)	$131,225
Single Customer Concentration (DISA Lifesciences)	79% of total revenue

Key drivers and items:

Revenue growth was driven by new cardiology distribution contracts in South Africa; U.S. Trachealator sales contributed, but remain a small share .
Gross margin declined due to the lower‑margin nature of distribution revenues; FX also influenced costs, but mix was the primary factor .
A $629,458 impairment of the Innovative Outcomes note receivable (U.S. channel shift) drove the Q3 net loss despite positive operating income .

Guidance Changes

No formal quantitative guidance was issued in Q3. Management commentary emphasized continued distribution expansion and U.S. rollout without providing ranges.

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY2024/Forward	N/A	No formal guidance provided	N/A
Gross Margin	FY2024/Forward	N/A	No formal guidance provided	N/A
OpEx/Tax/Other	FY2024/Forward	N/A	No formal guidance provided	N/A

(Company did not issue quantitative guidance in filings; no 8‑K 2.02 or earnings press release was found) .

Earnings Call Themes & Trends

No earnings call transcript was found for Q3; themes below reflect MD&A commentary across the last three quarters.

Topic	Previous Mentions (Q1 & Q2 FY2024)	Current Period (Q3 FY2024)	Trend
U.S. rollout of Trachealator	Initial U.S. sales began in Q1 ($174.9k); Q2 U.S. sales $109.4k	U.S. sales $131.2k; over 400 Trachealators supplied YTD; U.S. still small share	Gradual build
SA distribution expansion	Strategy to add distribution products; early contribution in Q2	SA distribution $1.34M in Q3; major growth driver	Strong ramp
Gross margin/mix	Higher margins when internally‑manufactured mix dominates (Q1/Q2)	Mix shift to distribution compresses margin	Down on mix
Compliance and G&A	Elevated compliance/market entry costs; OTCQX costs	Higher G&A with 25 sales reps for cardiology distribution; ongoing compliance costs	Higher structural run‑rate
Internal controls	Material weaknesses noted in Q1/Q2 (docs/policies, segregation)	Material weaknesses persist; added GAAP/SEC expertise deficiency	Ongoing remediation
Customer concentration	DISA Lifesciences 33% (Q1) and 38% (Q2) of revenue	79% in Q3, 66% for nine months	Increasing risk

Management Commentary

“Revenue increased…due to new distribution agreements the Company entered into. This led to increased revenues in South Africa. In addition, the Company realized sales for its Trachealator in the United States…” .
“Due to the fact that distribution revenues are distributed at lower gross profit margins than internally designed products, there has been a substantial increase in the cost of goods…” .
On strategy change and impairment: the Company “decided to provide full impairment against [the Innovative Outcomes] receivable… [as] the receivable is not backed by any Trachealator revenue streams anymore” .

Q&A Highlights

No earnings call transcript was available for Q3; therefore, no Q&A themes or guidance clarifications could be extracted (no transcript or press release found) .

Estimates Context

Wall Street consensus (S&P Global/Capital IQ) for Q3 FY2024 (quarter ended Nov 30, 2023) was unavailable for MDNC; as a result, we cannot frame results vs. estimates (consensus unavailable).
Note: No 8‑K 2.02 or company earnings press release was found to provide company‑issued “guidance vs. actuals” context for the quarter .

Key Takeaways for Investors

Top‑line inflection with distribution ramp: The pivot into cardiology distribution in South Africa transformed revenue scale (Q3 $2.00M), but it brings structurally lower margins—expect continued gross margin sensitivity to mix .
Positive operating income but headline loss due to one‑time impairment: Excluding the $0.63M non‑cash note impairment tied to the U.S. channel transition, profitability metrics improved; watch for potential recoveries/reversals if collections occur .
Concentration/controls risks: 79% revenue concentration in one customer and ongoing internal control weaknesses increase execution and reporting risk; progress on customer diversification and remediation is a key de‑risking catalyst .
U.S. adoption remains the upside lever: U.S. revenue is still small (~$0.13M in Q3), but each quarter shows activity; broader hospital adoption could re‑tilt mix toward higher‑margin internally‑manufactured products over time .
Cost structure step‑up: G&A and compliance costs have risen to enable distribution scale; operating leverage depends on sustaining higher revenue while normalizing one‑offs .
Watch regulatory/product milestones: 510(k) progression for Cape Cross catheters and continued Trachealator clinical adoption remain medium‑term growth drivers .
Near‑term trading setup: Monitor cadence of SA distribution orders, any updates on the impaired note, customer concentration trajectory, and signs of U.S. sales acceleration; absent consensus coverage, prints may be volatile around self‑reported filings .

Source & Document Availability Notes

We found no 8‑K 2.02 earnings press release, no Q3 earnings call transcript, and no other Q3 press releases in the document set; analysis is based on the Q3 FY2024 10‑Q and prior Q1/Q2 10‑Qs .
Prior two quarters were reviewed for trend analysis (Q1 FY2024 10‑Q and Q2 FY2024 10‑Q) .

Medinotec Inc. (MDNC)·Q3 2023 Earnings Summary