Company Overview - Precision Optics Corporation, Inc. is a leading designer and manufacturer of advanced optical instruments for the medical and defense/aerospace industries, founded in 1982 [3] - The company focuses on leveraging proprietary micro-optics, 3D imaging, and digital imaging technologies to provide services from new product concept through mass manufacture [3] - Precision Optics has capabilities in in-house design, prototype, regulatory, and fabrication, enabling the design and manufacture of next-generation product solutions [3] Industry Applications - In healthcare, Precision Optics supports next-generation medical device companies by providing enhanced and smaller imaging systems for minimally invasive surgery and 3D endoscopy systems [3] - The company has supplied a variety of optical products, including complex endocouplers and specialized endoscopes, to top-tier medical device companies for decades [3] - 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 [3] Upcoming Events - Precision Optics will participate in a webcasted fireside chat at the Lytham Partners 2025 Industrials & Basic Materials Investor Summit on April 1, 2025, at 3:30 p.m. ET [1][2] - The webcast can be accessed through the conference home page or directly via a specific link, with a replay available afterward [2]

Core Insights - Precision Optics Corporation has appointed Buell Duncan to its Board of Directors, enhancing its commitment to innovation and growth [1][3] - Buell Duncan has extensive experience in technology and business sectors, having held senior leadership roles at IBM and currently serving as a Portfolio Advisor at Iron Gate Capital [2] - Dr. Richard Miles has retired from the Board after 20 years of service, with the company expressing gratitude for his contributions [3][4] Company Overview - Founded in 1982, Precision Optics is a vertically integrated optics company focused on advanced optical instruments for healthcare and defense/aerospace industries [5] - The company leverages proprietary micro-optics, 3D imaging, and digital imaging technologies to meet the demands of the surgical community and support surgical robotic systems [5] - Precision Optics has a history of supplying a variety of optical products to top-tier medical device companies, including complex endocouplers and specialized endoscopes [5]

Core Viewpoint - Precision Optics Corporation has successfully closed a registered direct offering of common stock, raising approximately $5.1 million in gross proceeds to support its growth initiatives and repay debt [1][2][3]. Group 1: Offering Details - The offering consisted of 1,272,500 shares at a purchase price of $4.00 per share, resulting in gross proceeds of approximately $5.1 million and expected net proceeds of approximately $5.0 million after deducting offering expenses [2]. - The company plans to use the net proceeds to repay certain indebtedness, expand its facilities to support expected growth, and for general working capital purposes [2]. Group 2: Company Background - Founded in 1982, Precision Optics is a vertically integrated optics company focused on advanced optical instruments for the healthcare and defense/aerospace industries [4]. - The company leverages proprietary micro-optics, 3D imaging, and digital imaging technologies to meet the demands of the surgical community and support the proliferation of surgical robotic systems [4]. - Precision Optics has a long history of supplying a variety of optical products to top-tier medical device companies, including complex endocouplers and specialized endoscopes [4].

Core Viewpoint - Precision Optics Corporation has announced a registered direct offering of 1,272,500 shares at a price of $4.00 per share, aiming to raise approximately $5.1 million in gross proceeds, with net proceeds expected to be around $5.0 million after expenses [1][2]. Group 1: Offering Details - The offering is led by existing stockholders and is expected to close on or about February 21, 2025, pending customary closing conditions [2]. - The offering is conducted under an effective shelf registration statement on Form S-3, previously filed with the SEC [3]. Group 2: Use of Proceeds - The net proceeds from the offering will be utilized to repay certain debts, expand facilities to support anticipated growth, and for general working capital purposes [1]. Group 3: Company Overview - Precision Optics Corporation, founded in 1982, specializes in advanced optical instruments for the medical and defense/aerospace sectors, leveraging proprietary technologies in micro-optics and imaging [5]. - The company provides comprehensive services from product concept to mass manufacturing, catering to the increasing demands for enhanced imaging systems in minimally invasive surgeries and 3D endoscopy [5]. - Precision Optics also focuses on high-quality standards and optimization in size, weight, and power for defense/aerospace applications [5].

Financial Data and Key Metrics Changes - For Q2 2025, revenue was $4.5 million, down from $4.8 million in Q2 2024, slightly below the expected $5 million [38] - Manufacturing revenue increased by 42% from Q1 to Q2, marking the largest quarter-over-quarter production increase in many years [11][38] - Gross margins were 24% compared to 30% in the same quarter last year, impacted by lower sales volume and increased R&D spending [39] Business Line Data and Key Metrics Changes - The single-use cystoscope program and defense aerospace program have been ramping production, contributing significantly to revenue growth [11][26] - Production revenue in Q2 was up substantially over Q1, with expectations for record levels in Q3 and Q4 driven by these programs [26][31] Market Data and Key Metrics Changes - The single-use endoscope market is expected to grow at annual rates of up to 20%, with POC well-positioned to benefit from this trend [14] - The company has seen its Ross Optical components business stabilize at approximately $1 million per quarter, with expectations for recovery by the end of fiscal 2025 [32] Company Strategy and Development Direction - The launch of the Unity imaging platform is expected to enhance POC's competitive position by accelerating time to market and reducing development risks [21][24] - POC aims to double its product development pipeline size, requiring an increase in the engineering team to support anticipated growth [23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued growth in the second half of fiscal 2025, driven by strong backlogs and a return to normalized engineering operations [12][33] - The company is addressing capacity limitations to meet demand from existing customers, which is seen as a positive indicator for future growth [34][81] Other Important Information - The company is in the process of expanding its cleanroom space and workforce to meet production demands, with significant increases in capacity expected by the end of March [85][87] - Cash balance as of December 31, 2024, was approximately $200,000, with an additional $350,000 available on the line of credit [43] Q&A Session Summary Question: Update on defense contracts with specification problems - Management confirmed two significant defense aerospace programs are in production, with one running steadily at $2 million to $2.5 million annually, and the other expected to reach a $3 million to $4 million run rate by the end of the fiscal year [55][59] Question: Details on the Unity platform - The Unity platform allows for baseline designs tailored to customer specifications, significantly accelerating the time to market by reducing development cycles [60][66] Question: Reasons for lower than expected revenue in Q2 - Management cited delays in product development due to the focus on launching the Unity platform and customer-related delays in regulatory approvals and financing [72][76] Question: Plans to increase capacity - The company is expanding cleanroom capacity and increasing workforce by approximately 80% to meet the substantial backlog in production [84][87]

Financial Data and Key Metrics Changes - For Q2 2025, revenue was $4.5 million, down from $4.8 million in Q2 2024, slightly below the expected $5 million [38] - Gross margins decreased to 24% from 30% year-over-year [39] - Net loss for the quarter was $910,000 compared to a net loss of $704,000 in the previous year [42] - Adjusted EBITDA was negative $555,000, worsening from a negative adjusted EBITDA of $269,000 last year [42] Business Line Data and Key Metrics Changes - Manufacturing revenue increased by 42% from Q1 to Q2, marking the largest quarter-over-quarter production increase in many years [11] - The single-use cystoscope program and defense aerospace program are driving production increases, with multimillion-dollar backlogs for both [26][27] - The Ross Optical components business has stabilized at approximately $1 million per quarter due to short-term market forces [32] Market Data and Key Metrics Changes - The single-use endoscope market is projected to grow at annual rates of up to 20% [14] - The company is positioned to benefit from the transition to CMOS-based endoscope systems, which are increasingly favored in the market [8][14] Company Strategy and Development Direction - The launch of the Unity imaging platform is expected to enhance the company's competitive position and accelerate time to market for new products [19][21] - The strategy involves leveraging existing designs to create baseline platforms that can be customized for specific customer needs, reducing development risks [18][19] - The company plans to double production capacity for key programs by expanding clean room space and increasing workforce [85][87] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued growth in Q3 and Q4, driven by strong backlogs and the return of normalized engineering operations [46][49] - The company anticipates achieving record production revenue levels in Q3 and Q4, with forecasts of $5 million in Q3 and $6 million in Q4 [43][49] - Management acknowledged capacity limitations as a challenge but emphasized robust plans to address these requirements [34][81] Other Important Information - The Unity platform was launched at major trade shows, receiving positive feedback and generating new development opportunities [24][25] - The company is finalizing facility plans to support growth and expand manufacturing capabilities [44] Q&A Session Summary Question: Update on defense contracts with specification problems - The company has two significant defense aerospace programs, one running steadily at $2 million to $2.5 million annually, and the other has resumed production after resolving measurement errors [55][56][59] Question: Details on the Unity platform - The Unity platform allows for accelerated development timelines by using baseline designs that can be quickly customized for customer needs, potentially reducing time to market by 6 to 12 months [60][70] Question: Reasons for lower-than-expected revenue in Q2 - The product development group faced delays due to the Unity launch and customer-related events that postponed activities, but these are expected to resolve in Q3 [72][76] Question: Plans to increase capacity - The company is expanding clean room capacity and increasing workforce by approximately 80% to meet the substantial backlog in production [84][87]

Core Viewpoint - Precision Optics Corporation reported its second quarter fiscal year 2025 results, highlighting a significant production growth driven by new applications and defense/aerospace programs, despite a decline in engineering revenue due to R&D investments [4][5]. Financial Highlights - Revenue for Q2 2025 was $4.5 million, a decrease from $4.8 million in Q2 2024 but an 8% increase from $4.2 million in the previous quarter [5][6]. - Production revenue reached $3.3 million, up 42% sequentially from $2.3 million and compared to $2.6 million in the same quarter last year [5][6]. - Engineering revenue fell to $1.2 million from $2.3 million year-over-year and $1.9 million sequentially [5][6]. - Gross margins were reported at 23.6%, down from 30.1% in the same quarter last year and 26.6% sequentially [5][6]. - The net loss for the quarter was $1.0 million, compared to a loss of $0.8 million in the same quarter last year and $1.3 million in the previous quarter [5][6]. Recent Developments - The company launched the Unity Imaging Platform in January 2025, aimed at transforming endoscopic imaging device development by reducing costs and time to market [5][6]. - A $340,000 production order was received from a global medical device company for a new single-use ophthalmic endoscope, with expectations for follow-on orders [5][6]. - Following FDA clearance for a single-use urological endoscope, the company accelerated production against a $9 million order, estimating $2.7 million in product deliveries for the fiscal year ending June 2025 [5][6]. Operational Insights - Production growth was noted as the highest since the end of fiscal 2023, with expectations for continued revenue growth in the second half of fiscal 2025 [4][5]. - The company anticipates improvements in gross margin and net income due to a large backlog of production programs and engineering projects [4][5].

Revenue Performance - Total revenues for the quarter ended December 31, 2024 were $4,526,907, a decrease of $297,382 or 6.2% compared to $4,824,289 for the same period in the prior year[69]. - Revenue from Engineering Design Services decreased 46.8% during the three-month period ending December 31, 2024, attributed to decreased demand and delays in milestone completion[70]. - Revenue from Optical Components increased 50.8% during the three-month period ending December 31, 2024, driven by new defense/aerospace and medical device programs[71]. Financial Metrics - Gross margin decreased to 23.6% during the quarter ending December 31, 2024, compared to 30.1% for the same quarter in the prior year[74]. - R&D expenses increased to $317,747 during the quarter ending December 31, 2024, up $96,019 from $221,728 in the same quarter of the prior year[76]. - SG&A expenses decreased 14.0% to $1,662,216 during the three months ending December 31, 2024, compared to $1,933,411 in the same period of the prior year[77]. Cash Flow and Financing - Net cash used in operating activities totaled $1,105,431 during the six months ending December 31, 2024, a decrease from $1,492,824 in the same period of the prior year[79]. - The company raised a net of $1,204,542 through the issuance of new shares in a registered direct common stock offering during the six months ending December 31, 2024[81]. - The company raised approximately $1.4 million in gross proceeds from the sale of 265,868 shares of common stock on August 14, 2024, with net proceeds of $1,204,542[84]. Debt and Commitments - The company has a $2,600,000 term loan and a second term loan of $750,000, with $900,000 in borrowings outstanding on the line of credit as of December 31, 2024[82]. - The company did not meet the minimum annual debt service coverage ratio covenant of 1.2x as of June 30, 2024, but the lender has agreed to waive compliance for this period[83]. - Contractual cash commitments for fiscal 2025 total $111,094, including $19,610 for capital lease payments and $92,007 for minimum operating lease payments[86]. - The company has approximately $5,807,000 in contractual cash commitments related to open purchase orders as of December 31, 2024[86]. Operational Insights - The market for single-use endoscopes is expected to grow at two to three times the rate of the overall minimally invasive surgical market[63]. - There are currently no off-balance sheet arrangements that could materially affect the company's financial condition or results of operations[87]. - As a smaller reporting company, the company is electing scaled disclosure reporting obligations and is not required to provide certain market risk information[88].

Core Viewpoint - Precision Optics Corporation is set to announce its second quarter fiscal year 2025 financial results on February 13, 2025, followed by a conference call to discuss these results [1][2]. Company Overview - Precision Optics Corporation, founded in 1982, specializes in advanced optical instruments for the medical and defense/aerospace industries, focusing on micro-optics and 3D imaging technologies [5]. - The company provides a range of services from product concept to mass manufacturing, leveraging in-house design, electronic imaging expertise, and regulatory capabilities [5]. - In healthcare, Precision Optics supports the development of enhanced imaging systems for minimally invasive surgeries and surgical robotic systems [5]. - The company also supplies optical products to top-tier medical device companies, including complex endocouplers and specialized endoscopes [5]. - In the defense/aerospace sector, Precision Optics applies its micro-optics technology to meet high-quality standards while optimizing size, weight, and power [5]. Conference Call Details - The conference call is scheduled for February 13, 2025, at 5:00 p.m. ET, with access available via phone and live webcast [3]. - Call-in numbers include (844) 735-3662 or (412) 317-5705, and the live webcast can be accessed at https://app.webinar.net/z0E94DknxQO [3]. - A replay of the call will be available for seven days, with specific numbers and access codes provided for teleconference and webcast replay [4].

Financial Data and Key Metrics Changes - For Q1 2025, revenue was $4.2 million, slightly down from $4.3 million in Q1 2024, aligning with previous expectations [44] - Gross margins decreased to 27% from 34% year-over-year, impacted by manufacturing pauses and resource allocation towards R&D [45] - The net loss for the quarter was $1.3 million, compared to a loss of $464,000 in the previous year [49] - Adjusted EBITDA was negative $1 million, worsening from negative $245,000 in the prior year [50] Business Line Data and Key Metrics Changes - The production segment is expected to grow significantly, driven by single-use endoscopes, with revenue projected to increase from $6.6 million last year to over $10 million this year [40] - Product development revenue is anticipated to remain flat in fiscal 2025 due to resource allocation towards a new platform solution [39] - The Ross Optical division is expected to have flat revenue year-over-year, with signs of market recovery anticipated for fiscal 2026 [43] Market Data and Key Metrics Changes - The company has received its first production order for a single-use ophthalmic product, expected to begin production in January 2025, marking a significant milestone [11][29] - The market for treatment of benign prostate hyperplasia is expected to continue robust growth, with the company estimating $3.6 million in deliveries for the current fiscal year [28] Company Strategy and Development Direction - The company remains focused on single-use endoscope technology as a key driver for long-term growth, with strong customer engagement confirming market positioning [10] - Strategic investments in partnerships and technology development are expected to lead to substantial revenue growth in the single-use segment [25] - The company plans to launch a new platform solution to reduce development risk and time to market for customers [37] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for Q2 and the remainder of the fiscal year, expecting significant revenue and profitability improvements as production issues have been resolved [9][56] - The company is confident in its long-term prospects due to strong customer retention and recurring revenue from single-use medical devices [54] Other Important Information - The cash balance at the end of Q1 2025 was $636,000, with a recent direct offering netting $1.2 million to support working capital [52] - The company is evaluating alternatives to support growth in manufacturing and attract engineering talent [53] Q&A Session Summary Question: What type of visibility will you have to orders against the initial $9 million order for next year? - The company expects about $3.6 million to be delivered in the current fiscal year, with indications of follow-on orders expected towards the middle or end of fiscal 2026 [60][61] Question: What sort of visibility do you have for the second program? - The initial order is a stocking order for $340,000, with follow-on orders expected to be around $1.5 million for the first year after launch [64][66] Question: Can you quantify further insights into timelines for advancement to production for single-use programs? - There are two programs moving forward, with one expected to enter production in the next 12 months and another in 12 to 24 months [70][74] Question: Are single-use programs larger than the $1 million minimum run rate you desire for advancement? - Typically, single-use programs will start above the $1 million range, with quantities of 10,000 units or higher [75][76] Question: Are there opportunities to regrow the engineering base? - The engineering team has been growing, and updates to facilities and tools are expected to support significant growth starting in fiscal 2026 [80][86] Question: Can you help understand the fixed versus variable expenses on COGS? - Lower revenues impact margins significantly due to relatively fixed costs, with variable costs primarily being materials and some labor [88] Question: Does management expect Intuitive Surgical to be a potential customer? - The company has a long-standing relationship with Intuitive Surgical and believes its technologies could have broad applications in the robotic endoscopy market [92][93]