What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-14 compared with 2022-05-16 · 65 added, 90 removed, 149 unchanged (51% of the section changed)

Managements Discussion and Analysis of Financial Condition

and Results of Operations.

Management’s Discussion and Analysis of Financial

Condition and Results of Operations.

The following discussion of our financial condition

and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and notes to those

statements included elsewhere in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 and with our audited consolidated

statements included elsewhere in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 and with our audited consolidated

financial statements for the year ended June 30, 2022 included in our Annual Report on Form 10-K, filed with the Securities and Exchange

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We selectively execute 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.

next generation capabilities for designing and manufacturing 3D endoscopes and very small Microprecision TM lenses, anticipating

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

As Ross Optical Industries of El Paso, Texas we

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Lighthouse Imaging is an industry leader in chip on tip visualization systems.

Approximately 34% our business during the nine

months ended March 31, 2022 is from engineering services primarily relating to the design of medical device optical assemblies, 45% from

the sale of both internally manufactured and purchased optical components, and 21% from the manufacture of optical assemblies and sub-assemblies

primarily for medical device instrument applications.

Our proprietary medical instrumentation line, unique custom design and manufacturing

capabilities, and expert electrical engineering and development has generated traditional proprietary endoscopes and endocouplers as well

as other custom imaging and illumination products for our customers’ use in minimally invasive surgical procedures.

We design and

manufacture 3D endoscopes and very small Microprecision lenses, assemblies and complete medical devices to meet the surgical community’s

continuing demand for smaller, disposable, and more enhanced imaging systems for minimally invasive surgery.

Approximately 32% our business during the three

months ended September 30, 2022 is from engineering services (primarily relating to the design of medical device optical assemblies),

52% from the sale of both internally manufactured and purchased optical components, and 16% from the manufacture of optical assemblies

and sub-assemblies (primarily for medical device instrument applications).

Our proprietary medical instrumentation line, unique custom

design and manufacturing capabilities, and expert electrical engineering and development services have generated orders for traditional

proprietary endoscopes and endocouplers as well as for custom imaging and illumination products for use in minimally invasive surgical

We design and manufacture 3D endoscopes and very small Microprecision TM lenses, assemblies and complete medical

devices to meet the surgical community’s continuing demand for smaller, disposable, and more enhanced imaging systems for minimally

invasive surgery.

We are registered to the ISO 9001:2015 and ISO

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Accordingly, we expect to continue to seek and obtain product-related design and development contracts with customers

and to selectively invest our own funds on research and development, particularly in the areas of Microprecision optics, micro medical

cameras, illumination, single-use endoscopes and 3D endoscopes.

and to selectively invest our own funds on research and development, particularly in the areas of Microprecision TM optics,

micro medical cameras, illumination, single-use endoscopes and 3D endoscopes.

Current sales and marketing activities are intended

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Results of Operations

Our total revenues for the quarter ended March

31, 2022, were $4,651,352, as compared to $2,458,290 for the same period in the prior year, an increase of $2,193,062, or 89.2%, primarily

due to inclusion of the Lighthouse division since its acquisition on October 4, 2021 and an increase in medical devise manufacturing revenue.

Excluding the effect of the Lighthouse acquisition, engineering revenue experienced a slight quarter-over-quarter decrease while production

revenue was up 106% and component revenue increased 32% from the quarter ended March 31, 2021 to 2022.

Our total revenues for the nine months ended March 31,

Our total revenues for the quarter ended September

30, 2022, were $5,085,301, as compared to $2,336,344 for the same period in the prior year, an increase of $2,748,957, or 118%, primarily

due to inclusion of the Lighthouse division since its acquisition on October 4, 2021.

Excluding the effect of the Lighthouse acquisition,

engineering revenue during the nine months ended March 31, 2022 decreased approximately $287,000 compared to the same period of the prior

year due primarily to a change in mix of engineering projects.

Component revenues increased approximately $543,000 during the nine months

ended March 31, 2022 compared to the same period of the prior year, and production revenue increased approximately $161,000 over the same

period as production on some products began to return to pre-pandemic levels.

Our largest customer during the three and nine

months ended March 31, 2022 accounted for 10.9% and 9.0%, respectively, of our revenue and represented manufacturing assembly revenues

for a medical diagnostic system.

We generated revenues from 193 unique customers during the nine months ended March 31, 2022, and one

single customer accounted for slightly more than 10% or more of our revenue for the quarter and no single customer accounted for 10% or

more of our revenue for the nine months ended March 31, 2022 or the fiscal year ended June 30, 2021.

due to inclusion of the Lighthouse division since its acquisition in October, 2021 and an increase in medical device manufacturing and

optical component revenue.

Excluding the effect of the Lighthouse acquisition, component revenue increased 82%, production increased 37%

and engineering revenue increased 18% from the quarter ended September 30, 2021 to 2022.

Our largest customer during the three months ended

September 30, 2022 accounted for 16.6% of our revenue and represented component revenue for a defense/aerospace customer.

revenues from 194 unique customers during the three months ended September 30, 2022.

The COVID-19 world-wide pandemic that began during

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of amounts owed to us from our customers, our internal operating procedures, and our overall financial condition.

Given the uncertainty

surrounding the continuation of economic impacts both 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 quarterly fiscal

operating results.

Gross profit for the quarter ended March 31, 2022

Gross profit for the quarter ended September 30,

2022 was $1,724,654, compared to $639,032 for the same period in the prior year, an increase of $1,085,622, or 170%.

Gross profit for the quarter

ended March 31, 2022 as a percentage of our revenues was 37.2%, an increase from the gross profit percentage of 33.3% for the same period

in the prior year.

Gross profit for the nine months ended March 31, 2022 was $3,486,823, as compared to $2,647,642 for the same period

in the prior year, an increase of $839,181 or 31.7%.

Gross profit for the nine months ended March 31, 2022 as a percentage of our

revenues was 32.0%, a decrease from the gross profit percentage of 33.1% for the same period in the prior year.

Quarterly gross profit

and gross profit percentage depend on a number of factors, including overall sales volume, facility utilization, product sales mix, the

costs of engineering services, and production start-up costs and challenges in connection with new products, the effects of COVID-19 pandemic

policy decisions on various economies and our suppliers and customers, as well as the effects on production efficiencies due to the augmented

policies we have incorporated into our operations as a result of the COVID-19 pandemic.

Our gross margin on individual engineering projects

Gross profit for

the quarter ended September 30, 2022 as a percentage of our revenues was 33.9%, an increase from the gross profit percentage 27.4% for

the same period in the prior year.

Quarterly gross profit and gross profit percentage depend on a number of factors, including overall

sales volume, facility utilization, product sales mix, the costs of engineering services, production start-up costs and challenges in

connection with new products, the effects of COVID-19 pandemic policy decisions on various economies and our suppliers and customers,

as well as the effects on production efficiencies due to the augmented policies we have incorporated into our operations as a result of

the COVID-19 pandemic.

Our gross profit on individual engineering projects

is dependent on a number of factors and is expected to fluctuate from quarter to quarter based on the nature and status of engineering

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changes or delays.

Our increase in gross margin dollars during the quarter ended March 31, 2022 was due to inclusion of the Lighthouse

division since its acquisition on October 4, 2021, an increase in medical devise manufacturing revenue, and improved efficiencies in engineering

projects, which is partially offset by inclusion of the Lighthouse division engineering and production revenues at overall margins lower

than the Ross Optical division revenues.

The remainder of our production, engineering and component revenues resulted in margins within

our targeted range with reasonably expected fluctuations.

Our increase in gross margin dollars during the quarter ended September 30, 2022 was due to inclusion of the Lighthouse

division since its acquisition on October 4, 2021, an increase in both medical device manufacturing revenue and optical component revenue,

and improved efficiencies in engineering projects, which is partially offset by inclusion of the Lighthouse division engineering and production

revenues at overall margins lower than the Ross Optical division revenues.

The remainder of our production, engineering and component

revenues resulted in margins within our targeted range with reasonably expected fluctuations.

Research and development expenses were $245,477

for the quarter ended March 31, 2022, compared to $146,063 for the same period in the prior year, an increase of $68,835, or 47.1%.

and development expenses were $433,248 for the nine months ended March 31, 2022, compared to $443,609 for the same period in the

prior year, a decrease of $10,361, or 2.3%.

In-house research and development and certain internal functions not directly related to customer

engagements are classified as research and development expenses with the majority of our engineering, research and development activities

being consumed in revenue generating engagements with our customers for the development of their products.

During the quarter and nine

months ended March 31, 2022 we had an increase in research and development costs due to the inclusion of the Lighthouse division offset

by a greater amount of our engineering personnel time consumed in customer focused compared to the same periods of the prior fiscal year.

for the quarter ended September 30, 2022, compared to $105,186 for the same period in the prior year, an increase of $140,291, or 133%.

In-house research and development and certain internal functions not directly related to customer engagements are classified as research

and development expenses with the majority of our engineering, research and development activities being consumed in revenue generating

engagements with our customers for the development of their products.

During the quarter ended September 30, 2022 we had an increase in

research and development costs due to the inclusion of the Lighthouse division offset by a greater amount of our engineering personnel

time consumed in customer focused compared to the same periods of the prior fiscal year.

Selling, general and administrative expenses were

$1,574,432 for the quarter ended March 31, 2022, compared to $927,979 for the same period in the prior year, an increase of $646,453,

Selling, general and administrative expenses were $3,974,824 for the nine months ended March 31, 2022, compared to $2,671,176

for the same period in the prior year, an increase of $1,303,648, or 48.8%.

The increase in selling, general and administrative expenses

in the three and nine months ended March 31, 2022 compared to the same periods of the prior fiscal year was primarily due to inclusion

of the Lighthouse division since its acquisition on October 4, 2021, plus increased stock-based compensation and marketing related expenses.

$1,495,766 for the quarter ended September 30, 2022, compared to $933,624 for the same period in the prior year, an increase of $562,142,

The increase in selling, general and administrative expenses in the three months ended September 30, 2022 compared to the same

periods of the prior fiscal year was primarily due to inclusion of the Lighthouse division since its acquisition in October, 2021, plus

increased compensation due to expanded headcount and marketing related expenses.

Liquidity and Capital Resources

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for several years.

During the nine months ended March 31, 2022, we had a net loss of $1,197,713 and used cash in operating activities

At March 31, 2022, cash was $831,585, accounts receivables were $3,347,692 and current liabilities were $5,770,887, including

$1,018,275 of customer advances received for future order deliveries.

During the quarter ended September 30, 2022, and the years ended June 30, 2022 and 2021 we incurred operating losses

of $16,589, $1,513,890 and $905,583, respectively.

At September 30, 2022, cash was $673,502, accounts receivables were $3,414,685 and

current liabilities were $5,192,420, including $1,032,891 of customer advances received for future order deliveries.

Although our revenue and gross margin have increased

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paid against purchase orders by our customers and recorded in the current liabilities section of the accompanying financial statements.

We have incurred year to year and quarter to quarter operating losses during our efforts to develop current products including Microprecision

We have incurred year to year and quarter to quarter operating losses during our efforts to develop current products including Microprecision TM

optical elements, micro medical camera assemblies and 3D endoscopes.

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technical capabilities and related products have the potential to generate sales increases to achieve breakeven and profitable results.

On October 4, 2021 we acquired the assets of Lighthouse

Imaging, LLC as described in note 2.

Business Acquisition to the accompanying financial statements in this Form 10-Q.

To finance the cash

portion of the acquisition price we entered into a $2,600,000 bank term loan, sold shares of our common stock for gross proceeds of $1,500,000.

We also secured a $250,000 bank line of credit from the same bank on October 4, 2021 for working capital needs, upon which no borrowings

are outstanding as of December 31, 2021.

In connection with our October 2021 acquisition

of Lighthouse Imaging, we entered into a $2,600,000 bank term loan, and sold shares of our common stock for gross proceeds of $1,500,000.

We also secured a $250,000 bank line of credit from the same bank in October 2021 for working capital needs, which was increased to $500,000

There were no borrowings outstanding on the line of credit at September 30, 2022.

Capital equipment expenditures and additional

patent costs during the nine months ended March 31, 2022 were $82,660.

patent costs during the three months ended September 30, 2022 were $29,174.

Future capital equipment and patent expenditures will be dependent

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Contractual cash commitments for the fiscal periods

subsequent to March 31, 2022, are summarized as follows:

subsequent to September 30, 2022, are summarized as follows:

Capital lease for equipment, including interest

Minimum operating lease payments - Ross Optical division

Minimum operating lease payments

We have contractual cash commitments related to

open purchase orders as of March 31, 2022 of approximately $1,263,003.

open purchase orders as of September 30, 2022 of approximately $3,252,770.

Off-Balance Sheet Arrangements

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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 2. Management’s Discussion and Analysis