ESCALON MEDICAL CORP - Quarter Report: 2023 December (Form 10-Q)

Interest expense()()()()Total other expense()()()()Income tax expense$ $ $ Net loss()()()()Undeclared dividends on preferred stocks Net loss applicable to common shareholders$()$()$()$()Net loss per shareBasic loss per share$()$ $()$()Diluted loss per share$()$ $()$()Weighted average shares—basic Weighted average shares—diluted

See notes to unaudited condensed consolidated financial statements.

ESCALON MEDICAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2023 AND 2022

(UNAUDITED)

Series A Convertible Preferred Stock

Common Stock

Additional
Paid-in
Capital

Accumulated
Deficit

Total
Shareholders’
Equity

Amount

Balance at June 30, 2023

()

Net loss

()

Balance at September 30, 2023

()

Net loss

()

Balance at December 31, 2023

()

Series A Convertible Preferred Stock

Common Stock

Additional
Paid-in
Capital

Accumulated
Deficit

Total
Shareholders’
Equity

Amount

Balance at June 30, 2022

()

Net loss

()

Balance at September 30, 2022

()

Net loss

()

Balance at December 31, 2022

()

Depreciation and amortization

Non cash lease expense

Change in operating assets and liabilities:

Accounts receivable() Inventories ()Other current and non-current assets Accounts payable ()

Accrued expenses

()

Change in operating lease liability

()()Deferred revenue()() Other short term and long term liabilities ()Net cash used in operating activities()()Cash Flows from Investing Activities: Purchase of equipment () Purchase of patents ()

Net cash used in investing activities

()()Cash Flows from Financing Activities:Repayment of note payable()()Repayment of EIDL loan()()Net cash used in financing activities()()Net decrease in cash, cash equivalents and restricted cash()()Cash and restricted cash, beginning of period Cash and restricted cash, end of period$ $ Cash, cash equivalents and restricted cash consist of the following:End of periodCash $ $ Restricted cash $ $


Beginning of period
Cash	$	$
Restricted cash
	$	$


Supplemental Schedule of Cash Flow Information:


Interest paid			$						$

See notes to unaudited condensed consolidated financial statements

Escalon Medical Corp. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

1. Organization and Basis of Presentation

, and the results of operations and cash flows for the interim periods ended and 2022, 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, 2023 included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on October 13, 2023. Operating results for the three months and six months ended are not necessarily indicative of the results that may be expected for the full year ending June 30, 2024.

The Company’s common stock trades on the OTCQB Market under the symbol “ESMC.”

, the Company had incurred historical 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. 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.

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, and implementing cost-cutting measures. The Company may not be successful in any of these efforts.

Principles of Consolidation

Use of Estimates

Accounts Receivable and Allowance for Credit Losses

and $ as of , and June 30, 2023, respectively.

The activity for the allowance for credit losses during the three-month and six-month periods ended , and the fiscal year ended June 30, 2023, is as follows:

$ $ $ Provision (Reversal) () Write-offs Balance, at the end of the period$ $ $ $

Inventories

and $, respectively for the three-month periods ended and 2022. Revenue recorded that was included within prior period deferred revenue was $ and $, respectively for six month periods ended , and 2022.

$ $ $ Additions Revenue Recognized End of Period$ $ $ $

()$ $()$()

Convertible preferred stock Total potential dilutive securities not included in loss per share

$ Work-In-Process Finished Goods Total inventories$ $ Allowance for obsolete inventory()()Inventories, net$ $

principal amount of debt related to the accounts receivable factoring program the Company owes the Holders for shares of Series A Convertible Preferred Stock (the “Preferred Stock”).

Each share of Preferred Stock entitles the Holder thereof to 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 beneficially own approximately % 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 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 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 shares of Common Stock, or approximately % 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 $ 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 , and June 30, 2023, the cumulative dividends payable are $ ($ per share) and $ ($ 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. TD Note Payable

. 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 % per annum. Interest on the unpaid principal balance of the note is calculated using a rate of percentage points over the index, adjusted if necessary for any minimum and maximum rate limitations, resulting in an initial rate of % per annum based on a year of 360 days. The Company was required to put $ in the TD bank savings account as collateral. The Loan is guaranteed by Mr. DePiano Jr.

to a term note effective March 29, 2023 the "Conversion Date"). The scheduled monthly principal and interest payments in the amount of $ began on April 29, 2023. Commencing on the Conversion Date, the aggregate principal balance outstanding bears interest at a fixed per annum rate of % pursuant to the loan's terms and conditions.

The future note payable payments as of are as follows:

2025

2027 2028

Total

7. Long-term debt

EIDL loan. The annual interest rate is %. The payment term is years and the monthly payment of $ started on July 1st, 2021. The EIDL loan is secured by the tangible and intangible personal property of the Company.

are as follows:

2025 2026 2027 2028 Thereafter Total$

8. Concentration of Credit Risk

% and % of net revenue during the three-month period ended . customer accounted for % of net revenue during the six-month period ended . customer accounted for % and % 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.

As of , the Company had customers that represented 16%, %, and 11% of the total accounts receivable balance. As of June 30, 2023, the Company had customer that represents % of the total accounts receivable balance.

Major Supplier

largest supplier accounted for % of total purchases for the three-month period ended . The Company's largest supplier accounted for 43% of total purchases for the six-month period ended . The Company's largest suppliers accounted for % and 12% of total purchases for the three-month period ended December 31, 2022. The Company's largest suppliers accounted for 44% and 10% of total purchases for the six-month period ended December 31, 2022.

As of , the Company had suppliers that represented % of the total accounts payable balance. As of June 30, 2023, the Company had suppliers that represent approximately % and % of the total accounts payable balance.

Disaggregated Revenue

%$ %$ %$ %Foreign % % % %Total$ %$ %$ %$ %

, and 2022 as follows:

$ $ $ Total:$ $ $ $

Supplemental cash flow information was as follows:

$ $ $ Total$ $ $ $

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 :

2025 2026 2027 2028 Thereafter Total lease payments Less interest Present value of lease liabilities$

Average lease terms and discount rates were as follows:

Weighted-average discount rate

Operating leases

% %

10.

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 or 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, 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, 2023. 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, 2023 and this Form 10-Q quarterly report to be an exhaustive statement of all risks, uncertainties or potentially inaccurate assumptions.

Executive Overview—six-month periods ended December 31, 2023, and 2022

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 $204,000 or 3.6%, to $5,814,000 during the six months ended , as compared to the same period of last fiscal year. The increase in net revenue is mainly attributed to an increase in sales of Sonomed's ultrasound products of $234,000 during the six months ended .

•Consolidated cost of goods sold totaled approximately $3,257,000, or 56.0%, of total revenue for the six months ended , as compared to $3,301,000, or 58.8%, of total revenue of the same period of last fiscal year. The decrease of 2.8% in cost of goods sold as a percentage of total revenue is mainly due to changes in product sales mix and geographic differences during the six months ended .

•Consolidated marketing, general and administrative expenses increased $114,000, or 5.3%, to $2,284,000 for the six months ended , as compared to the same period of last fiscal year. The increase in marketing, general and administrative expenses is mainly due to temporary hiring costs, increased network expenses and travel expenses during the six months ended .

•Consolidated research and development expenses decreased $96,000, or 21.1%, to $360,000 for the six months ended , as compared to the same period of last fiscal year. Research and development expenses were primarily expenses associated with the introduction of new or enhanced products. The decrease in research and development expenses is mainly due to decreased image management consulting expense during the six months ended .

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. Under 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 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. On 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 application of judgment or involve complex estimation and which 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, 2023.

During the six months ended December 31, 2023, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses, however there were no significant impact and no changes in our significant accounting policies and estimates to our unaudited condensed consolidated financial statements.

Results of Operations

Three Months and Six Months Ended December 31, 2023, and 2022

The following table shows consolidated net revenue, as well as identifying trends in revenues for the three months and six months ended December 31, 2023, and 2022. Table amounts are in thousands:


	2023		2022		% Change		2023		2022		% Change
Net Revenue:
Products	$	2,734	$	2,854	(4.2)	%	$	5,534	$	5,297	4.5	%
Service plans	135		151		(10.6)	%	280		313		(10.5)	%
Total	$	2,869	$	3,005	(4.5)	%	$	5,814	$	5,610	3.6	%

Consolidated net revenue decreased approximately $136,000 or 4.5%, to $2,869,000 during the three months ended December 31, 2023, as compared to the same period of last fiscal year. The decrease in net revenue is mainly attributed to a decrease in sales of Sonomed's ultrasound products of $115,000 during the three months ended December 31, 2023.

Consolidated net revenue increased approximately $204,000 or 3.6%, to $5,814,000 during the six months ended December 31, 2023, as compared to the same period of last fiscal year. The increase in net revenue is mainly attributed to an increase in sales of Sonomed's ultrasound products of $234,000 during the six months ended December 31, 2023.

The following table presents the domestic and foreign sales for the three months and six months ended December 31, 2023, and 2022. The table amounts are in thousands:


	2023				2022				2023				2022
Domestic	$	1,536	53.5	%	$	1,734	57.7	%	$	3,059	52.6	%	$	3,354	59.8	%
Foreign	1,333		46.5	%	1,271		42.3	%	2,755		47.4	%	2,256		40.2	%
Total	$	2,869	100.0	%	$	3,005	100.0	%	$	5,814	100.0	%	$	5,610	100.0	%

The following table presents consolidated cost of goods sold and as a percentage of revenues for the three months and six months ended December 31, 2023, and 2022. Table amounts are in thousands:


	For the Three Months Ended December 31,								For the Six Months Ended December 31,
	2023		%		2022		%		2023	%		2022	%
Cost of Goods Sold:
	$	1,608	56.0	%	$	1,752	58.3	%	3,257	56.0	%	3,301	58.8	%
Total	$	1,608	56.0	%	$	1,752	58.3	%	3,257	56.0	%	3,301	58.8	%

Consolidated cost of goods sold totaled approximately $1,608,000, or 56.0%, of total revenue for the three months ended December 31, 2023, as compared to $1,752,000, or 58.3%, of total revenue of the same period of last fiscal year. The decrease of 2.3% in the cost of goods sold as a percentage of total revenue is mainly due to changes in product sales mix and geographic differences during the three months ended December 31, 2023.

Consolidated cost of goods sold totaled approximately $3,257,000, or 56.0%, of total revenue for the six months ended December 31, 2023, as compared to $3,301,000, or 58.8%, of total revenue of the same period of last fiscal year. The decrease of 2.8% in the cost of goods sold as a percentage of total revenue is mainly due to changes in product sales mix and geographic differences during the six months ended December 31, 2023.

The following table presents consolidated marketing, general and administrative expenses for three months and six months ended December 31, 2023, and 2022. Table amounts are in thousands:


	2023		2022		% Change		2023		2022		% Change
Marketing, General and Administrative:
	$	1,184	$	1,062	11.5	%	$	2,284	$	2,170	5.3	%
Total	$	1,184	$	1,062	11.5	%	$	2,284	$	2,170	5.3	%

Consolidated marketing, general and administrative expenses increased $122,000, or 11.5%, to $1,184,000 for the three months ended December 31, 2023, as compared to the same period of last fiscal year. The increase in marketing, general and administrative expenses is mainly due to temporary hiring costs, and increased network expenses during the three months ended December 31, 2023.

Consolidated marketing, general and administrative expenses increased $114,000, or 5.3%, to $2,284,000 for the six months ended December 31, 2023, as compared to the same period of last fiscal year. The increase in marketing, general and administrative expenses is mainly due to temporary hiring costs, increased network expenses and travel expenses during the six months ended December 31, 2023.

The following table presents consolidated research and development expenses for the three months and six months ended December 31, 2023, and 2022.

Table amounts are in thousands:


	For the Three Months Ended December 31,						For the Six Months Ended December 31,
	2023		2022		% Change		2023		2022		% Change
Research and Development:
	$	148	$	191	(22.5)	%	360		$	456	(21.1)	%
Total	$	148	$	191	(22.5)	%	$	360	$	456	(21.1)	%

Consolidated research and development expenses decreased $43,000, or 22.5%, to $148,000 for the three months ended December 31, 2023, as compared to the same period of last fiscal year. Research and development expenses were primarily expenses associated with the introduction of new or enhanced products. The decrease in research and development expenses is mainly due to decreased image management consulting expenses offset by the increased current year's new consulting services designing the housing and mechanical inner parts of probes during the three months ended December 31, 2023.

Consolidated research and development expenses decreased $96,000, or 21.1%, to $360,000 for the six months ended December 31, 2023, as compared to the same period of last fiscal year. Research and development expenses were primarily expenses associated with the introduction of new or enhanced products. The decrease in research and development expenses is mainly due to decreased image management consulting expense during the six months ended December 31, 2023.

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 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.

Israel-Hamas war

In October 2023, Hamas terrorists attacked Israel, and then Israel declared war 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 and collection of trade receivables in the region.

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 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

Our total cash on hand as of December 31, 2023 was approximately $390,000 of cash on hand and restricted cash of approximately $256,000 compared to approximately $890,000 of cash on hand and restricted cash of $256,000 as of June 30, 2023.

Because the Company's operations have not historically generated sufficient revenues to enable profitability, we will continue to 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 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 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, 2023, we had an accumulated deficit of approximately $68.5 million, historically incurred recurring losses from operations and negative cash flows from operating activities. These factors raise substantial doubt regarding our ability to continue as a going concern, and our ability to generate cash to meet our cash requirements for the following twelve months as of the date of this form 10-Q.

The following table presents overall liquidity and capital resources as of December 31, 2023, and June 30, 2023. Table amounts are in thousands:


	December 31,	June 30,
	2023	2023
Current Ratio:
Current assets	$4,169	$4,637
Less: Current liabilities	2,544	2,853
Working capital	$1,625	$1,784
Current ratio	1.64 to 1	1.63 to 1
Debt to Total Capital Ratio:
Note payable, lease liabilities, and EIDL loan	$708	$890
Total debt	708	890
Total equity	1,837	1,935
Total capital	$2,545	$2,825
Total debt to total capital	27.8%	31.5%

Working Capital Position

Working capital decreased approximately $159,000 as of , and the current ratio increased to 1.64 to 1 from 1.63 to 1 when compared to June 30, 2023.

Debt to total capital ratio was 27.8% and 31.5% as of , and June 30, 2023, respectively. The decrease of debt to total capital ratio is mainly due to lease payments.

Cash Flow Used in Operating Activities

During the six months ended December 31, 2023, the Company used approximately $438,000 of cash in operating activities as compared to cash of approximately $271,000 used in operating activities during the six months ended December 31, 2023.

For the six months ended December 31, 2023, its cash used in operations is due to an increase in accounts receivable of 271,000, a decrease in accounts payable of $218,000, a decrease in lease liability of $161,000, and a decrease in deferred revenue of $111,000, offset by a decrease in a decrease in inventory of $180,000. The remaining offsetting items for cash provided by operations is comprised of less significant items.

For the six months ended December 31, 2022, its cash used in operations is mainly as a result of net loss, along with an increase in inventories of $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.

Cash Flows used in Investing Activities

Cash flows used in investing activities for the six months ended was due to purchase of fixed assets of $40,000. 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.

Cash Flows Used in Financing Activities

For the six months ended the cash used in financing activities was due to loan payments of $19,000 and repayment of EIDL loan of $2,000. 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.

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 , 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, 2023.

(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 second quarter ended that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Part II. OTHER INFORMATION

Item 5. Other Information

None.

Item 6. Exhibits


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.
101. SCH Inline XBRL Taxonomy Extension Schema Document
101. CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101. DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101. LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101. PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

Signatures

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, 2024

By:

/s/ Richard J. DePiano, Jr.

Richard J. DePiano, Jr.

Chief Executive Officer

Date: February 14, 2024

By:

/s/ Mark Wallace

Mark Wallace

Chief Operating Officer and Principal Accounting & Financial Officer

ESCALON MEDICAL CORP - Quarter Report: 2023 December (Form 10-Q)

Similar companies