10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY PERIOD PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period ended September 30, 2017

Commission File Number 0-20127

Escalon Medical Corp.

(Exact name of registrant as specified in its charter)

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

435 Devon Park Drive, Building 100, Wayne, PA 19087

(Address of principal executive offices, including zip code)

(610) 688-6830

(Registrant’s telephone number, including area code)

N/A

Former name, former address and former fiscal year, if changed since last report

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," and "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o (Do not check if a smaller reporting company)	Smaller reporting company	x
		Emerging growth company	o

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 is a shell company (as defined in Rule 12b-2 of the Act).    Yes  o    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 7,551,430 shares of common stock, $0.001 par value, outstanding as of November 13, 2017.

TABLE OF CONTENTS
		Page
	PART I Financial Information
Item I.	Condensed Consolidated Financial Statements
	Condensed Consolidated Balance Sheets as of September 30, 2017 and June 30, 2017 (Unaudited)	2
	Condensed Consolidated Statements of Operations for the three-month periods ended September 30, 2017 and 2016 (unaudited)	3
	Condensed Consolidated Statement of Shareholders' Equity for the three-month period ended September 30, 2017 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the three-month periods ended September 30, 2017 and 2016 (unaudited)	5
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	17
Item 4.	Controls and Procedures	18
	PART II Other Information
Item 1.	Legal Proceedings	18
Item 1A.	Risk Factors	18
Item 6.	Exhibits	18

1

Item 1. Condensed Consolidated Financial Statements

ESCALON MEDICAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
	September 30, 2017			June 30, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	429,885		$	544,118
Accounts receivable, net	1,529,302			1,483,770
Inventory, net	2,018,886			1,917,938
Other current assets	230,468			209,546
Total current assets	4,208,541			4,155,372
Property and equipment, net	50,556			54,892
Trademarks and trade names	605,006			605,006
Patents, net	—			400
License, net	176,087			168,500
Total assets	$	5,040,190		$	4,984,170
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Line of credit	$	225,000		$	250,000
Accounts payable	1,016,783			1,047,463
Accrued expenses	1,053,194			965,764
Related party note payable	645,000			545,000
Current portion of accrued post-retirement benefits	101,891			101,891
Liabilities of discontinued operations	94,406			91,125
Total current liabilities	3,136,274			3,001,243
Accrued post-retirement benefits, net of current portion	780,857			799,347
Total long-term liabilities	780,857			799,347
Total liabilities	3,917,131			3,800,590
Shareholders' equity:
Common stock, $0.001 par value; 35,000,000 shares authorized; 7,551,430 issued and outstanding as of September 30, 2017 and June 30, 2017	7,551			7,551
Additional paid-in capital	69,701,907			69,701,907
Accumulated deficit	(68,586,399		)	(68,525,878		)
Total shareholders’ equity	1,123,059			1,183,580
Total liabilities and shareholders’ equity	$	5,040,190		$	4,984,170

See notes to condensed consolidated financial statements

2

ESCALON MEDICAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
	For the Three-months ended September 30,
	2017			2016
Net revenues:
Product revenue	$	2,629,624		$	2,331,988
Revenues, net	2,629,624			2,331,988
Costs and expenses:
Cost of goods sold	1,467,310			1,251,492
Marketing, general and administrative	996,505			1,155,415
Research and development	193,081			310,359
Total costs and expenses	2,656,896			2,717,266
(Loss) from operations	(27,272		)	(385,278		)
Other income (expense)
Interest	199			59
Interest expense	(33,448		)	(10,313		)
Total other (expense)	(33,249		)	(10,254		)
Net (loss)	$	(60,521	)	$	(395,532	)
Net (loss) per share
Basic net (loss) per share	$	(0.01	)	$	(0.05	)
Diluted net (loss) per share	$	(0.01	)	$	(0.05	)
Weighted average shares—basic	7,551,430			7,551,430
Weighted average shares—diluted	7,551,430			7,551,430

See notes to condensed consolidated financial statements

3

ESCALON MEDICAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED)
	Common Stock			Additional Paid-in Capital		Accumulated Deficit			Total Shareholders' Equity
	Shares	Amount
Balance at June 30, 2017	7,551,430	$	7,551	$69,701,907		$(68,525,878)			$	1,183,580
Net loss	—	—		—		(60,521		)	(60,521		)
Balance at September 30, 2017	7,551,430	$	7,551	$	69,701,907	$	(68,586,399	)	$	1,123,059

See notes to condensed consolidated financial statements

4

ESCALON MEDICAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
	For the three months ended September 30,
	2017			2016
Cash Flows from Operating Activities:
Net loss	$	(60,521	)	$	(395,532	)
Adjustments to reconcile net loss to cash (used in) operating activities:
Depreciation and amortization	11,855			12,373
Change in operating assets and liabilities:
Accounts receivable, net	(45,532		)	623,219
Inventory, net	(100,948		)	(336,638		)
Other current assets	(20,922		)	(48,869		)
Accounts payable and accrued expenses	56,750			(9,276		)
Change in accrued post-retirement benefits	(18,490		)	(11,972		)
Change in liabilities of discontinued operations	3,281			1,114
Net cash (used in) operating activities	(174,527		)	(165,581		)
Cash Flows from Investing Activities:
Purchase of property and equipment	(2,206		)	—
Purchase of licenses	(12,500		)	—
Net cash (used in) investing activities	(14,706		)	—
Cash Flows from Financing Activities:
Proceeds from related party note payable	100,000			—
Principal payment for line of credit	(25,000		)	—
Net cash provided by financing activities	75,000			—
Net (decrease) in cash and cash equivalents	(114,233		)	(165,581		)
Cash and cash equivalents, beginning of period	544,118			538,114
Cash and cash equivalents, end of period	$	429,885		$	372,533
Supplemental Schedule of Cash Flow Information:
Interest paid	$	10,587		$	—

See notes to condensed consolidated financial statements

5

Escalon Medical Corp. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(UNAUDITED)

1. Basis of Presentation

 Escalon Medical Corp. (“Escalon” or the “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 and its wholly owned subsidiaries: Sonomed, Inc. (“Sonomed”), Trek, Inc. (“Trek”), Escalon Medical Europe GmbH (“EME”), Escalon Digital Solutions, Inc. (“EMI”), Escalon Pharmaceutical, Inc. (“Pharmaceutical” inactive), Escalon Holdings, Inc. (“EHI”), Escalon IP Holdings, Inc., and Sonomed IP Holdings, Inc.All intercompany accounts and transactions have been eliminated. We have evaluated all subsequent events through the date the financial statements were issued.

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 governmental 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.

2. Stock-Based Compensation

Valuations are based upon highly subjective assumptions about the future, including stock price volatility and exercise patterns. The fair value of share-based payment awards was estimated using the Black-Scholes option pricing model. Expected volatilities are based on the historical volatility of the Company's stock. The Company uses historical data to estimate option exercise and employee terminations. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

The Company has historically granted options under the Company's option plans with an option exercise price equal to the closing market value of the stock on the date of the grant and with vesting, primarily for Company employees, either in equal annual amounts over a two- to five-year period or immediately, and, primarily for non-employee directors, immediately.

As of September 30, 2017 and 2016 there were no unrecognized compensation cost related to non-vested share-based compensation arrangements granted to employees under the 2004 Equity Incentive Plan.

The Company did not receive any cash from share option exercises under stock-based payment plans for the three-month periods ended September 30, 2017 and 2016. The Company did not realize any tax effect, which would be a reduction in its tax rate, on options due to the full valuation allowances established on its deferred tax assets.

The Company measures compensation expense for non-employee stock-based compensation based on the fair value of the options issued, as this is more reliable than the fair value of the services received. Fair value is measured as the value of the Company's common stock on the date that the commitment for performance by the counterparty has been reached or the counterparty's performance is complete. The fair value of the equity instrument is charged directly to compensation expense and additional paid-in capital. There was no non-employee compensation expense for the three-month periods ended September 30, 2017 and 2016.

3. Net (Loss) earnings per Share

The following table sets forth the computation of basic and diluted net (loss) per share:

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	For the Three-months ended September 30,
	2017			2016
Numerator:
Numerator for basic and diluted earnings per share
Net (loss)	$	(60,521	)	$	(395,532	)
Denominator:
Denominator for basic earnings per share - weighted average shares	7,551,430			7,551,430
Effect of dilutive securities:
Stock options and warrants	—			—
Shares reserved for future exchange	—			—
Denominator for diluted earnings per share - weighted average and assumed conversion	7,551,430			7,551,430
Net (loss) per share
Basic net (loss) per share	$	(0.01	)	$	(0.05	)
Diluted net (loss) per share	$	(0.01	)	$	(0.05	)

4. 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 may in the future 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.

5.     Recently Issued Accounting Standards

In May 2014 FASB issued Accounting Standards Update 2014-09 Revenue from Contracts with Customers (Topic 606). Under the new provision, an entity should apply five steps for revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For a public entity, the amendments in this Update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. In August 2015 FASB issued accounting Standards Update No. 2015-13 Revenue from Contracts with Customers (Topic 606) deferral of the effective date. The amendments in this Update defer the effective date of Update 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within the reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within the reporting period. Management is evaluating the standard's impact on the consolidated financial statements.

In August 2015 FASB issued Accounting Standards Update No. 2015-15 Interest -Imputation of Interest (Subtopic 835-30). This update adds SEC paragraphs pursuant to the SEC Staff Announcement at the June 18, 2015 Emerging Issues Task Force (EIFF) meeting about the presentation of subsequent measurement of debt issuance costs associated with line-of-credit arrangements. Given the absence of authoritative guidance within Update 2015-03 for debt issuance costs related to line-of-credit arrangements, the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance cots ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The adoption of this standard is not expected to have a material impact to the Company’s consolidated financial statements.

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In November 2015 FASB issued Accounting Standards Update No. 2015-17 Income Taxes (Topic 740) Balance Sheet Classification of Deferred Taxes to reduce complexity in accounting standards. The amendments require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. For public business entities, the amendments in this Update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. For all other entities, the amendments in this Update are effective for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. The adoption of this standard is not expected to have a material impact to the Company’s consolidated financial statements.

In February 2016 FASB issued Accounting Standards Update No. 2016-02 Leases (Topic 842) that changes the recognition of lease assets and lease liabilities by lessess for those leases classified as operating lease. The amendments in this Update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for a public business entity. Early adoption is permitted. Management is evaluating the standard's impact on the consolidated financial statements.

In March 2016 FASB issued Accounting Standards Update No. 2016-09 Compensation-Stock Compensation -(Topic 718) Improvements to employee share-based payments accounting as part of simplicity initiatives. This update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Some of the areas for simplification apply only to nonpublic entities. For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. For all other entities, the amendments are effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted for any entity in any interim or annual period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The adoption of this standard did not have a material impact to the Company’s consolidated financial statements.

In April 2016 FASB issued Accounting Standards Update No. 2016-10 Revenue from Contracts with Customers (Topic 606) Identifying Performance Obligations and Licensing. On May 2016 FASB issued Accounting Standards Update No. 2016-12 Revenue from Contracts with Customers (Topic 606) Narrow-Scope Improvements and Practical Expedients. The amendments in these two update do not change the the core principle of the guidance in Topic 606, which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, but they clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance and the Update affect only the narrow aspects of Topic 606. An entity should apply five steps to achieve the core principle. The adoption of this standard is not expected to have a material impact to the Company’s consolidated financial statements.

In May 2016 FASB issued Accounting Standards Update No. 2016-11 Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815). This Accounting Standards Update rescinds SEC paragraphs pursuant to two SEC Staff Announcements at the March 3, 2016 Emerging Issues Task Force (EITF) meeting.The adoption of this standard is not expected to have a material impact to the Company’s consolidated financial statements.

In August 2016 FASB issued Accounting Standards Update No. 2016-15 Statement of Cash Flows (Topic 230)Classification of Certain Cash Receipts and Cash Payments.The amendments in this Update provide guidance on the eight specific cash flow issues and apply to all entities, including both business entities and not-for-profit entities that are required to present a statement of cash flows under Topic 230.The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period.The adoption of this standard is not expected to have a material impact to the Company’s consolidated financial statements.

In January 2017 FASB issued Accounting Standards Update No. 2017-04 Intangibles—Goodwill and Other (Topic 350)Simplifying the Test for Goodwill Impairment.Under the amendments in this udpate an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.The amendments in this Update are required for public business entities and other entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill.A public business entity that is a U.S. Securities and Exchange Commission (SEC)

8

filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. A public business entity that is not an SEC filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2020.The adoption of this standard is not expected to have a material impact to the Company’s consolidated financial statements.

In March 2017 FASB issued Accounting Standards Update No. 2017-07 Compensation—Retirement Benefits (Topic 715)primarily to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost.The amendments in this Update require that an employer disaggregate the service cost component from the other components of net benefit cost. The amendments also provide explicit guidance on how to present the service cost component and the other components of net benefit cost in the income statement and allow only the service cost component of net benefit cost to be eligible for capitalization.The amendments in this Update apply to all employers, including not-for-profit entities, that offer to their employees defined benefit pension plans, other postretirement benefit plans, or other types of benefits accounted for under Topic 715.The amendments in this Update are effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those 3 annual periods. For other entities, the amendments in this Update are effective for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019.The amendments in this Update are effective for fiscal years beginning after December 15, 2018. Early adoption is permitted.The adoption of this standard is not expected to have a material impact to the Company’s consolidated financial statements.

In May 2017 FASB issued the amendments in ASU 2017-09- Compensation-Stock Compensation (“ASC Topic 718”): Scope of Modification Accounting: These amendments provide guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718. For public companies, these amendments are effective for annual periods beginning after December 15, 2017, including interim periods within those periods. While early application is permitted, including adoption in an interim period, the Company has not elected to early adopt. The effectiveness of this update is not expected to have a significant effect on the Company’s presentation of consolidated financial position or results of operations.

In July 2017 FASB issued the amendments in Accounting Standards Update (“ASU”) 2017-11: Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815). For public companies, these amendments are effective for annual periods beginning after December 15, 2018, including interim periods within those periods. While early application is permitted, including adoption in an interim period, the Company has not elected to early adopt. The effectiveness of this update is not expected to have a significant effect on the Company’s presentation of consolidated financial position or results of operations.

In September 2017 FASB issued Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842). The effectiveness of this update is not expected to have a significant effect on the Company’s presentation of consolidated financial position or results of operations.

6. Fair Value Measurements

On July 1, 2008, the Company adopted the FASB-issued authoritative guidance for the fair value of financial assets and liabilities. This standard defines fair value and establishes a hierarchy for reporting the reliability of input measurements used to assess fair value for all assets and liabilities. The FASB-issued authoritative guidance defines fair value as the selling price that would be received for an asset, or paid to transfer a liability, in the principal or most advantageous market on the measurement date. The hierarchy prioritizes fair value measurements based on the types of inputs used in the valuation technique. The inputs are categorized into the following levels:

Level 1—Observable inputs such as quoted prices in active markets for identical assets or liabilities.

Level 2—Directly or indirectly observable inputs for quoted and other than quoted prices for identical or similar assets and liabilities in active or non-active markets.

Level 3—Unobservable inputs not corroborated by market data, therefore requiring the entity to use the best available information available in the circumstances, including the entity’s own data.

Certain financial instruments are carried at cost on the consolidated balance sheets, which approximates fair value due to their short-term, highly liquid nature. These instruments include cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses, line of credit and related party note payable.

7. Discontinued Operations

BH Holdings, S.A.S ("BHH")

9

On January 12, 2012 BHH initiated the filing of an insolvency declaration with the Tribunal de Commerce de Rennes, France ("Commercial Court").  The Commercial Court on January 18, 2012 opened the liquidation proceedings with continuation of BHH's activity for 3 months and named an administrator to manage BHH. Since Drew no longer had a controlling financial interest in BHH it was deconsolidated in the December 31, 2011 quarterly condensed consolidated financial statements and prior period amounts were presented as discontinued operations.

Assets and liabilities of discontinued operations of BHH included in the condensed consolidated balance sheets are summarized as follows at September 30, 2017 and June 30, 2017 (in thousands):

	September 30,			June 30,
	2017			2017
Assets
Total assets	$	—		$	—
Liabilities
Accrued lease termination costs	94			91
Total liabilities	94			91
Net liabilities of discontinued operations	$	(94	)	$	(91	)

During fiscal year 2015 the Company was informed by French Counsel that the total amount claimed by the BHH landlord in the liquidation of BHH was approximately $86,000. The Company did not have insight into the French liquidation process due to the Liquidator's reticence to communicate with the Company. As such, the Company had accrued the present value of the maximum amount potentially due under the lease guaranteed by the Company on behalf of BHH. The landlord's claim under liquidation of approximately $86,000 can not be revisited by the landlord and can only be potentially increased by interest or sundry expenses. Beginning in fiscal year end 2016 any changes to this liability are included in continuing operations. As of September 30, 2017 and June 30, 2017, the liability was approximately $94,000 and $91,000, respectively.

8. Related Party Transactions

During the fiscal year ended June 30, 2017, Richard J. DePiano, Sr., the Company’s Chairman, participated in an accounts receivable factoring program that was implemented by the Company. Under the program, Mr. DePiano advanced the Company  $275,000 during fiscal year ended June 30, 2016, $270,000 during fiscal year ended June 30, 2017 and $100,000 during the quarter ended September 30, 2017. Interest on the transaction was 1.25% per month, which was equal to the best price offered by the Company’s usual factoring agent. The transactions excluded fees typically charged by the factoring agent and provided much needed liquidity to the Company. Related party interest expense for the three-month periods ended September 30, 2017 and 2016 was $23,112 and $10,313, respectively. Repayment is due upon the Company receiving payment from the underlying receivables purchased by Mr. DePiano. In the near term Mr. DePiano will roll-over the original $645,000 investment as the receivables are collected and additional receivables will be assigned as collateral until such time as the Company no longer needs the liquidity. As of September 30, 2017 and June 30, 2017, interest expense of $76,340 and $53,227, respectively, was accrued.

9. Inventory

(In thousands)	September 30,		June 30,
	2017		2017
Inventories, net:
Raw Material	$	715	$	865
Work-In-Process	239		337
Finished Goods	1,065		716
Total	$	2,019	$	1,918

10. Continuing Operations and Listing

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred recurring operating losses and negative cash flows from operating activities and these conditions raise substantial doubt about the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments relating to the realization of the carrying value of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company's continuance as a going concern is dependent on its future profitability and on the on-going support of its shareholders, affiliates and creditors. In order to mitigate the going concern issues, the Company is actively pursuing business partnerships, managing our continuing operations, implementing cost-cutting measures and seeking to sell certain assets. The Company may not be successful in any of these efforts.

If the Company is unable to achieve the mitigating factors mentioned above in the near term, it is likely that our existing cash and cash flow from operations will not be sufficient to fund activities without curtailing certain business activities.

The Company’s common stock trades on the OTCQB Market under the symbol “ESMC.” Since November 18, 2016, the Company's common stock was suspended from trading on the NASDAQ stock market effective at the opening of trading on November 18, 2016.

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 the Company's Form 10-K for the year ended June 30, 2017. 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 shareholders. Additional financing may not be available in amounts or on terms acceptable to the Company or at all.

11. Line of credit

On December 29, 2016, the Company entered into a credit agreement providing the Company up to an aggregate of $250,000 in cash, secured by the Company’s inventory. The Company, and its wholly owned subsidiary Sonomed, Inc., entered into an Inventory Advance Agreement as of December 29, 2016 (the "Agreement"), with CDS Business Services, Inc., doing business as Newtek Business Credit ("Newtek"). Newtek may in its discretion make loans against the Company’s Eligible Inventory in an aggregate amount outstanding at any time up to the lesser of (i) fifty percent (50%) of the Inventory Value or (ii) the Inventory

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Advance Limit, as those terms are defined in the Agreement, which is currently $250,000. The credit agreement renews annually and can be terminated upon 90 days written notice from the Company or 30 days written notice from NewTek.

If, at any time and for any reason, the aggregate amount of the outstanding advances under the Agreement exceeds the Inventory Advance Limit or percentage limitation contained in the preceding sentence, then Company must, upon demand by Newtek, immediately pay to Newtek, in cash, the amount of such excess, or at Newtek’s option Newtek may charge such excess against any reserves held by Newtek.

Newtek will maintain reserves against Company’s availability for advances and may maintain reserves against the Company’s accounts and/or ineligible inventory as well, or maintain a cash collateral deposit account, as NewTek in its discretion deems appropriate. Newtek may also increase such reserves or reduce its advance percentages based on eligible inventory without declaring an event of default and without prior notice, if it determines, in its discretion, that such increase in reserves or reduction is necessary, including, without limitation, to protect its interest in the collateral and/or against diminution in the value of any collateral, and/or to insure the prospect of payment or performance by Company of its obligations to Newtek are not impaired.

Interest will accrue on the daily balance at the per annum rate of 5.00% above the Prime Rate (currently 4.25%), but not less than 5.0%. The current annual interest rate is 9.25% as of September 30, 2017. The Company’s obligations will, at the option of Newtek, (i) from and after the occurrence of an event of default, or (ii) if the Company’s obligations are not paid in full by the termination date, bear interest at the per annum rate of 10.00% above the prime rate. All interest payable by under the financing documents will be computed on the basis of a 360-day year for the actual number of days elapsed on the daily balance.

In consideration of monitoring, ledgering and other administrative functions undertaken by Newtek in connection with the Company’s inventory, and the merchant processor, Company is obligated pay Newtek a monthly collateral monitoring fee calculated by multiplying (i) seventy basis points (0.70%) (approximately an annual rate of 8.5% )(except during the existence of an Event of Default at which time it shall be 1%) by (ii) the amount of the average daily balances during the calendar month preceding the month for which the calculation is made.

The foregoing description of the Agreement does not purport to be complete and is qualified in its entirety by reference to the Agreement, a copy of which is attached to the Form 8-K report dated December 29, 2016.

As of September 30, 2017 and June 30, 2017, the line of credit balance is at $225,000 and $250,000, respectively. The line of credit expense is $10,336 and $0 for the three-months ended September 30, 2017 and 2016, respectively.

12. Subsequent event

On October 2, 2017 Escalon and Modernizing Medicine Inc. (“MMI”) entered into a Source Code Software Licensing Agreement . The Agreement provided MMI a non-exclusive perpetual License to the source code of Escalon’s proprietary image management software (“AXIS source code”) for a one-time payment of $500,000. MMI continues to be an authorized reseller of the AXIS product.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS

Forward Looking Statements

Certain statements contained in, or incorporated by reference in, this report are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, which provide current expectations or forecasts of future events. Such statements can be identified by the use of terminology such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “possible,” “project,” “should,” “will,” and similar words or expressions. The Company's forward-looking statements include certain information relating to general business strategy, growth strategies, financial results, liquidity, the Company's ability to continue as a going concern, discontinued operations, research and development, product development, the introduction of new products, the potential markets and uses for the Company's products, the Company's ability to increase its sales campaign effectively, the Company's regulatory filings with the FDA, acquisitions, dispositions, the development of joint venture opportunities, intellectual property and patent protection and infringement, the loss of revenue due to the expiration on 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 list of such factors contained in its periodic report on Form 10-K for the year ended June 30,

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2017 and this Form 10-Q quarterly report to be an exhaustive statement of all risks, uncertainties or potentially inaccurate assumptions.

Executive Overview—three-Months Ended September 30,2017 and 2016.

The following highlights are discussed in further detail within this Form 10-Q. The reader is encouraged to read this

Form 10-Q in its entirety to gain a more complete understanding of factors impacting Company performance and financial

condition.

• Consolidated product revenue increased approximately $298,000, or 12.8%, to $2,630,000 during the three-month period ended September 30,2017 as compared to same period of the last fiscal year. The increase in revenue is attributed to an increase of $16,000 in surgical products, an increase of $194,000 in digital imaging cameras and AXIS image management systems and an increase of $88,000 in ultrasound products.

• Consolidated cost of goods sold totaled approximately $1,467,000, or 55.8%, of product revenue for the three-month period ended September 30,2017, as compared to $1,251,000, or 53.7%, of product revenue for the same period of the prior fiscal year. The increase of 2.1% in cost of goods sold as a percentage of revenue is due mainly to decreased ultrasound products margin.

• Total operating expenses decreased approximately $275,000, or 18.8%, during the three-month period ended September 30,2017 as compared to the same period of prior fiscal year. This decrease was due to decreased marketing, general and administrative expenses of $159,000, or 13.7% and a decrease of $117,000, or 37.8%, in research and development expenses.

• Net loss was approximately $61,000 for the three-months ended September 30,2017.

Company Overview

The following discussion should be read in conjunction with interim condensed consolidated financial statements and

the notes thereto, which are set forth in Item 1 of this report.

The Company operates in the healthcare market specializing in the development, manufacture, marketing and distribution of medical devices and pharmaceuticals in the area of ophthalmology. The Company and its products are subject to regulation and inspection by the FDA. The FDA requires extensive testing of new products prior to sale and has jurisdiction over the safety, efficacy and manufacture of products, as well as product labeling and marketing. The Company's Internet address is www.escalonmed.com. Sonomed-Escalon develops, manufactures and markets ultrasound systems used for diagnosis or biometric applications in ophthalmology, develops, manufactures and distributes ophthalmic surgical products under the Trek Medical Products name, and manufactures and markets digital camera systems for ophthalmic fundus photography and image management systems.

Critical Accounting Policies

The preparation of financial statements requires management to make estimates and assumptions that impact amounts reported therein. The most significant of those involve the application of FASB-issued authoritative guidance concerning Revenue Recognition, and Other Intangible Assets, discussed further in the notes to consolidated financial statements included in the Form 10-K for the year ended June 30, 2017. The 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. For example, estimates are used in determining valuation allowances for deferred income taxes, uncollectible receivables, obsolete inventory, sales returns and rebates, warranty liabilities and valuation of purchased intangible assets. Actual results achieved in the future could differ from current estimates. The Company used what it believes are reasonable assumptions and, where applicable, established valuation techniques in making its estimates.

Revenue Recognition

The Company recognizes revenue from the sale of its products at the time of shipment, when title and risk of loss transfer. The Company provides products to its distributors at agreed upon wholesale prices and to the balance of its customers at set retail prices. Distributors can receive discounts for accepting high volume shipments. The discounts are reflected immediately in the net invoice price, which is the basis for revenue recognition. No further material discounts are given.

The Company's considerations for recognizing revenue upon shipment of product to a distributor are based on the following:

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l Persuasive evidence that an arrangement (purchase order and sales invoice) exists between a willing buyer (distributor) and the Company that outlines the terms of the sale (company information, quantity of goods, purchase price and payment terms). The buyer (distributor) does not have a right of return.

l Shipping terms are ex-factory shipping point. At this point the buyer (distributor) takes title to the goods and is responsible for all risks and rewards of ownership, including insuring the goods as necessary.

l The Company's price to the buyer (distributor) is fixed and determinable as specifically outlined on the sales invoice. The sales arrangement does not have customer cancellation or termination clauses.

l The buyer (distributor) places a purchase order with the Company; the terms of the sale are cash, COD or credit. Customer credit is determined based on the Company's policies and procedures related to the buyer's (distributor's) creditworthiness. Based on this determination, the Company believes that collectibility is reasonably assured.

The Company assesses collectibility based on creditworthiness of the customer and past transaction history. The Company performs ongoing credit evaluations of its customers and does not require collateral from its customers. For many of the Company's international customers, the Company requires an irrevocable letter of credit to be issued by the customer before the purchase order is accepted.

Valuation of Intangible Assets

The Company annually, and as circumstances require, evaluates for impairment its intangible assets in accordance with FASB guidance related to other intangible assets, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. These intangible assets include trademarks and trade names and licenses. Recoverability of these assets is measured by comparison of their carrying amounts to future discounted cash flows the assets are expected to generate. If identifiable intangibles are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds its fair market value. The Company does not amortize intangible assets with indefinite useful lives, rather, such assets are required to be tested for impairment at least annually or sooner whenever events or changes in circumstances indicate that the assets may be impaired. The Company performs its intangible asset impairment tests on or about June 30, of each year. Any such impairment charge could be significant and could have a material adverse impact on the Company's financial statements if and when an impairment charge is recorded.

Income/(Loss) Per Share

The Company computes net income/(loss) per share under the provisions of FASB issued authoritative guidance.

Under the provisions of FASB issued authoritative guidance, basic and diluted net income/(loss) per share is computed by dividing the net income/(loss) for the period by the weighted average number of shares of common stock outstanding during the period. The calculation of diluted net income/(loss) per share excludes potential common shares if the impact is anti-dilutive. Basic earnings per share are computed by dividing net income/(loss) by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share are determined in the same manner as basic earnings per share, except that the number of shares is increased by assuming exercise of dilutive stock options and warrants using the treasury stock method.

Taxes

Estimates of taxable income of the various legal entities and jurisdictions are used in the tax rate calculation. Management uses judgment in estimating what the Company's income tax will be for the year. Since judgment is involved, there is a risk that the tax rate may increase or decrease in any period.

In determining income/(loss) for financial statement purposes, management must make certain estimates and judgments. These estimates and judgments occur in the calculation of certain tax liabilities and in the determination of the recoverability of certain deferred tax assets, which arise from temporary differences between the tax and financial statement recognition of revenue and expense. FASB issued authoritative guidance concerning accounting for income taxes also requires that the deferred tax assets be reduced by a valuation allowance if, based on the available evidence, it is more likely than not that all or some portion of the recorded deferred tax assets will not be realized in future periods.

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In evaluating the Company's ability to recover the Company's deferred tax assets, management considers all available positive and negative evidence including the Company's past operating results, the existence of cumulative losses and near-term forecasts of future taxable income that is consistent with the plans and estimates management is using to manage the underlying businesses.

Through September 30, 2017, the Company has recorded a valuation allowance against the Company's deferred tax assets arising from net operating losses due to uncertainty of their realization as a result of the Company's earnings history, the number of years the Company's net operating losses and tax credits can be carried forward, the existence of taxable temporary differences and near-term earnings expectations. The amount of the valuation allowance could decrease if facts and circumstances change that materially increase taxable income prior to the expiration of the loss carryforwards. Any reduction in the valuation allowance would result in an income tax benefit in the period such determination is made by the Company.

The Company has adopted FASB issued guidance related to accounting for uncertainty in income taxes, which provides a comprehensive model for the recognition, measurement, and disclosure in financial statements of uncertain income tax positions that a company has taken or expects to take on a tax return. Under the FASB guidance a company can recognize the benefit of an income tax position only if it is more likely than not (greater than 50%) that the tax position will be sustained upon tax examination, based solely on the technical merits of the tax position. Otherwise, no benefit can be recognized. The tax benefits recognized are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Additionally, companies are required to accrue interest and related penalties, if applicable, on all tax exposures for which reserves have been established consistent with jurisdictional tax laws. The Company has elected to recognize interest expense and penalties, if any, related to uncertain tax positions as a component of its provision for income taxes.

Stock-Based Compensation

Stock-based compensation expense for all stock-based compensation awards granted after July 1, 2006 is based on the grant-date fair value estimate in accordance with the provisions of the FASB issued guidance. The Company recognizes these compensation costs on a straight-line basis over the requisite service period of the award.

Valuations are based on highly subjective assumptions about the future, including stock price volatility and exercise patterns. The fair value of share-based payment awards was estimated using the Black-Scholes option pricing model. Expected volatilities are based on the historical volatility of the Company's stock. The Company uses historical data to estimate option exercise and employee terminations. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

Results of Operations

Three-month periods Ended September 30, 2017 and 2016

The following table shows consolidated product revenue, as well as identifying trends in revenues for the three-month periods ended September 30, 2017 and 2016.

Table amounts are in thousands:

	For the Three-months ended September 30,
	2017		2016		% Change
Product Revenue:
Sonomed-Escalon	$	2,630	$	2,332	12.8	%
Total	$	2,630	$	2,332	12.8	%

Consolidated product revenue increased approximately $298,000, or 12.8%, to $2,630,000 during the three months ended September 30, 2017 as compared to same period of the last fiscal year. The increase in revenue is attributed to an increase of $16,000 in surgical products, an increase of $194,000 in digital imaging cameras and AXIS image management systems and an increase of $88,000 in ultrasound products.

The following table presents consolidated cost of goods sold as a percentage of product revenues for the three months ended September 30, 2017 and 2016. Table amounts are in thousands:

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	For the Three-months ended September 30,
	2017		%		2016		%
Cost of Goods Sold:
Sonomed-Escalon	$	1,467	55.8	%	$	1,251	53.7	%
Total	$	1,467	55.8	%	$	1,251	53.7	%

Consolidated cost of goods sold totaled approximately $1,467,000, or 55.8%, of product revenue for the three months ended September 30, 2017, as compared to $1,251,000, or 53.7%, of product revenue for the same period of the prior fiscal year. The increase of 2.1% in cost of goods sold as a percentage of revenue is due mainly to a decrease in ultrasound products margin.

The following table presents consolidated marketing, general and administrative expenses as well as identifying trends in marketing, general and administrative expenses for the three-month periods ended September 30, 2017 and 2016. Table amounts are in thousands:

	For the Three-months ended September 30,
	2017		2016		% Change
Marketing, General and Administrative:
Sonomed-Escalon	$	997	$	1,155	(13.7	)%
Total	$	997	$	1,155	(13.7	)%

Consolidated marketing, general and administrative expenses decreased $158,000, or 13.7%, to $997,000 during the three months ended September 30, 2017, as compared to the same period of the prior fiscal year. The decrease is due to decreased hiring expense and fringe benefits and legal expense offset by increased consulting and commission expense in the current period.

The following table presents consolidated research and development expenses for the three months ended September 30, 2017 and 2016. Table amounts are in thousands:

	For the Three-months ended September 30,
	2017		2016		% Change
Research and Development:
Sonomed Escalon	$	193	$	310	(37.8	)%
Total	$	193	$	310	(37.8	)%

Consolidated research and development expenses decreased $117,000, or 37.8%, to $193,000 during the three-months ended September 30, 2017, as compared to the same period of the prior fiscal year. Research and development expenses were primarily expenses associated with the planned introduction of new or enhanced products. The decrease is mainly related to the decrease in headcount and consulting expense.

Discontinued Operations

During fiscal year 2015 the Company was informed by French Counsel that the total amount claimed by the BHH landlord in the liquidation of BHH was approximately $86,000. The Company did not have insight into the French liquidation process due to the Liquidator's reticence to communicate with the Company. As such, the Company had accrued the present value of the maximum amount potentially due under the lease guaranteed by the Company on behalf of BHH. The landlord's claim under liquidation of approximately $86,000 can not be revisited by the landlord and can only be potentially increased by interest or sundry expenses. Beginning in fiscal year end 2016 any changes to this liability are included in continuing operations. As of September 30, 2017 and June 30, 2017, the liability was approximately $94,000 and $91,000, respectively.

Other Income (expense)

The Company did not have significant other income during the three-months ended September 30, 2017 and 2016.

The Company incurred related party interest expense of $23,112 and $10,313 for the three-months ended September 30, 2017 and 2016, respectively. The line of credit expense is $10,336 and $0 for the three-months ended September 30, 2017 and 2016, respectively. See Note 8 to Consolidated Financial Statements for further details.

Liquidity and Capital Resources

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The following table presents overall liquidity and capital resources as of September 30, 2017 and June 30, 2017. Table amounts are in thousands:

	September 30, 2017			June 30, 2017
Current Ratio:
Current assets	$	4,209		$	4,155
Less: Current liabilities	3,136			3,001
Working capital	$	1,072		$	1,154
Current ratio	1.34 to 1			1.38 to 1
Debt to Total Capital Ratio:
Note payable and line of credit	$	870		$	795
Total debt	870			795
Total equity	1,123			1,184
Total capital	$	1,993		$	1,979
Total debt to total capital	43.7		%	40.2		%

Working Capital Position

Working capital decreased $82,000 as of September 30, 2017, and the current ratio changed from 1.38 to 1 to 1.34 to 1 when compared to June 30, 2017.

Debt to Total Capital Ratio was 43.7% and 40.2% as of September 30, 2017 and June 30, 2017, respectively.

Cash Used In or Provided By Operating Activities

During the three-months ended September 30, 2017 and 2016, the Company experienced cash outflows from operating activities of $175,000 and $166,000, respectively. The net decrease in cash used in operating activities of approximately $9,000 for the three-month period ended September 30, 2017, as compared to the same period in the prior fiscal year is due primarily to the following factors:

For the three-month period ended September 30, 2017, the Company had a net loss of $61,000, experienced net cash out-flows from a decrease in post-retirement benefits of $18,000, an increase in accounts receivable of $46,000, an increase in inventory of $101,000 and an increase in other current assets of $21,000. The cash outflows were partially offset by an increase in accounts payable and accrued expense of $57,000 and an increase in non-cash expenditures on depreciation and amortization of approximately $12,000 and a change in liabilities of discontinued operations of $3,000 .

For the three-month period ended September 30, 2016, the Company had a net loss of $396,000, experienced net cash out-flows from a decrease in post-retirement benefits of $12,000, a decrease in accounts payable and accrued expense of $9,000, and an increase in inventory of $337,000 and in other current assets of $49,000. The cash outflows were partially offset by a decrease in accounts receivable of $623,000, and an increase in non-cash expenditures on depreciation and amortization and change in liabilities of discontinued operations of approximately $12,000 and $1,000, respectively.

Cash Flows Used In Investing and Financing Activities

Cash flows used in investing activities during the three-month periods ended September 30, 2017 were appropriately $15,000, among which, $2,000 was used for purchase of fixed assets and $13,000 was for purchase of licenses. There were no cash flows used in investing activities during the three-month period ended September 30, 2016.

Cash flows provided by financing captivities during the three-month periods ended September 30, 2017 includes proceeds from related party note payable of $100,000 and repayment of principal for line of credit of $25,000. There were no cash flows from financing activities during the three-month period ended September 30, 2016.

Debt History

     On December 29, 2016, the Company entered into a credit agreement providing the Company up to an aggregate of $250,000 in cash, secured by the Company’s inventory. The Company, and its wholly owned subsidiary Sonomed, Inc., entered

16

into an Inventory Advance Agreement as of December 29, 2016 (the "Agreement"), with CDS Business Services, Inc., doing business as Newtek Business Credit ("Newtek"). Newtek may in its discretion make loans against the Company’s Eligible Inventory in an aggregate amount outstanding at any time up to the lesser of (i) fifty percent (50%) of the Inventory Value or (ii) the Inventory Advance Limit, as those terms are defined in the Agreement, which is currently $250,000. The credit agreement renews annually and can be terminated upon 90 days written notice from the Company or 30 days written notice from NewTek.

If, at any time and for any reason, the aggregate amount of the outstanding advances under the Agreement exceeds the Inventory Advance Limit or percentage limitation contained in the preceding sentence, then Company must, upon demand by Newtek, immediately pay to Newtek, in cash, the amount of such excess, or at Newtek’s option Newtek may charge such excess against any reserves held by Newtek.

    Newtek will maintain reserves against Company’s availability for advances and may maintain reserves against the Company’s accounts and/or ineligible inventory as well, or maintain a cash collateral deposit account, as NewTek in its discretion deems appropriate. Newtek may also increase such reserves or reduce its advance percentages based on eligible inventory without declaring an event of default and without prior notice, if it determines, in its discretion, that such increase in reserves or reduction is necessary, including, without limitation, to protect its interest in the collateral and/or against diminution in the value of any collateral, and/or to insure the prospect of payment or performance by Company of its obligations to Newtek are not impaired.

Interest will accrue on the daily balance at the per annum rate of 5.00% above the Prime Rate (currently 4.25%), but not less than 5.0%. The current annual interest rate is 9.25% as of September 30, 2017. The Company’s obligations will, at the option of Newtek, (i) from and after the occurrence of an event of default, or (ii) if the Company’s obligations are not paid in full by the termination date, bear interest at the per annum rate of 10.00% above the prime rate. All interest payable by under the financing documents will be computed on the basis of a 360-day year for the actual number of days elapsed on the daily balance.

In consideration of monitoring, ledgering and other administrative functions undertaken by Newtek in connection with the Company’s inventory, and the merchant processor, Company is obligated pay Newtek a monthly collateral monitoring fee calculated by multiplying (i) seventy basis points (0.70%) (approximately an annual rate of 8.5% )(except during the existence of an Event of Default at which time it shall be 1%) by (ii) the amount of the average daily balances during the calendar month preceding the month for which the calculation is made.

The foregoing description of the Agreement does not purport to be complete and is qualified in its entirety by reference to the Agreement, a copy of which is attached to the Form 8-K report dated December 29, 2016.

As of September 30, 2017 and June 30, 2017, the line of credit balance is at $225,000 and $250,000, respectively. The line of credit expense is $10,336 and $0 for the three-months period ended September 30, 2017 and 2016, respectively.

Off-Balance Sheet Arrangements and Contractual Obligations

The Company was not a party to any off-balance sheet arrangements during the three-month periods ended September 30, 2017 and 2016.

The following table presents the Company's contractual obligations as of September 30, 2017 (excluding interest):

			Less than				3-5		More than
	Total		1 Year		2-3 Years		Years		5 Years
Operating lease agreements	$	1,560,251	$	345,767	$	535,382	$	679,102	$	—
Line of credit	225,000		225,000		—		—		—
Related party note payable	645,000		645,000		—		—		—
Total	$	2,430,251	$	1,215,767	$	535,382	$	679,102	$	—

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

17

None

Item 4. Controls and Procedures

(A)Evaluation of Disclosure Controls and Procedures

The Company's management, with the participation of the Company's Chief Executive Officer and Principal Financial and Accounting Officer, have established disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to the officers who certify the Company's financial reports and to other members of senior management and the Board of Directors.

Based on their evaluation of the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2017, the Chief Executive Officer and Principal Financial and Accounting Officer of the Company have concluded that such disclosure controls and procedures are effective to ensure that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its Chief Executive Officer and Principal Financial and Accounting Officer, to allow timely decisions regarding required disclosure.

(B)Internal Control over Financial Reporting

There have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act), during the first fiscal quarter ended September 30, 2017 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Item 1.Legal Proceedings

See footnote 4of the notes to the condensed consolidated financial statements for further information regarding the Company's legal proceedings.

Item 1A. Risk Factors

There are no material changes from the risks previously disclosed in the Company's Annual Report on Form 10-K for the year ended June 30, 2017.

Item 6.Exhibits

31.1 Certificate of Chief Executive Officer under Rule 13a-14(a).

31.2 Certificate of Principal Financial and Accounting Officer under Rule 13a-14(a).

32.1 Certificate of Chief Executive Officer under Section 1350 of Title 18 of the United States Code.

32.2 Certificate of Principal Financial and Accounting Officer under Section 1350 of Title 18 of the United States Code

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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	Escalon Medical Corp.
	(Registrant)
Date: November 14, 2017	By:	/s/ Richard J. DePiano, Jr.
		Richard J. DePiano, Jr.
		Chief Executive Officer
Date: November 14, 2017	By:	/s/ Mark Wallace
		Mark Wallace
		Chief Operating Officer and Principal Accounting & Financial Officer

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EX-31.1

Exhibit 31.1

Certification of Principal Executive Officer

I, Richard J. DePiano Jr., certify that:

1. I have reviewed this quarterly report on Form 10Q of Escalon Medical Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/    Richard J. DePiano Jr.

Richard J. DePiano Jr.

Chief Executive Officer

Date: November 14, 2017

EX-31.2

Exhibit 31.2

Certification of Principal Financial Officer

I, Mark Wallace, certify that:

1. I have reviewed this quarterly report on Form 10Q of Escalon Medical Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/    Mark Wallace

Mark Wallace

Chief Operating Officer and Principal Accounting & Financial Officer

Date: November 14, 2017

EX-32.1

Exhibit 32.1

Certification pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Richard J. DePiano Jr., Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Quarterly Report of Escalon Medical Corp. on Form 10Q for the quarterly period ended September 30, 2017 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 14, 2017

/s/    Richard J. DePiano Jr.

Richard J. DePiano Jr.

Chief Executive Officer

EX-32.2

Exhibit 32.2

Certification pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Robert M. O’Connor, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Quarterly Report of Escalon Medical Corp. on Form 10-Q for the quarterly period ended September 30, 2017 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 14, 2017

/s/    Mark Wallace

Mark Wallace

Chief Operating Officer and Principal Accounting & Financial Officer

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Document And Entity Information - shares	3 Months Ended
	Sep. 30, 2017	Nov. 13, 2017
Entity Information [Line Items]
Entity Registrant Name	ESCALON MEDICAL CORP.
Entity Central Index Key	0000862668
Current Fiscal Year End Date	--09-30
Entity Filer Category	Smaller Reporting Company
Document Type	10-Q
Document Period End Date	Sep. 30, 2017
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Common Stock, Shares Outstanding		7,526,430
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes

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Consolidated Balance Sheets - USD ($)	Sep. 30, 2017	Jun. 30, 2017
Current assets:
Cash and cash equivalents	$ 429,885	$ 544,118
Accounts receivable, net	1,529,302	1,483,770
Inventory, net	2,018,886	1,917,938
Other current assets	230,468	209,546
Total current assets	4,208,541	4,155,372
Property and equipment, net	50,556	54,892
Indefinite-Lived Trade Names	605,006	605,006
Patents, net	0	400
Other Intangible Assets, Net	176,087	168,500
Total assets	5,040,190	4,984,170
Current liabilities:
Line of Credit, Current	225,000	250,000
Accounts payable	1,016,783	1,047,463
Accrued expenses	1,053,194	965,764
Notes Payable, Related Parties, Current	645,000	545,000
Pension and Other Postretirement Defined Benefit Plans, Current Liabilities	101,891	101,891
Liabilities of discontinued operations	94,406	91,125
Total current liabilities	3,136,274	3,001,243
Accrued post-retirement benefits	780,857	799,347
Total long-term liabilities	780,857	799,347
Total liabilities	3,917,131	3,800,590
Shareholders equity:
Common stock, $0.001 par value; 35,000,000 shares authorized; 7,526,430 issued and outstanding at September 30, 2017 and June 30, 2017	7,551	7,551
Additional paid-in capital	69,701,907	69,701,907
Accumulated deficit	(68,586,399)	(68,525,878)
Total shareholders' equity	1,123,059	1,183,580
Total liabilities and shareholders' equity	$ 5,040,190	$ 4,984,170

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Consolidated Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2017	Jun. 30, 2017
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	2,000,000	2,000,000
Preferred stock, shares issued	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	35,000,000	35,000,000
Common stock, shares issued	7,526,430	7,526,430
Common stock, shares outstanding	7,526,430	7,526,430

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Consolidated Statements Of Operations - USD ($)	3 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Net revenues:
Product revenue	$ 2,629,624	$ 2,331,988
Revenues, net	2,629,624	2,331,988
Costs and expenses:
Cost of goods sold	1,467,310	1,251,492
Marketing, general and administrative	996,505	1,155,415
Research and development	193,081	310,359
Total costs and expenses	2,656,896	2,717,266
Loss from operations	(27,272)	(385,278)
Other (expense) income:
Interest income	199	59
Interest Expense	(33,448)	(10,313)
Total other (expense) income	(33,249)	(10,254)
Net income (loss)	$ (60,521)	$ (395,532)
Basic:
Earnings Per Share, Basic	$ (0.01)	$ (0.05)
Diluted:
Earnings Per Share, Diluted	$ (0.01)	$ (0.05)
Weighted Average Number of Shares Outstanding, Basic	7,551,430	7,551,430
Weighted Average Number of Shares Outstanding, Diluted	7,551,430	7,551,430

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Consolidated Statements Of Shareholders' Equity and Comprehensive Loass - 3 months ended Sep. 30, 2017 - USD ($)	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]
Balance at Jun. 30, 2017	$ 1,183,580	$ 7,551
Balance, shares at Jun. 30, 2017		7,551,430
Net income (loss)	(60,521)	$ 0	$ 0	$ (60,521)
Balance at Sep. 30, 2017	$ 1,123,059	$ 7,551	$ 69,701,907	$ (68,586,399)
Balance, shares at Sep. 30, 2017		7,551,430

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Consolidated Statements Of Cash Flows - USD ($)	3 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Supplemental Cash Flow Information [Abstract]
Interest paid	$ 10,587	$ 0
Cash Flows from Operating Activities:
Net income (loss)	(60,521)	(395,532)
Adjustments to reconcile net income (loss) to cash provided by operating activities of continuing operations:
Depreciation and amortization	11,855	12,373
Increase (Decrease) in Pension and Postretirement Obligations	(18,490)	(11,972)
Increase(decrease) in liability of discontinued operations	3,281	1,114
Change in operating assets and liabilities:
Accounts receivable, net	(45,532)	623,219
Inventory, net	(100,948)	(336,638)
Other current and long-term assets	(20,922)	(48,869)
Accounts payable and accrued expenses	56,750	(9,276)
Net cash (used in) operating activities from continuing operations	(174,527)	(165,581)
Cash Flows from Investing Activities:
Purchase of fixed assets	(2,206)	0
Payments to Acquire Other Productive Assets	(12,500)	0
Net cash provided by (used in) investing activities	(14,706)	0
Cash Flows from Financing Activities:
(Repayments of) proceeds from related party note payable	100,000	0
Repayments of Short-term Debt	(25,000)	0
Net Cash Provided by (Used in) Financing Activities	75,000	0
Net increase (decrease) in cash and cash equivalents	(114,233)	(165,581)
Cash and cash equivalents, beginning of period	544,118	$ 538,114
Cash and cash equivalents, end of period	$ 429,885

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Note. 1 Basis of Presentation

3 Months Ended

Sep. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Business Description and Basis of Presentation [Text Block]

1. Basis of Presentation

 Escalon Medical Corp. (“Escalon” or the “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 and its wholly owned subsidiaries: Sonomed, Inc. (“Sonomed”), Trek, Inc. (“Trek”), Escalon Medical Europe GmbH (“EME”), Escalon Digital Solutions, Inc. (“EMI”), Escalon Pharmaceutical, Inc. (“Pharmaceutical” inactive), Escalon Holdings, Inc. (“EHI”), Escalon IP Holdings, Inc., and Sonomed IP Holdings, Inc.All intercompany accounts and transactions have been eliminated. We have evaluated all subsequent events through the date the financial statements were issued.

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 governmental 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.

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Note 2. Stock-Based Compensation

3 Months Ended

Sep. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

2. Stock-Based Compensation

Valuations are based upon highly subjective assumptions about the future, including stock price volatility and exercise patterns. The fair value of share-based payment awards was estimated using the Black-Scholes option pricing model. Expected volatilities are based on the historical volatility of the Company's stock. The Company uses historical data to estimate option exercise and employee terminations. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

The Company has historically granted options under the Company's option plans with an option exercise price equal to the closing market value of the stock on the date of the grant and with vesting, primarily for Company employees, either in equal annual amounts over a two- to five-year period or immediately, and, primarily for non-employee directors, immediately.

As of September 30, 2017 and 2016 there were no unrecognized compensation cost related to non-vested share-based compensation arrangements granted to employees under the 2004 Equity Incentive Plan.

The Company did not receive any cash from share option exercises under stock-based payment plans for the three-month periods ended September 30, 2017 and 2016. The Company did not realize any tax effect, which would be a reduction in its tax rate, on options due to the full valuation allowances established on its deferred tax assets.

The Company measures compensation expense for non-employee stock-based compensation based on the fair value of the options issued, as this is more reliable than the fair value of the services received. Fair value is measured as the value of the Company's common stock on the date that the commitment for performance by the counterparty has been reached or the counterparty's performance is complete. The fair value of the equity instrument is charged directly to compensation expense and additional paid-in capital. There was no non-employee compensation expense for the three-month periods ended September 30, 2017 and 2016.

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Note 3. Earning per Share

3 Months Ended

Sep. 30, 2017

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

3. Net (Loss) earnings per Share

The following table sets forth the computation of basic and diluted net (loss) per share:

	For the Three-months ended September 30,
	2017			2016
Numerator:
Numerator for basic and diluted earnings per share
Net (loss)	$	(60,521	)	$	(395,532	)
Denominator:
Denominator for basic earnings per share - weighted average shares	7,551,430			7,551,430
Effect of dilutive securities:
Stock options and warrants	—			—
Shares reserved for future exchange	—			—
Denominator for diluted earnings per share - weighted average and assumed conversion	7,551,430			7,551,430
Net (loss) per share
Basic net (loss) per share	$	(0.01	)	$	(0.05	)
Diluted net (loss) per share	$	(0.01	)	$	(0.05	)

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Note 4. Legal proceeding

3 Months Ended

Sep. 30, 2017

4. Legal Proceedings [Abstract]

Legal Matters and Contingencies [Text Block]

4. 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 may in the future 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.

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Note 5. Recently Issued Accounting Standards

3 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

.     Recently Issued Accounting Standards

In May 2014 FASB issued Accounting Standards Update 2014-09 Revenue from Contracts with Customers (Topic 606). Under the new provision, an entity should apply five steps for revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For a public entity, the amendments in this Update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. In August 2015 FASB issued accounting Standards Update No. 2015-13 Revenue from Contracts with Customers (Topic 606) deferral of the effective date. The amendments in this Update defer the effective date of Update 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within the reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within the reporting period. Management is evaluating the standard's impact on the consolidated financial statements.

In August 2015 FASB issued Accounting Standards Update No. 2015-15 Interest -Imputation of Interest (Subtopic 835-30). This update adds SEC paragraphs pursuant to the SEC Staff Announcement at the June 18, 2015 Emerging Issues Task Force (EIFF) meeting about the presentation of subsequent measurement of debt issuance costs associated with line-of-credit arrangements. Given the absence of authoritative guidance within Update 2015-03 for debt issuance costs related to line-of-credit arrangements, the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance cots ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The adoption of this standard is not expected to have a material impact to the Company’s consolidated financial statements.

In November 2015 FASB issued Accounting Standards Update No. 2015-17 Income Taxes (Topic 740) Balance Sheet Classification of Deferred Taxes to reduce complexity in accounting standards. The amendments require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. For public business entities, the amendments in this Update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. For all other entities, the amendments in this Update are effective for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. The adoption of this standard is not expected to have a material impact to the Company’s consolidated financial statements.

In February 2016 FASB issued Accounting Standards Update No. 2016-02 Leases (Topic 842) that changes the recognition of lease assets and lease liabilities by lessess for those leases classified as operating lease. The amendments in this Update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for a public business entity. Early adoption is permitted. Management is evaluating the standard's impact on the consolidated financial statements.

In March 2016 FASB issued Accounting Standards Update No. 2016-09 Compensation-Stock Compensation -(Topic 718) Improvements to employee share-based payments accounting as part of simplicity initiatives. This update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Some of the areas for simplification apply only to nonpublic entities. For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. For all other entities, the amendments are effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted for any entity in any interim or annual period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The adoption of this standard did not have a material impact to the Company’s consolidated financial statements.

In April 2016 FASB issued Accounting Standards Update No. 2016-10 Revenue from Contracts with Customers (Topic 606) Identifying Performance Obligations and Licensing. On May 2016 FASB issued Accounting Standards Update No. 2016-12 Revenue from Contracts with Customers (Topic 606) Narrow-Scope Improvements and Practical Expedients. The amendments in these two update do not change the the core principle of the guidance in Topic 606, which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, but they clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance and the Update affect only the narrow aspects of Topic 606. An entity should apply five steps to achieve the core principle. The adoption of this standard is not expected to have a material impact to the Company’s consolidated financial statements.

In May 2016 FASB issued Accounting Standards Update No. 2016-11 Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815). This Accounting Standards Update rescinds SEC paragraphs pursuant to two SEC Staff Announcements at the March 3, 2016 Emerging Issues Task Force (EITF) meeting.The adoption of this standard is not expected to have a material impact to the Company’s consolidated financial statements.

In August 2016 FASB issued Accounting Standards Update No. 2016-15 Statement of Cash Flows (Topic 230)Classification of Certain Cash Receipts and Cash Payments.The amendments in this Update provide guidance on the eight specific cash flow issues and apply to all entities, including both business entities and not-for-profit entities that are required to present a statement of cash flows under Topic 230.The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period.The adoption of this standard is not expected to have a material impact to the Company’s consolidated financial statements.

In January 2017 FASB issued Accounting Standards Update No. 2017-04 Intangibles—Goodwill and Other (Topic 350)Simplifying the Test for Goodwill Impairment.Under the amendments in this udpate an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.The amendments in this Update are required for public business entities and other entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill.A public business entity that is a U.S. Securities and Exchange Commission (SEC) filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. A public business entity that is not an SEC filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2020.The adoption of this standard is not expected to have a material impact to the Company’s consolidated financial statements.

In March 2017 FASB issued Accounting Standards Update No. 2017-07 Compensation—Retirement Benefits (Topic 715)primarily to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost.The amendments in this Update require that an employer disaggregate the service cost component from the other components of net benefit cost. The amendments also provide explicit guidance on how to present the service cost component and the other components of net benefit cost in the income statement and allow only the service cost component of net benefit cost to be eligible for capitalization.The amendments in this Update apply to all employers, including not-for-profit entities, that offer to their employees defined benefit pension plans, other postretirement benefit plans, or other types of benefits accounted for under Topic 715.The amendments in this Update are effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those 3 annual periods. For other entities, the amendments in this Update are effective for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019.The amendments in this Update are effective for fiscal years beginning after December 15, 2018. Early adoption is permitted.The adoption of this standard is not expected to have a material impact to the Company’s consolidated financial statements.

In May 2017 FASB issued the amendments in ASU 2017-09- Compensation-Stock Compensation (“ASC Topic 718”): Scope of Modification Accounting: These amendments provide guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718. For public companies, these amendments are effective for annual periods beginning after December 15, 2017, including interim periods within those periods. While early application is permitted, including adoption in an interim period, the Company has not elected to early adopt. The effectiveness of this update is not expected to have a significant effect on the Company’s presentation of consolidated financial position or results of operations.

In July 2017 FASB issued the amendments in Accounting Standards Update (“ASU”) 2017-11: Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815). For public companies, these amendments are effective for annual periods beginning after December 15, 2018, including interim periods within those periods. While early application is permitted, including adoption in an interim period, the Company has not elected to early adopt. The effectiveness of this update is not expected to have a significant effect on the Company’s presentation of consolidated financial position or results of operations.

In September 2017 FASB issued Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842). The effectiveness of this update is not expected to have a significant effect on the Company’s presentation of consolidated financial position or results of operations.

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Note 6. Fair Value Measurements

3 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

Fair Value Measurements

. Fair Value Measurements

On July 1, 2008, the Company adopted the FASB-issued authoritative guidance for the fair value of financial assets and liabilities. This standard defines fair value and establishes a hierarchy for reporting the reliability of input measurements used to assess fair value for all assets and liabilities. The FASB-issued authoritative guidance defines fair value as the selling price that would be received for an asset, or paid to transfer a liability, in the principal or most advantageous market on the measurement date. The hierarchy prioritizes fair value measurements based on the types of inputs used in the valuation technique. The inputs are categorized into the following levels:

Level 1—Observable inputs such as quoted prices in active markets for identical assets or liabilities.

Level 2—Directly or indirectly observable inputs for quoted and other than quoted prices for identical or similar assets and liabilities in active or non-active markets.

Level 3—Unobservable inputs not corroborated by market data, therefore requiring the entity to use the best available information available in the circumstances, including the entity’s own data.

Certain financial instruments are carried at cost on the consolidated balance sheets, which approximates fair value due to their short-term, highly liquid nature. These instruments include cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses, line of credit and related party note payable.

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Note 7. Discontinued Operations

3 Months Ended

Sep. 30, 2017

Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]

Discontinued Operations

. Discontinued Operations

BH Holdings, S.A.S ("BHH")

On January 12, 2012 BHH initiated the filing of an insolvency declaration with the Tribunal de Commerce de Rennes, France ("Commercial Court").  The Commercial Court on January 18, 2012 opened the liquidation proceedings with continuation of BHH's activity for 3 months and named an administrator to manage BHH. Since Drew no longer had a controlling financial interest in BHH it was deconsolidated in the December 31, 2011 quarterly condensed consolidated financial statements and prior period amounts were presented as discontinued operations.

Assets and liabilities of discontinued operations of BHH included in the condensed consolidated balance sheets are summarized as follows at September 30, 2017 and June 30, 2017 (in thousands):

	September 30,			June 30,
	2017			2017
Assets
Total assets	$	—		$	—
Liabilities
Accrued lease termination costs	94			91
Total liabilities	94			91
Net liabilities of discontinued operations	$	(94	)	$	(91	)

During fiscal year 2015 the Company was informed by French Counsel that the total amount claimed by the BHH landlord in the liquidation of BHH was approximately $86,000. The Company did not have insight into the French liquidation process due to the Liquidator's reticence to communicate with the Company. As such, the Company had accrued the present value of the maximum amount potentially due under the lease guaranteed by the Company on behalf of BHH. The landlord's claim under liquidation of approximately $86,000 can not be revisited by the landlord and can only be potentially increased by interest or sundry expenses. Beginning in fiscal year end 2016 any changes to this liability are included in continuing operations. As of September 30, 2017 and June 30, 2017, the liability was approximately $94,000 and $91,000, respectively.

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Note 8. Related Party (Notes)

3 Months Ended

Sep. 30, 2017

Related Party Transaction [Line Items]

Related Party Transactions Disclosure [Text Block]

8. Related Party Transactions

During the fiscal year ended June 30, 2017, Richard J. DePiano, Sr., the Company’s Chairman, participated in an accounts receivable factoring program that was implemented by the Company. Under the program, Mr. DePiano advanced the Company  $275,000 during fiscal year ended June 30, 2016, $270,000 during fiscal year ended June 30, 2017 and $100,000 during the quarter ended September 30, 2017. Interest on the transaction was 1.25% per month, which was equal to the best price offered by the Company’s usual factoring agent. The transactions excluded fees typically charged by the factoring agent and provided much needed liquidity to the Company. Related party interest expense for the three-month periods ended September 30, 2017 and 2016 was $23,112 and $10,313, respectively. Repayment is due upon the Company receiving payment from the underlying receivables purchased by Mr. DePiano. In the near term Mr. DePiano will roll-over the original $645,000 investment as the receivables are collected and additional receivables will be assigned as collateral until such time as the Company no longer needs the liquidity. As of September 30, 2017 and June 30, 2017, interest expense of $76,340 and $53,227, respectively, was accrued.

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Note 9. Composition of Certain Financial Statement Caption Composition of Certain Financial Statement (Notes)

3 Months Ended

Sep. 30, 2017

Inventory Disclosure [Abstract]

Inventory Disclosure [Text Block]

(In thousands)	September 30,		June 30,
	2017		2017
Inventories, net:
Raw Material	$	715	$	865
Work-In-Process	239		337
Finished Goods	1,065		716
Total	$	2,019	$	1,918

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Note 10. Continuing operations and NASDAQ (Notes)

3 Months Ended

Sep. 30, 2017

Risks and Uncertainties [Abstract]

Substantial Doubt about Going Concern [Text Block]

10. Continuing Operations and Listing

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred recurring operating losses and negative cash flows from operating activities and these conditions raise substantial doubt about the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments relating to the realization of the carrying value of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company's continuance as a going concern is dependent on its future profitability and on the on-going support of its shareholders, affiliates and creditors. In order to mitigate the going concern issues, the Company is actively pursuing business partnerships, managing our continuing operations, implementing cost-cutting measures and seeking to sell certain assets. The Company may not be successful in any of these efforts.

If the Company is unable to achieve the mitigating factors mentioned above in the near term, it is likely that our existing cash and cash flow from operations will not be sufficient to fund activities without curtailing certain business activities.

The Company’s common stock trades on the OTCQB Market under the symbol “ESMC.” Since November 18, 2016, the Company's common stock was suspended from trading on the NASDAQ stock market effective at the opening of trading on November 18, 2016.

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 the Company's Form 10-K for the year ended June 30, 2017. 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 shareholders. Additional financing may not be available in amounts or on terms acceptable to the Company or at all.

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Line of Credit

3 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Line of Credit

11. Line of credit

On December 29, 2016, the Company entered into a credit agreement providing the Company up to an aggregate of $250,000 in cash, secured by the Company’s inventory. The Company, and its wholly owned subsidiary Sonomed, Inc., entered into an Inventory Advance Agreement as of December 29, 2016 (the "Agreement"), with CDS Business Services, Inc., doing business as Newtek Business Credit ("Newtek"). Newtek may in its discretion make loans against the Company’s Eligible Inventory in an aggregate amount outstanding at any time up to the lesser of (i) fifty percent (50%) of the Inventory Value or (ii) the Inventory Advance Limit, as those terms are defined in the Agreement, which is currently $250,000. The credit agreement renews annually and can be terminated upon 90 days written notice from the Company or 30 days written notice from NewTek.

If, at any time and for any reason, the aggregate amount of the outstanding advances under the Agreement exceeds the Inventory Advance Limit or percentage limitation contained in the preceding sentence, then Company must, upon demand by Newtek, immediately pay to Newtek, in cash, the amount of such excess, or at Newtek’s option Newtek may charge such excess against any reserves held by Newtek.

Newtek will maintain reserves against Company’s availability for advances and may maintain reserves against the Company’s accounts and/or ineligible inventory as well, or maintain a cash collateral deposit account, as NewTek in its discretion deems appropriate. Newtek may also increase such reserves or reduce its advance percentages based on eligible inventory without declaring an event of default and without prior notice, if it determines, in its discretion, that such increase in reserves or reduction is necessary, including, without limitation, to protect its interest in the collateral and/or against diminution in the value of any collateral, and/or to insure the prospect of payment or performance by Company of its obligations to Newtek are not impaired.

Interest will accrue on the daily balance at the per annum rate of 5.00% above the Prime Rate (currently 4.25%), but not less than 5.0%. The current annual interest rate is 9.25% as of September 30, 2017. The Company’s obligations will, at the option of Newtek, (i) from and after the occurrence of an event of default, or (ii) if the Company’s obligations are not paid in full by the termination date, bear interest at the per annum rate of 10.00% above the prime rate. All interest payable by under the financing documents will be computed on the basis of a 360-day year for the actual number of days elapsed on the daily balance.

In consideration of monitoring, ledgering and other administrative functions undertaken by Newtek in connection with the Company’s inventory, and the merchant processor, Company is obligated pay Newtek a monthly collateral monitoring fee calculated by multiplying (i) seventy basis points (0.70%) (approximately an annual rate of 8.5% )(except during the existence of an Event of Default at which time it shall be 1%) by (ii) the amount of the average daily balances during the calendar month preceding the month for which the calculation is made.

The foregoing description of the Agreement does not purport to be complete and is qualified in its entirety by reference to the Agreement, a copy of which is attached to the Form 8-K report dated December 29, 2016.

As of September 30, 2017 and June 30, 2017, the line of credit balance is at $225,000 and $250,000, respectively. The line of credit expense is $10,336 and $0 for the three-months ended September 30, 2017 and 2016, respectively.

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Note 12. Subsequent event (Notes)

3 Months Ended

Sep. 30, 2017

Subsequent Event [Line Items]

Subsequent Events [Text Block]

12. Subsequent event

On October 2, 2017 Escalon and Modernizing Medicine Inc. (“MMI”) entered into a Source Code Software Licensing Agreement . The Agreement provided MMI a non-exclusive perpetual License to the source code of Escalon’s proprietary image management software (“AXIS source code”) for a one-time payment of $500,000. MMI continues to be an authorized reseller of the AXIS product.

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Sigificant accounting policies Revenue Recognition (Policies)

3 Months Ended

Sep. 30, 2017

Revenue Recognition [Abstract]

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

The Company recognizes revenue from the sale of its products at the time of shipment, when title and risk of loss transfer. The Company provides products to its distributors at agreed upon wholesale prices and to the balance of its customers at set retail prices. Distributors can receive discounts for accepting high volume shipments. The discounts are reflected immediately in the net invoice price, which is the basis for revenue recognition. No further material discounts are given.

The Company's considerations for recognizing revenue upon shipment of product to a distributor are based on the following:

l Persuasive evidence that an arrangement (purchase order and sales invoice) exists between a willing buyer (distributor) and the Company that outlines the terms of the sale (company information, quantity of goods, purchase price and payment terms). The buyer (distributor) does not have a right of return.

l Shipping terms are ex-factory shipping point. At this point the buyer (distributor) takes title to the goods and is responsible for all risks and rewards of ownership, including insuring the goods as necessary.

l The Company's price to the buyer (distributor) is fixed and determinable as specifically outlined on the sales invoice. The sales arrangement does not have customer cancellation or termination clauses.

l The buyer (distributor) places a purchase order with the Company; the terms of the sale are cash, COD or credit. Customer credit is determined based on the Company's policies and procedures related to the buyer's (distributor's) creditworthiness. Based on this determination, the Company believes that collectibility is reasonably assured.

The Company assesses collectibility based on creditworthiness of the customer and past transaction history. The Company performs ongoing credit evaluations of its customers and does not require collateral from its customers. For many of the Company's international customers, the Company requires an irrevocable letter of credit to be issued by the customer before the purchase order is accepted.

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Sigificant accounting policies Valuation of Intangible Assets (Policies)

3 Months Ended

Sep. 30, 2017

Company overview [Abstract]

Goodwill and Intangible Assets, Policy [Policy Text Block]

Valuation of Intangible Assets

The Company annually, and as circumstances require, evaluates for impairment its intangible assets in accordance with FASB guidance related to other intangible assets, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. These intangible assets include trademarks and trade names and licenses. Recoverability of these assets is measured by comparison of their carrying amounts to future discounted cash flows the assets are expected to generate. If identifiable intangibles are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds its fair market value. The Company does not amortize intangible assets with indefinite useful lives, rather, such assets are required to be tested for impairment at least annually or sooner whenever events or changes in circumstances indicate that the assets may be impaired. The Company performs its intangible asset impairment tests on or about June 30, of each year. Any such impairment charge could be significant and could have a material adverse impact on the Company's financial statements if and when an impairment charge is recorded.

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Sigificant accounting policies Income (Loss) Per Share (Policies)

3 Months Ended

Sep. 30, 2017

Income (Loss) Per Share [Abstract]

Earnings Per Share, Policy [Policy Text Block]

Income/(Loss) Per Share

The Company computes net income/(loss) per share under the provisions of FASB issued authoritative guidance.

Under the provisions of FASB issued authoritative guidance, basic and diluted net income/(loss) per share is computed by dividing the net income/(loss) for the period by the weighted average number of shares of common stock outstanding during the period. The calculation of diluted net income/(loss) per share excludes potential common shares if the impact is anti-dilutive. Basic earnings per share are computed by dividing net income/(loss) by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share are determined in the same manner as basic earnings per share, except that the number of shares is increased by assuming exercise of dilutive stock options and warrants using the treasury stock method.

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Sigificant accounting policies Taxes (Policies)

3 Months Ended

Sep. 30, 2017

Income Tax Disclosure [Abstract]

Income Tax, Policy [Policy Text Block]

Taxes

Estimates of taxable income of the various legal entities and jurisdictions are used in the tax rate calculation. Management uses judgment in estimating what the Company's income tax will be for the year. Since judgment is involved, there is a risk that the tax rate may increase or decrease in any period.

In determining income/(loss) for financial statement purposes, management must make certain estimates and judgments. These estimates and judgments occur in the calculation of certain tax liabilities and in the determination of the recoverability of certain deferred tax assets, which arise from temporary differences between the tax and financial statement recognition of revenue and expense. FASB issued authoritative guidance concerning accounting for income taxes also requires that the deferred tax assets be reduced by a valuation allowance if, based on the available evidence, it is more likely than not that all or some portion of the recorded deferred tax assets will not be realized in future periods.

In evaluating the Company's ability to recover the Company's deferred tax assets, management considers all available positive and negative evidence including the Company's past operating results, the existence of cumulative losses and near-term forecasts of future taxable income that is consistent with the plans and estimates management is using to manage the underlying businesses.

Through September 30, 2017, the Company has recorded a valuation allowance against the Company's deferred tax assets arising from net operating losses due to uncertainty of their realization as a result of the Company's earnings history, the number of years the Company's net operating losses and tax credits can be carried forward, the existence of taxable temporary differences and near-term earnings expectations. The amount of the valuation allowance could decrease if facts and circumstances change that materially increase taxable income prior to the expiration of the loss carryforwards. Any reduction in the valuation allowance would result in an income tax benefit in the period such determination is made by the Company.

The Company has adopted FASB issued guidance related to accounting for uncertainty in income taxes, which provides a comprehensive model for the recognition, measurement, and disclosure in financial statements of uncertain income tax positions that a company has taken or expects to take on a tax return. Under the FASB guidance a company can recognize the benefit of an income tax position only if it is more likely than not (greater than 50%) that the tax position will be sustained upon tax examination, based solely on the technical merits of the tax position. Otherwise, no benefit can be recognized. The tax benefits recognized are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Additionally, companies are required to accrue interest and related penalties, if applicable, on all tax exposures for which reserves have been established consistent with jurisdictional tax laws. The Company has elected to recognize interest expense and penalties, if any, related to uncertain tax positions as a component of its provision for income taxes.

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Sigificant accounting policies Stock-based Compensation (Policies)

3 Months Ended

Sep. 30, 2017

Share-based Compensation [Abstract]

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Stock-Based Compensation

Stock-based compensation expense for all stock-based compensation awards granted after July 1, 2006 is based on the grant-date fair value estimate in accordance with the provisions of the FASB issued guidance. The Company recognizes these compensation costs on a straight-line basis over the requisite service period of the award.

Valuations are based on highly subjective assumptions about the future, including stock price volatility and exercise patterns. The fair value of share-based payment awards was estimated using the Black-Scholes option pricing model. Expected volatilities are based on the historical volatility of the Company's stock. The Company uses historical data to estimate option exercise and employee terminations. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

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Note 3. Earning per Share (Tables)

3 Months Ended

Sep. 30, 2017

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

The following table sets forth the computation of basic and diluted net (loss) per share:

	For the Three-months ended September 30,
	2017			2016
Numerator:
Numerator for basic and diluted earnings per share
Net (loss)	$	(60,521	)	$	(395,532	)
Denominator:
Denominator for basic earnings per share - weighted average shares	7,551,430			7,551,430
Effect of dilutive securities:
Stock options and warrants	—			—
Shares reserved for future exchange	—			—
Denominator for diluted earnings per share - weighted average and assumed conversion	7,551,430			7,551,430
Net (loss) per share
Basic net (loss) per share	$	(0.01	)	$	(0.05	)
Diluted net (loss) per share	$	(0.01	)	$	(0.05	)

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Note 9. Composition of Certain Financial Statement Caption Composition of Certain Financial Statement (Tables)

3 Months Ended

Sep. 30, 2017

Inventory Disclosure [Abstract]

Schedule of Inventory, Current [Table Text Block]

(In thousands)	September 30,		June 30,
	2017		2017
Inventories, net:
Raw Material	$	715	$	865
Work-In-Process	239		337
Finished Goods	1,065		716
Total	$	2,019	$	1,918

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Note 2. Stock-Based Compensation (Details)	3 Months Ended
	Sep. 30, 2017 USD ($)
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized	$ 0
Non-employee compensation expense	$ 0

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Note 3. Earning per Share (Details) - USD ($)	3 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Net income (loss)	$ (60,521)	$ (395,532)
Weighted Average Number of Shares Outstanding, Basic	7,551,430	7,551,430
Proceeds from Stock Options Exercised	$ 0	$ 0
Shares reserved for future exchange	0	0
Weighted Average Number of Shares Outstanding, Diluted	7,551,430	7,551,430
Earnings Per Share, Basic	$ (0.01)	$ (0.05)
Earnings Per Share, Diluted	$ (0.01)	$ (0.05)

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Note 7. Discontinued Operations (BH Holdings, S.A.S) (Narrative) (Details)	Jan. 18, 2012
BH Holdings, S.A.S [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Liquidation period	3 months

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Note 7. Discontinued Operations (Assets and Liabilities of Discontinued Operations - BH Holdings, S.A.S) (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Jun. 30, 2017	Jun. 30, 2016
Liabilities [Abstract]
Total liabilities	$ 94	$ 91
BH Holdings, S.A.S [Member]
Assets [Abstract]
Total assets	0	0
Liabilities [Abstract]
Other current liabilities	94	91
Total liabilities	94	91	$ 86
Assets (Liabilities) of Disposal Group, Including Discontinued Operation, Net	$ (94)	$ (91)

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Note 8. Related Party (Details) - USD ($)	3 Months Ended		12 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Related Party Transaction [Line Items]
Related Party Transaction, Amounts of Transaction	$ 100,000		$ 270,000	$ 275,000
Related Party Transaction, Rate	0.00%
Interest Expense, Related Party	$ 23,112	$ 10,313
Related Party Transaction, Due from (to) Related Party, Current	645,000
accrued interest related party	$ 76,340		$ 53,227

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Note 9. Composition of Certain Financial Statement Caption Composition of Certain Assets (Details) - USD ($)	Sep. 30, 2017	Jun. 30, 2017
Inventory Disclosure [Abstract]
Inventory, Raw Materials, Net of Reserves	$ 715,000	$ 865,000
Inventory, Work in Process, Net of Reserves	239,000	337,000
Inventory, Finished Goods, Net of Reserves	1,065,000	716,000
Inventory, net	$ 2,018,886	$ 1,917,938

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Line of credit (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Mar. 31, 2017	Jun. 30, 2017	Dec. 29, 2016
Line of Credit Facility [Line Items]
Line of credit outstanding	$ 225,000			$ 250,000
Line of Credit Facility, Periodic Payment, Interest	10,336	$ 0
Interest Expense	$ 33,448	$ 10,313
Line of Credit [Member]
Line of Credit Facility [Line Items]
Maximum borrowing capacity					$ 250,000
Maximum borrowing capacity (as a percentage of inventory					50.00%
Current annual interest rate (as a percent)	9.25%
Fiscal period used to compute interest	360 days
Collateral monitoring fee (as a percent)	8.50%		0.70%
Collateral monitoring fee in event of default (as a percent)			1.00%
Line of credit outstanding	$ 225,000			$ 250,000
Prime Rate [Member] | Line of Credit [Member]
Line of Credit Facility [Line Items]
Basis spread on variable rate (as a percent)	5.00%
Variable rate basis (as a percent)	4.25%
Basis spread on variable rate if delinquent (as a percent)	10.00%
Minimum [Member] | Prime Rate [Member] | Line of Credit [Member]
Line of Credit Facility [Line Items]
Current annual interest rate (as a percent)	5.00%

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Note 12. Subsequent event (Details)	3 Months Ended
	Sep. 30, 2017 USD ($)
Source code [Member]
Subsequent Event [Line Items]
Proceeds from Sale of Productive Assets	$ 500,000