What changed in this filing

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Item 1. Business

2021-09-28 compared with 2020-09-24 · 292 added, 304 removed, 56 unchanged (91% of the section changed)

We have been a developer and manufacturer

of advanced optical instruments since 1982.

Our medical instrumentation line includes traditional endoscopes and endocouplers as

well as other custom imaging and illumination products for use in minimally invasive surgical procedures.

Much of our recent development

efforts have been targeted at the development of next generation endoscopes.

For over fifteen years, we have funded internal research

and development programs to develop next generation capabilities for designing and manufacturing 3D endoscopes and very small Microprecision™

lenses, anticipating future requirements as the surgical community continues to demand smaller and more enhanced imaging systems

for minimally invasive surgery.

Our unique proprietary technology in these areas, combined with recent developments in the areas

of 3D displays and millimeter sized CMOS image sensors, has allowed us to begin commercialization of these technologies.

that new products based on these technologies provide enhanced imaging for existing surgical procedures which help to enable development

of many new medical device products and related medical procedures.

The COVID-19 world-wide pandemic and the

domestic and international impact of policy decisions being made in major countries around the world has had, and is expected to

continue to have, an adverse impact on various aspects of our business.

While we and many of our medical device and defense contracting

customers continue to operate as essential businesses, we have taken various actions to augment our operating and human resource

policies and procedures to guard against the potential health hazards of COVID-19.

These augmented procedures can have a negative

impact on our operational efficiencies.

Given the uncertainty surrounding the continuation of economic slow-downs domestically

and abroad, we cannot predict with certainty at this time what the future impact of COVID-19 and resulting business and economic

policies in the US and abroad will be on our up-coming financial operating results.

Effective June 1, 2019 we acquired the

operating assets of Ross Optical Industries, Inc.

of El Paso, Texas, which we began operating as a division of our Company beginning

on that date.

The accompanying financial statements include the results of operations of the Ross Optical division for the month

of June 2019 and the entire fiscal year ended June 30, 2020 and the assets and liabilities of the division as of June 30, 2020

The acquisition of the assets of Ross Optical Industries effective June 1, 2019 expands our optics components and assemblies

All products supplied by Ross Optical include a custom or catalog optic, which is sourced through Ross Optical’s

extensive domestic and worldwide network of optical fabrication companies.

Most systems make use of optical lenses, prisms, mirrors

and windows and range from individual optical components to complex mechano-optical assemblies.

Products often include thin film

optical coatings that are applied using the in-house coating department.

Approximately 73% of Ross Optical revenues are from customers

in the United States, 7% from Western Europe and 8% from Canada during the fiscal year ended June 30, 2020.

Ross Optical’s

sales are mostly resale of specialized optical components with the remainder being assemblies.

Ross Optical does not perform revenue

generating engineering services or internal research and development.

The majority of Ross Optical sales are for industrial applications

with the remainder split between military and medical device products.

Approximately 8% of our non-Ross Optical

division revenue in fiscal year 2020 was from the design, manufacture and resale of optical products for military and defense and

2% for other industrial, non-medical products and approximately 32-34% of our revenues in each of the fiscal years 2019 and 2020

were derived from engineering and design services we performed for our customers to incorporate our technologies and capabilities

into their medical device products.

Approximately 64-79% of our total revenues in fiscal years 2019 and 2020 were derived from

the assembly and manufacture of endoscopic medical devises, sub-assemblies and optical components ordered by our customers and

usually developed from the engineering and design services we perform for them.

We expect sales revenue increases to come from

the orders from our customers to manufacture the products we help them engineer and design.

By combining the unique capabilities of

our company with the Ross Optical division we are experiencing opportunities for expanded sales of each division products and services

throughout the combined customer base.

We have been a developer and manufacturer of advanced

optical instruments since 1982.

Our medical instrumentation line includes traditional endoscopes and endocouplers as well as other custom

imaging and illumination products for use in minimally invasive surgical procedures.

Our core efforts are targeted at the development

of next generation endoscopes.

Through internal research and development and working in partnership with our customers, we continuously

develop next generation capabilities for designing and manufacturing 3D endoscopes and very small Microprecision™

lenses, anticipating

future requirements as the surgical community continues to demand smaller and more enhanced imaging systems for minimally invasive surgery.

Our unique proprietary technology in these areas, combined with recent developments in the areas of 3D displays and millimeter sized CMOS

image sensors, has allowed us to begin commercialization of these technologies.

The products we design and build based on these technologies

are providing enhanced imaging for existing surgical procedures and oftentimes represent critical imaging products, components and technology

which enable the development of new medical device products and related medical procedures.

The COVID-19 world-wide pandemic and the domestic

and international impact of policy decisions being made in major countries around the world has had, and may continue to have, an adverse

impact on various aspects of our business.

We have taken various actions to augment our operating and human resource policies and procedures

to guard against the potential health hazards of COVID-19.

Some of those augmented procedures can have a negative impact on our operational

efficiencies.

Given the uncertainty surrounding the continuation of economic slow-downs domestically and abroad, we cannot predict with

certainty at this time what the future impact of COVID-19 and resulting business and economic policies in the US and abroad will be on

our up-coming financial operating results.

Effective June 1, 2019 we acquired the operating

assets of Ross Optical Industries, Inc.

of El Paso, Texas, which we began operating as a division of our Company beginning on that date.

The accompanying financial statements include the results of operations of the Ross Optical division for fiscal years ended June 30, 2021

and 2020, and the assets and liabilities of the division as of June 30, 2021 and 2020.

The Ross Optical division expands our optics components

and assemblies’

business to include custom and catalog optics, which are sourced through Ross Optical’s extensive domestic

and worldwide network of optical fabrication companies.

Most systems make use of optical lenses, prisms, mirrors and windows and range

from individual optical components to complex mechano-optical assemblies.

Products often include thin film optical coatings that are applied

using the in-house coating department.

Over 70% of the Ross Optical division sales are in the United States, with the majority being specialized

optical components for industrial applications and the remainder being assemblies.

The balance of sales is split between military and

medical device products.

Approximately 54% of our total revenues in fiscal

year 2021 were derived from optical components we design, manufacture and assemble as well as custom components we source, qualify and

resell to our customers.

Approximately 26% of our revenues in fiscal year 2021 were derived from optical engineering and design services,

and the remaining 20% from the assembly and manufacture of endoscopic medical devises, sub-assemblies and optical components ordered by

our customers and typically developed from the engineering and design services we perform for them.

During fiscal year 2021, approximately

60% of our revenues were medical products related, 33% industrial, and 7% related to military and defense.

The allocation of sales revenues

between service offerings and industries was similar in fiscal year 2020 to those allocations in fiscal year 2021 described above.

expect sales revenue increases to result from assembly and manufacturing orders received from our customers for the products we assist

them in designing using our unique optical product design and manufacturing capabilities.

By combining the unique capabilities of our company

with the Ross Optical division we are experiencing opportunities for expanded sales of each division products and services throughout

the combined customer base.

Additionally, Ross’

expanded worldwide vendor relationships are benefiting our traditional

efforts to source materials at competitive prices for our development projects and manufacturing activities.

expanded worldwide vendor relationships are benefiting our traditional efforts to

source materials at competitive prices for our development projects and manufacturing activities.

We incorporated in Massachusetts in December 1982

and have been publicly-owned since November 1990.

References to our Company contained herein include our two wholly-owned

subsidiaries, Precise Medical, Inc.

and Wood’s Precision Optics Corporation, Limited, except where the context otherwise

Effective June 1, 2019 we acquired the operating assets of Ross Optical Industries, Inc.

of El Paso, Texas, which we

began operating as a division of our Company beginning on that date.

The accompanying financial statements include the results

of operations of the Ross division for the fiscal year ended June 30, 2020 and the month of June 2019 and its assets and liabilities

as of June 30, 2020 and 2019.

References to our Company contained herein include our two wholly-owned subsidiaries,

Precise Medical, Inc.

and Wood’s Precision Optics Corporation, Limited, except where the context otherwise requires.

June 1, 2019 we acquired the operating assets of Ross Optical Industries, Inc.

of El Paso, Texas, which we began operating as a division

of our Company beginning on that date.

The accompanying financial statements include the results of operations of the Ross division for

the fiscal years ended June 30, 2021 and 2020 and its assets and liabilities as of June 30, 2021 and 2020.

Our websites are www.poci.com and www.rossoptical.com.

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we have manufactured medical products such as endoscopes and endocouplers.

We have developed and sold endoscopes incorporating

various optical technologies including our proprietary Lenslock™

technology, for use in a variety of minimally invasive surgical

and diagnostic procedures.

Today, we produce endoscopes for various applications, which are CE marked and therefore certified for

sale throughout the European Economic Area.

Since 1985, we have developed, manufactured and sold a proprietary product line of

endocouplers.

We also design and manufacture custom optical medical devices to satisfy our customers’

We have developed and sold endoscopes incorporating various

optical technologies including our proprietary Lenslock™

technology, for use in a variety of minimally invasive surgical and diagnostic

Today, we produce endoscopes for various applications, which are CE marked and therefore certified for sale throughout the

European Economic Area.

Since 1985, we have developed, manufactured and sold a proprietary product line of endocouplers.

We also design

and manufacture custom optical medical devices to satisfy our customers’

specific requirements.

In addition to medical devices, we also manufacture and sell components and assemblies specially designed for industrial and military

In addition to medical devices,

we also manufacture and sell components and assemblies specially designed for industrial and military use.

The acquisition of the assets of Ross Optical

Industries effective June 1, 2019 expands our optics components and assemblies business.

All products supplied by Ross Optical

include a custom or catalog optic, which is sourced through Ross Optical’s extensive domestic and worldwide network of optical

fabrication companies.

Most systems make use of optical lenses, prisms, mirrors and windows and range from individual optical components

to complex mechano-optical assemblies.

Products often include thin film optical coatings that are applied by the Ross Optical division

in-house coating department.

Industries effective June 1, 2019 expanded our optics components and assemblies business.

All products supplied by Ross Optical include

a custom or catalog optic, which is sourced through Ross Optical’s extensive domestic and worldwide network of optical fabrication

Most systems make use of optical lenses, prisms, mirrors and windows and range from individual optical components to complex

mechano-optical assemblies.

Products often include thin film optical coatings that are applied by the Ross Optical division in-house coating

Microprecision™

Lenses and Micro

Medical Cameras:

While the size of endoscopes has gradually decreased over time, the widespread use of very small endoscopes,

with diameters of one millimeter or smaller, has been limited, in part, we believe, by the inability of traditional lens fabrication

methods to support these smaller sizes with good image quality and acceptable manufacturing costs.

Lenses and Micro Medical

While the size of endoscopes has gradually decreased over time, the widespread use of very small endoscopes, with diameters

of one millimeter or smaller, has been limited, in part, we believe, by the inability of traditional lens fabrication methods to support

these smaller sizes with good image quality and acceptable manufacturing costs.

We believe our Microprecision™

optics technology provides a solution to this problem.

Combined with recent advances by other companies in complementary metal-oxide-semiconductor,

or CMOS, image sensor fabrication techniques, our Microprecision™

lenses and proprietary manufacturing techniques enable

the manufacture of micro medical cameras at low prices and with sizes on the order of one millimeter or less, characteristics that

make them well suited to medical applications.

We are currently engaged in development

projects with numerous customers to design and produce even smaller CMOS based camera modules together with customized illumination

using various technologies to match the needs of the medical device endoscopes.

We are also currently designing disposable versions

of our camera modules and assemblies designed for single-use and reduced risk of contamination from repeated use.

We believe these

on-going improvements are significant to the continued evolution and acceptance of our Microprecision™

optics technology

provides a solution to this problem.

Combined with recent advances by other companies in complementary metal-oxide-semiconductor, or CMOS,

image sensor fabrication techniques, our Microprecision™

lenses and proprietary manufacturing techniques enable the manufacture

of micro medical cameras at low prices and with sizes on the order of one millimeter or less, characteristics that make them well suited

to medical applications.

We are currently engaged in development projects

with numerous customers to design and produce even smaller CMOS based camera modules together with customized illumination using various

technologies to match the needs of the medical device endoscopes.

We are also currently designing disposable versions of our camera modules

and assemblies designed for single-use and reduced risk of contamination from repeated use.

We believe these on-going improvements are

significant to the continued evolution and acceptance of our Microprecision™

technology platform.

We have been engaged by various customers

for an increasing amount of development work relating to the design of endoscopes and camera assemblies that utilize our Microprecision™

We previously received two production orders exceeding $1M each from two customers for their custom designed products,

and follow-on orders for equal or larger amounts from each of these two customers.

We also believe we will receive additional productions

orders from other customers currently in our engineering and design pipeline.

We have been engaged by various customers for

an increasing amount of development work relating to the design of endoscopes and camera assemblies that utilize our Microprecision™

We previously received production orders each exceeding $1M and follow-on orders from multiple customers for their custom

designed products fulfillment of which is ongoing.

We believe we will receive additional production orders from other customers currently

in our engineering and design pipeline.

3D Endoscopes:

Our 3D endoscopes

provide next generation optical imaging for minimally invasive surgical procedures that utilize hand-held rigid endoscopes by using

the brain’s natural ability to perceive depth, which is the third dimension, by viewing one’s environment through two

Utilizing our proprietary technology to provide independent images to right and left eyes, surgeons can view the operative

field with 3D perception.

Our 3D endoscopes provide

next generation optical imaging for minimally invasive surgical procedures that utilize hand-held rigid endoscopes by using the brain’s

natural ability to perceive depth, which is the third dimension, by viewing one’s environment through two eyes.

Utilizing our proprietary

technology to provide independent images to right and left eyes, surgeons can view the operative field with 3D perception.

Competition and Markets

We sell our products in a highly competitive

market and we compete for business with both foreign and domestic manufacturers.

Many of our current competitors are larger than

us and have substantially greater resources than we do.

In addition, there is an ongoing risk that other domestic or foreign companies

who do not currently service or manufacture products for our target markets, some with greater experience in the optics industry

and greater financial resources than we have, may seek to produce products or services that compete directly with ours.

While our resources are substantially more

limited than those of some of our competitors, we believe that we can compete successfully in this market on the basis of product

quality, price, delivery and innovation.

Our success will depend, in part, on our ability to maintain a technological advantage

over our competitors.

To this end, we intend to continue to aggressively support and augment our internal engineering, research

and development resources and to aggressively pursue patent protection for existing and new technology.

We believe that our unique

technical capabilities in the areas of Microprecision™

optics, micro medical cameras and illumination, as well as 3D endoscopes

currently represent competitive advantages for us in the minimally invasive surgical device market.

We sell our products in highly competitive markets

and we compete for business with both foreign and domestic manufacturers.

Many of our current competitors are larger than us and have

substantially greater resources than we do.

In addition, there is an ongoing risk that other domestic or foreign companies who do not

currently service or manufacture products for our target markets, some with greater experience in the optics industry and greater financial

resources than we have, may seek to produce products or services that compete directly with ours.

While our resources are substantially more limited

than those of some of our competitors, we believe that we can compete successfully in this market on the basis of product quality, price,

delivery and innovation tailored to our customers’

specifications.

Our success will depend, in part, on our ability to maintain

a technological advantage over our competitors and to effectively incorporate that technology into our custom designs.

To this end, we

intend to continue to aggressively support and augment our internal engineering, research and development resources and to aggressively

pursue patent protection for existing and new technology.

We believe that our unique technical capabilities in the areas of Microprecision™

optics, micro medical cameras and illumination, as well as 3D endoscopes currently represent competitive advantages for us in the minimally

invasive surgical device market.

The competitive advantage of our Ross Optical

division is its ability to provide difficult-to-find optics, and, increasingly, to provide a broader range of services based on

its ability to source optics worldwide and augmented by its ability to provide thin-film coatings and assembly.

division is its ability to provide difficult-to-find optics, and, increasingly, to provide a broader range of services based on its ability

to source optics worldwide and augmented by its ability to provide thin-film coatings and assembly.

Market Opportunities

Microprecision™

Lenses and Micro

Medical Cameras:

While other approaches exist for the manufacture of camera lenses, we design custom camera module assemblies

with the combined objectives of low cost, small size, range of optical specifications and high image quality desired by our customer’s

Lenses and Micro Medical

While other approaches exist for the manufacture of camera lenses, we design custom camera module assemblies with the combined

objectives of low cost, small size, range of optical specifications and high image quality required by our customer’s precise medical

device specifications.

By enabling the production of millimeter sized and smaller cameras with low manufacturing costs, we believe

our Microprecision™

By enabling the production of millimeter sized and smaller cameras with low manufacturing costs, we believe our

Microprecision™

technology opens the possibility to replace existing re-sterilizable endoscopes with a single-use alternative.

Also, the small size of our Microprecision™

lenses and micro medical cameras combined with our proprietary illumination techniques

can provide visualization for existing procedures that are currently performed blind or with sub-optimal imaging, and we believe

can facilitate the development of new surgical procedures that are currently impractical without sub-millimeter visualization instrumentation.

the small size of our Microprecision™

lenses and micro medical cameras combined with our proprietary illumination techniques can

provide visualization for existing procedures that are currently performed blind or with sub-optimal imaging, and we believe can facilitate

the development of new surgical procedures that are currently impractical without sub-millimeter visualization instrumentation.

3D Endoscopes and Robotic Surgery Systems :

3D endoscopes have been used for many years as part of robotic surgery systems partly because the market price of robotic surgery

systems is high enough to support the cost of a high-quality custom 3D display.

Competition amongst medical device companies, many

of which are our customers for other products, in the area of 3D robotic surgery systems is increasing, and various companies are

now pursuing less expensive, procedure specific robotic systems.

We believe our experience and expertise in 3D endoscopes for medical

applications could be a benefit to various companies in this area that could provide us with new product development and manufacturing

opportunities.

3D endoscopes have been used for many years as part of robotic surgery systems partly because the market price of robotic surgery systems

is high enough to support the cost of a high-quality custom 3D display.

Competition amongst medical device companies, many of which are

our customers for other products, in the area of 3D robotic surgery systems is increasing, and various companies are now pursuing less

expensive, procedure specific robotic systems.

We believe our experience and expertise in 3D endoscopes for medical applications could

be a benefit to various companies in this area that could provide us with new product development and manufacturing opportunities.

Sales and Marketing

Current sales and marketing activities

are intended to broaden awareness of the benefits of our new technology platforms and our successful application of these new technologies

to medical device projects requiring surgery-grade visualization from sub-millimeter sized devices and 3D endoscopy, including

single-use products and assemblies.

We market directly to established medical device companies primarily in the United States that

we believe could benefit from our advanced endoscopy visualization systems.

Through this direct marketing, referrals, attendance

at trade shows and a presence in online professional association websites, we have expanded our on-going pipeline of projects to

significant medical device companies as well as well-funded emerging technology companies.

We expect our customer pipeline to continue

to expand as development projects transition to production orders and new customer projects enter the development phase.

Optical division markets through existing customers and trade shows, in addition to proactive online marketing strategies executed

primarily through its website.

Through the gradual integration of the sales and marketing resources of the two operations we have

begun to realize both expanded sales opportunities of the Ross component products and our micro optics engineering services, as

well as benefits from utilizing Ross’

worldwide vendor relationships for optical components.

Current sales and marketing activities are intended

to broaden awareness of the benefits of our new technology platforms and our successful application of these new technologies to medical

device projects requiring surgery-grade visualization from sub-millimeter sized devices and 3D endoscopy, including single-use products

and assemblies.

We market directly to established medical device companies primarily in the United States that we believe could benefit

from our advanced endoscopy visualization systems.

Through this direct marketing, referrals, attendance at trade shows and a presence

in online professional association websites, we have expanded our on-going pipeline of projects to significant medical device companies

and to well-funded emerging technology companies.

We expect our customer pipeline to continue to expand as development projects transition

to production orders and new customer projects enter the development phase.

Our Ross Optical division markets through existing customers

and trade shows, in addition to proactive online marketing strategies executed primarily through its website.

Through the gradual integration

of the sales and marketing resources of the two operations we have begun to realize both expanded sales opportunities of the Ross component

products and our micro optics engineering services, as well as benefits from utilizing Ross’

worldwide vendor relationships for

optical components.

International Business

We have had negligible direct export sales

However, our medical products have received the CE mark certification, which permits sales into the European Economic

Area and which benefits our customers as they market their products manufactured by us or containing our sub-assemblies into markets

outside the United States.

In the future, we may establish or use additional production facilities overseas to produce key components

for our business, such as lenses.

From the 1990s through approximately 2014, we maintained a physical presence in Asia to support

business and quality control activities throughout the region as needed.

We continue to acquire various optical components from

overseas to meet the needs of custom device designs.

We believe that the availability of specialized components and cost savings

from various overseas production resources is essential to our ability to deliver complex and unique device designs and to compete

on a price basis in the medical products area particularly and to our profitability generally.

Other than the Ross Optical division international

sales described below, we have had negligible direct export sales to date.

However, our medical products have received the CE mark certification,

which permits sales into the European Economic Area and which benefits our customers as they market their products manufactured by us

or containing our sub-assemblies into markets outside the United States.

In the future, we may establish or use additional production

facilities overseas to produce key components for our business, such as lenses.

From the 1990s through approximately 2014, we maintained

a physical presence in Asia to support business and quality control activities throughout the region as needed.

We continue to acquire

various optical components from overseas to meet the needs of custom device designs.

We believe that the availability of specialized components

and cost savings from various overseas production resources is essential to our ability to deliver complex and unique device designs and

to compete on a price basis in the medical products area particularly and to our profitability generally.

The addition of Ross Optical adds an expanded

network of overseas suppliers of various types and sizes of optical components and assemblies that will enhance our ability to

meet the material demands of our customers’

network of overseas suppliers of various types and sizes of optical components and assemblies that will enhance our ability to meet the

material demands of our customers’

unique optical and medical device designs.

During fiscal year 2020, 27%

of the Ross Optical division sales were to customers outside of the United States, with 8%, 7% and 7% of total Ross Optical division

sales to Canada, Western Europe and Singapore, respectively.

During fiscal year 2021, 13% of the Ross Optical

division sales were to customers outside of the United States and Canada, with the balance of sales primarily split between Western Europe

and Singapore.

Research and Development

We believe that our future success depends,

to a large degree, on our ability to continue to conceive and develop new optical products and technologies to enhance the performance

characteristics and methods of manufacture of existing and new products.

Although development work on behalf of customers is almost

entirely performed under revenue generating contracts and customer purchase orders, research and development expenses are incurred

on our own proprietary products and technology, such as Microprecision™

We believe that our future success depends, to

a large degree, on our ability to continue to conceive and develop new optical products and technologies to enhance the performance characteristics

and methods of manufacture of existing and new products.

Although development work on behalf of customers is almost entirely performed

under revenue generating contracts and customer purchase orders, research and development expenses are incurred on our own proprietary

products and technology, such as Microprecision™

optics, micro medical cameras and 3D endoscopes.

Accordingly, we treat engineering expenses not consumed in customer contracted development and our investment of funds and resources

in internal product and intellectual property development as research and development expense in the accompanying statement of

For the years ended June 30, 2020 and 2019, research and development expenses were $886,129 and $505,300, respectively.

Accordingly, we treat engineering

expenses not consumed in customer contracted development and our investment of funds and resources in internal product and intellectual

property development as research and development expense in the accompanying statement of operations.

For the years ended June 30, 2021

and 2020, research and development expenses were $624,253 and $886,129, respectively.

Raw Materials and Principal Suppliers

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of endoscope products for our customers from various suppliers such as OmniVision Technologies, Inc.

We believe that while the

number of sources of supply is limited for the CMOS sensors with the specifications used in medical device endoscopes we develop,

the manufacturing capacities of those suppliers is adequate to meet our demand in the next twelve months.

Likewise, a limited number

of suppliers provide CMOS electronic cabling services for the smallest sensors, such as FujiKura, Ltd.

and High Speed Interconnects.

However, we believe our demand for these services is relatively small compared to these companies’

and others’

for CMOS sensor electronic cabling services.

We have experienced supply disruptions

and customer delays from certain vendors and customers that we believe were the result of the COVID-19 pandemic and related economic

Although we are not currently experiencing vendor supply issues as a result of COVID-19, we cannot predict with certainty

at this time what the future impact of COVID-19 and resulting business and economic policies in the US and abroad will be on our

vendors and principal suppliers.

We believe that while the number

of sources of supply is limited for the CMOS sensors with the specifications used in medical device endoscopes we develop;

the manufacturing

capacities of those suppliers is adequate to meet our demand in the next twelve months.

We have experienced supply disruptions and customer

delays from certain vendors and customers that we believe were the result of the COVID-19 pandemic and related economic slow-down.

we are not currently experiencing vendor supply issues as a result of COVID-19, we cannot predict with certainty at this time what the

future impact of COVID-19 and resulting business and economic policies in the US and abroad will be on our vendors and principal suppliers.

Patents and Trademarks

We rely, in part, upon patents, trade secrets

and proprietary knowledge as well as personnel policies and employee confidentiality agreements concerning inventions and other

creative efforts to develop and maintain our competitive position.

We plan to file for patents, copyrights and trademarks in the

United States and in other appropriate countries to protect our intellectual property rights to the greatest extent practicable.

We currently hold rights to various United States patents, and have patent applications pending, including applications for our

new generation of micro medical cameras and 3D endoscopes.

Our current patent portfolio includes patents, rights to patents and

patent applications that cover various aspects of our technology in the following areas:

and proprietary knowledge as well as personnel policies and employee confidentiality agreements concerning inventions and other creative

efforts to develop and maintain our competitive position.

We plan to file for patents, copyrights and trademarks in the United States

and in other appropriate countries to protect our intellectual property rights to the greatest extent practicable.

We currently hold rights

to various United States patents, and have patent applications pending, including applications for our new generation of micro medical

Our current patent portfolio includes patents, rights to patents and patent applications that cover various aspects of our technology

in the following areas:

Medical devices;

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lenses and micro medical cameras;

Military products.

The patents contained in our current patent

portfolio have various expiration dates through May 2036.

Defense products.

The patents contained in our current patent portfolio

have various expiration dates through May 2036.

We are not aware of any infringements of these patents.

While we believe

that our pending applications relate to patentable devices or concepts, these patents may not ultimately be issued and we may not

be able to successfully defend these patents or effectively limit the development of competitive products and services.

In July 2011, we entered into an asset

purchase agreement with Intuitive Surgical Operations, Inc., in which we received $2.5 million in connection with the sale of certain

intellectual property.

Pursuant to the agreement, we agreed to assign to Intuitive Surgical all of the issued and non-expired patents

and pending patent applications that we held on the date of the agreement, and in return, Intuitive Surgical agreed to grant to

us a royalty-free, worldwide license to these patents in fields outside of medical robotics.

We intend to continue to innovate and extend

our technological capabilities in the areas of 3-D endoscopy Microprecision™

While we believe that our pending

applications relate to patentable devices or concepts, these patents may not ultimately be issued and we may not be able to successfully

defend these patents or effectively limit the development of competitive products and services.

In July 2011, we entered into an asset purchase

agreement with Intuitive Surgical Operations, Inc., in which we assigned to Intuitive Surgical all of the issued and non-expired patents

and pending patent applications that we held at that time, and in return, Intuitive Surgical granted us a royalty-free, worldwide license

to these patents in fields outside of medical robotics.

We intend to continue to innovate and extend our

technological capabilities in the areas of 3-D endoscopy Microprecision™

optics, micro medical cameras, and related illumination

techniques, and to aggressively pursue patent protection for such developments.

As of June 30, 2020, we had 60 employees,

58 of which were full-time employees.

There were 38 employees in manufacturing, 9 in engineering/research and development, 6 in

sales, and 7 in finance and administration.

As of June 30, 2021, we had 52 employees, 50 of

which were full-time employees.

There were 28 employees in manufacturing, 9 in engineering/research and development, 6 in sales, and 9

in finance and administration.

We are not a party to any collective bargaining agreements.

We believe our relations

with our employees are very good.

Revenues from our largest customers, as

a percentage of total revenues, for fiscal years 2020 and 2019 were as follows:

During fiscal year 2020 we sold product

and services to 643 customers in addition to those represented in the table above, and no other customer accounted for more than

10% of our revenues in fiscal years 2020 and 2019.

We believe our relations with our employees

are very good.

During fiscal year 2021 we sold product and services

to over 326 customers and no customer accounted for 10% or more of our total revenues during the fiscal years ended June 30, 2021, and

Our largest customer account receivable balance

at June 30, 2021, was 16% of total accounts receivable.

At June 30, 2020, our largest customer account receivable balance was 14%

of total accounts receivable.

At June 30, 2019, our largest customer account receivable balance was 12% of total accounts

No other accounts accounted for more than 10% of accounts receivable at June 30, 2021, or 2020.

Environmental Matters

Our operations are subject to a variety

of federal, state and local laws and regulations relating to the discharge of materials into the environment or otherwise relative

to the protection of the environment.

Our operations are subject to a variety of federal,

state and local laws and regulations relating to the discharge of materials into the environment or otherwise relative to the protection

of the environment.

From time to time, we use a small amount of hazardous materials in our operations.

that we currently comply with all applicable environmental laws and regulations and intend to do our best efforts to remain in

We believe that we currently comply

with all applicable environmental laws and regulations and intend to do our best efforts to remain in compliance.

Government Regulations

Domestic Regulation .

develop, manufacture and sell several medical products, the marketing of which is subject to governmental regulation in the United

Medical devices are regulated in the United States by the Food and Drug Administration, or FDA, and, in some cases, by

certain state agencies.

The FDA regulates the research, design, testing, manufacture, safety, effectiveness, labeling, promotion

and distribution of medical devices in the United States.

Generally, medical devices require clearance or approval prior to commercial

distribution.

Additionally, certain material changes to, and changes in, intended uses of, medical devices are also subject to

FDA review and clearance or approval.

Non-compliance with applicable requirements can result in failure of the FDA to grant pre-market

clearance or approval, withdrawal or suspension of approval, suspension of production, or the imposition of various other penalties.

We previously notified the FDA of our intent

to market our endoscopes, image couplers, beamsplitters, adapters and video ophthalmoscopes, and the FDA has determined that we

may market such devices, subject to the general control provisions of the Food, Drug and Cosmetic Act.

We obtained this FDA permission

without the need to undergo a lengthy and expensive approval process due to the FDA’s determination that such devices met

the regulatory standard of being substantially equivalent to existing FDA-approved devices.

In the future, we plan to market additional

medical devices that may require the FDA’s permission to market such products.

We may also develop additional products or

seek to sell some of our current or future medical products in a manner that requires us to obtain the permission of the FDA to

market such products, as well as the regulatory approval or license of other federal, state and local agencies or similar agencies

in other countries.

The FDA has authority to conduct detailed inspections of manufacturing plants in order to assure that “good

manufacturing practices”

are being followed in the manufacture of medical devices including medical devices or components

of medical devices manufactured for other medical device companies, to require periodic reporting of product defects to the FDA,

and to prohibit the sale of devices which do not comply with law.

We design and manufacture components for

the defense industry, and our Ross Optical division imports, exports and manufactures optical products for the defense industry,

some of which is controlled by U.S.

Generally, these regulations require strict control over technical data in documented

form and as embodied in products, both within our company and as part of exported shipments.

In particular, we maintain a technology

control plan, we are ISO certified and ITAR (International Traffic in Arms Regulations) registered with the U.S.

We currently develop,

manufacture and sell several medical products, the marketing of which is subject to governmental regulation in the United States.

devices are regulated in the United States by the Food and Drug Administration, or FDA, and, in some cases, by certain state agencies.

The FDA regulates the research, design, testing, manufacture, safety, effectiveness, labeling, promotion and distribution of medical devices

in the United States.

Generally, medical devices require clearance or approval prior to commercial distribution.

Additionally, certain

material changes to, and changes in, intended uses of, medical devices are also subject to FDA review and clearance or approval.

Non-compliance

with applicable requirements can result in failure of the FDA to grant pre-market clearance or approval, withdrawal or suspension of approval,

suspension of production, or the imposition of various other penalties.

We previously notified the FDA of our intent to

market our endoscopes, image couplers, beamsplitters, adapters and video ophthalmoscopes, and the FDA has determined that we may market

such devices, subject to the general control provisions of the Food, Drug and Cosmetic Act.

We obtained this FDA permission without the

need to undergo a lengthy and expensive approval process due to the FDA’s determination that such devices met the regulatory standard

of being substantially equivalent to existing FDA-approved devices.

In the future, we plan to market additional medical

devices that may require the FDA’s permission to market such products.

We may also develop additional products or seek to sell some

of our current or future medical products in a manner that requires us to obtain the permission of the FDA to market such products, as

well as the regulatory approval or license of other federal, state and local agencies or similar agencies in other countries.

has authority to conduct detailed inspections of manufacturing plants in order to assure that “good manufacturing practices”

are being followed in the manufacture of medical devices including medical devices or components of medical devices manufactured for other

medical device companies, to require periodic reporting of product defects to the FDA, and to prohibit the sale of devices which do not

comply with law.

We design and manufacture components for the defense

industry, and our Ross Optical division imports, exports and manufactures optical products for the defense industry, some of which is

controlled by U.S.

Generally, these regulations require strict control over technical data in documented form and as embodied

in products, both within our company and as part of exported shipments.

In particular, we maintain a technology control plan, we are ISO

certified and ITAR (International Traffic in Arms Regulations) registered with the U.S.

State Department and we maintain a number of technology

assistance agreements with overseas suppliers that have been approved by the U.S.

State Department.

and we maintain a number of technology assistance agreements with overseas suppliers that have been approved by the U.S.

Non-compliance with applicable requirements can result in U.S.

actions that may result in withdrawal or suspension

of approvals, suspension of company imports, exports or production, or the imposition of fines or various other penalties.

Non-compliance with applicable requirements

can result in U.S.

actions that may result in withdrawal or suspension of approvals, suspension of company imports, exports or production,

or the imposition of fines or various other penalties.

Foreign Requirements .

1 unchanged sentence

device products outside the United States are subject to foreign regulatory requirements that may vary from country to country.

Our failure to comply with foreign regulatory requirements would jeopardize our ability to market and sell our products in foreign

jurisdictions.

The regulatory environment in the European Union member countries of the European Economic Area for medical device

products differs from that in the United States.

to comply with foreign regulatory requirements would jeopardize our ability to market and sell our products in foreign jurisdictions.

The regulatory environment in the European Union member countries of the European Economic Area for medical device products differs from

that in the United States.

Medical devices sold in the European Economic Area must bear the Conformité

Européenne, or CE mark.

Devices are classified by manufacturers according to the risks they represent, with a classification

of Class III representing the highest risk devices and Class I representing the lowest risk devices.

Once a device has been

classified, the manufacturer can follow one of a series of conformity assessment routes, typically through a registered quality

system, and demonstrate compliance to a “European Notified Body.”

Européenne, or CE

Devices are classified by manufacturers according to the risks they represent, with a classification of Class III representing the

highest risk devices and Class I representing the lowest risk devices.

Once a device has been classified, the manufacturer can follow

one of a series of conformity assessment routes, typically through a registered quality system, and demonstrate compliance to a “European

Notified Body.”

The CE mark may then be applied to the device.

of the system is ensured through annual on-site audits by the notified body and a post-market surveillance system requiring the

manufacturer to submit serious complaints to the appropriate governmental authority.

All of our medical products are manufactured

in conformity with the CE mark requirements.

Maintenance of the system is ensured through annual on-site audits

by the notified body and a post-market surveillance system requiring the manufacturer to submit serious complaints to the appropriate

governmental authority.

All of our medical products are manufactured in conformity with the CE mark requirements.

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 1. Business