Escalon Medical Corp 10-K for FY2022

Escalon Medical Corp (ESMC)

10-K 2022-09-28 For: 2022-06-30

Added on April 06, 2026

About this 10-K

Escalon Medical Corp filed this 10-K on September 28, 2022, covering the fiscal year ended June 30, 2022 (FY2022).

Headline figures

Fiscal year ended June 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $10.7M; up 2.2% from $10.47M a year earlier
Net income: $18.08K; compared with a net loss of $52.02K a year earlier
Diluted EPS: $0.00; compared with -$0.01 a year earlier

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	2022		2021
Balance July 1,	$	—	$	791,985
Actuarial adjustment	—		(758,021)
Payment of benefits	—		(33,964)
Balance June 30,	$	—	$	—


	2022		2021
Balance July 1,	$	—	$	791,985
Actuarial adjustment	—		(758,021)
Payment of benefits	—		(33,964)
Balance June 30,	$	—	$	—


Pennsylvania						33-0272839
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


		Page
	PART I

Item 1.	Business	2
Item 1A.	Risk Factors	6
Item 1B.	Unresolved Staff Comments	14
Item 2.	Properties	14
Item 3.	Legal Proceedings	14
Item 4.	Mine Safety Disclosures	14

	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	14
Item 6.	[Reserved]
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk—omitted pursuant to item 305(e) of Regulation S-K
Item 8.	Financial Statements and Supplementary Data	23
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	45
Item 9A.	Controls and Procedures	45
Item 9B.	Other Information	46

	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	46
Item 11.	Executive Compensation	48
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	50
Item 13.	Certain Relationships and Related Transactions, and Director Independence	51
Item 14.	Principal Accounting Fees and Services	52

	PART IV
Item 15.	Exhibits and Financial Statement Schedules	53


	For the Years Ended June 30,
		2022		2021		% Change
Net Revenue:
Products		$	9,980	$	9,548	4.5	%
Service plans		723		924		(21.8)	%
Total		$	10,703	$	10,472	2.2	%


	June 30,	June 30,
	2022	2021
Current Ratio:
Current assets	$4,186	$4,593
Less: Current liabilities	3,002	3,397
Working capital	$1,184	$1,196
Current ratio	1.39 to 1	1.35 to 1
Debt to Total Capital Ratio:
Line of credit, note payable, lease liabilities, PPP loan and EIDL loan	$1,205	$1,772
Total debt	1,205	1,772
Total equity	1,478	1,460
Total capital	$2,683	$3,232
Total debt to total capital	44.9%	54.8%



			Page
Report of Independent Registered Public Accounting Firm (PCAOB ID 711)			24
Consolidated Balance Sheets at June 30, 2022 and 2021			26
Consolidated Statements of Operations for the Years Ended June 30, 2022 and 2021			27
Consolidated Statements of Shareholders’ Equity for the Years Ended June 30, 2022 and 2021			28
Consolidated Statements of Cash Flows for the Years Ended June 30, 2022 and 2021			29
Notes to Consolidated Financial Statements			31


/s/ Friedman LLP

We have served as the Company’s auditor since 2018.

Marlton, New Jersey

September 28, 2022


	June 30, 2022		June 30, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	593,869	$	1,650,970
Restricted cash	256,165		255,920
Accounts receivable, net	1,541,750		1,081,702
Inventories, net	1,603,955		1,416,727
Other current assets	190,043		187,357
Total current assets	4,185,782		4,592,676
Property and equipment, net	52,660		81,442
Right-of-use assets	788,257		843,559
License, net	82,750		102,400
Other long term assets	62,788		62,789
Total assets	$	5,172,237	$	5,682,866
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Line of credit	$	201,575	$	201,575
Current portion of note payable	3,401		3,401
Current portion of PPP loan	—		500,000
Current portion of EIDL loan	3,105		2,862
Accounts payable	1,012,451		1,102,125
Accrued expenses	901,996		695,553
Related party accrued interest	112,389		112,389
Current portion of operating lease liabilities	304,737		279,051
Deferred revenue	332,383		363,700
Other short term liabilities	129,961		136,107
Total current liabilities	3,001,998		3,396,763
Note payable, net of current portion	3,888		7,839
Operating lease liabilities, net of current portion	538,794		630,330
EIDL loan, net of current portion	149,540		147,138
Other long-term liabilities	—		40,860
Total long-term liabilities	692,222		826,167
Total liabilities	3,694,220		4,222,930
Commitments and 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 $870,731 and $819,131)	645,000		645,000
Common stock, $0.001 par value; 35,000,000 shares authorized; 7,415,329 shares issued and outstanding	7,415		7,415
Additional paid-in capital	69,702,043		69,702,043
Accumulated deficit	(68,876,441)		(68,894,522)
Total shareholders’ equity	1,478,017		1,459,936
Total liabilities and shareholders’ equity	$	5,172,237	$	5,682,866


ESCALON MEDICAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
	For the Years Ended June 30,
		2022		2021
Net revenues:
Products		$	9,980,343	$	9,547,606
Service plans		722,727		924,011
Revenues, net		10,703,070		10,471,617
Costs and expenses:
Cost of goods sold		6,096,169		6,044,399
Marketing, general and administrative		4,085,982		3,570,433
Research and development		990,982		890,482

Total costs and expenses		11,173,133		10,505,314
Loss from operations		(470,063)		(33,697)
Other income (expense)
Other income		506,305		2,530
Interest income		245		985
Interest expense		(18,406)		(21,841)
Total other income, net		488,144		(18,326)
Net income (loss)		18,081		(52,023)
Undeclared dividends on preferred stocks		51,600		51,422
Net income (loss) applicable to common shareholders		$	(33,519)	$	(103,445)
Net income (loss) per share
Basic income (loss) per share		$	0.00	$	(0.01)
Diluted income (loss) per share		$	0.00	$	(0.01)
Weighted average shares—basic		7,415,329		7,415,329
Weighted average shares—diluted		13,220,202		7,415,329


	Series A Convertible Preferred Stock			Common Stock			Additional Paid-in Capital		Accumulated Deficit		Total Shareholders’ Equity
	Shares	Amount		Shares	Amount
Balance at June 30, 2021	2,000,000	$	645,000	7,415,329	$	7,415	$	69,702,043	$	(68,894,522)	$	1,459,936




Net income	—	—		—	—		—		18,081		18,081
Balance at June 30, 2022	2,000,000	$	645,000	7,415,329	$	7,415	$	69,702,043	$	(68,876,441)	$	1,478,017


ESCALON MEDICAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Years Ended June 30,
	2022		2021
Cash Flows from Operating Activities:
Net income (loss)	$	18,081	$	(52,023)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:

Increase in accounts receivable allowance	155,267		10,000

Other income-gain on PPP loan forgiveness	(506,305)		—
Depreciation and amortization	48,432		44,812
Non cash lease expense	279,719		274,615


Change in operating assets and liabilities:
Accounts receivable	(615,315)		221,233
Inventories	(187,229)		368,303
Other current assets	(2,684)		(33,164)

Accounts payable	(89,674)		341,504
Accrued expenses	218,373		14,506
Change in operating lease liability	(290,267)		(276,833)
Deferred revenue	(31,317)		(152,353)
Other short-term and long-term liabilities	(47,006)		78,105
Net cash (used in) provided by operating activities	(1,049,925)		838,705
Cash Flows from Investing Activities:
Purchase of equipment	—		(9,390)

Net cash used in investing activities	—		(9,390)
Cash Flows from Financing Activities:
Repayment of EIDL loan	(2,980)		—
Repayment of note payable	(3,951)		(3,664)

Net cash used in financing activities	(6,931)		(3,664)
Net (decrease) increase in cash, cash equivalents and restricted cash	(1,056,856)		825,651
Cash, cash equivalents and restricted cash, beginning of year	1,906,890		1,081,239
Cash, cash equivalents and restricted cash, end of year	$	850,034	$	1,906,890

Cash, cash equivalents and restricted cash consist of the following:
End of year
Cash and cash equivalents	$	593,869	$	1,650,970
Restricted cash	256,165		255,920
	$	850,034	$	1,906,890
Beginning of year
Cash and cash equivalents	$	1,650,970	$	825,958
Restricted cash	255,920		255,281
	$	1,906,890	$	1,081,239

Supplemental Schedule of Cash Flow Information:
Income taxes paid	$	—	$	—
Interest paid	$	18,406	$	11,223

Non Cash Finance Activities


Record right-of-use assets per ASC 842	$	224,417	$	20,200
Record lease liability per ASC 842	$	224,417	$	20,200
Dispose right-of-use assets	$	—	$	9,154
Dispose lease liability	$	—	$	9,154


	Years ended June 30,
		2022		2021
Beginning of Year		$	364,000	$	516,000
Additions		692,000		772,000
Revenue Recognized		(723,000)		(924,000)
End of Year		$	333,000	$	364,000


	Gross Carrying Amount		Impairment		Adjusted Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Amortized Intangible Assets Licenses
	$	199,000	$	—	$	199,000	$	(116,250)	$	82,750
Total	$	199,000	$	—	$	199,000	$	(116,250)	$	82,750


	For the Years Ended June 30,
		2022	2021
Domestic			$	5,720	53.4	%	$	6,255	59.7	%
Foreign			4,983		46.6	%	4,217		40.3	%
Total			$	10,703	100.0	%	$	10,472	100.0	%


	For the Years Ended June 30,
		2022		%		2021		%
Cost of Goods Sold:
		$	6,096	57.0	%	$	6,044	57.7	%
Total		$	6,096	57.0	%	$	6,044	57.7	%



	For the years ended June 30,
	2022		2021
Raw materials	$	1,010,471	$	833,105
Work in process	138,182		171,097
Finished goods	805,698		773,451
Total inventories	$	1,954,351	$	1,777,653

Allowance for obsolete inventory	(350,396)		(360,926)
Inventories, net	$	1,603,955	$	1,416,727


	June 30,
	2022		2021
Equipment	$	771,097	$	748,725
Furniture and fixtures	128,499		150,871
Leasehold improvements	39,048		39,048
	938,644		938,644
Less: Accumulated depreciation and amortization	(885,984)		(857,202)
	$	52,660	$	81,442



Year ending June 30,	EIDL Loan Payment
2023	$	3,105
2024	3,084
2025	3,202
2026	3,324
2027	3,582
Thereafter	136,348
Total	$	152,645


	2022			2021
	Common Stock Options	Weighted Average Exercise Price		Common Stock Options	Weighted Average Exercise Price
Outstanding at the beginning of the year	157,000	$	1.47	157,000	$	1.47
Granted	—	—		—	—
Exercised	—	—		—	—
Forfeited	—	—		—	$	—
Outstanding at the end of the year	157,000	$	1.47	157,000	$	1.47
Exercisable at the end of the year	157,000	$	1.47	157,000	1.47
Weighted average fair value of options granted during the year		$	—		$	—


	Number Outstanding at June 30, 2022	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price		Number Exercisable at June 30, 2022	Weighted Average Exercise Price
Range of Exercise Prices
$0.79	21,000	3.83	$	0.79	21,000	$	0.79
$1.45 to $2.12	136,000	1.83	$	1.57	136,000	$	1.57
Total	157,000				157,000


	2022		2021
Current income tax provision
Federal	$	—	$	—
State	—		—
	—		—
Deferred income tax provision
Federal	(82,615)		51,366
State	(23,605)		14,676
Change in valuation allowance	106,220		(66,042)
	—		—
Income tax expense (benefit)	$	—	$	—


	2022		2021
Statutory federal income tax rate	21.00	%	21.00	%
Permanent differences	0.00	%	0.00	%

Valuation allowance	(21.00)	%	(21.00)	%
Effective income tax rate	0.00	%	0.00	%


	2022		2021
Deferred income tax assets:
Net operating loss carryforward	$	7,430,299	$	7,352,719
Executive post retirement costs	—		—
General business credit	—		—
Allowance for doubtful accounts	49,633		21,100
Accrued vacation	48,969		49,336
Inventory reserve	73,583		69,432



Accelerated depreciation	57,628		65,432
Warranty reserve	6,736		6,736
Total deferred income tax assets	7,666,848		7,564,755
Valuation allowance	(7,649,471)		(7,543,251)
	17,377		21,504
Deferred income tax liabilities:
Accelerated depreciation	(17,377)		(21,504)
Total deferred income tax liabilities	(17,377)		(21,504)
	$	—	$	—


(in thousands)	For the Years Ended June 30,
		2022	2021
Domestic			$	5,720	53.4	%	$	6,255	59.7	%
Foreign			4,983		46.6	%	4,217		40.3	%
Total			$	10,703	100.0	%	$	10,472	100.0	%


	Year Ended June 30,
	2022		2021
Operating lease costs:
Fixed	337,774		346,302
Total:	$	337,774	$	346,302


		June 30,
Leases (operating)	Classification on the Balance Sheet	2022		2021
Assets
Operating lease ROU assets	Right-of-use asset	$	788,257	$	843,559
Liabilities
Current	Current portion of operating lease liabilities	$	304,737	$	279,051
Non-current	Operating lease liabilities	$	538,794	$	630,330


	Operating


2023	343,242
2024	350,142
2025	211,215
2026	2,728

Total lease payments	907,327
Less interest	63,796
Present value of lease liabilities	$	843,531


Name and Principal Position	Year	Salary		Bonus		Stock Awards		Option Awards (1)		Non-Equity Incentive Plan Compensation		Nonqualified Deferred Compensation Earnings		All Other Compensation (1)		Total

Richard J. DePiano, Jr. Chief Executive Officer, President and General Counsel	2022	$	182,000	$	—	$	—	$	—	$	—	$	—	$	22,000	$	204,000
	2021	$	182,000	$	—	$	—	$	—	$	—	$	—	$	22,000	$	204,000
	2020	$	182,000	$	—	$	—	$	—	$	—	$	—	$	22,000	$	204,000

Mark Wallace Chief Operating Officer and Principal Financial & Accounting Officer	2022	$	149,000	$	—	$	—	$	—	$	—	$	—	$	12,810	$	161,810
	2021	$	149,000	$	—	$	—	$	—	$	—	$	—	$	12,810	$	161,810
	2022	$	149,000	$	—	$	—	$	—	$	—	$	—	$	12,810	$	161,810


Option Awards
Name	Number of Securities Underlying Unexercised Options	Number of Securities Underlying Unexercised Options	Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options	Option Exercise Price		Option Expiration Date
	Exercisable	Unexercisable

Richard J. DePiano, Jr.
	10,000	—	—	$	1.57	5/7/2024
	10,000	—	—	$	0.79	5/7/2026
	45,000	—	—	$	1.57	5/7/2024
Mark Wallace

	35,000	—	—	$	1.57	5/7/2024


Name (1)	Amount of Beneficial Ownership of Outstanding Shares (1)		Percent of Class		Amount of Beneficial Ownership of Shares Underlying Options	Amount of Aggregate Beneficial Ownership		Aggregate Percent of Class


Richard J. DePiano, Jr.	4,440,833	(2)	59.9	%	65,000	4,505,833	(2)	59.5	%
Mark G. Wallace	—		—	%	35,000	35,000		*
Lisa A. Napolitano	—		—	%	2,000	2,000		*
C. Todd Trusk	250		—	%	7,000	7,250		*
John P. Dogum	—		—	%	—	—		*
David J. Jocavinni	—		—	%	—	—		*
All Directors and Executive Officers as a group (7 persons)	4,441,083		59.9	%	109,000	4,550,083		60.1	%


Plan Category	Number of Shares to be issued upon exercise of outstanding stock options (a)	Weighted-average exercise price of outstanding stock options (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column a)) (c)
Equity Compensation plans approved by shareholders	157,000	$	1.47
Equity Compensation plans not approved by shareholders	—	—		—
	157,000	$	1.47	—


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)
	(c)	Statement with respect to shares dated February 15, 2018. (18)
3.2		Bylaws of Registrant. (8)
4.6		Description of Securities

10.6		Employment Agreement between the Company and Richard J. DePiano dated May 12, 1998. (6)**



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)**


10.37			2013 Equity Incentive Plan dated December 27, 2013 incorporate by reference.
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			Consent of Independent Registered Public Accounting Firm (*).
31.1			Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (*).

31.2			Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (*).

32.1			Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (*).

32.2			Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (*).


*			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.
(14)			Filed as an exhibit to the Company’s Registration Statement on Form S-3 dated April 8, 2004 (Registration No. 333-114332).
(15)			Filed as an exhibit to the Company’s Form 10-Q for the quarter ended March 31, 2004.
(16)			Filed as an exhibit to the Company’s Form 8-K, dated June 23, 2005.
(17)			Filed as an exhibit to the Company’s Form 8-K, dated May 6, 2010.
(18)			Filed as an exhibit to the Company's Form 8-K, dated February 15, 2018
(19)			Filed as exhibit to the Company's Form 8-K dated July 6, 2018


Escalon Medical Corp.
(Registrant)

	By:	/s/ Richard J. DePiano, Jr.
		Richard J. DePiano, Jr. Chief Executive Officer




By:	/s/ Richard J. DePiano, Jr.	Chairman and Chief Executive Officer (Principal Executive Officer)	September 28, 2022
	Richard J. DePiano, Jr.

By:	/s/ Mark Wallace	Chief Operating Officer and Principal Financial & Accounting Officer	September 28, 2022
	Mark Wallace

By:	/s/ John P. Dogum	Director	September 28, 2022
	John P. Dogum

By:	/s/ Lisa Napolitano	Director	September 28, 2022
	Lisa Napolitano

By:	/s/ C. Todd Trusk	Director	September 28, 2022
	C. Todd Trusk

By:	/s/ David J Jacovini	Director	September 28, 2022
	David J Jacovini


/s/ Richard J. DePiano Jr.
Richard J. DePiano Jr.
Chief Executive Officer
Date: September 28, 2022