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Item 1. Financial Statements

2022-02-14 compared with 2021-11-15 · 212 added, 110 removed, 234 unchanged (58% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

September 30,

Current Assets:

Cash and cash equivalents

Accounts receivable (net of allowance for doubtful accounts of $ 252,133 at September 30, 2021 and $ 251,383 at June 30, 2021)

Accounts receivable, net of allowance for doubtful accounts of $ 252,883 at December 31, 2021 and $ 251,383 at June 30, 2021

Due from related party

Prepaid expenses

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Furniture and fixtures

Less—Accumulated depreciation and amortization

Total Fixed Assets

Accumulated depreciation and amortization

Net fixed assets

3 unchanged sentences

Current portion of capital lease obligation

Current maturities of long-term debt

Current portion of acquisition earn out liability

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Capital lease obligation, net of current portion

Long-term debt, net of current maturities

Acquisition earn out liability, net of current portion

3 unchanged sentences

50,000,000 shares authorized;

issued and outstanding – 13,282,476 shares at September 30, 2021 and at June 30, 2021

issued and outstanding 16,746,696 shares at December 31, 2021 and 13,282,476 at June 30, 2021

Additional paid-in capital

Common stock subscribed

Accumulated deficit

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CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED

30 , 2021 AND 2020

Ended September 30,

FOR THE THREE AND SIX MONTHS ENDED

DECEMBER 31, 2021 AND 2020

Ended December 31,

Cost of goods sold

3 unchanged sentences

Total operating expenses

Operating Income (Loss)

Interest Expense

Net Income (Loss)

Operating loss

( 1,032,302 )

Interest (expense) income, net

$ ( 507,013 )

$ ( 213,454 )

$ ( 1,083,814 )

$ ( 212,661 )

Loss Per Share:

1 unchanged sentence

Weighted Average Common Shares Outstanding:

Fully Diluted

Basic and fully diluted

The accompanying notes are an integral part

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

FOR THE THREE MONTHS ENDED

FOR THE SIX MONTHS ENDED

31 , 2021 AND 2020

Three Month Period Ended September 30, 2021

Six Month Period Ended December 31, 2021

Stockholders’

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( 47,742,779 )

Three Month Period Ended September 30, 2020

Stock-based compensation

Proceeds from private placement of common stock

( 1,030,000 )

Issuance of common stock in business acquisition

Proceeds from exercise of stock option

Exercise of stock options net of 1,435 shares withheld

Issuance of common stock for employee services

Balance, December 31, 2021

$ ( 48,249,792 )

Six Month Period Ended December 31, 2020

Stockholders’

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( 47,062,350 )

Stock-based compensation

Balance, December 31, 2020

$ ( 47,275,804 )

The accompanying notes are an integral part

3 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED

FOR THE SIX MONTHS ENDED

31 , 2021 AND 2020

Ended September 30,

Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

Net Income (Loss)

$ ( 1,083,814 )

Adjustments to reconcile net loss to net cash used in by operating activities -

$ ( 212,661 )

Adjustments to Reconcile Net Loss to Net Cash Used In Operating Activities -

Depreciation and amortization

Stock-based compensation expense

Changes in operating assets and liabilities -

Changes in Operating Assets and Liabilities, net of effects of business acquisition -

Accounts receivable, net

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CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of fixed assets

Additional patent costs

Purchases of property and equipment

Acquisition of business

Net Cash Used In Investing Activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Payment of capital lease obligation

Gross Proceeds from private placement of common stock subscribed

Payment of capital lease obligations

Payments of long-term debt

Payment of debt issuance costs

Gross proceeds from private placement of common stock

Gross proceeds from exercise of stock options

Net Cash Provided By (Used in) Financing Activities

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Offering costs included in accrued compensation and other

Issuance of common stock for services

Acquisition of business financed with long-term debt

The accompanying notes are an integral part

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and its wholly-owned subsidiaries (the Company).

All significant

intercompany accounts and transactions have been eliminated in consolidation.

All significant intercompany

accounts and transactions have been eliminated in consolidation.

These consolidated financial statements have been

prepared by the Company, without audit, and reflect normal recurring adjustments which, in the opinion of management, are necessary for

a fair statement of the results of the first quarter of the Company’s fiscal year 2022.

These consolidated financial statements

do not include all disclosures associated with annual consolidated financial statements and, accordingly, should be read in conjunction

with footnotes contained in the Company’s consolidated financial statements for the year ended June 30, 2021, together with

the Report of Independent Registered Public Accounting Firm filed under cover of the Company’s 2021 Annual Report on Form 10-K,

a fair statement of the results of the second quarter and six months of the Company’s fiscal year 2022.

These consolidated financial

statements do not include all disclosures associated with annual consolidated financial statements and, accordingly, should be read in

conjunction with footnotes contained in the Company’s consolidated financial statements for the year ended June 30, 2021, together

with the Report of Independent Registered Public Accounting Firm filed under cover of the Company’s 2021 Annual Report on Form 10-K,

filed with the Securities and Exchange Commission on September 28, 2021.

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plus the number of potentially dilutive securities outstanding during the period such as stock options.

For the three months ended September

30, 2021, the effect of such securities was antidilutive and not included in the fully diluted calculation because of the net loss generated

in that period.

For the three and six months ended

December 31, 2021, the effect of such securities was antidilutive and not included in the fully diluted calculation because of the net

loss generated in that period.

The following is the calculation of income (loss) per share for the

three months ended September 30, 2021 and 2020:

Loss Per Share

Ended September 30,

Net Income (Loss) – Basic and Fully Diluted

three and six months ended December 31, 2021 and 2020:

Schedule of earnings per share

Ended December 31,

Net Loss - Basic and Fully Diluted

$ ( 507,013 )

Weighted Average Shares Outstanding

Fully Diluted

$ ( 213,454 )

$ ( 1,083,814 )

$ ( 212,661 )

Basic and Dilutive Weighted Average Shares Outstanding

Loss Per Share - Basic and Fully Diluted

1 unchanged sentence

of outstanding stock options that were excluded from the computation as their effect was antidilutive was approximately 2,669,700 and

893,200 for the three months ended September 30, 2021 and 2020, respectively.

2,135,200 for the three and six months ended December 31, 2021 and 2020, respectively.

Income taxes are accounted for under the asset

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Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

No such impairments of goodwill or patents have been estimated by management as of September 30, 2021.

No such impairments of goodwill or patents have been estimated by management as of December 31, 2021.

BUSINESS ACQUISITION

On October 4, 2021, the Company entered into an

asset purchase agreement to acquire substantially all of the assets of Lighthouse Imaging, LLC, a medical optics and digital imaging business,

as described in Forms 8-K and 8-K/A that the Company filed with the Securities and Exchange Commission on October 8, 2021 and December

20, 2021, respectively.

The aggregate cash purchase price consisted of $ 2,855,063 in cash at closing, $ 1,500,000 as earn-out consideration

over the subsequent two year period, and 2,500,000 unregistered shares of common stock issued to the seller at closing.

The effective

date of the acquisition was October 4, 2021, and the actual results of operations and financial position of the Lighthouse division are

included in the accompanying consolidated financial statements as of, and for the three months ended, December 31, 2021.

A post acquisition

adjustment totaling $ 84,210 is owed by the seller and recorded as Due From Related Party in the accompanying balance sheet at December

The Company financed the cash portion of the acquisition

by securing a $ 2,600,000 term loan from Main Street Bank on October 4, 2021, and by selling 937,500 shares of its common stock for $ 1,500,000

of gross proceeds in a private placement closed on October 1, 2021.

The earn-out consideration will be paid at a rate

of $750,000 per annum from October 1, 2021 to September 30, 2023 if certain levels of gross profit are earned by the Lighthouse division.

Purchase Price Allocation and Goodwill

The allocation of purchase price is preliminary

and subject to change based on future payments made for the earn-out contingent liability.

Any unearned portions of the earn-out liability

will be recognized in earnings.

The acquired assets, contingent consideration and assumed liabilities at the effective date of acquisition

include the following:

Schedule of acquired assets, contingent consideration and assumed liabilities

At Acquisition Effective Date October 4, 2021

Trade accounts receivable, net

Other current assets

Total Assets Acquired

Accounts payable

Customer advances

Accrued compensation and other

Total Liabilities Assumed

Net assets acquired

Total Purchase Price-Initial and Contingent Consideration

Consolidated Pro Forma Results

Consolidated unaudited pro forma results of operations

for the Company are presented below assuming that the acquisition of the Lighthouse division had occurred on July 1, 2020.

operating results include net adjustments resulting from the acquisition transaction during the three and six months ended December 31,

2021 and 2020.

Schedule of consolidated pro forma results

Ended December 31,

( 1,026,519 )

Net loss per share - basic and fully diluted

Pro forma financial information is not necessarily

indicative of the Company’s actual results of operations if the acquisition had been completed at the date indicated, nor is it

necessarily an indication of future operating results.

Amounts do not include any operating efficiencies or cost saving that the Company

believes may be achievable.

Inventories are stated at the lower of cost (first-in,

1 unchanged sentence

Schedule of inventory

September 30,

Raw Materials

2 unchanged sentences

Total Inventories

LEASE OBLIGATION

BANK FINANCING ACTIVITIES

Bank Line of Credit

On October 4, 2021, the Company entered into a

Loan Agreement with Main Street Bank of Marlborough, Massachusetts, which provided for a $ 2,600,000 Term Loan and a $ 250,000 Revolving

Line of Credit Loan Facility.

The $250,000 line of credit is due on demand and had zero borrowings outstanding at December 31, 2021.

under the line of credit bear interest payable monthly at the prime lending rate plus 1.5% per annum and shall not be less than 4.75%

Borrowings under the line of credit are limited to the borrowing base comprised of a percentage of accounts receivable and

inventory and are secured by all the assets of the Company.

Long-Term Debt

Long-term debt consists of the following at December

Schedule of long-term debt

Term Loan Note payable to Main Street Bank with monthly principal payments of $ 30,952 .38 plus interest at the prime lending rate plus 1.5 % per annum.

Secured by all assets of the Company, and subject to certain periodic reporting to the bank, an annual minimum debt service coverage ratio of 1.20:1, and other conditions.

The Term Loan Note matures on October 15, 2028 .

Less current maturities

Less debt issuance costs, net of accumulated amortization of $ 3,404

Long-term debt, net of current portion of debt issuance costs

At December 31, 2021 principal payments

due on the Term Loan Note payable are as follows:

Schedule of future minimum note payable

Fiscal Year Ending June 30:

LEASE OBLIGATIONS

In March 2021 the Company entered into a five-year

2 unchanged sentences

for $ 47,750 for manufacturing equipment.

The net book value of fixed assets under capital lease obligations as of September 30, 2021 is

The net book value of fixed assets under capital lease obligations as of December 31, 2021 is

On July 1, 2019 the Company entered into a three-year

operating lease for its facility in El Paso, Texas with total remaining minimum lease payments of $ 47,116

at September 30, 2021.

Total rent expense including base rent and common area expenses was $ 13,997

during the three months ended September 30, 2021 and 2020, respectively.

Included in the accompanying balance sheet at September

30, 2021 is a right-of-use asset of $ 46,244 and current

and long-term right-of-use operating lease liabilities of $ 46,244

and $ 0 , respectively.

At September 30, 2021, future minimum lease payments

operating lease for its facility in El Paso, Texas with total remaining minimum lease payments of $ 31,411 at December 31, 2021.

rent expense including base rent and common area expenses was $ 15,705 and $ 15,190 during the three months ended December 31, 2021 and

2020, respectively.

Included in the accompanying balance sheet at December 31, 2021 is a right-of-use asset of $ 31,054 and current and

long-term right-of-use operating lease liabilities of $ 31,054 and $ 0 , respectively.

At December 31, 2021 future minimum lease payments

under the capital lease and operating lease obligations are as follows:

8 unchanged sentences

The Company’s operating leases for its Gardner,

Massachusetts office, production and storage spaces plus an equipment lease have expired and are continuing on a month-to-month tenant

at will basis.

Rent expense on these operating leases was $ 50,826 and $ 41,616 for the three months ended September 30, 2021 and 2020,

respectively.

Massachusetts office, production and storage spaces plus an equipment lease as well as the Windham, Maine office and production space

have expired and are continuing on a month-to-month tenant at will basis.

Rent expense on these operating leases was $ 136,744 and $ 83,232

for the six months ended December 31, 2021 and 2020, respectively.

STOCK-BASED COMPENSATION

Stock Options

The following table summarizes stock-based compensation

expense for the three months ended September 30, 2021 and 2020:

expense for the three and six months ended December 31, 2021 and 2020:

Schedule of stock-based compensation expense

Ended September 30,

Ended December 31,

Cost of Goods Sold

Research and Development Expenses

Selling, General and Administrative Expenses

Research and Development

Selling, General and Administrative

Stock Based Compensation Expense

No compensation has been capitalized because such

1 unchanged sentence

The following tables summarize stock option activity

for the three months ended September 30, 2021:

Stock option activity

for the six months ended December 31, 2021:

Schedule of stock option activity

Options Outstanding

4 unchanged sentences

Outstanding at June 30, 2021

Outstanding at September 30, 2021

Outstanding at December 31, 2021

Information related to the stock options outstanding

as of September 30, 2021 is as follows:

Stock options outstanding by exercise price range

as of December 31, 2021 is as follows:

Schedule of stock options outstanding by exercise

Exercise Prices

3 unchanged sentences

The aggregate intrinsic value of the Company’s

“in-the-money” outstanding and exercisable options as of September 30, 2021 was $ 1,564,100 and $ 1,355,063 , respectively.

in-the-money outstanding and exercisable options as of December 31, 2021 was $ 2,564,065 and $ 2,119,321 , respectively.

Restricted Common Stock Granted

Effective November 17, 2021 the Company granted

an employee hired as part of the Lighthouse Imaging, LLC business acquisition 50,000 shares of restricted common stock vesting one-third

on the first three one-year anniversary dates of his date of hire, or October 1, 2022, 2023 and 2024, at which time the vesting portions

of the shares shall be issued to the employee.

A total of $ 113,000 of compensation expense was assigned as of the grant date, which will

be recognized as stock based compensation expense over the vesting period.

Stock based compensation expense for the three months ended

December 31, 2021 includes $ 9,417 relating to these restricted common stock shares.

Common Stock Issued for Services

In December 2021, the Company issued 9,045 shares

of its common stock to its Chief Financial Officer as compensation for services performed.

The company recognized $ 20,000 of stock based

compensation expense during the three months ended December 31, 2021 relating to these common stock shares.

SALE OF STOCK IN OCTOBER 2021

3 unchanged sentences

The Company received $ 1,500,000 in gross proceeds from the offering, $ 1,030,000 of which was received as of

September 30, 2021, and is included in cash in the accompanying balance sheet and in the accompanying statement of stockholders’

equity as common stock subscriptions.

The Company used the net proceeds from this placement to partially fund the October 4, 2021, acquisition

of the operating assets of Lighthouse Imaging, LLC with an effective date of October 1, 2021.

Subsequent Event-Business

Acquisition below.

In conjunction with the placement, we also entered into a registration rights agreement with the investors, whereby we are obligated to

file a registration statement with the Securities Exchange Commission on or before 120 calendar days after October 4, 2021 to register

the resale by the investors of 937,500 shares of our common stock purchased in the placement.

September 30, 2021, and included in cash and common stock subscriptions in the September 30, 2021 balance sheet and statement of stockholders’

equity, respectively.

The Company used the net proceeds from this placement to partially fund the October 4, 2021, acquisition of the

operating assets of Lighthouse Imaging, LLC with an effective date of October 4, 2021.

In conjunction with the placement, the Company also entered into a registration rights agreement with the investors, whereby it is obligated

to file a registration statement with the Securities and Exchange Commission on or before 120 calendar days after October 4, 2021 to register

the resale by the investors of 937,500 shares of its common stock purchased in the placement.

The registration statement was filed on

January 31, 2022.

ISSUANCE OF COMMON STOCK IN BUSINESS ACQUISITION

On October 4, 2021, the Company issued 2,500,000

unregistered shares of its common stock to the sellers of Lighthouse Imaging, LLC, valued on that date at $ 1.93 per share or $ 4,825,000 ,

as shown in the accompanying statement of stockholders’ equity at December 31, 2021.

In conjunction with the issuance, the Company

agreed to use reasonable efforts to effectuate within a reasonable period after the October 4, 2021 business acquisition date a registration

statement with the Securities and Exchange Commission to register the resale by the sellers of 2,500,000 shares of its common stock issued

in the business acquisition.

REVENUE RECOGNITION

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by economic factors.

Revenues are comprised of the following for the three and nine months ended September 30, 2021 and 2020:

Disaggregation of revenues

Ended September 30,

Revenues are comprised of the following for the three and six months ended December 2021 and 2020:

Schedule of disaggregation of

Ended December 31,

Engineering Design Services

Optical Components

Medical Device Products & Assemblies

Medical Device Products and Assemblies

Total Revenues

Contract Assets and Liabilities

6 unchanged sentences

These costs have been recorded in selling, general and administrative expenses.

As of September

As of December 31,

2021, there were no contract assets recorded in the Company’s Consolidated Balance Sheets.

The Company’s contract liabilities arise

as a result of unearned revenue received from customers at inception of contracts or where the timing of billing for services precedes

satisfaction of our performance obligations.

The Company generally satisfies performance obligations within one year from the contract

inception date.

Contract liabilities, which were recorded as customer

advances in the Company’s Consolidated Balance Sheets, and unearned revenue are comprised of the following:

Contract Liabilities

Three Months Ended September 30,

from unearned revenue received from customers at inception of contracts or where the timing of billing for services precedes satisfaction

of our performance obligations.

The Company generally satisfies performance obligations within one year from the contract inception date.

Contract liabilities, which were recorded as

customer advances in the Company’s Consolidated Balance Sheets, and unearned revenue are comprised of the following:

Schedule of contract liabilities

Ended December 31,

Contract liabilities, beginning of period

Assumed in business acquisition

Unearned revenue received from customers

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the US and abroad will be on its up-coming quarterly fiscal operating results.

SUBSEQUENT EVENT – BUSINESS ACQUISITION

On October 4, 2021, the Company closed on an asset

purchase agreement with an effective date of October 1, 2021 with Lighthouse Imaging, LLC and Anania & Associates Investment Company,

LLC for substantially all of the assets of Lighthouse Imaging, LLC, a Maine limited liability company operating a medical optics and digital

imaging business, as more fully described in Form 8-K filed with the Securities and Exchange Commission on October 10, 2021.

The aggregate

cash purchase price consisted of $2,855,000 in cash at closing and $1,500,000 as earn-out consideration contingent on certain performance

criteria over a period of two years.

The Company also issued 2,500,000 unregistered shares of its common stock to the sellers at the closing

The wife of the Company’s VP of sales and marketing Jeffrey Di Rubio participated in the private placement by purchasing 12,500

shares of common stock for $20,000.

The Company financed the acquisition in October

2021 by taking on a $2,600,000 term loan from Main Street Bank, and by closing a $1,500,000 private placement for the sale and purchase

of 937,500 of its common stock, $0.01 par value, at a purchase price of $1.60 per share.

Gross proceeds from the offering totaling $1,030,000

were received from investors prior to September 30, 2021 and are included in common stock subscribed in the accompanying Consolidated

Statements of Stockholders Equity.

The Company also secured a revolving line of credit not to exceed $250,000 for general working capital

The financial

statements of Lighthouse Imaging, LLC and pro forma financial information required to be filed by Items 9.01(a) and (b) of Form 8-K will

be filed by amendment no later than the required 71 calendar days after the October 10, 2021 filing of the Form 8-K, or by December 20,

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-Q

Item 1. Financial Statements