Company Overview - Precision Optics (POCI) is a vertically integrated optics company focused on micro-optics and imaging technologies for the healthcare and defense/aerospace industries[7] - The company's business model involves close collaboration with medical device and defense companies from the early design stages through manufacturing[13, 14] - The company has launched Unity CMOS Imaging Platform to drive growth in development pipeline[11] Financial Performance - The company's revenue has grown from $3.9 million in 2016 to $19.1 million in 2024[51] - The company's gross margin was 30.3% in 2024[54] - The company's adjusted EBITDA was -$1.55 million in 2024[57] Recent Orders and Backlog - The company announced a $9 million production order in May 2024 for a single-use cystoscopy program[47] - The company has minimum purchase commitments of nearly $4 million per year through calendar year 2026 for a top tier aerospace program[47] - The company's current customer program backlog is $6.6 million, expected to be delivered over the next 12 months (as of April 2025)[47] Growth Strategy - The company aims to continue and expand production lines for record backlog, especially for two recent large programs[48] - The company intends to advance pipeline projects to commercialization and expand the pipeline with new development programs leveraging the Unity Platform[48]

Company Expansion - LaCroix Precision Optics is expanding its manufacturing operations in Batesville, Arkansas, creating 107 new jobs over five years with an investment of $13.8 million [1][2] - The expansion is driven by a multi-year military contract aimed at restoring a critical supply chain to the United States, which will enhance the company's capabilities with advanced equipment and additional manufacturing space of 18,750 square feet [2][4] Economic Impact - The expansion is seen as a significant win for the Batesville community, contributing to local job creation and economic growth [5][6] - Arkansas officials highlight the pro-business climate, low costs, and experienced workforce as key factors attracting investments like that of LaCroix Precision Optics [4][3] Company Background - LaCroix Precision Optics has been a family-run business for nearly 60 years, originally founded in Chicago in 1947 and fully relocating to Batesville in 1976 [3][7] - The company specializes in high precision optics, producing a range of custom optics including spherical lenses, achromats, and prisms [3][7] Future Prospects - Construction for the expansion has already commenced, with operations expected to start in December 2025 [5] - Applications for new positions are currently open, indicating ongoing growth and opportunities within the company [6]

Core Insights - Precision Optics Corporation is relocating its corporate offices and engineering development from Gardner, MA to Littleton, MA to enhance production capabilities and address a growing backlog [1][2] - The move is part of a strategic initiative to consolidate production at existing facilities in Gardner and to tap into a broader engineering talent pool in Massachusetts and Maine [1][2] - The new corporate headquarters will be located at 550 King St, Building A, Suite 100, Littleton, MA, effective August 1, 2025 [2] Company Overview - Founded in 1982, Precision Optics is a vertically integrated optics company focused on advanced optical instruments for the medical and defense/aerospace industries [3] - The company leverages proprietary micro-optics, 3D imaging, and digital imaging technologies, providing services from product concept to mass manufacture [3] - Precision Optics supports next-generation medical device companies by providing enhanced imaging systems for minimally invasive surgery and 3D endoscopy systems [3] - The company also applies its micro-optics expertise to defense/aerospace applications, emphasizing high quality and optimization of size, weight, and power [3]

Summary of Precision Optics Corporation (POCI) Conference Call Company Overview - **Company Name**: Precision Optics Corporation (POCI) - **Ticker Symbol**: POCI, traded on NASDAQ - **Industry**: Optical systems design and manufacturing, focusing on medical devices and defense aerospace applications [2][3] Core Business Model - **Business Model**: Develops technology in optical systems, collaborates with customers to design products, and handles manufacturing [4][5] - **Revenue Growth**: Recent transition from product development to manufacturing is expected to significantly impact revenue positively [6][8] Financial Performance - **Revenue Trends**: Revenue has shown continuous growth over the past seven to eight years, with a slight pullback from fiscal 2023 to 2024 due to legacy products going end of life [7][30] - **Fiscal Year**: Fiscal year runs from July 1 to June 30, with expectations of revenue growth resuming towards the end of fiscal 2025 and into 2026 [8][30] - **Gross Margins**: Historically between 30% to 40%, currently lower due to startup challenges with new programs, with a target to return to 40% [31] - **Adjusted EBITDA**: Expected to reach $6 million in the current quarter, indicating a revenue run rate of $24 million, which would surpass breakeven [32][47] Key Technologies and Markets - **Micro Optics**: Focus on small optics for medical devices, particularly endoscopic systems [8][9] - **3D Imaging**: Development of high-precision imaging systems, including UHD and 3D endoscopes [10][14] - **Digital Imaging**: Integration of CMOS sensor technology into medical devices, enabling single-use endoscopes that enhance safety and reduce sterilization concerns [15][16][17] - **Market Segments**: - **Medical Devices**: Major focus area, contributing significantly to revenue [12][17] - **Defense Aerospace**: Represents about 30% of revenue, with opportunities in smaller optics for military applications [18][19] Production and Operational Challenges - **Production Ramp-Up**: Transitioning to larger volume production has faced challenges, including initial yield issues, particularly with the single-use cystoscope production line [36][38] - **Current Status**: Production rates have doubled since resolving initial challenges, with expectations for continued increases [39][42] Future Outlook and Strategy - **Pipeline Development**: Targeting two to four new programs to move into production each year, with several programs expected to commercialize in the next twelve months [50][52] - **Expansion Plans**: Plans to expand production capabilities and update facilities to support growth [28][29] - **Acquisition Strategy**: Continues to look for opportunistic acquisitions that align with technical synergies [30] Conclusion - **Positive Outlook**: The company is at an inflection point with strong customer demand and a focus on executing manufacturing processes, anticipating significant revenue growth in the near future [58][59]

Core Viewpoint - Precision Optics Corporation will participate in the Lytham Partners Spring 2025 Investor Conference, hosting a webcast presentation and one-on-one meetings with investors on May 29, 2025 [1][2][3]. Company Overview - Founded in 1982, Precision Optics is a vertically integrated optics company focused on advanced optical instruments for the medical and defense/aerospace industries [4]. - The company leverages proprietary micro-optics, 3D imaging, and digital imaging technologies to provide services from product concept to mass manufacture [4]. - Precision Optics supports next-generation medical device companies by providing enhanced imaging systems for minimally invasive surgery and 3D endoscopy systems [4]. - The company has a long history of supplying optical products, including complex endocouplers and specialized endoscopes, to top-tier medical device companies [4]. - In the defense/aerospace sector, Precision Optics applies its technical proficiency in micro-optics to meet high-quality standards while optimizing size, weight, and power [4].

Core Viewpoint - Precision Optics Corporation is conducting a conference call to discuss its third quarter fiscal year 2025 financial results, which ended on March 31, 2025 [3]. Group 1: Company Overview - The conference call features key participants including Dr. Joe Forkey, the Chief Executive Officer, and Wayne Coll, the Chief Financial Officer [3]. - The call is being recorded and participants are in listen-only mode [1][4]. Group 2: Financial Results Discussion - The focus of the call is to provide insights into the financial performance of Precision Optics for the third quarter of fiscal year 2025 [3].

Financial Data and Key Metrics Changes - For Q3 FY2025, revenue was $4.2 million, down from $5.2 million in Q3 FY2024, with production revenue at $3.2 million compared to $3.0 million year-over-year, while engineering revenue fell to $924,000 from $2.3 million [22][24] - Gross margins decreased to 10% from 35% in the same quarter last year, attributed to low yields and a one-month shutdown of production lines [24] - The net loss for the quarter was $2.1 million, compared to a net loss of $317,000 in the same quarter last year, with adjusted EBITDA at negative $1.3 million compared to a positive $52,000 [25] Business Line Data and Key Metrics Changes - The single-use cystoscope program faced significant production challenges, leading to a drop in daily yields to below 50%, necessitating a halt in manufacturing for root cause analysis [9][10] - Despite production challenges, overall systems production revenue increased over 20% quarter-over-quarter and more than doubled year-over-year [11] - The aerospace program's production revenue grew from approximately $300,000 in Q1 to just under $900,000 in Q3, with expectations for further growth in Q4 [12] Market Data and Key Metrics Changes - The single-use endoscope market is growing at annual rates estimated to be as high as 20%, driven by lower costs and superior performance of new technologies [16][17] - The company has a backlog greater than $6 million, with a commitment from a military customer for minimum annual purchases of nearly $4 million for 2025 and 2026 [13][35] Company Strategy and Development Direction - The company is focused on resolving production issues and expanding its Unity platform, which aims to streamline the development of new endoscopic systems [18][19] - The Unity platform is expected to reduce time to market by 6 to 12 months compared to custom designs, enhancing competitiveness [59] - The company is actively pursuing alternative suppliers to mitigate the impact of tariffs on its business [68][69] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in resolving production issues and anticipates significant revenue growth in Q4, projecting $6 million in sales [26][28] - The company maintains strong customer relationships and a robust pipeline of opportunities, particularly with the Unity platform [27] Other Important Information - The company has made recent changes to its Board, adding two new members with relevant experience in the medical device industry [20][21] - R&D spending increased due to investments in the Unity platform, with expectations for steady state expenses in the coming quarters [24][55] Q&A Session Summary Question: Were engineering clients affected by production issues? - Yes, engineering resources were diverted to address production issues, impacting revenue collection [31][32] Question: Will engineering fees be collected now that issues are resolved? - Correct, with production issues resolved, the company expects to collect both engineering and production fees [32] Question: Is the aerospace program expected to continue beyond 2026? - Yes, indications suggest the program will continue beyond 2026, with higher order rates anticipated [33][34] Question: Are there any contractual issues due to production delays? - No, the company has a good relationship with the customer and is moving forward positively [36][38] Question: Is staffing adequate for production needs? - The company is close to full staffing for assembly technicians and is looking to add a few more for smooth operations [39] Question: When will the second production line be operational? - The second line is expected to start running in the first half of fiscal 2026 [40] Question: Will the current quarter be EBITDA positive? - Yes, the company expects to achieve positive EBITDA in the current quarter [43][44]

Financial Data and Key Metrics Changes - For Q3 2025, revenue was $4.2 million, down from $5.2 million in Q3 2024. Production revenue increased to $3.2 million from $3 million, while engineering revenue decreased to $924,000 from $2.3 million [21][24] - Gross margins fell to 10% from 35% year-over-year, attributed to low yields and a one-month shutdown of production lines [23] - The net loss for the quarter was $2.1 million compared to a net loss of $317,000 in the same quarter last year. Adjusted EBITDA was negative $1.3 million, down from a positive $52,000 [24] Business Line Data and Key Metrics Changes - The single-use cystoscope program faced significant yield issues, dropping to less than 50% before corrective actions were taken [8] - Systems production revenue, including new and legacy products, grew over 20% quarter-over-quarter and more than doubled year-over-year [10] - Aerospace program production revenue increased from approximately $300,000 in Q1 to just under $900,000 in Q3, with expectations for further growth in Q4 [11] Market Data and Key Metrics Changes - The single-use endoscope market is growing at annual rates estimated to be as high as 20%, driven by lower costs and superior performance of new technologies [15][16] - The company has a production backlog exceeding $6 million, indicating strong demand for its products [12] Company Strategy and Development Direction - The company is focused on resolving production challenges and expanding its Unity platform, which aims to streamline the development of new endoscopic systems [17] - The Unity platform is designed to reduce risk, cost, and time to market, with positive responses from potential customers [18] - The company is committed to leveraging its proprietary manufacturing technology and partnerships to become a leading supplier in the single-use endoscope market [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in overcoming production challenges and anticipates significant revenue growth in Q4, aiming for $6 million in sales [26] - The company expects to achieve positive adjusted EBITDA in the upcoming quarter, indicating a recovery from recent setbacks [43] Other Important Information - The company has made changes to its Board, adding two new members with relevant experience in the medical device industry [19][20] - The company is actively pursuing alternative suppliers to mitigate the impact of tariffs on its business [68][69] Q&A Session Summary Question: Were engineering resources diverted to fix production issues? - Yes, engineering resources were used to address production challenges, impacting billable projects [30][31] Question: Will the aerospace program continue beyond 2026? - The aerospace program is expected to continue beyond 2026, with minimum annual purchase commitments of nearly $4 million for 2025 and 2026 [32][33] Question: Are there any contractual issues due to production delays? - There are no contractual issues; the customer has been supportive and has even placed additional orders [35][38] Question: Is the company fully staffed for production? - The company is close to full staffing for assembly technicians and is looking to add a few more to ensure smooth operations [39] Question: When will the second production line be operational? - The second production line is expected to start running in the first half of fiscal 2026 [40] Question: Will the current quarter be EBITDA positive? - Yes, the expectation is for the current quarter to be EBITDA positive, reducing the need for additional stock issues [43]

Core Insights - Precision Optics Corporation reported its third quarter fiscal year 2025 results, highlighting a significant production backlog and a new purchase agreement with a top-tier aerospace company, ensuring minimum annual commitments of nearly $4 million for 2025 and 2026 [4][6]. Financial Performance - Revenue for Q3 2025 was $4.2 million, down from $5.2 million in Q3 2024 and $4.5 million in the previous quarter [6]. - Production revenue increased to $3.3 million compared to $3.0 million in the same quarter of the previous year, while engineering revenue decreased to $0.9 million from $2.3 million year-over-year [6]. - Gross margins fell to 10.0% from 35.5% in the same quarter last year and 23.6% in the previous quarter [6]. - The net loss for the quarter was $2.1 million, compared to a loss of $0.3 million in Q3 2024 and $1.0 million in the previous quarter [6]. Operational Highlights - The company faced initial yield issues with its single-use cystoscope production line, leading to a temporary production halt, but has since restarted with improved yields and doubled throughput [5]. - A new Unity Imaging Platform was launched, aimed at transforming endoscopic imaging device development by reducing costs and time to market [6]. - The company is expanding its production capacity to meet customer demand and has initiated production for two new programs transitioning from development [5]. Strategic Developments - The company appointed two new board members with significant industry experience, enhancing its leadership team [6]. - A common stock offering raised $5.1 million, which will be used to expand facilities to support anticipated growth [6]. Balance Sheet Overview - Total assets increased to $19.6 million as of March 31, 2025, compared to $16.9 million a year earlier [17]. - Current assets rose to $10.0 million, with cash and cash equivalents at $2.5 million [17]. - Total liabilities decreased to $6.4 million from $6.8 million year-over-year [18]. Stockholder Equity - Stockholders' equity increased to $13.2 million as of March 31, 2025, compared to $10.1 million a year earlier [18]. - The company issued 1,272,500 shares in a registered direct offering, contributing to the increase in equity [20].

PART I FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Financial statements show increased assets from stock offerings, a wider net loss of $4.38 million from declining revenues, offset by financing activities [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to $19.6 million by March 31, 2025, driven by higher cash and equity from stock issuances Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $2,547,873 | $405,278 | | Total current assets | $9,970,851 | $7,118,233 | | Total Assets | $19,622,274 | $16,912,574 | | Total current liabilities | $5,009,212 | $4,906,816 | | Total Liabilities | $6,444,557 | $6,844,786 | | Total stockholders' equity | $13,177,717 | $10,067,788 | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) Revenues decreased 10.3% to $12.9 million, gross profit fell 45.4%, and net loss widened to $4.38 million for the nine months ended March 31, 2025 Statement of Operations Summary (Unaudited) | Metric | Nine Months Ended Mar 31, 2025 | Nine Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Revenues | $12,909,928 | $14,388,123 | | Gross Profit | $2,605,247 | $4,773,324 | | Operating Loss | ($4,195,247) | ($1,367,982) | | Net Loss | ($4,377,689) | ($1,540,272) | | Loss Per Share (Basic & Diluted) | ($0.67) | ($0.25) | [Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) Stockholders' equity increased to $13.2 million from $6.2 million in stock offering proceeds, partially offset by a $4.38 million net loss - Issued 1,272,500 shares in a registered direct offering, raising **$5,065,594**[17](index=17&type=chunk) - Issued 265,868 shares in a registered direct offering, raising **$1,204,542**[17](index=17&type=chunk) - The net loss for the nine-month period was **$4,377,689**, which increased the accumulated deficit[14](index=14&type=chunk)[17](index=17&type=chunk) [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operations increased to $3.0 million, offset by $5.3 million from financing activities, resulting in a $2.1 million net cash increase Cash Flow Summary (Unaudited) | Activity | Nine Months Ended Mar 31, 2025 | Nine Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($2,978,165) | ($1,706,998) | | Net cash used in investing activities | ($149,837) | ($282,078) | | Net cash provided by (used in) financing activities | $5,270,597 | ($11,709) | | Net increase (decrease) in cash | $2,142,595 | ($2,000,785) | | Cash and cash equivalents, end of period | $2,547,873 | $925,067 | [Notes to Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail increased inventory, debt covenant waivers contingent on a $6.3 million equity raise, and subsequent lease agreements - Inventories increased to **$3.67 million** from **$2.87 million**, with raw materials rising from **$1.57 million** to **$2.00 million**[30](index=30&type=chunk) - The company obtained waivers for its annual debt service coverage ratio covenant for fiscal years 2024 and 2025, the latter contingent on a successful equity raise of at least **$4.5 million** completed in February 2025[32](index=32&type=chunk) - The company raised net proceeds of **$1,204,542** in August 2024 and **$5,053,000** in February 2025 from registered direct offerings[39](index=39&type=chunk)[40](index=40&type=chunk) - Subsequent to the quarter's end, the company extended its El Paso, Texas facility lease for 36 months and entered a new 8-year lease for a facility in South Portland, Maine[52](index=52&type=chunk)[54](index=54&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=14&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a 10.3% revenue decrease driven by Engineering Design Services decline, gross margin contraction due to yield issues, and liquidity boosted by $6.3 million in stock offerings [Overview](index=16&type=section&id=Overview) The company specializes in advanced optical instruments, including 3D endoscopes and micro-precision lenses, expanding capabilities through acquisitions - The company designs and manufactures **3D endoscopes** and very small **Microprecision lenses** for minimally invasive surgery[60](index=60&type=chunk) - The Ross Optical division supplies custom optical components for military, defense, and medical applications[61](index=61&type=chunk) - The Lighthouse Imaging division is an industry leader in **chip-on-tip visualization systems** and provides expertise in electrical engineering and medical visualization device development[62](index=62&type=chunk) [Results of Operations](index=18&type=section&id=Results%20of%20Operations) Total revenue decreased 10.3% to $12.9 million, driven by Engineering Design Services decline, with gross margin contracting to 20.2% due to yield issues Revenue by Segment (Nine Months Ended March 31) | Segment | 2025 Revenue | 2024 Revenue | % Change | | :--- | :--- | :--- | :--- | | Engineering Design Services | $3,980,155 | $6,440,895 | (38.2)% | | Optical Components | $8,000,344 | $6,285,808 | 27.3% | | Finished Products and Assemblies | $929,429 | $1,661,420 | (44.1)% | | **Total Revenues** | **$12,909,928** | **$14,388,123** | **(10.3)%** | - Gross margin for the nine-month period decreased to **20.2%** from **33.2%** in the prior year[76](index=76&type=chunk) - R&D expenses for the nine-month period increased by **$302,389** to support product improvements and new technology development for single-use medical devices[77](index=77&type=chunk) [Liquidity and Capital Resources](index=19&type=section&id=Liquidity%20and%20Capital%20Resources) Management believes current cash and capital access will fund operations for 12 months, with liquidity boosted by $6.3 million from stock offerings - Management believes available cash and ability to raise funds will be sufficient for at least **12 months**, but cash from operations alone may be insufficient[79](index=79&type=chunk) - Net cash used in operating activities increased to **$2,978,165** for the nine months ended March 31, 2025, from **$1,706,998** in the prior year period[80](index=80&type=chunk) - The company raised a net of **$6,270,136** from two registered direct offerings in August 2024 and February 2025[82](index=82&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=20&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, the company is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[90](index=90&type=chunk) [Controls and Procedures](index=21&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective, with R&D cost capitalization weakness remediated and inventory valuation issues ongoing - The CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the quarter[91](index=91&type=chunk) - A material weakness related to improperly expensing certain R&D costs was remediated as of September 30, 2024[93](index=93&type=chunk) - A material weakness in inventory valuation was identified, with remediation steps including ERP system updates and new monitoring processes[92](index=92&type=chunk) PART II OTHER INFORMATION [Legal Proceedings](index=22&type=section&id=Item%201.%20Legal%20Proceedings) The company is not aware of any pending or threatened litigation that could materially impact its operations or finances - The company may occasionally be involved in legal matters in the ordinary course of business, but management believes such matters are currently insignificant[96](index=96&type=chunk) [Risk Factors](index=22&type=section&id=Item%201A.%20Risk%20Factors) The company identifies a risk that changes in U.S. tariff policy could adversely affect its international supply chain, costs, and competitive position - The company identifies a risk that changes in U.S. tariff policy could adversely affect its international supply chain, costs, and competitive position[98](index=98&type=chunk) - The company relies on a global supply chain for specialized optical components, and tariffs could increase the cost of goods sold and disrupt the availability of critical components[98](index=98&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=22&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities during the reporting period - None[102](index=102&type=chunk) [Other Information](index=22&type=section&id=Item%205.%20Other%20Information) No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter - No director or officer adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the period[104](index=104&type=chunk) [Exhibits](index=23&type=section&id=Item%206.%20Exhibits) The report lists several exhibits filed with the Form 10-Q, including a Securities Purchase Agreement, a waiver letter, and officer certifications