What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-02-13 compared with 2024-11-14 · 68 added, 59 removed, 165 unchanged (43% of the section changed)

1 unchanged sentence

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 September 30, 2024 and with our audited consolidated

financial statements for the year ended June 30, 2024 included in our Annual Report on Form 10-K, filed with the Securities and Exchange

Commission on September 30, 2024.

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 December 31, 2024 and with our

audited consolidated financial statements for the year ended June 30, 2024 included in our Annual Report on Form 10-K, filed with the

Securities and Exchange Commission on September 30, 2024.

This Quarterly Report on Form 10-Q contains

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Results of Operations

Ended September 30,

Ended December 31,

Percent of Sales

2 unchanged sentences

Engineering Design Services

$ (1,061,225 )

Optical Components

1 unchanged sentence

Total Revenues

Total revenues for the quarter ending September

30, 2024 were $4,197,053, as compared to $4,321,255 for the same period in the prior year, a decrease of $124,202.

Revenue from Engineering

Design Services decreased 2.6% during the quarter ending September 30, 2024 from the prior year period ending September 30, 2023.

the quarter ending September 30, 2024 engineering capacity, and therefore billable revenues, was reduced as a result of increased research

and development activities.

Ended December 31,

Engineering Design Services

$ (1,110,853 )

Optical Components

Finished Products and Assemblies

Total Revenues

Total revenues for the quarter ended December

31, 2024 were $4,526,907, as compared to $4,824,289 for the same period in the prior year, a decrease of $297,382 or 6.2% and for the

six months ended December 31, 2024 was $8,723,960 as compared to $9,145,544 for the same period in the prior year, a decrease of $421,584,

Revenue from Engineering Design Services decreased

46.8% and 26.7% during the three- and six-month periods ending December 31, 2024 from the same periods in the prior fiscal year.

decreases in the engineering category resulted from decreased demand for services, increases in internal research and development, and

delays related to milestone completion.

Engineering demand was reduced in the quarter by customer design engagements completing the transition

into the manufacture of new Finished Products and Assemblies.

Revenue from Optical Components increased 50.8%

during the three-month period ending September 30, 2024 from the prior year period ending September 30, 2023.

The market for Optical Components

was impacted beginning in the period ending September 30, 2023, as we noted lower order volumes as customers sought to rebalance their

inventories, and we believe a recovery is now underway.

and 30.4% during the three- and six-month periods ending December 31, 2024 from the same periods in the prior fiscal year due to the introduction

of new defense/aerospace and medical device programs.

Revenue from Finished Products and Assemblies

decreased 48.6% during the quarter ending September 30, 2024 from the prior year quarter ending September 30, 2023.

The decrease in revenue

from Finished Products and Assemblies was primarily attributable to a manufacturing pause for a defense/aerospace customer that was occasioned

by a change in specification finalized late in the quarter ending September 30, 2024.

decreased 41.7% and 45.0% during the three- and six-month periods ending December 31, 2024 from the same periods in the prior fiscal year.

The decreases in Finished Products and Assemblies were attributable to lower demand for certain production programs and the timing of

order fulfillment.

Gross margin decreased to 23.6% during the quarter

ending September 30, 2024, compared to 33.9% for the quarter ending September 30, 2023.

ending December 31, 2024, compared to 30.1% for the quarter ending December 31, 2023.

Gross profit decreased to $1,069,942 during the

three months ended September 30, 2024, compared to $1,463,611 for the three months ended September 30, 2023, primarily driven by changes

three months ending December 31, 2024, compared to $1,450,976 for the three months ended December 31, 2023, primarily driven by changes

in the product sales mix and the decreases in revenue discussed above.

Gross margin decreased to 25.1% during the six

months ending December 31, 2024, compared to 31.9% for the six months ending December 31, 2023.

Gross profit decreased to $2,187,272

during the six months ending December 31, 2024, compared to $,2,914,587 for the six months ending December 31, 2023.

Research & Development

R&D expenses increased $96,019 to $317,747

during the quarter ending September 30, 2024, compared to $212,758 during the quarter ending September 30, 2023.

R&D expenses for

the period represent employee-related expenses to support product improvements, the development of new technologies and standardized approaches

to address the opportunities for an evolving single-use medical device environment.

during the quarter ending December 31, 2024, compared to $221,728 during the quarter ending December 31, 2023.

R&D expenses increased

$283,920 to $718,406 during the six months ending December 31, 2024, compared to $434,486 during the six months end December 31, 2023.

R&D expenses for the period represent employee-related expenses to support product improvements, the development of new technologies

and standardized approaches to address the opportunities for an evolving single-use medical device environment.

Selling, General and Administrative Expenses

SG&A expenses increased $307,466, or 18.6%

to $1,963,612 during the three months ended September 30, 2024, compared to $1,656,146 during the three months ended September 30, 2023.

The increase in SG&A for the three-month period was primarily due to increased recruitment costs, bad debt expense, consulting expenses

and information technology expenses.

SG&A expenses decreased $271,194, or 14.0%

to $1,662,216 during the three months ending December 31, 2024, compared to $1,933,411 during the three months ending December 31, 2023.

The decrease in SG&A for the three-month period was primarily due to lower bad debt expense and lower stock-based compensation.

expenses increased $36,272, or 1.0% to $3,625,828 during the six months ending December 31, 2024, compared to $3,589,556 during the six

months ended December 31, 2023.

Liquidity and Capital Resources

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Net Cash Used in Operating Activities

During the three months ending September 30, 2024,

net cash used in operating activities totaled $318,622 and included a net loss of $1,311,247, increases in inventory of $592,521, offset

by increases in accounts payable and accrued expenses of $1,016,135, decreases in accounts receivable net of decreased customer deposit

liabilities of $356,092, and non-cash items totaling $202,030.

During the three months ending September 30, 2023,

net cash used in operating activities totaled $1,372,989 and included a net loss of $464,515, increases in inventory of $194,995, increases

in accounts receivable net of increased customer deposit liabilities of $375,426, decreases in accounts payable and accrued expenses of

$390,719, and non-cash items totaling $164,886.

During the six months ending December 31, 2024,

net cash used in operating activities totaled $1,105,431 as compared to $1,492,824 during the six months ending December 31, 2023.

decrease in net cash used in operating activities was primarily due to increased accounts payable and customer advances during the six

months ending December 31, 2024, partially offset by the increase in net loss and inventory during such period.

Net Cash Used in Investing Activities

During the three months ending September 30, 2024,

During the six months ending December 31, 2024,

net cash used in investing activities was $60,085, consisting of purchases of property and equipment and patent costs.

During the three

months ended September 30, 2023, net cash used in investing activities was $43,517, consisting of purchases of property and equipment

During the six

months ending December 31, 2023, net cash used in investing activities was $170,772, consisting of purchases of property and equipment

and patent costs.

Net Cash Provided by Financing Activities

During the three months ending September 30, 2024,

During the six months ending December 31, 2024,

we made payments of $158,863 on term notes and capital leases and repaid $100,000 on our revolving line of credit.

We raised a net of

$1,204,542 through the issuance of new shares in a registered direct common stock offering.

During the three months ending September 30,

2023, we made payments of $138,876 on term notes and capital leases.

$1,204,542 through the issuance of new shares in a registered direct common stock offering and $27,000 in proceeds from stock option exercises.

During the six months ending December 31, 2023, we made payments of $277,912 on term notes and capital leases offset by proceeds on stock

exercises of $2,700.

In October 2021 we entered a $2,600,000 term loan

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the same bank in October 2021 for working capital needs, which was increased to $500,000 in May 2022 and to $1,250,000 in June 2023.

were $500,000 in borrowings outstanding on the line of credit on September 30, 2024 and additional availability in the amount of $750,000.

were $900,000 in borrowings outstanding on the line of credit on December 31, 2024 and additional availability in the amount of $350,000.

Our loan agreement contains a minimum annual debt

service coverage ratio covenant of 1.2x, for the period ending June 30, 2024.

We did not meet this annual debt service coverage ratio

as of June 30, 2024.

Our lender has agreed to waive compliance with the debt service ratio covenant for the period ending June 30, 2024.

In addition to the waiver, we have entered into amendments dated September 30, 2024 with our lender to both term loans which provide for

a six month period of interest only payments from October 15, 2024 through March 15, 2025.

We will begin to pay principal and interest

under the Notes beginning with the payments due on April 15, 2025, with a new amortization schedule for the remaining term for such Notes

through their maturity date.

There were no other changes to or modifications to the Loan Agreement or the Notes.

service coverage ratio covenant of 1.2x.

We did not meet this annual debt service coverage ratio as of June 30, 2024.

Our lender has agreed

to waive compliance with the debt service ratio covenant for the period ending June 30, 2024.

In addition to the waiver, we have entered

into amendments dated September 30, 2024 with our lender to both term loans which provide for a six-month period of interest only payments

from October 15, 2024 through March 15, 2025.

We will begin to pay principal and interest under the Notes beginning with the payments

due on April 15, 2025, with a new amortization schedule for the remaining term for such Notes through their maturity date.

no other changes to or modifications to the Loan Agreement or the Notes.

On August 14.

5 unchanged sentences

Capital equipment expenditures and additional

patent costs during the three months ended September 30, 2024 and in the same period in the prior year were $28,099 and $43,517, respectively.

patent costs during the six months ended December 31, 2024 and in the same period in the prior year were $60,085 and $170,772, respectively.

Contractual cash commitments for the fiscal periods

subsequent to September 30, 2024, are summarized as follows:

subsequent to December 31, 2024, are summarized as follows:

Capital lease for equipment, including interest

1 unchanged sentence

We have contractual cash commitments related to

open purchase orders as of September 30, 2024 of approximately $4,549,000.

open purchase orders as of December 31, 2024 of approximately $5,807,000.

Off-Balance Sheet Arrangements

8 unchanged sentences

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