What changed in this filing

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Item 1A. Risk Factors

2023-10-13 compared with 2022-09-08 · 298 added, 273 removed, 163 unchanged (78% of the section changed)

Investing in our common stock

involves a high degree of risk.

You should carefully consider the following risk factors, as well as the other information contained in

this report, before deciding whether to invest in shares of our common stock.

Investing in our common

stock involves a high degree of risk.

You should carefully consider the following risk factors, as well as the other information contained

in this report, before deciding whether to invest in shares of our common stock.

If any of the following risks actually occur, our business,

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risks that we currently do not know about or that we currently believe to be immaterial may also impair our operations and business results.

Related to COVID-19

The COVID-19 pandemic, or the perception of its

effects, could have a material adverse effect on our business, financial condition, and results of operations.

To date, COVID-19 has not had a

material adverse impact on our business or results of operations, but due to the uncertainties surrounding this pandemic, it may adversely

impact us in the future.

We have and may continue to experience disruptions in our supply chain and critical suppliers may delay or be

unable to deliver products we have ordered.

Additionally, our customers could reduce planned orders, request cancelations of existing

orders, and/or delay payment to us due to financial hardship they may experience as a result of this healthcare and resulting economic

Therefore, it is impossible at this time to predict the ultimate short-term or long-term impact of the pandemic on our business,

financial condition, and results of operations.

The ability of our employees to work may be significantly

impacted by the COVID-19 crisis.

Our employees are being affected

by the COVID-19 pandemic.

Some of our office and management personnel were continuing to work remotely during some of fiscal 2022, but

our employees engaged in manufacturing and assembly continued and are continuing to work at our corporate headquarters.

The health of

our workforce is of primary concern and we may need to enact further precautionary measures to help minimize the risk of our employees

being exposed to the coronavirus.

Further, our management team is focused on mitigating the adverse effects of the COVID-19 pandemic,

which has required and will continue to require a large investment of time and resources across the entire Company, thereby diverting

their attention from other priorities that existed prior to the outbreak of the pandemic.

To date, several of our employees have had COVID-19,

but all have made full recoveries and returned to work.

If more of our employees test positive for COVID-19, or these conditions worsen,

or last for an extended period of time, our ability to manage our business may be impaired, and operational risks, cybersecurity risks,

and other risks facing us even prior to the pandemic may be elevated.

Risks Related to Our Business and the Industry

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and results of operations.

In fiscal 2022, our top three customers

accounted for 88% of our sales, with our current largest customer accounting for 66% of our sales.

This customer has made purchase commitments

to us through a supply agreement to purchase surgical handpieces through calendar 2025.

We provide this customer with a device used primarily

in elective surgeries and although this customer has not requested a reduction or delay to their planned shipments, if the COVID-19 pandemic

continues to adversely impact the United States and other markets where our products are sold, coupled with the recommended deferrals

of elective procedures by governments and other authorities, we would expect to see a decline in demand from our principal customer.

loss of this customer or any of our significant customers would severely impact us, including having a material adverse effect on our

business, financial condition, cash flows, revenue, and results of operations.

A substantial portion of our business is derived

from our core business area that, if not serviced properly, may result in a material adverse impact upon our business, financial condition,

and results of operations.

In fiscal 2022, we derived 97% of

our revenue from sales of our medical device products and related services.

In fiscal 2023, our top three

customers accounted for 92% of our sales, with our current largest customer accounting for 67% of our sales.

This customer has made purchase

commitments to us through a supply agreement to purchase surgical handpieces through calendar 2025.

We provide this customer with a device

used primarily in elective surgeries and although this customer has not requested a reduction or delay to their planned shipments, if

the COVID-19 pandemic were to again materially adversely impact the United States and other markets where our products are sold, coupled

with any new recommended deferrals of elective procedures by governments and other authorities, we would expect to see a decline in demand

from our principal customer.

The loss of this customer or any of our significant customers would severely impact us, including having

a material adverse effect on our business, financial condition, cash flows, revenue, and results of operations.

A substantial portion of our business is

derived from our core business area that, if not serviced properly, may result in a material adverse impact upon our business, financial

condition, and results of operations.

In fiscal 2023, we derived

97% of our revenue from sales of our medical device products and related services.

We believe that a primary factor in the market acceptance

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efforts will also be required to support future growth.

There can be no assurance that we

will be successful in our product development efforts, that the market will continue to accept our existing products, or that new products

or product enhancements will be developed and implemented in a timely manner, meet the requirements of our customers, or achieve market

If the market does not continue to accept our existing products, or our new products or product enhancements do not achieve

market acceptance, our business, financial condition, and results of operations could be materially adversely affected.

There can be no assurance

that we will be successful in our product development efforts, that the market will continue to accept our existing products, or that

new products or product enhancements will be developed and implemented in a timely manner, meet the requirements of our customers, or

achieve market acceptance.

If the market does not continue to accept our existing products, or our new products or product enhancements

do not achieve market acceptance, our business, financial condition, and results of operations could be materially adversely affected.

Our customers may cancel or reduce their orders, change production quantities,

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Changes in the specific products or quantities our customers order;

· Long lead times and advance financial commitments for components required to complete actual/anticipated

customer orders.

Long lead times and advance financial commitments for components required to complete actual/anticipated customer orders.

In addition to reducing our sales,

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orders, such as costs associated with purchased raw materials and write-offs of obsolete inventory.

In recent years, we have launched many new medical

device products and our estimates of warranty claims are based largely on our previous history from similar legacy products.

warranty claims exceed our estimates, it could have an adverse effect on our results of operations and financial condition.

In recent years, we have launched several

new medical device products and our estimates of warranty claims are based largely on our previous history from similar legacy products.

If actual warranty claims exceed our estimates, it could have an adverse effect on our results of operations and financial condition.

In recent years, we have completed

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using, we may incur additional costs which could be materially adverse to our results of operations and financial condition.

We face significant competition from a number of

different sources, which could negatively impact our results of operations.

The markets for products in the

industries served by our customers are intensely competitive, and we face significant competition from a number of different sources.

We face significant competition from a number

of different sources, which could negatively impact our results of operations.

The markets for products

in the industries served by our customers are intensely competitive, and we face significant competition from a number of different sources.

Several of our competitors have significantly greater name recognition, as well as substantially greater financial, technical, product

development and marketing resources, than us.

We compete in all of our markets

with other major surgical device and related companies.

As a provider of outsourced products and services, we also compete with our customers’

own internal development groups.

Competitive pressures and other factors, such as new product or new technology introductions by us, our

customers’ internal development and manufacturing departments, or our competitors, may result in price or market share erosion that

could have a material adverse effect on our business, results of operations and financial condition.

Also, there can be no assurance that

our products and services will achieve broad market acceptance or will successfully compete with other products.

We compete in all of our

markets with other major surgical device and related companies.

As a provider of outsourced products and services, we also compete with

our customers’ own internal development groups.

Competitive pressures and other factors, such as new product or new technology introductions

by us, our customers’ internal development and manufacturing departments, or our competitors, may result in price or market share

erosion that could have a material adverse effect on our business, results of operations and financial condition.

Also, there can be no

assurance that our products and services will achieve broad market acceptance or will successfully compete with other products.

The industry in which we operate is subject to

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could make our current products obsolete.

The medical device market is generally

characterized by rapid technological change, changing customer needs, frequent new product introductions and evolving industry standards.

The introduction of products incorporating new technologies and the emergence of new industry standards could render our existing products

obsolete and unmarketable.

There can be no assurance that we will be successful in developing and marketing new products that respond

to technological changes or evolving industry standards.

New product development requires

significant research and development expenditures that we have historically funded through operations;

however, we may be unable to do

so in the future.

Any significant decrease in revenues or research funding could impair our ability to respond to technological advances

in the marketplace and to remain competitive.

If we are unable, for technological or other reasons, to develop and introduce new products

in a timely manner in response to changing market conditions or customer requirements, our business, results of operations, and financial

condition may be materially adversely affected.

Although we continue to target new markets for access, develop new products, and update

existing products, there can be no assurance that we will do so successfully or that, even if we are successful, such efforts will be

completed concurrently with or prior to the introduction of competing products.

Any such failure or delay could adversely affect our competitive

position or could make our current products obsolete.

The medical device market

is generally characterized by rapid technological change, changing customer needs, frequent new product introductions and evolving industry

The introduction of products incorporating new technologies and the emergence of new industry standards could render our existing

products obsolete and unmarketable.

There can be no assurance that we will be successful in developing and marketing new products that

respond to technological changes or evolving industry standards.

New product development

requires significant research and development expenditures that we have historically funded through operations;

however, we may be unable

to do so in the future.

Any significant decrease in revenues or research funding could impair our ability to respond to technological

advances in the marketplace and to remain competitive.

If we are unable, for technological or other reasons, to develop and introduce

new products in a timely manner in response to changing market conditions or customer requirements, our business, results of operations,

and financial condition may be materially adversely affected.

Although we continue to target new markets for access, develop new products,

and update existing products, there can be no assurance that we will do so successfully or that, even if we are successful, such efforts

will be completed concurrently with or prior to the introduction of competing products.

Any such failure or delay could adversely affect

our competitive position or could make our current products obsolete.

We rely heavily on our proprietary technology,

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results of operations.

We are dependent on the maintenance

and protection of our proprietary technology and rely on patent filings, exclusive development and supply agreements, confidentiality

We are dependent on the

maintenance and protection of our proprietary technology and rely on patent filings, exclusive development and supply agreements, confidentiality

procedures and employee nondisclosure agreements to protect it.

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laws of the United States and are often not enforced as vigorously as those in the United States.

We do not believe that our operations

or products infringe on the intellectual property rights of others.

However, there can be no assurance that others will not assert infringement

or trade secret claims against us with respect to our current or future products.

As an example, see Note 10 to the consolidated financial

statements contained elsewhere in this report.

Assertions or claims by others, whether or not valid, could cause us to incur significant

legal costs defending our intellectual property rights and potentially require us to enter into a license agreement or royalty arrangement

with the party asserting the claim or to cease our use of the infringing technology, any of which could have a material adverse effect

on our business, financial condition and results of operations.

We do not believe that our

operations or products infringe on the intellectual property rights of others.

However, there can be no assurance that others will not

assert infringement or trade secret claims against us with respect to our current or future products.

Assertions or claims by others,

whether or not valid, could cause us to incur significant legal costs defending our intellectual property rights and potentially require

us to enter into a license agreement or royalty arrangement with the party asserting the claim or to cease our use of the infringing technology,

any of which could have a material adverse effect on our business, financial condition and results of operations.

If our technology infrastructure is compromised,

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and sabotage.

In addition, our technology infrastructure

and systems are vulnerable to damage or interruption from natural disasters, power loss and telecommunications failures.

Any such disruption

to our systems, or the technology systems of third parties on which we rely, the failure of these systems to otherwise perform as anticipated,

or the theft, destruction, loss, misappropriation, or release of sensitive and/or confidential information or intellectual property, could

result in business disruption, negative publicity, loss of customers, potential liability, including litigation or other legal actions

against us or the imposition of penalties, fines, fees or liabilities, which may not be covered by our insurance policies, and competitive

disadvantage, any or all of which would potentially adversely affect our customer service, decrease the volume of our business and result

in increased costs and lower profits.

Moreover, a cybersecurity breach could require us to devote significant management resources to

address the problems associated with the breach and to expend significant additional resources to upgrade further the security measures

we employ to protect information against cyber-attacks and other wrongful attempts to access such information, which could result in a

disruption of our operations.

While we have invested, and continue

to invest, in technology security initiatives and other measures to prevent security breaches and cyber incidents, as well as disaster

recovery plans, these initiatives and measures may not be entirely effective to insulate us from technology disruption that could result

in adverse effects on our results of operations and financial condition.

To service our debt

obligations, we will require a significant amount of cash.

In addition, our technology

infrastructure and systems are vulnerable to damage or interruption from natural disasters, power loss and telecommunications failures.

Any such disruption to our systems, or the technology systems of third parties on which we rely, the failure of these systems to otherwise

perform as anticipated, or the theft, destruction, loss, misappropriation, or release of sensitive and/or confidential information or

intellectual property, could result in business disruption, negative publicity, loss of customers, potential liability, including litigation

or other legal actions against us or the imposition of penalties, fines, fees or liabilities, which may not be covered by our insurance

policies, and competitive disadvantage, any or all of which would potentially adversely affect our customer service, decrease the volume

of our business and result in increased costs and lower profits.

Moreover, a cybersecurity breach could require us to devote significant

management resources to address the problems associated with the breach and to expend significant additional resources to upgrade further

the security measures we employ to protect information against cyber-attacks and other wrongful attempts to access such information, which

could result in a disruption of our operations.

While we have invested,

and continue to invest, in technology security initiatives and other measures to prevent security breaches and cyber incidents, as well

as disaster recovery plans, these initiatives and measures may not be entirely effective to insulate us from technology disruption that

could result in adverse effects on our results of operations and financial condition.

To service our debt obligations, we will require

a significant amount of cash.

However, our ability to generate cash depends on many factors beyond our control.

Our ability to make payments on,

and to refinance, our debt obligations and to fund capital expenditures, will depend on our ability to generate cash in the future, which,

in turn, is subject to general economic, financial, competitive, regulatory and other factors, many of which are beyond our control.

Our business may not generate sufficient

cash flow from operations, and we may not have available to us future borrowings in an amount sufficient to enable us to pay our debt

obligations or to fund our other liquidity needs.

In these circumstances, we may need to refinance all or a portion of our debt obligations

on or before maturity.

We may not be able to refinance any of our debt obligations, on commercially reasonable terms, or at all.

this financing, we could be forced to sell assets or secure additional financing to make up for any shortfall in our payment obligations

under unfavorable circumstances.

However, we may not be able to secure additional financing on terms favorable to us or at all and, in

addition, the agreements governing our debt obligations limit our ability to sell assets.

In addition, we may not be able to sell assets

quickly enough or for sufficient amounts to enable us to meet our obligations.

Our ability to make payments

on, and to refinance, our debt obligations and to fund capital expenditures, will depend on our ability to generate cash in the future,

which, in turn, is subject to general economic, financial, competitive, regulatory and other factors, many of which are beyond our control.

Our business may not generate

sufficient cash flow from operations, and we may not have available to us future borrowings in an amount sufficient to enable us to pay

our debt obligations or to fund our other liquidity needs.

In these circumstances, we may need to refinance all or a portion of our debt

obligations on or before maturity.

We may not be able to refinance any of our debt obligations, on commercially reasonable terms, or at

Without this financing, we could be forced to sell assets or secure additional financing to make up for any shortfall in our payment

obligations under unfavorable circumstances.

However, we may not be able to secure additional financing on terms favorable to us or at

all and, in addition, the agreements governing our debt obligations limit our ability to sell assets.

In addition, we may not be able

to sell assets quickly enough or for sufficient amounts to enable us to meet our obligations.

Our cash and cash equivalents may be exposed to

banking institution risk.

We hold our cash balances with

a single financial institution which institution is subject to risks, which may include failure or other circumstances that limit our

access to deposits or other banking services.

For example, in March 2023, Silicon Valley Bank (“SVB”) was unable to continue

their operations and the Federal Deposit Insurance Corporation (“FDIC”) was appointed as receiver for SVB.

However, if further

failures in financial institutions occur where we hold deposits, we could experience additional risk.

Any such loss or limitation on our

cash and cash equivalents would adversely affect our business.

In addition, in such circumstances

we might not be able to receive timely payment from customers.

We and they may maintain cash balances that are not insured or are in excess

of the FDIC’s insurance limit.

Any delay in ours or our customers’ ability to access funds could have a material adverse effect

on our operations.

If any parties with which we conduct business are unable to access funds pursuant to such instruments or lending arrangements

with such a financial institution, such parties’ ability to continue to fund their business and perform their obligations to us

could be adversely affected, which, in turn, could have a material adverse effect on our business, financial condition and results of

We periodically invest surplus cash in marketable

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At June 30, 2023, the fair value

of these marketable securities was approximately $2.5 million.

Approximately $1.8 million of our investments at June 30, 2022 include

equity securities of companies that are thinly traded.

As such, these investments are classified as long-term in nature, as we may not

be able to liquidate the investments in a timely manner even if we wish to sell them.

While we intend to hold our investments, until such

of our investments was approximately $8.7 million.

Of that amount $6.2 million relates to an investment in Monogram Orthopaedics Inc.

(“Monogram”) described more fully in Note 5 to the consolidated financial statements contained elsewhere in this report.

investment in Monogram is also the subject of the restatement of our previous financial statements described in Note 2 to the consolidated

financial statements contained elsewhere in this report.

Our initial investment in Monogram was an $800,000 loan which we made primarily

in exchange for exclusive development and supply rights.

At that time, we believed that this long-term strategic investment would likely

take several years to cultivate, which it has.

While we intend to hold our investments, including our investment in Monogram, until such

time as we believe it is appropriate to sell them in accordance with our overall investment policy, we may have unexpected cash requirements

that could necessitate the sale of some or all of these marketable securities for a loss.

that could necessitate the sale of some or all of these investments for a loss.

Additionally, these investments are subject to changes

in their valuation, which could cause us to record a significant unrealized loss in the future.

We may not be able to successfully integrate our business acquisitions,

which could adversely affect our business, financial condition, and results of operations.

We have acquired, and may acquire

in the future, businesses, products, and technologies that complement or expand our current operations.

Acquisitions could require significant

capital investments and require us to integrate with companies that have different cultures, management teams, and business infrastructure.

Depending on the size and complexity of an acquisition, our successful integration of the acquisition could depend on several factors,

We have acquired, and may

acquire in the future, businesses, products, and technologies that complement or expand our current operations.

Acquisitions could require

significant capital investments and require us to integrate with companies that have different cultures, management teams, and business

infrastructure.

Depending on the size and complexity of an acquisition, our successful integration of the acquisition could depend on

several factors, including:

Difficulties in assimilating and integrating the operations, products, and workforce of an acquired business;

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Diversion of resources and management attention from our other operations.

If market conditions or other factors

require us to change our strategic direction, we may fail to realize the expected value from one or more of our acquisitions.

to successfully integrate any future acquisitions or realize the expected value from past or future acquisitions could harm our business,

financial condition, and results of operations.

We have experienced losses in the past, and we

cannot be certain that we will sustain our current profitability;

If market conditions or

other factors require us to change our strategic direction, we may fail to realize the expected value from one or more of our acquisitions.

Our failure to successfully integrate any future acquisitions or realize the expected value from past or future acquisitions could harm

our business, financial condition, and results of operations.

We have experienced losses in the past, and

we cannot be certain that we will sustain our current profitability;

we may need additional capital in the future to fund our businesses,

which we may not be able to obtain on acceptable terms.

We have experienced operating losses

Our ability to achieve or sustain profitability is based on a number of factors, many of which are out of our control, including

the material costs for our products and the demand for our products.

We have experienced operating

losses in the past.

Our ability to achieve or sustain profitability is based on a number of factors, many of which are out of our control,

including the material costs for our products and the demand for our products.

We currently anticipate that our

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If such personnel were to leave unexpectedly, we may not be able to execute our business plan.

Our future performance depends in

significant part upon the continued service of our key technical and senior management personnel.

Because we have a relatively small number

of employees when compared to other companies in the same industry, our dependence on maintaining our relationship with key employees

Our future performance depends

in significant part upon the continued service of our key technical and senior management personnel.

Because we have a relatively small

number of employees when compared to other companies in the same industry, our dependence on maintaining our relationship with key employees

is particularly significant.

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of product development, operations management, marketing and finance.

A high level of employee mobility

and the aggressive recruiting of skilled personnel characterize the medical device industry.

There can be no assurance that our current

employees will continue to work for us.

Loss of services of key employees could have a material adverse effect on our business, results

of operations, and financial condition.

Furthermore, we may need to provide enhanced forms of incentive compensation to attract and retain

such key personnel, which could potentially dilute the holdings of other shareholders.

Risks Related to Ownership of Our Common Stock

Two of our directors hold voting power with respect

to a substantial portion of our outstanding common stock that enables them to have significant influence over the outcome of all matters

submitted to our shareholders for approval, which influence may conflict with our interests and the interests of other shareholders.

As of August 12, 2022, two of our

directors, Nicholas J.

A high level of employee

mobility and the aggressive recruiting of skilled personnel characterize the medical device industry.

There can be no assurance that our

current employees will continue to work for us.

Loss of services of key employees could have a material adverse effect on our business,

results of operations, and financial condition.

Furthermore, we may need to provide enhanced forms of incentive compensation to attract

and retain such key personnel, which could potentially dilute the holdings of other shareholders.

Risks Related to Ownership of Our Common

Two of our directors hold voting power with

respect to a substantial portion of our outstanding common stock that enables them to have significant influence over the outcome of all

matters submitted to our shareholders for approval, which influence may conflict with our interests and the interests of other shareholders.

As of August 12, 2023, two

of our directors, Nicholas J.

Swenson and Raymond E.

Cabillot, directly or indirectly, controlled voting power over approximately 38% (28% and

10%, respectively) of the outstanding shares of our common stock.

As a result of such voting control, these directors will have significant

influence over all matters submitted to our shareholders for approval, including the election of our directors and other corporate actions,

and may have interests that conflict with our interests and the interests of other shareholders.

Cabillot, directly or indirectly, controlled voting power over approximately 39%

(29% and 10%, respectively) of the outstanding shares of our common stock.

As a result of such voting control, these directors will have

significant influence over all matters submitted to our shareholders for approval, including the election of our directors and other corporate

actions, and may have interests that conflict with our interests and the interests of other shareholders.

Our quarterly results can fluctuate significantly

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our shares trade.

Our sales have fluctuated in the

past, and may fluctuate in the future from quarter to quarter and period to period, as a result of a number of factors, including, without

Our sales have fluctuated

in the past, and may fluctuate in the future from quarter to quarter and period to period, as a result of a number of factors, including,

without limitation:

the size and timing of orders from customers;

the length of new product development cycles;

market acceptance of new technologies;

market acceptance of new

technologies;

changes in pricing policies or price reductions by us or our competitors;

the timing of new product announcements and product introductions

by us or our competitors;

the timing of new product announcements and product

introductions by us or our competitors;

the financial stability of major customers;

our success in expanding our sales and marketing programs;

acceleration,

deferral, or cancellation of customer orders and deliveries;

acceleration, deferral, or cancellation of customer orders and deliveries;

changes in our strategy;

revenue recognition policies in conformity with

accounting principles generally accepted in the United States (“U.S.

revenue recognition policies in conformity

with accounting principles generally accepted in the United States (“U.S.

personnel changes;

and general market and economic

and general market and

economic factors.

Because a significant percentage

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of future performance for any particular period.

In addition, it is possible that

our operating results in future quarters may be below the expectations of public market analysts and investors.

In such an event, the

price of our common stock could be materially adversely affected.

In addition, it is possible

that our operating results in future quarters may be below the expectations of public market analysts and investors.

In such an event,

the price of our common stock could be materially adversely affected.

Regulatory & Compliance Risks

Our operations are subject to a number of complex

government regulations, the violation of which could have a material adverse effect on our business.

Our operations are subject to a number of

complex government regulations, the violation of which could have a material adverse effect on our business.

The manufacture and distribution

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an adverse effect on our operations.

The FDA designates all medical devices

into one of three classes (Class I, II, or III) based on the level of control necessary to assure the safety and effectiveness of the

device (with Class I requiring the lowest level of control and Class III requiring the greatest level of control).

The surgical instrumentation

we manufacture is generally classified into Class I.

The FDA has broad enforcement powers to recall and prohibit the sale of products

that do not comply with federal regulations and to order the cessation of non-compliant processes.

No claim has been made to date by the

FDA regarding any of our products or processes.

Nevertheless, as is common in the industry, certain of our products and processes are

from time to time subject to routine governmental reviews and investigations.

We are also subject to EPA regulations concerning the disposal

of industrial waste.

While management believes that our

products and processes fully comply with applicable laws and regulations, we are unable to predict the outcome of any such future review

or investigation.

We face risks and uncertainties associated with

potential litigation by or against us, which could have a material adverse effect on our business, financial condition, and results of

We continually face the possibility

of litigation as either a plaintiff or a defendant (See Note 10 to the consolidated financial statements contained elsewhere in this report).

It is not reasonably possible to estimate the awards or damages, or the range of awards or damages, if any, that we might incur in connection

with such litigation.

Many of our products are complex

and technologically advanced.

Such products may, from time to time, be the subject of claims concerning product performance and construction,

including warranty and patent infringement claims.

While we are committed to investigating such concerns and correcting them, there is

no assurance that solutions will be found on a timely basis, if at all, to satisfy customer demands or to avoid potential claims or litigation.

Also, due to the location of our facilities, as well as the nature of our business activities, there is a risk that we could be subject

to litigation related to environmental remediation claims.

We maintain insurance to protect against claims associated with the manufacture

and use of our products as well as environmental pollution, but there can be no assurance that our insurance coverage will adequately

cover any claim asserted against us.

The uncertainty associated with

potential litigation may have an adverse impact on our business.

The FDA designates all medical

devices into one of three classes (Class I, II, or III) based on the level of control necessary to assure the safety and effectiveness

of the device (with Class I requiring the lowest level of control and Class III requiring the greatest level of control).

instrumentation we manufacture is generally classified into Class I.

The FDA has broad enforcement powers to recall and prohibit the sale

of products that do not comply with federal regulations and to order the cessation of non-compliant processes.

No claim has been made

to date by the FDA regarding any of our products or processes.

Nevertheless, as is common in the industry, certain of our products and

processes are from time to time subject to routine governmental reviews and investigations.

We are also subject to EPA regulations concerning

the disposal of industrial waste.

While management believes

that our products and processes fully comply with applicable laws and regulations, we are unable to predict the outcome of any such future

review or investigation.

We face risks and uncertainties associated

with potential litigation by or against us, which could have a material adverse effect on our business, financial condition, and results

of operations.

We continually face the

possibility of litigation as either a plaintiff or a defendant.

It is not reasonably possible to estimate the awards or damages, or the

range of awards or damages, if any, that we might incur in connection with such litigation.

Many of our products are

complex and technologically advanced.

Such products may, from time to time, be the subject of claims concerning product performance

and construction, including warranty and patent infringement claims.

While we are committed to investigating such concerns and correcting

them, there is no assurance that solutions will be found on a timely basis, if at all, to satisfy customer demands or to avoid potential

claims or litigation.

Also, due to the location of our facilities, as well as the nature of our business activities, there is a risk that

we could be subject to litigation related to environmental remediation claims.

We maintain insurance to protect against claims associated

with the manufacture and use of our products as well as environmental pollution, but there can be no assurance that our insurance coverage

will adequately cover any claim asserted against us.

The uncertainty associated

with potential litigation may have an adverse impact on our business.

In particular, litigation could impair our relationships with existing

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impose restrictions on our business and could adversely affect our ability to undertake certain corporate actions.

The agreements governing our

debt obligations include covenants imposing significant restrictions on our business.

These restrictions may affect our ability to operate

our business and may limit our ability to take advantage of potential business opportunities as they arise.

These covenants place restrictions

on our ability to, among other things:

The agreements governing

our debt obligations include covenants imposing significant restrictions on our business.

These restrictions may affect our ability to

operate our business and may limit our ability to take advantage of potential business opportunities as they arise.

These covenants place

restrictions on our ability to, among other things:

incur additional debt;

· declare or pay dividends to shareholders;

or pay dividends to shareholders;

create liens or use assets as security in other transactions;

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pursue strategic acquisitions;

· engage in transactions with affiliates;

in transactions with affiliates;

sell or transfer assets.

The agreements governing our

debt obligations also require us to comply with a number of financial ratios, borrowing base requirements and additional covenants.

Our ability to comply with these

covenants may be affected by events beyond our control, including prevailing economic, financial, and industry conditions.

These covenants

could adversely affect our business by limiting our ability to take advantage of financing, merger and acquisition, or other corporate

opportunities.

The agreements governing

our debt obligations also require us to comply with a number of financial ratios, borrowing base requirements and additional covenants.

Our ability to comply with

these covenants may be affected by events beyond our control, including prevailing economic, financial, and industry conditions.

covenants could adversely affect our business by limiting our ability to take advantage of financing, merger and acquisition, or other

corporate opportunities.

The breach of any of these covenants or restrictions could result in a default under our debt obligations.

If we were unable

to repay our debt or are otherwise in default under any provision governing our secured debt obligations, our lender could proceed against

us and against the collateral securing that debt.

We are subject to changes in and interpretations

of financial accounting matters that govern the measurement of our performance, compliance with which could be costly and time consuming.

We are subject to changes in and

interpretations of financial accounting standards that govern the measurement of our performance.

we were unable to repay our debt or are otherwise in default under any provision governing our secured debt obligations, our lender could

proceed against us and against the collateral securing that debt.

We are subject to changes in and interpretations of financial accounting

matters that govern the measurement of our performance, compliance with which could be costly and time-consuming.

We are subject to changes

in and interpretations of financial accounting standards that govern the measurement of our performance.

Based on our reading and interpretations

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weaknesses in internal controls will not be discovered.

If a material weakness is discovered, corrective action may be time consuming

and costly, and could further divert the attention of management.

The disclosure of a material weakness, even if quickly remedied, could

reduce the market’s confidence in our financial statements and harm our stock price, especially if a restatement of financial statements

for past periods is required.

The material weakness discovered in conjunction with the preparation of our consolidated

financial statements for the fiscal year ended June 30, 2023, as described in Note 2 to the consolidated financial statements contained

elsewhere in this report, for example, has been time consuming and costly.

The disclosure of a material weakness, even if quickly remedied,

could reduce the market’s confidence in our financial statements and harm our stock price, especially if a restatement of financial

statements for past periods is required.

Risks Related to COVID-19

The COVID-19 pandemic, or the perception

of its effects, could have a material adverse effect on our business, financial condition, and results of operations.

To date, COVID-19 has not had

a material adverse impact on our business or results of operations, but due to the uncertainties surrounding this pandemic, it may adversely

impact us in the future.

We have and may continue to experience disruptions in our supply chain and critical suppliers may delay or be

unable to deliver products we have ordered.

Additionally, our customers could reduce planned orders, request cancelations of existing

orders, and/or delay payment to us due to financial hardship they may experience as a result of this healthcare and resulting economic

Therefore, it is impossible to predict the future impact of the pandemic on our business, financial condition, and results of

The ability of our employees to work may

be significantly impacted by the COVID-19 crisis.

Substantially all of our

employees worked in the office during fiscal 2023.

The health of our workforce is of primary concern and we may need to enact further

precautionary measures to help minimize the risk of our employees being exposed to the coronavirus.

Further, our management team is focused

on mitigating the adverse effects of the COVID-19 pandemic, which has required and may continue to require a large investment of time

and resources across the entire Company, thereby diverting their attention from other priorities that existed prior to the outbreak of

the pandemic.

To date, several of our employees have had COVID-19, but all have made full recoveries and returned to work.

our employees test positive for COVID-19, or these conditions worsen, or last for an extended period of time, our ability to manage our

business may be impaired, and operational risks, cybersecurity risks, and other risks facing us even prior to the pandemic may be elevated.

General Risks

The global economic environment may impact our

business, financial condition, and results of operations.

Changes in the global economic environment

have caused, and may cause in the future, a general tightening in the credit markets, lower levels of liquidity, increases in rates of

default and bankruptcy, high rates of inflation, and extreme volatility in credit, equity and fixed income markets.

These macroeconomic

developments could negatively affect our business, operating results or financial condition should they cause, for example, current or

potential customers to become unable to fund purchases of our products, in turn resulting in delays, decreases or cancellations of

purchases of our products and services, or causing the customer to not pay us or to delay paying us for previously purchased products

and services.

In addition, financial institution failures may cause us to incur increased expenses or make it more difficult either to

obtain financing for our operations, investing activities (including the financing of any future acquisitions), or financing activities.

Additional economic risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and

adversely affect our business, financial condition, and results of operations.

The global economic environment may impact

our business, financial condition, and results of operations.

Changes in the global economic

environment have caused, and may cause in the future, a general tightening in the credit markets, lower levels of liquidity, increases

in rates of default and bankruptcy, high rates of inflation, higher interest rates, and extreme volatility in credit, equity and fixed

income markets.

These macroeconomic developments could negatively affect our business, operating results or financial condition should

they cause, for example, current or potential customers to become unable to fund purchases of our products, in turn resulting in

delays, decreases or cancellations of purchases of our products and services, or causing the customer to not pay us or to delay paying

us for previously purchased products and services.

In addition, financial institution failures may cause us to incur increased expenses

or make it more difficult either to obtain financing for our operations, investing activities (including the financing of any future acquisitions),

or financing activities.

Additional economic risks and uncertainties not currently known to us or that we currently deem to be immaterial

also may materially and adversely affect our business, financial condition, and results of operations.

UNRESOLVED STAFF COMMENTS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors