What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-15 compared with 2025-02-13 · 80 added, 65 removed, 168 unchanged (46% 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 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.

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, 2025 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 , as amended by that certain Amendment No.

1 on Form 10-K/A filed with the Securities and Exchange Commission

on October 28, 2024.

This Quarterly Report on Form 10-Q contains

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Results of Operations

Ended December 31,

Ended March 31,

Percent of Sales

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Total Revenues

Ended December 31,

$ (1,056,611 )

Ended March 31,

Engineering Design Services

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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,

$ (1,478,195 )

Total revenues for the quarter ended March 31,

2025 were $4,185,968, as compared to $5,242,579 for the same period in the prior year, a decrease of $1,056,611 or 20.2% and for the nine

months ended March 31, 2025 was $12,909,928 as compared to $14,388,123 for the same period in the prior year, a decrease of $1,478,195,

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.

59.3% and 38.2% during the three- and nine-month periods ending March 31, 2025 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.

Engineering revenue in the quarter was reduced due to unplanned increases in non-billable sustaining

engineering activity to support manufacturing scale up along with delayed revenue opportunities within the product development pipeline.

Revenue from Optical Components increased 22.2%

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

and 27.3% during the three- and nine-month periods ending March 31, 2025 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 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.

decreased 42.3% and 44.1% during the three- and nine-month periods ending March 31, 2025 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

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Gross margin decreased to 10.0% during the quarter

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 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.

ending March 31, 2025, compared to 35.5% for the quarter ending March 31, 2024.

Gross profit decreased to $417,975 during the three months

ending March 31, 2025, compared to $1,858,737 for the three months ended March 31, 2024, primarily driven by yield issues associated with

new manufacturing lines, lower utilization of billable engineering resources, and the decreases in revenue discussed above.

Gross margin decreased to 20.2% during the nine

months ending March 31, 2025, compared to 33.2% for the nine months ending March 31, 2024.

Gross profit decreased to $2,605,247 during

the nine months ending March 31, 2025, compared to $4,773,324 for the nine months ending March 31, 2024.

Research & Development

R&D expenses increased $18,469 to $211,242

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

during the quarter ending March 31, 2025, compared to $192,773 during the quarter ending March 31, 2024.

R&D expenses increased $302,389

$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.

to $929,648 during the nine months ending March 31, 2025, compared to $627,259 during the nine months ending March 31, 2024.

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 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.

SG&A expenses increased $320,527, or 16.7%

to $2,245,018 during the three months ending March 31, 2025, compared to $1,924,491 during the three months ending March 31, 2024.

increase in SG&A for the three-month period was primarily due to increased personnel costs, chiefly stock-based compensation and recruiting

expense, SG&A expenses increased $356,799, or 6.5% to $5,870,846 during the nine months ending March 31, 2025, compared to $5,514,047

during the nine months ending March 31, 2024.

Liquidity and Capital Resources

Based on our current plans and business conditions, management believes

that the Company’s available cash and cash equivalents, the cash generated from operations, availability on our line of credit,

and our ability to raise funds in the capital markets will be sufficient to provide for the Company’s working capital and capital

expenditure requirements for at least 12 months from the date of this filing.

However, our cash on hand and cash generated solely from

operations may be insufficient to meet working capital needs for such period and we may be required to raise external financing in the

Based on our current plans and business conditions,

management believes that the Company’s available cash and cash equivalents, the cash generated from operations, availability on

our line of credit, and our ability to raise funds in the capital markets will be sufficient to provide for the Company’s working

capital and capital expenditure requirements for at least 12 months from the date of this filing.

However, our cash on hand and cash generated

solely from operations may be insufficient to meet working capital needs for such period and we may be required to raise external financing

in the short-term.

Net Cash Used in Operating Activities

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.

During the nine months ending March 31, 2025,

net cash used in operating activities totaled $2,978,165 as compared to $1,706,998 during the nine months ending March 31, 2024.

in net cash used in operating activities was primarily due to the increase in net loss and inventory during the nine months ending March

31, 2025, partially offset by the increase in accounts payable and customer advances during such period.

Net Cash Used in Investing Activities

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 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.

During the nine months ending March 31, 2025,

net cash used in investing activities was $149,837, consisting of purchases of property and equipment net of adjustments in patent costs.

During the nine months ending March 31, 2024, net cash used in investing activities was $282,078, consisting of purchases of property

and equipment and patent costs.

Net Cash Provided by Financing Activities

During the six months ending December 31, 2024,

During the nine months ending March 31, 2025,

we made payments of $196,487 on term notes and capital leases and repaid $1,000,000 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 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.

$6,270,136 from two registered direct offerings made in August 2024 and February 2025 pursuant to our shelf registration statement.

the nine months ending March 31, 2024, we made payments of $417,109 on term notes and capital leases offset by borrowings on the line

of credit of $400,000.

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 $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.

were no borrowings under the Revolver at March 31, 2025.

Our loan agreement contains a minimum annual

debt 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.

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.

On February 14, 2025 the lender agreed to waive compliance with the annual debt service coverage ratio

covenant for the fiscal year ended June 30, 2025 subject to a $30,000 waiver fee and the completion of an equity raise of at least

$4,500,000 by February 24, 2025, which we completed on February 21, 2025.

Any future advances are contingent on the Company

achieving a minimum Debt Service Coverage ratio of 1.20x based on quarterly testing.

There were no other changes to or modifications

to the Loan Agreement or the Notes.

On August 14.

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Net proceeds were $1,204,542.

On February 19, 2025 the Company entered into

securities purchase agreements with institutional and accredited investors for the sale of $1,272,500 shares of the Company’s common

stock in a registered direct offering at a purchase price of $4.00 per share.

The offering closed on February 21, 2025 with net proceeds

after transaction costs of $5,053,000.

Capital equipment expenditures and additional

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.

patent costs during the nine months ended March 31, 2025 and in the same period in the prior year were $7,484 and $282,078, respectively.

Contractual cash commitments for the fiscal periods

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

subsequent to March 31, 2025, 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 December 31, 2024 of approximately $5,807,000.

open purchase orders as of March 31, 2025 of approximately $5,740,000.

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