Overview of Financial Performance

For the three months ended June 30, 2024, the company reported:

• Sales of $502,568, an increase of 44.9% compared to the same period in 2023. This was driven by a $336,906 increase in sales from the Optron subsidiary, offset by a $179,139 decrease in sales from the Overhoff subsidiary.
• Gross profit of $258,441, a significant increase from $34,653 in the prior year period. Gross margins improved from 10% to 51.4%, due to fluctuations in material costs and one-time costs incurred in 2023.
• Selling, general and administrative expenses of $621,641, up 3.5% primarily due to increases in professional fees, payroll, and stock-based compensation.
• A net loss of $455,426, an improvement of 47.7% from the $871,518 loss in the same period of 2023. This was driven by the increase in gross profit and decrease in other expenses.

For the six months ended June 30, 2024, the company reported:

• Sales of $1,130,318, an increase of 13.7% compared to the first half of 2023. This was driven by a $163,292 increase in Optron sales, partially offset by a $27,481 decrease in Overhoff sales.
• Gross profit of $612,210, up 30.2% from the prior year period. Gross margins improved from 47.28% to 54.2%.
• Selling, general and administrative expenses of $1,119,839, down 16.2% due to decreases in stock-based compensation.
• A net loss of $617,404, a 59.8% improvement from the $1,536,052 loss in the first half of 2023.

Liquidity and Capital Resources

The company has historically been financed by its majority shareholder and through the sale of common stock. As of June 30, 2024:

• Total assets decreased slightly to $2,844,418 from $2,856,876 at the end of 2023, with increases in inventory offset by decreases in accounts receivable and cash.
• Total liabilities increased to $5,157,088 from $4,839,495 at the end of 2023, driven by increases in accounts payable, accrued expenses, customer deposits, and shareholder loans.
• Net cash used in operating activities was $189,031, compared to $190,126 in the prior year period.
• Net cash used in investing activities was $18,081, down from $19,539 in the first half of 2023.
• Net cash provided by financing activities was $192,121, up from $179,348 in the prior year period.

Key Strengths and Weaknesses

Strengths:

• Improved gross margins due to better management of material costs and one-time issues in 2023
• Reduction in selling, general and administrative expenses, particularly stock-based compensation
• Decreases in other expenses, such as amortization of debt discounts

Weaknesses:

• Continued net losses, although significantly improved from the prior year
• Reliance on majority shareholder and equity financing to fund operations
• Fluctuations in sales between the Optron and Overhoff subsidiaries

Outlook

The company’s financial performance has shown signs of improvement, with increased sales, expanded gross margins, and reduced operating expenses. However, the company continues to operate at a net loss and relies heavily on external financing to fund its operations.

To achieve profitability, the company will need to further optimize its cost structure, while also driving consistent revenue growth across its subsidiaries. Maintaining the momentum in Optron’s international sales and addressing the decline in Overhoff’s performance will be critical. Additionally, the company may need to explore alternative financing options beyond its majority shareholder to support its long-term growth and sustainability.

Overall, the company has made progress in the first half of 2024, but significant challenges remain in order to achieve financial stability and profitability.