UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[Mark One]

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March~~September 3130, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____to______

Commission file number: 000-26028

IMAGING DIAGNOSTIC SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Florida		22-2671269
(State of Incorporation)		(IRS Employer Ident. No.)

618 E South St, Suite 500, Orlando, FL		32801
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number: (954) 581-9800

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

Yes ☒ No ☐

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

Large accelerated filer ☐	Accelerated filer ☐	Smaller reporting company ☒
Non-accelerated filer ☐		Emerging growth company ☐

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)

Yes ☐ No ☒

The ~~number~~ number of shares outstanding of the issuer’s common stock as of ~~May~~November 2014, 2022: 123,156,941 shares of common stock, no par value.

IMAGING DIAGNOSTIC SYSTEMS, INC.

	IMAGING DIAGNOSTIC SYSTEMS, INC.

		Page

	Part I - Financial Information

Item 1.	Financial Statements	1

	Balance Sheets – September 30, 2022 (Unaudited) and June 30, 2022	1

	Statements of Operations – (Unaudited) Three months ended September 30, 2022 and 2021	2

	Statements of Changes in Stockholders’ Deficit – (Unaudited) Three months ended September 30, 2022 and 2021	3

	Statements of Cash Flows - (Unaudited) Three months ended September 30, 2022 and 2021	4

	Notes to (Unaudited) Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

	Financial Condition and Results	22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28

Item 4.	Controls and Procedures	28

	Part II - Other Information

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 3.	Defaults Upon Senior Securities	29

Item 4.	Mine Safety Disclosures	29

Item 5.	Other Information	29

Item 6.	Exhibits	29

Signatures		30

	Part I - Financial Information
		Page
Item 1.	Financial Statements	1
	Balance Sheets – March 31, 2022 (Unaudited) and June 30, 2021	1
	Statements of Operations – (Unaudited) Three and nine months ended March 31, 2022 and 2021	2
	Statements of Changes in Stockholders’ Deficit – (Unaudited) Three and nine months ended March 31, 2022 and 2021	3
	Statements of Cash Flows - (Unaudited) Nine months ended March 31, 2022 and 2021	4
	Notes to (Unaudited) Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
	Financial Condition and Results	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30
	Part II - Other Information
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	31
Signatures		32

Item 1. Financial Statements

IMAGING DIAGNOSTIC SYSTEMS, INC.

Balance Sheets

~~(unaudited)~~Assets

	March 31, 2022			June 30, 2021
	September 30, 2022			June 30, 2022
Assets
	(unaudited)
Current assets:
Cash	$	~~560~~14,084		$	~~2,473~~613
Consultant advances		5,000			5,000
Prepaid expenses and deposits		11,783			11,989
Prepaid expenses and deposits		12,423			12,951
Total current assets		25,867			12,602
Total current assets		17,983			20,424
Property and equipment, net		-			-
Total assets	$	1725,~~983~~867		$	2012,~~424~~602
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable and accrued expenses	$	~~685~~851,~~289~~368		$	~~472~~767,~~571~~317
Accrued payroll taxes and penalties		314,019			314,019
Promissory notes, related party		~~661~~717,~~276~~815			~~581~~671,276
Current portion of PPP loan payable		72,930			10,595
PPP loan payable		72,930			72,930
Total current liabilities		1,~~733~~956,~~514~~132			1,~~378~~825,~~461~~542
Long-term liabilities
Total liabilities		1,956,132			1,825,542
PPP Loan Payable, less current portion		-			69,005
Total long-term liabilities		-			69,005
Total liabilities		1,733,514			1,447,466
Commitment and Contingencies (Note 17)
Temporary equity
Convertible Preferred Series L		~~429~~438,~~451~~476			~~415~~433,939
Total temporary equity		~~429~~438,~~451~~476			~~415~~433,939
Stockholders’ Deficit:
Preferred stock, no par, 2,000,000 authorized Convertible preferred stock, Series M, 600 designated 0 shares issued and outstanding at March 31, 2022 and June 30, 2021		-			-
Preferred stock, no par , 2,000,000 authorized Convertible preferred stock, Series M, 600 designated 0 shares issued and outstanding at September 30, 2022 and June 30, 2022		-			-
Common stock, no par value, 500,000,000 authorized, 123,156,941 and 123,156,941 shares issued and outstanding March 31, 2022 and June 30, 2021, respectively		133,155,864			132,974,686
Common stock, no par value, 500,000,000 authorized , 123,156,941 and 123,156,941 shares issued and outstanding September 30, 2022 and June 30, 2022, respectively		133,236,117			133,236,117
Accumulated Deficit		(135,~~300~~604,~~846~~858	)		(~~134~~135,~~817~~482,~~667~~996	)
Total stockholders’ deficit		(2,~~144~~368,~~982~~741	)		(12,~~842~~246,~~981~~879	)
Total liabilities and stockholders’ deficit	$	1725,~~983~~867		$	2012,~~424~~602

See accompanying notes to the unaudited financial statements

IMAGING DIAGNOSTIC SYSTEMS, INC.

Statements of Operations

(unaudited)

	Three Months Ended			Three Months Ended			~~Nine Months Ended~~			~~Nine Months Ended~~
	March 31, 2022			March 31, 2021			March 31, 2022			March 31, 2021
	September 30, 2022			September 30, 2021
Total Revenue	$	-		$	-		$	-		$	-
Cost of Sales		-			-			-			-
Gross Profit		-			-			-			-
Operating Expenses:
General and administrative		1349,~~873~~510			2140,~~860~~289			~~73,547~~			~~129,183~~
Research and development		-			-			-			8,308
Sales and marketing		336			111
Sales and marketing		314			111			551			711
Consulting expenses (including share-based compensation)		46,876			51,000
Depreciation and amortization		-			-			-			622
Total Operating Expenses		96,722			91,400
Consulting expenses (including share-based compensation)		171,479			171,479			334,178			353,586
Operating Loss		(96,722	)		(91,400	)
Total Operating Expenses		185,666			193,450			408,276			492,410
Other Income (expense)
Operating Loss		(185,666	)		(193,450	)		(408,276	)		(492,410	)
Interest expense		(20,603	)		(20,584	)
Other Income (expense)
Total Other Expense		(20,603	)		(20,584	)
Interest income		-			-			-			1
Net Loss		(117,325	)		(111,984	)
Gain on termination of lease		-			-			-			10,863
Preferred Stock Dividends		(4,537	)		(4,537	)
Loss on disposal of fixed assets		-			-			-			(1,180	)
Net Loss Available to Common Stockholders		(121,862	)		(116,521	)
Other Income		-			-			-			1,000
Net Loss per common share:
Interest expense		(20,215	)		(20,169	)		(61,391	)		(60,491	)
Basic and diluted	$	-		$	-
Total Other Expense		(20,215	)		(20,169	)		(61,391	)		(49,807	)
Weighted average number of common shares outstanding:
Net Loss		(205,881	)		(213,619	)		(469,667	)		(542,217	)
Basic and diluted		123,156,941			123,156,941
Preferred Stock Dividends		(4,438	)		(4,438	)		(13,512	)		(13,488	)
Net Loss Available to Common Stockholders		(210,319	)		(218,057	)	$	(483,179	)	$	(555,705	)
Net Loss per common share:
Basic and diluted	$	-		$	-		$	-		$	-
Weighted average number of common shares outstanding:
Basic and diluted		123,156,941			122,933,978			123,156,941			122,915,121

See accompanying notes to the unaudited financial statements

IMAGING DIAGNOSTIC SYSTEMS, INC.

Statements of Changes in Stockholders’ Deficit

For the three ~~and nine~~ months ended ~~March~~September 3130, 2022 and 2021

(unaudited)

	Common Stock									Total				~~Total~~
	Number of					Accumulated	~~Shares to be~~			Stockholders’	~~Accumulated~~			~~Stockholders’~~
	Shares		Amount	~~Amount~~		Deficit	~~Issued~~			Deficit	~~Deficit~~			~~Deficit~~
Balance at June 30, 2021		123,156,941		$	132,974,686		$	-			$	(134,817,667	)	$	(1,842,981	)
Balance at June 30, 2022		123,156,941	$	133,236,117		$	(135,482,996	)		$	(2,246,879	)
Cummulative Dividend on Series L CV Preferred		-		-	-		(4,537	-)			(4,537	~~(4,537~~)	)		~~(4,537~~	)
Net loss		-		-	-		(117,325	-)			(117,325	~~(111,984~~)	)		~~(111,984~~	)
Balance at September 30, 2021		123,156,941		$	132,974,686		$	-			$	(134,934,188	)	$	(1,959,502	)
Balance at September 30, 2022		123,156,941	$	133,236,117		$	(135,604,858	)		$	(2,368,741	)
Cummulative Dividend on Series L CV Preferred		-			-			-				(4,537	)		(4,537	)
Balance at June 30, 2021		123,156,941	$	132,974,686		$	(134,817,667	)		$	(1,842,981	)
Stock options expense		-			60,699			-				-			60,699
Cummulative Dividend on Series L CV Preferred		-		-			(4,537	)			(4,537	)
Net loss		-		-	-		(111,984	-)			(111,984	~~(151,802~~)	)		~~(151,802~~	)
Balance at December 31, 2021		123,156,941		$	133,035,385		$	-			$	(135,090,527	)	$	(2,055,142	)
Balance at September 30, 2021		123,156,941	$	132,974,686		$	(134,934,188	)		$	(1,959,502	)
Cummulative Dividend on Series L CV Preferred		-			-			-				(4,438	)		(4,438	)
Stock option expense		-			120,479			-				-			120,479
Net loss		-			-			-				(205,881	)		(205,881	)
Balance at March 31, 2022		123,156,941		$	133,155,864		$	-			$	(135,300,846	)	$	(2,144,982	)
Balance at June 30, 2020		122,876,549		$	132,570,255		$	-			$	(134,109,749	)	$	(1,539,494	)
Cummulative Dividend on Series L CV Preferred		-			-			-				(4,525	)		(4,525	)
Net loss		-			-			-				(158,027	)		(158,027	)
Balance at September 30, 2020		122,876,549		$	132,570,255		$	-			$	(134,272,301	)	$	(1,702,046	)
Cummulative Dividend on Series L CV Preferred		-			-			-				(4,525	)		(4,525	)
Related party payables converted to Equity		-			-			70,000				-			70,000
Stock options expense		-			60,699			-				-			60,699
Net loss		-			-			-				(170,571	)		(170,571	)
Balance at December 31, 2020		122,876,549		$	132,630,954		$	70,000			$	(134,447,397	)	$	(1,746,443	)
Cummulative Dividend on Series L CV Preferred		-			-			-				(4,438	)		(4,438	)
Related party payables converted to Equity		137,255			70,000			(70,000	)			-			-
Stock options expense		-			120,479			-				-			120,479
Net loss		-			-			-				(213,619	)		(213,619	)
Balance at March 31, 2021		123,013,804		$	132,821,433		$	-			$	(134,665,454	)	$	(1,844,021	)

See accompanying notes to the unaudited financial statements

IMAGING DIAGNOSTIC SYSTEMS, INC.

Statements of Cash Flows

(unaudited)

	Nine months ended			Nine months ended
	Three Months Ended			Three Months Ended
	March 31, 2022			March 31, 2021
	September 30, 2022			September 30, 2021
Net loss	$	(~~469~~117,~~667~~325	)	$	(~~542~~111,~~217~~984	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		-			622
Loss on abandonment of fixed assets		-			1,180
Gain on termination of lease		-			(10,863	)
Stock option expense		181,178			181,178
Changes in assets and liabilities:
(Increase) decrease in royalty receivable		-			10,875
(Increase) decrease in prepaid expenses		206			(1,125	)
(Increase) decrease in prepaid expenses		528			(8,938	)
Increase in accounts payable and accrued expenses		84,051			96,072
Increase (decrease) in accounts payable and accrued expenses		212,718			276,762
Total adjustments		84,257			94,947
Change in right of use asset/lease obligation, net		-			(108	)
Net cash used in operating activities		(33,068	)		(17,037	)
Total adjustments		394,424			450,708
Net cash used in operating activities		(75,243	)		(91,509	)
Cash flows from financing activities:
Change in bank overdrafts		-			(8,826	)
Proceeds from promissory notes, related party		46,539			45,000
Proceeds from promissory notes, related party		80,000			54,375
Net cash provided by financing activities		46,539			45,000
(Repayment) of Paycheck Protection Program Loan		(6,670	)		-
Net increase in cash and cash equivalents		13,471			27,963
Net cash provided by financing activities		73,330			45,549
Cash at the beginning of year		613			2,473
Net increase (decrease) in cash and cash equivalents		(1,913	)		(45,960	)
Cash at end of the period	$	14,084		$	30,436
Cash at the beginning of year		2,473			45,960
Cash at end of the period	$	560		$	-
Supplemental Disclosure of cash flow information:
Cash paid for interest	$	~~1,497~~-		$	-1,145
Cash paid for taxes	$	-		$	-
Non-cash investing and financing activities:
Related party payables converted to Equity	$	-		$	70,000

See accompanying notes to the unaudited financial statements

IMAGING DIAGNOSTIC SYSTEMS, INC.

Notes to Unaudited Financial Statements

~~March 31~~September 30, 2022

(1) ORGANIZATION AND NATURE OF BUSINESS

Imaging Diagnostic Systems, Inc. (the “Company” or “IDSI”) is a medical technology company that has developed a new, non-invasive CT scanner called CTLM^® that uses a laser beam in place of ionizing X-ray for breast imaging. This technology is called Diffuse Optical Tomography. The CTLM^® will provide an adjunctive imaging modality to other methods of imaging the breast such as X-ray mammography, MRI and ultrasound.

(2) GOING CONCERN AND MANAGEMENT’S PLANS

The accompanying financial statements are prepared assuming the Company will continue as a going concern. As of ~~March~~September 3130, 2022, the Company had an accumulated deficit of $135,~~300~~604,~~846~~858, a stockholders’ deficit of $2,~~144~~368,~~982~~741 and a working capital deficiency of $1,~~715~~930,~~531~~265. For the ~~nine~~three months ended ~~March~~September 3130, 2022, net loss totaled $~~469~~117,~~667~~325. The net cash used in operating activities for the ~~nine~~three months ended ~~March~~September 3130, 2022 totaled $7533,~~243~~068. These matters raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the date these financial ~~statements~~ statements are issued. The ability of the Company to continue as a going concern is dependent upon generating sales and obtaining additional ~~capital~~ capital and financing. While the Company believes in the viability of its strategy to generate material sales volume and in its ability to raise additional funds, there can be no assurances to that effect. The Company received from the Chinese FDA (“CFDA”) marketing clearance for the CTLM® effective November 16, 2018 to November 15, 2023. However, there can be no assurance that we will obtain U.S. Food and Drug Administration (“FDA”) marketing or other new international marketing clearances, that the CTLM® will achieve market acceptance or that sufficient revenues will be generated from sales of the CTLM® in China or elsewhere to allow us to operate profitably. IfSince 2016, we have financed our ~~majority~~operations ~~shareholder~~through loans by Viable International Investments, LLC (“Viable”), our majority shareholder, and its affiliates and the private placement of common stock to Viable affiliates and independent Chinese investors. We do not have any formal financing arrangements with Viable and its affiliates; however, Viable has stated its intention to continue to provide financing of our operations consistent with past practice. While we believe that Viable and its affiliates will provide on commercially reasonable terms the funding we need until we achieve a positive cash flow from operations, there can be no assurance that we will receive such funding or that we will ever achieve profitability. If Viable fails to continue funding, the Company would be materially adversely affected and may have to cease operations due to a lack of funding. These matters affect the Company’s liquidity profile, and management’s plans in those regards are discussed in the paragraphs that follow.

During fiscal year ~~2022~~2023, we anticipate that losses from operations will continue until we begin to generate revenues through the sales of CTLM® systems in China. These losses will be primarily due to an anticipated increase in marketing, manufacturing and operational expenses associated with the international commercialization of the CTLM®, expenses associated with FDA approval processes, and the costs associated with advanced product development activities.

The Company’s next focus, after having obtained CFDA approval in China, is on obtaining marketing clearance of its CTLM^® Breast Imaging System through the FDA. The premarket approval (“PMA”) process for U.S. marketing clearance is expected to take longer than the Chinese process, and we intend to resume this effort after achieving successful marketing and sales of CTLM^® systems in China. Our sales and marketing efforts in China have been significantly hindered by the ongoing COVID-19 pandemic, and therefore we do not expect revenue from China in the foreseeable future. No sales in other countries are expected in the foreseeable future, as we do not intend to pursue sales in other countries until after obtaining FDA marketing clearance, as to which there can be no assurance.

In analyzing the regulatory path forward, timeline, and costs associated with the level of effort required to upgrade the Company’s Quality Management System (QMS), we have decided not to renew our CE mark (required for sales in the European Union) for this year and to consider reapplying in 2 to 3 years to avoid these regulatory fees. Similarly, we will maintain our Quality Management System to be compliant to ISO 13485:2016 but not certify to ISO 13485:2016 by Underwriters Laboratories (UL) which will allow us to avoid fees associated with certification, travel, and hosting audits. Maintaining our QMS to be ISO 13485:2016 compliant will allow us to quickly schedule an audit with UL and become ISO 13485 certified when necessary.

IMAGING DIAGNOSTIC SYSTEMS, INC.

Notes to Unaudited Financial Statements

~~March 31~~September 30, 2022

(2) GOING CONCERN AND MANAGEMENT’S PLANS (Continued)

Xi’an IDI has been working with Yiling Hospital Management Group based in Beijing, China (“Yiling”) to evaluate CTLM^®’s potential use and application. As of the date of this report, Xi’an IDI has loaned three CTLM^® systems to Yiling and Yiling is at the stage of testing and data validation.

It is important that the effectiveness of the image quality improvements be established before Xi’an IDI can resume their sales and marketing efforts in China. Once the Company has substantial revenues and cash flow, it believes it will be able to raise the necessary funding to allow the Company to move forward with its various R&D and regulatory initiatives that have been put on hold due to the COVID-19 pandemic.

The Company’s ability to continue as a going concern and its future success are dependent upon its ability to raise additional capital in the near term to: (1) satisfy its current obligations, (2) continue its research and development efforts, and (3) successfully develop, market, and sell its products. Due to the difficulty of raising additional capital during the current COVID-19 crisis, the Company has been taking aggressive measures to reduce its operating costs in order to preserve cash. The Company’s ability to meet its cash flow requirements through fiscal ~~2022~~2023 and continue its development and commercialization efforts will be dependent on the length and severity of the COVID-19 crisis and the Company’s ability to secure additional funding. There can be no assurance that IDSI will generate sufficient revenue to provide positive cash flows from operations or that sufficient capital will be available, when required, to permit the Company to execute its plan of operations. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of presentation and use of estimates

The ~~financial~~ financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“U.S. GAAP”). The unaudited interim financial information furnished herein reflects all adjustments, consisting only of normal recurring items, which in the opinion of management are necessary to fairly state the Company’s financial position, results of operations and cash flows for the dates and periods presented and to make such information not misleading. The preparation of financial statements in conformity ~~with~~ with Generally Accepted Accounting Principles in the United States requires the Company to make estimates and assumptions that affect ~~the~~ the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates and assumptions also include the valuations of certain financial instruments, stock-based compensation, deferred tax assets, the outcome of litigation and tax matters, and other matters that affect the statements of financial condition and related disclosures. Actual results could differ materially from these estimates.

These unaudited financial statements should be read in conjunction with the Company’s audited financial statements for the year ended June 30, 2021, contained in our General Form for Registration of Securities of Form 10-K as filed with the Securities and Exchange Commission (the “Commission”) on October 12, 2021. The results of operations for the nine months ended March 31, 2022, are not necessarily indicative of results to be expected for any other interim period or the fiscal year ending June 30, 2022.

IMAGING DIAGNOSTIC SYSTEMS, INC.

Notes to Unaudited Financial Statements

~~March 31~~September 30, 2022

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

deferred tax assets, the outcome of litigation and tax matters, and other matters that affect the statements of financial condition and related disclosures. Actual results could differ materially from these estimates.

These unaudited financial statements should be read in conjunction with the Company’s audited financial statements for the year ended June 30, 2022, contained in our General Form for Registration of Securities of Form 10-K as filed with the Securities and Exchange Commission (the “Commission”) on October 4, 2022. The results of operations for the three months ended September 30, 2022, are not necessarily indicative of results to be expected for any other interim period or the fiscal year ending June 30, 2023.

(b) Revenue recognition

As of July 1, 2018, the Company adopted Revenue from Contracts with Customers (Topic 606) (“ASC 606”). The Company sells medical imaging products, parts, and services where permitted to independent distributors and in certain unrepresented territories directly to end-users. The Company recognizes revenue when obligations under the terms of a contract with the customer are satisfied. Product sales occur once control is transferred upon delivery to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. The amount of consideration the Company receives and revenue the Company recognizes varies with changes in customer incentives the Company offers to its customers and their customers. Any discounts, sales incentives or similar arrangements with the customer are estimated at time of sale and deducted from revenue. Sales taxes and other similar taxes are excluded from revenue.

The Company also receives royalties pursuant to a licensing relationship with Trifoil Imaging. Revenue is recognized in the reporting periods in which royalties are due to the Company. During the three months ended September 30, 2022 and 2021, there was no income from royalties.

In the event that management determines that a receivable becomes uncollectible, or events or circumstances change, which result in a temporary cessation of payments from the distributor, we will make our best estimate of probable or potential losses in our accounts receivable balance using the allowance method for each quarterly period. Management will review the receivables at the end of each fiscal year and the appropriate allowance will be made based on current available evidence and historical experience.

Our ~~allowance~~ allowance for doubtful accounts was $850 as of ~~March~~September 3130, 2022 and June 30, ~~2021~~2022. These amounts consist of other receivables that have ~~been~~ been fully reserved.

(d) Cash and cash equivalents

Holdings of highly liquid investments with original maturities of three months or less and investment in money market funds are considered to be cash equivalents by the Company. There were no cash equivalents at ~~March~~September 3130, 2022 and June 30, ~~2021~~2022.

(e) Concentration of Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable.

The ~~Company~~ Company places its cash and cash equivalents with high-quality financial institutions. At times, balances in the Company’s cash ~~accounts~~ accounts may exceed the Federal Deposit Insurance Corporation limit of $250,000. At ~~March~~September 3130, 2022 and June 30, ~~2021~~2022, the Company ~~had~~did not $0have cash balances in excess of the federally insured limit.

The Company did not have any revenue for the nine months ended March 31, 2022 and 2021.

(f) Inventory

Inventories, consisting principally of raw materials, work-in-process (including completed units under testing), finished goods and units placed on consignment, are carried at the lower of cost and net realizable value. Cost is determined using the first-in, first-out (FIFO) method. Raw materials consist of purchased parts, components and supplies. Work-in-process includes completed units undergoing final inspection and testing. The Company periodically reviews the value of items in inventory and records write-downs or write-offs based on its assessment of slow moving or obsolete inventory. The Company maintains a reserve for obsolete inventory and generally makes inventory value adjustments against the reserve.

IMAGING DIAGNOSTIC SYSTEMS, INC.

Notes to Unaudited Financial Statements

~~March 31~~September 30, 2022

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The Company did not have any revenue for the three months ended September 30, 2022 and 2021.

(f) Inventory

(g) Property and equipment

Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization are computed using straight-line methods over the estimated useful lives of the related assets. Expenditures for renewals and betterments which increase the estimated useful life or capacity of the asset are capitalized; expenditures for repairs and maintenance are expensed when incurred.

(h) Research and development

Research and development expenses consist principally of expenditures for equipment and outside third-party consultants, raw materials which are used in testing and the development of the Company’s CTLM^® device or other products and product software. The non-payroll related expenses include testing at outside laboratories, parts associated with the design of initial components and tooling costs, and other costs which do not remain with the developed CTLM^® device.

(i) Net loss per share

The Company relies on the guidance provided by ASC 260, (“Earnings per Share”), which requires the reporting of both basic and diluted earnings per share. Basic net loss per share is determined by dividing loss available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur if options or other contracts to issue common stock were exercised or converted into common stock, as long as the effect of their inclusion is not anti-dilutive.

The ~~Company~~ Company had 9,~~235~~610,~~012~~000 and 139,~~922~~610,~~657~~012 options vested as of ~~March~~September 3130, 2022 and June 30, ~~2021~~2022, respectively and 1,~~970~~595,290 and 21,~~830~~595,290 ~~options~~ options not yet vested as of ~~March~~September 3130, 2022 and June 30, ~~2021~~2022, respectively.

(j) Stock-based compensation

In July 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, an accounting standard update to improve non-employee share-based payment accounting. The accounting standard update more closely aligns the accounting for employee and non-employee share-based payments. The accounting standards update is effective as of the beginning of 2019 with early adoption permitted. We have elected to adopt this standard.

The Company has elected to use the Black-Scholes-Merton, or BSM, option-pricing model to estimate the fair value of its options and similar awards, which incorporates various subjective assumptions including volatility, risk-free interest rate, expected life, and dividend yield to calculate the fair value of outstanding and vested stock option awards. Compensation expense recognized in the statements of operations is based on awards ultimately expected to vest and reflects estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

IMAGING DIAGNOSTIC SYSTEMS, INC.

Notes to Unaudited Financial Statements

~~March 31~~September 30, 2022

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The ~~assumptions~~ assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and the Company uses different assumptions, the Company’s stock-based compensation expense could be materially different in the future. In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company’s forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining lives of unvested options, and the amount of vested options as a percentage of total options outstanding. If the Company’s actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what we have recorded in the current period. No stock options were granted during ~~the~~three ~~nine~~ months ended ~~March~~September 3130, 2022~~. During the nine months ended March 31, 2021 the Board granted options to~~ ~~purchase~~and ~~157,102 shares with an exercise price of $~~2021.51 ~~per share to an employee.~~ Stock options are being expensed pursuant to ASC 718.

The fair value concepts were not changed significantly in ASC 718; however, in adopting this Standard, companies were given the option to choose among alternative valuation models and amortization assumptions. We elected to continue to use the Black-Scholes option pricing model and expense the options as compensation over the requisite vesting period of the grant. We will reconsider use of the Black-Scholes model if additional information becomes available in the future that indicates another model would be more appropriate, or if grants issued in future periods have characteristics that cannot be reasonably estimated using this model. See Note (16) Stock Options.

(k) Long-lived assets

The Company relies on the guidance provided by ASC 360 (“Property, Plant & Equipment”). ASC 360 requires companies to write down to estimated fair value long-lived assets that are impaired. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. In performing the review of recoverability, the Company estimates the future cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future cash flows is less than the carrying amount of the assets, an impairment loss is recognized.

The ~~Company~~ Company has determined that no impairment losses need to be recognized through the ~~nine~~three months ended ~~March~~September 3130, 2022 and 2021.

(l) Income taxes

The Company accounts for income taxes pursuant to the provisions of ASC 740-10, “Accounting for Income Taxes,” which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.

The Company follows the provisions of the ASC 740 -10 related to, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any.

Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax positions.

IMAGING DIAGNOSTIC SYSTEMS, INC.

Notes to Unaudited Financial Statements

~~March 31~~September 30, 2022

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The Company has adopted ASC 740-10-25 Definition of Settlement, which provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. As of the date these financials were available to be issued, tax years ended June 30, 2019 to 2021 are still potentially subject to audit by the taxing authorities.

(m) Warranty reserve

The ~~Company~~ Company warrants all products and parts supplied for a period of 12 months from the date of installation or 15 months from the date the ~~products~~ products was/were shipped from IDSI, whichever occurs first. Although the Company tests its product in accordance with its quality programs ~~and~~ and processes, its warranty obligation is affected by product failure rates and service delivery costs incurred in correcting a product failure. Based on the Company’s experience, the warranty reserve was estimated based on the replacement cost of the laser and certain ~~electronic~~ electronic parts. Should actual product failure rates or service costs differ from the Company’s estimates, which are based on limited historical data, where applicable, revisions to the estimated warranty liability would be required. The Company had no warranty reserve balance as of ~~March~~September 3130, 2022 or June 30, ~~2021~~2022.

(n) Impact of recently issued accounting pronouncements

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption.

(o) Fair Value of Financial Instruments

The ~~carrying~~ carrying values of cash and cash equivalents, receivables, accounts payable, short-term debt and accrued liabilities approximated their fair values due to the short maturity of these instruments. After a review of our accounts receivable, the Company has not recorded an ~~allowance~~ allowance for doubtful accounts. The fair value of the Company’s debt obligations is estimated based on the quoted market prices for the same or similar issues or on current rates offered to the Company for debt of the same remaining maturities. At ~~March~~September 3130, 2022 ~~and~~ and June 30, ~~2021~~2022, the aggregate fair value of the Company’s debt obligations approximated its carrying value. The Company relies ~~upon~~ upon the guidance of ASC 820 (“Fair Value Measurements and Disclosures”). ASC 820 defines fair value as the price that would be be received from selling an asset or paid to transfer a liability in an orderly, transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions and risk of nonperformance. ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes three levels of inputs that may be used to measure fair value:

IMAGING DIAGNOSTIC SYSTEMS, INC.

Notes to Unaudited Financial Statements

~~March 31~~September 30, 2022

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.

(4) REVENUE

The Company recognizes revenue when obligations under the terms of a contract with the customer are satisfied. Product sales occur once control is transferred upon delivery to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. The amount of consideration the Company receives and revenue the Company recognizes varies with changes in customer incentives the Company offers to its customers and their customers. Sales taxes and other similar taxes are excluded from revenue.

As of July 1, 2018, the Company adopted Revenue from Contracts with Customers (Topic 606) (“ASC 606”). The new guidance sets forth a new five-step revenue recognition model which replaces the prior revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance that have historically existed in U.S. GAAP. The underlying ~~principle~~ principle of the new standard is that a business or other organization will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects to receive in exchange for the goods or services. The standard also ~~requires~~ requires more detailed disclosures and provides additional guidance for transactions that were not addressed completely in the prior accounting guidance. The Company adopted the standard using the modified retrospective method and the adoption did not have a material impact on its financial statements. The Company expects that the impact to net income of the new standard will be immaterial on an ongoing quarterly and annual basis. The comparative information has not been restated and continues to be reported under the accounting ~~guidance~~standards in effect for those periods.

The ~~Company~~ Company had no revenues during the ~~nine~~three months ended ~~March~~September 3130, 2022 and 2021.

(5) RELATED PARTY TRANSACTIONS

Related party revenues

On March 22, 2018, the Board of Directors approved the execution of two agreements with Xi’an of China, an affiliated Company of IDSI. The agreements are a Know How Transfer Contract and a CTLM® Know How Confidentiality Agreement. The contract, having a term of 20 years, stipulates that Xi’an will pay IDSI a know how transfer fee of 25% of revenue for CTLM® product sales in their territory. There were no such sales during the nine months ended March 31, 2022 and 2021.

IMAGING DIAGNOSTIC SYSTEMS, INC.

Notes to Unaudited Financial Statements

~~March 31~~September 30, 2022

(5) ~~RELATED~~ RELATED PARTY TRANSACTIONS ~~(Continued)~~

Related party revenues

On March 22, 2018, the Board of Directors approved the execution of two agreements with Xi’an of China, an affiliated Company of IDSI. The agreements are a Know How Transfer Contract and a CTLM^® Know How Confidentiality Agreement. The contract, having a term of 20 years, stipulates that Xi’an will pay IDSI a know how transfer fee of 25% of revenue for CTLM^® product sales in their territory. There were no such sales during the three months ended September 30, 2022 and 2021.

Related party fees

Erhfort, LLC earned a consulting fee of $7625,500 for ~~each~~ of the ~~nine~~three-month ~~periods~~period ended ~~March~~September 3130, 2022 and 2021. Erhfort, LLC regularly reviews the Company’s operations and reports to IDSI’s CEO, ~~Chunming Zhang,~~ who lives in China. Erhfort, LLC is a related party because it owns Company common stock directly and indirectly.

David Fong, ~~serving~~who served as the Company’s CFO through August 10, 2022 and as a consultant on an as needed basis thereafter, earned consulting fees of $7619,~~500~~236 for ~~each of~~ the ~~nine~~three-month periods ended ~~March~~September 3130, 2022 and $25,500 for the three-month period ended September 30, 2021. These fees were assigned to his affiliated business, Fong & Associates, LLC.

Related party payables and accrued expenses

As of ~~March~~September 3130, 2022 and June 30, ~~2021~~2022, the amount of interest on related party notes due to Erhfort, LLC, which is included in accounts payable, is $~~141~~180,~~814~~921 and $83161,260, respectively.

As of ~~March~~September 3130, 2022 and June 30, ~~2021~~2022, the amount of consulting fees due to Ehrfort, LLC, which is included in accounts payable, is $~~127~~178,500 and $51153,000, respectively.

As of ~~March~~September 3130, 2022 and June 30, ~~2021~~2022, the amount of consulting fees due to Fong & Associates, LLC, which is included in accounts payable and accrued expenses, is $~~260~~305,~~500~~236 and $~~184~~286,000, respectively.

As of ~~March~~September 3130, 2022 and June 30, ~~2021~~2022, the amount of ~~interest~~reimbursable onexpenses ~~related party notes~~ due to JMFong ~~One~~& ~~Holdings~~Associates, LLC, which is included in ~~accrued~~accounts ~~expenses~~payable, is $81,~~112~~436 and $5839,~~860,~~ respectively. ~~JM One Holdings, LLC is an entity affiliated with the Company’s CFO.~~

As of September 30, 2022 and June 30, 2022, the amount of interest on related party notes due to JM One Holdings, LLC, which is included in accrued expenses, is $9,616 and $8,860, respectively. JM One Holdings, LLC is an entity affiliated with David Fong.

Related party debt

As of ~~March~~September 3130, 2022 and June 30, ~~2021~~2022, the amount in promissory notes due to related parties are $~~661~~717,~~276~~815 and $~~581~~671,276, respectively (See Note 12).

(6) ROYALTY RECEIVABLE

On June 16, 2006, the Company entered into a Royalty Agreement with Bioscan Inc. whereby the Company established a licensing relationship with Bioscan which granted Bioscan an exclusive sublicensable, royalty-bearing license to make, use, offer for sale, import and otherwise develop and commercialize products in its territory. Bioscan Inc. was subsequently purchased by TriFoil Imaging. During the nine months ended March 31, 2022 and 2021, there was no royalty income. As of March 31, 2022 and June 30, 2021, the Company had royalty receivable balances of $0.

IMAGING DIAGNOSTIC SYSTEMS, INC.

Notes to Unaudited Financial Statements

~~March 31~~September 30, 2022

(6) ROYALTY RECEIVABLE

On June 16, 2006, the Company entered into a Royalty Agreement with Bioscan Inc. whereby the Company established a licensing relationship with Bioscan which granted Bioscan an exclusive sublicensable, royalty-bearing license to make, use, offer for sale, import and otherwise develop and commercialize products in its territory. Bioscan Inc. was subsequently purchased by TriFoil Imaging. During the three months ended September 30, 2022 and 2021, there was no royalty income. As of September 30, 2022 and June 30, 2022, the Company had royalty receivable balances of $0.

(7) INVENTORIES

Inventories consisted of the following:

	March 31, 2022			June 30, 2021
	September 30, 2022			June 30, 2022
Raw materials consisting of purchased parts, components and supplies	$	92,587		$	92,587
Finished goods		7,500			7,500
Total Inventory	$	100,087		$	100,087
Allowance for Obsolete Inventory		(100,087	)		(100,087	)
Net Inventory	$	-		$	-

Due to the age of the inventory, lack of demand for parts and lack of sales the Company reserved for all inventory during the year ended June 30, 2017. The Company is not carrying any inventory purchased after June 30, 2017 and has booked an allowance for the entire value of its inventory.

(8) PREPAID EXPENSES AND DEPOSITS

The following is a summary of prepaid expenses:

	March 31, 2022		June 30, 2021
	September 30, 2022		June 30, 2022
Prepaid Software	$	~~581~~-	$	206
Prepaid Rent		59		962
Rent Deposits		1,783		1,783
Consulting Retainers		10,000		10,000
Total Prepaid expenses	$	1211,~~423~~783	$	1211,~~951~~989

IMAGING DIAGNOSTIC SYSTEMS, INC.

Notes to Unaudited Financial Statements

~~March 31~~September 30, 2022

(9) PROPERTY AND EQUIPMENT

The following is a summary of property and equipment, less accumulated depreciation:

	March 31, 2022			June 30, 2021			Useful life
	September 30, 2022			June 30, 2022			Useful life
Computers and Equipment	$	12,612		$	12,612		5 years
Third Party Software		10,291			10,291		5 years
Clinical Equipment		15,000			15,000		5 years
Total Property & Equipment	$	37,903		$	37,903
Less: accumulated depreciation		(37,903	)		(37,903	)
Total Property & Equipment - Net	$	-		$	-

Depreciation expense for the ~~nine~~three months ended ~~March~~September 31, 2022 and 2021 was $0 ~~and $622 respectively~~.

(10) ACCOUNTS PAYABLE AND ACCRUED EXPENSES

As of ~~March 31~~September 30, 2022 and June 30, ~~2021~~2022, accounts payable and accrued expenses totaled $~~685~~851,~~289~~368 and $~~472~~767,~~571,~~317 respectively, which consists of accounts payable of $~~677~~815,~~177~~181 and $~~465~~758,~~799~~171 and other accrued expenses of $836,~~112~~187 and $69,~~772~~146, respectively.

(11) ACCRUED PAYROLL TAXES AND PENALTIES

As of ~~March 31~~September 30, 2022 and June 30, ~~2021~~2022, the Company owed the IRS $314,019 and $314,019, respectively. Accrued payroll taxes represent outstanding interest and penalties based on prior management’s failure to pay payroll taxes commencing with the quarter ending ~~September~~March 3031, 2010. As part of new management’s restructuring plan, the Company received funds from an accredited investor to be able to make a payment to pay off the payroll tax portion of the amount owed to the IRS. The Company engaged tax counsel to manage the settlement and payment. On June 27, 2018, the IRS provided counsel with a payoff calculation table indicating that the balance of taxes due was $381,224. On June 29, 2018, Viable International Investments LLC provided a bank check in that amount to counsel and they sent the check to the IRS with a letter requesting penalty and interest abatement. The amount due at ~~March~~September 3130, 2022 of $314,019 represents the interest ~~and~~ and penalties. The Company has formally asked the IRS to abate all remaining interest and penalties of $314,019. The Company had a telephone conference on April 18, 2019 with the office of appeals and is waiting for further communications from the appeals officer. As of ~~March~~September 3130, 2022, the Company’s tax counsel is in the process of reviewing recent IRS correspondence to determine appeals status and will work towards final resolutions with the IRS on all outstanding liabilities. The Company has decided to wait until all resolutions are final before making any adjustments to the balance of $314,019 owed to the IRS.

IMAGING DIAGNOSTIC SYSTEMS, INC.

Notes to Unaudited Financial Statements

~~March 31~~September 30, 2022

(12) PROMISSORY NOTES – RELATED PARTY

The ~~following~~ following table is a summary of the outstanding note balances as of ~~March~~September 3130, 2022 and June 30, ~~2021~~2022.

Noteholder	Interest Rate	Maturity Date	~~March~~September 3130, 2022		June 30, ~~2021~~2022
Related Party Notes:
Erhfort, LLC	15%	612/3031/22	$	100,000	$	100,000
Erhfort, LLC	15%	612/3031/22		100,000		100,000
JM One Holdings, LLC	15%	612/3031/22		20,000		20,000
Erhfort, LLC	15%	612/3031/22		100,000		100,000
Erhfort, LLC	15%	612/3031/22		100,000		100,000
Erhfort, LLC	15%	612/3031/22		100,000		100,000
Erhfort, LLC	15%	612/3031/22		10,000		10,000
Erhfort, LLC	15%	612/3031/22		10,000		10,000
Viable International Investments, LLC	0%	On Demand		7,865		7,865
Viable International Investments, LLC	0%	On Demand		5,000		5,000
Viable International Investments, LLC	0%	On Demand		5,000		5,000
Viable International Investments, LLC	0%	On Demand		5,000		5,000
Viable International Investments, LLC	0%	On Demand		5,000		5,000
Viable International Investments, LLC	0%	On Demand		3,000		3,000
Viable International Investments, LLC	0%	On Demand		15,000		-15,000
Viable International Investments, LLC	0%	On Demand		30,000		-30,000
Viable International Investments, LLC	0%	On Demand		10,000		-10,000
Viable International Investments, LLC	0%	On Demand		10,000		-10,000
Viable International Investments, LLC	0%	On Demand		10,000		-10,000
Viable International Investments, LLC	0%	On Demand		5,000		-5,000
Viable International Investments, LLC	0%	On Demand		10,000		10,000
Viable International Investments, LLC	0%	On Demand		8,847		-
Viable International Investments, LLC	0%	On Demand		12,768		-
Viable International Investments, LLC	0%	On Demand		9,988		-
Viable International Investments, LLC	0%	On Demand		7,968		-
Viable International Investments, LLC	0%	On Demand		6,968		-
Xi’an IDI	0%	On Demand		10,411		10,411
Total Related Party Notes			$	~~661~~717,~~276~~815	$	~~581~~671,276

Erhfort, LLC and Viable International Investments, LLC own Company common stock directly and indirectly. JM One Holdings, LLC is an entity affiliated with the Company’s former CFO. Hence, these debts are considered related party debt. Xi’an IDI is affiliated with IDSI due to a licensing agreement.

During the ~~nine~~three months ended ~~March~~September 3130, 2022, the Company received loan proceeds of $8046,~~000~~539 from Viable International Investments, LLC with an annual interest rate of 0%. OnDuring ~~December 31, 2021,~~ the ~~maturity~~three ~~dates~~months ofended ~~the~~September ~~loans that were due to mature on December 31~~30, 2021 ~~were extended to June 30~~, ~~2022. The extension of~~ the ~~maturity~~Company ~~dates~~received isloan aproceeds ~~modification~~ of ~~the~~$45,000 ~~loans~~from Viable International Investments, ~~and~~LLC ~~not~~with ~~accounted~~an ~~for~~annual asinterest ~~gain~~rate ~~or loss~~of ~~extinguishments.~~0%

On September 30, 2022, the maturity dates of the loans that were due to mature on September 30, 2022 were extended to December 31, 2022. The extension of the maturity dates is a modification of the loans, and not accounted for as gain or loss extinguishments.

IMAGING DIAGNOSTIC SYSTEMS, INC.

Notes to Unaudited Financial Statements

~~March 31~~September 30, 2022

(13) LONG-TERM DEBT

The ~~following~~ following table is a summary of the outstanding loan balances as of ~~March~~September ~~31,~~30 2022 and June 30, ~~2021~~2022.

Noteholder	Interest Rate	Maturity Date	~~March~~September 3130, 2022			June 30, ~~2021~~2022
Truist Bank	1%	In Default	$	72,930		$	7972,~~600~~930
Total Debt				72,930			7972,~~600~~930
Current Portion of Debt				(72,930	)		(1072,~~595~~930	)
Total Long-term Debt			$	-		$	~~69,005~~-

On May 9, 2020, the Company entered into a loan with Truist Bank, a lender pursuant to the Paycheck Protection Program of the CARES Act as administered by the SBA in the amount of $79,600. The loan, in the form of a promissory note, had an original maturity date of May 1, 2025. No additional collateral or guarantees were provided by the Company for the loan. The PPP loan provides for customary events of default. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, rent payments, mortgage interest and covered utilities during the 24-week period beginning on the date of loan disbursement. The Company is required to repay the entire amount of outstanding principal, along with accrued interest, as the Company is not eligible for forgiveness. The Company began to make payments, beginning October 2021, including interest accruing at an annual interest rate of 1.0% beginning on the date of disbursement. On May 17, 2022, the Company received a default and demand letter from Truist Bank in regards to the PPP loan due to non-payment. As such the remaining balance of the PPP loan became due immediately ~~(See Note 18)~~. As of ~~March~~September 3130, 2022 and June 30, ~~2021~~2022, the Company reported an accrued interest balance related to the PPP Loan of $0373 and $~~912~~186, respectively. The accrued interest is included in accounts payable and accrued expenses on our balance sheets.

IMAGING DIAGNOSTIC SYSTEMS, INC

Notes to Unaudited Financial Statements

March 31, 2022

(14) CONVERTIBLE PREFERRED STOCK

The following schedule reflects the number of shares of preferred stock that have been issued, converted and are outstanding as of ~~March~~September 3130, 2022:

Security	Date Issued	No. of Shares		Amount		Date of Conversion	No. of Shares Converted		Amount Converted		Balance 39/3130/2022
Series L Cv Pfd	2/10/2010		35	$	350,000	1/6/2011		15	$	150,000	$	200,000
Dividends												~~229~~238,~~451~~476
Total redemption value						~~Total redemption value~~					$	~~429~~438,~~451~~476
Total Series M Cv Pfd	Various		600	$	6,000,000	1/6/2011		15	$	6,000,000	$	-0-
Dividends												-0-
Total redemption value						~~Total redemption value~~					$	-0-

Series L Convertible Preferred Stock

On March 31, 2010, a private investor converted a $350,000 short-term promissory note into 35 shares of Series L Convertible Preferred Stock. The original purchase price/stated value is $10,000 per share and dividends accrue at an annual rate of 9%. The preferred stock is convertible into 474 shares of common stock for each share of preferred stock. On January 6, 2011, the private investor converted 15 shares of Series L Convertible Preferred Stock representing a principal value of $150,000. After the conversion, the private investor held 20 shares representing a principal value of $200,000. The remaining principal value of $200,000 is presented on the balance sheet as temporary equity, as the holder has the option to redeem for cash at any time. At ~~March~~September 3130, 2022 and June 30, ~~2021~~2022, the balance of cumulative dividends owed to the investor which is included in redemption value was $~~229~~238,~~451~~476 and $~~215~~233,939, respectively. The total presented on the balance sheet as temporary equity is $~~429~~438,~~451~~476 as of ~~March~~September 3130, 2022 and $~~415~~433,939 as of June 30, ~~2021~~2022.

~~Series M Convertible Preferred Stock~~16

~~The Company had previously sold 600 Series M Convertible Preferred~~IMAGING ~~Stock~~DIAGNOSTIC ~~to Viable International Investments~~SYSTEMS, ~~LLC, a Florida limited liability company, (“Viable”)~~INC. Each share of the Series M Preferred Stock was convertible into 147,283 shares of Common Stock. In the event of a liquidation, the holders of the Series M Preferred Stock would have been entitled to receive, prior to any distribution of assets to holders of Common Stock or other class of capital stock or other equity securities of the Corporation, $10,000 per share of Series M Preferred Stock held plus accrued but unpaid dividends. The holders of the Series M Preferred Stock would have had identical voting rights as any holder of Common Stock and would have voted together, not as separate classes. The original purchase price/stated value of each share of Series M Preferred Stock was $10,000 and Viable was be entitled to receive

IMAGING DIAGNOSTIC SYSTEMS, INC

Notes to Unaudited Financial Statements

~~March 31~~September 30, 2022

(14) CONVERTIBLE PREFERRED STOCK (Continued)

~~cumulative dividends at the fixed rate of 9% of the stated value per share per annum. As of March 31, 2022 and June 30, 2021, the balance of~~ Series M Convertible Preferred ~~stock was $0.~~Stock

The Company had previously sold 600 Series M Convertible Preferred Stock to Viable International Investments, LLC, a Florida limited liability company, (“Viable”). Each share of the Series M Preferred Stock was convertible into 147,283 shares of Common Stock. In the event of a liquidation, the holders of the Series M Preferred Stock would have been entitled to receive, prior to any distribution of assets to holders of Common Stock or other class of capital stock or other equity securities of the Corporation, $10,000 per share of Series M Preferred Stock held plus accrued but unpaid dividends. The holders of the Series M Preferred Stock would have had identical voting rights as any holder of Common Stock and would have voted together, not as separate classes. The original purchase price/stated value of each share of Series M Preferred Stock was $10,000 and Viable was be entitled to receive cumulative dividends at the fixed rate of 9% of the stated value per share per annum. As of September 30, 2022 and June 30, 2022, the balance of Series M Preferred stock was $0.

(15) COMMON STOCK

The Company has 500,000,000 of common shares no par value authorized and 2,000,000 of no par preferred shares authorized.

The Company did not issue any shares of common or preferred stock during the ~~nine~~three months ended ~~March~~September 3130, 2022 and 2021.

During the nine months ended March 31, 2021, the Company issued 137,255 shares of common stock pursuant to a debt conversion agreement for $70,000 of accounts payable with Erhfort, LLC. The amount of debt converted per share was $.51.

(16) STOCK OPTIONS

On December 4, 2016, the Board of Directors adopted the Company’s 2016 Equity Incentive Plan (the “2016 Plan”) which was subsequently approved and adopted by majority written consent in lieu of an annual meeting. The purpose of the 2016 Plan is to encourage and enable the officers, employees, directors and other key persons (including consultants) of the Company, upon whose judgment, initiative and efforts the Company largely depends for the successful conduct of its business, to acquire a proprietary interest in the Company. It is anticipated that providing such persons with a direct stake in the Company’s welfare will assure a closer identification of their interests with those of the Company and its stockholders, thereby stimulating their efforts on the Company’s behalf and strengthening their desire to remain with the Company.

On August 1, 2020, the Board granted an option to purchase 157,102 shares with an exercise price of $.51 and a fair value of $.51 to an employee. These options will vest when CTLM® 3.0 is ready for Alpha testing and will be expensed at that time. On May 1, 2021, the Board granted an option to purchase 1,500,000 shares with an exercise price of $.51 and fair value of $.13 per share to a consultant. These options will vest over a three-year period. These options will be expensed as they vest.

In computing the impact of stock option grants, the fair value of each option is estimated on the date of grant based on the Black-Scholes options-pricing model utilizing certain assumptions for a risk-free interest rate; volatility of a comparable company; and expected remaining lives of the awards. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and the Company uses different assumptions, the Company’s stock-based compensation expense could be materially different in the future.

IMAGING DIAGNOSTIC SYSTEMS, INC.

Notes to Unaudited Financial Statements

September 30, 2022

(16) STOCK OPTIONS (Continued)

In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. The Company cannot assess its forfeiture rate at this time due to the lack of historical data.

	As of September 30, 2022	As of June 30, 2022
Expected volatility	20% to 44%	20% to 44%
Expected term	0.25 to 3.59 Years	0.5 to 4.83 Years
Risk-Free interest rate	0.05% to 2.49%	0.05% to 2.49%
Forfeiture rate	0.00%	0.00%
Expected dividend rate	0.00%	0.00%

At September 30, 2022, the Company has unvested and vested options under the 2016 Plan with exercise prices that range from a low of $.20 per share to a high of $.51 per share. The following table summarizes information about all of the stock options granted, exercised, expired and cancelled under the 2016 Plan at September 30, 2022 and June 30, 2022:

Employees/Consultants	Options			Wtd. Avg. Exercise Price		Wtd. Avg. Remaining Term		Aggregate Intrinsic Value
Outstanding at June 30, 2020		16,752,935		$	0.25		1.76 Years	$	-
Granted		-		$	-
Expired		(5,547,645	)	$	0.20
Exercised		-		$	-
Cancelled		-		$	-
Outstanding at June 30, 2021		11,205,290		$	0.30		1.39 Years	$	-
Granted		-		$	-
Expired		-		$	-
Exercised		-		$	-
Cancelled		-		$	-
Outstanding at September 30, 2022		11,205,290		$	0.30		1.13 Years	$	-

IMAGING DIAGNOSTIC SYSTEMS, INC.

Notes to Unaudited Financial Statements

~~March 31~~September 30, 2022

(16) STOCK OPTIONS (Continued)

	As of March 31, 2022			As of June 30, 2021
Expected volatility		23% to 44	%		23% to 44	%
Expected term		.76 to 4.08 Years			.5 to 4.83 Years
Risk-Free interest rate		.05% to 3.09	%		.05% to 3.09	%
Forfeiture rate		0.00	%		0.00	%
Expected dividend rate		0.00	%		0.00	%

The following table summarizes information about vested and unvested options under the 2016 Plan at September 30, 2022 and June 30, 2022. The Company did not recognize any options expense during the three months ended September 30, 2022.

At March 31, 2022, the Company has unvested and vested options under the 2016 Plan with exercise prices that range from a low of $.20 per share to a high of $.51 per share. The following table summarizes information about all of the stock options granted, exercised, expired and cancelled under the 2016 Plan at March 31, 2022 and June 30, 2021:

Employees/Consultants	Unvested			Vested and Exercisable			Total
Outstanding at June 30, 2021		2,830,290			13,922,645			16,752,935
Granted		-			-			-
Vested and Exercisable		(1,235,000	)		1,235,000			-
Cancelled		-			-			-
Expired		-			(5,547,645	)		-
Outstanding at June 30, 2022		1,595,290			9,610,000			11,205,290
Granted		-			-			-
Vested and Exercisable		-			-			-
Cancelled		-			-			-
Expired		-			-			-
Adjustment		-			-			-
Outstanding at September 30, 2022		1,595,290			9,610,000			11,205,290

Employees/Consultants	Options			Wtd. Avg. Exercise Price		Wtd. Avg. Remaining Term		Aggregate Intrinsic Value
Outstanding at June 30, 2020		15,095,833		$	0.24		2.43 Years	$	-
Granted		1,657,102		$	0.51
Expired		-		$	-
Exercised		-		$	-
Cancelled		-		$	-
Outstanding at June 30, 2021		16,752,935		$	0.25		1.76 Years	$	-
Granted		-		$	-
Expired		(5,547,645	)	$	0.20
Exercised		-		$	-
Cancelled		-		$	-
Outstanding at March 31, 2022		11,205,290		$	0.30		1.64 Years	$	-

Unvested options will be expensed under the Black-Scholes options-pricing model when they vest. As of September 30, 2022, remaining options to be expensed when vested are estimated to be $179,028.

~~The~~At ~~following~~September 30, ~~table~~2022, ~~summarizes~~the ~~information~~Company ~~about~~has ~~vested~~issued ~~and unvested~~ options ~~under~~pursuant ~~the~~to ~~2016~~six ~~Plan~~different atstock ~~March~~option 31plans, ~~2022~~the ~~and~~most ~~June~~recent ~~30,~~being ~~2021.~~the ~~The~~2016 ~~Company~~Plan. ~~recognized~~All anthe ~~expense~~options for ofthe ~~$181,178~~previous ~~for~~five ~~the~~plans ~~options~~through ~~vested during~~and including the ~~nine~~2012 ~~months~~Non-Statutory ~~ended~~Plan ~~March~~have ~~31, 2022~~expired.

The tables below summarize information about these five plans:

Employees/Consultants	Options			Wtd. Avg. Exercise Price		Wtd. Avg. Remaining Term		Aggregate Intrinsic Value
Outstanding at June 30, 2021		12		$	350		1.11 Years	$	-
Granted		-		$	-
Exercised		-		$	-
Cancelled		-		$	-
Outstanding at June 30, 2022		12		$	350		0.11 Years	$	-
Granted		-		$	-
Exercised		-		$	-
Cancelled		(12	)	$	350
Outstanding at September 30, 2022		-		$	-		-	$	-

Vested & Exercisable Stock Options	September 30, 2022		June 30, 2022
Employee 2016 Equity Plan		-		-
Director 2016 Equity Plan		-		-
Employee Other Plans		-		12
Directors and Consultants Other Plans		-		-
Total		-		12

IMAGING DIAGNOSTIC SYSTEMS, INC.

Notes to Unaudited Financial Statements

~~March 31~~September 30, 2022

(16) STOCK OPTIONS (Continued)

Employees/Consultants	Unvested			Vested and Exercisable			Total
Outstanding at June 30, 2020		4,123,184			10,972,649			15,095,833
Granted		1,657,102			-			1,657,102
Vested and Exercisable		(2,950,000	)		2,950,000			-
Cancelled		-			-			-
Expired		-			-			-
Rounding Adjustment		4			(4	)		-
Outstanding at June 30, 2021		2,830,290			13,922,645			16,752,935
Granted		-			-			-
Vested and Exercisable		(860,000	)		860,000			-
Cancelled		-			-			-
Expired		-			(5,547,645	)		-
Adjustment		-			-			-
Outstanding at March 31, 2022		1,970,290			9,235,000			11,205,290

The table below summarizes information about all stock options outstanding as of September 30, 2022:

Unvested options will be expensed under the Black-Scholes options-pricing model when they vest. As of March 31, 2022, remaining options to be expensed when vested are estimated to be $259,281.

	Outstanding Options						Vested Options
Range of Exercise price	Number Outstanding at September 30, 2022		Weighted Averaged Exercise Price		Weighted Averaged Remaining Life		Number Exercisable at September 30, 2022		Weighted Averaged Exercise Price		Weighted Averaged Remaining Life
$0.20 - $0.51		11,205,290	$	0.30		1.13		9,235,000	$	0.26		0.78
Total Outstanding options		11,205,290	$	0.30		1.13		9,235,000	$	0.26		0.78

At March 31, 2022, the Company has issued options pursuant to six different stock option plans, the most recent being the 2016 Plan. The previous five plans through and including the 2012 Non-Statutory Plan have a remaining total of options vested and exercisable to purchase 12 shares at exercise price of $350 per share.

The tables below summarize information about these five plans:

Employees/Consultants	Options			Wtd. Avg. Exercise Price		Wtd. Avg. Remaining Term		Aggregate Intrinsic Value
Outstanding at June 30, 2020		13		$	976		2.01 Years	$	-
Granted		-		$	-
Exercised		-		$	-
Cancelled		(1	)	$	13,500
Outstanding at June 30, 2021		12		$	350		1.11 Years	$	-
Granted		-		$	-
Exercised		-		$	-
Cancelled		-		$	-
Outstanding at March 31, 2022		12		$	350		.36 Years	$	-

IMAGING DIAGNOSTIC SYSTEMS, INC

Notes to Unaudited Financial Statements

March 31, 2022

(16) STOCK OPTIONS (Continued)

Vested & Exercisable Stock Options	March 31, 2022		June 30, 2021
Employee 2016 Equity Plan		-		-
Director 2016 Equity Plan		-		-
Employee Other Plans		12		12
Directors and Consultants Other Plans		-		-
Total		12		12

The table below summarizes information about all stock options outstanding as of March 31, 2022:

	Outstanding Options						Vested Options
Range of Exercise price	Number Outstanding at March 31, 2022		Weighted Averaged Exercise Price		Weighted Averaged Remaining Life		Number Exercisable at March 31, 2022		Weighted Averaged Exercise Price		Weighted Averaged Remaining Life
$0.20 - $0.51		11,205,290	$	0.30		1.64		9,235,000	$	0.26		1.28
$350		12	$	350		.36		12	$	350		.36
Outstanding options		11,205,302	$	0.30		1.64		9,235,012	$	0.26		1.28

The Company’s common stock, symbol IMDS, was quoted on OTCmarkets.com Pink until September 25, 2014 at which time IDSI’s registration was revoked by the Securities and Exchange Commission (SEC) for failure to timely file its Quarterly and Annual Reports. The last quoted price was $0.1. Because the Company was de-registered and OTC markets did not provide a quote for IMDS, there is no public market for the Company’s shares. Given the exercise prices adjusted for the reverse split, it is highly unlikely that any employee holding pre-2016 Plan options will exercise them. The Company has sufficient authorized shares available for all outstanding option; however, if exercised, the shares will be issued with a restrictive legend because the Company was not an SEC reporting company until October 2018. Further, given its recent return to SEC reporting status, the Company is unable to file an S-8 Registration Statement to register shares issued because of option exercise pursuant to various stock option agreements.

(17) COMMITMENTS AND CONTINGENCIES

The Company previously carried $3,000,000 in product liability insurance to cover both clinical sites and sales. As part of its cost savings initiatives, the Company cancelled the policy as it had not had any adverse experiences after conducting more than 25,000 patient scans worldwide. The Company is now self-insuring the risk of product liability.

From May 2010 to June 2012, claims were made by the IRS for payment of the Company’s accrued payroll taxes, interest and penalties, which as of June 30, 2012 was $1,489,640. The Company engaged tax counsel to handle this matter and intends to fully satisfy its payroll tax obligations. On August 4, 2014, Viable purchased 250 shares of convertible preferred stock for $2,500,000, which gave them a 78.9% voting and economic interest in the Company’s capital stock representing a change in control of the Company. New management’s tax counsel negotiated a new Installment Agreement which stipulated a lump sum payment of $250,000, which was paid on September 4, 2014 and monthly installment payments of $20,000 beginning in September 2014 due on the 18th of each month until the balance of payroll taxes, interest and penalties are paid in full (Note 11).

2120

IMAGING DIAGNOSTIC SYSTEMS, INC.

Notes to Unaudited Financial Statements

~~March 31~~September 30, 2022

~~(17)~~During ~~COMMITMENTS~~fiscal 2018, ~~AND~~as ~~CONTINGENCIES~~part ~~(Continued)~~of new management’s restructuring plan, the Company received funds from an accredited investor to pay off the payroll tax portion of the amount owed to the IRS. The Company engaged tax counsel to manage the settlement and payment. On June 27, 2018, the IRS provided counsel with a payoff calculation table indicating that the balance of taxes due was $381,224. On June 29, 2018, Viable International Investments LLC provided a bank check in that amount to counsel and they sent the check to the IRS with a letter requesting abatement of penalties and interest totaling $314,019. As of September 30, 2022, the Company’s tax counsel is in the process of reviewing recent IRS correspondence to determine appeals status and will work towards final resolutions with the IRS on all outstanding liabilities. The Company has decided to wait until all resolutions are final before making any adjustments to the balance of $314,019 owed to the IRS.

~~September~~On 4October 23, ~~2014~~2019, the Company entered into a consulting agreement (“the Agreement”) effective as of November 1, 2019, with Dr. Huabei Jiang to serve as IDSI’s Chief Scientific Consultant. Pursuant to the Agreement, Dr. Jiang is focused on improving the technical performance and ~~monthly~~image ~~installment~~quality ~~payments~~of IDSI’s CTLM® breast imaging device. Per the Agreement, the goal of the initial project was to complete image quality improvement by November 1, 2020. A payment of $20500,000 ~~beginning~~will be due upon satisfactory completion of the project. inAs of September ~~2014~~30, ~~due~~2022, onDr. Jiang has completed the ~~18th~~first phase of ~~each~~image ~~month~~quality ~~until~~improvement and is currently collecting image data for evaluation and further technical improvement. We have yet to establish the ~~balance~~effectiveness of ~~payroll~~the ~~taxes~~improvements, ~~interest~~as ~~and~~completion ~~penalties~~of ~~are~~the project ~~paid~~has inbeen ~~full (Note~~delayed ~~11)~~due to the COVID-19 crisis.

During fiscal 2018, as part of new management’s restructuring plan, the Company received funds from an accredited investor to pay off the payroll tax portion of the amount owed to the IRS. The Company engaged tax counsel to manage the settlement and payment. On June 27, 2018, the IRS provided counsel with a payoff calculation table indicating that the balance of taxes due was $381,224. On June 29, 2018, Viable International Investments LLC provided a bank check in that amount to counsel and they sent the check to the IRS with a letter requesting abatement of penalties and interest totaling $314,019. As of March 31, 2022, the Company’s tax counsel is in the process of reviewing recent IRS correspondence to determine appeals status and will work towards final resolutions with the IRS on all outstanding liabilities. The Company has decided to wait until all resolutions are final before making any adjustments to the balance of $314,019 owed to the IRS.

On October 23, 2019, the Company entered into a consulting agreement (“the Agreement”) effective as of November 1, 2019, with Dr. Huabei Jiang to serve as IDSI’s Chief Scientific Consultant. Pursuant to the Agreement, Dr. Jiang is focused on improving the technical performance and image quality of IDSI’s CTLM® breast imaging device. Per the Agreement, the goal of the initial project was to complete image quality improvement by November 1, 2020. A payment of $500,000 will be due upon satisfactory completion of the project. As of March 31, 2022, Dr. Jiang has completed the first phase of image quality improvement and is currently collecting image data for evaluation and further technical improvement. We have yet to establish the effectiveness of the improvements, as completion of the project has been delayed due to the COVID-19 crisis.

(18) SUBSEQUENT EVENTS

On October ~~May 17~~13, 2022, the Company received loan proceeds of $107,~~000~~786 from Viable International Investments, LLC. Interest is 0% and the principal is payable on demand.

~~On May 17, 2022, the Company received a default and demand letter from Truist Bank in regards to the PPP loan due to non-payment.~~21

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q for the period ended September 30, 2022, contains “forward-looking statements” within the meaning of the federal securities laws and use terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “estimates,” “projects”, “potential,” or “continue,” or the negative or other comparable terminology regarding beliefs, plans, expectations, or intentions regarding the future. These forward-looking statements involve substantial risks and uncertainties, and actual results could differ materially from those discussed and anticipated in such statements. These forward-looking statements include, among others, statements relating to our business strategy, which is based upon our interpretation and analysis of trends in the healthcare treatment industry, especially those related to the diagnosis and treatment of breast cancer, and upon management’s ability to successfully develop and commercialize its principal product, the CTLM^®. This strategy assumes that the CTLM^® will provide benefits, from both a medical and an economic perspective, to current alternative techniques for diagnosing and managing breast cancer. Factors that could cause actual results to materially differ include, without limitation, the ongoing global COVID-19 pandemic/economic crisis, the timely and successful completion of our clinical trials required by the U.S. Food and Drug Administration (“FDA”) and compliance with the regulations of the FDA and the China Food and Drug Administration (“CFDA”); the timely and successful submission of our FDA application for pre-market approval and our ability to obtain U.S. marketing clearance; manufacturing risks relating to the CTLM^®, including our reliance on a single or limited source or sources of supply for some key components of our products as well as the need to comply with especially high standards for those components and in the manufacture of optical imaging products in general; uncertainties inherent in the development of new products and the enhancement of our existing CTLM^® product, including technical and regulatory risks, cost overruns and delays; our ability to accurately predict the demand for our CTLM^® product as well as future products and to develop strategies to address our markets successfully; the early stage of market development for medical optical imaging products and our ability to gain market acceptance of our CTLM^® product by the medical community; our ability to expand our international distributor network for both the near and longer-term to effectively implement our globalization strategy; our dependence on senior management and key personnel and our ability to attract and retain additional qualified personnel; risks relating to financing through private placements or other working capital financing arrangements; technical innovations that could render the CTLM^® or other products marketed or under development by us obsolete; competition; risks and uncertainties relating to intellectual property, including claims of infringement and patent litigation; risks relating to future acquisitions and strategic investments and alliances; and reimbursement policies for the use of our CTLM^® product and any products we may introduce in the future. There are also many known and unknown risks, uncertainties and other factors, including, but not limited to, technological changes and competition from new diagnostic equipment and techniques, changes in general economic conditions, healthcare reform initiatives, legal claims, regulatory changes and risk factors detailed from time to time in our Securities and Exchange Commission filings that may cause these assumptions to prove incorrect and may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, those described above and in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022, filed on October 4, 2022. All forward-looking statements and risk factors included in this Form 10-Q report and in the Form 10-K report are made as of the date of the relevant disclosure document based on information available to us as of the date thereof, and we assume no obligation to update any forward-looking statements or risk factors. The occurrence of any of the events described as risk factors or other future events could have a material adverse effect on our business, results of operations and financial position. Since our common stock is considered a “penny stock,” we are ineligible to rely on the safe harbor for forward-looking statements provided in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). You are cautioned not to place undue reliance on these forward-looking statements.

~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations~~OVERVIEW

~~CAUTIONARY~~Our ~~STATEMENTS~~business address ~~REGARDING~~is ~~FORWARD-LOOKING~~618 E South St, Suite 500, Orlando, FL 32801. Our Internet website address is www.imds.com. The information ~~STATEMENTS~~contained in, or that can be accessed through, our website is not part of this Form 10-Q quarterly report.

~~This~~Imaging ~~quarterly report on Form 10-Q for the period ended March 31~~Diagnostic Systems, ~~2022, contains~~Inc. (“~~forward-looking statements~~IDSI” ~~within~~or the ~~meaning of the federal securities laws and use terminology such as~~ “~~may,~~Company” ~~“will,”~~) “expects,” “plans,” “anticipates,” “estimates,” “projects”, “potential,” or “continue,” or the negative or other comparable terminology regarding beliefs, plans, expectations, or intentions regarding the future. These forward-looking statements involve substantial risks and uncertainties, and actual results could differ materially from those discussed and anticipated in such statements. These forward-looking statements include, among others, statements relating to our business strategy, which is ~~based~~a ~~upon~~late ~~our~~development ~~interpretation~~stage and analysis of trends in the healthcare treatment industry, especially those related to the diagnosis and treatment of breast cancer, and upon management’s ability to successfully develop and commercialize its principal product, the CTLM®. This strategy assumes that the CTLM® will provide benefits, from both a medical ~~and~~ antechnology ~~economic~~company ~~perspective, to current alternative techniques for diagnosing and managing breast cancer. Factors~~ that ~~could~~has ~~cause actual~~developed ~~results~~a ~~to materially differ include~~new, ~~without limitation, the ongoing global COVID~~non-19invasive ~~pandemic/economic~~CT ~~crisis,~~scanner ~~the timely and successful completion of our clinical trials required by the U.S. Food and Drug Administration~~ (“~~FDA~~CTLM®”) ~~and~~that ~~compliance~~uses ~~with~~a ~~the~~laser ~~regulations of~~beam ~~the~~in ~~FDA~~place ~~and the China Food and Drug Administration (“CFDA”); the timely and successful submission~~ of ~~our~~ionizing ~~FDA application for pre~~X-~~market~~ray ~~approval and our ability to obtain U.S. marketing clearance; manufacturing risks relating to the CTLM®, including our reliance on a single or limited source or sources of supply~~ for ~~some~~breast ~~key components of our products as well as the need to comply with especially high standards for those components and in the manufacture of optical~~ imaging. ~~products~~This ~~in general; uncertainties inherent in~~technology ~~the~~is ~~development~~called ofDiffuse ~~new~~Optical ~~products~~Tomography. ~~and~~The ~~the enhancement of our existing~~ CTLM® ~~product,~~will ~~including~~provide ~~technical~~an ~~and~~adjunctive regulatory risks, cost overruns and delays; our ability to accurately predict the demand for our CTLM® product as well as future products and to develop strategies to address our markets successfully; the early stage of market development for medical optical imaging ~~products~~modality ~~and our ability~~ to gain market acceptance of our CTLM® product by the medical community; our ability to expand our international distributor network for both the near and longer-term to effectively implement our globalization strategy; our dependence on senior management and key personnel and our ability to attract and retain additional qualified personnel; risks relating to financing through private placements or other ~~working~~ ~~capital~~methods financing arrangements; technical innovations that could render the CTLM® or other products marketed or under development by us obsolete; competition; risks and uncertainties relating to intellectual property, including claims of ~~infringement~~imaging ~~and patent litigation; risks relating to future acquisitions and strategic investments and alliances; and reimbursement policies for~~ the ~~use of our CTLM®~~breast product and any products we may introduce in the future. There are also many known and unknown risks, uncertainties and other factors, including, but not limited to, technological changes and competition from new diagnostic equipment and techniques, changes in general economic conditions, healthcare reform initiatives, legal claims, regulatory changes and risk factors detailed from time to time in our Securities and Exchange Commission filings that may cause these assumptions to prove incorrect and may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, those described above and in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021, filed on October 12, 2021. All forward-looking statements and risk factors included in this Form 10-Q report and in the Form 10-K report are made as ~~of the date of the relevant disclosure document based on information available to us as of the date thereof, and we assume no obligation to update any forward~~X-~~looking~~ray ~~statements or risk factors. The occurrence of any of the events described as risk factors or other future events could have a material adverse effect on our business~~mammography, ~~results~~MRI ~~of operations~~ and ~~financial position~~ultrasound. Since our common stock is considered a “penny stock,” we are ineligible to rely on the safe harbor for forward-looking statements provided in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). You are cautioned not to place undue reliance on these forward-looking statements.

23Since inception in December 1993 as a Florida corporation and subsequently its reverse merger with Alkan Corp., a New Jersey Corporation on April 14, 1994, we continued operations and changed our state of incorporation from New Jersey to Florida, effective July 1, 1995. On July 14, 1995, we filed with the United States Securities and Exchange Commission (“SEC”) a Form 10 SB for registration of our securities as a small business issuer. The Form 10 SB was declared effective in September 1995 and our stock began trading on the OTC Bulletin Board (OTC:BB) on September 20, 1995 under the symbol IMDS. We became a fully reporting company under Commission File Number 0-26028 and traded on the OTC:BB and then on the OTC:QB and ultimately on the OTC PINK until September 25, 2014, at which time our registration was revoked by the SEC for failure to timely file our required periodic reports. Our latest quarterly report on Form 10-Q that was filed prior to our filing of our Form 10 registration statement on August 28, 2018, was filed on May 15, 2013, for the quarter ended March 31, 2013. Our latest annual report on Form 10-K that was filed prior to the filing of our Form 10 registration statement on August 28, 2018, was filed on October 15, 2012, for the year ended June 30, 2012. Copies of our SEC reports through the date of revocation (the “Prior Reports”) are available at www.sec.gov.

~~OVERVIEW~~On August 28, 2018, we filed a Form 10 registration statement to register issued and outstanding shares held by our shareholders and to become a fully reporting company under the Securities Exchange Act of 1934 (the “Exchange Act”). The Form 10 was amended in response to SEC comments on October 5, 2018 and November 14, 2018. On February 7, 2019, the SEC confirmed that it had no further comments on the Form 10. Under the Exchange Act, our registration became effective on October 29, 2018, i.e. 60 days after filing the Form 10. The Form 10 was further amended on September 26, 2019 to correct the classification of the Series L Convertible Preferred Stock from a current liability to temporary equity.

~~Our~~As ~~business~~of ~~address~~the date isof ~~618~~this Equarterly ~~South~~report ~~St,~~on ~~Suite~~Form ~~500~~10-Q for the three months ended September 30, ~~Orlando~~2022, FLwe ~~32801. Our~~have ~~Internet~~had ~~website~~no ~~address~~substantial ~~is www.imds.com. The~~revenues ~~information~~from ~~contained~~our operations ~~in,~~and orhave ~~that~~incurred ~~can~~net belosses ~~accessed~~applicable to common shareholders since inception through September 30, ~~our~~2022 of $135,604,858 ~~website~~after isdiscounts ~~not~~and ~~part~~dividends on preferred stock. We incurred net losses applicable to common shareholders of ~~this~~$121,862 ~~Form~~for ~~10-Q~~the ~~quarterly~~three months ~~report~~ended September 30, 2022 and $116,521 for the three months ended September 30, 2021.

~~Imaging~~The ~~Diagnostic~~Company received ~~Systems,~~marking ~~Inc.~~clearance for the CTLM® from the Chinese FDA (“~~IDSI~~CFDA”) oreffective November 16, 2018 to November 15, 2023 as disclosed in the “Company”)’s 8-K report filed December 11, 2018; however, we anticipate that substantial losses from operations iswill acontinue ~~late~~until ~~development~~we ~~stage~~begin ~~medical~~to ~~technology~~generate ~~company~~revenues through the sales of CTLM® systems in China. We believe that ~~has~~we ~~developed~~face asubstantial delays ~~new,~~before ~~non-invasive~~receiving CTmarketing ~~scanner~~clearance through the U.S. Food and Drug Administration (“~~CTLM®~~FDA”). ~~that~~These losses will be primarily ~~uses~~due ato ~~laser~~an ~~beam~~anticipated increase in ~~place~~marketing, ofmanufacturing ~~ionizing~~and ~~X-ray~~operational ~~for~~expenses ~~breast~~associated ~~imaging.~~with ~~This~~the ~~technology~~international iscommercialization of ~~called~~the ~~Diffuse~~CTLM®, ~~Optical~~expenses ~~Tomography.~~associated ~~The~~with international commercialization of the CTLM®, ~~will~~expenses associated with FDA approval processes, ~~provide~~and the costs associated with advanced product development activities. We have implemented a new business strategy which includes a licensing agreement on June 20, 2017 with Xi’an ~~adjunctive~~IDI ~~imaging~~Laser ~~modality~~Imaging Co. Ltd (Xi’an IDI), a related party, to ~~other~~shift ~~methods~~manufacturing of ~~imaging~~ the CTLM® ~~breast~~for ~~such~~the asChina ~~X-ray~~and ~~mammography,~~Asian ~~MRI~~markets ~~and~~to ~~ultrasound~~China.

Since inception in December 1993 as a Florida corporation and subsequently its reverse merger with Alkan Corp., a New Jersey Corporation on April 14, 1994, we continued operations and changed our state of incorporation from New Jersey to Florida, effective July 1, 1995. On July 14, 1995, we filed with the United States Securities and Exchange Commission (“SEC”) a Form 10 SB for registration of our securities as a small business issuer. The Form 10 SB was declared effective in September 1995 and our stock began trading on the OTC Bulletin Board (OTC:BB) on September 20, 1995 under the symbol IMDS. We became a fully reporting company under Commission File Number 0-26028 and traded on the OTC:BB and then on the OTC:QB and ultimately on the OTC PINK until September 25, 2014, at which time our registration was revoked by the SEC for failure to timely file our required periodic reports. Our latest quarterly report on Form 10-Q that was filed prior to our filing of our Form 10 registration statement on August 28, 2018, was filed on May 15, 2013, for the quarter ended March 31, 2013. Our latest annual report on Form 10-K that was filed prior to the filing of our Form 10 registration statement on August 28, 2018, was filed on October 15, 2012, for the year ended June 30, 2012. Copies of our SEC reports through the date of revocation (the “Prior Reports”) are available at www.sec.gov.23

OnThe ~~August~~Company’s next ~~28,~~regulatory ~~2018~~focus, weafter ~~filed~~having aobtained ~~Form~~CFDA 10approval ~~registration~~in ~~statement~~China, tois ~~register issued~~on ~~and~~obtaining ~~outstanding~~marketing ~~shares~~clearance ~~held~~of byits ~~our~~CTLM® ~~shareholders~~Breast ~~and~~Imaging System tothrough ~~become a fully reporting company under~~ the ~~Securities~~FDA. ~~Exchange~~The ~~Act~~premarket ofapproval ~~1934~~ (~~the~~ “~~Exchange Act~~PMA”). ~~The~~process ~~Form~~for 10U.S. ~~was~~marketing ~~amended~~clearance inis ~~response~~expected to ~~SEC~~take ~~comments~~longer onthan the ~~October~~Chinese 5process, ~~2018~~ and ~~November~~we ~~14,~~intend ~~2018.~~to Onresume ~~February 7,~~this ~~2019,~~effort ~~the~~after ~~SEC~~successful ~~confirmed~~marketing ~~that~~and itsales ~~had~~of noCTLM® ~~further~~systems ~~comments~~in onChina. ~~the~~Our ~~Form~~sales and ~~10.~~marketing ~~Under~~efforts ~~the~~in ~~Exchange~~China ~~Act,~~have ~~our~~been ~~registration~~significantly ~~became~~hindered ~~effective~~by ~~on October~~the ~~29,~~ongoing ~~2018~~COVID-19 pandemic, ~~i.e.~~and 60therefore ~~days~~we ~~after~~do ~~filing~~not expect revenue from China in the ~~Form~~foreseeable 10future. ~~The~~No ~~Form~~sales 10in ~~was~~other ~~further~~countries ~~amended~~are onexpected ~~September~~in ~~26,~~the ~~2019~~near tofuture, ~~correct~~as ~~the~~we ~~classification of~~do ~~the~~not ~~Series~~intend Lto ~~Convertible~~pursue ~~Preferred~~sales in ~~Stock~~other ~~from~~countries auntil ~~current~~after ~~liability~~obtaining toFDA ~~temporary~~marketing ~~equity~~clearance.

AsIn of analyzing the ~~date~~regulatory ofpath ~~this~~forward, ~~quarterly~~timeline, ~~report~~and oncosts ~~Form~~associated ~~10-Q~~with ~~for~~the level of effort required to upgrade the ~~nine~~Company’s ~~months~~Quality ~~ended~~Management ~~March~~System 31(QMS), ~~2022,~~ we have ~~had~~decided nonot ~~substantial~~to ~~revenues~~renew ~~from~~ our ~~operations~~CE ~~and~~mark ~~have~~(required ~~incurred~~for ~~net~~sales ~~losses~~in ~~applicable~~the toEuropean ~~common~~Union) ~~shareholders since~~for ~~inception~~this ~~through~~year ~~March~~and ~~31,~~to ~~2022~~consider reapplying ofin ~~$135,300,846~~2 ~~after~~to ~~discounts~~3 ~~and~~years ~~dividends~~to onavoid ~~preferred~~these ~~stock~~regulatory fees. WeSimilarly, ~~incurred~~we ~~net~~will ~~losses~~maintain ~~applicable~~our Quality Management System to be compliant to ISO ~~common~~13485:2016 ~~shareholders~~but ofnot ~~$483,179~~certify ~~for~~to ~~the~~ISO ~~nine~~13485:2016 ~~months~~by ~~ended~~Underwriters ~~March~~Laboratories 31(UL) which will allow us to avoid fees associated with certification, ~~2022~~travel, and ~~$555,705~~hosting ~~for~~audits. ~~the~~Maintaining ~~nine~~our ~~months~~QMS ~~ended~~to ~~March~~be ~~31,~~ISO ~~2021~~13485:2016 compliant will allow us to quickly schedule an audit with UL and become ISO 13485 certified when necessary.

~~The~~On ~~Company~~October 23, ~~received~~2019, ~~marking~~we ~~clearance~~entered ~~for~~into ~~the~~a ~~CTLM®~~consulting ~~from~~agreement ~~the~~effective ~~Chinese FDA~~as ~~(“CFDA”)~~of ~~effective~~ November 161, ~~2018~~2019, towith ~~November~~Dr. ~~15,~~Huabei ~~2023~~Jiang asto ~~disclosed~~serve inas ~~the Company~~IDSI’s ~~8-K report filed December~~Chief ~~11,~~Scientific ~~2018;~~Consultant ~~however,~~(the we“Consulting ~~anticipate~~Agreement”). ~~that~~Pursuant ~~substantial losses from operations will continue until we begin~~ to ~~generate revenues through~~ the ~~sales~~ ofConsulting ~~CTLM®~~Agreement, ~~systems in China~~Dr. WeJiang ~~believe~~is ~~that~~focused weon ~~face~~improving the ~~substantial~~technical ~~delays~~performance ~~before~~and ~~receiving~~image ~~marketing~~quality ~~clearance~~of ~~through~~IDSI’s ~~the~~Computed ~~U.S. Food~~Tomography ~~and~~Laser ~~Drug~~Mammography ~~Administration~~ (~~“FDA”~~CTLM®). ~~These~~breast ~~losses~~imaging device. ~~will~~The bedetails ~~primarily~~of ~~due~~this toAgreement anwere ~~anticipated~~disclosed ~~increase~~on inour ~~marketing,~~Form ~~manufacturing and~~8-K ~~operational~~report ~~expenses~~filed ~~associated~~ with the ~~international~~SEC ~~commercialization~~on ofOctober ~~the CTLM®~~29, ~~expenses~~2019. ~~associated~~As ~~with international commercialization~~ of the ~~CTLM®,~~date ~~expenses~~of this ~~associated with FDA approval processes~~report, ~~and the costs associated with advanced product development activities~~Dr. WeJiang ~~have~~has ~~implemented~~completed athe ~~new~~first ~~business~~phase ~~strategy~~of ~~which~~image ~~includes~~quality aimprovement ~~licensing~~and ~~agreement~~is oncurrently ~~June~~collecting ~~20,~~image ~~2017~~data ~~with Xi’an IDI Laser Imaging Co. Ltd (Xi’an IDI), a related party, to shift manufacturing of the CTLM®~~ for ~~the China~~ evaluation and ~~Asian~~further ~~markets~~technical ~~to China~~improvement.

24Xi’an IDI has been working with Yiling Hospital Management Group based in Beijing, China (“Yiling”) to evaluate CTLM’s potential use and application. As of the date of this report, Xi’an IDI has loaned three CTLM® systems to Yiling and Yiling is at the stage of testing and data validation.

~~The~~It ~~Company’s~~is ~~next regulatory focus, after having obtained CFDA~~important ~~approval~~that inthe ~~China,~~effectiveness isof onthe ~~obtaining~~image ~~marketing~~quality ~~clearance~~improvements ofbe ~~its~~established ~~CTLM®~~before ~~Breast~~Xi’an ~~Imaging~~IDI ~~System~~can ~~through~~resume ~~the~~their ~~FDA.~~sales ~~The~~and ~~premarket~~marketing ~~approval~~efforts ~~(“PMA”)~~in ~~process for U~~China.S. ~~marketing~~Once ~~clearance~~IDSI ishas ~~expected~~substantial torevenues ~~take~~and ~~longer~~cash ~~than~~flow, ~~the~~we ~~Chinese~~believe ~~process,~~we ~~and~~will webe ~~intend~~able to ~~resume this~~raise ~~effort~~from ~~after~~operations ~~successful marketing~~ and/or ~~sales~~private ofinvestors the ~~CTLM®~~necessary ~~systems~~funding into ~~China.~~allow ~~Our~~us ~~sales~~to ~~and~~move ~~marketing~~forward ~~efforts~~with inour ~~China~~CTLM® ~~have~~3.0 ~~been significantly hindered by the ongoing COVID-19 pandemic~~project, ~~and~~as ~~therefore~~discussed wein dodetail ~~not expect revenue from China~~ in the ~~foreseeable~~“CTLM®” section ~~future~~below. NoThe ~~sales~~CTLM® in3.0 ~~other countries~~project ~~are~~and ~~expected~~some inregulatory ~~the~~initiatives ~~near~~have ~~future,~~been asput weon dohold ~~not~~due ~~intend~~ to ~~pursue~~the ~~sales~~COVID-19 inpandemic ~~other~~and ~~countries~~its ~~until after obtaining FDA marketing clearance~~consequences.

~~In analyzing the regulatory path forward, timeline, and costs associated~~CRITICAL ~~with~~ACCOUNTING the level of effort required to upgrade the Company’s Quality Management System (QMS), we have decided not to renew our CE mark (required for sales in the European Union) for this year and to consider reapplying in 2 to 3 years to avoid these regulatory fees. Similarly, we will maintain our Quality Management System to be compliant to ISO 13485:2016 but not certify to ISO 13485:2016 by Underwriters Laboratories (UL) which will allow us to avoid fees associated with certification, travel, and hosting audits. Maintaining our QMS to be ISO 13485:2016 compliant will allow us to quickly schedule an audit with UL and become ISO 13485 certified when necessary.POLICIES

OnThe ~~October~~financial statements ~~23,~~are ~~2019,~~prepared wein ~~entered~~accordance ~~into~~with aGenerally ~~consulting~~Accepted ~~agreement~~Accounting ~~effective~~Principles in the United States of America (“U.S. GAAP”). asThe preparation of ~~November~~financial 1,statements ~~2019,~~in conformity with DrU.S. ~~Huabei~~GAAP ~~Jiang~~requires us to ~~serve~~make asestimates ~~IDSI’s~~and ~~Chief~~assumptions ~~Scientific~~that ~~Consultant~~affect (the ~~“Consulting Agreement”).~~reported ~~Pursuant~~amounts toof ~~the~~assets ~~Consulting~~and ~~Agreement,~~liabilities ~~Dr.~~and ~~Jiang~~disclosure isof ~~focused~~contingent onassets ~~improving~~and ~~the~~liabilities ~~technical~~at ~~performance~~the ~~and~~date ~~image~~of ~~quality~~the offinancial ~~IDSI’s~~statements ~~Computed~~and the ~~Tomography~~reported ~~Laser~~amounts ~~Mammography~~of ~~(CTLM®)~~revenues ~~breast~~and ~~imaging~~expenses ~~device.~~during ~~The~~the ~~details~~reporting ofperiod. ~~this~~Such ~~Agreement~~estimates ~~were~~and ~~disclosed~~assumptions onalso ~~our~~include ~~Form~~the ~~8-K~~valuations of ~~report~~certain ~~filed~~financial ~~with~~instruments, ~~the~~stock-based ~~SEC~~compensation, ondeferred ~~October~~tax 29assets, ~~2019.~~the Asoutcome of ~~the~~litigation ~~date~~and oftax ~~this report~~matters, ~~Dr.~~and ~~Jiang~~other ~~has~~matters that ~~completed~~affect the ~~first~~statements ~~phase~~ of ~~image~~financial ~~quality improvement~~condition and isrelated ~~currently~~disclosures. ~~collecting~~Actual ~~image~~results ~~data~~could ~~for~~differ ~~evaluation~~materially ~~and~~from ~~further~~these ~~technical improvement~~estimates.

Xi’an IDI has been working with Yiling Hospital Management Group based in Beijing, China (“Yiling”) to evaluate CTLM’s potential use and application. As of the date of this report, Xi’an IDI has loaned three CTLM® systems to Yiling and Yiling is at the stage of testing and data validation.24

ItWe ~~is important that~~ believe the ~~effectiveness~~following ofcritical ~~the~~accounting ~~image~~policies ~~quality~~affect ~~improvements be~~our ~~established~~more ~~before~~significant ~~Xi’an~~judgments ~~IDI can resume their sales~~ and ~~marketing~~estimates ~~efforts~~used in ~~China. Once IDSI has substantial revenues and cash flow, we believe we will be able to raise from operations and/or private investors~~ the ~~necessary~~preparation ~~funding~~of ~~to allow us to move forward with~~ our ~~CTLM®~~ ~~3.0 project, as discussed in detail in the “CTLM®” section below. The CTLM® 3.0 project and some regulatory~~financial ~~initiatives have been put on hold due to the COVID-19 pandemic and its consequences.~~statements:

~~CRITICAL ACCOUNTING POLICIES~~Stock-Based Compensation

~~The~~We ~~financial~~rely ~~statements are prepared in accordance with Generally~~on ~~Accepted Accounting Principles in~~ the ~~United~~guidance ~~States~~provided ofby ~~America~~ASC 718, (“~~U.S.~~Share ~~GAAP~~Based Payments”). ~~The~~ASC ~~preparation~~718 ~~of financial statements in conformity with U.S. GAAP~~ requires uscompanies to ~~make~~expense ~~estimates and assumptions that affect~~ the ~~reported~~value ~~amounts~~ of ~~assets~~employee ~~and liabilities and disclosure~~stock ofoptions ~~contingent assets~~ and ~~liabilities~~similar atawards ~~the date of the financial statements~~ and ~~the~~applies ~~reported~~to ~~amounts~~all ofoutstanding ~~revenues~~ and ~~expenses~~vested ~~during the reporting period. Such estimates and assumptions also include the valuations of certain financial instruments,~~ stock-based ~~compensation, deferred tax assets, the outcome of litigation and tax matters, and other matters that affect the statements of financial condition and related disclosures~~awards. ~~Actual results could differ materially from these estimates.~~

WeIn ~~believe~~computing the impact, the ~~following~~fair ~~critical~~value ~~accounting~~of ~~policies~~each ~~affect~~option ~~our~~is ~~more~~estimated on the date of grant based on the Black-Scholes options-pricing model utilizing ~~significant~~certain ~~judgments~~assumptions for a risk-free interest rate; volatility; and ~~estimates~~expected remaining lives of the awards. The assumptions used in calculating the ~~preparation~~fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, the Company’s stock-based compensation expense could be materially different in the future. In addition, we are required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company’s forfeiture rate, we analyzed its historical forfeiture rate, the remaining lives of unvested options, and the amount of vested options as a percentage of total options outstanding. If our ~~financial~~actual ~~statements:~~forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what we have recorded in the current period. During the three months ended September 30, 2022 and 2021, no stock options were granted to employees or consultants. Those options are being expensed pursuant to ASC 718.

25The fair value concepts were not changed significantly in ASC 718; however, in adopting this Standard, companies were given the option to choose among alternative valuation models and amortization assumptions. We elected to continue to use the Black-Scholes option pricing model and expense the options as compensation over the requisite service period of the grant. We will reconsider use of the Black-Scholes model if additional information becomes available in the future that indicates another model would be more appropriate, or if grants issued in future periods have characteristics that cannot be reasonably estimated using this model.

~~Inventory~~ RESULTS OF OPERATIONS

~~Inventories, consisting principally of raw materials, work-in-process~~Sales ~~(including completed units under testing), finished goods~~ and ~~units placed on consignment, are carried at the lower of cost and net realizable value.~~ Cost ~~is determined using the first-in, first-out (FIFO) method. Raw materials consist~~ of purchased parts, components and supplies. Work-in-process includes completed units undergoing final inspection and testing. We periodically review the value of items in inventory and record write-downs or write-offs based on its assessment of slow moving or obsolete inventory. We maintain an allowance for obsolete inventory and generally makes inventory value adjustments against the allowanceSales

~~Stock-Based~~Revenues during ~~Compensation~~the three months ended September 30, 2022 and 2021 were $0.

WeThe ~~rely on the guidance provided by ASC 718, (“Share Based Payments”).~~Cost ~~ASC~~of ~~718~~Sales ~~requires~~during ~~companies to expense~~ the ~~value~~three ofmonths ~~employee~~ended ~~stock~~September ~~options~~30, ~~and~~2022 ~~similar awards~~ and ~~applies~~2021 towas ~~all outstanding and vested stock-based awards~~$0.

InOur ~~computing the impact, the fair value of each option is estimated~~sales ~~on the date of grant based on the Black-Scholes options-pricing model utilizing certain assumptions for a risk-free interest rate; volatility;~~ and ~~expected~~marketing ~~remaining~~efforts ~~lives~~been ofsignificantly ~~the~~hindered ~~awards.~~by ~~The assumptions used in calculating~~ the ~~fair~~ongoing ~~value of share~~COVID-~~based~~19 ~~payment awards represent management’s best estimates~~pandemic, ~~but these estimates involve inherent uncertainties~~ and ~~the~~therefore ~~application of management judgment. As a result, if factors change and~~ we ~~use~~do ~~different~~not ~~assumptions,~~expect ~~the~~revenue ~~Company’s stock-based compensation expense could be materially different~~ in the foreseeable future. InWe ~~addition,~~also wedid ~~are~~not ~~required~~receive toany ~~estimate~~royalties ~~the expected forfeiture rate and only recognize expense~~ for ~~those shares expected to vest. In estimating~~ the ~~Company’s~~three forfeiture rate, we analyzed its historical forfeiture rate, the remaining lives of unvested options, and the amount of vested options as a percentage of total options outstanding. If our actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what we have recorded in the current period. During the nine months ended ~~March~~September 3130, 2022~~, no stock options were granted to employees or consultants~~. During the nine months ended March 31, 2021, the Board granted options to purchase 157,102 shares with an exercise price of $.51 per share to an employee. Those options are being expensed pursuant to ASC 718.

~~The fair value concepts were not changed significantly in ASC 718;~~GENERAL ~~however,~~AND in adopting this Standard, companies were given the option to choose among alternative valuation models and amortization assumptions. We elected to continue to use the Black-Scholes option pricing model and expense the options as compensation over the requisite service period of the grant. We will reconsider use of the Black-Scholes model if additional information becomes available in the future that indicates another model would be more appropriate, or if grants issued in future periods have characteristics that cannot be reasonably estimated using this model.ADMINISTRATIVE

~~RESULTS~~Our OFgeneral and ~~OPERATIONS~~administrative expenses include travel/subsistence related to general and administrative activities, property and casualty insurance, professional fees associated with our corporate and securities attorneys and independent auditors, corporate governance expenses, stockholder expenses, utilities, maintenance, telephones, office supplies and sales and property taxes.

~~Sales~~General and ~~Cost~~administrative expenses during the three months ended September 30, 2022, were $49,510 representing an increase of ~~Sales~~$9,221 or 23% from $40,289 during the three months ended September 30, 2021.

~~Revenues~~The general and administrative increase of $9,221 is due primarily to higher legal fees during the three months ended ~~March~~September 3130, 2022 ~~and 2021 were $0~~.

~~The Cost of Sales during the three months ended March 31, 2022 and 2021 was $0.~~25

~~Revenues during the nine months ended March 31, 2022 and 2021 were~~SALARIES ~~$0.~~AND WAGES

~~The~~Our ~~Cost~~salaries and ofwages ~~Sales~~expenses ~~during~~include ~~the~~compensation, ~~nine~~related ~~months~~benefits, ~~ended~~payroll ~~March~~taxes ~~31,~~and ~~2022~~other ~~and~~payroll ~~2021 was~~fees $0for all employees.

~~Our sales~~ Salaries and ~~marketing~~wages ~~efforts~~expense ~~been~~during ~~significantly~~the ~~hindered~~three bymonths ~~the ongoing~~ended ~~COVID-19~~September ~~pandemic~~30, 2022 and ~~therefore~~2021 wewas ~~do not expect revenue in the foreseeable future~~$0.

26The lack of salaries and wages is due to the Company’s decision to furlough all employees on May 1, 2020 in response to the COVID-19 crisis. Some of these individuals have worked as independent contractors on an as-needed basis. Payments made to contractors are included in consulting expenses.

~~GENERAL~~ RESEARCH AND ~~ADMINISTRATIVE~~DEVELOPMENT

~~Our~~We ~~general~~incur research and ~~administrative~~development expenses ~~include~~to ~~travel/subsistence related~~develop tosignificant ~~general~~enhancements ~~and~~to ~~administrative~~our ~~activities~~sole product, ~~property~~the ~~and~~CTLM®. ~~casualty~~These ~~insurance,~~expenses ~~professional~~consist ~~fees~~primarily of ~~associated~~clinical ~~with~~costs, ~~our~~costs ~~corporate~~of ~~and securities~~materials ~~attorneys~~ and ~~independent~~components ~~auditors,~~to ~~corporate~~make ~~governance~~product ~~expenses~~enhancements, ~~stockholder~~new ~~expenses,~~product ~~utilities,~~research ~~maintenance~~costs, ~~telephones, office~~and ~~supplies~~costs ~~and~~associated ~~sales~~with servicing ~~and~~clinical ~~property~~collaboration ~~taxes~~sites.

~~General~~ Research and ~~administrative~~development ~~expenses during the three months ended March 31, 2022,~~ were $~~13,873~~0 ~~representing~~for ~~a decrease of $7,987 or 37% from $21,860 during~~ the three months ended ~~March~~September 3130, 2022 and 2021.

~~The general~~ Research and ~~administrative~~development ~~decrease~~costs of $~~7,987~~0 iswas due ~~primarily~~ to the ~~reduction~~lack of ~~legal~~business ~~fees~~activity during the three months ended ~~March~~September 3130, 2022 and 2021.

~~General and administrative expenses during the nine months ended March~~SALES ~~31,~~AND ~~2022, were $73,547 representing a decrease of $55,636 or 43% from $129,183 during the nine months ended March 31, 2021.~~MARKETING

~~The~~Our ~~general~~ sales and ~~administrative~~marketing ~~decrease~~expenses ofconsist ~~$55,636 is due~~ primarily to ~~the~~of ~~Company~~expenses ~~termination~~associated ofwith ~~leases~~advertising and ~~the~~promotion, ~~company~~representative ~~transitioning to a virtual~~ office ~~environment~~expense, ~~during the nine months ended March~~trade 31shows, ~~2021.~~conferences, ~~The~~promotional ~~larger~~and ~~expenses~~training ~~that~~costs ~~were~~related ~~eliminated due~~ to marketing the ~~transition~~CTLM®, ~~are~~commissions, ~~office~~travel/subsistence, ~~and~~patent ~~warehouse~~maintenance fees, ~~rent~~consulting, ~~auto~~certification expenses, ~~utilities,~~ and ~~insurance.~~ Inproduct ~~addition,~~liability ~~legal fees were greatly reduced during the nine months ended March 31, 2022~~insurance.

~~SALARIES~~Sales ~~AND~~and marketing ~~WAGES~~expenses during the three months ended September 30, 2022, were $336 representing an increase of $225 or 203% from $111 during the three months ended September 30, 2021.

~~Our~~All ~~salaries~~ sales and ~~wages~~marketing expenses ~~include~~during ~~compensation,~~both ~~related~~the ~~benefits~~three months ended September 30, ~~payroll~~ ~~taxes~~2022 and ~~other~~2021 ~~payroll~~were related to fees for ~~all~~maintaining ~~employees~~our website. The difference relates to variations in website related fees between the two periods.

~~Salaries and wages expense during the three months ended March 31,~~CONSULTING ~~2022 and 2021 was $0.~~EXPENSES

~~The~~Our ~~lack~~consulting expenses consists of ~~salaries~~all ~~and~~consulting ~~wages~~fees ispaid ~~due~~as towell ~~the~~as ~~Company’s~~share-based ~~decision to~~compensation ~~furlough~~issued ~~all~~to ~~employees~~our onconsultants. ~~May~~Our ~~1, 2020 in response to the COVID~~share-19based ~~crisis.~~compensation expense ~~Some~~consists of ~~these~~vested ~~individuals~~stock ~~have~~options ~~worked~~expensed asunder ~~independent~~the ~~contractors on~~Black-Scholes anoptions ~~as-needed~~pricing ~~basis~~model.

~~Salaries~~Consulting expenses ~~and~~for ~~wages expense during~~ the ~~nine~~three months ended ~~March~~September 3130, 2022 ~~and~~, ~~2021~~were ~~was~~$46,876 representing a decrease of $04,124 or 8% from $51,000 during the three months ended September 30, 2021.

The ~~lack~~consulting expense decrease of ~~salaries~~$4,124 ~~and wages~~ is primarily due tochanges in the ~~Company’s~~compensation ~~decision to~~structure ~~furlough~~for ~~all~~David ~~employees on May 1~~Fong, ~~2020~~who inserved ~~response~~as to the ~~COVID-19~~Company’s ~~crisis.~~CFO until ~~Some~~August of10, ~~these~~2022, ~~individuals~~and ~~have worked~~ as ~~independent~~a ~~contractors~~ consultant on an as-needed basis thereafter.

~~RESEARCH~~AGGREGATE OPERATING ~~AND DEVELOPMENT~~EXPENSES

WeTotal ~~incur~~operating expenses (general and administrative, salaries and wages, research and development, ~~expenses~~sales toand ~~develop~~marketing, ~~significant~~depreciation ~~enhancements~~and amortization, toand ~~our~~stock ~~sole~~options) ~~product,~~and cost of sales during the ~~CTLM®.~~three ~~These~~months ~~expenses~~ended ~~consist~~September ~~primarily~~30, of2022, ~~clinical~~were ~~costs~~$96,722, ~~costs~~representing an increase of ~~materials~~$5,322 or ~~and~~6% ~~components~~from $91,400 when compared to ~~make~~the ~~product enhancements,~~operating ~~new~~expenses ~~product~~and ~~research~~cost ~~costs~~of sales during the three months ended September 30, ~~and~~2021. The slight ~~costs~~increase ~~associated~~in ~~with~~operating ~~servicing~~expense ~~clinical~~are ~~collaboration~~generally ~~sites~~related to changes to the Company’s officers and directors on August 10, 2022.

~~Research~~ Depreciation and ~~development~~amortization ~~were~~during ~~$0 for~~ the three months ended ~~March~~September 3130, 2022 and 2021, was $0. All fixed assets are fully depreciated.

~~Research~~Interest expense ~~and~~during ~~development~~the ~~costs~~three ofmonths $0ended September 30, 2022, was ~~due~~$20,603 torepresenting ~~the~~an ~~lack~~increase of ~~business activity~~$19 ~~during~~or less than 1% from $20,584 during the three months ended ~~March~~September 3130, 2021. Although the amount of outstanding debt at September 30, 2022 ~~and~~was ~~2021~~higher, the more recent debt were 0% interest loans, which is why the amount of interest expense did not change significantly.

~~Research and development expenses during the nine months ended March 31, 2022 were $0 representing a decrease of $8,308 or 100% from $8,308 during the nine months ended March 31, 2021.~~26

~~The research and development decrease of $8,308 is due to the lack~~BALANCE ofSHEET ~~business activity during the period ended March 31, 2022.~~DATA

27Our combined cash and cash equivalents totaled $14,084 at September 30, 2022 and $613 at June 30, 2022. We do not expect to generate a positive internal cash flow for at least the next 12 months due to our efforts to generate sales in China and obtain FDA marketing clearance, the expected costs of commercializing our initial product, the CTLM®, and the time required for homologations from certain countries.

~~SALES~~Our ~~AND~~inventory, which ~~MARKETING~~consists of raw materials, work in process (including completed units under testing), and finished goods totaled $100,087 at September 30, 2022 and $100,087 at June 30, 2022. Raw materials used for research and development or other purposes are expensed and not included in inventory. The net inventory is $0 at September 30, 2022 and June 30, 2022 because the Company has recorded an allowance for slow moving and obsolete inventory for the entire value of the inventory due to lack of demand for parts and lack of sales.

Our ~~sales and marketing expenses consist primarily of expenses associated~~property ~~with advertising~~ and ~~promotion~~equipment, ~~representative~~net, ~~office~~totaled ~~expense,~~$0 ~~trade~~at ~~shows,~~September ~~conferences~~30, ~~promotional~~2022 and ~~training~~$0 ~~costs~~at ~~related~~June ~~to marketing the CTLM®~~30, ~~commissions, travel/subsistence, patent maintenance fees, consulting, certification expenses, and product liability insurance~~2022.

~~Sales~~Our current liabilities, which consist of accounts payable, accrued payroll taxes and ~~marketing~~penalties, ~~expenses~~short ~~during~~term ~~the~~debt, ~~three~~and ~~months~~current ~~ended~~portion ~~March~~of 31long-term debt, totaled $1,956,132 at September 30, 2022 and $1,825,542 at June 30, 2022. Accounts payable and accrued expenses totaled $851,368 at September 30, 2022 and $767,317 ~~were~~at June 30, 2022. Accrued payroll taxes and penalties totaled $314,019 ~~representing~~at anSeptember ~~increase~~30, 2022 and $314,019 at June 30, 2022. Promissory notes totaled $717,815 at September 30, 2022 and $671,276 at June 30, 2022. The current portion of long-term debt was $~~203~~72,930 orat ~~183%~~September ~~from~~30, 2022 and $~~111~~72,930 ~~during~~at ~~the~~June ~~three~~30, ~~months~~2022. ~~ended~~Current ~~March~~liabilities 31increased primarily due to accounts payable and accrued expenses increasing by $84,051 ~~2021~~and related party promissory notes increasing by $46,539.

~~All~~Our ~~sales~~temporary equity, ~~and~~which ~~marketing~~consists ~~expenses~~of ~~during~~Convertible ~~both~~Preferred ~~the~~Series ~~three~~L ~~months~~(including ~~ended March~~accrued 31dividends), totaled $438,476 at September 30, 2022 and ~~2021~~$433,939 at ~~were~~June ~~related~~30, 2022. The increase of $4,537 is due to ~~fees~~dividends for ~~maintaining~~the ~~our~~three ~~website.~~months ~~The~~ended ~~difference~~September ~~relates~~30, to2022 ~~variations~~that inare ~~website~~being ~~related~~included ~~fees~~in ~~between~~ the ~~two~~total ~~periods~~redemption value.

~~Sales and marketing expenses during the nine months ended March 31,~~LIQUIDITY ~~2022,~~AND ~~were~~CAPITAL ~~$551 representing a decrease of $160 or 23% from $711 during the nine months ended March 31, 2021.~~RESOURCES

~~All~~We ~~sales~~are currently a development stage company and ~~marketing~~our ~~expenses~~continued ~~during~~existence ~~both~~is ~~the~~dependent ~~nine~~upon ~~months~~our ~~ended March~~ability 31to resolve our liquidity problems, ~~2022~~principally by obtaining additional debt and/or ~~2021~~equity ~~were~~financing. We ~~related~~have yet to ~~fees~~generate ~~for~~a ~~maintaining~~positive internal cash flow, and until significant sales of our ~~website~~product occur, we are mostly dependent upon debt and equity funding from Viable and its affiliates and/or outside investors. While ~~The~~Viable ~~difference~~has ~~relates~~stated its intention to ~~variations~~provide, indirectly ~~website~~or ~~related~~through ~~fees~~private investors it procures, the working capital that we need ~~between~~for the ~~two~~next ~~periods~~12 months, there can be no assurance that this funding will be provided. In the event that we are unable to obtain adequate debt or equity financing or are unable to obtain such financing on terms and conditions acceptable to us, we may have to cease or severely curtail our operations. This would materially impact our ability to continue as a going concern.

~~CONSULTING~~We ~~EXPENSES~~have financed our operating and research and development activities through multiple private placements of common stock as well as short term loans from related parties. During the three months ended September 30, 2022, we received $46,539 through short-term related party loans. During the three months ended September 30, 2021, we received $45,000 through short-term related party loans.

~~Our~~Net ~~consulting~~cash used in operating and product development expenses, ~~consists~~which may include our purchase of ~~all~~additional ~~consulting~~materials ~~fees~~to ~~paid~~continue asthe ~~well~~manufacture asof ~~share-based~~CTLM® ~~compensation~~Systems ~~issued~~in toanticipation of receiving orders from our ~~consultants~~distributors in certain countries where permitted by law was $33,068 for the three months ended September 30, 2022, compared to net cash used in operating activities and product development of the CTLM® and related software development of $17,037 during the three months ended September 30, 2021. At ~~Our~~September ~~share-based~~30, ~~compensation~~2022, ~~expense~~we ~~consists~~had negative working capital of ~~vested~~$1,930,265 ~~stock~~compared ~~options~~to ~~expensed~~negative working capital of $1,812,940 at June 30, 2022. We do not expect to generate a positive ~~under~~internal cash flow for at least the ~~Black~~next 12 months due to the time needed to ramp up our sales and marketing plan in China. Implementation of our plan has been severely impeded by the ongoing COVID-~~Scholes~~19 ~~options~~crisis, ~~pricing~~and ~~model~~abatement of the crisis is needed in order for our plan to succeed.

~~Consulting expenses for the three months ended March 31, 2022, were $171,479 representing no change from $171,479 during the three months ended March 31, 2021.~~27

~~Consulting~~If and when we receive marketing clearance from the FDA, which cannot be assured, we believe that we will need funding in excess of $5 million above and beyond normal operating expenses over the following year to fully complete all necessary stages in order for us to market the ~~nine~~CTLM® in ~~months~~the ~~ended~~United ~~March~~States 31and foreign countries other than China. In China Xi’an IDI will be responsible for all expenses relating to the manufacture, ~~2022~~marketing and sale of the CTLM®. The $5 million will be used to purchase inventory, ~~were~~sub-contracted components, ~~$334~~tooling and manufacturing templates and pay non-recurring engineering costs associated with preparation for full capacity manufacturing and assembly and marketing,~~178~~ ~~representing~~advertising aand ~~decrease~~promotion, training, ongoing regulatory expenses, and other costs associated with product launch. We expect to use the proceeds of ~~$19~~the sale of restricted common stock through private placements as our preferred choice to raise the additional funds required to continue operations. In the event that we are unable to raise funds through private placements,~~408~~ of common or 5%preferred ~~from~~stock, ~~$353~~or debt securities,~~586~~ ~~during~~or ~~the~~combinations ~~nine~~thereof; ~~months~~we ~~ended~~will ~~March~~be 31materially adversely affected and may have to cease operations. If additional funds are raised by issuing equity securities, ~~2021~~dilution to existing stockholders will result, and future investors may be granted rights superior to those of existing stockholders.

~~The~~Through the ~~consulting~~date ~~expense decrease~~ of ~~$19~~this report,~~408~~ isIDSI ~~primarily~~has ~~due~~been totaking ~~former employees~~drastic ~~being~~measures ~~retained~~ as ~~consultants~~a ~~during~~response to the ~~nine~~global ~~months~~COVID-19 ~~ended~~crisis ~~March~~to ~~31,~~preserve ~~2021~~working capital. These ~~There~~measures ~~were~~include nothe ~~such~~conversion ~~expenses~~of ~~during~~our ~~the~~full-time ~~nine~~employees ~~months~~to contractors working on an as-needed basis, deferral of payments to ~~ended~~vendors, ~~March~~and 31transition of our facilities to a smaller, ~~2022~~more cost-efficient space.

~~AGGREGATE~~Item 3. ~~OPERATING~~Quantitative ~~EXPENSES~~and Qualitative Disclosures about Market Risk

~~Total~~Not operating expenses (general and administrative, salaries and wages, research and development, sales and marketing, depreciation and amortization, and stock options) and cost of sales during the three months ended March 31, 2022, were $185,666, representing a decrease of $7,784 or 4% from $193,450 when compared to the operating expenses and cost of sales during the three months ended March 31, 2021applicable. ~~The overall decrease in expenses is due to minor reductions of our general and administrative expenses.~~

~~Depreciation and amortization during the three months ended March 31,~~Item ~~2022 and 2021, was $0~~4. ~~All~~Controls ~~fixed~~and ~~assets are fully depreciated.~~Procedures

~~Interest~~We ~~expense~~maintain disclosure ~~during~~controls ~~the~~and ~~three~~procedures ~~months~~that ~~ended~~are ~~March~~designed ~~31,~~to ~~2022,~~ensure ~~was $20,215~~that ~~representing~~the aninformation ~~increase~~required ofto ~~$46~~be ordisclosed ~~less~~in ~~than~~the 1%reports ~~from~~that ~~$20,169~~we ~~during~~file under the ~~three~~Securities ~~months~~Exchange ~~ended~~Act ~~March~~of 311934 (the “Exchange Act”) is recorded, ~~2021.~~processed, ~~Although~~summarized ~~the~~and ~~amount~~reported within the oftime ~~outstanding~~periods ~~debt~~specified atin ~~March~~the ~~31,~~Securities ~~2022~~and ~~was~~Exchange ~~higher~~Commission’s rules and forms, ~~the~~and ~~more~~that ~~recent~~such ~~debt~~information ~~were~~is 0%accumulated ~~interest~~and communicated ~~loans~~to our management, ~~which~~including isour ~~why~~Chief ~~the~~Executive ~~amount~~Officer ofand ~~interest~~our ~~expense~~Chief Financial Officer, as appropriate, to allow timely ~~did~~decisions ~~not~~regarding ~~change~~required ~~significantly~~disclosures.

~~Total~~Under the ~~operating~~supervision ~~expenses (general~~ and ~~administrative,~~participation ~~salaries~~of ~~and wages,~~our ~~research~~Chief ~~and~~Executive ~~development,~~Officer ~~sales~~ and ~~marketing,~~Chief ~~depreciation~~Financial ~~and amortization~~Officer, ~~and~~our ~~stock~~management ~~options)~~has ~~and~~evaluated ~~cost~~the effectiveness of ~~sales~~our ~~during~~disclosure ~~the~~controls ~~nine months~~and ~~ended~~procedures ~~March~~as ~~31,~~of ~~2022,~~September ~~were $408~~30,~~276,~~ ~~representing~~2022. aBased ~~decrease~~on ofthat ~~$84~~evaluation,~~134~~ orour ~~17%~~Chief ~~from~~Executive ~~$492,410~~Officer ~~when~~and ~~compared~~Chief ~~to the operating expenses~~Financial ~~and~~Officer, ~~cost~~or ~~of sales during~~ the ~~nine~~persons ~~months~~performing ~~ended~~similar ~~March 31~~functions, ~~2021. The~~concluded ~~overall~~that ~~decrease~~our indisclosure ~~expenses~~controls isand ~~due~~procedures ~~primarily~~were toeffective ~~the ongoing COVID-19 pandemic which required us to reduce~~ as ~~much~~ of ~~our~~September 30, ~~costs as possible~~2022.

28There have been no changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recent fiscal year that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

Depreciation and amortization during the nine months ended March 31, 2022, was $0 representing a decrease of $622 or 100% from $622 during the nine months ended March 31, 2021. Assets had become fully depreciated as of the quarter ended September 30, 2020.28

~~Interest expense during the nine months ended March 31, 2022, was $61,391~~PART ~~representing~~II an increase of $900 or 1% from $60,491 during the nine months ended March 31, 2021. Although the amount of outstanding debt at March 31, 2022 was higher, the more recent debt were 0% interest loans, which is why the amount of interest expense did not change significantly.

~~BALANCE SHEET DATA~~ OTHER INFORMATION

~~Our combined cash and cash equivalents totaled $560 at March 31, 2022~~Item ~~and $2,473 at June 30, 2021~~1. We doLegal not expect to generate a positive internal cash flow for at least the next 12 months due to our efforts to generate sales in China and obtain FDA marketing clearance, the expected costs of commercializing our initial product, the CTLM®, and the time required for homologations from certain countriesProceedings.

~~Our inventory, which consists of raw materials, work in process (including~~At ~~completed~~this ~~units under testing)~~time, ~~and~~there ~~finished~~are ~~goods~~no ~~totaled~~material ~~$100,087~~pending atlegal ~~March~~proceedings ~~31,~~to ~~2022~~which ~~and~~the ~~$100,087~~Company atis ~~June~~a ~~30,~~party ~~2021. Raw materials used for research and development~~ or ~~other~~as ~~purposes~~to ~~are~~which ~~expensed~~any ~~and~~of ~~not~~its ~~included~~property ~~in inventory. The net inventory~~ is ~~$0 at March 31~~subject, ~~2022~~ and ~~June~~no ~~30,~~such ~~2021~~proceedings ~~because~~are ~~the~~known ~~Company~~to ~~has recorded an allowance for slow moving and obsolete inventory for~~ the ~~entire~~Company ~~value of the inventory due~~ to ~~lack~~be ofthreatened ~~demand~~or ~~for~~contemplated ~~parts~~against ~~and lack of sales~~it.

~~Our property and equipment, net, totaled $0 at March 31, 2022 and $0~~Item at1A. ~~June~~Risk ~~30, 2021~~Factors.

Our ~~current liabilities, which consist of accounts payable, accrued~~Annual ~~payroll~~Report ~~taxes~~on ~~and~~Form ~~penalties, short term debt, and current portion of long~~10-~~term~~K ~~debt,~~for ~~totaled~~the ~~$1,733,514~~fiscal atyear ~~March~~ended ~~31, 2022 and $1,378,461 at~~ June 30, ~~2021.~~2022, ~~Accounts~~filed ~~payable~~on ~~and~~October ~~accrued expenses totaled $685~~4,~~289~~ ~~at March 31~~2022, ~~2022~~includes ~~and~~a ~~$472,571~~detailed atdiscussion ~~June~~of ~~30,~~our ~~2021.~~risk ~~Accrued payroll~~factors. ~~taxes~~The ~~and~~risks ~~penalties~~described ~~totaled~~in ~~$314,019~~our atForm ~~March~~10-K ~~31,~~Report ~~2022~~are ~~and~~not ~~$314,019~~the atonly ~~June~~risks ~~30,~~facing ~~2021~~IDSI. ~~Promissory~~Additional ~~notes~~risks ~~totaled~~and ~~$661,276~~uncertainties atnot ~~March~~currently ~~31, 2022~~known ~~and~~to ~~$581,276~~us ator ~~June~~that ~~30,~~we ~~2021.~~currently ~~The~~deem ~~current~~to ~~portion~~be ofimmaterial ~~long-term~~also ~~debt~~may ~~was~~materially ~~$72,930~~adversely ataffect ~~March~~our 31business, ~~2022~~financial condition and/or ~~$10,595 at June 30, 2021~~operating results. ~~Current liabilities~~For ~~increased~~the ~~primarily~~three ~~due~~months toended ~~accounts~~September ~~payable and accrued expenses increasing by $212~~30,~~718~~ ~~and related party promissory notes increasing by $80,000. On May 17,~~ 2022, wethere ~~received~~were ano ~~default~~material ~~and~~changes ~~demand letter from Truist Bank~~ in ~~regards~~risk tofactors ~~the~~as ~~PPP~~previously ~~loan~~disclosed ~~due~~in ~~to non-payment~~our ~~which~~Form ~~caused the entire amount of the PPP loan to be due immediately~~10-K.

~~Our long-term liabilities, which consists of long-term loans payable~~Item ~~totaled $0 at March 31, 2022 and $69,005 at June 30, 2021~~2. ~~The~~Unregistered ~~decrease~~Sales inof ~~long-term~~Equity ~~liabilities~~Securities ~~was due to the PPP loan going into default~~ and ~~becoming~~Use ~~due immediately as~~ of ~~May 17, 2022~~Proceeds.

Our temporary equity, which consists of Convertible Preferred Series L (including accrued dividends), totaled $429,451 at March 31, 2022 and $415,939 at June 30, 2021. The increase of $13,512 is due to dividends for the nine months ended March 31, 2022 that are being included in the total redemption value.None

~~LIQUIDITY~~Item 3. ~~AND~~Defaults ~~CAPITAL~~Upon ~~RESOURCES~~ Senior Securities.

We are currently a development stage company and our continued existence is dependent upon our ability to resolve our liquidity problems, principally by obtaining additional debt and/or equity financing. We have yet to generate a positive internal cash flow, and until significant sales of our product occur, we are mostly dependent upon debt and equity funding from Viable and its affiliates and/or outside investors. While Viable has stated its intention to provide, directly or through private investors it procures, the working capital that we need for the next 12 months, there can be no assurance that this funding will be provided. In the event that we are unable to obtain adequate debt or equity financing or are unable to obtain such financing on terms and conditions acceptable to us, we may have to cease or severely curtail our operations. This would materially impact our ability to continue as a going concern.None

29Item 4. (Mine Safety Disclosures)

~~We have financed our operating and research and development activities~~Not through multiple private placements of common stock as well as short term loans from related parties. During the nine months ended March 31, 2022, we received $80,000 through short-term related party loans. During the nine months ended March 31, 2021, we received $54,375 through short-term related party loans.Applicable

~~Net cash used for operating and product development expenses, which~~Item may include our purchase of additional materials to continue the manufacture of CTLM® Systems in anticipation of receiving orders from our distributors in certain countries where permitted by law was $75,243 for the nine months ended March 31, 2022, compared to net cash used by operating activities and product development of the CTLM® and related software development of $91,509 during the nine months ended March 31, 20215. At ~~March~~Other 31, 2022, we had negative working capital of $1,715,531 compared to negative working capital of $1,358,037 at June 30, 2021. We do not expect to generate a positive internal cash flow for at least the next 12 months due to the time needed to ramp up our sales and marketing plan in China. Implementation of our plan has been severely impeded by the ongoing COVID-19 crisis, and abatement of the crisis is needed in order for our plan to succeed.Information

If and when we receive marketing clearance from the FDA, which cannot be assured, we believe that we will need funding in excess of $5 million above and beyond normal operating expenses over the following year to fully complete all necessary stages in order for us to market the CTLM® in the United States and foreign countries other than China. In China Xi’an IDI will be responsible for all expenses relating to the manufacture, marketing and sale of the CTLM®. The $5 million will be used to purchase inventory, sub-contracted components, tooling and manufacturing templates and pay non-recurring engineering costs associated with preparation for full capacity manufacturing and assembly and marketing, advertising and promotion, training, ongoing regulatory expenses, and other costs associated with product launch. We expect to use the proceeds of the sale of restricted common stock through private placements as our preferred choice to raise the additional funds required to continue operations. In the event that we are unable to raise funds through private placements, of common or preferred stock, or debt securities, or combinations thereof; we will be materially adversely affected and may have to cease operations. If additional funds are raised by issuing equity securities, dilution to existing stockholders will result, and future investors may be granted rights superior to those of existing stockholders.None

~~Through the date of this report, IDSI has been~~Item ~~taking drastic measures as a response to the global COVID-19 crisis to preserve working capital~~6. These measures include the conversion of our full-time employees to contractors working on an as-needed basis, deferral of payments to vendors, and transition of our facilities to a smaller, more cost-efficient space.Exhibits

Item 3. Quantitative and Qualitative Disclosures about Market Risk

31.1		Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance Document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

~~Not applicable.~~29

~~Item 4. Controls and Procedures~~SIGNATURES

~~We maintain disclosure controls and procedures that are designed to~~Pursuant ~~ensure~~to ~~that~~ the ~~information~~requirements ~~required~~of toSection be13 ~~disclosed~~or in15(d) ~~the~~of ~~reports that we file under~~ the Securities Exchange Act of 1934 ~~(the “Exchange Act”) is recorded~~, ~~processed, summarized and reported within~~ the ~~time~~registrant ~~periods~~has ~~specified~~duly incaused ~~the~~this ~~Securities~~report ~~and Exchange Commission’s rules and forms, and that such information is accumulated and communicated~~ to ~~our~~be ~~management, including our Chief Executive Officer and~~signed ~~our~~on ~~Chief~~its ~~Financial~~behalf ~~Officer,~~by asthe ~~appropriate,~~undersigned tothereunto ~~allow~~duly ~~timely decisions regarding required disclosures~~authorized.

Under the supervision and participation of our Chief Executive Officer and Chief Financial Officer, our management has evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2022. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer, or the persons performing similar functions, concluded that our disclosure controls and procedures were effective as of March 31, 2022.

Dated: November 14, 2022		Imaging Diagnostic Systems, Inc.

	By:	/s/ Rongbin Wang
		Rongbin Wang
		Chief Financial Officer
		(PRINCIPAL ACCOUNTING OFFICER)

		/s/ Lun Li
		Lun Li
		Chief Executive Officer (PRINCIPAL EXECUTIVE OFFICER)

There have been no changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recent fiscal year that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.30

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xbrli:shares iso4217:USD iso4217:USD xbrli:shares xbrli:pure

PART II

OTHER INFORMATION

Item 1. Legal Proceedings.

At this time, there are no material pending legal proceedings to which the Company is a party or as to which any of its property is subject, and no such proceedings are known to the Company to be threatened or contemplated against it.

Item 1A. Risk Factors.

Our Annual Report on Form 10-K for the fiscal year ended June 30, 2021, filed on October 12, 2021, includes a detailed discussion of our risk factors. The risks described in our Form 10-K Report are not the only risks facing IDSI. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. For the nine months ended March 31, 2022, there were no material changes in risk factors as previously disclosed in our Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None

Item 3. Defaults Upon Senior Securities.

None

Item 4. (Mine Safety Disclosures)

Not Applicable

Item 5. Other Information

None

Item 6. Exhibits

31.1		Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance Document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Dated: May 20, 2022		Imaging Diagnostic Systems, Inc.
	By:	/s/ David Fong
		David Fong
		Chief Financial Officer
		(PRINCIPAL ACCOUNTING OFFICER)
		/s/ Chunming Zhang
		Chunming Zhang
		Chief Executive Officer

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