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1、UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549 FORM 10-QQUARTERLY PERIOD PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the Quarterly Period ended March 31,2025Commission File Number 0-20127Escalon Medical Corp.(Exact name of registrant as specified in

2、its charter)Pennsylvania 33-0272839(State or other jurisdiction ofincorporation or organization)(I.R.S.EmployerIdentification No.)435 Devon Park Drive,Suite 824,Wayne,PA 19087(Address of principal executive offices,including zip code)(610)688-6830(Registrants telephone number,including area code)N/A

3、Former name,former address and former fiscal year,if changed since last reportSecurities registered pursuant to Section 12(b)of the Act:NONEIndicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the SecuritiesExchange Act of 1934 during th

4、e preceding 12 months(or for such shorter period that the registrant was required to file suchreports),and(2)has been subject to such filing requirements for the past 90 days.Yes x No oIndicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site,if

5、any,everyInteractive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)duringthe preceding 12 months(or for such shorter period that the registrant was required to submit and post such files).Yes x No oIndicate by check mark whether the regi

6、strant is a large accelerated filer,an accelerated filer,a non-accelerated filer,smallerreporting company.or an emerging growth company.See the definitions of large accelerated filer,accelerated filer,andsmaller reporting company and emerging growth company in Rule 12b-2 of the Exchange Act.2025/5/2

7、2 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/data/862668/000086266825000014/esmc-20250331.htm1/36 2025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/data/862668/000086266825000014/esmc-20250331.htm2/36Large accelerated fileroAccelerated fileroNon-accelerated filerxSmaller reporti

8、ng companyxEmerging Growth CompanyoIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition periodfor complying with any new or revised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.o Indicate by chec

9、k mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Act).o Yes x NoIndicate the number of shares outstanding of each of the issuers classes of common stock,as of the latest practicable date:7,415,329 shares of common stock,$0.001 par value,outstanding as of May 13,2025.2

10、025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/data/862668/000086266825000014/esmc-20250331.htm3/36TABLE OF CONTENTS PagePART I Financial InformationItem I.Unaudited Condensed Consolidated Financial Statements2Condensed Consolidated Balance Sheets as of March 31,2025(unaudited)and June

11、 30,20242Condensed Consolidated Statements of Operations for the three-month and nine-monthperiods ended March 31,2025 and 2024(unaudited)3Condensed Consolidated Statements of Shareholders Equity for the three-month and nine-month periods ended March 31,2025 and 2024(unaudited)4Condensed Consolidate

12、d Statements of Cash Flows for the nine-month periods endedMarch 31,2025 and 2024(unaudited)5Notes to the Condensed Consolidated Financial Statements(Unaudited)7Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations15Item 3.Quantitative and Qualitative Disclosure

13、s about Market Risk22Item 4.Controls and Procedures22PART II Other InformationItem 6.Exhibits2312025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/data/862668/000086266825000014/esmc-20250331.htm4/36PART I.FINANCIAL INFORMATIONItem I.UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSES

14、CALON MEDICAL CORP.AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETSMarch 31,2025June 30,2024(Unaudited)ASSETSCurrent assets:Cash$540,908$209,033 Restricted cash256,518 256,422 Accounts receivable2,299,899 2,295,263 Less:allowance for credit losses(171,104)(171,104)Accounts receivable,net2,128,7

15、95 2,124,159 Inventories1,744,326 1,613,118 Other current assets172,339 194,096 Total current assets4,842,886 4,396,828 Property and equipment,net34,348 48,878 Right-of-use assets240,639 199,989 License and patent,net34,705 49,442 Other long term assets62,788 62,788 Total assets$5,215,366$4,757,925

16、LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current portion of note payable$40,184$34,177 Current portion of EIDL loan3,293 3,172 Accounts payable1,063,081 1,357,222 Accrued expenses763,256 588,317 Related party accrued interest112,389 112,389 Current portion of operating lease liabilitie

17、s71,121 207,966 Deferred revenue376,018 280,004 Other short-term liabilities89,303 85,692 Total current liabilities2,518,645 2,668,939 Note payable,net of current portion92,349 128,825 EIDL loan,net of current portion139,862 142,508 Operating lease liabilities,net of current portion169,652 8,071 Tot

18、al long-term liabilities401,863 279,404 Total liabilities2,920,508 2,948,343 Contingencies(Note 10)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$1,012,632 and$974,003)645,000 645,000

19、Common stock,$0.001 par value;35,000,000 shares authorized;7,415,329 sharesissued and outstanding7,415 7,415 Additional paid-in capital69,702,043 69,702,043 Accumulated deficit(68,059,600)(68,544,876)Total shareholders equity2,294,858 1,809,582 Total liabilities and shareholders equity$5,215,366$4,7

20、57,925 See notes to unaudited condensed consolidated financial statements.22025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/data/862668/000086266825000014/esmc-20250331.htm5/36ESCALON MEDICAL CORP.AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)For the Three Mo

21、nths Ended March 31,For the Nine Months Ended March 31,2025202420252024Net revenues:Products$3,314,827$2,567,387$9,068,890$8,101,834 Service plans159,365 128,114 407,204 407,904 Revenues,net3,474,192 2,695,501 9,476,094 8,509,738 Costs and expenses:Cost of goods sold1,874,287 1,578,727 5,089,050 4,8

22、35,402 Marketing,general and administrative1,159,113 1,117,534 3,420,504 3,401,902 Research and development164,755 155,848 461,554 515,213 Total costs and expenses3,198,155 2,852,109 8,971,108 8,752,517 Income(loss)from operations276,037(156,608)504,986(242,779)Other expenseOther expense (5,000)Inte

23、rest expense(4,565)(5,541)(14,710)(16,888)Income tax expense Net income(loss)271,472(162,149)485,276(259,667)Less undeclared dividends on preferred stocks12,689 12,830 38,629 38,842 Less income allocated to convertible preferredstocks123,323 212,849 Net income(loss)applicable to commonshareholders$1

24、35,460$(174,979)$233,798$(298,509)Net income(loss)per shareBasic income(loss)per share$0.02$(0.02)$0.03$(0.04)Diluted income(loss)per share$0.02$(0.02)$0.03$(0.04)Weighted average sharesbasic7,415,329 7,415,3297,415,329 7,415,329Weighted average sharesdiluted14,166,2177,415,32914,166,2177,415,329See

25、 notes to unaudited condensed consolidated financial statements.32025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/data/862668/000086266825000014/esmc-20250331.htm6/36ESCALON MEDICAL CORP.AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITYFOR THE THREE AND NINE MONTH

26、S ENDED MARCH 31,2025 AND 2024(UNAUDITED)Series A ConvertiblePreferred StockCommon StockAdditionalPaid-inCapitalAccumulatedDeficitTotalShareholdersEquity SharesAmountSharesAmount Balance at June 30,20242,000,000$645,000 7,415,329$7,415$69,702,043$(68,544,876)$1,809,582 Net loss (32,217)(32,217)Balan

27、ce at September 30,20242,000,000 645,000 7,415,329 7,415 69,702,043(68,577,093)1,777,365 Net income 246,021 246,021 Balance at December 31,20242,000,000 645,000 7,415,329 7,415 69,702,043(68,331,072)2,023,386 Net income 271,472 271,472 Balance at March 31,20252,000,000$645,000 7,415,329$7,415$69,702

28、,043$(68,059,600)$2,294,858 Series A ConvertiblePreferred StockCommon StockAdditionalPaid-inCapitalAccumulatedDeficitTotalShareholdersEquity SharesAmountSharesAmount Balance at June 30,20232,000,000$645,000 7,415,329$7,415$69,702,043$(68,419,615)$1,934,843 Net loss (21,197)(21,197)Balance at Septemb

29、er 30,20232,000,000 645,000 7,415,329 7,415 69,702,043(68,440,812)1,913,646 Net loss (76,321)(76,321)Balance at December 31,20232,000,000 645,000 7,415,329 7,415 69,702,043(68,517,133)1,837,325 Net loss (162,149)(162,149)Balance at March 31,20242,000,000$645,000 7,415,329$7,415$69,702,043$(68,679,28

30、2)$1,675,176 See notes to unaudited condensed consolidated financial statements.42025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/data/862668/000086266825000014/esmc-20250331.htm7/36ESCALON MEDICAL CORP.AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)For the Ni

31、ne Months Ended March 31,20252024Cash Flows from Operating Activities:Net income(loss)$485,276$(259,667)Adjustments to reconcile net income(loss)to net cash used in operating activities:Change in allowance of doubtful accounts 20,354 Depreciation and amortization29,267 26,763 Non cash lease expense1

32、87,280 227,558 Change in operating assets and liabilities:Accounts receivable(4,636)274,164 Inventories(131,208)(216,940)Other current and non-current assets21,757 83,189 Accounts payable(294,141)(87,453)Accrued expenses174,939(62,101)Change in operating lease liability(203,194)(244,817)Deferred rev

33、enue96,014(23,158)Other short term and long term liabilities3,611(792)Net cash provided by(used in)operating activities364,965(262,900)Cash Flows from Investing Activities:Purchase of equipment(31,038)Net cash used in investing activities(31,038)Cash Flows from Financing Activities:Repayment of note

34、 payable(30,469)(27,853)Repayment of EIDL loan(2,525)(3,079)Net cash used in financing activities(32,994)(30,932)Net increase(decrease)in cash,cash equivalents and restricted cash331,971(324,870)Cash and restricted cash,beginning of period465,455 1,145,967 Cash and restricted cash,end of period$797,

35、426$821,097 Cash,cash equivalents and restricted cash consist of the following:End of periodCash$540,908$564,707 Restricted cash256,518 256,390$797,426$821,097 Beginning of periodCash$209,033$889,674 Restricted cash256,422 256,293$465,455$1,145,967 52025/5/22 11:51esmc-20250331https:/www.sec.gov/Arc

36、hives/edgar/data/862668/000086266825000014/esmc-20250331.htm8/36Supplemental Schedule of Cash Flow Information:Interest paid$16,060$16,985 Non Cash Finance ActivitiesRecord right-of-use assets per ASC 842$227,930$Record lease liability per ASC 842$227,930$See notes to unaudited condensed consolidate

37、d financial statements62025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/data/862668/000086266825000014/esmc-20250331.htm9/36Escalon Medical Corp.and SubsidiariesNotes to Unaudited Condensed Consolidated Financial Statements1.Organization and Basis of Presentation Escalon Medical Corp.(E

38、scalon or 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.(“So

39、nomed”),Escalon DigitalSolutions,Inc.(“EMI”),and Sonomed IP Holdings,Inc.The Company operates in the healthcare market,specializing in the development,manufacture,marketing and distribution ofmedical devices and pharmaceuticals in the area of ophthalmology.The Company and its products are subject to

40、 regulation andinspection by the United States Food and Drug Administration(the“FDA”).The FDA and other government authorities requireextensive testing of new products prior to sale and has jurisdiction over the safety,efficacy and manufacture of products,as well asproduct labeling and marketing.The

41、 accompanying unaudited condensed consolidated financial statements(“financial statements”)have been prepared inaccordance with accounting principles generally accepted in the United States of America(“GAAP”)for interim financialinformation pursuant to the rules and regulations of the Securities and

42、 Exchange Commission(“SEC”)and have been consistentlyapplied.Certain information and footnote disclosures normally included in financial statements presented in accordance withGAAP,but which are not required for interim reporting purposes,have been omitted.In the opinion of management,alladjustments

43、(consisting of normal recurring accruals)considered necessary to present fairly the financial position as of March 31,2025,and the results of operations and cash flows for the interim periods ended March 31,2025,and 2024,have been included.These unaudited condensed consolidated financial statements

44、should be read in conjunction with the audited consolidated financialstatements and notes thereto for the year ended June 30,2024 included in the Companys Annual Report on Form 10-K,as filedwith the Securities and Exchange Commission on September 30,2024.Operating results for the nine months ended M

45、arch 31,2025 are not necessarily indicative of the results that may be expected for the full year ending June 30,2025.The Companys common stock trades on the OTCQB Market under the symbol“ESMC.”2.Going ConcernThe Companys operations are subject to a number of factors that can affect its operating re

46、sults 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 to manufacture successfully;competition from products manufactured andsold or being developed b

47、y other companies,the price of,and demand for,the Companys products and its ability to raisecapital to support its operations.To date,the Companys operations have not generated sufficient revenues to enable consistent profitability.ThroughMarch 31,2025,while the Company had net income and positive c

48、ash flow from operations,however,it has historicallyincurred recurring losses from operations and incurred negative cash flows from operating activities.These factors raisesubstantial doubt regarding the Companys ability to continue as a going concern for the next 12 months following the issuanceof

49、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.These unaud

50、itedcondensed consolidated financial statements do not include any adjustments relating to the realization of the carrying value ofassets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as agoing concern.The Companys continuance as a

51、going concern is dependent on its future profitability and on the on-going support of itsshareholders,affiliates and creditors.In order to mitigate the going concern issues,the Company is actively pursuing businesspartnerships,managing its continuing operations,and implementing cost-cutting measures

52、.The Company may not besuccessful in any of these efforts.3.Summary of Accounting PoliciesRecently Issued Accounting Standards2025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/data/862668/000086266825000014/esmc-20250331.htm10/3672025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/ed

53、gar/data/862668/000086266825000014/esmc-20250331.htm11/36In November 2023,the FASB issued ASU 2023-07,Segment Reporting(Topic 280).The amendments in this update improvereportable segment disclosure requirements,primarily through enhanced disclosures about significant segment expenses.ASU2023-07 will

54、 become effective for the Companys annual period ending June 30,2025 and interim periods beginning after July 1,2025.The Company is currently evaluating the impacts of adoption of this ASU for both of its annual and interim periods.In December 2023,the FASB issued ASU 2023-09,Income Taxes(Topic 740)

55、:Improvements to Income TaxDisclosures,which requires disaggregated information about a reporting entitys effective tax rate reconciliation,as well asinformation related to income taxes paid to enhance the transparency and decision usefulness of income tax disclosures.This ASUwill be effective for t

56、he annual period ending June 30,2026.The Company is currently evaluating the timing and impacts ofadoption of this ASU.In November 2024,the Financial Accounting Standards Board(FASB)issued Accounting Standards Update(ASU)2024-03,Income Statement reporting Comprehensive Income-Expense Disaggregation

57、Disclosure(Subtopic 220-40):Disaggregationof Income Statement Expense,which requires disclosure in the notes to the financial statements of specified information aboutcertain costs and expenses.The amendments are effective for the fiscal years beginning after December 15,2026,and for interimperiods

58、within the fiscal years beginning after December 15,2027.Early adoption is permitted.The amendments should be appliedeither prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to anyor all prior periods presented in the financial

59、 statements.The Company is currently evaluating the new guidance to determine theimpact it may have on its consolidated financial statements and related disclosure.Principles of ConsolidationThe unaudited condensed consolidated financial statements include the accounts of the Company and its wholly

60、ownedsubsidiaries.All intercompany accounts and transactions have been eliminated.Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States ofAmerica(US GAAP)requires management to make estimates and assumptions that impa

61、ct the reported amounts of assets andliabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts ofrevenue and expenses during the reporting period.Actual results could differ from those estimates.Accounts Receivable and Allowance

62、 for Credit LossesAccounts receivables are recorded at net realizable value.The Company performs ongoing credit evaluations of customersfinancial condition and does not require collateral for accounts receivable arising in the normal course of business.The Companymaintains allowances for potential c

63、redit losses based on the Companys historical trends,specific customer issues and currenteconomic trends.Accounts are written off against the allowance when they are determined to be uncollectible based onmanagements assessment of individual accounts.The Company adopted the current expected credit l

64、oss model prospectively fromfiscal year 2024,and assessed the allowance for expected credit losses to reflect the risk of loss,even when that risk is remote.TheCompany continues to use the aging matrix in conjunction with the historical information,current conditions and reasonable andsupportable fo

65、recasts.The Company groups most of the trade receivable by pools after adoption of the new standards while itanalyzed the credit loss of the trade receivables one by one before adoption.The major difference is the estimate of the currentexpected credit loss for the receivables that are current on th

66、eir payment.With adoption of the new standards,the small credit lossrate applied to current receivables will be mostly offset by the lower expected credit rate applied to over 120 days past due whenless than 100%of expected credit loss is applied.The historical credit loss rate is adjusted for curre

67、nt conditions and managementsassessment for factors such as international relations,economic conditions,and special-term contracts etc.For the nine-monthperiod ended March 31,2025,the adoption of the new guidance did not have an impact on the Companys unaudited consolidatedfinancial statements.The C

68、ompany will continue to assess the current expected credit loss.It may need to recognize a credit loss inthe income statement earlier than under the legacy guidance at certain time when the expected credit loss is increased.TheCompany recorded an allowance for credit losses of approximately$171,104

69、as of March 31,2025 and June 30,2024,respectively.The activity for the allowance for credit losses during the three-month and nine-month periods ended March 31,2025 and 2024,isas follows:82025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/data/862668/000086266825000014/esmc-20250331.htm12

70、/36 For the three Months Ended March 31,For the Nine Months Ended March 31,2025202420252024Balance,at the beginning of the period$171,104$133,524$171,104$153,878 Reversal (20,354)Write-offs(900)(900)Balance,at the end of the period$171,104$132,624$171,104$132,624 InventoriesInventories are stated at

71、 the lower of cost or net realizable value.Cost is determined on a first-in,first-out basis and includefreight-in materials,labor and overhead costs.Inventories are written down if the estimated net realizable value is less than therecorded value.The Company reviews the carrying cost of inventories

72、by product to determine the adequacy of reserves forobsolescence.In accounting for inventories,the Company must make estimates regarding the estimated realizable value ofinventory.The estimate is based,in part,on the age of inventory.If actual conditions are less favorable than those the Company has

73、projected,the Company may need to increase its reserves for excess and obsolete inventories.Any increases in the reserves willadversely have impact on the Companys results of operations.The establishment of a reserve for excess and obsolete inventoryestablishes a new cost basis in the inventory.Such

74、 reserves are not reduced until the product is sold.If the Company is able to sellsuch inventory any related reserves would be reversed in the period of sale.In accordance with industry practice,service partsinventory is included in current assets,although service parts are carried for established r

75、equirements during the serviceable livesof the products and,therefore,not all parts are expected to be sold within one year.Deferred Revenues The Company records deferred revenues when cash payments are received or due in advance of its performance.The Companysdeferred revenues relate to payments re

76、ceived for the customer care plans for a 12-month period.The consideration received isrecognized monthly over the service period.Revenue recorded that was included within prior period deferred revenue was$187,000 and$165,000,respectively for the three-month periods ended March 31,2025 and 2024.Reven

77、ue recorded that wasincluded within prior period deferred revenue was$459,000 and$440,000,respectively for the nine-month periods endedMarch 31,2025 and 2024.(in thousands)For the Three Months Ended March 31,For the Nine Months Ended March 31,2025202420252024Beginning of Period342$316$280$426 Additi

78、ons316 284 710 560 Revenue Recognized282 197 614 583 End of Period$376$403$376$403 Earnings(loss)Per Share The Company utilizes the two-class method to compute net income(loss)per common share.These participating securitiesincluded the Companys convertible preferred stock which accrues dividends pay

79、able.The two-class method requires earnings(loss)for the period to be allocated between common stock and participating securities based upon their respective rights to receivedistributed and undistributed earnings.Under the two-class method,for periods with net income,basic net income per common sha

80、re is computed by dividing thenet income attributable to common stockholders by the weighted average number of shares of common stock outstanding duringthe period.Net income attributable to common stockholders is computed by subtracting from net income the portion of the currentperiod earnings that

81、the participating securities would have been entitled to receive pursuant to their dividend rights had all of theperiods earnings been distributed.No such adjustment to earnings is made during periods with a net loss,as the holders of theparticipating securities have no obligation to fund losses.202

82、5/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/data/862668/000086266825000014/esmc-20250331.htm13/3692025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/data/862668/000086266825000014/esmc-20250331.htm14/36Diluted net income per common share is computed under the two-class meth

83、od by using the weighted average number ofshares of common stock outstanding,plus,for periods with net income attributable to common stockholders,the potential dilutiveeffects of stock options.The Company analyzed the potential dilutive effect of any outstanding dilutive securities under the“if-conv

84、erted”method and treasury-stock method when calculating diluted earnings per share,in which it is assumed that theoutstanding participating securities convert into common stock at the beginning of the period or date of issuance,if later.TheCompany reports the more dilutive of the approaches(two-clas

85、s or“if-converted”)as its diluted net income per share during theperiod.As of March 31,2025 and 2024,the average market prices for the years then ended are less than the exercise price of all theoutstanding stock options and,therefore,the inclusion of the stock options would be anti-dilutive.For the

86、 Three Months Ended March 31,For the Nine Months Ended March 31,2025202420252024Numerator:Numerator for basic loss per share:Net income(loss)$271,472$(162,149)$485,276$(259,667)Undeclared dividends on preferred stock12,689 12,830 38,629 38,842 Less:Net income allocating to participatingsecurities123

87、,323 212,849 Net income(loss)applicable to commonshareholders$135,460$(174,979)$233,798$(298,509)Numerator for diluted income(loss)per share:Net income(loss)$271,472$(162,149)$485,276$(259,667)Undeclared dividends on preferred stock12,689 12,830 38,629 38,842 Diluted income(loss)$258,783$(174,979)$4

88、46,647$(298,509)Denominator for basic income(loss)per shareDenominator for basic income(loss)per share-weighted average shares outstanding7,415,329 7,415,329 7,415,329 7,415,329 Weighted average preferred stock converted tocommon stock6,750,888 6,750,888 Denominator for diluted income(loss)assumed c

89、onversion14,166,217 7,415,329 14,166,217 7,415,329 Net income(loss)per share:Basic net income(loss)per share$0.02$(0.02)$0.03$(0.04)Diluted net income(loss)income per share$0.02$(0.02)$0.03$(0.04)The following table summarizes convertible preferred stock and securities that,if exercised,would have a

90、n anti-dilutiveeffect on earnings(loss)per share.For the three Months Ended March 31,For the Nine Months Ended March 31,2025202420252024Stock options21,000 157,000 21,000 157,000 Convertible preferred stock 6,407,820 6,407,820 Total potential dilutive securities not included inincome(loss)per share2

91、1,000 6,564,820 21,000 6,564,820 102025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/data/862668/000086266825000014/esmc-20250331.htm15/36Income Taxes The Company accounts for income taxes under the asset and liability method,which requires the recognition of deferred taxassets and liabi

92、lities for the expected future tax consequences of events that have been included in the consolidated financialstatements.Under this method,the Company determines deferred tax assets and liabilities on the basis of the differences betweenthe financial statement and tax bases of assets and liabilitie

93、s by using enacted tax rates in effect for the year in which thedifferences are expected to reverse.The effect of a change in tax rates on deferred tax assets and liabilities is recognized in incomein the period that includes the enactment date.The provision for income taxes during interim reporting

94、 periods is computed byapplying an estimated annual effective tax rate to year-to-date income,adjusted for discrete items occurring within the quarter.Theestimated annual effective tax rate is updated quarterly based on changes in the forecast of full-year income and tax expense.Forthe three and nin

95、e months ended March 31,2025 and March 31,2024,the Companys provision for income taxes and effective taxrate were zero.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 consid

96、ers all available positive and negative evidence,including future reversals ofexisting taxable temporary differences,projected future taxable income,tax-planning strategies,and results of recent operations.Ifthe Company determines that it would be able to realize its deferred tax assets in the futur

97、e 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 forincome taxes.We will continue to maintain a full valuation allowance on our deferred tax assets until there is sufficient positiveevidence t

98、o support the reversal of all or some portion of these allowances.A release of the valuation allowance would result in therecognition of certain deferred tax assets and a corresponding income tax benefit in the period the release is recorded.The amountof the valuation allowance release will be deter

99、mined based on the available sources of future taxable income as of the period inwhich the release is recorded.As of March 31,2025 and June 30,2024,the Company has recorded a full valuation allowanceagainst its deferred tax assets.The Company records uncertain tax positions in accordance with ASC 74

100、0 on the basis of a two-step process in which(1)theCompany determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical meritsof the position and(2)for those tax positions that meet the more-likely-than-not recognition threshold,the Company rec

101、ognizes thelargest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related taxauthority.The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in theaccompanying consolidated stateme

102、nts of operations.As of March 31,2025 and June 30,2024,no accrued interest or penaltieswere required to be included on the related tax liability line in the consolidated balance sheets.4.InventoriesMarch 31,June 30,(in thousands)20252024Inventories:Raw Material$1,148$804 Work-In-Process157 466 Finis

103、hed Goods656 603 Total inventories$1,961$1,873 Allowance for obsolete inventory(217)(260)Inventories,net$1,744$1,613 5.Related Party Transactions and Preferred Stock As of March 31,2025,and June 30,2024,the related party interest accrual of$112,389 related to the debt prior to the exchange,remained

104、as an on demand payable.On February 14,2018,the Company entered into a Debt Exchange Agreement(the“Exchange Agreement”)with RichardDePiano,Sr.,(Mr.DePiano Sr.),the Companys former Chairman and DP Associates Inc.Profit-Sharing Plan of which Mr.2025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/e

105、dgar/data/862668/000086266825000014/esmc-20250331.htm16/36DePiano Sr.is the sole owner and sole trustee(the“Holders”).Pursuant to the terms of the Exchange Agreement,effective112025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/data/862668/000086266825000014/esmc-20250331.htm17/36February

106、 15,2018,the Holders exchanged a total of$645,000 principal amount of debt related to the accounts receivable factoringprogram the Company owes the Holders for 2,000,000 shares of Series A Convertible Preferred Stock(the“Preferred Stock”).Each share of Preferred Stock entitles the Holder thereof to

107、13 votes per share and will vote together with all other classes andseries of stock of the Company as a single class on all actions to be taken by the Companys stockholders.As a result of this votingpower,the Holders as of March 31,2025 beneficially own approximately 77.81%of the voting power on all

108、 actions to be taken bythe Companys shareholders.Subject to the terms and conditions of Preferred Stock,the holder of any share or shares of the Preferred Stock has the right,atits option at any time,to convert each such share of Preferred Stock(except that,upon any liquidation of the Company,the ri

109、ght ofconversion will terminate at the close of business on the business day fixed for payment of the amounts distributable on thePreferred Stock)into 2.15 shares of Common Stock(the“Conversion Ratio”).The Conversion Ratio is subject to standardprovisions for adjustment in the event of a subdivision

110、 or combination of the Companys Common Stock and upon anyreorganization or reclassification of the capital stock of the Company.If the Holders were to convert their shares of Preferred Stockinto Common Stock at the Conversion Ratio the Holders would receive a total of 4,300,000 shares of Common Stoc

111、k,orapproximately 36.70%of the then 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

112、,stock split,combination,reclassification othersimilar event),payable upon the earlier of(i)a liquidation,dissolution or winding up of the Company or(ii)conversion of thePreferred Stock into Common Stock.Upon either of such events,all such accrued and unpaid dividends,whether or not earned ordeclare

113、d,to and until the date of such event,will become immediately due and payable and will be paid in full.The dividendspayable to the holders of the Preferred Stock are payable in cash or,at the election of any such holder,in a number of additionalshares of Common Stock equal to the amount of the divid

114、end expressed in dollars divided by the then applicable Conversion Ratiodescribed above.As of March 31,2025,and June 30,2024,the cumulative dividends payable are$367,632($0.1838 per share)and$329,003($0.1645 per share),respectively.Mr.DePiano Sr.passed away on October 3,2019,and left a will by which

115、 he appointed Richard J.DePiano,Jr.,the ChiefExecutive Officer of the Company,as executor.Richard DePiano Jr.was elected to serve as Chairman of the Companys 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.TD No

116、te Payable On June 29,2018,the Company entered a business loan agreement with TD bank receiving a line of credit evidenced by apromissory note of$250,000.The interest is subject to change based on changes in an independent index which the Wall StreetJournal Prime.The index rate at the date of the ag

117、reement is 5.0%per annum.Interest on the unpaid principal balance of the note iscalculated using a rate of 0.74 percentage points over the index,adjusted if necessary for any minimum and maximum ratelimitations,resulting in an initial rate of 5.74%per annum based on a year of 360 days.The Company wa

118、s required to put$250,000in the TD bank savings account as collateral.The Loan is guaranteed by Mr.DePiano Jr.TD bank elected to exercise the term note conversion option to convert the loan balance of$201,575 to a five-year termnote effective March 29,2023 the Conversion Date).The scheduled monthly

119、principal and interest payments in the amount of$4,247 began on April 29,2023.Commencing on the Conversion Date,the aggregate principal balance outstanding bears interest ata fixed per annum rate of 9.49%pursuant to the loans terms and conditions.The future note payable payments as of March 31,2025

120、are as follows:Year ending June 30,TD Note Payment2025(remainder of FY 2025)$9,693 202641,145 202745,224 202836,471 2025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/data/862668/000086266825000014/esmc-20250331.htm18/36122025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/data/

121、862668/000086266825000014/esmc-20250331.htm19/36Total$132,533 7.Long-term debtEconomic Injury Disaster Loan(EIDL)EIDL is designed to provide economic relief to businesses that are currently experiencing a temporary loss of revenue due to theCoronavirus(COVID-19)pandemic.EIDL proceeds can be used to

122、cover a wide array of working capital and normal operatingexpenses,such as continuation to health care benefits,rent,utilities,and fixed debt payments.The Company received a$150,000EIDL loan.The annual interest rate is 3.75%.The payment term is 30 years and the monthly payment of$731 started on July

123、 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 March 31,2025 are as follows:Year ending June 30,EIDL Payment2025(remainder of FY 2025)$812 20263,324 20273,451 20283,582 20293,719 Thereafter128,26

124、7 Total$143,155 8.Concentration of Credit RiskCredit RiskFinancial instruments,which potentially subject the Company to the concentration of credit risk,consist principally of cashand cash equivalents,restricted cash and trade receivables.Concentration of credit risk with respect to trade receivable

125、s isgenerally diversified due to the large number of entities comprising the Companys customer base and their dispersion acrossgeographic areas principally within the United States and international.The Company routinely addresses the financial strength ofits customers and,as a consequence,believes

126、that its receivable credit risk exposure is limited.The Company does not requirecustomers to post collateral.Major Customer One customer accounted for 14%of net revenue during the three-month period ended March 31,2025.One customer accountedfor 16%of net revenue during the nine-month period ended Ma

127、rch 31,2025.One customer accounted for 13%of net revenueduring the three-month period ended March 31,2024.One customer accounted for 11%of net revenue during the nine-monthperiod ended March 31,2024.As of March 31,2025,the Company had one customer that represented 21%of the total accounts receivable

128、 balance.As ofJune 30,2024,the Company had two customers that represented 37%and 14%of the total accounts receivable balance,respectively.Major Supplier The Companys two largest suppliers accounted for 42%and 14%of total purchases for the three-month period ended March 31,2025,respectively.The Compa

129、nys one largest supplier accounted for 42%of total purchases for the nine-month period ended2025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/data/862668/000086266825000014/esmc-20250331.htm20/36March 31,2025.The Companys two largest suppliers accounted for 36%and 11%of total purchases f

130、or the132025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/data/862668/000086266825000014/esmc-20250331.htm21/36three-month period ended March 31,2024,respectively.The Companys one largest supplier accounted for 40%of total purchasesfor the nine-month period ended March 31,2024.As of Marc

131、h 31,2025,the Company had one supplier that represented 39%of the total accounts payable balance.As of June 30,2024,the Company had two suppliers that represented approximately 25%and 21%of the total accounts payable balance,respectively.Disaggregated Revenue Domestic and international sales from op

132、erations are as follows:(in thousands)For the Three Months Ended March 31,For the Nine Months Ended March 31,2025202420252024Domestic$1,789 51%$1,339 50%$5,218 55%$4,394 52%Foreign1,685 49%1,357 50%4,258 45%4,116 48%Total$3,474 100%$2,696 100%$9,476 100%$8,510 100%9.Leases The Company leases certain

133、 facilities and equipment under operating leases.Total lease expense,under ASC 842,was includedin the cost of goods sold and marketing,general and administrative costs in our unaudited condensed consolidated statements ofoperations for the three months and nine months ended March 31,2025 and 2024 as

134、 follows:For the Three Months Ended March 31,For the Nine Months Ended March 31,2025202420252024Operating lease costs:Fixed$89,331$84,970$258,782$254,992 Total:$89,331$84,970$258,782$254,992 The supplemental cash flow information was as follows:For the Three Months Ended March 31,For the Nine Months

135、 Ended March 31,2025202420252024Cash paid for amounts included in themeasurement of lease liabilitiesOperating cash flows for operating leases$89,516$88,224$268,266$262,387 Total$89,516$88,224$268,266$262,387 The table below reconciles the undiscounted future minimum lease payments(displayed by year

136、 and in the aggregate)under noncancelable operating leases with terms of more than one year to the total operating lease liabilities recognized on theunaudited condensed consolidated balance sheets as of March 31,2025:142025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/data/862668/000086

137、266825000014/esmc-20250331.htm22/36Operating2025(reminder of FY 2025)$23,853 202688,616 202788,258 202875,678 20291,541 Thereafter385 Total lease payments278,331 Less interest37,558 Present value of lease liabilities$240,773 Average lease terms and discount rates were as follows:March 31,June 30,202

138、52024Weighted-average remaining lease terms(years)Operating leases2.111.67Weighted-average discount rateOperating leases5.71%5.69%The Companys corporate office lease and the New York facility lease,both of which expired on December 31,2024,havebeen extended for one year.The monthly lease expense is$

139、4,385 and$16,377 respectively.The Company has the option to renewthe leases after the lease terms expires.However,it remains uncertain whether the Company will continue to extend.The Companyhas elected not to apply the standard to leases of 12 months or less,therefore,the two leases are not included

140、 in the operating leaseROU assets and lease liabilities as of March 31,2025.The Companys Wisconsin facility lease,which will expire on April 30,2025has been extended to April 30,2028,and is included in the operating lease ROU assets and lease liabilities as of March 31,2025.10.ContingenciesThe Compa

141、ny,from time to time is involved in various legal proceedings and disputes that arise in the normal course ofbusiness.These matters have included intellectual property disputes,contract disputes,employment disputes and other matters.TheCompany does not believe that the resolution of any of these mat

142、ters has had or is likely to have a material adverse impact on theCompanys business,financial condition or results of operations.ITEM 2.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONSForward Looking Statements Certain statements contained in,or incorporated by ref

143、erence in,this report are forward-looking statements made pursuant to thesafe harbor provisions of the Private Securities Litigation Reform Act of 1995,which provide current expectations or forecasts offuture events.Such statements can be identified by the use of terminology such as“anticipate,”“bel

144、ieve,”“could,”“estimate,”“expect,”“forecast,”“intend,”“may,”“plan,”“possible,”“project,”“should,”“will,”and similar words or expressions.TheCompanys forward-looking statements include certain information relating to general business strategy,growth strategies,financialresults,liquidity,the Companys

145、ability to continue as a going concern,discontinued operations,research and development,productdevelopment,the introduction of new products,the potential markets and uses for the Companys products,the Companys abilityto increase its sales campaign effectively,the Companys regulatory filings with the

146、 FDA,acquisitions,dispositions,thedevelopment of joint venture opportunities,intellectual property and patent protection and infringement,the loss of revenue due tothe expiration or termination of certain agreements,the effect of competition on the structure of the markets in which the Companycompet

147、es,increased legal,accounting and Sarbanes-Oxley compliance costs,information security,cybersecurity and data privacyrisks,defending the Company in litigation matters and the Companys cost saving initiatives.The reader must carefully considerforward-looking statements and understand that2025/5/22 11

148、:51esmc-20250331https:/www.sec.gov/Archives/edgar/data/862668/000086266825000014/esmc-20250331.htm23/36152025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/data/862668/000086266825000014/esmc-20250331.htm24/36such statements involve a variety of risks and uncertainties,known and unknown,a

149、nd may be affected by assumptions that fail tomaterialize as anticipated,including risks related to the COVID-19 pandemic,inflation,the ability to continue as a going concernincluding the ability to raise capital,manage operations and pursue business partnerships and cost-cutting measures,and the ot

150、herrisks described in the Companys Form 10-K for the fiscal year ended June 30,2024.Consequently,no forward-looking statementcan be guaranteed,and actual results may vary materially.It is not possible to foresee or identify all factors affecting theCompanys forward-looking statements,and the reader

151、therefore should not consider the list of such factors contained in itsperiodic report on Form 10-K for the year ended June 30,2024 and this Form 10-Q quarterly report to be an exhaustive statementof all risks,uncertainties or potentially inaccurate assumptions.Executive Overviewnine-month periods e

152、nded March 31,2025 and 2024The following highlights are discussed in further detail within this Form 10-Q.The reader is encouraged to read this Form10-Q in its entirety to gain a more complete understanding of factors impacting Company performance and financial condition.Consolidated net revenue inc

153、reased approximately$966,000 or 11.4%,to$9,476,000 during the nine months endedMarch 31,2025,as compared to the same period of last fiscal year.The increase in net revenue is mainly attributed to anincrease in sales of sales of Treks gas products of$546,000 and an increase in Sonomeds ultrasound pro

154、ducts of$337,000 during the nine months ended March 31,2025.The net revenue of AXIS also increased by$83,000 during thesame period.Consolidated cost of goods sold totaled approximately$5,089,000,or 53.7%,of total revenue for the nine months endedMarch 31,2025,as compared to$4,836,000,or 56.8%,of tot

155、al revenue of the same period of last fiscal year.The decreaseof 3.1%in the cost of goods sold as a percentage of total revenue is mainly due to changes in product sales mix andgeographic differences,inventory valuation adjustment resulted from unit cost adjustment,and a decrease in Digitalheadcount

156、s during nine months ended March 31,2025.Consolidated marketing,general and administrative expenses increased$19,000,or 0.6%,to$3,421,000 for the ninemonths ended March 31,2025,as compared to the same period of last fiscal year.The increase in marketing,general andadministrative expenses is mainly d

157、ue to an increase in Sonomed payroll and commission expenses offset by a decrease inconsulting expenses,network expenses and Corporate payroll expenses during the nine months ended March 31,2025.Consolidated research and development expenses decreased$53,000,or 10.3%,to$462,000 for the nine months e

158、ndedMarch 31,2025,as compared to the same period of last fiscal year.Research and development expenses were primarilyexpenses associated with the introduction of new or enhanced products.The decrease in research and developmentexpenses is mainly due to decreased image management consulting expense d

159、uring the nine months ended March 31,2025.162025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/data/862668/000086266825000014/esmc-20250331.htm25/36Company Overview The following discussion should be read in conjunction with the interim unaudited condensed consolidated financial statement

160、sand 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 ofmedical devices and pharmaceuticals in the area of ophthalmology.The Company and its products are subject to regu

161、lation andinspection 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 Companys Internet address .Under the trade name of Sonomed-Escalon the Company deve

162、lops,manufactures and markets ultrasoundsystems used for diagnosis or biometric applications in ophthalmology,develops,manufactures and distributes ophthalmic surgicalproducts under the Trek Medical Products name,and manufactures and markets image management systems.Critical Accounting EstimatesThe

163、preparation of unaudited condensed consolidated financial statements requires management to make estimates andassumptions that impact amounts reported therein.The unaudited condensed consolidated financial statements are prepared inconformity with accounting principles generally accepted in the Unit

164、ed States of America,and,as such,include amounts based oninformed estimates and judgments of management.We consider an accounting estimate to be critical if:(i)the accounting estimaterequires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made

165、,and(ii)changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonablycould have used in the current period,would have a material impact on our financial condition or results of operations.There areitems within our financial stateme

166、nts that require estimation but are not deemed critical,as defined above.172025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/data/862668/000086266825000014/esmc-20250331.htm26/36Results of OperationsThree and Nine Months Ended March 31,2025 and 2024The following table shows consolidated

167、net revenue,as well as identifying trends in revenues for the three months and ninemonths ended March 31,2025 and 2024.Table amounts are in thousands:For the Three Months Ended March 31,For the Nine Months Ended March 31,20252024%Change20252024%ChangeNet Revenue:Products$3,315$2,568 29.1%$9,069$8,10

168、2 11.9%Service plans159 128 24.2%407 408(0.2)%Total$3,474$2,696 28.9%$9,476$8,510 11.4%Consolidated net revenue increased approximately$778,000 or 28.9%,to$3,474,000 during the three months endedMarch 31,2025,as compared to the same period of last fiscal year.The increase in net revenue mainly is at

169、tributed to an increasein sales of Sonomeds ultrasound products of$494,000 and an increase in sales of Treks gas products of$188,000 during the threemonths ended March 31,2025.The net revenue of AXIS also increased by$96,000 during the same period.Consolidated net revenue increased approximately 966

170、,000 or 11.4%,to 9,476,000 during the nine months endedMarch 31,2025,as compared to the same period of last fiscal year.The increase in net revenue is mainly attributed to an increasein sales of sales of Treks gas products of$546,000 and an increase in Sonomeds ultrasound products of$337,000 during

171、the ninemonths ended March 31,2025.The net revenue of AXIS also increased by$83,000 during the same period.The following table presents the domestic and foreign sales for the three months and nine months ended March 31,2025and 2024.The table amounts are in thousands:For the Three Months Ended March

172、31,For the Nine Months Ended March 31,2025202420252024Domestic$1,789 51.5%$1,339 49.7%$5,218 55.1%$4,394 51.6%Foreign1,685 48.5%1,357 50.3%4,258 44.9%4,116 48.4%Total$3,474 100.0%$2,696 100.0%$9,476 100.0%$8,510 100.0%The following table presents consolidated cost of goods sold and as a percentage o

173、f revenues for the three months and ninemonths ended March 31,2025 and 2024.Table amounts are in thousands:For the Three Months Ended March 31,For the Nine Months Ended March 31,2025%2024%2025%2024%Cost of Goods Sold:$1,874 53.9%$1,579 58.6%5,089 53.7%4,836 56.8%Total$1,874 53.9%$1,579 58.6%5,089 53

174、.7%4,836 56.8%Consolidated cost of goods sold totaled approximately$1,874,000,or 53.9%,of total revenue for the three months endedMarch 31,2025,as compared to$1,579,000,or 58.6%,of total revenue of the same period of last fiscal year.The decrease of 4.7%in the cost of goods sold as a percentage of t

175、otal revenue is mainly due to changes in product sales mix and geographic differences,inventory valuation adjustment resulted from unit cost adjustment,and a decrease in Digital headcounts during the three monthsended March 31,2025.182025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/data

176、/862668/000086266825000014/esmc-20250331.htm27/362025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/data/862668/000086266825000014/esmc-20250331.htm28/36Consolidated cost of goods sold totaled approximately$5,089,000,or 53.7%,of total revenue for the nine months endedMarch 31,2025,as comp

177、ared to$4,836,000,or 56.8%,of total revenue of the same period of last fiscal year.The decrease of 3.1%in the cost of goods sold as a percentage of total revenue is mainly due to changes in product sales mix and geographic differences,inventory valuation adjustment resulted from unit cost adjustment

178、,and a decrease in Digital headcounts during nine months endedMarch 31,2025.The following table presents consolidated marketing,general and administrative expenses for three months and nine monthsended March 31,2025 and 2024.Table amounts are in thousands:For the Three Months Ended March 31,For the

179、Nine Months Ended March 31,20252024%Change 20252024%Change Marketing,General and Administrative:$1,159$1,118 3.7%$3,421$3,402 0.6%Total$1,159$1,118 3.7%$3,421$3,402 0.6%Consolidated marketing,general and administrative expenses increased$41,000,or 3.7%,to$1,159,000 for the three monthsended March 31

180、,2025,as compared to the same period of last fiscal year.The increase is mainly due to an increase in Sonomedsalary and commission expenses during the three months ending March 31,2025.Consolidated marketing,general and administrative expenses increased$19,000,or 0.6%,to$3,421,000 for the nine month

181、sended March 31,2025,as compared to the same period of last fiscal year.The increase in marketing,general and administrativeexpenses is mainly due to an increase in Sonomed payroll and commission expenses offset by a decrease in consulting expenses,network expenses and Corporate payroll expenses dur

182、ing the nine months ending March 31,2025.The following table presents consolidated research and development expenses for the three months and nine months endedMarch 31,2025 and 2024.Table amounts are in thousands:For the Three Months Ended March 31,For the Nine Months Ended March 31,20252024%Change

183、20252024%ChangeResearch and Development:$165$156 5.8%462$515(10.3)%Total$165$156 5.8%$462$515(10.3)%Consolidated research and development expenses increased$9,000,or 5.8%,to$165,000 for the three months endedMarch 31,2025,as compared to the same period of last fiscal year.Research and development ex

184、penses were primarily expensesassociated with the introduction of new or enhanced products.Both Digital and Sonomed consulting expenses had a slight increaseduring the three months ended March 31,2025.Consolidated research and development expenses decreased$53,000,or 10.3%,to 462,000 for the nine mo

185、nths endedMarch 31,2025,as compared to the same period of last fiscal year.Research and development expenses were primarily expensesassociated with the introduction of new or enhanced products.The decrease in research and development expenses is mainly due todecreased image management consulting exp

186、enses offset by the increased current years new consulting services designing thehousing and mechanical inner parts of probes during the nine months ended March 31,2025.Russia-Ukraine WarIn February 2022,Russia invaded Ukraine.As military activity proceeds and sanctions,export controls and other mea

187、sures areimposed by many countries against Russia,Belarus and specific areas of Ukraine,the war is increasingly affecting the globaleconomy and financial markets,as well as exacerbating ongoing economic challenges,including rising inflation and global supply-chain disruption.2025/5/22 11:51esmc-2025

188、0331https:/www.sec.gov/Archives/edgar/data/862668/000086266825000014/esmc-20250331.htm29/36192025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/data/862668/000086266825000014/esmc-20250331.htm30/36Israel-Hamas warIn October 2023,Hamas terrorists attacked Israel,and then Israel declared wa

189、r and decimated the Gaza Strip.The Israel-Hamas war and conflicts could affect economic activity via lower trade with the Middle East,disruption of supply chain andcollection of trade receivables in the region.The Company has operations or activities in countries and regions outside the United State

190、s.As a result,its globaloperations are affected by economic,political,and other conditions in the foreign countries in which it does business as well asU.S.laws regulating international trade,although the Company has not yet assessed that these wars have had a material effect onits financial positio

191、n or results of operations.Recently Announced Tariffs and Trade MeasuresBeginning in the third quarter of FY2025,the U.S.government announced new tariffs on a broad range of imports,including a 10%tariff on most imports and additional individualized higher tariffs on certain specific goods and count

192、ries.Inresponse,certain affected countries have imposed or may impose retaliatory tariffs on U.S.exports and may implement additionaltrade restrictions and/or other retaliatory measures in the future.These recent and potential future tariffs and trade measures could adversely affect the Companys bus

193、iness in severalways.Increased costs of imported raw materials,components,and finished goods may negatively impact profitability and grossmargins.The Company may face challenges in passing these increased costs on to its customers due to competitive pressures ormarket conditions.Additionally,the unc

194、ertainty surrounding the duration and extent of these tariffs,as well as potential tradepolicy changes,could disrupt the Companys supply chain,require alternative and potentially more expensive sourcing options,andimpact long-term strategic planning and investment decisions.The imposition of retalia

195、tory tariffs by other countries could alsoreduce the demand for the Companys exported products,negatively impacting revenue and international sales.Management is actively monitoring these developments,assessing the potential impacts on the Companys business,andevaluating possible mitigation strategi

196、es,including exploring alternative sourcing,adjusting pricing strategies where feasible,andanalyzing potential shifts in global supply chains.However,the ultimate financial impact of these tariffs and the associateduncertainty cannot be reasonably estimated at this time.This situation could have a m

197、aterial adverse effect on the Companys futurefinancial condition,results of operations,and cash flows.The Company will continue to evaluate these developments and provideupdates in future filings as the situation evolves and more information becomes available.Liquidity and Capital ResourcesOur total

198、 cash as of March 31,2025 was approximately$541,000 of cash on hand and restricted cash of approximately$257,000 compared to approximately$209,000 of cash on hand and restricted cash of$256,000 as of June 30,2024.Because the Companys operations have not historically generated sufficient revenues to

199、enable profitability,we will continueto monitor costs and expenses closely and may need to raise additional capital or take other actions to fund operations.The Company expects to continue to fund operations from cash on hand and through capital raising sources if possible andavailable,which may be

200、dilutive to existing stockholders,through revenues from the licensing of the Companys products,orthrough strategic alliances.Additionally,we may seek to sell additional equity or debt securities through one or more discretetransactions,or enter a strategic alliance arrangement,but can provide no ass

201、urances that any such financing or strategic alliancearrangement will be available on acceptable terms,or at all.Moreover,the incurrence of indebtedness in connection with a debtfinancing would result in increased fixed obligations and could contain covenants that would restrict our operations.As of

202、 March 31,2025,we had an accumulated deficit of approximately$68.1 million,historically incurred recurring lossesfrom operations and negative cash flows from operating activities.These factors raise substantial doubt regarding our ability tocontinue as a going concern,and our ability to generate cas

203、h to meet our cash requirements for the following twelve months as ofthe date of this form 10-Q.2025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/data/862668/000086266825000014/esmc-20250331.htm31/36202025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/data/862668/0000862668250

204、00014/esmc-20250331.htm32/36The following table presents overall liquidity and capital resources as of March 31,2025,and June 30,2024.Table amountsare in thousands:March 31,June 30,20252024Current Ratio:Current assets$4,843$4,397Less:Current liabilities2,5192,669Working capital$2,324$1,728Current ra

205、tio1.92 to 11.65 to 1Debt to Total Capital Ratio:Note payable,lease liabilities,and EIDL loan$516$525Total debt516525Total equity2,2951,810Total capital$2,811$2,334Total debt to total capital18.4%22.5%212025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/data/862668/000086266825000014/esmc

206、-20250331.htm33/36Working Capital PositionWorking capital increased approximately$596,000 as of March 31,2025,and the current ratio increased to 1.92 to 1 from1.65 to 1 when compared to June 30,2024.Debt to total capital ratio was 18.4%and 22.5%as of March 31,2025,and June 30,2024,respectively.The d

207、ecrease of debtto total capital ratio is mainly due to lease payments.Cash Flow Provided by(Used in)Operating ActivitiesDuring the nine months ended March 31,2025,the Company provided approximately$365,000 of cash in operatingactivities as compared to cash of approximately$263,000 used in operating

208、activities during the nine months ended March 31,2024.For the nine months ended March 31,2025,its cash provided by operations is due to a net income of$485,000,an increase inaccrued expenses of 175,000,and an increase in deferred revenue of$96,000,offset by a decrease in accounts payable of$294,000,

209、and an increase in inventory of 131,000.The remaining offsetting items for cash provided by operations is comprised of lesssignificant items.For the nine months ended March 31,2024,its cash used in operations is due to an increase in inventory of$217,000,adecrease in accounts payable of$87,000,a dec

210、rease in lease liability of$245,000,and a decrease in deferred revenue of$23,000,offset by a decrease in accounts receivable of$274,000 and a decrease in other current assets of$83,000.The remaining offsettingitems for cash provided by operations is comprised of less significant items.Cash Flows use

211、d in Investing ActivitiesThere were no cash flows in investing activities for the nine months ended March 31,2025.Cash flows used in investingactivities for the nine months ended March 31,2024 was due to purchase of fixed assets of$31,000.Cash Flows Used in Financing ActivitiesFor the nine months en

212、ded March 31,2025 the cash used in financing activities was due to loan payments of$30,000 andrepayment of EIDL loan of$3,000.For the nine months ended March 31,2024 the cash used in financing activities was due to loanpayments of$28,000 and repayment of EIDL loan of$3,000.Item 3.Quantitative and Qu

213、alitative Disclosures About Market RiskNone.Item 4.Controls and Procedures(A)Evaluation of Disclosure Controls and ProceduresThe Companys management,with the participation of the Companys Chief Executive Officer and Principal Financial andAccounting Officer,have established disclosure controls and p

214、rocedures to ensure that material information relating to theCompany,including its consolidated subsidiaries,is made known to the officers who certify the Companys financial reports and toother members of senior management and the Board of Directors.Based on their evaluation of the effectiveness of

215、the Companys disclosure controls and procedures(as defined in Rules13a-15(e)and 15d-15(e)under the Exchange Act)as of March 31,2025,the Chief Executive Officer and Principal Financial andAccounting Officer of the Company have concluded that such disclosure controls and procedures are effective to en

216、sure that theinformation 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 bedisclosed in the reports that the Comp

217、any files or submits under the Exchange Act is accumulated and communicated to theCompanys management,including its Chief Executive Officer and Principal Financial and Accounting Officer,to allow timelydecisions regarding required disclosure.We identified a material weakness in internal control rela

218、ted to the proper design andimplementation of controls over our estimates relating to the valuation of inventory and allowance for doubtful accounts,specifically over the precision of managements review during the year end June 30,2024.2025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/da

219、ta/862668/000086266825000014/esmc-20250331.htm34/36(B)Internal Control over Financial Reporting222025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/data/862668/000086266825000014/esmc-20250331.htm35/36There have been changes in the Companys internal control over financial reporting(as suc

220、h term is defined in Rule 13a-15(f)under the Exchange Act),during the third quarter ended March 31,2025 that have materially affected,or are reasonablylikely to materially affect,the Companys internal control over financial reporting.These include continuously standardizing theprocess for updating s

221、tandard costs,enhancing data quality control through enhanced segregation of duties in both the updating andreview stages and improving the accuracy of data in an Excel spreadsheet with multiple links and formulas.These changes weredesigned to strengthen the accuracy and reliability of the inventory

222、 valuation process.Part II.OTHER INFORMATIONItem 5.Other InformationNone.Item 6.Exhibits31.1 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

223、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.101.SCH Inline XBRL Taxonomy Extension Schema Document101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document101.DEF Inline XBRL

224、Taxonomy Extension Definition Linkbase Document101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase DocumentSignatures Pursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report

225、to be signed on itsbehalf by the undersigned thereunto duly authorized.Escalon Medical Corp.(Registrant)Date:May 14,2025By:/s/Richard J.DePiano,Jr.Richard J.DePiano,Jr.Chief Executive OfficerDate:May 14,2025By:/s/Mark WallaceMark WallaceChief Operating Officer and PrincipalAccounting&Financial Officer232025/5/22 11:51esmc-20250331https:/www.sec.gov/Archives/edgar/data/862668/000086266825000014/esmc-20250331.htm36/36