What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-09-28 compared with 2025-09-29 · 235 added, 99 removed, 624 unchanged (35% of the section changed)

55 unchanged sentences

Revenue Recognition — Refer to Note

A to the Financial Statements

1B to the Financial Statements

Critical Audit Matter Description

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Current Liabilities:

Revolving line of credit

Current portion of capital lease obligation

3 unchanged sentences

Accrued compensation and other

Operating lease liability

Current portion of operating lease liabilities

Total current liabilities

Capital lease obligation, net of current portion

Long-term debt, net of current maturities

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( 5,551,291 )

Other expense

Other income (expense):

Interest expense

Interest income

Loss before provision for income taxes

16 unchanged sentences

$ ( 51,190,384 )

Issuance of common stock in a registered direct offering

Proceeds from exercise of stock option

Exercise of stock options net of 2,916 shares withheld

Issuance of common stock for consulting services and employees

Stock-based compensation

3 unchanged sentences

$ ( 56,970,630 )

Issuance of common stock in a registered direct offering

Issuance of common stock in public offering

Proceeds from exercise of stock option

Issuance of common stock for consulting services and employees

Issuance of common stock for employee services

Stock-based compensation

17 unchanged sentences

Non-cash operating lease expense

Loss on disposal of fixed assets

Changes in operating assets and liabilities:

Accounts receivable, net

( 1,607,682 )

Prepaid expenses

Accounts payable

( 1,034,951 )

Contract liabilities

4 unchanged sentences

Cash Flows from Investing Activities:

Reclassification/additional patent costs

Additional patent costs

Proceeds from sale of fixed assets

Purchases of property and equipment

4 unchanged sentences

Payment of debt issuance costs

(Repayments)/Borrowings on line of credit

Repayments on line of credit

( 1,000,000 )

Gross proceeds from registered direct offerings of common stock

Stock issued for services

Proceeds from public offering of common stock, net

Gross proceeds from exercise of stock options

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

( 2,520,574 )

Net increase in cash and cash equivalents

Cash and cash equivalents, beginning of year

3 unchanged sentences

Cash paid during the year for interest

Leasehold improvements financed by landlord

Issuance of common stock for consulting and employee services

Stock based compensation for employee services included in accrued compensation

Operating right-of-use assets obtained in exchange for operating lease liabilities

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costs charged to customers are included in revenue.

At June 30, 2026, and 2025, two individual

customers accounted for more than 10 % of the Company’s total revenue.

Revenue recognition policies for each of the three

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Total Inventories (Net)

The Company provides for estimated

obsolescence on unmarketable inventory based upon assumptions about future demand and market conditions.

If actual demand and market

conditions are less favorable than those projected by management, additional inventory write-downs may be required.

Inventory, once

written down, is not subsequently written back up, as these adjustments are considered permanent adjustments to the carrying value

of the inventory.

The reserve for excess and obsolete inventory for the years ended June 30, 2025 and 2024, were $ 272,894

and $ 266,843 ,

respectively.

The Company provides for estimated obsolescence

on unmarketable inventory based upon assumptions about future demand and market conditions.

If actual demand and market conditions are

less favorable than those projected by management, additional inventory write-downs may be required.

Inventory, once written down, is

not subsequently written back up, as these adjustments are considered permanent adjustments to the carrying value of the inventory.

reserve for excess and obsolete inventory for the years ended June 30, 2026 and 2025, were $ 330,965 and $ 272,894 , respectively.

Fixed assets are recorded at cost.

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Operating segments are identified as components

of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker,

or decision-making group, in making decisions about how to allocate resources and assess performance.

The Company’s chief decision-maker

is its Chief Executive Officer.

To date, the Company has viewed its operations and manages its business as principally one segment.

of an enterprise for which separate discrete financial information is available and is regularly reviewed by the chief operating decision

maker (“CODM”) in making decisions regarding resource allocation and assessing performance.

The Company’s CODM is its

Chief Executive Officer.

The Company operates as a single reportable segment.

The CODM assesses the Company’s performance and allocates resources based on the Company’s results of operations, including

the revenues and expenses presented in the statements of operations.

The CODM uses net income (loss) as the measure of segment profit

or loss in evaluating the Company’s operating performance and making resource allocation decisions.

Use of Estimates

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Recent Accounting Pronouncements

In December 2023, the FASB issued ASU No.

Improvements to Income Tax Disclosures (Topic 740).

The guidance requires disclosure of disaggregated income taxes paid, prescribes standardized

categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures.

will be effective for us beginning with our annual reporting for fiscal year 2026, with early adoption permitted.

We are currently evaluating

the impact of this standard on our income tax disclosures.

In December 2023, the FASB issued ASU 2023-09,

Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (“ASU 2023-09”), which enhances income tax disclosure requirements,

primarily related to the rate reconciliation and income taxes paid.

The Company adopted ASU 2023-09 effective July 1, 2025.

of ASU 2023-09 resulted in additional disclosures within the Company’s consolidated financial statements and did not have a material

impact on the Company’s financial statements.

In November 2024, the FASB issued ASU 2024-03,

Income Statement - Reporting Comprehensive Income (Topic 220):

Expense Disaggregation Disclosures.

Additionally, in January 2025, the

FASB issued ASU 2025-01 to clarify the effective date of ASU 2024- 03.

This ASU provides guidance to expand disclosures related to the

disaggregation of income statement expenses.

This ASU also requires, in the notes to the financial statements, disclosure of specified

information about certain costs and expenses which includes purchases of inventory, employee compensation, depreciation, and intangible

asset amortization included in each relevant expense caption.

ASU 2025-01 is effective for fiscal years beginning after December 15, 2026,

and interim periods within annual reporting periods beginning after December 15, 2027, on a retrospective or prospective basis, with early

adoption permitted.

This ASU will be effective for the Company’s Form 10-K for fiscal 2028 and Form 10-Q filed thereafter.

is currently evaluating the impact this ASU may have on our financial statement disclosures.

Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income

Statement Expenses (“ASU 2024-03”), which requires additional disclosures about certain expenses included in the expense captions

presented on the statement of operations.

The guidance is effective for annual reporting periods beginning after December 15, 2026, and

interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted.

is currently evaluating the impact of adopting this guidance on its financial statement disclosures.

In December 2025, the FASB issued ASU 2025-10,

Government Grants (Topic 832):

Accounting for Government Grants Received by Business Entities (“ASU 2025-10”).

adds guidance on the recognition, measurement and presentation of government grants.

ASU 2025-10 is effective for fiscal years beginning

after December 15, 2028, including interim periods within those fiscal years, and permits modified prospective, modified retrospective,

or full retrospective adoption.

The Company has elected to early adopt the guidance effective for the fiscal year ended June 30, 2026.

Government Grants

The Company recognizes grants or subsidies from

governments as a receivable when it is probable that the Company will comply with any conditions associated with the grant arrangement

and the grant will be received.

The Company evaluates the conditions of each grant as of each reporting period to determine whether it

is probable that the Company has met the conditions of each grant arrangement.

Grants are recognized in the statements of operations on

a systematic basis over the periods in which the Company recognized the related costs for which the grant is intended to compensate.

Company records grant receivables in the balance sheets in accounts receivable, depending on when the amounts are expected to be received

from the government agency.

During the year ended June 30, 2026, the Company

recognized a reduction to expense of $ 224,544 related to grants within the statements of operations, all in cost of goods sold.

June 30, 2026, the Company has $ 224,544 recorded as a government receivable, included in accounts receivable, which relates to personnel,

direct costs and operating expenses to be reimbursed and received as cash.

As of June 30, 2025, the Company had no government receivable.

Derivative Financial Instruments

The Company evaluates warrants and other financial

instruments to determine whether such instruments or embedded features qualify as derivatives to be accounted for separately in accordance

with ASC 480, Distinguishing Liabilities from Equity , and ASC 815, Derivatives and Hedging .

Warrants that do not meet the

criteria for equity classification are recorded as liabilities at fair value and are remeasured at each reporting date until exercised,

expired, modified, or otherwise settled.

Changes in the fair value of warrant liabilities are recognized in other income (expense), net

in the statements of operations.

Warrants that meet the criteria for equity classification,

including the scope exception under ASC 815-10-15-74(a), are classified within stockholders’ equity and are not subsequently remeasured

as long as the conditions for equity classification continue to be met.

The Company reassesses the classification of warrants

at each reporting date.

As of June 30, 2026, the Company determined that all outstanding warrants qualified for equity classification.

Reclassifications

Certain items in the 2025 financial statements

have been reclassified to conform to the current year classifications.

Such classifications have no effect on previously reported loss

from operations or net loss.

IEEPA Tariff Refunds and Related Customer Refunds

On February 20, 2026, the U.S.

Supreme Court issued a ruling relating

to tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”).

Following the ruling, the U.S.

Border Protection and other federal agencies issued additional guidance and took actions affecting the assessment, collection, refund,

and/or protest of certain tariffs.

In March 2026, the U.S.

Court of International Trade issued an additional ruling stating that importers

that have paid tariffs under IEEPA are due refunds.

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.

Bank Financing Activities

6 unchanged sentences

of accounts receivable and inventory and secured by all assets of the Company.

Borrowings under the Revolver will bear interest payable

monthly at the prime lending rate plus 1.5% per annum and shall not be less than 4.75% per annum.

Borrowings under the Revolver are due

Borrowings under the Revolver bear interest payable monthly

at the prime lending rate plus 1.5% per annum and shall not be less than 4.75% per annum.

Borrowings under the Revolver are due upon demand.

There were no borrowings under the Revolver at June 30, 2026.

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for the fiscal year ended June 30, 2024.

The Company’s Lender has 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 have 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 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 provided for a six-month period of interest only payments from October 15, 2024 through March 15,

2025 for the Notes.

6 unchanged sentences

Any future advances are contingent on the Company achieving a minimum Debt Service Coverage ratio of 1.20x based

on quarterly testing.

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 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.

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Less current maturities

Less debt issuance costs, net of accumulated amortization of $ 29,756

and $14,360, respectively.

Less debt issuance costs, net of accumulated amortization of $ 48,187 and $ 29,756 , respectively.

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

1 unchanged sentence

on long-term debt are as follows:

Schedule of principal payments due on term loan note payable

Schedule of principal payments

Fiscal Year Ending June 30:

13 unchanged sentences

during the fiscal years ended June 30, 2026 and 2025, respectively.

On October 4, 2021 the Company assumed the remaining term of the Windham

Maine lease as part of the Lighthouse acquisition.

The lease expired on July 31, 2025.

Remaining minimum lease payments at June 30, 2025

total $ 11,477 .

Total lease costs including base rent and common area expenses was $ 137,728 and $ 137,728 during the fiscal year ended June

30, 2025 and 2024, respectively.

The amount of variable lease payments is immaterial.

Included in the accompanying balance sheet at June

30, 2025 is a right-of-use asset of $ 141,825 and current and long-term right-of-use operating lease liabilities of $ 50,995 and $ 90,954 ,

respectively.

On May 15, 2025 the Company entered into an seven-year

Included in the

accompanying balance sheet at June 30, 2026 is a right-of-use asset of $ 89,462 and current and long-term operating lease liabilities of

$ 44,831 and $ 46,123 , respectively.

The applicable discount rate utilized for this lease at commencement was 9.0 %.

On May 14, 2025 the Company entered into a seven-year

lease in South Portland, Maine with two five-year extension options.

On June 2, 2025 the Company entered into a seven-year operating lease

in Littleton, Massachusetts with two five-year extension options.

As of June 30, 2025, the Company had entered into

additional operating leases with total fixed payment obligations of $ 3.8 million that have not yet commenced.

The leases are expected

to commence in fiscal year 2026 and have initial lease terms of approximately 8 years.

The extensions associated with the lease have been accounted with

the assumption that they will not be extended.

Remaining minimum lease payments at June 30, 2026 total $ 1,046,762 .

Total lease costs including

base rent and common area expenses was $ 179,638 and $ 0 during the fiscal year ended June 30, 2026 and 2025, respectively.

The amount of

variable lease payments is immaterial.

Included in the accompanying balance sheet at June 30, 2026 is a right-of-use asset of $ 522,098

and current and long-term operating lease liabilities of $ 71,291 and $ 706,328 , respectively.

The applicable discount rate utilized for

this lease at commencement was 9.0 %.

On June 2, 2025 the Company entered into a seven-year

operating lease in Littleton, Massachusetts with two five-year extension options.

The extensions associated with the lease have been accounted

with the assumption that they will not be extended.

Remaining minimum lease payments at June 30, 2026 total $ 2,498,362 .

Total lease costs

including base rent and common area expenses was $ 354,216 and $ 0 during the fiscal year ended June 30, 2026 and 2025, respectively.

amount of variable lease payments is immaterial.

Included in the accompanying balance sheet at June 30, 2026 is a right-of-use asset of

$ 1,689,306 and current and long-term operating lease liabilities of $ 209,378 and $ 1,694,125 , respectively.

The applicable discount rate

utilized for this lease at commencement was 9.0 %.

The weighted average discount rate is 9.0 % at

June 30,2026 and 8.3 % June 30, 2025.

The weighted average lease term is 6.4 years at June 30, 2026 and 2.4 years at June 30, 2025.

the rates implicit in the Company’s leases are generally not readily determinable, the Company utilizes its incremental borrowing rate

to determine the present value of lease payments.

The incremental borrowing rate represents the interest rate the Company would be required

to pay to borrow on a collateralized basis over a similar term in an amount equal to the lease payments.

The Company estimates the incremental

borrowing rate using information available at the lease commencement date, including prevailing market interest rates, the Company’s credit

profile, and the term of the lease.

In circumstances where the implicit rate is readily determinable, that rate is used instead of the

incremental borrowing rate.

At June 30, 2026 future minimum lease payments

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

Schedule of future minimum lease payments under capital lease and operating lease obligations

under the operating lease obligations are as follows:

Schedule of principal payments due on term loan note payable

Fiscal Year Ending June 30:

Capital Leases

Operating Lease

4 unchanged sentences

Future minimum long-term lease liability

The Company’s four facilities in Gardner,

The Company’s three facilities in Gardner,

Massachusetts, which are used for offices, production and storage spaces, are leased primarily on a tenant-at-will basis.

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Weighted average fair value of grants

(b) Stock Option Plans

Stock Option Plans

The type of share-based payments currently utilized

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At June 30, 2026, options for 432,325

shares of common stock were outstanding under the 2011 Plan.

At June 30, 2025, options for a total of zero shares of common stock were

outstanding under the 2006 Plan.

shares of common stock were outstanding under the 2011 Plan, and none were outstanding under the 2006 Plan.

The following tables summarize stock option activity

10 unchanged sentences

“in-the-money” outstanding and exercisable options as of June 30, 2026, was $ 974,540 and $ 833,438 , respectively.

Sale of Stock in August 2024

On August 14, 2024, the Company entered into agreements

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

of 265,868 shares of the Company’s common stock pursuant to a registered direct offering at a purchase price of $ 5.25 per share

for the institutional and unaffiliated accredited investors and $ 5.79 per share for the directors and officers, 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.

Sale of Stock in February 2025

3 unchanged sentences

placement agent commissions and other estimated offering expenses.

The Company used the net proceeds from this placement for general

working capital needs and paydown of the Company’s line of credit.

The Company used the net proceeds from this placement for general working

capital needs and paydown of the Company’s line of credit.

Sale of Stock in March 2026

On March 27, 2026, the Company entered into an

underwriting agreement for a public offering of 2,777,777 shares of common stock at a price of $3.60 per share.

The underwriter exercised

its over-allotment option in full at closing, resulting in 3,194,444 total shares issued.

The offering closed on March 30, 2026.

after underwriting discounts, commissions, and offering expenses were $ 10,630,678 .

The Company is using the net proceeds for working capital

and general corporate purposes.

Stock Warrants

In connection with the public offering that closed

on March 30, 2026, the Company issued to the underwriter warrants to purchase 159,722 shares of common stock at an exercise price of $ 4.21

The warrants are immediately exercisable and expire on March 27, 2031.

Each warrant is exercisable for one share of common

The warrants met the criteria for equity classification

under ASC 815-40 and were recorded within stockholders’ equity.

The warrants are not subsequently remeasured as long as the conditions

for equity classification continue to be met.

The grant-date fair value of the warrants on the

issuance date of March 30, 2026 was approximately $ 342,687 , determined using a Black-Scholes option pricing model with the following assumptions:

stock price $ 4.20 , exercise price $ 4.21 , expected term of approximately 5 years, expected volatility of 54.8 %, risk-free interest rate

of 3.9 %, and dividend yield of 0 %.

The fair value was recorded as an additional issuance cost and recognized as a reduction to additional

paid-in capital, with an offsetting credit to additional paid-in capital — warrants outstanding.

The net impact on total stockholders’

equity was zero.

As of June 30, 2026, all 159,722 warrants remain

outstanding and unexercised.

The Company has identified its federal tax return

6 unchanged sentences

The provision for income taxes in the accompanying

consolidated statements of operations consists of the state income tax liability of $ 1,936 for the years ended June 30, 2025, and 2024.

consolidated statements of operations consists of the state income tax liability of $ 4,958 and $ 1,936 for the years ended June 30, 2026,

A reconciliation of the federal statutory rate

1 unchanged sentence

Schedule of effective income tax rate reconciliation

Year Ended June 30, 2026

Income tax expense (benefit) at federal statutory rate

$ ( 762,277 )

Increase (decrease) in tax resulting from:

4 unchanged sentences

Effective tax rate

Year Ended June 30, 2025

Income tax expense (benefit) at federal statutory rate

$ ( 1,213,852 )

Increase (decrease) in tax resulting from:

State taxes, net of federal benefit (1)

Change in valuation allowance (2)

Stock based compensation

Nondeductible items

Effective tax rate

(1) State taxes in Massachusetts and California make up the majority (greater than 50%) of this category.

(2) During the fiscal year ended June

30, 2026 and June 30, 2025, we recorded $ 702,542 and $ 1,204,859 tax expense related to the increase in the valuation allowance for capital

losses generated during the year.

The components of deferred tax assets and liabilities

at June 30, 2026 and 2025 are approximately as follows:

Schedule of deferred tax assets and liabilities

Schedule of components of deferred tax assets and liabilities

Deferred tax assets:

18 unchanged sentences

contributions were made to the plan in fiscal years 2026 and 2025.

CAPTIVE INSURANCE AND SELF-INSURED RISKS

Effective June 1, 2026, the Company established

a self-funded employee health insurance program and began participating in a group captive insurance arrangement.

Under the program, the

Company is responsible for eligible employee healthcare claims, subject to stop-loss insurance coverage designed to limit exposure to

significant individual and aggregate claims.

The Company recognizes the cost of healthcare

claims in the period in which the underlying services are incurred, including an estimate for claims incurred but not reported (“IBNR”).

The estimated liability is based on available claims information, historical healthcare costs and other relevant information available

to management.

Estimates are subject to uncertainty, and actual claims may differ from amounts estimated and recorded.

At June 30, 2026, the Company’s accrued liability

for healthcare claims, including IBNR, was approximately $ 70,000 .

CHANGES IN AND DISAGREEMENTS

1 unchanged sentence

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 8. Financial Statements and Supplementary Data