UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549




FORM 10-Q
QUARTERLY PERIOD PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934




For the Quarterly Period ended December 31, 20172022
Commission File Number 0-20127




Escalon Medical Corp.
(Exact name of registrant as specified in its charter)



Pennsylvania 33-0272839
Pennsylvania33-0272839
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification No.)
435 Devon Park Drive, Building 100,Suite 824, Wayne, PA 19087
(Address of principal executive offices, including zip code)
(610) 688-6830
(Registrant’s telephone number, including area code)




N/A
Former name, former address and former fiscal year, if changed since last report
Securities registered pursuant to Section 12(b) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  x    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company. or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.


 




Large accelerated fileroAccelerated filero
Non-accelerated filer
x
Smaller reporting companyx
Large accelerated fileroAccelerated filero
Non-accelerated filer
o (Do not check if a smaller reporting company)
Smaller reporting companyx
Emerging growth companyo

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  o    No  x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 7,551,430date: 7,415,329 shares of common stock, $0.001 par value, outstanding as of February 13, 2018.2023.







TABLE OF CONTENTS
TABLE OF CONTENTS
Page
Item I.
Item 2.
Item 3.
Item 4.
Item 6.





1


PART I. FINANCIAL INFORMATION


Item 1. Condensed Consolidated Financial StatementsI. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


ESCALON MEDICAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
December 31,
2022
June 30,
2022
ASSETS
Current assets:
Cash and cash equivalents$313,498 $593,869 
Restricted cash256,208 256,165 
Accounts receivable, net1,188,423 1,541,750 
Inventories, net1,883,531 1,603,955 
Other current assets172,120 190,043 
Total current assets3,813,780 4,185,782 
Property and equipment, net39,709 52,660 
Right-of-use assets645,467 788,257 
License and patent, net79,991 82,750 
Other long term assets62,788 62,788 
Total assets$4,641,735 $5,172,237 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Line of credit$201,575 $201,575 
Current portion of note payable3,401 3,401 
Current portion of EIDL loan2,916 3,105 
Accounts payable1,321,693 1,012,451 
Accrued expenses659,109 901,996 
Related party accrued interest112,389 112,389 
Current portion of operating lease liabilities316,818 304,737 
Deferred revenue258,827 332,383 
Other short-term liabilities85,159 129,961 
Total current liabilities2,961,887 3,001,998 
Note payable, net of current portion1,799 3,888 
EIDL loan, net of current portion149,241 149,540 
Operating lease liabilities, net of current portion377,558 538,794 
Total long-term liabilities528,598 692,222 
Total liabilities3,490,485 3,694,220 
Shareholders' equity:
Series A convertible preferred stock, $0.001 par value; 2,000,000 shares authorized; 2,000,000 shares issued and outstanding (liquidation value of $896,743 and $870,731)645,000 645,000 
Common stock, $0.001 par value; 35,000,000 shares authorized; 7,415,329 shares issued and outstanding7,415 7,415 
Additional paid-in capital69,702,043 69,702,043 
Accumulated deficit(69,203,208)(68,876,441)
Total shareholders’ equity1,151,250 1,478,017 
Total liabilities and shareholders’ equity$4,641,735 $5,172,237 
See notes to unaudited condensed consolidated financial statements
2
ESCALON MEDICAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 December 31,
2017
 June 30,
2017
ASSETS   
Current assets:   
Cash and cash equivalents$788,211
 $544,118
Accounts receivable, net1,926,078
 1,483,770
Inventories, net2,067,414
 1,917,938
Other current assets196,950
 209,546
Total current assets4,978,653
 4,155,372
Property and equipment, net43,931
 54,892
Trademarks and trade names605,006
 605,006
Patents, net
 400
License, net171,175
 168,500
Total assets$5,798,765
 $4,984,170
LIABILITIES AND SHAREHOLDERS’ EQUITY   
Current liabilities:   
Line of credit$190,000
 $250,000
Accounts payable945,327
 1,047,463
Accrued expenses1,221,179
 965,764
Related party note payable645,000
 545,000
Current portion of accrued post-retirement benefits101,891
 101,891
Liabilities of discontinued operations95,832
 91,125
Total current liabilities3,199,229
 3,001,243
Accrued post-retirement benefits, net of current portion765,257
 799,347
Total long-term liabilities765,257
 799,347
Total liabilities3,964,486
 3,800,590
Commitments and contingencies   
Shareholders' equity:   
Preferred stock, $0.001 par value; 2,000,000 shares authorized; no shares issued or outsanding
 
Common stock, $0.001 par value; 35,000,000 shares authorized; 7,551,430 issued and outstanding7,551
 7,551
Additional paid-in capital69,701,907
 69,701,907
Accumulated deficit(67,875,179) (68,525,878)
Total shareholders’ equity1,834,279
 1,183,580
Total liabilities and shareholders’ equity$5,798,765
 $4,984,170



ESCALON MEDICAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months Ended December 31,For the Six Months Ended December 31,
2022202120222021
Net revenues:
Products$2,854,450 $2,521,467 $5,296,787 $5,001,274 
Service plans151,039 179,290 313,518 374,552 
Revenues, net3,005,489 2,700,757 5,610,305 5,375,826 
Costs and expenses:
Cost of goods sold1,752,245 1,539,563 3,300,617 3,203,437 
Marketing, general and administrative1,061,916 949,808 2,170,016 1,854,299 
Research and development191,325 260,439 455,566 551,628 
Total costs and expenses3,005,486 2,749,810 5,926,199 5,609,364 
Income (loss) from operations3 (49,053)(315,894)(233,538)
Other (expense) income
Other income— — — 506,305 
Interest expense(6,046)(4,101)(10,873)(8,701)
Total other (expense) income, net(6,046)(4,101)(10,873)497,604 
Net (loss) income(6,043)(53,154)(326,767)264,066 
Undeclared dividends on preferred stocks13,006 13,006 26,012 26,012 
$(19,049)$(66,160)$(352,779)$238,054 
Net (loss) earning per share
Basic (loss) earnings per share$0.00 $(0.01)$(0.05)$0.03 
Diluted (loss) earnings per share$0.00 $(0.01)$(0.05)$0.02 
Weighted average shares—basic7,415,329 7,415,3297,415,329 7,415,329
Weighted average shares—diluted7,415,3297,415,3297,415,32913,049,616
See notes to unaudited condensed consolidated financial statements

3
ESCALON MEDICAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

 For the three-month period ended December 31, For the six-month period ended December 31,
 2017 2016 2017 2016
Net revenues:       
Products$3,174,742
 $2,976,146
 $5,601,234
 $5,133,994
Licenses and service plans208,286
 186,419
 411,418
 360,559
Revenues, net3,383,028
 3,162,565
 6,012,652

5,494,553
Costs and expenses:       
Cost of goods sold1,837,758
 1,712,052
 3,305,068
 2,963,544
Marketing, general and administrative1,192,624
 1,206,888
 2,189,129
 2,362,303
Research and development107,509
 286,135
 300,590
 596,494
Total costs and expenses3,137,891
 3,205,075
 5,794,787
 5,922,341
Income (loss) from operations245,137
 (42,510) 217,865
 (427,788)
Other income (expense)       
Other income500,000
 
 500,000
 
Interest income645
 42
 844
 101
Interest expense(34,562) (22,489) (68,010) (32,802)
Total other income (expense)466,083
 (22,447)
432,834

(32,701)
Net income (loss)$711,220
 $(64,957) $650,699
 $(460,489)
Net income (loss) per share       
Basic net income (loss) per share$0.09
 $(0.01) $0.09
 $(0.06)
Diluted net income (loss) per share$0.09
 $(0.01) $0.09
 $(0.06)
Weighted average shares—basic7,551,430
 7,551,430
 7,551,430
 7,551,430
Weighted average shares—diluted7,551,430
 7,551,430
 7,551,430
 7,551,430



ESCALON MEDICAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2022 AND 2021
(UNAUDITED)


 Series A Convertible Preferred StockCommon StockAdditional
Paid-in
Capital
Accumulated
Deficit
Total
Shareholders’
Equity
 SharesAmountSharesAmount  
Balance at June 30, 20222,000,000 $645,000 7,415,329 $7,415 $69,702,043 $(68,876,441)$1,478,017 
Net loss— — — — — (320,724)(320,724)
Balance at September 30, 20222,000,000 645,000 7,415,329 7,415 69,702,043 (69,197,165)1,157,293 
Net loss— — — — — (6,043)(6,043)
Balance at December 31, 20222,000,000 $645,000 7,415,329 $7,415 $69,702,043 $(69,203,208)$1,151,250 

 Series A Convertible Preferred StockCommon StockAdditional
Paid-in
Capital
Accumulated
Deficit
Total
Shareholders’
Equity
 SharesAmountSharesAmount  
Balance at June 30, 20212,000,000 $645,000 7,415,329 $7,415 $69,702,043 $(68,894,522)$1,459,936 
Net income— — — — — 317,220 317,220 
Balance at September 30, 20212,000,000 645,000 7,415,329 7,415 69,702,043 (68,577,302)1,777,156 
Net loss— — — — — (53,154)(53,154)
Balance at December 31, 20212,000,000 $645,000 7,415,329 $7,415 $69,702,043 $(68,630,456)$1,724,002 


See notes to unaudited condensed consolidated financial statements

4


ESCALON MEDICAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Six Months Ended December 31,
20222021
Cash Flows from Operating Activities:
Net (loss) income$(326,767)$264,066 
Adjustments to reconcile net loss to net cash used in operating activities:
Increase in allowance of doubtful accounts20,000 15,000 
Other income— (506,305)
Depreciation and amortization22,865 25,450 
Non cash lease expense142,790 138,453 
Change in operating assets and liabilities:
Accounts receivable333,327 (267,804)
Inventories(279,576)(28,789)
Other current and non-current assets17,923 (21,913)
Accounts payable309,242 (53,197)
   Accrued expenses(242,887)95,537 
Change in operating lease liability(149,155)(142,934)
Deferred revenue(73,556)(53,511)
  Other short term and long term liabilities(44,802)(45,500)
Net cash used in operating activities(270,596)(581,447)
Cash Flows from Investing Activities:
 Patents(7,155)— 
Net cash used in investing activities(7,155) 
Cash Flows from Financing Activities:
Repayment of note payable(2,089)(1,937)
Repayment of EIDL loan(488)(1,448)
Net cash used in financing activities(2,577)(3,385)
Net decrease in cash, cash equivalents and restricted cash(280,328)(584,832)
Cash, cash equivalents and restricted cash, beginning of period850,034 1,906,890 
Cash, cash equivalents and restricted cash, end of period$569,706 $1,322,058 
Cash, cash equivalents and restricted cash consist of the following:
End of period
Cash and cash equivalents$313,498 $1,065,956 
Restricted cash256,208 256,102 
$569,706 $1,322,058 
5


ESCALON MEDICAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31, 2017
(UNAUDITED)

 Common Stock 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 Total Shareholders' Equity
 Shares Amount      
Balance at June 30, 20177,551,430
 $7,551
 $69,701,907 $(68,525,878) $1,183,580
Net income
 
 
 650,699
 650,699
Balance at December 31, 20177,551,430
 $7,551
 $69,701,907
 $(67,875,179) $1,834,279
Beginning of period
Cash and cash equivalents$593,869 $1,650,970 
Restricted cash256,165 255,920 
$850,034 $1,906,890 

Supplemental Schedule of Cash Flow Information:
Interest paid$11,351 $8,400 
See notes to unaudited condensed consolidated financial statements

6
ESCALON MEDICAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 For the six-months ended December 31,
 2017 2016
Cash Flows from Operating Activities:   
Net income (loss)$650,699
 $(460,489)
Adjustments to reconcile net income (loss) to net cash used in operating activities:   
Gain on sale from source code license agreement(500,000) 
 Depreciation and amortization23,392
 23,530
Change in operating assets and liabilities:   
Accounts receivable, net(442,308) 117,965
Inventories, net(149,476) (107,642)
Other current assets12,596
 (53,214)
Accounts payable and accrued expenses153,279
 (14,606)
           Change in accrued post-retirement benefits(34,090) (17,999)
Change in liabilities of discontinued operations4,707
 (4,375)
Net cash used in operating activities(281,201) (516,830)
Cash Flows from Investing Activities:   
Proceeds from sales of source code licensing agreement500,000
 
Purchase of property and equipment

(2,206) 
Purchase of licenses

(12,500) 
Net cash provided by investing activities485,294
 
Cash Flows from Financing Activities:   
Proceeds from related party note payable100,000
 270,000
Proceeds from (repayment of) line of credit(60,000) 247,000
Net cash provided by financing activities40,000
 517,000
Net increase in cash and cash equivalents244,093
 170
Cash and cash equivalents, beginning of period544,118
 538,114
Cash and cash equivalents, end of period$788,211
 $538,284
Supplemental Schedule of Cash Flow Information:   
             Interest paid$17,355
 $

See notes to unaudited condensed consolidated financial statements


Escalon Medical Corp. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
(UNAUDITED)

1. Organization and basisBasis of presentationPresentation


          Escalon Medical Corp. (“Escalon”("Escalon" or the “Company” "Company") is a Pennsylvania corporation initially incorporated in California in 1987, and reincorporated in Pennsylvania in November 2001. Within this document, the “Company” collectively shall mean Escalon, which includes its division called "Trek" and its wholly owned subsidiaries: Sonomed, Inc. (“Sonomed”), Trek, Inc. (“Trek”), Escalon Digital Solutions, Inc. (“EMI”), Escalon Holdings, Inc. (“EHI”), Escalon IP Holdings, Inc., and Sonomed IP Holdings, Inc. All intercompany accounts and transactions have been eliminated. We have evaluated all subsequent events through the date the financial statements were issued.

    
The Company operates in the healthcare market, specializing in the development, manufacture, marketing and distribution of medical devices and pharmaceuticals in the area of ophthalmology. The Company and its products are subject to regulation and inspection by the United States Food and Drug Administration (the “FDA”). The FDA and other governmentalgovernment authorities require extensive testing of new products prior to sale and havehas jurisdiction over the safety, efficacy and manufacture of products, as well as product labeling and marketing.


The unaudited condensed consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the SecuritySecurities and Exchange Commission, and reflect all adjustments (consisting of only normal and recurring adjustments) which are, in the opinion of management, necessary to present fairly the unaudited condensed consolidated financial information required herein. Certain information and note disclosures normally included in financial statementstatements prepared in accordance with accounting principles generally accepted in the United Statements of America ("US GAAP") have been condensed or omitted pursuant to such rules and regulations. While management believes that the disclosures are adequate to make the information presented not misleading, it is suggested that these unaudited condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K filed with the Security and Exchange Commission for the fiscal year ended June 30, 2017.2022. The results of operations for the three and six months ended December 31, 2022 are not necessarily indicative of the results to be expected for the full year.


In February 2022, Russia invaded Ukraine. As military activity proceeds and sanctions, export controls and other measures are imposed by many countries against Russia, Belarus and specific areas of Ukraine, the war is increasingly affecting the global economy and financial markets, as well as exacerbating ongoing economic challenges, including rising inflation and global supply-chain disruption. The Company has operations or activities in countries and regions outside the United States. As a result, its global operations are affected by economic, political and other conditions in the foreign countries in which the Company has business as well as U.S. laws regulating international trade, although the Company has not yet assessed that the war has had a material effect on its financial position or results of operations. The Company will continue to monitor the impacts of the Russia-Ukraine war on macroeconomic conditions and continually assess the effect these matters may have on customer demand, suppliers’ ability to deliver products, cybersecurity risks and its liquidity and access to capital.

The Company’s common stock trades on the OTCQB Market under the symbol “ESMC.” Since November 18, 2016, the Company's common stock was suspended from trading on the NASDAQ stock market effective at the opening of trading on November 18, 2016.


2. Going concernConcern


The Company’s operations are subject to a number of factors that can affect its operating results and financial condition. Such factors include, but are not limited to: the continuous enhancement of the current products, development of new products; changes in domestic and foreign regulations; ability of manufacture successfully; competition from products manufactured and sold or being developed by other companies; the price of, and demand for, the Company’s products and its ability to raise capital to support its operations.

To date, the Company’s operations have not generated sufficient revenues to enable profitability. As of December 31, 2022, the Company had an accumulated deficit of $69.2 million, and incurred recurring losses from operations and incurred negative cash flows from operating activities. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern for the next 12 months following the issuance of these unaudited condensed consolidated financial statements.

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred recurring operating losses and negative cash flows from operating activities and these conditions raise substantial doubt about the Company’s ability to continue as a going concern. These unaudited condensed consolidated financial statements do not include any adjustments relating to the realization of the carrying value of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
7



The Company's continuance as a going concern is dependent on its future profitability and on the on-going support of its shareholders, affiliates and creditors. In order to mitigate the going concern issues, the Company is actively pursuing business partnerships, managing its continuing operations, implementing cost-cutting measures and seeking to sell certain assets. The Company may not be successful in any of these efforts.


If the Company is unable to achieve the mitigating factors mentioned above in the near term, it is likely that its existing cash and cash flow from operations will not be sufficient to fund activities without curtailing certain business activities.


3. Summary of Significant Accounting Policies

Quarterly Reporting
The accompanying unaudited condensed consolidated financial statements (“financial statements”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and have been consistently applied. Certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP, but which are not required for interim reporting purposes, have been omitted. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to present fairly the financial position as of December 31, 2022 and the results of operations and cash flows for the interim periods ended December 31, 2022 and 2021, have been included. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended June 30, 2022 included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on September 28, 2022. Operating results for the three and six months ended December 31, 2022 are not necessarily indicative of the results that may be expected for the full year ending June 30, 2023.
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated.


Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("US GAAPGAAP") requires management to make estimates and assumptions that impact the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
For the purposes of reporting cash flows, the Company considers all cash accounts, which are not subject to withdrawal restrictions or penalties, and highly liquid investments with original maturities of 90 days or less to be cash and cash equivalents. From time to time cash balances exceed federal insurance limits.

Accounts Receivable

Accounts receivable are recorded at net realizable value. The Company performs ongoing credit evaluations of customers’ financial condition and does not require collateral for accounts receivable arising in the normal course of business. The Company maintains allowances for potential credit losses based on the Company’s historical trends, specific customer issues and current economic trends. Accounts are written off against the allowance when they are determined to be uncollectible based on management’s assessment of individual accounts. The Company recorded an allowance for doubtful accounts of approximately $181,000$256,000 and $172,000$236,000 as of December 31, 20172022 and June 30, 2017, respectively.2022, respectively.

Inventories
Inventories include freight-in, materials, labor and overhead costs and are stated at the lower of cost (on a first-in, first-out basis) or net realizable value. ProvisionCost is made for slow-moving, obsolete or unusable inventory.
Accrued Warranties
determined on a first-in, first-out basis and include freight-in materials, labor and overhead costs. Inventories are written down if the estimated net realizable value is less than the recorded value. The Company provides a limited one year warranty against manufacturer’s defects on its products soldreviews the carrying cost of inventories by product to customers. The Company’s standard warranties requiredetermine the adequacy of reserves for obsolescence. In accounting for inventories, the Company to repair or replace, atmust make estimates regarding the estimated realizable value of inventory. The estimate is based, in part, on the Company’s discretion, defectiveforecasts of future sales and age of inventory. If actual conditions are less favorable than those the Company has projected, the Company may need to increase its reserves for excess and obsolete inventories. Any increases in the reserves will adversely impact the Company’s results of operations. The establishment of a reserve for excess and obsolete inventory establishes a new cost basis in the inventory. Such reserves are not reduced until the product is sold. If the Company is able to sell such inventory any related reserves would be reversed in the period of sale. In accordance with industry practice, service parts during such warranty period. The Company accruesinventory is included in current assets, although service parts are carried for its product warranty liabilities based on estimates of costs to be incurredestablished requirements during the warranty period, based on historical repair information for warranty costs.
Valuationserviceable lives of Intangible Assets
The Company annually,the products and, as circumstances require, evaluates for impairment its intangible assets in accordance with FASB guidance related to other intangible assets, or whenever events or changes in circumstances indicate that the carrying value maytherefore, not be recoverable. These intangible assets include trademarks and trade names and licenses. Recoverability of these assets is measured by comparison of their carrying amounts to future discounted cash flows the assetsall parts are expected to generate. If identifiable intangiblesbe sold within one year.

PPP Loans
8


The Company's policy is to account for the PPP loan(See Note 7)as debt. The Company will continue to record the loan as debt until either (1) the loan is partially or entirely forgiven and the Company has been legally released, at which point the amount forgiven will be recorded as income or (2) the Company pays off the loan.The full amount of the PPP loan and accrued interest were forgiven on August 13, 2021 and was included in other income in the unaudited condensed consolidated income statement for the six-month period ended December 31, 2021.

Deferred Revenues

    The Company records deferred revenues when cash payments are received or due in advance of its performance. The Company’s deferred revenues relate to payments received for the customer care plans for a 12-month period. The consideration received is recognized monthly over the service period.

(in thousands)Three Months Ended December 31,Six Months Ended December 31,
2022202120222021
Beginning of Period$274 $276 $332 $364 
Additions137 213 241321
Revenue Recognized152 179 314 375 
End of Period$259 $310 $259 $310 

Earnings (loss) Per Share
Earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the year. All outstanding stock options are considered to be impaired,potential common stock. All outstanding convertible preferred stock are considered common stock at the impairment to be recognized equals the amount by which the carrying valuebeginning of the assets exceeds its fair value. The Company does not amortize intangible assets with indefinite useful lives, rather, such assets are required to be tested for impairment at least annuallyperiod or sooner whenever events or changes in circumstances indicate that the assets may be impaired. The Company performs its intangible asset impairment tests on or about June 30, of each year. Any such impairment charge could be significant and could have a material adverse impact on the Company's financial statements if and when an impairment charge is recorded.
Revenue Recognition
Product revenue includes the sale of medical device products and the sale and installation of the Company's AXIS image management system software. Revenue is recognized for medical device products at the time of shipment and for software when the software is delivered and installed.
The Company provides products to its distributors at agreed wholesale prices andissuance, if later, pursuant to the balanceif-converted method. The dilutive effect, if any, of its customers at set retail prices. Distributors can receive discounts for accepting high volume shipments. The discounts are reflected immediately instock options is calculated using the net invoice price, which is the basis for revenue recognition. No further material discounts or sales incentives are given.
The Company’s considerations for recognizing revenue are based on the following:
- Persuasive evidence of an arrangement exists
- Delivery has occurred

-The Company's price or fee is fixed or determinable
-Collectability is reasonably assured
License and services plan revenues are recognized proportionally over the service period, which for both licenses and service plans are typically one year. Deferred revenue related to licenses and services plans was approximately $482,000 and $388,000 astreasury stock method. As of December 31, 20172022, and June 30, 2017, respectively2021, the average market prices for the three-month and included in accrued expenses insix-month periods then ended are less than the accompanying unaudited condensed consolidated balance sheets.exercise price of all the outstanding stock options and, therefore, the inclusion of the stock options would be anti-dilutive. In addition, since the effect of common stock equivalents is anti-dilutive with respect to losses, the convertible preferred stock has also been excluded from the Company’s computation of loss per common for the three-month period ended December 31, 2021 and six-month period ended December 31, 2022. Therefore, basic and diluted loss per common share for the three-month periods ended December 31, 2021 and the six-month period ended December 31, 2022 are the same.
9


For the Three Months Ended December 31,For the Six Months Ended December 31,
2022202120222021
Numerator:
  Numerator for basic loss per share:
 Net (loss) income$(6,043)$(53,154)$(326,767)$264,066 
Undeclared dividends on preferred stock13,006 13,006 26,012 26,012 
Net (loss) income applicable to common shareholders$(19,049)$(66,160)$(352,779)$238,054 
Numerator for diluted earnings per share:
Net (loss) income applicable to common shareholders$(19,049)$(66,160)$(352,779)$238,054 
Undeclared dividends on preferred stock— — — 26,012 
Diluted (loss) income$(19,049)$(66,160)$(352,779)$264,066 
Denominator for basic (loss) earnings per share
Denominator for basic (loss) earnings per share - weighted average shares outstanding
7,415,3297,415,329 7,415,3297,415,329 
Weighted average preferred stock converted to common stock— — — 5,634,287 
 Denominator for diluted (loss) earnings assumed conversion7,415,329 7,415,329 7,415,329 13,049,616 
Net (loss) earnings per share:
Basic net (loss) earnings per share$0.00 $(0.01)$(0.05)$0.03 
Diluted net (loss) earnings per share$0.00 $(0.01)$(0.05)$0.02 

The following table summarizes convertible preferred stock and securities that, if exercised would have an anti-dilutive effect on earnings per share.

10


For the Three Months Ended December 31,For the Six Months Ended December 31,
2022202120222021
Stock options157,000 157,000 157,000 157,000 
Convertible preferred stock5,978,287 5,634,287 5,978,287 — 
Total potential dilutive securities not included in income per share6,135,287 5,791,287 6,135,287 157,000 

Income Taxes


The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the unaudited condensed consolidated financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.


The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. As of December 31, 20172022 and June 30, 2017,2022, the Company has a fully recorded valuation allowance against its deferred tax assets.


The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.


The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying unaudited condensed consolidated statements of operations. As of December 31, 20172022 and June 30, 2017,2022, no accrued interest or penalties were required to be included on the related tax liability line in the unaudited condensed consolidated balance sheets.

On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act” ("US Tax Reform"). The US Tax Reform provides for significant changes in the U.S. Internal Revenue Code of 1986, as amended.  Certain provisions of the US Tax Reform will be effective during the Company’s fiscal year ending June 30, 2018 with all provisions of the US Tax Reform effective as of the beginning of the Company’s fiscal year ending June 30, 2019.  As the US Tax Reform was enacted after the Company’s year end of June 30, 2017, it had no impact on the Company’s fiscal 2017 financial results.  The US Tax Reform contains provisions with separate effective dates but is generally effective for taxable years beginning after December 31, 2017.

Beginning on January 1, 2018, the US Tax Reform lowers the US corporate income tax rate to 21% from that date and beyond.  The Company estimates that the revaluation of its US deferred tax assets and liabilities to the 21% corporate tax rate will have no net effect on its deferred tax assets and liabilities as the Company has a full valuation allowance as of December 31, 2017.

Although the Company believes it has accounted for the parts of the US Tax Reform that will have the most significant impact on its financials, the ultimate impact of the US Tax Reform on the company’s reported results in 2018 may differ from the estimates provided herein, due to, among other things, changes in interpretations and assumptions the Company has made, guidance that may be issued, and other actions the Company may take as a result of the US Tax Reform different from that presently contemplated.

Fair Value Measurements
The Company adopted the Financial Accounting Standards Board ("FASB")-issued authoritative guidance for the fair value of financial assets and liabilities. This standard defines fair value and establishes a hierarchy for reporting the reliability of input

measurements used to assess fair value for all assets and liabilities. The FASB-issued authoritative guidance defines fair value as the selling price that would be received for an asset, or paid to transfer a liability, in the principal or most advantageous market on the measurement date. The hierarchy prioritizes fair value measurements based on the types of inputs used in the valuation technique. The inputs are categorized into the following levels:
Level 1—Observable inputs such as quoted prices in active markets for identical assets or liabilities.
Level 2—Directly or indirectly observable inputs for quoted and other than quoted prices for identical or similar assets and liabilities in active or non-active markets.
Level 3—Unobservable inputs not corroborated by market data, therefore requiring the entity to use the best available information available in the circumstances, including the entity’s own data.

Fair Value of Financial Instruments
The carrying amounts for cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and related party note payable approximate their fair value because of their short-term maturity. The carrying amount of the accrued post retirement benefits approximates fair value since the Company utilizes approximate current market interest rates to calculate the liability. While the Company believes the carrying value of the assets and liabilities are reasonable, considerable judgment is used to develop estimates of fair value; thus the estimates are not necessarily indicative of the amounts that could be realized in a current market exchange.
Net Income (loss) Per Share
Earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the year. All outstanding stock options are considered potential common stock. The dilutive effect, if any, of stock options is calculated using the treasury stock method. As of December 31, 2017 the average market prices for the three and six months periods then ended are less than the exercise price of all the outstanding stock options and, therefore, the inclusion of the the stock option would be anti-dilutive. In addition, since the effect of common stock equivalents is anti-dilutive with respect to losses, the stock options have been excluded from the Company’s computation of loss per common for the three and six months ended December 31, 2016. Therefore, basic and diluted loss per common share for the three and six months ended December 31, 2017 and 2016 were the same.

The following table sets forth the computation of basic and diluted net income (loss) per share:
 For the three-month period ended December 31, For the six-month period ended December 31,
 2017 2016 2017 2016
        
Numerator:       
  Numerator for basic and diluted earnings per share       
 Net income (loss)$711,220
 $(64,957) $650,699
 $(460,489)
Denominator:       
  Denominator for basic earnings per share - weighted average shares7,551,430
 7,551,430
 7,551,430
 7,551,430
 Denominator for diluted earnings per share - weighted average and assumed conversion7,551,430
 7,551,430
 7,551,430
 7,551,430
        
Net income (loss) per share       
Basic net income (loss) per share$0.09
 $(0.01) $0.09
 $(0.06)
Diluted net income (loss) per share$0.09
 $(0.01) $0.09
 $(0.06)


Reclassifications
Certain items in the December 31 2016 unaudited condensed consolidated statements of operations have been reclassified to conform to the current period presentation.

Recently Issued Accounting Standards
In May 2014 FASB issued Accounting Standards Update 2014-09 Revenue from Contracts with Customers (Topic 606). Under the new provision, an entity should apply five steps for revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For a public entity, the amendments in this Update were effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. In August 2015 FASB issued accounting Standards Update No. 2015-13 Revenue from Contracts with Customers (Topic 606) deferral of the effective date. The amendments in this Update defer the effective date of Update 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within the reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within the reporting period. Management is evaluating the standard's impact on the consolidated financial statements.
In August 2015 FASB issued Accounting Standards Update No. 2015-15 Interest -Imputation of Interest (Subtopic 835-30). This update adds SEC paragraphs pursuant to the SEC Staff Announcement at the June 18, 2015 Emerging Issues Task Force (EIFF) meeting about the presentation of subsequent measurement of debt issuance costs associated with line-of-credit arrangements. Given the absence of authoritative guidance within Update 2015-03 for debt issuance costs related to line-of-credit arrangements, the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance cots ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The adoption of this standard did not have a material impact to the Company’s consolidated financial statements.
In November 2015 FASB issued Accounting Standards Update No. 2015-17 Income Taxes (Topic 740) Balance Sheet Classification of Deferred Taxes to reduce complexity in accounting standards. The amendments require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. For public business entities, the amendments in this Update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The adoption of this standard did not have a material impact to the Company’s consolidated financial statements.
In February 2016 FASB issued Accounting Standards Update No. 2016-02 Leases (Topic 842) that changes the recognition of lease assets and lease liabilities by lessess for those leases classified as operating lease. The amendments in this Update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for a public business entity. Early adoption is permitted. Management is evaluating the standard's impact on the consolidated financial statements.

In March 2016 FASB issued Accounting Standards Update No. 2016-09 Compensation-Stock Compensation -(Topic 718) Improvements to employee share-based payments accounting as part of simplicity initiatives. This update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Some of the areas for simplification apply only to nonpublic entities. For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The adoption of this standard did not have a material impact to the Company’s consolidated financial statements.
In April 2016 FASB issued Accounting Standards Update No. 2016-10 Revenue from Contracts with Customers (Topic 606) Identifying Performance Obligations and Licensing. On May 2016 FASB issued Accounting Standards Update No. 2016-12 Revenue from Contracts with Customers (Topic 606) Narrow-Scope Improvements and Practical Expedients. The amendments in these two updates do not change the the core principle of the guidance in Topic 606, which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, but they clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance and the Update affect only the narrow aspects of Topic 606. An entity should apply five steps to achieve the core principle. The management is evaluating the standard's impact to the Company’s consolidated financial statements.

In August 2016 FASB issued Accounting Standards Update No. 2016-15 Statement of Cash Flows (Topic 230)Classification of Certain Cash Receipts and Cash Payments.The amendments in this Update provide guidance on the eight specific cash flow issues and apply to all entities, including both business entities and not-for-profit entities that are required to present a statement of cash flows under Topic 230.The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period.The adoption of this standard is not expected to have a material impact to the Company’s consolidated financial statements.
In January 2017 FASB issued Accounting Standards Update No. 2017-04 Intangibles—Goodwill and Other (Topic 350)Simplifying the Test for Goodwill Impairment.Under the amendments in this udpate an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.The amendments in this Update are required for public business entities and other entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill.A public business entity that is a U.S. Securities and Exchange Commission (SEC) filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.The adoption of this standard is not expected to have a material impact to the Company’s consolidated financial statements.
In May 2017 FASB issued the amendments in ASU 2017-09- Compensation-Stock Compensation (“ASC Topic 718”): Scope of Modification Accounting: These amendments provide guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718. For public companies, these amendments are effective for annual periods beginning after December 15, 2017, including interim periods within those periods. While early application is permitted, including adoption in an interim period, the Company has not elected to early adopt. The effectiveness of this update is not expected to have a significant effect on the Company’s presentation of consolidated financial position or results of operations.

4. Inventories
(In thousands)December 31, June 30,
 2017 2017
Inventories, net:   
        Raw Material$806
 $865
        Work-In-Process190
 337
        Finished Goods1,071
 716
Total$2,067
 $1,918


5. Discontinued Operations

BH Holdings, S.A.S ("BHH")

On January 12, 2012 BHH initiated the filing of an insolvency declaration with the Tribunal de Commerce de Rennes, France ("Commercial Court").  The Commercial Court on January 18, 2012 opened the liquidation proceedings with continuation of BHH's activity for 3 months and named an administrator to manage BHH. Since Drew no longer had a controlling financial interest in BHH it was deconsolidated in the December 31, 2011 quarterly unaudited condensed consolidated financial statements and prior period amounts were presented as discontinued operations.
Assets and liabilities of discontinued operations of BHH included in the condensed consolidated balance sheets are summarized as follows at December 31, 2017 and June 30, 2017 (in thousands):
4. Inventories

December 31,June 30,
(in thousands)20222022
Inventories:
        Raw Material$1,174 $1,010 
        Work-In-Process166 138 
        Finished Goods893 806 
Total inventories$2,233 $1,954 
Allowance for obsolete inventory(350)(350)
Inventories, net$1,884 $1,604 

 December 31, June 30,
 2017 2017
Assets   
Total assets$
 $
Liabilities   
Accrued lease termination costs96
 91
Total liabilities96
 91
Net liabilities of discontinued operations$(96) $(91)

During fiscal year 2015 the Company was informed by French Counsel that the total amount claimed by the BHH landlord in the liquidation of BHH was approximately $86,000. The Company did not have insight into the French liquidation process due to the Liquidator's reticence to communicate with the Company. As such, the Company had accrued the present value of the maximum amount potentially due under the lease guaranteed by the Company on behalf of BHH. The landlord's claim under liquidation of approximately $86,000 can not be revisited by the landlord and can only be potentially increased by interest or sundry expenses. Beginning in fiscal year end 2016 any changes to this liability are included in continuing operations. As of December 31, 2017 and June 30, 2017, the liability was approximately $96,000 and $91,000, respectively.

6.5. Related Party Transactions and Preferred Stock


During the six-month period ended December 31, 2017, Richard J. DePiano, Sr., the Company’s Chairman, participated in an accounts receivable factoring program that was implemented by the Company. Under the program, Mr. DePiano advanced the Company $275,000 during fiscal year ended June 30, 2016, $270,000 during fiscal year ended June 30, 2017 and $100,000 during the quarter ended September 30, 2017. Interest on the transaction was 1.25% per month. The transactions excluded fees typically charged by the factoring agent and provided much needed liquidity to the Company. Related party interest expense for the three-month periods ended December 31, 2017 and 2016 was $24,387 and $16,489, respectively. Related party interest expense for the six-month periods ended December 31, 2017 and 2016 was $47,499 and $26,802, respectively. Repayment is due upon the Company receiving payment from the underlying receivables purchased by Mr. DePiano. In the near term Mr. DePiano will roll-over the original $645,000 investment as the receivables are collected and additional receivables will be assigned as collateral until such time as the Company no longer needs the liquidity (See note 10). As of December 31, 2017 and June 30, 2017, interest expense of $100,726 and $53,227, respectively, was accrued.
11


    
7. Line of credit

On December 29, 2016, the Company entered into a credit agreement providing the Company up to an aggregate of $250,000 in cash, secured by the Company’s inventory. The Company, and its wholly owned subsidiary Sonomed, Inc., entered into an Inventory Advance Agreement as of December 29, 2016 (the "Agreement"), with CDS Business Services, Inc., doing business as Newtek Business Credit ("Newtek"). Newtek may in its discretion make loans against the Company’s Eligible Inventory in an aggregate amount outstanding at any time up to the lesser of (i) fifty percent (50%) of the Inventory Value or (ii) the Inventory Advance Limit, as those terms are defined in the Agreement, which is currently $250,000. The credit agreement renews annually and can be terminated upon 90 days written notice from the Company or 30 days written notice from NewTek.

If, at any time and for any reason, the aggregate amount of the outstanding advances under the Agreement exceeds the Inventory Advance Limit or percentage limitation contained in the preceding sentence, then Company must, upon demand by Newtek, immediately pay to Newtek, in cash, the amount of such excess, or at Newtek’s option Newtek may charge such excess against any reserves held by Newtek.
Newtek will maintain reserves against Company’s availability for advances and may maintain reserves against the Company’s accounts and/or ineligible inventory as well, or maintain a cash collateral deposit account, as NewTek in its discretion deems appropriate. Newtek may also increase such reserves or reduce its advance percentages based on eligible inventory without declaring an event of default and without prior notice, if it determines, in its discretion, that such increase in reserves or reduction is necessary, including, without limitation, to protect its interest in the collateral and/or against diminution in the value of any collateral, and/or to insure the prospect of payment or performance by Company of its obligations to Newtek are not impaired.

Interest will accrue on the daily balance at the per annum rate of 5.00% above the Prime Rate (currently 4.25%), but not less than 5.0%. The current annual interest rate is 9.25% as of December 31, 2017. The Company’s obligations will, at the option of Newtek, (i) from and after the occurrence of an event of default, or (ii) if the Company’s obligations are not paid in full by the termination date, bear interest at the per annum rate of 10.00% above the prime rate. All interest payable by under the financing documents will be computed on the basis of a 360-day year for the actual number of days elapsed on the daily balance.

In consideration of monitoring, ledgering and other administrative functions undertaken by Newtek in connection with the Company’s inventory, and the merchant processor, Company is obligated pay Newtek a monthly collateral monitoring fee calculated by multiplying (i) seventy basis points (0.7% ) (approximately an annual rate of 8.5% (except during the existence of an Event of Default at which time it shall be 1% ) by (ii) the amount of the average daily balances during the calendar month preceding the month for which the calculation is made.
As of December 31, 2017 and June 30, 2017, the line of credit balance is at $190,000 and $250,000, respectively. The line of credit interest expense is $10,175 and $0 for the three-month period ended December 31, 2017 and 2016, respectively.
The line of credit interest expense is $20,511 and $0 for the six-month period ended December 31, 2017 and 2016, respectively.

8. Other income
On October 2, 2017 Escalon and Modernizing Medicine Inc. (“MMI”) entered into a Source Code Software Licensing Agreement . The Agreement provided MMI a non-exclusive perpetual license to the source code of Escalon’s proprietary image management software (“AXIS source code”) for a one-time payment of $500,000. MMI continues to be an authorized reseller of the AXIS product.

9. Commitments and contingency

Lease Commitments

The following table presents the Company's operating lease obligations as of December 31, 2017 (excluding interest):


     Less than   3-5 More than
   Total  1 Year  2-3 Years Years  5 Years
           
Operating lease agreements 1,584,602
 331,219
 517,414
 543,740
 192,229
  1,584,602
 331,219
 517,414
 543,740
 192,229

Legal Proceedings
The Company, from time to time is involved in various legal proceedings and disputes that arise in the normal course of business. The Company does not believe that the resolution of any of these matters has had or is likely to have a material adverse impact on the Company’s business, financial condition, results of operations or cash flows.

10. Subsequent events



On February 14, 2018, the Company entered into a Debt Exchange Agreement (the “Exchange Agreement”) with Richard J. DePiano, Sr. (“Mr. DePiano”, (Mr. DePiano Sr.), the Company's former Chairman and DP Associates Inc. Profit-Sharing Plan of which Mr. DePiano Sr. is the sole owner and sole trustee (the “Holders”).  Pursuant to the terms of the Exchange Agreement, effective February 15, 2018, the Holders are exchangingexchanged a total of $645,000 principal amount of debt related to the accounts receivable factoring program the Company owes the Holders (See Note 6) for 2,000,000 shares of Series A Convertible Preferred Stock (the “Preferred Stock”).
    
Each share theof Preferred Stock entitles the Holder thereof to 13 votes per share and will vote together with all other classes and series of stock of the Company as a single class on all actions to be taken by the Company’s stockholders.  As a result of this voting power, the Holders as of February 15, 2018December 31, 2022 beneficially own approximately 77.49%77.81% of the voting power on all actions to be taken by the Company’s shareholders.


Subject to the terms and conditions of Preferred Stock, the holder of any share or shares of the Preferred Stock has the right, at its option at any time, to convert each such share of Preferred Stock (except that, upon any liquidation of the Corporation,Company, the right of conversion will terminate at the close of business on the business day fixed for payment of the amounts distributable on the Preferred Stock) into 2.15 shares of Common Stock (the “Conversion Ratio”).  The Conversion Ratio is subject to standard provisions for adjustment in the event of a subdivision or combination of the Company’s Common Stock and upon any reorganization or reclassification of the capital stock of the Company. If the Holders were to convert their shares of Preferred Stock into Common Stock at the Conversion Ratio the Holders would receive a total of 4,300,000 shares of Common Stock, or approximately 36.28%36.70% of the currentlythen outstanding shares of Common Stock assuming such conversion.


    Each outstanding share of the Preferred Stock accrues dividends calculated cumulatively at the annual rate of $.0258 per share (such amount subject to equitable adjustment in the event of any stock dividend, stock split, combination, reclassification other similar event), payable upon the earlier of (i) a liquidation, dissolution or winding up of the Company or (ii) conversion of the Preferred Stock into Common Stock. Upon either of such events, all such accrued and unpaid dividends, whether or not earned or declared, to and until the date of such event, will become immediately due and payable and will be paid in full. The dividends payable to the holders of the Preferred Stock is payable in cash or, at the election of any such holder, in a number of additional shares of Common Stock equal to the amount of the dividend expressed in dollars divided by the then applicable Conversion Ratio, described above. As of December 31, 2022 and June 30, 2022 the cumulative dividends payable is $251,743 ($0.1259 per share) and $225,731 ($0.1129 per share), respectively.

    Mr. DePiano Sr. passed away on October 3, 2019 and left a will by which he appointed Richard J. DePiano, Jr., the Chief Executive Officer of the Company, as executor. Richard DePiano Jr. was elected to serve as chairman of the Company's board. Mr. DePiano, Jr. qualified as executor and has control over the listed shares in his capacity as executor of Mr. DePiano Sr.'s estate.

6. Line of Credit

    On June 29, 2018 the Company entered a business loan agreement with TD bank receiving a line of credit evidenced by a promissory note of $250,000. The interest is subject to change based on changes in an independent index which the Wall Street Journal Prime. The index rate at the date of the agreement is 5.0% per annum. Interest on the unpaid principal balance of the note is calculated using a rate of 0.74 percentage points over the index, adjusted if necessary for any minimum and maximum rate limitations, resulting in an initial rate of 5.74% per annum based on a year of 360 days. The interest rate was 8.24% as of December 31, 2022. The Company was required to put $250,000 in the TD bank savings account as collateral. The Loan is guaranteed by Mr. DePiano Jr.

    As of December 31, 2022 and June 30, 2022, the line of credit balance was $201,575 with TD bank. The line of credit interest expense was approximately $4,000 for the three months ended December 31, 2022 and 2021, respectively. The line of credit interest expense was approximately $7,000 and $5,000 for the six months ended December 31, 2022 and 2021, respectively.

7. Long-term debt

Paycheck Protection Program ("PPP") loan

    On April 27, 2020, the Company entered into a PPP loan for $500,000 in connection with the CARES Act related to COVID-19. The full amount of the PPP loan and accrued interest were forgiven on August 13, 2021 and was included in other income in the unaudited condensed consolidated statement of operations for the six-month period ended December 31, 2021.

12


Economic Injury Disaster Loan ("EIDL")

    EIDL is designed to provide economic relief to businesses that are currently experiencing a temporary loss of revenue due to the Coronavirus (COVID-19) pandemic. EIDL proceeds can be used to cover a wide array of working capital and normal operating expenses, such as continuation to health care benefits, rent, utilities, and fixed debt payments. The Company received a $150,000 EIDL loan. The annual interest rate is 3.75%. The payment term is 30 years and the monthly payment of $731 started on July 1st, 2021. The EIDL loan is secured by the tangible and intangible personal property of the Company.

    The future annual principal amounts to be paid as of December 31, 2022 are as follows:
Year ending June 30,EIDL Payment
2023 (remainder of FY 2023)$2,631 
20243,237 
20253,376 
20263,497 
Thereafter139,416 
Total$152,157 

Other short-term Liabilities

    The CARES Act allows employers to defer the deposit and payment of the employer share of Social Security tax that would otherwise be due on or after March 27, 2020, and before January 1, 2021. The Company had deferred approximately $82,000 of the social security tax. 50% of the deferred employment taxes was paid before December 31, 2021. The remaining $41,000 was paid before December 31, 2022.

8. Concentration of Credit Risk

Credit Risk

Financial instruments, which potentially subject the Company to concentration of credit risk, consist principally of cash and cash equivalents, restricted cash and trade receivables. Concentration of credit risk with respect to trade receivables is generally diversified due to the large number of entities comprising the Company's customer base and their dispersion across geographic areas principally within the United States and international. The Company routinely address the financial strength of its customer and, as a consequence, believes that its receivable credit risk exposure is limited. The Company does not require customers to post collateral.

Major Customer

    The Company's two customers accounted for 12% and 11% of net revenue during the three-month period ended December 31, 2022. One customer accounted for 11% of net revenue during the six-month period ended December 31, 2022. One customer accounted for 12% during the three-month and six-month periods ended December 31, 2021.

    As of December 31, 2022 the Company had two customer that represented 17% and 11% of the total accounts receivable balance. As of June 30, 2022 the Company had one customer that represents 13% of the total accounts receivable balance.

Major Supplier

    The Company's two largest suppliers accounted for 49% and 12% of the total purchase for the three-month period ended December 31, 2022. The Company's two largest suppliers accounted for 44% and 10% of the total purchase for the six-month period ended December 31, 2022. The Company's one largest supplier accounted for 49% of total purchases for the three-month period ended December 31, 2021. The Company's two largest suppliers accounted for 41% and 11% of total purchases for the six-month period ended December 31, 2021.

13


    As of December 31, 2022 the Company had two suppliers that represented 49% and 10% of the total accounts payable balance. As of June 30, 2022 the Company had one supplier that represent approximately 36% of the total accounts payable balance.
Disaggregated Revenue

    Domestic and international sales from operations are as follows:
( in thousands)For the Three Months Ended December 31,For the Six Months Ended December 31,
2022202120222021
Domestic$1,734 58 %$1,360 50 %$3,354 60 %$2,985 56 %
Foreign1,271 42 %1,341 50 %2,256 40 %$2,391 44 %
Total$3,005 100 %$2,701 100 %$5,610 100 %$5,376 100 %

9. Leases

    The Company leases certain facilities and equipment under operating leases. Total lease expense, under ASC 842, was included in cost of goods sold and marketing, general and administrative costs in our unaudited condensed consolidated statements of operations for the three and six months ended December 31, 2022 and 2021 as follows:

Three Months Ended December 31,Six Months Ended December 31,
2022202120222021
Operating lease costs:
Fixed$85,324 $84,245 $170,760 $168,490 
Total:$85,324 $84,245 $170,760 $168,490 

    Supplemental cash flow information was as follows:
Three Months Ended December31,Six Months Ended December 31,
2022202120222021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases$85,941 $83,788 $170,533 $166,178 
Total$85,941 $83,788 $170,533 $166,178 


    The table below reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate)
under noncancelable operating leases with terms of more than one year to the total operating lease liabilities recognized on the unaudited condensed consolidated balance sheets as of December 31, 2022:
Operating
2023 (reminder of FY 2023)$172,708 
2024350,142 
2025211,215 
20262,728 
Total lease payments736,793 
Less interest42,401 
Present value of lease liabilities$694,392 

14


    Average lease terms and discount rates were as follows:
December 31,June 30,
20222022
Weighted-average remaining lease terms (years)
Operating leases2.112.61
Weighted-average discount rate
Operating leases5.65 %5.65 %

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Forward Looking Statements


Certain statements contained in, or incorporated by reference in, this report are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, which provide current expectations or forecasts of future events. Such statements can be identified by the use of terminology such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “possible,” “project,” “should,” “will,” and similar words or expressions. The Company's forward-looking statements include certain information relating to general business strategy, growth strategies, financial results, liquidity, the Company's ability to continue as a going concern, discontinued operations, research and development, product development, the introduction of new products, the potential markets and uses for the Company's products, the Company's ability to increase its sales campaign effectively, the Company's regulatory filings with the FDA, acquisitions, dispositions, the

development of joint venture opportunities, intellectual property and patent protection and infringement, the loss of revenue due to the expiration onor termination of certain agreements, the effect of competition on the structure of the markets in which the Company competes, increased legal, accounting and Sarbanes-Oxley compliance costs, information security, cybersecurity and data privacy risks, defending the Company in litigation matters and the Company's cost saving initiatives. The reader must carefully consider forward-looking statements and understand that such statements involve a variety of risks and uncertainties, known and unknown, and may be affected by assumptions that fail to materialize as anticipated.anticipated, including risks related to the COVID-19 pandemic, inflation, the ability to continue as a going concern including the ability to raise capital, manage operations and pursue business partnerships and cost-cutting measures, and the other risks described in the Company's Form 10-K for the fiscal year ended June 30, 2022. Consequently, no forward-looking statement can be guaranteed, and actual results may vary materially. It is not possible to foresee or identify all factors affecting the Company's forward-looking statements, and the reader therefore should not consider the list of such factors contained in its periodic report on Form 10-K for the year ended June 30, 20172022 and this Form 10-Q quarterly report to be an exhaustive statement of all risks, uncertainties or potentially inaccurate assumptions.



Executive Overview—Six-months Endedsix-month periods ended December 31, 20172022 and 2016.

2021
The following highlights are discussed in further detail within this Form 10-Q. The reader is encouraged to read this
Form 10-Q in its entirety to gain a more complete understanding of factors impacting Company performance and financial
condition.


Consolidated net revenue increased approximately $518,099,$234,000 or 9.4%4.4%, to $6,012,652$5,610,000 during the six-month periodsix months ended December 31, 20172022, as compared to the same period of the last fiscal year. The increase in consolidatednet revenue is attributed to an increase of $127,000 in surgical products, an increase of $253,000 inSonomed's ultrasound products of $361,000, offset by a decrease in Trek revenue of $40,000, a decrease in service plans revenue of $61,000 and an increasea decrease in sales of $138,000 in digital imaging cameras and AXIS image management system software.products of $26,000.


Consolidated cost of goods sold totaled approximately $3,305,000,$3,301,000, or 55.0%58.8%, of consolidatedtotal revenue for the six-month periodsix months ended December 31, 2017,2022, as compared to $2,964,000,$3,203,000, or 53.9%59.6%, of consolidatedtotal revenue forof the same period of the prior fiscallast fiscal year. The increasedecrease of 1.1%0.8% in cost of goods sold as a percentage of consolidatedtotal revenue is due mainly to a a decrease in ultrasound products margin due to changes in product mix.sales mix and geographic differences.


Total operatingConsolidated marketing, general and administrative expenses decreased approximately $469,000,increased $316,000, or 15.9%17.0%, duringto $2,170,000 for the six-month periodsix months ended December 31, 20172022, as compared to the same period of priorlast fiscal year. This decrease was due to decreasedThe increase in marketing, general and administrativeadministrate expenses is mainly due to increased network expense, increased consulting expense related to
15


a regulatory filing related to AXIS products, increased trade show and travel expense and the increased sales compensation.

Consolidated research and development expenses decreased $96,000, or 17.4%, to $456,000 for the six months ended December 31, 2022, as compared to the same period of $173,000,last fiscal year. Research and development expenses were primarily expenses associated with the introduction of new or 7.3% and aenhanced products. The decrease of $295,000, or 49.5%, in research and development expenses.

• Net income was approximately $651,000 forexpense is mainly due to increased consulting expense during the six-month periodsix months ended December 31, 2017, which includes other income of $500,000 from source code software licensing agreement.2022.

Company Overview


The following discussion should be read in conjunction with the interim unaudited condensed consolidated financial statements and
the notes thereto, which are set forth in Item 1 of this report.


The Company operates in the healthcare market specializing in the development, manufacture, marketing and distribution of medical devices and pharmaceuticals in the area of ophthalmology. The Company and its products are subject to regulation and inspection by the FDA. The FDA requires extensive testing of new products prior to sale and has jurisdiction over the safety, efficacy and manufacture of products, as well as product labeling and marketing. The Company's Internet address is www.escalonmed.com. underUnder the trade name of Sonomed-Escalon the Company develops, manufactures and markets ultrasound systems used for diagnosis or biometric applications in ophthalmology, develops, manufactures and distributes ophthalmic surgical products under the Trek Medical Products name, and manufactures and markets digital camera systems for ophthalmic fundus photography and image management systems.
Critical Accounting Policies and Estimates
The preparation of unaudited condensed consolidated financial statements requires management to make estimates and assumptions that impact amounts reported therein. TheOn a regular basis, we evaluate these estimates. These estimates are based on management’s historical industry experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

For a description of the accounting policies that, in management’s opinion, involve the most significant of those involve the application of FASB-issued authoritative guidance concerning Revenue Recognition,judgment or involve complex estimation and Intangible Assets, discussed further inwhich could, if different judgment or estimates were made, materially affect our reported financial position, results of operations, or cash flows, see the notes to consolidated financial statements included in the Form 10-K for the year ended June 30, 2017. The unaudited condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in2022.

During the United States of America, and, as such, include amounts based on informed estimates and judgments of management. For example, estimates are used in determining valuation allowances for deferred income taxes, uncollectible receivables, obsolete inventory, sales returns and rebates, warranty liabilities and valuation of purchased intangible assets. Actual results achieved in the future could differ from current estimates.

The Company used what it believes are reasonable assumptions and, where applicable, established valuation techniques in making its estimates.

Accounts Receivable
Accounts receivable are recorded at net realizable value. The Company performs ongoing credit evaluations of customers’ financial condition and does not require collateral for accounts receivable arising in the normal course of business. The Company maintains allowances for potential credit losses based on the Company’s historical trends, specific customer issues and current economic trends. Accounts are written off against the allowance when they are determined to be uncollectible based on management’s assessment of individual accounts. The Company recorded an allowance for doubtful accounts of approximately $181,000 and $172,000 as of December 31, 2017 and June 30, 2017, respectively.
Inventories
Inventories include freight-in, materials, labor and overhead costs and are stated at the lower of cost (on a first-in, first-out basis) or net realizable value. Provision is made for slow-moving, obsolete or unusable inventory.
Accrued Warranties
The Company provides a limited one year warranty against manufacturer’s defects on its products sold to customers. The Company’s standard warranties require the Company to repair or replace, at the Company’s discretion, defective parts during such warranty period. The Company accrues for its product warranty liabilities based on estimates of costs to be incurred during the warranty period, based on historical repair information for warranty costs.
Valuation of Intangible Assets
The Company annually, and as circumstances require, evaluates for impairment its intangible assets in accordance with FASB guidance related to other intangible assets, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. These intangible assets include trademarks and trade names and licenses. Recoverability of these assets is measured by comparison of their carrying amounts to future discounted cash flows the assets are expected to generate. If identifiable intangibles are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds its fair value. The Company does not amortize intangible assets with indefinite useful lives, rather, such assets are required to be tested for impairment at least annually or sooner whenever events or changes in circumstances indicate that the assets may be impaired. The Company performs its intangible asset impairment tests on or about June 30, of each year. Any such impairment charge could be significant and could have a material adverse impact on the Company's financial statements if and when an impairment charge is recorded.
Revenue Recognition
Product revenue includes the sale of medical device products and the sale and installation of the Company's AXIS image management system software. Revenue is recognized for medical device products at the time of shipment and for software when the software is delivered and installed.
The Company provides products to its distributors at agreed wholesale prices and to the balance of its customers at set retail prices. Distributors can receive discounts for accepting high volume shipments. The discounts are reflected immediately in the net invoice price, which is the basis for revenue recognition. No further material discounts or sales incentives are given.
The Company’s considerations for recognizing revenue are based on the following:
- Persuasive evidence of an arrangement exists
- Delivery has occurred
-The Company's price or fee is fixed or determinable
-Collectability is reasonably assured
License and services plan revenues are recognized proportionally over the service period, which for both licenses and service plans are typically one year. Deferred revenue related to licenses and services plans was approximately $482,000 and $388,000 as of December 31, 2017 and June 30, 2017, respectively and included in accrued expenses in the accompanying unaudited condensed consolidated balance sheets.
Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. As December 31, 2017 and June 30, 2017, the Company has a fully recorded valuation allowance against its deferred tax assets.

The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying unaudited condensed consolidated statements of operations. As of December 31, 2017 and June 30, 2017, no accrued interest or penalties were required to be included on the related tax liability line in the unaudited condensed consolidated balance sheets.

On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act” ("US Tax Reform"). The US Tax Reform provides for significant changes in the U.S. Internal Revenue Code of 1986, as amended.  Certain provisions of the US Tax Reform will be effective during the Company’s fiscal year ending June 30, 2018 with all provisions of the US Tax Reform effective as of the beginning of the Company’s fiscal year ending June 30, 2019.  As the US Tax Reform was enacted after the Company’s year end of June 30, 2017, it had no impact on the Company’s fiscal 2017 financial results.  The US Tax Reform contains provisions with separate effective dates but is generally effective for taxable years beginning after December 31, 2017.

Beginning on January 1, 2018, the US Tax Reform lowers the US corporate income tax rate to 21% from that date and beyond.  The Company estimates that the revaluation of its US deferred tax assets and liabilities to the 21% corporate tax rate will have no net effect on its deferred tax assets and liabilities as the Company has a full valuation allowance as of December 31, 2017.

Although the Company believes it has accounted for the parts of the US Tax Reform that will have the most significant impact on its financials, the ultimate impact of the US Tax Reform on the company’s reported results in 2018 may differ from the estimates provided herein, due to, among other things, changes in interpretations and assumptions the Company has made, guidance that may be issued, and other actions the Company may take as a result of the US Tax Reform different from that presently contemplated.

Fair Value Measurements
The Company adopted the Financial Accounting Standards Board ("FASB")-issued authoritative guidance for the fair value of financial assets and liabilities. This standard defines fair value and establishes a hierarchy for reporting the reliability of input measurements used to assess fair value for all assets and liabilities. The FASB-issued authoritative guidance defines fair value as the selling price that would be received for an asset, or paid to transfer a liability, in the principal or most advantageous market on the measurement date. The hierarchy prioritizes fair value measurements based on the types of inputs used in the valuation technique. The inputs are categorized into the following levels:
Level 1—Observable inputs such as quoted prices in active markets for identical assets or liabilities.
Level 2—Directly or indirectly observable inputs for quoted and other than quoted prices for identical or similar assets and liabilities in active or non-active markets.

Level 3—Unobservable inputs not corroborated by market data, therefore requiring the entity to use the best available information available in the circumstances, including the entity’s own data.

Fair Value of Financial Instruments
The carrying amounts for cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and related party note payable approximate their fair value because of their short-term maturity. The carrying amount of the accrued post retirement benefits approximates fair value since the Company utilizes approximate current market interest rates to calculate the liability. While the Company believes the carrying value of the assets and liabilities are reasonable, considerable judgment is used to develop estimates of fair value; thus the estimates are not necessarily indicative of the amounts that could be realized in a current market exchange.
Net Income (loss) Per Share
Earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the year. All outstanding stock options are considered potential common stock. The dilutive effect, if any, of stock options is calculated using the treasury stock method. As of December 31, 2017 the average market prices for the three and six months periods then ended are less than the exercise price of all the outstanding stock options and, therefore, the inclusion of the the stock option would be anti-dilutive. In addition, since the effect of common stock equivalents is anti-dilutive with respect to losses, the stock options have been excluded from the Company’s computation of loss per common for the three and six months ended December 31, 2016. Therefore, basic2022, there were no significant changes in our accounting policies and diluted loss per common share for the three and six months ended December 31, 2017 and 2016 were the same.estimates to our unaudited condensed consolidated financial statements.
16


Results of Operations
Three-monthThree Months and six-month periodsSix Months Ended December 31, 20172022, and 20162021
The following table shows consolidated net revenue, as well as identifying trends in revenues for the three-month periodsthree months and six months ended December 31, 20172022, and 2016.
2021. Table amounts are in thousands:
 For the Three Months Ended December 31,For the Six Months Ended December 31,
 20222021% Change20222021% Change
Net Revenue:
Products$2,854 $2,522 13.2 %$5,297 $5,001 5.9 %
Service plans151 179 (15.6)%313 375 (16.5)%
Total$3,005 $2,701 11.3 %$5,610 $5,376 4.4 %
 For the three-month period ended December 31, For the six-month period ended December 31,
 2017 2016 % Change 2017 2016 % Change
Net Revenue:           
Products$3,175
 $2,976
 6.7% $5,601
 $5,134
 9.1%
Licenses and service plans$208
 $187
 11.7% $412
 $361
 12.0%
Total$3,383
 $3,163
 7.0% $6,013
 $5,495
 9.4%
Consolidated net revenue increased approximately $220,000,$304,000 or 7.0%11.3%, to $3,383,000$3,005,000 during the three months ended December 31, 20172022, as compared to the same period of the last fiscal year. The increase in net revenue is attributed to an increase in Sonomed's ultrasound revenue of $39,000 in surgical products,$268,000, an increase in Trek revenue of $237,000 in ultrasound products and$104,000, offset by a decrease in service plans revenue of $56,000$28,000 and a decrease in digital imaging cameras andsales of AXIS image management system software. The increaseproducts of sales force and entrance into new market attributed to the increase of the ultrasound products.$40,000.

Consolidated net revenue increased approximately $518,099,$234,000 or 9.4%4.4%, to $411,000$5,610,000 during the six months ended December 31, 20172022, as compared to the same period of the last fiscal year. The increase in net revenue is attributed to an increase in Sonomed's ultrasound revenue of $127,000$361,000, offset by a decrease in surgicalTrek revenue of $40,000, a decrease in service plans revenue of $61,000 and a decrease in sales of AXIS products an increase of $253,000 in ultrasound products$26,000.

The following table presents the domestic and an increase of $138,000 in digital imaging camerasforeign sales for the three months and AXIS image management system software. The increase of sales force and entrance into new market attributed to the increase of the ultrasound products. Digital imaging products sales increase in Q1 also attributed to the increase six-month periodsix months ended December 21, 2017.31, 2022, and 2021. The table amounts are in thousands:

For the Three Months Ended December 31,For the Six Months Ended December 31,
2022202120222021
Domestic$1,734 57.7 %$1,360 50.4 %$3,354 59.8 %$2,985 55.5 %
Foreign1,271 42.3 %1,341 49.6 %2,256 40.2 %2,391 44.5 %
Total$3,005 100.0 %$2,701 100.0 %$5,610 100.0 %$5,376 100.0 %

The following table presents consolidated cost of goods sold and as a percentage of total revenues for the three-monththree months and six-month periodsix months ended December 31, 20172022, and 2016.2021. Table amounts are in thousands:

 For the Three Months Ended December 31,For the Six Months Ended December 31,
 2022%2021%2022%2021%
Cost of Goods Sold:
$1,752 58.3 %$1,540 57.0 %3,301 58.8 %3,203 59.6 %
Total$1,752 58.3 %$1,540 57.0 %3,301 58.8 %3,203 59.6 %
 For the three-month period ended December 31, For the six-month period ended December 31,
 2017 % 2016 % 2017 % 2016 %
Cost of Goods Sold:               
 $1,838
 54.3% $1,712
 54.1% $3,305
 55.0% $2,964
 53.9%
Total$1,838
 54.3% $1,712
 54.1% $3,305
 55.0% $2,964
 53.9%




Consolidated cost of goods sold totaled approximately $1,838,000,$1,752,000, or 54.3%58.3%, of total revenue for the three months ended December 31, 2017,2022, as compared to $2,964,000,$1,540,000, or 53.9%57.0%, of total revenue forof the same period of the prior fiscallast fiscal year. The increase of 0.2%1.3% in cost of goods sold as a percentage of total revenue is due mainly to a decrease in ultrasound products margin due to changes in product mix.sales mix and geographic differences.


Consolidated cost of goods sold totaled approximately $3,305,000,$3,301,000, or 55.0%58.8%, of total revenue for the six months ended December 31, 2017,2022, as compared to $2,964,000,$3,203,000, or 53.9%59.6%, of total revenue forof the same period of the prior fiscallast fiscal year. The increasedecrease of 1.1%0.8% in cost of goods sold as a percentage of total revenue is due mainly to a a decrease in ultrasound products margin due to changes in product mix.sales mix and geographic differences.

17


The following table presents consolidated marketing, general and administrative expenses as well as identifying trends in marketing, generalfor three months and administrative expenses for the three-month and six-month periodssix months ended December 31, 20172022 and 2016.2021. Table amounts are in thousands:
 For the Three Months Ended December 31,For the Six Months Ended December 31,
 20222021% Change 20222021% Change 
Marketing, General and Administrative:
$1,062 $950 11.8 %$2,170 $1,854 17.0 %
Total$1,062 $950 11.8 %$2,170 $1,854 17.0 %
 For the three-month period ended December 31, For the six-month period ended December 31,
 2017 2016 % Change  2017 2016 % Change 
Marketing, General and Administrative:           
 $1,193
 $1,207
 (1.2)% $2,189
 $2,362
 (7.3)%
Total$1,193
 $1,207
 (1.2)% $2,189
 $2,362
 (7.3)%

Consolidated marketing, general and administrative expenses decreased 14,000,increased $112,000, or 1.2%11.8%, to $1,193,000 during$1,062,000 for the three months ended December 31, 2017,2022, as compared to the same period of the priorlast fiscal year. The decreaseincrease in marketing, general and administrate expenses is mainly due to decreased hiringincreased network expense and fringe benefits of administration department, decreased rent expense, decreased meeting and exhibit expense in the current period offset by increased hiring expense of sales department and accounting expense.compensation.

Consolidated marketing, general and administrative expenses decreased $173,000,increased $316,000, or 7.3%17.0%, to $2,189,000 during$2,170,000 for the six months ended December 31, 2017,2022, as compared to the same period of the priorlast fiscal year. The decreaseincrease in marketing, general and administrate expenses is mainly due to decreased hiringincreased network expense, increased consulting expense related to a regulatory filing related to AXIS products, increased trade show and travel expense and fringe benefits . There is also reduced office rent expense when the lease was renewed, legal expense and meeting and exhibit expense offset by increased hiring expense of the sales department, accounting, consulting and commission expense in the current period.compensation.

The following table presents consolidated research and development expenses for the three-monththree months and six-month periodssix months ended December 31, 20172022 and 2016. 2021.
Table amounts are in thousands:
For the Three Months Ended December 31,For the Six Months Ended December 31,
 20222021% Change  20222021% Change
Research and Development:
$191 $260 (26.5)%456 $552 (17.4)%
Total$191 $260 (26.5)%$456 $552 (17.4)%

 For the three-month period ended December 31, For the six-month period ended December 31,
 2017 2016 % Change   2017 2016 % Change  
Research and Development:           
 $108
 $286
 (62.4)% $301
 $596
 (49.5)%
Total$108
 $286
 (62.4)% $301
 $596
 (49.5)%
Consolidated research and development expenses decreased $178,000,$69,000, or 62.4%26.5%, to $108,000 during$191,000 for the three months ended December 31, 2017,2022, as compared to the same period of the priorlast fiscal year.year. Research and development expenses were primarily expenses associated with the planned introduction of new or enhanced products. The decrease is mainly related to the decrease in headcount and consulting expense. The Company reduced research and development expense as part of its cost cutting efforts afteris mainly due to decreased consulting expense during the completion of prior projects.three months ended December 31, 2022.
Consolidated research and development expenses decreased $295,000,$96,000, or 49.5%17.4%, to $301,000 during$456,000 for the six months ended December 31, 2017,2022, as compared to the same period of the priorlast fiscal year.year. Research and development expenses were primarily expenses associated with the planned introduction of new or enhanced products. The decrease is mainly related to the decrease in headcount and consulting expense. The Company reduced research and development expense as part of its cost cutting efforts after the completion of prior projects.
Discontinued Operations

During fiscal year 2015 the Company was informed by French Counsel that the total amount claimed by the BHH landlord in the liquidation of BHH was approximately $86,000. The Company did not have insight into the French liquidation processis mainly due to increased consulting expense during the Liquidator's reticence to communicate with the Company. As such, the Company had accrued the present value of the maximum amount potentially due under the lease guaranteed by the Company on behalf of BHH. The landlord's claim under liquidation of

approximately $86,000 can not be revisited by the landlord and can only be potentially increased by interest or sundry expenses. Beginning in fiscal year end 2016 any changes to this liability are included in continuing operations. As ofsix months ended December 31, 2017 and June 30, 2017, the liability was approximately $96,000 and $91,000, respectively.

2022.
Other Income (expense)income
  
On October 2, 2017 Escalon and Modernizing Medicine Inc. (“MMI”)April 27, 2020, the Company entered into a Source Code Software Licensing Agreement .PPP loan for $500,000 in connection with the CARES Act related to COVID-19. The Agreement provided MMIpromissory note has a non-exclusive perpetual License tofixed payment schedule. The PPP loan is unsecured. A final payment for the source codeunpaid principal and accrued interest will be payable no later than two years after the funding date. The note will bear interest at a rate of Escalon’s proprietary image management software (“AXIS source code”) for a one-time payment of $500,000. MMI continues to be an authorized reseller1.00% per annum. The Company submitted the loan forgiveness application on August 2, 2021. The full amount of the AXIS product. The Company did not have significantPPP loan and accrued interest of $6,305 were forgiven on August 13, 2021 and reported as other income during the six-month period ended December 31, 2016.2021.


Related party interest expense for
Russia-Ukraine War

In February 2022, Russia invaded Ukraine. As military activity proceeds and sanctions, export controls and other measures are imposed by many countries against Russia, Belarus and specific areas of Ukraine, the three-month periods ended December 31, 2017war is increasingly affecting the global economy and 2016 was $24,387financial markets, as well as exacerbating ongoing economic challenges, including rising inflation and $16,489, respectively. Related party interest expense forglobal supply-chain disruption. The Company has operations or activities in countries and regions outside the six-month periods ended December 31, 2017
18


United States. As a result, its global operations are affected by economic, political and 2016 was $47,499 and $26,802, respectively.other conditions in the foreign countries in which it does business as well as U.S. laws regulating international trade, although the Company has not yet assessed that the war has had a material effect on its financial position or results of operations.

Liquidity and Capital Resources
The accompanying unaudited condensed consolidated financial statements
Our total cash on hand as of December 31, 2022 was approximately $313,000 of cash on hand and restricted cash of approximately $256,000 compared to approximately $594,000 of cash on hand and restricted cash of $256,000 as of June 30, 2022. Approximately $48,000 was available under our line of credit as of December 31, 2022.

Because the Company's operations have been prepared on a going concern basis, which contemplates the realization of assetsnot historically generated sufficient revenues to enable profitability, we will continue to monitor costs and the satisfaction of liabilitiesexpenses closely and may need to raise additional capital or take other actions in the normal course of business. order to fund operations.

The Company hasexpects to continue to fund operations from cash on hand and through capital raising sources if possible and available, which may be dilutive to existing stockholders, through revenues from the licensing of the Company's products, or through strategic alliances. Additionally, we may seek to sell additional equity or debt securities through one or more discrete transactions, or enter into a strategic alliance arrangement, but can provide no assurances that any such financing or strategic alliance arrangement will be available on acceptable terms, or at all. Moreover, the incurrence of indebtedness in connection with a debt financing would result in increased fixed obligations and could contain covenants that would restrict our operations.

As of December 31, 2022 we had an accumulated deficit of approximately $69.2 million, incurred recurring operating losses from operations and negative cash flows from operating activities and these conditionsactivities. These factors raise substantial doubt about the Company’sregarding our ability to continue as a going concern. These unaudited condensed consolidated financial statements do not include any adjustments relatingconcern, and our ability to generate cash to meet our cash requirements for the realizationfollowing twelve months as of the carrying valuedate of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.this form 10-Q.

The Company's continuance as a going concern is dependent on its future profitability and on the on-going support of its shareholders, affiliates and creditors. In order to mitigate the going concern issues, the Company is actively pursuing business partnerships, managing its continuing operations, implementing cost-cutting measures and seeking to sell certain assets. The Company may not be successful in any of these efforts.

If the Company is unable to achieve the mitigating factors mentioned above in the near term, it is likely that its existing cash and cash flow from operations will not be sufficient to fund activities without curtailing certain business activities.

The following table presents overall liquidity and capital resources as of December 31, 20172022 and June 30, 2017.2022. Table amounts are in thousands:
 
December 31,June 30,
 20222022
Current Ratio:
Current assets$3,814$4,186
Less: Current liabilities2,9623,002
Working capital$852$1,184
Current ratio1.29 to 11.39 to 1
Debt to Total Capital Ratio:
Line of credit, note payable, lease liabilities, and EIDL loan$1,053$1,205
Total debt1,0531,205
Total equity1,1511,478
Total capital$2,204$2,683
Total debt to total capital47.8%44.9%
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 December 31, 2017 June 30, 2017
Current Ratio:   
Current assets$4,979
 $4,155
Less: Current liabilities3,199
 3,001
Working capital$1,778
 $1,154
Current ratio1.56 to 1
 1.38 to 1
Debt to Total Capital Ratio:   
Related party note payable and line of credit$835
 $795
Total debt835
 795
Total equity1,834
 1,184
Total capital$2,669
 $1,979
Total debt to total capital31.3% 40.2%



Working Capital Position
Working capital increased $625,000decreased approximately $332,000 as of December 31, 2017,2022, and the current ratio changed from 1.38decreased to 1.29 to 1 to 1.56from 1.39 to 1 when compared to June 30, 2017.2022. The decrease in working capital is due to a decrease in current liabilities of $40,000 during the quarter ended December 31, 2022, and a decrease in current assets of $372,000.
Debt to Total Capital Ratiototal capital ratio was 31.3%47.8% and 40.2%44.9% as of December 31, 20172022 and June 30, 2017,2022, respectively. The decreaseincrease of debt to total capital ratio is due to operating loss.
Cash Flow Used in Operating Activities
During the six months ended December 31, 2022 the Company used approximately $271,000 of cash in operating activities as compared to cash of approximately $581,000 used in operating activities during the six months ended December 31, 2021.
    For the six months ended December 31, 2022, its cash used in operations is mainly as a result of net incomeloss, along with an increase in inventories of $668,000$280,000, a decrease in accrued expense of $243,000 a decrease in deferred revenue of $74,000, and a repayment of employer tax deferral of $45,000 offset by an increase in accounts payable of $309,000 and a decrease in accounts receivable of approximately $333,000. The remaining offsetting items for cash provided by operations is comprised of less significant items.
    For the six months ended December 31, 2021, its cash used in operations is mainly due to increase in accounts receivable of approximately 268,000, a decrease in deferred revenue of $54,000, a decrease in accounts payable of $53,000, a repayment of employer tax deferral of 54,000, and decrease in operating liabilities of $143,000 offset by an increase in accrued expense of $96,000. The remaining offsetting items for cash provided by operations is comprised of less significant items.
Cash Flows used in Investing Activities
Cash flows used in investing activities for the six-month period ended December 31, 2022 was due to the addition to the patent of $7,000. There were no cash flows used in investing activities for the six-month period ended December 31, 2021.
Cash Flows Used in Financing Activities
For the six months ended December 31, 2022 the cash used in financing activities was due to an auto loan payment of $2,000 and repayment of EIDL loan of $1,000. For the six months ended December 31, 2021 the cash used in financing activities was due to auto loan payment of employer $2,000 and repayment of EIDL loan of $1,000.
Debt Financing

    On June 29, 2018 the Company entered a business loan agreement with TD bank receiving a line of credit evidenced by a promissory note of $250,000. The interest is subject to change based on changes in an independent index which the Wall Street Journal Prime. The index rate at the date of the agreement is 5.000% per annum. Interest on the unpaid principal balance of the note will be calculated using a rate of 0.740 percentage points over the index, adjusted if necessary for any minimum and maximum rate limitations, resulting in an initial rate of 5.740% per annum based on a year of 360 days. The interest rate was 8.24% as of December 31, 2022. The Company was required to put $250,000 in the TD bank savings account as collateral.
    As of December 31, 2022 and June 30, 2022, the line of credit balance was $201,575 with TD bank. The line of credit interest expense was approximately $4,000 and $3,000 for the three months ended December 31, 2022 and 2021, respectively. The line of credit interest expense was approximately $7,000 and $5,000 for the six months ended December 31, 2022 and 2021, respectively.

COVID-19 Relief Loans and Liabilities

Payroll Protection Program ("PPP")

    On April 27, 2020, the Company entered into a PPP loan for $500,000 in connection with the CARES Act related to COVID-19. The full amount of the PPP loan and accrued interest were forgiven on August 13, 2021 and reported as other income during the six-month period ended December 31, 2017.2021.


Economic Injury Disaster Loan ("EIDL")
Cash Used In or Provided By Operating Activities
During the six-month period ended December 31, 2017 and 2016, the Company experienced cash outflows from operating activities    EIDL is designed to provide economic relief to businesses that are currently experiencing a temporary loss of $281,000 and $517,000, respectively. The net decrease in cash used in operating activities of approximately $236,000 for the six-month period ended December 31, 2017, as comparedrevenue due to the same period in the prior fiscal year is due primarilyCoronavirus (COVID-19) pandemic. EIDL proceeds can be used to the following factors:cover a wide array of working capital and normal
For the six-month period ended December 31, 2017, the Company had a net income of $651,000, experienced net cash out-flows from a decrease in post-retirement
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operating expenses, such as continuation to health care benefits, of $34,000, an increase in accounts receivable of $442,000, an increase in inventory of $149,000. The cash outflows were partially offset byrent, utilities, and a decrease in other current assets of $13,000, an increase in accounts payable and accrued expense of $153,000 and an increase in non-cash expenditures on depreciation and amortization of approximately $23,000 and a change in liabilities of discontinued operations of $5,000.
For the six-month period ended December 31, 2016, the Company had a net loss of $460,000, experienced net cash out-flows from a decrease in post-retirement benefits of $18,000, a change in liabilities of discontinued operations of $4,000, a decrease in accounts payable and accrued expense of $15,000, an increase in inventory of $108,000 and an increase in other current assets of $53,000. The cash outflows were partially offset by a decrease in accounts receivable of $118,000, and an increase in non-cash expenditures on depreciation and amortization of approximately $24,000.
Cash Flows Used In Investing and Financing Activities
Cash flows from investing activities of $500,000 were the from the proceeds from the source code licensing agreement during the six-month period ended December 31, 2017. Cash flows used in investing activities during the six-month period ended December 31, 2017 were appropriately $15,000, among which, $2,000 was used for purchase of property and equipment and $13,000 was for purchase of licenses. There was no cash flows used in or provided by investing activities during the six-month periods ended December 31, 2016.

Cash flows provided by financing captivities during the six-month periods ended December 31, 2017 includes proceeds from related party note payable of $100,000 reduced by repayment of the line of credit of $60,000. Cash flows provided by financing captivities during the six-month period ended December 31, 2016 includes $270,000 of related party note payable and $247,000 of short-term debt.

Debt History

     On December 29, 2016, the Company entered into a credit agreement providing the Company up to an aggregate of $250,000 in cash, secured by the Company’s inventory.fixed debt payments. The Company and its wholly owned subsidiary Sonomed,Inc., entered into an Inventory Advance Agreement as of December 29, 2016 (the "Agreement"), with CDS Business Services, Inc., doing business as Newtek Business Credit ("Newtek"). Newtek may in its discretion make loans against the Company’s Eligible Inventory in an aggregate amount outstanding at any time up to the lesser of (i) fifty percent (50%) of the Inventory Value or (ii) the Inventory Advance Limit, as those terms are defined in the Agreement, which is currently $250,000.received $150,000 EIDL loan. The credit agreement renews annually and can be terminated upon 90 days written notice from the Company or 30 days written notice from NewTek.
If, at any time and for any reason, the aggregate amount of the outstanding advances under the Agreement exceeds the Inventory Advance Limit or percentage limitation contained in the preceding sentence, then Company must, upon demand by Newtek, immediately pay to Newtek, in cash, the amount of such excess, or at Newtek’s option Newtek may charge such excess against any reserves held by Newtek.

    Newtek will maintain reserves against Company’s availability for advances and may maintain reserves against the Company’s accounts and/or ineligible inventory as well, or maintain a cash collateral deposit account, as NewTek in its discretion deems appropriate. Newtek may also increase such reserves or reduce its advance percentages based on eligible inventory without declaring an event of default and without prior notice, if it determines, in its discretion, that such increase in reserves or reduction is necessary, including, without limitation, to protect its interest in the collateral and/or against diminution in the value of any collateral, and/or to insure the prospect of payment or performance by Company of its obligations to Newtek are not impaired.
Interest will accrue on the daily balance at the per annum rate of 5.00% above the Prime Rate (currently 4.25%), but not less than 5.0%. The current annual interest rate is 9.25% as3.75%, the payment term is 30 years and the monthly payment of December 31, 2017.$731 started on July 1st, 2021. The Company’s obligations will, at the option of Newtek, (i) from and after the occurrence of an event of default, or (ii) if the Company’s obligations are not paid in fullEIDL loan is secured by the termination date, bear interest at the per annum rate of 10.00% above the prime rate. All interest payable by under the financing documents will be computed on the basis of a 360-day year for the actual number of days elapsed on the daily balance.

In consideration of monitoring, ledgeringtangible and other administrative functions undertaken by Newtek in connection with the Company’s inventory, and the merchant processor, Company is obligated pay Newtek a monthly collateral monitoring fee calculated by multiplying (i) seventy basis points (0.7%) (approximately an annual rate of 8.5%) (except during the existence of an Event of Default at which time it shall be 1.0%) by (ii) the amountintangible personal property of the average daily balances duringCompany.

Employer Payroll Tax Withholding

    The CARES Act allows employers to defer the calendar month preceding the month for which the calculation is made.

The foregoing description of the Agreement does not purport to be completedeposit and is qualified in its entirety by reference to the Agreement, a copy of which is attached to the Form 8-K report dated December 29, 2016.

As of December 31, 2017 and June 30, 2017, the line of credit balance is at $190,000 and $250,000, respectively. The line of credit interest expense is $10,175 and $0 for the three-month period ended December 31, 2017 and 2016, respectively. The line of credit interest expense is $20,511 and $0 for the six-month period ended December 31, 2017 and 2016, respectively.

Subsequent event

On February 14, 2018, the Company entered into a Debt Exchange Agreement (the “Exchange Agreement”) with Richard J. DePiano Sr. (“Mr. DePiano”), the Company's Chairman and DP Associates Inc. Profit-Sharing Plan of which Mr. DePiano is the sole owner and sole trustee (the “Holders”).  Pursuant to the terms of the Exchange Agreement, effective February 15, 2018, the Holders are exchanging a total of $645,000 principal amount of debt the Company owes the Holders (See Note 6) for 2,000,000 shares of Series A Convertible Preferred Stock (the “Preferred Stock”).
Each share the Preferred Stock entitles the Holder thereof to 13 votes per share and will vote together with all other classes and series of stock of the Company as a single class on all actions to be taken by the Company’s stockholders.  As a result of this voting power, the Holders as of February 15, 2018 beneficially own approximately 77.49% of the voting power on all actions to be taken by the Company’s shareholders.

Subject to the terms and conditions of Preferred Stock, the holder of any share or shares of the Preferred Stock has the right, at its option at any time, to convert each such share of Preferred Stock (except that, upon any liquidation of the Corporation, the right of conversion will terminate at the close of business on the business day fixed for payment of the amounts distributableemployer share of Social Security tax that would otherwise be due on or after March 27, 2020, and before January 1, 2021. The Company has deferred approximately $82,000 ofthe Preferred Stock) into 2.15 shares of Common Stock (the “Conversion Ratio”).  The Conversion Ratio is subject standard provisions for adjustment in the event of a subdivision or combinationsocial security tax. 50% of the Company’s Common Stock and upon any reorganization or reclassification of the capital stock of the Company. If the Holders were to convert their shares of Preferred Stock into Common Stock at the Conversion Ratio the Holders would receive a total of 4,300,000 shares of Common Stock, or approximately 36.28% of the currently outstanding shares of Common Stock assuming such conversion. The Company will be providing further information on Form 8K to be filed with the SEC.

Off-Balance Sheet Arrangements and Contractual Obligations

The Companydeferred employment taxes was not a party to any off-balance sheet arrangements during the six-month periods ended paid before December 31, 2017 and 2016.

2021. The following table presents the Company's contractual obligations asremaining balance of $41,000 was paid before December 31, 2017 (excluding interest):2022.



     Less than   3-5 More than
   Total  1 Year  2-3 Years Years  5 Years
           
Operating lease agreements $1,584,602
 $331,219
 $517,414
 $543,740
 $192,229
Line of credit 190,000
 190,000
 
 
 
Related party note payable 645,000
 645,000
 
 
 
Total $2,419,602
 $1,166,219
 $517,414
 $543,740
 $192,229


Item 3.    Quantitative and Qualitative Disclosures About Market Risk


None


Item 4. Controls and Procedures


(A)Evaluation of Disclosure Controls and Procedures


The Company's management, with the participation of the Company's Chief Executive Officer and Principal Financial and Accounting Officer, have established disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to the officers who certify the Company's financial reports and to other members of senior management and the Board of Directors.


Based on their evaluation of the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2017,2022, the Chief Executive Officer and Principal Financial and Accounting Officer of the Company have concluded that such disclosure controls and procedures are not effective to ensure that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its Chief Executive Officer and Principal Financial and Accounting Officer, to allow timely decisions regarding required disclosure. We identified a material weakness in internal control related to the proper design and implementation of controls over our estimates relating to the valuation of inventory and allowance for doubtful accounts, specifically over the precision of management’s review during the year end June 30, 2022.




(B)Internal Control over Financial Reporting


There have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act), during the first fiscalsecond quarter ended December 31, 20172022 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.


Part II. OTHER INFORMATION


Item 6.Exhibits
10.1 Source Code Licensing Agreement.
31.1 Certificate of Chief Executive Officer under Rule 13a-14(a).

31.2 Certificate of Principal Financial and Accounting Officer under Rule 13a-14(a).
32.1 Certificate of Chief Executive Officer under Section 1350 of Title 18 of the United States Code.
32.2 Certificate of Principal Financial and Accounting Officer under Section 1350 of Title 18 of the United States Code.

Signatures
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Escalon Medical Corp.
(Registrant)
Date: February 14, 20182023By:/s/ Richard J. DePiano, Jr.
Richard J. DePiano, Jr.
Chief Executive Officer
Date: February 14, 20182023By:/s/ Mark Wallace
Mark Wallace
Chief Operating Officer and Principal Accounting & Financial Officer




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