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Pennsylvania
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33-0272839
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Large accelerated filer
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o
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Accelerated filer
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o
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Non-accelerated filer
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o
(Do not check if a smaller reporting company)
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Smaller reporting company
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x
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Emerging growth company
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o
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TABLE OF CONTENTS
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Page
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Mine Safety Disclosures
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Item 6.
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Selected Financial Data—omitted pursuant to item 301(c) of Regulation S-K
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Item 7A.
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Quantitative and Qualitative Disclosures About Market Risk—omitted pursuant to item 305(e) of Regulation S-K
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•
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The timing and expense of new product introductions by the Company or its competitors, although the Company might not successfully develop new products and any such new products may not gain market acceptance;
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•
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The cancellation or delays in the purchase of the Company’s products;
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•
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Fluctuations in customer demand for the Company’s products;
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•
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Changes in domestic and foreign regulations;
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•
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The gain or loss of significant customers;
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•
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Changes in the mix of products sold by the Company;
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•
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Competitive pressures on prices at which the Company can sell its products;
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•
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Announcements of new strategic relationships by the Company or its competitors;
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•
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Litigation costs and settlements; and
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•
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General economic conditions and other external factors such as energy costs.
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•
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The price of the products;
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•
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The continued receipt of regulatory approvals for multiple indications;
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•
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The establishment and demonstration of the clinical safety and efficacy of the Company’s products; and
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•
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The advantages of the Company’s products over those marketed by the Company’s competitors.
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•
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Properly identify customer needs;
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•
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Innovate and develop new technologies, services and applications;
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•
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Establish adequate product distribution coverage;
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•
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Obtain and maintain required regulatory approvals from the FDA and other regulatory agencies;
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•
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Protect the Company’s intellectual property;
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•
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Successfully commercialize new technologies in a timely manner;
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•
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Manufacture and deliver the Company’s products in sufficient volumes on time;
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•
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Differentiate the Company’s offerings from the offerings of the Company’s competitors;
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•
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Price the Company’s products competitively;
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•
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Anticipate competitors’ announcements of new products, services or technological innovations; and
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•
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Anticipate general market and economic conditions.
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•
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Acquisitions, strategic alliances, joint ventures and divestitures that the Company effects, if any;
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•
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Announcements of technological innovations;
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•
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Changes in marketing, product pricing and sales strategies or new products by the Company’s competitors;
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•
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Changes in domestic or foreign governmental regulations or regulatory requirements; and
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•
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Developments or disputes relating to patent or proprietary rights and public concern as to the safety and efficacy of the procedures for which the Company’s products are used.
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•
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sales returns;
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•
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allowances for doubtful accounts;
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•
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inventories and related valuation allowances;
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•
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intangible assets;
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•
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income and other tax accruals;
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•
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deferred tax asset valuation allowances;
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•
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sales discounts;
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•
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warranty obligations; and
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•
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accrued lease termination costs
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•
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contingencies and litigation.
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High
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Low
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||||
Fiscal year ended June 30, 2018
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||||
Quarter ended September 30, 2017
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$
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0.22
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$
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0.07
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Quarter ended December 31, 2017
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$
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0.21
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$
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0.12
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Quarter ended March 31, 2018
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$
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0.30
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$
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0.15
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Quarter ended June 30, 2018
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$
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0.30
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|
$
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0.17
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|
Fiscal year ended June 30, 2017
|
|
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|
||||
Quarter ended September 30, 2016
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$
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1.29
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|
$
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0.65
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Quarter ended December 31, 2016
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$
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0.67
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$
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0.07
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Quarter ended March 31, 2017
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$
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0.19
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$
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0.09
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Quarter ended June 30, 2017
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$
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0.24
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$
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0.08
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•
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Total revenue from continuing operations increased approximately
167,000
or
1.5%
during the fiscal year ended June 30,
2018
as compared to the prior fiscal year. The increase in total revenue is attributed to an increase in EMI total products of $104,000, which includes revenue from license and service plans and an increase in sales of Trek products of $212,000 offset by a decrease in sales in Sonomed's ultrasound products of $149,000.
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•
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Cost of goods sold as a percentage of total revenue from continuing operations increased to approximately
55.3%
of product revenues during the fiscal year ended June 30,
2018
, as compared to approximately
54.1%
of total revenue
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•
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Marketing general and administrative expenses and research and development expenses decreased approximately 13.4% during the fiscal year ended June 30,
2018
, as compared to the prior fiscal year. This was due to decreased marketing, general and administrative expenses of 4.5% and by a decrease of
52.6%
in research and development offset.
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Fiscal Years Ended June 30,
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|||||||||
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2018
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2017
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% Change
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|||||
Net Revenue:
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|||||
Products
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$
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10,550
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$
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10,520
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0.3
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%
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Licenses and service plans
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$
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852
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$
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715
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19.2
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%
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Total
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$
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11,402
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$
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11,235
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1.5
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%
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2018
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2017
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||||
Foreign Sales
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$
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4,600,000
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$
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4,821,000
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Total
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$
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4,600,000
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$
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4,821,000
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Total Net Revenue
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$
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11,402,000
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$
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11,235,000
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40.3
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%
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42.9
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%
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Fiscal Years Ended June 30,
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||||||||||||
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2018
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%
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2017
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%
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||||||
Cost of Goods Sold:
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||||||
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$
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6,300
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55.3
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%
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$
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6,080
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54.1
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%
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Total
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$
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6,300
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55.3
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%
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$
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6,080
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54.1
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%
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Fiscal Years Ended June 30,
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|||||||||
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2018
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2017
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% Change
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|||||
Marketing, General and Administrative:
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|||||
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$
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4,397
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$
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4,603
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(4.5
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)%
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Total
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$
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4,397
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$
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4,603
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(4.5
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)%
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Fiscal Years Ended June 30,
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|||||||||
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2018
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2017
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% Change
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|||||
Research and Development:
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|||||
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$
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500
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$
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1,054
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(52.6
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)%
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Total
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$
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500
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$
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1,054
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(52.6
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)%
|
|
June 30,
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||||||
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2018
|
|
2017
|
||||
Current Ratio:
|
|
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|
||||
Current assets
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$
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4,584
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$
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4,155
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Less: Current liabilities
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2,247
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|
|
3,001
|
|
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Working capital
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$
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2,337
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$
|
1,154
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Current ratio
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2.04 to 1
|
|
|
1.38 to 1
|
|
||
Debt to Total Capital Ratio:
|
|
|
|
||||
Related party payable, line of credit and note payable
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$
|
186
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$
|
795
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Total debt
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186
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|
|
795
|
|
||
Total equity
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2,412
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1,184
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Total capital
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$
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2,598
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$
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1,979
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Total debt to total capital
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7.0
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%
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40.2
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%
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Page
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/s/ Friedman LLP
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We have served as the Company’s auditor since 2018.
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Marlton, New Jersey
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September 28, 2018
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ESCALON MEDICAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
|||||||
|
June 30,
2018 |
|
June 30,
2017 |
||||
ASSETS
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|
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|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
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874,002
|
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$
|
544,118
|
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Restricted cash
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250,000
|
|
|
—
|
|
||
Accounts receivable, net
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1,387,133
|
|
|
1,483,770
|
|
||
Inventory, net
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1,823,414
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|
|
1,917,938
|
|
||
Other current assets
|
249,620
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|
|
209,546
|
|
||
Total current assets
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4,584,169
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4,155,372
|
|
||
Property and equipment, net
|
76,268
|
|
|
54,892
|
|
||
Trademarks and trade names
|
605,006
|
|
|
605,006
|
|
||
Patents, net
|
—
|
|
|
400
|
|
||
License, net
|
161,350
|
|
|
168,500
|
|
||
Total assets
|
$
|
5,426,793
|
|
|
$
|
4,984,170
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Line of credit
|
$
|
165,000
|
|
|
$
|
250,000
|
|
Current portion of note payable
|
3,153
|
|
|
—
|
|
||
Accounts payable
|
528,844
|
|
|
1,047,463
|
|
||
Accrued expenses
|
874,421
|
|
|
577,329
|
|
||
Related party note payable
|
—
|
|
|
545,000
|
|
||
Current portion of post-retirement benefits
|
101,891
|
|
|
101,891
|
|
||
Deferred revenue
|
481,180
|
|
|
388,435
|
|
||
Liabilities of discontinued operations
|
92,532
|
|
|
91,125
|
|
||
Total current liabilities
|
2,247,021
|
|
|
3,001,243
|
|
||
Note payable, net of current portion
|
18,037
|
|
|
—
|
|
||
Accrued post-retirement benefits, net of current portion
|
749,480
|
|
|
799,347
|
|
||
Total long-term liabilities
|
767,517
|
|
|
799,347
|
|
||
Total liabilities
|
3,014,538
|
|
|
3,800,590
|
|
||
Commitments and contingencies
|
|
|
|
||||
Shareholders' equity:
|
|
|
|
||||
Series A convertible preferred stock, $0.001 par value; 2,000,000 shares authorized; 2,000,000 issued and outstanding at June 30, 2018 and none issued and outstanding at June 30, 2017 (liquidation value of $645,000)
|
645,000
|
|
|
—
|
|
||
Common stock, $0.001 par value; 35,000,000 shares authorized; 7,415,329 issued and outstanding as of June 30, 2018 and 7,551,430 shares issued and outstanding as of June 30, 2017
|
7,415
|
|
|
7,551
|
|
||
Additional paid-in capital
|
69,702,043
|
|
|
69,701,907
|
|
||
Accumulated deficit
|
(67,942,203
|
)
|
|
(68,525,878
|
)
|
||
Total shareholders’ equity
|
2,412,255
|
|
|
1,183,580
|
|
||
Total liabilities and shareholders’ equity
|
$
|
5,426,793
|
|
|
$
|
4,984,170
|
|
ESCALON MEDICAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|||||||
|
For the Years Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
Net revenues:
|
|
|
|
||||
Products
|
$
|
10,550,272
|
|
|
$
|
10,519,868
|
|
Licenses and service plans
|
852,000
|
|
|
715,000
|
|
||
Revenues, net
|
11,402,272
|
|
|
11,234,868
|
|
||
Costs and expenses:
|
|
|
|
||||
Cost of goods sold
|
6,299,720
|
|
|
6,080,017
|
|
||
Marketing, general and administrative
|
4,397,498
|
|
|
4,603,285
|
|
||
Research and development
|
500,334
|
|
|
1,053,432
|
|
||
Goodwill impairment
|
—
|
|
|
125,027
|
|
||
Total costs and expenses
|
11,197,552
|
|
|
11,861,761
|
|
||
Income (loss) from operations
|
204,720
|
|
|
(626,893
|
)
|
||
Other income (expense)
|
|
|
|
||||
Other income
|
500,000
|
|
|
—
|
|
||
Interest income
|
4,642
|
|
|
327
|
|
||
Interest expense
|
(125,687
|
)
|
|
(100,329
|
)
|
||
Total other income (expense)
|
378,955
|
|
|
(100,002
|
)
|
||
Net income (loss)
|
$
|
583,675
|
|
|
$
|
(726,895
|
)
|
Undeclared dividends on preferred stock
|
19,368
|
|
|
—
|
|
||
Net income (loss) applicable to common shareholders
|
$
|
564,307
|
|
|
$
|
(726,895
|
)
|
Net income (loss) per share
|
|
|
|
||||
Basic earnings per share
|
$
|
0.07
|
|
|
$
|
(0.10
|
)
|
Diluted earnings per share
|
$
|
0.06
|
|
|
$
|
(0.10
|
)
|
Weighted average shares—basic
|
7,551,057
|
|
|
7,551,430
|
|
||
Weighted average shares—diluted
|
9,141,468
|
|
|
7,551,430
|
|
ESCALON MEDICAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|||||||
Years Ended June 30,
|
2018
|
|
2017
|
||||
Cash Flows from Operating Activities:
|
|
|
|
||||
Net income (loss)
|
$
|
583,675
|
|
|
$
|
(726,895
|
)
|
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
|
|
|
|
||||
Recovery of allowance of doubtful accounts
|
(53,190
|
)
|
|
(30,547
|
)
|
||
Provision for inventory valuation allowance
|
114,000
|
|
|
148,894
|
|
||
Gain on sale from source code license agreement
|
(500,000
|
)
|
|
—
|
|
||
Depreciation and amortization
|
49,218
|
|
|
45,914
|
|
||
Goodwill impairment
|
—
|
|
|
125,027
|
|
||
Change in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
149,827
|
|
|
161,326
|
|
||
Inventory
|
(19,476
|
)
|
|
40,316
|
|
||
Other current assets
|
(40,076
|
)
|
|
69,284
|
|
||
Accounts payable and accrued expenses
|
(221,527
|
)
|
|
(352,182
|
)
|
||
Accrued post-retirement benefits
|
(49,867
|
)
|
|
(36,242
|
)
|
||
Deferred revenue
|
92,745
|
|
|
46,644
|
|
||
Liabilities of discontinued operations
|
1,407
|
|
|
2,465
|
|
||
Net cash provided by (used in) operating activities
|
106,736
|
|
|
(505,996
|
)
|
||
Cash Flows from Investing Activities:
|
|
|
|
||||
Proceeds from sales of source code licensing agreement
|
500,000
|
|
|
—
|
|
||
Purchase of equipment
|
(29,352
|
)
|
|
—
|
|
||
Purchase of licenses
|
(12,500
|
)
|
|
(8,000
|
)
|
||
Net cash provided by (used in) investing activities
|
458,148
|
|
|
(8,000
|
)
|
||
Cash Flows from Financing Activities:
|
|
|
|
||||
Increase in restricted cash
|
(250,000
|
)
|
|
—
|
|
||
Proceeds from related party note payable
|
100,000
|
|
|
270,000
|
|
||
Proceeds from (Prepayment of ) line of credit
|
(85,000
|
)
|
|
250,000
|
|
||
Net cash provided by financing activities
|
(235,000
|
)
|
|
520,000
|
|
||
Net increase in cash and cash equivalents
|
329,884
|
|
|
6,004
|
|
||
Cash and cash equivalents, beginning of year
|
544,118
|
|
|
538,114
|
|
||
Cash and cash equivalents, end of year
|
$
|
874,002
|
|
|
$
|
544,118
|
|
Supplemental Schedule of Cash Flow Information:
|
|
|
|
||||
Interest paid
|
$
|
37,811
|
|
|
$
|
54,802
|
|
Non Cash Finance and Investing Activities
|
|
|
|
||||
Note payable for acquisition of vehicle
|
$
|
22,372
|
|
|
$
|
—
|
|
Related party note payable converted to preferred stock
|
$
|
645,000
|
|
|
$
|
—
|
|
|
June 30,
|
||||||
|
2018
|
|
2017
|
||||
Balance, July 1
|
$
|
172,120
|
|
|
$
|
202,667
|
|
Recovery in bad debts
|
(45,593
|
)
|
|
—
|
|
||
Write-offs
|
(7,597
|
)
|
|
(30,547
|
)
|
||
Balance, June 30
|
$
|
118,930
|
|
|
$
|
172,120
|
|
|
For the years ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
Raw materials
|
$
|
652,613
|
|
|
$
|
864,813
|
|
Work in process
|
192,287
|
|
|
336,934
|
|
||
Finished goods
|
978,514
|
|
|
716,191
|
|
||
Total inventory
|
$
|
1,823,414
|
|
|
$
|
1,917,938
|
|
|
For the years ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
Balance, July 1
|
$
|
347,014
|
|
|
$
|
198,120
|
|
Provision for valuation allowance
|
114,000
|
|
|
150,000
|
|
||
Write-off
|
—
|
|
|
(1,106
|
)
|
||
Balance, June 30
|
$
|
461,014
|
|
|
$
|
347,014
|
|
|
June 30,
|
||||||
|
2018
|
|
2017
|
||||
Equipment
|
$
|
701,848
|
|
|
$
|
695,311
|
|
Furniture and fixtures
|
143,330
|
|
|
99,321
|
|
||
Leasehold improvement
|
28,549
|
|
|
28,549
|
|
||
|
873,727
|
|
|
823,181
|
|
||
Less: Accumulated depreciation and amortization
|
(797,459
|
)
|
|
(768,289
|
)
|
||
|
$
|
76,268
|
|
|
$
|
54,892
|
|
|
|
For the Year Ended June 30,
|
|
For the Year Ended June 30,
|
||||
|
|
2018
|
|
2017
|
||||
Numerator:
|
|
|
|
|
||||
Numerator for basic earnings per share
|
|
|
|
|
||||
Net income (loss)
|
|
$
|
583,675
|
|
|
$
|
(726,895
|
)
|
Undeclared dividends on preferred stock
|
|
19,368
|
|
|
—
|
|
||
Net income (loss) applicable to common shareholders
|
|
$
|
564,307
|
|
|
$
|
(726,895
|
)
|
Numerator for diluted earnings per share:
|
|
|
|
|
||||
Net income (loss) applicable to common shareholders
|
|
$
|
564,307
|
|
|
$
|
(726,895
|
)
|
Undeclared dividends on preferred stock
|
|
19,368
|
|
|
—
|
|
||
Net income (loss)
|
|
$
|
583,675
|
|
|
$
|
(726,895
|
)
|
Denominator:
|
|
|
|
|
||||
Denominator for basic earnings per share - weighted average shares outstanding
|
|
7,551,057
|
|
|
7,551,430
|
|
||
Weighted average preferred stock converted to common stock
|
|
1,590,411
|
|
|
—
|
|
||
Denominator for diluted earnings per share - weighted average and assumed conversion
|
|
9,141,468
|
|
|
7,551,430
|
|
||
|
|
|
|
|
||||
Net income (loss) per share
|
|
|
|
|
||||
Basic net income (loss) per share
|
|
$
|
0.07
|
|
|
$
|
(0.10
|
)
|
Diluted net income (loss) per share
|
|
$
|
0.06
|
|
|
$
|
(0.10
|
)
|
|
For the Year Ended June 30,
|
|
For the Year Ended June 30,
|
||
|
2018
|
|
2017
|
||
Stock options
|
367,500
|
|
|
502,000
|
|
Total potential dilutive securities not included in income per share
|
367,500
|
|
|
502,000
|
|
|
|
|
|
|
2018 Net Carrying Amount
|
|
2017 Net Carrying Amount
|
||||
Trademarks and trade names
|
|
|
|
||||
|
$
|
605,006
|
|
|
$
|
605,006
|
|
Total
|
$
|
605,006
|
|
|
$
|
605,006
|
|
|
Gross
Carrying
Amount
|
|
Impairment
|
|
Adjusted
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Value
|
||||||||||
Amortized Intangible Assets Patents
|
|
|
|
|
|
|
|
|
|
||||||||||
|
$
|
90,962
|
|
|
$
|
—
|
|
|
$
|
90,962
|
|
|
$
|
(90,962
|
)
|
|
$
|
—
|
|
Total
|
$
|
90,962
|
|
|
$
|
—
|
|
|
$
|
90,962
|
|
|
$
|
(90,962
|
)
|
|
$
|
—
|
|
|
Gross
Carrying
Amount
|
|
Impairment
|
|
Adjusted
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Value
|
||||||||||
Amortized Intangible Assets Patents
|
|
|
|
|
|
|
|
|
|
||||||||||
|
$
|
90,962
|
|
|
$
|
—
|
|
|
$
|
90,962
|
|
|
$
|
(90,562
|
)
|
|
$
|
400
|
|
Total
|
$
|
90,962
|
|
|
$
|
—
|
|
|
$
|
90,962
|
|
|
$
|
(90,562
|
)
|
|
$
|
400
|
|
|
Gross
Carrying Amount |
|
Impairment
|
|
Adjusted
Gross Carrying Amount |
|
Accumulated
Amortization |
|
Net
Carrying Value |
||||||||||
Amortized Intangible Assets Licenses
|
|
|
|
|
|
|
|
|
|
||||||||||
|
$
|
199,000
|
|
|
$
|
—
|
|
|
$
|
199,000
|
|
|
$
|
(37,650
|
)
|
|
$
|
161,350
|
|
Total
|
$
|
199,000
|
|
|
$
|
—
|
|
|
$
|
199,000
|
|
|
$
|
(37,650
|
)
|
|
$
|
161,350
|
|
|
Gross
Carrying Amount |
|
Impairment
|
|
Adjusted
Gross Carrying Amount |
|
Accumulated
Amortization |
|
Net
Carrying Value |
||||||||||
Amortized Intangible Assets Licenses
|
|
|
|
|
|
|
|
|
|
||||||||||
|
$
|
186,500
|
|
|
$
|
—
|
|
|
$
|
186,500
|
|
|
$
|
(18,000
|
)
|
|
$
|
168,500
|
|
Total
|
$
|
186,500
|
|
|
$
|
—
|
|
|
$
|
186,500
|
|
|
$
|
(18,000
|
)
|
|
$
|
168,500
|
|
|
June 30, 2018
|
|
June 30,
2017 |
||||
Accrued compensation
|
$
|
424,871
|
|
|
$
|
375,451
|
|
Interest accrual
|
142,186
|
|
|
56,887
|
|
||
Customer deposits
|
61,494
|
|
|
28,447
|
|
||
Warranty reserve
|
32,078
|
|
|
32,078
|
|
||
Sales tax payable
|
104,539
|
|
|
43,639
|
|
||
Rent payable
|
49,458
|
|
|
—
|
|
||
Other accruals
|
59,795
|
|
|
40,827
|
|
||
Total accrued expenses
|
$
|
874,421
|
|
|
$
|
577,329
|
|
|
2018
|
|
2017
|
||||||||||
|
Common
Stock
Options
|
|
Weighted
Average
Exercise
Price
|
|
Common
Stock
Options
|
|
Weighted
Average
Exercise
Price
|
||||||
Outstanding at the beginning of the year
|
502,000
|
|
|
$
|
2.12
|
|
|
616,500
|
|
|
$
|
2.27
|
|
Granted
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Exercised
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Forfeited
|
(134,500
|
)
|
|
3.05
|
|
|
(114,500
|
)
|
|
$
|
2.65
|
|
|
Outstanding at the end of the year
|
367,500
|
|
|
$
|
1.78
|
|
|
502,000
|
|
|
$
|
2.12
|
|
Exercisable at the end of the year
|
367,500
|
|
|
$
|
1.78
|
|
|
502,000
|
|
|
2.12
|
|
|
Weighted average fair value of options granted during the year
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
Number
Outstanding at June 30, 2018 |
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
|
Weighted
Average
Exercise
Price
|
|
Number
Exercisable at June 30, 2018 |
|
Weighted
Average
Exercise
Price
|
||||||
Range of Exercise Prices
|
|
|
|
|
|
|
|
|
|
||||||
$0.79
|
21,000
|
|
|
7.5
|
|
$
|
0.79
|
|
|
21,000
|
|
|
$
|
0.79
|
|
$1.51 to $1.57
|
192,000
|
|
|
4.54
|
|
$
|
1.55
|
|
|
192,000
|
|
|
$
|
1.55
|
|
$2.21
|
154,500
|
|
|
0.42
|
|
$
|
2.21
|
|
|
154,500
|
|
|
$
|
2.21
|
|
Total
|
367,500
|
|
|
|
|
|
|
367,500
|
|
|
|
|
2018
|
|
2017
|
||||
Current income tax (benefit) provision
|
|
|
|
||||
Federal
|
$
|
—
|
|
|
$
|
—
|
|
State
|
—
|
|
|
—
|
|
||
|
—
|
|
|
—
|
|
||
Deferred income tax provision
|
|
|
|
||||
Federal
|
(3,498,532
|
)
|
|
125,468
|
|
||
State
|
(999,581
|
)
|
|
22,142
|
|
||
Change in valuation allowance
|
4,498,113
|
|
|
(147,610
|
)
|
||
|
—
|
|
|
—
|
|
||
Income tax (benefit)
|
$
|
—
|
|
|
$
|
—
|
|
|
2018
|
|
2017
|
||
Statutory federal income tax rate
|
34.00
|
%
|
|
34.00
|
%
|
Increase in deductible timing differences
|
(0.51
|
)%
|
|
11.00
|
%
|
Tax Act-revaluation of net deferred tax assets
|
(33.49
|
)%
|
|
0.00
|
%
|
Net operating loss carryforward
|
0.00
|
%
|
|
(45.00
|
)%
|
Effective income tax rate
|
0.00
|
%
|
|
0.00
|
%
|
|
2018
|
|
2017
|
||||
Deferred income tax assets:
|
|
|
|
||||
Net operating loss carryforward
|
$
|
7,042,134
|
|
|
$
|
11,323,998
|
|
Executive post retirement costs
|
178,788
|
|
|
306,421
|
|
||
General business credit
|
207,698
|
|
|
207,698
|
|
||
Allowance for doubtful accounts
|
24,975
|
|
|
58,521
|
|
||
Accrued vacation
|
46,527
|
|
|
89,477
|
|
||
Inventory reserve
|
96,813
|
|
|
117,985
|
|
||
Accelerated depreciation
|
119,980
|
|
|
38,492
|
|
||
Warranty reserve
|
6,736
|
|
|
10,907
|
|
||
Total deferred income tax assets
|
7,723,651
|
|
|
12,153,499
|
|
||
Valuation allowance
|
(7,562,716
|
)
|
|
(12,060,831
|
)
|
||
|
160,935
|
|
|
92,668
|
|
||
Deferred income tax liabilities:
|
|
|
|
||||
Accelerated depreciation
|
(160,935
|
)
|
|
(92,668
|
)
|
||
Total deferred income tax liabilities
|
(160,935
|
)
|
|
(92,668
|
)
|
||
|
$
|
—
|
|
|
$
|
—
|
|
Year Ending June 30,
|
Lease
Obligations |
||
2019
|
$
|
365,351
|
|
2020
|
268,469
|
|
|
2021
|
182,972
|
|
|
2022
|
178,536
|
|
|
2023
|
183,892
|
|
|
Thereafter
|
286,238
|
|
|
Total
|
$
|
1,465,458
|
|
|
2018
|
2017
|
Balance July 1,
|
$901,238
|
$937,480
|
Actuarial adjustment
|
52,024
|
65,649
|
Payment of benefits
|
(101,891)
|
(101,891)
|
Balance June 30,
|
$851,371
|
$901,238
|
|
June 30,
|
|
June 30,
|
||||
|
2018
|
|
2017
|
||||
Assets
|
|
|
|
||||
Total assets
|
$
|
—
|
|
|
$
|
—
|
|
Liabilities
|
|
|
|
||||
Accrued lease termination costs
|
93
|
|
|
91
|
|
||
Total liabilities
|
93
|
|
|
91
|
|
||
Net liabilities of discontinued operations
|
$
|
(93
|
)
|
|
$
|
(91
|
)
|
|
Years Ended June 30,
|
|||||||||||
|
2018
|
|
2017
|
|||||||||
Domestic
|
6,802,000
|
|
|
59.66
|
%
|
|
6,414,000
|
|
0.570894526
|
|
57.09
|
%
|
International
|
4,600,000
|
|
|
40.34
|
%
|
|
4,821,000
|
|
0.429105474
|
|
42.91
|
%
|
Total
|
11,402,000
|
|
|
100.00
|
%
|
|
11,235,000
|
|
1
|
|
100.00
|
%
|
•
|
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets;
|
•
|
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and
|
•
|
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on our financial statements.
|
ITEM 11.
|
EXECUTIVE COMPENSATION
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
ITEM 14.
|
PRINCIPAL ACCOUNTING FEES AND SERVICES
|
1.
|
Documents Filed as Part of This Annual Report on Form 10-K:
|
a.
|
Financial Statements
|
2.
|
Financial Statement Schedules
|
3.
|
EXHIBITS
|
3.1
|
|
(a)
|
Restated Articles of Incorporation of the Company. (8)
|
|
|
|
|
|
(b)
|
Agreement and Plan of Merger dated as of September 28, 2001 between Escalon Pennsylvania, Inc. and Escalon Medical Corp. (8)
|
|
|
|
|
|
3.2
|
|
|
Bylaws of Registrant. (8)
|
|
|
|
|
|
|
|
|
10.6
|
|
|
Employment Agreement between the Company and Richard J. DePiano dated May 12, 1998. (6)**
|
|
|
|
|
10.7
|
|
|
Non-Exclusive Distributorship Agreement between Company and Scott Medical Products dated October 12, 2000. (9)
|
|
|
|
|
10.13
|
|
|
Supply Agreement between the Company and Bausch & Lomb Surgical, Inc. dated August 13, 1999. (5)
|
|
|
|
|
10.29
|
|
|
Company’s amended and restated 1999 Equity Incentive Plan. (13) **
|
|
|
|
10.33
|
|
Manufacturing Supply and Distribution Agreement between Sonomed, Inc. and Ophthalmic Technologies, Inc. dated as of March 11, 2004. (15)
|
|
|
|
10.34
|
|
Supplemental Executive Retirement Benefit Agreement for Richard DePiano dated June 23, 2005. (16)**
|
|
|
|
10.35
|
|
Settlement Agreement with Intralase Corp, dated February 27, 2008 (4).
|
|
|
|
10.36
|
|
Vascular Access Sales Agreement with Vascular Solutions, Inc. dated April 28, 2010 (17)
|
10.37
|
|
2013 Equity Incentive Plan dated December 27, 2013 incorporate by reference.
|
10.38
|
|
Debt Exchange Agreement as of February 14, 2018 (18)
|
10.39
|
|
Business Loan Agreement with TD Bank, N.A. dated June 29, 2018. (19)
|
10.40
|
|
Promissory Note dated June 29, 2018 between the Company and TD Bank N.A. (19)
|
10.41
|
|
Agreement of Deposit Account dated June 29, 2018 between the Company and TD Bank N.A. (19)
|
21
|
|
Subsidiaries. (11)
|
|
|
|
23.1
|
|
|
23.2
|
|
|
31.1
|
|
|
|
|
|
31.2
|
|
|
|
|
|
32.1
|
|
|
|
|
|
32.2
|
|
*
|
Filed herewith
|
**
|
Management contract of compensatory plan
|
|
|
(1)
|
Filed as an exhibit to Pre-Effective Amendment No. 2 to the Company’s Registration Statement on Form S-1 dated November 9, 1993 (Registration No. 33-69360).
|
(2)
|
Filed as an exhibit to the Company’s Form 10-KSB for the year ended June 30, 1994.
|
(3)
|
Filed as an exhibit to the Company’s Form 10-KSB for the year ended June 30, 1995.
|
(4)
|
Filed as an exhibit to the Company’s Form 8-K dated February 27, 2008.
|
(5)
|
Filed as an exhibit to the Company’s Form 10-KSB for the year ended June 30, 1999.
|
(6)
|
Filed as an exhibit to the Company’s Form 8-K/A, dated March 31, 2000
|
(7)
|
Filed as an exhibit to the Company’s Registration Statement on Form s-* dated February 25, 2000 (Registration No. 333-31138).
|
(8)
|
Filed as an exhibit to the Company’s Proxy Statement on Schedule 14A, as filed by the Company with the SEC on September 21, 2001.
|
(9)
|
Filed as an exhibit to the Company’s Form 10-KSB for the year ended June 30, 2001.
|
(10)
|
Filed as an exhibit to the Company’s Form 10-Q for the quarter ended March 31, 2001.
|
(11)
|
Filed as an exhibit to the Company’s Form 10-KSB/A for the year ended June 30, 2002.
|
(12)
|
Filed as an exhibit to the Company’s Form 10-Q for the quarter ended December 31, 2002.
|
(13)
|
Filed as an exhibit to the Company’s Form 10-Q for the quarter ended December 31, 2003.
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(14)
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Filed as an exhibit to the Company’s Registration Statement on Form S-3 dated April 8, 2004 (Registration No. 333-114332).
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(15)
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Filed as an exhibit to the Company’s Form 10-Q for the quarter ended March 31, 2004.
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(16)
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Filed as an exhibit to the Company’s Form 8-K, dated June 23, 2005.
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(17)
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Filed as an exhibit to the Company’s Form 8-K, dated May 6, 2010.
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(18)
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Filed as an exhibit to the Company's Form 8-K, dated February 2018
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(19)
|
Filed as exhibit to the Company's Form 8-K dated February 15, 2018
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Escalon Medical Corp.
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(Registrant)
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By:
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/s/ Richard J. DePiano, Jr.
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Richard J. DePiano, Jr.
Chief Executive Officer
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By:
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/s/ Richard J. DePiano
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Chairman
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September 28, 2018
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Richard J. DePiano
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By:
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/s/ Richard J. DePiano, Jr.
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Chief Executive Officer (Principal Executive Officer)
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September 28, 2018
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Richard J. DePiano, Jr.
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By:
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/s/ Mark Wallace
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Chief Operating Officer and Principal Financial & Accounting Officer
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September 28, 2018
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Mark Wallace
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By:
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/s/ John P. Dogum
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Director
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September 28, 2018
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John P. Dogum
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By:
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/s/ Lisa Napolitano
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Director
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September 28, 2018
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Lisa Napolitano
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By:
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/s/ C. Todd Trusk
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Director
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September 28, 2018
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C. Todd Trusk
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By:
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/s/ David J Jacovinni
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Director
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September 28, 2018
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David J Jacovini
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1.
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I have reviewed this annual report on Form 10-K for the fiscal year ended June 30,
2018
of Escalon Medical Corp.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a.
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c.
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a.
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b.
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Richard J. DePiano, Jr.
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Richard J. DePiano, Jr.
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Chief Executive Officer
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Date: September 28, 2018
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1.
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I have reviewed this annual report on Form 10-K for the fiscal year ended June 30,
2018
of Escalon Medical Corp.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a.
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c.
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a.
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b.
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Mark Wallace
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Mark Wallace
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Date: September 28, 2018
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1.
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
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2.
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ Richard J. DePiano, Jr.
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Richard J. DePiano, Jr.
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Chief Executive Officer
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1.
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
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2.
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ Mark Wallace
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Mark Wallace
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