Escalon Medical Corp. 2026财年净收入401万美元，但存在重大内部控制缺陷

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

FORM 10-K

For the fiscal year ended June 30, 2026

Commission File Number 0-20127

Escalon Medical Corp.

(Exact name of registrant as specified in its charter)

994 Old Eagle School Road Suite 1015, Wayne, PA 19087

(Address of principal executive offices, including zip code)

(610) 688-6830

(Registrant’s telephone number, including area code)

             Securities Registered Pursuant to Section 12(b) of the Act: NONE

Securities Registered Pursuant to Section 12(g) of the Act: NONE

Common Stock, par value $0.001

Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act.    Yes  o    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.     Yes  o    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  x    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  o 

If securities are registered pursuant to Section 12 (b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.                                                  o  

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). o  Yes  x  No

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant on December 31, 2025 was approximately $505,622, computed by reference to the price at which the common equity was last sold on the OTCQB Market on such date.

As of October 9, 2026, the registrant had 7,415,329 shares of common stock outstanding.

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PART I

Cautionary Factors That May Affect Future Results

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,” “would,” “seek,” and similar words or expressions. The Company’s forward-looking statements include certain information relating to general business strategy, growth strategies, financial results, liquidity, product development, the introduction of new products, the enhancement of existing products, the potential markets and uses for the Company’s products, the Company’s regulatory filings with the Food and Drug Administration ("FDA"), acquisitions, 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, 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. 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 following list of risk factors to be an exhaustive statement of all risks, uncertainties or potentially inaccurate assumptions. The Company cautions the reader to consider carefully these factors as well as the specific factors discussed with each specific forward-looking statement in this Form 10-K annual report and in the Company’s other filings with the Securities and Exchange Commission (the “SEC”). In some cases, these factors have impacted, and in the future (together with other unknown factors) could impact, the Company’s ability to implement the Company’s business strategy and may cause actual results to differ materially from those contemplated by such forward-looking statements. Any expectation, estimate or projection contained in a forward-looking statement may not be achieved. The Company also cautions the reader that forward-looking statements speak only as of the date made. The Company undertakes no obligation to update any forward-looking statement, but investors are advised to consult any further disclosures by the Company on this subject in the Company’s filings with the SEC.

ITEM 1. BUSINESS

Company Overview

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

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

A-Scans

The A-Scan provides information about the internal structure of the eye by sending a beam of ultrasound along a fixed axis through the eye and displaying the various echoes reflected from the surfaces intersected by the beam. The principal echoes occur at the cornea, both surfaces of the lens and the retina. The system displays the position and magnitudes of the echoes on an electronic display. The A-Scan also includes software for measuring distances within the eye. This information is primarily used to calculate lens power for implants.

B-Scans

The B-Scan is primarily a diagnostic tool that supplies information to physicians where the media within the eye are cloudy or opaque. Whereas physicians normally use light, which cannot pass through such media, the ultrasound beam is capable of passing through the opacity and displaying an image of the internal structures of the eye. Unlike the A-Scan, the B-Scan transducer is not in a fixed position; it swings through a 60 degree sector to provide a two-dimensional image of the eye.

UBM

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The UBM is a high frequency/high resolution ultrasound device, designed to provide highly detailed information about the anterior segment of the eye. The UBM is used for glaucoma evaluation, tumor evaluation and differentiation, pre- and post-intraocular lens implantation and corneal refractive surgery. The device allows the surgeons to perform precise measurements within the anterior chamber of the eye.

Pachymeters

The pachymeter uses the same principles as the A-Scan, but the system is tailored to measure the thickness of the cornea. Central corneal thickness is used in the calculation of intraocular pressure. Pachymetry is also used by refractive surgeons to screen candidates and help plan surgery.

Ispan Intraocular Gases

The Company distributes two intraocular gas products C3F8 and SF6, which are used by vitreoretinal surgeons as a temporary tamponade in detached retina surgery. Under a non-exclusive distribution agreement with AirGas, Inc. (AirGas"), the Company distributes packages of AirGas gases in canisters containing up to 25 grams of gas. Along with the intraocular gases, the Company manufactures and distributes a patented disposable universal gas kit, which delivers the gas from the canister to the patient.

Surgical Packs

The Company markets disposable surgical packs used in vitreoretinal surgery, including packs which aid surgeons in the process of injecting and extracting silicone oil.

AXIS Image Management

The AXIS Image Management system easily manages ophthalmic diagnostic images via a web browser from any device regardless of modality, device manufacturer or location.

Research and Development

The development of ultrasound ophthalmic equipment and AXIS Image Management system are performed at the Company’s Westbury, New York facility. Company-sponsored research and development expenditures from operations for the fiscal years ended June 30, 2026 and 2025 were approximately $501,000 and $753,000, respectively.

Manufacturing and Distribution

The Company assembles and distributes its ophthalmic surgical products at its 7,440 square foot leased facility in New Berlin, WI. The Company designs, assembles, and services its ophthalmic ultrasound products at its 5,811 square foot leased facility in Westbury, NY and did so in 6728 square foot leased facility in Lake Success, NY prior to its relocation during the year ended June 30, 2026. In addition to performing its own assembly, the Company subcontracts component manufacturing, sterilization, and other services to various qualified vendors.

The Company has registered its facilities with the FDA and has attained ISO 13485 certification for its facilities and medical devices. ISO 13485 requires an implemented quality system that applies to product design, manufacture, installation, and servicing. Certification can be obtained only after an audit of a company’s quality system by a qualified independent outside auditor and requires regular reexamination. The Company has obtained European Community certification (“CE-Mark”) for many of its medical devices.

The manufacture, testing, and marketing of each of the Company’s products entails risk of product liability. The Company carries product liability insurance to cover primary risk.

Governmental Regulations

The Company’s products are subject to stringent ongoing regulation by the FDA and similar health authorities, and if these governmental approvals or clearances of the Company’s products are restricted or revoked, the Company could face delays that would impair the Company’s ability to generate funds from operations.

The Company has received the necessary FDA and other necessary regulations clearances and approvals for all products that the Company currently markets. The FDA and comparable agencies in state and local jurisdictions and in foreign countries impose substantial requirements upon the manufacturing and marketing of pharmaceutical and medical device equipment and related disposables, including the obligation to adhere to the FDA’s Good Manufacturing Practice regulations. Compliance with these regulations requires detailed validation of manufacturing and quality control practices, FDA periodic inspections and

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other procedures. If the FDA finds any deficiencies the FDA may impose restrictions on marketing the specific products until such deficiencies are corrected.

The FDA and similar health authorities in foreign countries extensively regulate the Company’s activities. The Company must obtain either 510(K) clearances or pre-market approvals and new drug application approvals prior to marketing a product in the United States. Foreign regulation also requires that the Company obtain other approvals from foreign government agencies prior to the sale of products in those countries. Also, the Company may be required to obtain FDA clearance or approval before exporting a product or device that has not received FDA marketing clearance or approval.

The Company has received CE Mark on several of the Company’s products that allows the Company to sell the products in the countries comprising the European Community. CE Mark indicates that a product has been assessed by the manufacturer and deemed to meet EU safety, health and environmental protection requirements. In addition to the CE Mark, some foreign countries require separate individual foreign regulatory clearances.

Marketing and Sales

The Company's products are sold through independent sales representatives, a network of distributors, and internal sales employees directly to medical institutions, throughout the world.

Service and Support

The Company maintains a full-service program for all products sold. The Company provides limited warranties on all products against defects and performance. Product repairs are made at the Company's New York facility for ultrasound products. Service support for AXIS Imaging Management and surgical products are provided remotely.

Patents, Trademarks and Licenses

The Company seeks to protect its proprietary technologies, products and processes through a combination of patents, trademarks, trade secrets, confidentiality agreements, and other intellectual property protections, as appropriate. While the Company maintains patent protection for certain aspects of its technology in the United States and, where warranted, in selected foreign jurisdictions, it believes that its competitive position and commercial success are driven primarily by its specialized know-how, proprietary processes and trade secrets rather than patented technology. The Company currently holds two United States patents covering certain of its technologies. The duration of the Company's patents, trademarks, and licenses varies, although the Company does not believe its current products, revenues or competitive position are materially dependent on patent protection.

The Company intends to vigorously defend its patents if the need arises.

Competition

There are numerous direct and indirect competitors of the Company in the United States and abroad. These competitors include ophthalmic-oriented companies that market a broad portfolio of products, including companies that market prescription devices and pharmaceuticals exclusively for ophthalmic indications and integrated companies that market products for ophthalmic and other indications.

Several large companies dominate the ophthalmic market, with the balance of the industry being highly fragmented and comprised of smaller companies ranging from start-up entities to established market players. The ophthalmic market in general is intensely competitive, with each company eager to expand its market share. The Company’s strategy is to compete primarily on the basis of technological innovation to which it has proprietary rights. The Company believes, therefore, that its business will depend in large part on protecting its intellectual property through maintaining trade secrets, patents, and other governmental regulations.

Sonomed has had a leading presence in the ophthalmic ultrasound industry for over 30 years. Management believes that this has helped Sonomed build a reputation as a long-standing operation that provides a quality product, which has enabled the Company to establish effective distribution coverage throughout the world. Various competitors offering similar products at a lower price could threaten Sonomed’s market position. The development of optical technologies for ophthalmic biometrics and imaging may also diminish the Company’s market position. This equipment can be used instead of ultrasound equipment in certain applications with some advantage. Such equipment, however, is more expensive.

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To remain competitive, the Company needs to maintain a low-cost operation. There are numerous other companies that can provide this manufacturing service.

The Company believes it establishes competitive advantage by offering technical innovation, product features, low total cost of ownership, and capable and responsive technical support.

Human Capital

As of June 30, 2026, the Company employed 40 employees. Of these employees, 19 of the Company’s employees are employed in manufacturing, 15 are employed in general and administrative positions, and 6 are employed in sales and marketing. The Company’s employees are not covered by a collective bargaining agreement, and the Company considers its relationship with its employees to be good.

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ITEM 1A. RISK FACTORS

Financial Risks

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

There are inherent uncertainties involved in estimates, judgments and assumptions used in the preparation of financial statements in accordance with United States GAAP. Any changes in estimates, judgments and assumptions used could have a material adverse effect on the Company’s business, financial position and operating results.

The consolidated financial statements included in the periodic reports the Company files with the SEC are prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The preparation of financial statements in accordance with GAAP involves making estimates, judgments and assumptions that affect reported amounts of assets (including intangible assets), liabilities and inventories, revenues, expenses and income. This includes estimates, judgments and assumptions for assessing the recoverability of the Company’s other intangible assets, pursuant to Financial Accounting Standards Board (“FASB”) issued authoritative guidance. If any estimates, judgments or assumptions change in the future, the Company may be required to record additional expenses or impairment charges. Any resulting expense or impairment loss would be recorded as a charge against the Company's earnings and could have a material adverse impact on the Company's financial condition and operating results. Estimates, judgments and assumptions are inherently subject to change in the future, and any such changes could result in corresponding changes to the amounts of assets (including goodwill and other intangible assets), liabilities, revenues, expenses and income. Any such changes could have a material adverse effect on the Company’s financial position and operating results.

On an ongoing basis, the Company evaluates its estimates, including, among others, those relating to:

•sales returns;

•allowances for doubtful accounts;

•inventories;

•intangible assets;

•right-of-use assets;

•income and other tax accruals;

•deferred tax asset valuation allowances;

•sales discounts;

•warranty obligations;

•contingencies and litigation.

The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The Company’s assumptions and estimates may, however, prove to have been incorrect and the Company’s actual results may differ from these estimates under different assumptions or conditions. While the Company believes the assumptions and estimates it makes are reasonable, any changes to the Company’s assumptions or estimates, or any actual results which differ from the Company’s assumptions or estimates, could have a material adverse effect on the Company’s financial position and operating results. Improper design and implementation of internal control related to the estimates could result in misstatement of financial reports.

The Company has identified a material weakness in its internal control over financial reporting, which could result in material misstatements in the Company’s financial statements.

As disclosed in Item 9A of this Annual Report, management identified a material weakness in the Company’s internal control over financial reporting that existed as of June 30, 2026. The material weakness relates to the design and implementation of controls over estimates used in the valuation of inventory, specifically the precision of management’s review of inventory reserve calculations. This material weakness was first identified as of June 30, 2023 and has not yet

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been remediated. Beginning in the fourth quarter of fiscal 2024 and continuing through fiscal 2025 and 2026, management implemented additional controls, including a standardized process for updating standard costs, enhanced segregation of duties over updates and reviews, improved data accuracy and integrity in the valuation calculations, and senior management review of all material estimates. However, the inventory reserve spreadsheet continues to rely on various manual entries, and management’s review covers preset links and formulas but does not extend to certain manual inputs and links. In addition, testing of the operating effectiveness of the enhanced controls has not been completed. Accordingly, management concluded that the material weakness continued to exist as of June 30, 2026 and that the Company’s internal control over financial reporting was not effective as of that date.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Although the Company has implemented remediation measures, including increasing the precision of management’s review of all assumptions used in the valuation of inventory and instituting senior management reviews of all material estimates applied in the inventory valuation process, there can be no assurance that these measures will be sufficient to remediate the material weakness or prevent future material weaknesses from occurring.

If the Company is unable to remediate the material weakness, or if additional material weaknesses or significant deficiencies are identified in the future, the Company’s ability to report its financial results on a timely and accurate basis

could be adversely affected, which could result in a loss of investor confidence in the Company’s financial reports, a decline in the price of the Company’s common stock, potential regulatory investigations or sanctions, or an inability to access the capital markets on favorable terms. The existence of a material weakness could also increase the risk that the Company’s financial statements contain material misstatements, which could require restatements of previously issued financial statements.

Operational Risk

Any acquisitions, strategic alliances, joint ventures and divestitures that the Company effects, if any, could result in financial results that differ from market expectations.

In the normal course of business, the Company engages in discussions with third parties regarding possible acquisitions, strategic alliances, joint ventures and divestitures. As a result of any such transactions, of which the Company cannot assure that any will occur, the Company’s financial results may differ from the investment community’s expectations in a given quarter. In addition, acquisitions and alliances may require the Company to integrate a different company culture, management team, business infrastructure, accounting systems and financial reporting systems. The Company may not be able to effect any such acquisitions or alliances. The Company may have difficulty developing, manufacturing and marketing the products of a newly acquired business in a way that enhances the performance of the Company’s combined businesses or product lines to realize the value from any expected synergies. Depending on the size and complexity of an acquisition, the Company’s successful integration of the entity depends on a variety of factors, including the retention of key employees and the management of facilities and employees in separate geographical areas. These efforts require varying levels of management resources, which may divert the Company’s attention from other business operations. Also, the Company’s results may be adversely impacted because of acquisition-related costs, amortization costs for certain intangible assets and impairment losses related to goodwill in connection with such transactions. Finally, acquisitions or alliances by the Company may not occur, which could impair the Company’s growth.

The Company’s results fluctuate from quarter to quarter.

The Company has experienced quarterly fluctuations in operating results and anticipates continued fluctuations in the future. A number of factors contribute to these fluctuations:

•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;

•The cancellation or delays in the purchase of the Company’s products;

•Fluctuations in customer demand for the Company’s products;

•Changes in domestic and foreign regulations;

•The gain or loss of significant customers;

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•Changes in the mix of products sold by the Company;

•Competitive pressures on prices at which the Company can sell its products;

•Announcements of new strategic relationships by the Company or its competitors;

•Litigation costs and settlements; and

•General economic conditions and other external factors such as energy costs.

The Company sets its spending levels in advance of each quarter based, in part, on the Company’s expectations of product orders and shipments during that quarter. A shortfall in revenue, therefore, in any particular quarter as compared to the Company’s plan could have a material adverse impact on the Company’s results of operations and cash flows. Also, the Company’s quarterly results could fluctuate due to general market conditions in the healthcare industry or global economy generally, or market volatility unrelated to the Company’s business and operating results.

Failure of the market to accept the Company’s products could adversely impact the Company’s business and financial condition.

The Company’s business and financial condition will depend in part upon the market acceptance of the Company’s products. The Company’s products may not achieve or maintain market acceptance. Market acceptance depends on a number of factors including:

•The price of the products;

•The continued receipt of regulatory approvals for multiple indications;

•The establishment and demonstration of the clinical safety and efficacy of the Company’s products; and

•The advantages of the Company’s products over those marketed by the Company’s competitors.

Any failure to achieve or maintain significant market acceptance of the Company’s products will have a material adverse impact on the Company’s business.

The success of products with which the Company’s products compete could have an adverse impact on the Company’s business.

The Company faces intense competition in the medical device and pharmaceutical markets, which are characterized by rapidly changing technology, short product life cycles, cyclical oversupply and rapid price erosion. Many of the Company’s competitors have substantially greater financial, technical, marketing, distribution and other resources. The Company’s strategy is to compete primarily on the basis of technological innovation, reliability, quality and price of the Company’s products. Without timely introductions of new products and enhancements, the Company’s products will become technologically obsolete over time, in which case the Company’s revenues and operating results would suffer. The success of the Company’s new product offerings will depend on several factors, including the Company’s ability to:

•Properly identify customer needs;

•Innovate and develop new technologies, services and applications;

•Establish adequate product distribution coverage;

•Obtain and maintain required regulatory approvals from the FDA and other regulatory agencies;

•Protect the Company’s intellectual property;

•Successfully commercialize new technologies in a timely manner;

•Manufacture and deliver the Company’s products in sufficient volumes on time;

•Differentiate the Company’s offerings from the offerings of the Company’s competitors;

•Price the Company’s products competitively;

•Anticipate competitors’ announcements of new products, services or technological innovations; and

•Anticipate general market and economic conditions.

The Company may not be able to compete effectively in the competitive environments in which the Company operates.

Lack of availability of key system components could result in delays, increased costs or costly redesign of the Company’s products.

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Although some of the parts and components used to manufacture the Company’s products are available from multiple sources, the Company currently purchases most of the Company’s components and outsourced finished goods from single sources in an effort to obtain volume discounts. Lack of availability of any of these parts, components and finished goods could result in production delays, increased costs or costly redesign of the Company’s products. Any loss of availability of an essential component or finished good could result in a material adverse change to the Company’s business, financial condition and results of operations. Some of the Company’s suppliers are subject to the FDA’s Good Manufacturing Practice regulations. Failure of these suppliers to comply with those regulations could result in the delay or limitation of the supply of parts or components to the Company, which would adversely impact the Company’s financial condition and results of operations.

The supply chain challenges could increase the costs of products and the numbers of backorders and could adversely affect our results of operations.

The Company is dependent on its management and key personnel to succeed.

The Company’s principal executive officers and technical personnel have extensive experience with the Company’s products, the Company’s research and development efforts, the development of marketing and sales programs and the necessary support services to be provided to the Company’s customers. Also, the Company competes with other companies, universities, research entities and other organizations to attract and retain qualified personnel. The loss of the services of any of the Company’s executive officers or other technical personnel, or the Company’s failure to attract and retain other skilled and experienced personnel, could have a material adverse impact on the Company’s ability to maintain or expand businesses.

Legal, Regulatory and Global

The Company’s products are subject to stringent ongoing regulation by the FDA and similar domestic and foreign health care regulatory authorities, and if the regulatory approvals or clearances of the Company’s products are restricted or revoked, the Company could face delays that would impair the Company’s ability to generate funds from operations.

The FDA and similar health care regulatory authorities in foreign countries extensively regulate the Company’s activities. The Company must obtain either 510(K) clearances or pre-market approvals and new drug application approvals prior to marketing any products in the United States. Foreign regulation also requires that the Company obtain other approvals from foreign government agencies prior to the sale of products in those countries. Also, the Company may be required to obtain FDA approval before exporting a product or device that has not received FDA marketing clearance or approval.

The Company has received the necessary FDA approvals for all products that the Company currently markets in the United States. Any restrictions on or revocation of the FDA approvals and clearances that the Company has obtained, however, would prevent the continued marketing of the impacted products and other devices. The restrictions or revocations could result from the discovery of previously unknown problems with the product. Consequently, FDA revocation would impair the Company’s ability to generate funds from operations.

The FDA and comparable agencies in state and local jurisdictions and in foreign countries impose substantial requirements upon the manufacturing and marketing of pharmaceutical and medical device equipment and related disposables, including the obligation to adhere to the FDA’s Good Manufacturing Practice regulations. Compliance with these regulations requires time-consuming detailed validation of manufacturing and quality control processes, FDA periodic inspections and other procedures. If the FDA finds any deficiencies in the validation processes, for example, the FDA may impose restrictions on marketing the specific products until such deficiencies are corrected.

The Company has received CE Mark on several of the Company’s products that allows the Company to sell the products in the countries comprising the European Community. In addition to the CE Mark, however, some foreign countries may require separate individual foreign regulatory clearances. The Company may not be able to obtain regulatory clearances for other products in the United States or foreign markets.

The process for obtaining regulatory clearances and approvals underlying clinical studies for any new products or devices and for multiple indications for existing products is lengthy and will require substantial commitments of Company’s financial resources and Company’s management’s time and effort. Any delay in obtaining clearances or approvals or any changes in existing regulatory requirements would materially adversely impact the Company’s business.

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The Company’s failure to comply with the applicable regulations would subject the Company to fines, delays or suspensions of approvals or clearances, seizures or recalls of products, operating restrictions, injunctions or civil or criminal penalties, which would adversely impact the Company’s business, financial condition and results of operations.

Tariffs and International Trade Policies

The Company's business may be adversely affected by changes in tariffs, trade policies, import duties, or other governmental actions affecting the products and components we purchase from foreign suppliers. Increases in tariffs or the imposition of new trade restrictions could increase our cost of goods sold, reduce gross margins, disrupt our supply chain, or require us to seek alternative suppliers, which may not be available on favorable terms or within required timeframes. Although we may seek to mitigate the impact of higher costs through pricing adjustments, supplier negotiations, or sourcing alternatives, there can be no assurance that such measures will fully offset the effects of increased tariffs or trade restrictions. Any significant increase in costs or disruption in the availability of products or components could adversely affect our operating results, cash flows, and financial condition.

The Company’s products employ proprietary technology, and this technology may infringe on the intellectual property rights of third parties.

The Company holds several United States and foreign patents for the Company’s products. Other parties, however, hold patents relating to similar products and technologies. If patents held by others were adjudged valid and interpreted broadly in an adversarial proceeding, the court or agency could deem them to cover one or more aspects of the Company’s products or procedures. Any claims for patent infringements or claims by the Company for patent enforcement would consume time, result in costly litigation, divert technical and management personnel or require the Company to develop non-infringing technology or enter into royalty or licensing agreements. The Company may become subject to one or more claims for patent infringement. The Company may not prevail in any such action, and the Company’s patents may not afford protection against competitors with similar technology.

If a court determines that any of the Company’s products infringes, directly or indirectly, on a patent in a particular market, the court may enjoin the Company from making, using or selling the product. Furthermore, the Company may be required to pay damages or obtain a royalty-bearing license, if available, on acceptable terms.

The Company’s ability to market or sell the Company’s products may be adversely impacted by limitations on reimbursements by government programs, private insurance plans and other third-party payers.

The Company’s customers bill various third party-payers, including government programs and private insurance plans, for the health care services provided to their patients. Third-party payers may reimburse the customer, usually at a fixed rate based on the procedure performed, or may deny reimbursement if they determine that the use of the Company’s products was elective, unnecessary, inappropriate, not cost-effective, experimental or used for a non-approved indication. Third-party payers may deny reimbursement notwithstanding FDA approval or clearance of a product and may challenge the prices charged for the medical products and services. The Company’s ability to sell the Company’s products on a profitable basis may be adversely impacted by denials of reimbursement or limitations on reimbursement, compared with reimbursement available for competitive products and procedures. New legislation that further reduces reimbursements under the capital cost pass-through system utilized in connection with the Medicare program could also adversely impact the marketing of the Company’s products.

The Company may become involved in product liability litigation, which may subject the Company to liability and divert management attention.

The testing and marketing of the Company’s products entails an inherent risk of product liability, resulting in claims based upon injuries or alleged injuries or a failure to diagnose associated with a product defect. Some of these injuries may not become evident for a number of years. Although the Company is not currently involved in any product liability litigation, the Company may be party to litigation in the future as a result of an alleged claim. Litigation, regardless of the merits of the claim or outcome, could consume a great deal of the Company’s time and attention away from the Company’s core businesses. The Company maintains limited product liability insurance coverage of $1,000,000 per occurrence and $2,000,000 in the aggregate, with umbrella policy coverage of $5,000,000 in excess of such amounts. A successful product liability claim in excess of any insurance coverage may adversely impact the Company’s financial condition and results of operations. The Company’s product liability insurance coverage may not continue to be available to the Company in the future on reasonable terms or at all.

The Company’s international operations could be adversely impacted by changes in laws or policies of foreign governmental agencies and social and economic conditions in the countries in which the Company operates.

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The Company derives a portion of its revenue from sales outside the United States. Changes in the laws or policies of governmental agencies, as well as social and economic conditions, in the countries in which the Company operates could impact the Company’s business in these countries and the Company’s results of operations. Also, economic factors, including inflation and fluctuations in interest rates and foreign currency exchange rates, and competitive factors such as price competition, business combinations of competitors or a decline in industry sales from continued economic weakness, both in the United States and other countries in which the Company conducts business, could adversely impact the Company’s results of operations.

The impact of terrorism or acts of war could have a material adverse impact on the Company’s business.

Terrorist acts, acts of war, armed conflicts, or other geopolitical events, whether occurring in the United States or abroad, could disrupt our operations, those of our suppliers, logistics providers, distribution channels, or customers. Such events could result in damage to facilities, interruptions in manufacturing or supply chains, delays in the delivery of products, increased operating costs, reduced customer demand, or broader economic and political instability, any of which could materially adversely affect our business, financial condition, results of operations, and cash flows.    

The Company’s charter documents and Pennsylvania law may inhibit a takeover.

Certain provisions of Pennsylvania law and the Company’s Bylaws could delay or impede the removal of incumbent directors and could make it more difficult for a third party to acquire, or discourage a third party from attempting to acquire, control of the Company. These provisions could limit the share price that certain investors might be willing to pay in the future for shares of the Company’s common stock. The Company’s Board of Directors is divided into three classes, with directors in each class elected for three-year terms. The Bylaws impose various procedural and other requirements that could make it more difficult for stockholders to effect certain corporate actions. The Company’s Board of Directors may issue shares of preferred stock without stockholder approval on such terms and conditions, and having such rights, privileges and preferences, as the Board may determine. The rights of the holders of common stock will be subject to, and may be adversely impacted by, the rights of the holders of any preferred stock that may be issued in the future.

Healthcare policy changes, including pending proposals to reform the U.S. healthcare system and implementation of the Affordable Healthcare Act, may have a material adverse effect on the Company.

Healthcare costs have risen significantly over the past decade. There have been and continue to be proposals by legislators, regulators and third-party payers to keep these costs down. Certain proposals, if passed, would impose limitations on the prices the Company will be able to charge for the Company’s products, or the amounts of reimbursement available for its products from governmental agencies or third-party payers. These limitations could have a material adverse effect on the Company’s financial position and results of operations.

Changes in the healthcare industry in the U.S. and elsewhere could adversely affect the demand for the Company’s products as well as the way in which the Company conducts the Company’s business. The 2010 Affordable Care Act provides that most individuals must have health insurance, establishes new regulations on health plans, and creates insurance pooling mechanisms and other expanded public health care measures.

The Company anticipates that the healthcare reform legislation will further reduce Medicare spending on services provided by hospitals and other providers and further forms sales or excise tax on the medical device manufacturing sector. Various healthcare reform proposals have also emerged at the federal and state level. The Company cannot predict what healthcare initiatives, if any, will be implemented at the federal or state level, or the effect any future legislation or regulation will have on the Company. However, an expansion in government’s role in the U.S. healthcare industry may lower reimbursements for the Company’s products, reduce medical procedure volumes and adversely affect the Company’s business, possibly materially.

Future legislation or changes in government programs may adversely impact the market for the Company’s products.

From time to time, the federal government and Congress have made proposals to change aspects of the delivery and financing of health care services. The Company cannot predict what form any future legislation or regulation may take or its impact on the Company’s business. Legislation that sets price limits and utilization controls adversely impact the rate of growth of the markets in which the Company participates. If any future health care legislation or regulations were to adversely impact those markets, the Company’s product marketing could also suffer, which would adversely impact the Company’s business.

Information Security, Cybersecurity and Data Privacy Risks

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Cybersecurity incidents could disrupt business operations, result in the loss of critical and confidential information and adversely impact the Company's reputation and results of operations.

The Company is subject to cyber security risks and may incur increasing costs in efforts to minimize those risks and to comply with regulatory standards. The Company employs information technology systems and Internet systems, including websites, which allow for the secure storage and transmission of proprietary or confidential information regarding the Company’s customers, employees and others, including credit card information and personal identification information. The Company has made significant efforts to secure its computer network to mitigate the risk of possible cyber-attacks and is continuously working to upgrade its existing information technology systems and provide employee awareness training around phishing, malware, and other cyber risks to ensure that the Company is protected, to the greatest extent possible, against cyber risks and security breaches. Despite these efforts security of the Company’s computer networks could be compromised which could impact operations and confidential information could be misappropriated, which could lead to negative publicity, loss of sales and profits or cause the Company to incur significant costs to reimburse third-parties for damages which could adversely impact profits.

Other

The Company’s Chairman and Chief Executive Officer, Richard DePiano Jr. is the Company’s controlling stockholder and has sufficient voting power to determine the outcome of all matters submitted to the Company’s stockholders for approval.

In February 2018, the Company entered into a Debt Exchange Agreement (the "Exchange Agreement") with Mr. DePiano Sr. and DP Associates Inc. Profit-Sharing Plan of which Mr. DePiano Sr. is the sole owner and sole trustee (the "Holders"). Pursuant to the terms of the Exchange Agreement, the Holders exchanged a total of $645,000 principal amount of debt the Company owed the Holders under factoring agreements and notes (the "Notes") the Company entered into with the Holders in February and March of 2016 for 2,000,000 shares of Series A Convertible Preferred Stock (the "Preferred Stock"). Each share of the Preferred Stock entitles the holder thereof to 13 votes per share and will vote together with all other classes and series of stock of the Company as a single class on all actions to be taken by the Company’s stockholders. As a result of this voting power, the holders currently beneficially own approximately 77.81% of the voting power on all actions to be taken by the Company’s stockholders. If the holders were to convert their shares of Preferred Stock into common stock at the current conversion ratio, the Holders would receive a total of 4,300,000 shares of Common Stock, or approximately 36.70% of the currently outstanding shares of Common Stock assuming such conversion.

The holders, therefore, control the election of all of the members of the Company’s board of directors and control the outcome of any corporate transaction or other matter submitted to a vote of the Company’s stockholders for approval, including mergers or other acquisition proposals and the sale of all or substantially all of the Company’s assets, in each case regardless of how all of the Company’s stockholders other than the holders vote their shares. The interests of the Holders in maintaining this voting control of the Company may have an adverse effect on the price of the Company’s common stock because of the absence of any potential “takeover” premium and may, therefore, be inconsistent with the interest of the Company’s stockholders other than the holders. The voting control by the holders could also discourage a third party from attempting to acquire control of the Company and may make it more difficult for a third party to acquire control of the Company. 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 shares in his capacity as executor of Mr. DePiano Sr.'s estate.

The market price of the Company’s stock has historically been volatile, and the Company has not paid cash dividends.

The volatility of the Company’s common stock imposes a greater risk of capital losses on stockholders as compared to less volatile stocks. In addition, such volatility makes it difficult to ascribe a stable valuation to a stockholder’s holdings of the Company’s common stock. The following factors have and may continue to have a significant impact on the market price of the Company’s common stock:

•Acquisitions, strategic alliances, joint ventures and divestitures that the Company effects, if any;

•Announcements of technological innovations;

•Changes in marketing, product pricing and sales strategies or new products by the Company’s competitors;

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•Changes in domestic or foreign governmental regulations or regulatory requirements; and

•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.

Moreover, the possibility exists that the stock market could experience extreme price and volume fluctuations unrelated to operating performance.

The Company has not paid cash dividends on its common stock and does not anticipate paying cash dividends in the foreseeable future.

If the Company raises funds in the future, the Company may be required to raise those funds through public or private financings, strategic relationships or other arrangements at prices and other terms that may not be favorable. The sale of additional equity and debt securities may result in additional dilution to the Company’s stockholders. Additional financing may not be available in amounts or on terms acceptable to the Company or at all.

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ITEM 1B. UNRESOLVED SEC STAFF COMMENTS

None.

ITEM 1C. CYBER SECURITY

Risk Management and Strategy

The Company recognizes the importance of cybersecurity and has implemented a comprehensive program to protect its information assets. Key components of our cybersecurity program include appointment of an Information Security Officer, who is also the Chief Operating officer with extensive knowledge of cybersecurity issues, information security policies and procedures, engagement of third-party security experts, regular penetration testing, managed backup and data protection, managed threat response, hardware and software protections, physical security measures, employee training, internal cybersecurity audits, and ongoing product cybersecurity assessments. The Company maintains cybersecurity insurance covering its internal operations and customer-facing products.

Despite these measures, the Company cannot guarantee that it will be immune from cybersecurity threats. A successful attack could result in unauthorized access to our systems, data breaches, disruptions to our operations, and financial losses. We are committed to continually evaluating and enhancing our cybersecurity program to mitigate these risks.

Governance

The Company's Board of Directors receives regular reports from the Information Security Officer regarding the Company's cybersecurity program. The Board ensures that the Company has the necessary resources and authority to implement and maintain a sufficient cybersecurity program. The Information Security Officer reports directly to the Chief Executive Officer and is responsible for working with internal and third-party resources to develop and implement the Company's cybersecurity strategy, manage cybersecurity risks, and oversee the Company's cybersecurity operations.

ITEM 2. PROPERTIES

As of June 30, 2026, the Company leased an aggregate of 15,437 square feet of space for (i) its corporate offices in Wayne, Pennsylvania, (ii) Sonomed’s manufacturing facility in Westbury, New York, and (iii) Trek’s distribution facility in New Berlin, Wisconsin. The corporate office lease terminated on July 15, 2025. Then the Company had a month to month lease until July 15, 2026 when it relocated its corporate offices to another building of 3,012 square feet in Wayne, Pennsylvania in early July 2026. The lease for the new corporate office expires on September 30, 2031. Please refer to Note 14-Subsequent Event. The lease for the Company’s Wisconsin distribution facility, which comprises 7,440 square feet, expires on April 30, 2028. The lease for the Sonomed facility located in Westbury, New York, consisting of 5,811 square feet, expires on October 22, 2032.

ITEM 3. LEGAL PROCEEDINGS

The Company, from time to time is involved in various legal proceedings and disputes that arise in the normal course of business. These matters have previously and could pertain to intellectual property disputes, commercial contract disputes, employment disputes, and other matters. The Company does not believe that the resolution of any of these matters has had or is likely to have a material adverse impact on the Company’s business, financial condition or results of operations.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

Part II.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company’s common stock trades on the OTCQB Market under the symbol “ESMC.” Any over the counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not present actual transactions.

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As of October 9, 2026, there were 1,252 holders of record of the Company’s common stock. On October 9, 2026 the closing price of the Company’s Common Stock as reported by the OTCQB Market was $0.15 per share.

The Company has never declared or paid a cash dividend on its common stock and presently intends to retain any future earnings to finance future growth and working capital needs.

The Company’s forecast of the period of time through which its financial resources will be adequate to support its operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed in “Risk Factors” included in this Form 10-K. If the Company raises funds in the future, the Company may be required to raise those funds through public or private financings, strategic relationships or other arrangements at prices and other terms that may not be as favorable as they would without such qualification. The sale of additional equity and debt securities may result in additional dilution to the Company’s stockholders. Additional financing may not be available in amounts or on terms acceptable to the Company or at all.

ITEM 6. [Reserved]

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with the sections titled “Business” and “Risk Factors” and the consolidated financial statements and related notes included elsewhere in this Annual Report. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, as well as assumptions that may never materialize or that may be proven incorrect. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed in the sections titled “Special Note Regarding Forward-Looking Statements” and “Risk Factors” and in other parts of this Annual Report.

The Company operates its business as one operating and reportable segment. For additional information, see “Note 12—Segment Information” in the notes to our consolidated financial statements included elsewhere in this Annual Report.

Financial Highlights

The following discussion and analysis should be read together with the consolidated financial statements and notes thereto and other financial information contained elsewhere in this Form 10-K and the discussion under “Risk Factors” included in Item 1A of this Form 10-K.

•Consolidated net revenue increased approximately $690,000 or 5.7%, to $12,736,000 during the year ended June 30, 2026, as compared to the prior fiscal year. The increase in net revenue is mainly attributable to a $1,259,000 increase in sales of Sonomed products and services, partially offset by a $518,000 decrease in sales of Trek products and a $51,000 decrease in AXIS revenue during the year ended June 30, 2026.

•Consolidated cost of revenue totaled approximately $7,167,000, or 56.3%, of total revenue during the year ended June 30, 2026, as compared to $6,535,000, or 54.3%, of total revenue of the prior fiscal year. The 2.0% increase in cost of revenue as a percentage of total revenue is mainly due to change in product mix.

•Consolidated marketing, general and administrative expenses increased $398,000, or 8.6%, to $5,023,000 during the year ended June 30, 2026, as compared to the prior fiscal year. The increase in marketing, general and administrative expenses was mainly due to increases in compensation, including bonuses and fringe benefits, legal expenses, advertising expenses, and travel expenses, partially offset by decreases in network expenses and a favorable bad debt adjustment during the year ended June 30, 2026.

•Consolidated research and development expenses decreased $252,000 or 33.5%, to $501,000 during the year ended June 30, 2026, as compared to the same period of the prior 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 a $406,000 decrease in AXIS consulting expenses offset by a $152,000 increase invested in ultrasound development during the year ended June 30, 2026.

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•During the year ended June 30, 2026, the Company sold its AXIS software for an aggregate purchase price of $3,000,000. The Company received net proceeds of $2,800,000 and recognized a gain of $2,813,525, before income taxes, on the sale.

•The Company released $1,139,449 of its valuation allowance related to previously fully reserved deferred tax assets after evaluating the positive and negative evidence, and consequently recognized a corresponding deferred income tax benefit in the consolidated statement of operations for the fiscal year ended June 30, 2026.

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Results of Operations

Years Ended June 30, 2026 and 2025

The following table shows consolidated net revenue, as well as identifying trends in revenues for the years ended June 30, 2026 and 2025. Table amounts are in thousands:

Consolidated net revenue increased approximately $690,000 or 5.7%, to $12,736,000 during the year ended June 30, 2026,as compared to the prior fiscal year. The increase in net revenue is mainly attributable to a $1,259,000 increase in sales of Sonomed products and services, partially offset by a $518,000 decrease in sales of Trek products and a $51,000 decrease in AXIS revenue during the year ended June 30, 2026.

Foreign sales

The following table presents domestic and international sales from continuing operations. Table amounts are in thousands:

The following table presents consolidated cost of revenue and as a percentage of revenues for the years ended June 30, 2026 and 2025. Table amounts are in thousands:

Consolidated cost of revenue totaled approximately $7,167,000, or 56.3%, of total revenue during the year ended June 30, 2026, as compared to $6,535,000, or 54.3%, of total revenue of the prior fiscal year. The 2.0% increase in cost of revenue as a percentage of total revenue is mainly due to change in product mix.

The following table presents consolidated marketing, general and administrative expenses for the years ended June 30, 2026 and 2025. Table amounts are in thousands:

Consolidated marketing, general and administrative expenses increased $398,000, or 8.6%, to $5,023,000 during the year ended June 30, 2026 as compared to the prior fiscal year. The increase in marketing, general and administrative expenses was mainly due to increases in compensation, including bonuses and fringe benefits, legal expenses, advertising

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expenses, and travel expenses, partially offset by decreases in network expenses and a favorable bad debt adjustment during the year ended June 30, 2026.

The following table presents consolidated research and development expenses for the years ended June 30, 2026 and 2025.

Table amounts are in thousands:

Consolidated research and development expenses decreased $252,000, or 33.5%, to $501,000 during the year ended June 30, 2026 as compared to the prior 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 a $406,000 decrease in nonrecurring AXIS consulting expenses offset by a $152,000 increase in ultrasound consulting expenses during the year ended June 30, 2026.

During the year ended June 30, 2026, the Company sold its AXIS software for an aggregate purchase price of $3,000,000. The Company received net proceeds of $2,800,000 and recognized a gain of $2,813,525, before income taxes, on the sale.

Recently Announced Tariffs and Trade Measures

Beginning in the third quarter of fiscal year 2025, the U.S. government announced new tariffs on a broad range of imports, including a 10% tariff on most imports and additional individualized higher tariffs on certain specific goods and countries. In response, certain affected countries have imposed or may impose retaliatory tariffs on U.S. exports and may implement additional trade restrictions and/or other retaliatory measures in the future.

These recent and potential future tariffs and trade measures could adversely affect the Company’s business in several ways. Increased costs of imported raw materials, components, and finished goods may negatively impact profitability and gross margins. The Company may face challenges in passing these increased costs on to its customers due to competitive pressures or market conditions. Additionally, the uncertainty surrounding the duration and extent of these tariffs, as well as potential trade policy changes, could disrupt the Company’s supply chain, require alternative and potentially more expensive sourcing options, and impact long-term strategic planning and investment decisions. The imposition of retaliatory tariffs by other countries could also reduce the demand for the Company’s exported products, negatively impacting revenue and international sales.

Management is actively monitoring these developments, assessing the potential impacts on the Company’s business, and evaluating possible mitigation strategies, including exploring alternative sourcing, adjusting pricing strategies where feasible, and analyzing potential shifts in global supply chains. However, the ultimate financial impact of these tariffs and the associated uncertainty cannot be reasonably estimated at this time. This situation could have a material adverse effect on the Company’s future financial condition, results of operations, and cash flows. The Company will continue to evaluate these developments and provide updates in future filings as the situation evolves and more information becomes available.

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Liquidity and Capital Resources

Our total cash as of June 30, 2026, consisted approximately $3,065,000 of cash on hand compared to approximately $546,000 of cash on hand and restricted cash of $257,000 as of June 30, 2025. At June 30, 2026 and 2025, the Company’s balances exceeded federally insured limits by approximately $2,457,000 and $290,000, respectively. The Company is seeking to enhance deposit insurance coverage while investing excess cash in a short-term investment portfolio designed to balance yield, liquidity, and capital preservation.

For the fiscal year ended June 30, 2026, the Company reported income from continuing operations of approximately $45,000, compared to a net income from continuing operations of $133,000 for the year ended June 30, 2025, representing a significant improvement over the prior years when there were net losses from continuing operations. In addition, the sale of the AXIS software business generated net cash proceeds of approximately $2.8 million, substantially improving the Company's liquidity. It will continue to closely monitor costs and expenses and may need to raise additional capital to fund operations.

Based on its current cash position, anticipated operating cash requirements, and planned investment strategy, management believes the Company has sufficient liquidity to fund its operations, working capital needs, and strategic initiatives for the foreseeable future. Management will continue to monitor operating performance, cash flows, and capital requirements and may evaluate additional financing, strategic partnerships, or capital market opportunities if such transactions are deemed beneficial to the Company and its stockholders.

The Company expects to continue funding operations from cash on hand, cash generated from operations, investment income, and revenues from the licensing and sale of its products. Although management may consider additional equity, debt, or strategic financing alternatives in the future, there can be no assurance that such financing arrangements would be available on favorable terms or at all.

The following table presents overall liquidity and capital resources as of June 30, 2026 and 2025. Table amounts are in thousands:

Working Capital Position

Working capital increased approximately $2,697,000 to $4,624,000 as of June 30, 2026, and the current ratio increased to 2.94 to 1 to from 1.72 to 1 when compared to June 30, 2025.

The increase in working capital as of June 30, 2026 is mainly due to rise in current assets of $2,400,000, driven by the net proceeds from sales of AXIS software of $2,800,000.

Debt to total capital ratio was 14.1% and 21.5% as of June 30, 2026 and June 30, 2025, respectively.

Cash Flow (Used In) Provided By Operating Activities

During year ended June 30, 2026, the Company used approximately $403,000 of cash in operating activities as compared to approximately $381,000 of cash provided by operating activities during the year ended June 30, 2025.

For the year ended June 30, 2026, cash used in operations was from a $2,800,000 gain on the sale of the AXIS software and a deferred income tax benefit of $1,139,000 offsetting the net income of $4,013,000. In addition, cash used in operations is also due to a decrease in accounts payable of $459,000, and an increase in accounts receivable of $339,000, an increase in current and long term assets of $197,000, and a decrease in related party accrued interest and lease liability of $112,000 and $106,000,

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respectively. Cash used in operating activities was offset by a decrease in inventories of 408,000, and an increase in accrued expenses of $209,000. The remaining offsetting items for cash used in operations is comprised of less significant items.

For the year ended June 30, 2025, its cash provided by operations is mainly due to a decrease in accounts receivable of $628,000, an increase in deferred revenue of $48,000, an increase in accrued expenses of $45,000, an increase in lease liability of $227,000, an increase in accounts payable of $30,000, and a decrease in other current assets of $30,000. The cash inflow is offset by an increase in inventories of 486,000. The remaining offsetting items for cash used in operations is comprised of less significant items.

Cash Flows Provided by (Used In) Investing Activities

Cash flows provided by investing activities for the year ended June 30, 2026, was due to net proceeds from sales of AXIS software of $2,800,000, offset by purchase of the fixed assets of $4,000. Cash flows used in investing activities for the year ended June 30, 2025, was due to purchase of the fixed assets of $4,000.

Any necessary capital expenditures have generally been funded out of cash from operations, and the Company is not aware of any factors that would cause historical capital expenditure levels to not be indicative of capital expenditures in the future and, accordingly, does not believe that the Company will have to commit material resources to capital investment for the foreseeable future.

Cash Flows Used in Financing Activities

For the year ended June 30, 2026, the cash used in the financing activities of $130,000 was attributed to repayment of TD bank loan balance of $127,000, and repayment of EIDL loan of $3,000. During the second quarter, the Company also borrowed $100,000 from a related party, which was repaid in full during the third quarter.

For the year ended June 30, 2025, the cash used in the financing activities of $40,000 was attributed to repayment of notes payable of $37,000, and repayment of EIDL loan of $3,000.

Off-balance Sheet Arrangements and Contractual Obligations

The Company was not a party to any off-balance sheet arrangements during the years ended June 30, 2026 and 2025.

Critical Accounting Estimates

The preparation of financial statements requires management to make estimates and assumptions that impact amounts reported therein. The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, and, as such, include amounts based on informed estimates and judgments of management. We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. There are items within our financial statements that require estimation but are not deemed critical, as defined above. There are items within our financial statements that require estimation but are not deemed critical as defined above except for the estimated valuation allowance against the deferred tax asset. The company records a valuation allowance against the deferred tax asset when it is more likely than not that some portion of the deferred tax assets will not be realized. Determining the appropriate valuation allowance requires significant judgment regarding future taxable income, reversal patters of temporary differences, available tax planning strategies, and the utilization of net operating loss carryforwards.

Recently Issued Accounting Standards    

The Company considers the applicability and impact of all accounting standards updates ("ASUs"). Management periodically reviews new accounting standards that are issued.

Recently Adopted Accounting Standards

On July 30, 2025, the Financial Accounting Standards Board (the "FASB") issued Accounting Standard Update (ASU) 2025-5, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets” to simplify the estimation of expected credit losses for current accounts receivable and current contract assets arising from revenue-transactions under ASC 606. Key changes include a practical expedient, available to all entities, that allows assuming that conditions as of the balance sheet date will remain unchanged over the life of those assets. The amendments are effective for annual periods beginning after December 15, 2025, including interim periods, with early adoption permitted; the

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guidance should be applied prospectively. The Company adopted this ASU for the year ended June 30, 2026, and the adoption did not have a material effect on the financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting entity’s effective tax rate reconciliation, as well as information related to income taxes paid to enhance the transparency and decision usefulness of income tax disclosures. This ASU was effective for the annual period ending June 30, 2026. As a result, the Company updated the income tax footnote disaggregating the information as required for year ended June 30, 2026, prospectively. The adoption did not have a material impact on the Company’s consolidated financial statements or results of operations and primarily resulted in additional disclosures in the income tax footnote, including disaggregated information in the effective tax rate reconciliation and income taxes paid.

Recent Accounting Pronouncements Not Yet Adopted

In November 2024, FASB issued ASU 2024-03, Income Statement reporting Comprehensive Income - Expense Disaggregation Disclosure (Subtopic 220-40): Disaggregation of Income Statement Expense. As subsequently amended by ASU 2025-01 the standard requires disclosure in the notes to the financial statements of specified information about certain costs and expenses. The amendments are effective for the fiscal years beginning after December 15, 2026, and for interim periods within the fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments should be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the new guidance to determine the impact it may have on its consolidated financial statements and related disclosure.

In December 2025, the FASB issued ASU 2025-12, Codification Improvements. The amendments address various technical corrections, clarifications, and other improvements to the FASB Accounting Standards Codification. The amendments are effective for annual reporting periods beginning after December 15, 2026, including interim periods within those annual reporting periods. The Company is currently evaluating the impact of this ASU on its consolidated financial statements and related disclosures.

In April 2026, the FASB issued ASU 2026-01, Equity (Topic 505): Initial Measurement of Paid-in-Kind Dividends on Equity-Classified Preferred Stock. The amendments provide guidance on the initial measurement of paid-in-kind dividends on equity-classified preferred stock. The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the applicability and potential impact of this ASU on its consolidated financial statements and related disclosures.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a small reporting company, we are not required to provide the information under Item 7A.

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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Escalon Medical Corp.

Index to Consolidated Financial Statements

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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of Escalon Medical Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Escalon Medical Corp. (the “Company”) as of June 30, 2026 and 2025, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended June 30, 2026, and the related notes (collectively referred to as the “financial statements”). In our opinion, based on our audits, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2026 and 2025, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2026, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

/s/ CBIZ, CPAs P.C.

CBIZ, CPAs P.C.

We have served as the Company’s auditor since 2018 (such date takes into account the acquisition of the attest business of Marcum LLP by CBIZ CPAs P.C. effective November 1, 2024).

Marlton, New Jersey

October 13, 2026

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ESCALON MEDICAL CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

See notes to consolidated financial statements

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See notes to consolidated financial statements

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ESCALON MEDICAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED JUNE 30, 2026 AND 2025

See notes to consolidated financial statements

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See notes to consolidated financial statements

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Escalon Medical Corp. and Subsidiaries

Notes to Consolidated Financial Statements

1. Organization and Description of Business

Escalon Medical Corp. ("Escalon" or "Company") is a Pennsylvania corporation initially incorporated in California in 1987, and reincorporated in Pennsylvania in November 2001. Within this document, the Company collectively shall mean Escalon, which includes its division called "Trek" and its wholly owned subsidiaries: Sonomed, Inc. (“Sonomed”), Escalon Digital Solutions, Inc. (“EMI”), and Sonomed IP Holdings, Inc.

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

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

2. Basis of Presentation and Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated.

Use of Estimate

The preparation of financial statements in conformity with accounting principals generally accepted in the United States of America (“US GAAP”) requires management to make estimates and assumptions that impact the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Segment Information

The Company has one operating and reportable segment. The Company’s CODM is its Chief Executive Officer and Chief Operating Officer, who reviews financial information presented on a consolidated basis for the purpose of allocating resources and evaluating financial performance.

Cash

For the purposes of reporting cash flows, the Company considers all cash accounts, which are not subject to withdrawal restrictions or penalties, and highly liquid investments with original maturities of 90 days or less to be cash and cash equivalents. From time to time cash balances exceed federal insurance limits. At June 30, 2026 and 2025, the Organization’s balances exceeded federally insured limits by approximately $2,457,000 and $290,000, respectively.

Restricted Cash

As of June 30, 2026 and 2025, restricted cash included $0 and $256,550, which was pursuant to the requirements in the TD Bank Loan entered into June 2018 (see Note 5 TD Note Payable).

Accounts Receivable

Accounts receivables are recorded at net realizable value. The Company performs ongoing credit evaluations of customers financial conditions and does not require collateral for accounts receivable arising in the normal course of business. The Company maintains allowances for potential credit losses based on the Company’s historical trends, specific customer issues and current economic trends. Accounts are written off against the allowance when they are determined to be uncollectible based on management’s assessment of individual accounts. While such credit losses have historically been within the Company’s expectation and the provision established, the Company cannot guarantee that this will continue. The Company recorded an allowance for credit losses of $74,035 and $164,499 as of June 30, 2026 and 2025, respectively.

The activity for the allowance for credit losses during years ended June 30, 2026 and 2025, is as follows:

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Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined on a first-in, first-out basis and include freight-in materials, labor and overhead costs. Inventories are written down if the estimated net realizable value is less than the recorded value. The Company reviews the carrying cost of inventories by product to determine the adequacy of reserves for obsolescence. In accounting for inventories, the Company must make estimates regarding the estimated realizable value of inventory. The estimate is based, in part, on age of inventory. If actual conditions are less favorable than those the Company has projected, the Company may need to increase its reserves for excess and obsolete inventories. Any increases in the reserves will adversely impact the Company’s results of operations. The establishment of a reserve for excess and obsolete inventory establishes a new cost basis in the inventory. Such reserves are not reduced until the product is sold. If the Company is able to sell such inventory any related reserves would be reversed in the period of sale. In accordance with industry practice, service parts inventory is included in current assets, although service parts are carried for established requirements during the serviceable lives of the products and, therefore, not all parts are expected to be sold within one year.

Property and Equipment

Property and equipment are recorded at cost. Leasehold improvements are amortized on a straight-line basis over the lesser of the estimated useful life of the asset or lease term. Depreciation on property and equipment is recorded using the straight-line method over the estimated economic useful life of the related assets. Estimated useful lives are generally three years to five years for computer equipment and software, five years to seven years for furniture and fixtures and five years to ten years for production and test equipment. Depreciation and amortization expense for the years ended June 30, 2026 and 2025 was approximately $23,000 and $35,000, respectively.

Property and equipment consist of the following:

Intangible Assets and Long-Lived Assets

Long-lived assets including intangible assets deemed to have finite lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment indicators include, among other conditions, cash flow deficits, historic or anticipated declines in revenue or operating profit or material adverse

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changes in the business climate that indicate that the carrying amount of an asset may be impaired. When impairment indicators are present, the recoverability of the asset is measured by comparing the carrying value of the asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the projected undiscounted cash flows from the asset are less than the carrying value of the asset the asset is considered to be impaired. The impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. At June 30, 2026 and 2025 the Company performed a qualitative assessment and considered the totality of events and circumstances, and concluded that it is not more likely than not that the fair value of the related assets are below their carrying amount. Based on this assessment, no impairment charges were recorded for the periods presented.

Accrued Warranties

The Company provides a limited one-year warranty against manufacturer’s defects on its products sold to customers. The Company’s standard warranties require the Company to repair or replace, at the Company’s discretion, defective parts during such warranty period. The Company accrues for its product warranty liabilities based on estimates of costs to be incurred during the warranty period, based on historical repair information for warranty costs.

Fair Value of Financial Instruments

The carrying amounts for cash and cash equivalents, restricted cash, accounts receivable, and accounts payable approximate their fair value because of their short-term maturity. The Company determined that the carrying amount of the notes payable and lease liabilities approximates fair value since such debt borrowing bears interest at the approximate current market rate. While the Company believes the carrying value of the assets and liabilities are reasonable, considerable judgment is used to develop estimates of fair value; thus the estimates are not necessarily indicative of the amounts that could be realized in a current market exchange. Hierarchical levels, which are directly related to the amount of subjectivity associated with the inputs to the valuation of these assets or liabilities, are as follows:

Level 1: Inputs that are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. 

Level 2: Inputs (other than quoted prices included in Level 1) that are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life. 

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities and that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.

Revenue Recognition

The Company recognizes revenue when its performance obligations with its customers have been satisfied. At contract inception, the Company determines if the contract is within the scope of Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, and then evaluates the contract using the following five steps: (1) identify the contract with the customer; (2) identify the performance obligations; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only recognizes revenue to the extent that it is probable that a significant revenue reversal will not occur in a future period.

The Company generates product revenue from the sale of medical device products and the sale and installation of the Company's AXIS image management system software. Revenue for service plans relate to the customer care plans for the Company’s equipment and AXIS image management system software.

Revenue is recognized upon transfer of control of the promised goods or services to the customer for an amount that reflects the consideration that the Company expects to be entitled in exchange for those goods or services. The Company’s performance obligations are for product sales, installation of AXIS image management system software and customer care plans. The performance obligations are determined at contract inception based upon promises within the contract that are distinct.

The product sales and installation of AXIS image management system software performance obligations are satisfied at a point in time, which is upon shipment for product sales and upon successful installation for the AXIS image management system. The performance obligation for customer care plans is satisfied over time as the customer receives and consumes the Company’s services.

The Company invoices its customers upon shipment for product sales. For the installation of AXIS image management system

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software and customer care plans, the Company invoices its customers upon successful installation. Invoice payments are generally due within 30 days of invoice date. The transaction price is determined based on fixed consideration in the Company’s customer contracts and is recorded net of variable consideration. In determining the transaction price, a significant financing component does not exist since the timing from when the Company invoices its customers to when payment is received as it is less than one year.

Revenue for product sales and installation of AXIS image management system software is recognized when delivered or installed. The customer care plan revenues are recognized proportionately over the service period, which is a 12-month period.

    The Company has elected the following practical expedients in applying ASC 606:

•Unsatisfied Performance Obligations - all performance obligations relate to contracts with a duration of less than one year, the Company has elected to apply the optional exemption provided in ASC 606 and therefore, is not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period.

•Contract Costs - all incremental customer contract acquisition costs are expensed as they are incurred as the amortization period of the asset that the Company otherwise would have recognized is one year or less in duration.

•Significant Financing Component - the Company does not adjust the promised amount of consideration for the effects of a significant financing component as the Company expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.

•Sales Tax Exclusion from the Transaction Price - the Company excludes from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from the customer.

•Shipping and Handling Activities - the Company elected to account for shipping and handling activities as a fulfillment cost rather than as a separate performance obligation.

•Portfolio Approach - the Company applied the Portfolio Approach to contract reviews within its identified revenue streams that have similar characteristics and the Company believes this approach would not differ materially than if applying Topic 606 to each individual contract.

Deferred Revenue

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

Revenue recorded that was included within prior period deferred revenue was $254,000 and $238,000, respectively for the years ended June 30, 2026 and 2025, respectively. The movement within the deferred revenue balance was due to new orders and the subsequent revenue recognition.

Shipping and Handling Revenues and Costs

Shipping and handling revenues are included in product revenue and the related costs are included in cost of revenue.

Research and Development

All research and development costs are charged to operations as incurred.

Earnings Per Share

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The Company used the two-class method to compute net income per common share. These participating securities included the Company’s convertible preferred stock which accrues dividends payable. The two-class method requires earnings for the period to be allocated between common stock and participating securities based upon their respective rights to receive distributed and undistributed earnings.

Under the two-class method, for periods with net income, basic net income per common share is computed by dividing the net income attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Net income attributable to common stockholders is computed by subtracting from net income the portion of current period earnings that the participating securities would have been entitled to receive pursuant to their dividend rights had all of the period’s earnings been distributed. No such adjustment to earnings is made during periods with a net loss, as the holders of the participating securities have no obligation to fund losses.

Diluted net income per common share is computed under the two-class method by using the weighted average number of shares of common stock outstanding, plus, for periods with net income attributable to common stockholders, the potential dilutive effects of stock options. The Company analyzed the potential dilutive effect of any outstanding dilutive securities under the “if-converted” method and treasury-stock method when calculating diluted earnings per share, in which it is assumed that the outstanding participating securities convert into common stock at the beginning of the period or date of issuance, if later. The Company reports the more dilutive of the approaches (two-class or “if-converted”) as its diluted net income per share during the period. Basic earnings per share are computed by dividing net income by the weighted average number of shares of common stock outstanding during the year. As of June 30, 2026 and 2025, the average market prices for the years then ended are less than the exercise price of all the outstanding stock options and, therefore, the inclusion of the stock options would be anti-dilutive.

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

on earnings per share.

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Income Taxes

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

The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. The Company maintains a full valuation allowance against its deferred tax assets as of June 30, 2025. A release of the valuation allowance would result in the recognition of certain deferred tax assets and a corresponding income tax benefit in the period the release is recorded. The amount of the valuation allowance release will be determined based on the available sources of future taxable income as of the period in which the release is recorded.

During the fiscal year ended June 30, 2026, the Company evaluated all available positive and negative evidence, including its cumulative income in recent years and projected future taxable income. The Company’s June 30, 2026 assessment indicates that the available positive evidence outweighs the negative evidence for certain of its deferred tax assets. In particular, management believes that the combination of demonstrated recent profitability, positive adjusted three-year results, and the availability of NOL carryforwards with indefinite carryforward periods and forecasted future taxable income provides sufficient positive evidence to overcome the Company's historical loss experience. Based on that evaluation, it concluded that it is more likely than not that a portion of its deferred tax assets will be realized. Accordingly, the Company released $1,139,449 of its valuation allowance related to previously unrecognized deferred tax assets and recognized a corresponding deferred income tax benefit in the consolidated statement of operations for the fiscal year ended June 30, 2026. The Company will continue to assess the realizability of its deferred tax assets each reporting period. Any further release of the valuation allowance would result in an additional income tax benefit in the period the release is recorded. The remaining valuation is at $5,393,142. The Company continues to maintain a valuation allowance against deferred tax assets that are not considered more likely than not to be realized.

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

The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statements of operations. As of June 30, 2026 and June 30, 2025, no accrued interest or penalties were required to be included on the related tax liability line in the consolidated balance sheets.

Leases

The Company determines if an arrangement is a lease at the inception of a contract. Operating lease right-of-use ("ROU") assets are included in right-of-use assets on the consolidated balance sheets. The current and long-term components of operating lease liabilities are included in the current portion of operating lease liabilities and operating lease liabilities, net of current portion, respectively on the consolidated balance sheets.

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Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term. As most of the Company's leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. Certain leases may include options to extend or terminate the lease. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

New Accounting Pronouncements

Recently Adopted Accounting Standards

On July 30, 2025, the Financial accounting Standards Board (the "FASB") issued Accounting Standard Update (ASU) 2025-5, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets” to simplify the estimation of expected credit losses for current accounts receivable and current contract assets arising from revenue-transactions under ASC 606. Key changes include a practical expedient, available to all entities, that allows assuming that conditions as of the balance sheet date will remain unchanged over the life of those assets. The amendments are effective for annual periods beginning after December 15, 2025, including interim periods, with early adoption permitted; the guidance should be applied prospectively. The Company adopted this ASU for the year ended June 30, 2026, and the adoption did not have a material effect on the financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting entity’s effective tax rate reconciliation, as well as information related to income taxes paid to enhance the transparency and decision usefulness of income tax disclosures. This ASU was effective for the annual period ending June 30, 2026. As a result, the Company updated the income tax footnote disaggregating the information as required for year ended June 30, 2026 prospectively. The adoption did not have a material impact on the Company’s consolidated financial statements or results of operations and primarily resulted in additional disclosures in the income tax footnote, including disaggregated information in the effective tax rate reconciliation and income taxes paid.

Recent Accounting Pronouncements Not Yet Adopted

In November 2024, FASB issued ASU 2024-03, Income Statement reporting Comprehensive Income - Expense Disaggregation Disclosure (Subtopic 220-40): Disaggregation of Income Statement Expense. As subsequently amended by ASU 2025-01 the standard requires disclosure in the notes to the financial statements of specified information about certain costs and expenses. The amendments are effective for the fiscal years beginning after December 15, 2026, and for interim periods within the fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments should be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the new guidance to determine the impact it may have on its consolidated financial statements and related disclosure.

In December 2025, the FASB issued ASU 2025-12, Codification Improvements. The amendments address various technical corrections, clarifications, and other improvements to the FASB Accounting Standards Codification. The amendments are effective for annual reporting periods beginning after December 15, 2026, including interim periods within those annual reporting periods. The Company is currently evaluating the impact of this ASU on its consolidated financial statements and related disclosures.

In April 2026, the FASB issued ASU 2026-01, Equity (Topic 505): Initial Measurement of Paid-in-Kind Dividends on Equity-Classified Preferred Stock. The amendments provide guidance on the initial measurement of paid-in-kind dividends on equity-classified preferred stock. The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the applicability and potential impact of this ASU on its consolidated financial statements and related disclosures.

3. Intangible Assets

The Company's intangible assets consist of the following:

Licenses and Patents

The Company capitalized and amortized its purchased licenses and patents over 10 years and 20 years, respectively. Amortization expense is approximately $20,000 for each of the years ended June 30, 2026 and 2025. Annual amortization related entirely to licenses and patents is estimated to be zero for the year ending June 30, 2027.

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During fiscal 2026, the Company retired a software license with an original cost of $196,500 and accumulated amortization of $185,025. The remaining carrying value of $11,475 was written off.

The following table presents amortized licenses and patents as of June 30, 2026:

The following table presents amortized licenses and patents as of June 30, 2025:

4. Accrued Expenses

The following table presents accrued expenses:

Accrued compensation as of June 30, 2026 and 2025 primarily relates to payroll and vacation accrual.

5. TD Note Payable

On June 29, 2018 the Company entered a business loan agreement with TD bank receiving a line of credit evidenced by a promissory note of $250,000. The index rate at the date of the agreement is 5.000% per annum. Interest on the unpaid principal balance of the note is calculated using a rate of 0.740 percentage points over the index, adjusted if necessary for any minimum and maximum rate limitations, resulting in an initial rate of 5.740% per annum based on a year of 360 days. TD bank elected to exercise the term note conversion option to convert the loan balance of $201,575 to a five-year term note effective March 29, 2023 ("the Conversion Date") at an annual rate of 9.49%. On October 17, 2025, the Company fully repaid its outstanding loan with TD Bank of $113,960 with its restricted cash. As a result, the Company has no outstanding balance under the TD Bank loan agreement as of June 30, 2026.

6. Long-term debt

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Economic Injury Disaster ("EIDL") loan

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

The future annual principal amounts and accrued interest to be paid as of June 30, 2026 are as follows:

7. Income Taxes

Our income before provision for (benefit from) income taxes for the years ended June 30, 2026 and 2025 was as follows:

Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due. Deferred taxes relate to difference between the basis of assets and liabilities for financial reporting and income tax reporting which will be either taxable or deductible when the assets or liabilities are recovered or settled.”

The provision for income taxes for the years ended June 30, 2026 and 2025 consists of the following:

The Company is subject to taxation in the United States at both the federal level and within various state jurisdictions. The Company is not currently under audit, and its statute of limitations remains open for 2021 and subsequent years.

The Company had an effective tax rate of (39.65)% and 0% for the years ended June 30, 2026 and 2025, respectively.

Beginning in fiscal year 2026 annual reporting, the Company adopted ASU 2023-09 prospectively. See Note 2-Summary of Significant Accounting Policies - Recently Adopted Accounting Pronouncements for additional details on the adoption of ASU

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2023-09. A reconciliation of the U.S. federal statutory income tax rate to our effective tax rate pursuant to the disclosure requirements of ASU 2023-09 for the year ended June 30, 2026 is as follows (in dollars, except for percentages):

Income tax expense (benefit) as a percentage of loss for the years ended June 30, 2026 and 2025 differ from statutory federal income tax rate due to the following:

(1) CA, MA, NY, and WI account for 100% of the tax effect in this category.

Cash paid for income taxes, net of refunds received, by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 for the year ended June 30, 2026 is as follows:

The components of the net deferred income tax assets and liabilities as of June 30, 2026 and 2025 are as follows:

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As of June 30, 2026 and June 30, 2025, the Company has a valuation allowance of $5,393,142 and 7,073,376, which primarily relate to the federal net operating loss carryforwards. During the year ended June 30, 2026, the valuation allowance decreased by $1,680,235 and during the year ended June 30, 2025, the valuation decreased by $534,387.

The valuation allowance is a result of management evaluating its estimates of the net operating losses available to the Company as they relate to the results of operations of acquired businesses subsequent to their being acquired by the Company. The Company evaluates a variety of factors in determining the amount of the valuation allowance, including the Company's earnings history, the number of years the Company's operating loss can be carried forward, the existence of taxable temporary differences, and near-term earnings expectations. Future reversal of the valuation allowance will be recognized either when the benefit is realized or when it has been determined that it is more likely than not that the benefit will be realized through future earnings.

During the year ended June 30, 2026, the Company released approximately $1,139,449 of its valuation allowance after concluding that it is more likely than not that a portion of its deferred tax assets will be realized. In assessing the realizability of its deferred tax assets, which consist primarily of federal and state net operating loss ("NOL") carryforwards, management considered all available positive and negative evidence in accordance with ASC 740, including historical operating results, recent earnings trends, projected future taxable income, the timing and character of temporary difference reversals, and the availability and utilization periods of existing tax attributes. Management's assessment was further supported by several favorable developments during the year, including the resolution of the Company's prior going concern uncertainty and its return to a cumulative pre-tax income position. As part of this evaluation, management performed a detailed scheduling analysis to assess the extent to which future income could support the utilization of both finite-lived and indefinite-lived NOL carryforwards. The analysis demonstrated that a portion of the Company's deferred tax assets is expected to be realized through forecasted future income and available tax attributes, including federal NOL carryforwards generated after enactment of the Tax Cuts and Jobs Act that are not subject to expiration. Accordingly, the Company released the portion of its valuation allowance supported by the available positive evidence, while continuing to maintain a valuation allowance against deferred tax assets for which realization is not considered more likely than not.

As of June 30, 2026 and 2025, Company has available federal net operating loss carry forwards of approximately $28.3 million and $29.5 million, respectively, and state net operating loss carry forwards of approximately $5.7 million and $4.2 million, respectively. As of June 30, 2026, approximately $24.8 million of federal and $4.6 million of state net operating loss carryforwards are scheduled to expire within the next ten years, while an additional $0.9 million and $1.2 million, respectively, will expire in years eleven through twenty. The remaining $2.6 million of federal net operating loss carryforwards may be carried forward indefinitely. As of June 30, 2025, approximately $23.0 million of federal and $2.3 million of state net operating loss carryforwards were scheduled to expire within the next ten years, $4.0 million of federal and $1.4 million of state

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net operating loss carryforwards scheduled to expire in years eleven through twenty. $2.2 million of federal and $0.5 million of sate net operating loss carryforwards could be carried forward indefinitely.

The Company's U.S. Federal NOLs pre 2017 Tax Cuts and Jobs Act ("TCJA") NOLs and post 2017 TCJA NOLs are $25.7 million and $2.6 million, respectively, as of June 30, 2026.

The Company's U.S. Federal NOLs generated prior to the enactment o`f the TCJA may be utilized to offset up to 100% of taxable income and generally expire 20 years after the year in which they were generated. The Company’s U.S. Federal NOLs, generated after the enactment of the TCJA are available for indefinite carryforward; however, their utilization is limited to 80% of taxable income.

The utilization of the Company’s net operating loss carryforwards and research tax credit carryovers could be subject to annual limitations under Section 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), and similar state tax provisions, due to ownership change limitations that may have occurred previously or that could occur in the future. These ownership changes limit the amount of net operating loss carryforwards and other deferred tax assets that can be utilized to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382 and 383 of the Code, results from transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50 percent points over a three-year period. The Company has not completed an analysis of an ownership change under Section 382 of the Code. To the extent that a study is completed and an ownership change is deemed to occur, the Company’s net operating losses and tax credits could be limited.

The Company files income tax returns in the U.S. and various state and local jurisdictions. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the fiscal year ended June 30, 2021 and subsequent years remain open to tax examination. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses were generated and carried forward, and make adjustments up to the amount of the net operating loss amount.

The Company’s policy is to recognize interest and penalties associated with uncertain tax benefits as part of the income tax provision and include accrued interest and penalties with the related income tax liability on the Company’s Condensed Consolidated Balance Sheets. To date, the Company has not recognized any interest and penalties in its Condensed Consolidated Statements of Operations, nor has it accrued for or made payments for interest and penalties. The Company has no unrecognized tax benefits as of June 30, 2026 and June 30, 2025.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provision of the Tax Cuts and Jobs Act, modification to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and other implemented through 2027. Under OBBBA, the Company is permitted to claim 100% bonus depreciation and to immediately expense Section 174 costs. These provisions accelerate tax deductions but does not create a permanent tax difference; therefore, the impact is timing‑related only and does not materially affect the Company’s income tax provision.

8. Commitments and Contingencies

Legal Proceedings

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

9. Related Party Transactions and Preferred Stock

On February 14, 2018, the Company entered into a Debt Exchange Agreement (the “Exchange Agreement”) with Mr. DePiano Sr., the Company's former Chairman and DP Associates Inc. Profit-Sharing Plan of which Mr. DePiano Sr. is the sole owner and sole trustee (the “Holders”).  Pursuant to the terms of the Exchange Agreement, effective February 15, 2018, the holders exchanged a total of $645,000 principal amount of debt related to the accounts receivable factoring program for 2,000,000 shares of Series A Convertible Preferred Stock (the “Preferred Stock”). As of June 30, 2025, the related party interest accrual of $112,389 related to the debt prior to the exchange, remained as an on demanded payable. The related party interest accrual was paid in full during the year ended June 30, 2026.

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Each share of Preferred Stock entitles the holder thereof to 13 votes per share and will vote together with all other classes and series of stock of the Company as a single class on all actions to be taken by the Company’s stockholders.  As a result of this voting power, the holders as of June 30, 2026 beneficially own approximately 77.81% of the voting power on all actions to be taken by the Company’s stockholders.

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 2.15 shares of Common Stock (the “Conversion Ratio”).  The Conversion Ratio is subject to standard provisions for adjustment in the event of a subdivision or combination of the Company’s Common Stock and upon any reorganization or reclassification of the capital stock of the Company. If the Holders were to convert their shares of Preferred Stock into Common Stock at the Conversion Ratio the Holders would receive a total of 4,300,000 shares of Common Stock, or approximately 36.70% of the then outstanding shares of Common Stock assuming such conversion.

Each outstanding share of the Preferred Stock accrues dividends calculated cumulatively at the annual rate of $.0258 per share (such amount subject to equitable adjustment in the event of any stock dividend, 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 June 30, 2026 and 2025 the cumulative dividends payable is $432,131 ($0.2161 per share) and $380,531 ($0.1903 per share), respectively.

The weighted average preferred stock converted to common stock is the total of 4,300,000 shares converted from the convertible preferred stock and shares converted from accrued dividends. As of June 30, 2026 and 2025, the weighted average preferred stock converted to common stock balance was 7,180,873 and 6,836,873, respectively.

After Mr. DePiano Sr. passed away on October 3, 2019, the abovementioned shares of Preferred Stock are now held in Richard DePiano Sr Trust under the Will (TUW) with Mr. DePiano, Jr. as the trustee.

During November 2025, the Company entered into a loan agreement with TUW. Under the terms of the agreement, TUW provided financing to the Company in the amount of $100,000 to support working capital needs secured by collateral. The loan has an annualized interest rate of 14% during the three-month term. The $100,000 short-term loan and accrued interest of 4,037 was paid in full on February 19, 2026.

10. Concentration of Credit Risk

Credit Risk

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

Major Customer

One customer accounted for approximately 12% of net sales during the year ended June 30, 2026. One customer accounted for approximately 17% of net sales during the year ended June 30, 2025.

As of June 30, 2026, the Company had one customer that represented approximately 17% of the total accounts receivable balance. As of June 30, 2025, the Company had one customer that represented approximately 21% of the total accounts receivable balance.

Major Supplier

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The Company's one largest supplier accounted for 45% of the total purchases for the year ended June 30, 2026. The Company's one largest supplier accounted for the total purchases for 43%  of total purchases for the year ended June 30, 2025. 

As of June 30, 2026, the Company had one supplier that represented approximately 44% of the total accounts payable balance. As of June 30, 2025, the Company had two suppliers that represented 30% and 28% of the total accounts payable balance.

Foreign Sales

Domestic and international sales from continuing operations are as follows:

11. Leases

Lessee Arrangements

On October 23rd, 2025, the Company entered into a new lease agreement for three office spaces in a building located at 865 Merrick Avenue, Westbury, New York. The lease has a seven year term, with no option to extend. The lease has monthly payments ranging from $10,390 to $12,407 for the three spaces, and the Company determined the discount rate for the lease to be 9.49%. On the lease commencement date, only one space was available for use. The Company recognized a right of use asset and a lease liability of $365,967. The Company recognized an additional right of use asset and a lease liability of $321,274 accordingly during the fourth quarter of 2026 for other two spaces. The lease addition did not have a material impact on the Company's results of operations for the year ended June 30, 2026.

Total lease expense, under ASC 842, was included in cost of revenue and marketing, general and administrative costs in the Company's audited consolidated statement of operations for the years ended June 30, 2026 and 2025 as follows:

Supplemental cash flow information was as follows:

Leases recorded on the balance sheet consist of the following:

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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 consolidated balance sheets as of June 30, 2026:

The aggregate future lease payments for operating leases as of June 30, 2026 were as follows:

Average lease terms and discount rates were as follows:

Lessor Arrangement

During the year ended June 30, 2026, the Company entered into one sales-type lease. As of June 30, 2026, the Company's investment in the sales-type lease was $29,470, consisting of $4,621 classified as short-term and $24,849 classified as long-term. These amounts are included in short-term other assets and long-term other assets, respectively, in the accompanying consolidated balance sheets. For the year ended June 30, 2026, the Company recognized $2,128 of interest income and $29,470 of selling profit related to the sales-type lease. Interest income is recognized over the lease term using the effective interest method. Selling profit, if applicable, is recognized at lease commencement when the criteria for sales-type lease accounting are met.

12. Segment Information

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly provided to the Chief Operating Decision Maker ("CODM") in deciding how to allocate resources to an individual segment and in assessing performance.

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The Company’s CODM consists of the Chief Executive Officer and Chief Operating Officer. The CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. The accounting policies of the Company’s reportable segment, as well as how the Company derives revenue, are consistent with those described in "Note 2-Basis of Presentation and Summary of Significant Accounting Policies” within these financial statements.

The CODM uses consolidated net income, consistent with GAAP to assess performance, evaluate cost optimization, and allocate resources, including personnel-related and financial or capital resources, in the annual budget and forecasting process, as well as budget-to-actual variances on a monthly basis. As such, the Company has determined that it operates as one operating and reportable segment.

As the Company has only one reportable segment, all revenues, expenses, and operating results are attributable to that segment. Total assets attributable to the Company’s sole reportable segment were $9,128,115 and $4,993,059 as of June 30, 2026 and June 30, 2025, respectively.

The following tables set forth significant expense categories and other specified amounts included in consolidated net income that are otherwise regularly provided to the CODM for the years ended June 30, 2026 and 2025:

(1) 2026 and 2025 exclude depreciation and amortization expenses in cost of revenue, general and administrative expenses.

(2) 2026 and 2025 exclude the credit loss adjustment.

13. Other Income

During the year ended June 30, 2026, the Company was a party to a certain asset purchase agreement by and between the Company and Optos Public Limited Company, a company incorporated in Scotland (“Optos”). Pursuant to the asset purchase agreement, the Company agreed to sell to Optos certain software-related assets associated with the Company’s AXIS platform (the “Disposition”) in exchange for the aggregate purchase price of $3,000,000. The purchase price is payable in three milestone installments, each in the amount and subject to the conditions as set forth in the asset purchase agreement, in addition to $25,000 which was paid upon the execution by the Company and Optos of a term sheet with respect to the Disposition. The Company received the full purchase price, less the deposit, and recognized a net gain of $2,813,525 before tax on the sale during the year ended June 30, 2026. The pretax gain is calculated as the net proceeds less selling cost and the remaining book value of the license. The Company is evaluating the tax impact of the gain from sales on its condensed consolidated financial statements, and it is expected that the impact is not significant due to the existing and available net operating losses.

The Company considered the accounting guidance for discontinued operations noting that the disposition did not represent a strategic shift as required under the standard and therefore no adjustments were reflected in the condensed consolidated financial statements to reflect discontinued operations. The Company has evaluated the tax impact of the gain from sales on its condensed consolidated financial statements, and concluded that the impact is not significant due to the existing and available net operating losses and sales allocation by state.

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14. Subsequent Event

The Company entered into a Short-Form Lease Agreement (the "Lease") with HP BC Eagle One LLC ("Landlord") for approximately 3,012 rentable square feet of office space located at 994 Old Eagle School Road, Wayne, Pennsylvania, to serve as the Company's corporate office. The lease term is 62 months with first 2 full months free. The lease started in early July 2026. The lease is approximately $6,024 per month in year one, escalating annually to approximately $6,983 per month in the final partial period (months 61–62).

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Annual Report on Form 10-K, the Company’s management evaluated, with the participation of the Company’s principal executive officer and principal financial officer, the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are not effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to the Company's management, including the Company’s principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934). The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:

•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.

As of June 30, 2026, the Company had a material weakness in its internal control over financial reporting related to the design and implementation of controls over estimates used in the valuation of inventory, specifically the precision of management’s review of inventory reserve calculations. This material weakness was first identified during the year ended June 30, 2023. Beginning in the fourth quarter of fiscal 2024 and continuing through fiscal 2025 and 2026, management implemented additional controls, including a standardized process for updating standard costs, enhanced segregation of duties, improved data accuracy in the valuation calculations, and senior management review of all material estimates. However, the material weakness has not been remediated because the inventory reserve spreadsheet still relies on manual entries that management’s review does not fully cover, and the enhanced controls have not yet operated for a sufficient period, or been tested, to demonstrate that they are operating effectively. Accordingly, the Company’s management, with the participating of its principal executive officer, concluded that its internal control over financial reporting was not effective as of June 30, 2026.

Remediation Plan for Existing Material Weakness

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Management is committed to the remediation of the material weakness described above. As part of its remediation plan, the Company has implemented additional controls to increase the precision of management's review of all assumptions used in the valuation of inventory and to institute senior management of all material estimates applied in the inventory valuation process.

Pursuant to the rules of the SEC, the Company’s management’s report on internal control over financial reporting is furnished with this Annual Report on Form 10-K and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933 or Securities Exchange Act of 1934.

This Annual Report on Form 10-K does not include an attestation report of the Company’s independent registered public accounting firm regarding the Company's internal control over financial reporting. The Company’s management’s report on internal control over financial reporting was not subject to attestation by the Company’s independent registered public accounting firm pursuant to the rules of the SEC that permits the Company to provide only the management’s report on internal control over financial reporting in this Annual Report on Form 10-K.

Changes in Internal Control Over Financial Reporting

During the year ended June 30, 2026, the Company made changes designed to improve its internal control over financial reporting. These changes include standardizing the process for updating standard costs, enhancing segregation of duties in both the updating and review stages and improving the accuracy and integrity of data used in inventory valuation calculations. The Company believes these changes strengthen the accuracy and reliability of the inventory valuation process. Other than the foregoing, there were no changes in the Company's internal control over financial reporting during the year ended June 30, 2026 that have material affected, or are reasonably likely to materially affect the Company's internal control over financial reporting.

As previously disclosed, management identified a material weakness in internal control over financial reporting related to the design and implementation of controls over estimates used in the valuation of inventory, specifically regarding the precision of management's review of inventory reserve calculations.

ITEM 9B. OTHER INFORMATION

Rule 10b5-1 Trading Plans

During the fiscal year ended June 30, 2026, none of our directors or executive officers adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (as those terms are defined in Item 408 of Regulation S-K).

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable

PART III.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

    Directors and Executive Officers

The following table sets forth information with respect to our directors and our executive officers.

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Set forth below are the names, positions held and business experience, including during the past five years, of our directors and executive officers as of October 13, 2026. Officers serve at the discretion of the board of directors.

Mr. DePiano, Jr. has been a Class I director since May 9, 2013, and was appointed our President and General Counsel of the Company on January 1, 2008 and our Chief Executive Officer on September 28, 2013. Previously, he was Chief Operating Officer and General Counsel. Mr. DePiano, Jr. joined us in November of 2000 as Vice President Corporate and Legal Affairs. He currently serves as a member of the board of directors, and served as President from 2008 to 2009 of the Delaware Valley Corporate Counsel Association (“DELVACCA”). Mr. DePiano, Jr. also serves as a member of the nominations committee, Chairman of the law school initiative committee and member of the pro-bono committee of DELVACCA. He also is vice chairman of the board of directors of the Montgomery County Industrial Development Authority.

Mr. Wallace was appointed our Chief Operating Officer on January 1, 2008. He was also appointed the Principal Financial and Accounting Officer on July 7, 2017. Mr. Wallace has worked with us since 1997. Previous to being appointed Chief Operating Officer he was Executive Vice President of our Escalon Digital Solutions and Trek Medical subsidiaries. He has jointly held the position of Vice President-Quality, with quality and regulatory responsibilities for all of our companies, and has also previously served as Operations Manager at Sonomed, Inc. and our Quality Manager. He had previously worked with Lunar Corp. (now GE Healthcare) and Trek Medical. He holds a B.S. in Industrial Engineering and a M.S. in Manufacturing Systems Engineering, both from the University of Wisconsin-Madison, is a senior member of the American Society of Quality and has over 20 years' experience in the medical device industry.

Ms. Huang was appointed Chief Financial Officer on May 1, 2026. She has been with the Company since 2008 and has previously served as Assistant Controller, Controller, and Vice President of Finance. With more than 15 years of experience at the Company, she has played a key role in financial reporting, compliance, and corporate finance activities. Ms. Huang holds a M.S. in Accounting and an MBA from Drexel University. She is a Certified Public Accountant (CPA) and a Certified Management Accountant (CMA).

Ms. Napolitano has served on our board of directors since 2003. She is a Class II director. Ms. Napolitano has served as a Tax Manager at Global Tax Management, Inc., a provider of compliance support services for both federal and state taxes, since 1998. Ms. Napolitano is a Certified Public Accountant in Pennsylvania. Ms. Napolitano qualifies for our board of directors and audit committee based on her extensive experience in public accounting and through her understanding of internal controls, accounting principles, business operations and regulatory compliance. We believe that Ms.Napolitano financial, operational and regulatory experience qualifies her to serve as a member of our board of directors and our audit committee.

Mr. Trusk was appointed as a member of our Board in 2015 as a Class I director. He is President of BroadBase Solutions, Inc., an information technology staffing and consulting firm since 2000. Mr. Trusk was a sales executive with CB Technologies an IT consulting firm based in the Philadelphia suburbs. Before joining CB Technologies Mr. Trusk held several sales and sales management positions within the disposable medical equipment markets. B. Braun Medical from 1994 to 1997 and Calgon Vestal Labs, a subsidiary of Merck & Co.; Inc. from 1991 to 1994. We believe Mr. Trusk’s operational, executive and professional experience qualifies him to serve as a member of our Board and our Audit Committee.

Mr. Jacovini was appointed as a Class III Director in February 2018. He previously served as the Chief Financial Officer of LaFrance Corp, a global manufacturer specializing in on-product branding. Previously, he was President and Founder of Innovator Management LLC, a sponsor of mutual funds and exchange traded funds, from 2011 to 2017. He served as Chief Executive Officer and portfolio manager of Academy Asset Management LLC from 2007 to 2015. Between 2007 and 2017 he held the positions of President, Treasurer, and Trustee of the Academy Funds Trust, a registered investment company. Prior to that, he worked on Wall Street as a derivatives marketer at Deutsche Bank AG and as a municipal strategist at Prudential Securities Incorporated. He holds a BA from the College of the Holy Cross and an MBA from the MIT Sloan School of

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Management. We believe Mr. Jacovini's operational, executive and professional experience qualifies him to serve as a member of our Board and our Audit Committee.

Mr. Dogum was appointed as a Class II director in February 2018. John P. Dogum is a partner at Martin Law where he has been working since 2003. He has concentrated his practice on litigating Pennsylvania workers’ compensation cases since 1992. Mr. Dogum has served as consultant to major insurers in addition to frequently appearing before Workers’ Compensation Judges in the Eastern region of Pennsylvania. Mr. Dogum has argued a case of first impression before the Third Circuit Court of Appeals. He has also litigated claims under the Federal Longshore and Harbor Workers’ Compensation Act. Mr. Dogum has been listed as a Pennsylvania Super Lawyer since 2009 as well as a Top 100 Philadelphia Super Lawyer in 2009. He has been listed as a Best Lawyer since 2013 by Best Lawyers in America. He holds a BS from the Susquehanna University and JD from the Widener University School of Law. We believe Mr. Dogum's operational, executive and professional experience qualifies him to serve as a member of our Board.

Section 16 (a) Beneficial Ownership Reporting Compliance

Section 16 (a) of the Securities Exchange Act of 1934 requires our directors, executive officers and 10% stockholders to file initial reports of ownership and reports of changes in ownership of our common stock and other equity securities with the Securities and Exchange Commission (the "SEC"). The directors, executive officers and 10% stockholders are required to furnish us with copies of all Section 16(a) reports they file. Based on a review of the copies of such reports furnished to us and written representations from our directors and executive officers that no other reports were required, we believe that our directors, executive officers and 10% stockholders complied with all Section 16 (a) filing requirements applicable to them for the year ended June 30, 2026.

Code of Conduct and Ethics

Our board of directors has adopted a Code of Conduct and Ethics, which applies to all of our directors, the principal executive officer, principal financial officer, principal accounting officer or controller and persons performing similar functions, officers and employees. Our Code of Conduct and Ethics is posted in the “Corporate Governance” section of our Internet web site at www.escalonmed.com. Any amendments to, or grant of waiver with respect to, any provision of our Code of Conduct and Ethics, will be disclosed noting the nature of such amendment or waiver in the “Corporate Governance” section of our Internet web site at www.escalonmed.com or by other appropriate means as required or permitted under the applicable regulations of the SEC.

Insider Trading Policies and Procedures

The Company has not adopted formal insider trading policies or procedures governing transactions in its securities by directors, officers, or employees. The Company has not adopted such policies due to its size, limited number of security holders, and the absence of an active trading market for its common stock.

Audit Committee Members and Financial Expert

The members of the audit committee of our board of directors are Ms. Napolitano, Mr. Trusk, and Mr. Jacovini. Our board of directors has determined that each audit committee member has the attributes, education and experience of, and therefore is, an “audit committee financial expert,” as such term is defined in Item 407(d)(5) of Regulation S-K, and that each member of our audit committee is “independent,” as defined by OTCQB market Listing Rules.

Overview of Executive Employment Agreements and Equity-Based Awards

The Company does not maintain formal written employment agreements with any of its Named Executive Officers. Each Named Executive Officer serves at the discretion of the board of directors. Compensation for the Named Executive Officers consists primarily of base salary and, in the case of certain officers, discretionary cash bonuses determined by the board of directors. The Company also provides certain perquisites to its Named Executive Officers, including those described in the footnotes to the Summary Compensation Table below.

Compensation of Named Executive Officers

Summary Compensation Table

The following table sets forth certain summary information concerning compensation that we paid or accrued to or on behalf of each of our executive officers (the “Named Executive Officers”) during each of the fiscal years ended June 30, 2026, and 2025.

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