Fiscal Year Ended June 30, 2012

The Company reported revenues for the fiscal year 2012 of $6,613,864, a decrease of $1,785,722, or 21% compared to fiscal year 2011 ending on June 30, 2011. The pattern of sales for the fiscal year reflects significant declines in the ILS market, down $2,223,399 year over year. The gross profit margin remained at 44% year over year.

The $897,882, or 35% increase in selling, general and administration expense reflects a $545,000 increase in the level of marketing costs in fiscal year 2012 versus 2011, $164,387 of non-recurring stock compensation expense in fiscal year 2012 along with a continued increase in plant utilization overhead. Research and development costs of $503,343 were up $342,732, for the year ended June 30, 2012 compared to $160,611 for fiscal year 2011. In the prior year, the research and development costs related to the mesh product line were written off through discontinued operations.

As of June 30, 2012, the Company recorded a $273,861 valuation allowance on the amount of the non-current deferred tax asset related to the net operating loss carry forward, as it is more likely than not that some portion of this non-current deferred tax asset may not be realized. There was no valuation allowance provided in prior year. In management’s estimation, the remaining deferred tax assets and liabilities will reverse over time and, therefore, are not offset by a valuation allowance.

The Company recognized a net loss of $882,302, or $.38 for fiscal year ended June 30, 2012 compared to a net loss after discontinued operations of $326,771, or $.15 per share for the year ended June 30, 2011.

Backlog of Orders

The Company's backlog of orders on June 30, 2012, totaled approximately $1,487,491 compared to $2,277,566 at June 30, 2011 a decrease of 34.7%. Incoming orders for the year ended June 30, 2012 totaled $5,862,254 versus $8,359,869 for the fiscal year ended June 30, 2011, a decrease of 29.9%.

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