What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-09-28 compared with 2025-09-29 · 61 added, 42 removed, 122 unchanged (46% of the section changed)

24 unchanged sentences

We recognized bad debt expenses

of $38,000 and $202,000 for the years ending June 30, 2025, and June 30, 2024, respectively.

of $38,000 for the years ending June 30, 2026, and June 30, 2025.

Reserve for Excess and Obsolete

13 unchanged sentences

Notes to our Financial Statements contained elsewhere in this Annual Report on Form 10-K.

IEEPA Tariff Refund Claims and Related Customer Refunds

In February 2026, the Supreme Court of the United States

determined that certain tariffs imposed pursuant to the International Emergency Economic Powers Act (“IEEPA”) were not authorized

Subsequent rulings by the U.S.

Court of International Trade have directed the U.S.

Customs and Border Protection to establish

processes to effect refunds of certain tariffs previously collected.

Based on these judicial determinations, we concluded that the company

has been legally released from the obligation underlying the invalidated tariffs in accordance with the legal release model within the

scope of Accounting Standards Codification 405, Liabilities, and that we have a present right to repayment of amounts previously paid.

Accordingly, during the year ended

June 30, 2026, the Company recorded a receivable of $880,598 within accounts receivable in the balance sheet, representing recovery of

IEEPA tariffs previously paid, with a corresponding offset to cost of goods sold.

In addition, the Company recorded a $558,266 liability

within accrued compensation and other in the balance sheet as a result of its decision to refund IEEPA tariff surcharges collected from

customers, with a corresponding reduction of revenue in the statement of operations.

In the year ended June 30, 2026, we received $37,576

in IEEPA tariff refund proceeds, resulting in outstanding IEEPA tariff refund claims receivable of $843,022 within accounts receivable

in the balance sheet, representing a recovery of IEEPA tariffs previously paid.

Results of Operations for the Fiscal Year Ended

10 unchanged sentences

Total revenues for the fiscal year ended June

30, 2025 were $19,091,269, as compared to $19,104,350 for the same period in the prior year, a decrease of $13,081, or 0.1%.

30, 2026 were $31,531,765, as compared to $19,091,269 for the same period in the prior year, an increase of $12,440,496, or 65.2%.

Revenue from Engineering Design Services decreased

2 unchanged sentences

from decreased demand for services, primarily from the transfer of our single-use cystoscope program from development (Engineering Design

Services) to production (Systems Manufacturing), and increases in internal research and development.

Engineering revenue in the year 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.

Services) to production (Systems Manufacturing).

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

engineering activity to support manufacturing scale up along with insufficient product development engagements.

Revenue from Systems Manufacturing increased 172.9%

during the year ending June 30, 2026 from the prior year ending June 30, 2025.

Revenue increases in this category resulted from increased

demand for manufacturing services as design services engagements concluded and progressed to manufacturing.

Revenue increases in this category resulted from significant

increases in customer demand and the resultant scaling of manufacturing capabilities.

Revenue from the MicroOptics Lab decreased 75.7%

during the year ending June 30, 2025 from the prior year ending June 30, 2024, primarily due to reorder timing.

Revenue from Ross Optical Industries decreased

during the year ending June 30, 2026 from the prior year ending June 30, 2025, primarily due to delays in receiving new production orders

from a defense contractor, which is the primary customer for this line of business.

Revenue from Ross Optical Industries increased

31.7% for the year ending June 30, 2026 from the prior year ending June 30, 2025.

We believe the decrease continues to be attributable

to a general, industry-wide slowdown, coupled with uncertainty driven by evolving tariff costs, which has led customers to postpone deliveries.

We believe a portion of the increase is attributable

to the inability of our customers to continue to postpone deliveries that had previously been delayed due to the uncertainty of new tariffs

and the passthrough of these tariff costs which increased revenue.

Gross margin decreased to 17.2% during the year

ended June 30, 2026, compared to 17.8% for the year ended June 30, 2025.

Gross profit decreased to $3,404,433 during the year ended June

30, 2025, compared to $5,797,777 for the year ended June 30, 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 profit increased to $5,431,220 during the year ended June

30, 2026, compared to $3,404,433 for the year ended June 30, 2025, primarily driven by increased volume in Systems Manufacturing.

Research & Development

R&D expenses increased $176,182 to $1,157,963

R&D expenses decreased $124,807 to $1,033,156

during the year ended June 30, 2026, compared to $1,157,963 during the year ended June 30, 2025.

5 unchanged sentences

to $7,906,672 during the year ended June 30, 2026, compared to $7,797,761 during the year ended June 30, 2025.

The increase in SG&A

for the year was primarily due to increased personnel costs, most related to stock-based compensation and recruiting expense.

The decrease in SG&A

for the year was primarily due to decreased stock-based compensation and recruiting expenses, partially offset by consulting and bonus

Liquidity and Capital Resources

3 unchanged sentences

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

1 unchanged sentence

used in operating activities totaled $1,550,219 as compared to $3,395,702 during the year ended June 30, 2025.

The increase in net cash

used in operating activities was primarily due to the increase in net loss, accounts receivable and inventory during the year ended June

30, 2025, partially offset by the increase in accounts payable and customer advances during such period.

The decrease in net cash

used in operating activities was primarily due to the decrease in net loss, inventory and accrued expense during the year ended June 30,

2026, partially offset by the increase in accounts payable and accounts receivable during such period.

Net Cash Used in Investing Activities

During the year ended June 30, 2026, net cash

used in investing activities was $233,473, consisting of purchases of property and equipment net of adjustments in patent costs.

the year ended June 30, 2024, net cash used in investing activities was $293,883, consisting of purchases of property and equipment and

patent costs.

used in investing activities was $429,350, consisting of purchases of property and equipment and additional patent costs.

During the year

ended June 30, 2025, net cash used in investing activities was $233,473, consisting of purchases of property and equipment net of adjustments

in patent costs.

Net Cash Provided by Financing Activities

During the year ended June 30, 2026, we made payments

of $321,554 on term notes and capital leases and repaid $1,000,000 on our revolving line of credit.

We raised a net of $6,270,136 from

two registered direct offerings made in August 2024 and February 2025 pursuant to our shelf registration statement.

During the year ended

June 30, 2024, we made payments of $556,468 on term notes and capital leases offset by borrowings on the line of credit of $1,000,000.

of $623,701 on term notes and capital leases.

We raised a net of $10,630,678 from a public offering of common stock made in March 2026

pursuant to our shelf registration statement.

During the year ended June 30, 2025, we made payments of $321,554 on term notes and capital

leases and repaid $1,000,000 on our revolving line of credit.

We raised a net of $6,270,136 from two registered direct offerings made

in August 2024 and February 2025 pursuant to our shelf registration statement.

On October 4, 2021, the Company entered into a

11 unchanged sentences

As the Company did not meet this annual debt service coverage

ratio for the fiscal year ended June 30, 2024, the Company’s Lender had agreed to waive compliance with such debt service ratio

covenant for the period ending June 30, 2024.

ratio for the fiscal year ended June 30, 2024, the Company’s Lender agreed to waive compliance with such debt service ratio covenant

for the period ending June 30, 2024.

In addition to such waiver, the Lender and the Company entered into an amendment dated September

30, 2024 to that certain Term Loan dated October 4, 2021, as amended and that certain Promissory Note dated June 2, 2023 (collectively,

the “Notes”) which amendments provide for a six month period of interest only payments from October 15, 2024 through March

the “Notes”) which amendments provided for a six-month period of interest only payments from October 15, 2024 through March

15, 2025 for the Notes.

7 unchanged sentences

on quarterly testing which the company was not in compliance with as of June 30, 2026.

On September 25, 2026, the lender agreed to waive

the Company’s minimum annual debt service coverage ratio covenant for the fiscal year ended June 30, 2026 and modified the Company’s

credit arrangements to eliminate the debt service coverage ratio covenant and replace it with a minimum liquidity covenant of $2.0 million,

retain the existing term note, and provide the Company access to $750,000 of availability under its revolving line of credit, subject

to borrowing-base requirements and a $5,000 waiver fee.

The lender further agreed to expand availability under the revolving line of credit

to $1,250,000 upon attaining a DSCR of 1.2x.

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

On August 14.

2024 we entered into securities

purchase agreements with institutional and accredited investors in addition to certain directors and officers of the Company for the purchase

and sale of 265,868 shares of the Company’s common stock resulting in gross proceeds of approximately $1.4 million before deducting

placement agent commissions and other estimated offering expenses.

Net proceeds were approximately $1.2 million.

Contractual cash commitments for the fiscal

1 unchanged sentence

Fiscal Year 2027

Capital lease for equipment, including interest

Minimum operating lease payments

11 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-K

Item 7. Management’s Discussion and Analysis