Precision Optics Corporation, Inc. (PEYE) Q4 2021 Earnings Conference Call September 28, 2021 5:00 PM ET Company Participants Robert Blum - IR, Lytham Partners Joe Forkey - Chief Executive Officer Dan Habhegger - CFO Operator Good afternoon and welcome to the Precision Optics Fourth Quarter and Fiscal Year 2021 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instruct ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2021 or ☐ 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 001-10647 PRECISION OPTICS CORPORATION, INC. (Exact name of registrant as specified in its charter) M ...

Financial Data and Key Metrics Changes - In Q3, total revenue was $2.5 million, a slight increase from the same quarter last year, but down slightly sequentially [29] - Production revenue was $1.9 million, flat compared to the previous quarter and down from $2.2 million in Q3 of the previous year, primarily due to decreased orders in the otoscopy and defense programs [10][29] - Engineering services revenue was $550,000, representing a 162% increase year-over-year but down $300,000 from the second quarter due to timing of revenue recognition [30] - Gross margin was 33%, compared to 31% in the previous quarter and 34% in the same quarter last year, with potential gross margins estimated at approximately 38% without additional costs related to single-use engineering programs [30][31] - Net income for Q3 was $552,000, but excluding PPP loan forgiveness, it would have been a loss of $257,000 [32] Business Line Data and Key Metrics Changes - The cardiac program saw an uptick in production volumes, while the otoscopy program experienced a decline [10][14] - Engineering revenue increased significantly year-over-year, driven by strategic investments in sales and technical capabilities [11][24] - The company reported stable volumes in traditional products, including complex endo-couplers and specialized endoscopes [18] Market Data and Key Metrics Changes - The single-use endoscope market is expanding, driven by increased demand and advancements in technology [20][21] - The defense and aerospace markets are also seeing a demand for smaller optics, which aligns with the company's capabilities [43][46] Company Strategy and Development Direction - The company is focused on growing sales capabilities, investing in technical resources, updating production capabilities for single-use products, and exploring strategic partnerships or acquisitions [34][35] - The engineering pipeline is robust, with numerous projects in various stages of development, indicating strong future growth potential [27][35] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of the market and the company's positioning to capitalize on growth opportunities in the medical device and defense sectors [13][35] - The company is well-prepared to manage through ongoing challenges and is focused on transitioning projects into long-term production contracts [36] Other Important Information - The company has made significant investments in its engineering pipeline, which is expected to yield long-term benefits [26][27] - The company has three new patents pending related to innovations in single-use endoscopes, which could enhance its competitive position [40][41] Q&A Session Summary Question: Additional details on intellectual property related to single-use applications - Management discussed two categories of intellectual property: patentable innovations and trade secrets, emphasizing the importance of both in the single-use market [39][42] Question: Insights on aerospace and defense markets - Management highlighted the demand for smaller optics in defense and aerospace, driven by cost and efficiency considerations, aligning with the company's core competencies [43][46]

PART I — FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The financial statements for the period ended March 31, 2021, reflect decreased assets, reduced liabilities due to loan forgiveness, and a shift to net income from prior losses [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2021, total assets decreased to $5.91 million, while total liabilities significantly reduced to $2.45 million, increasing equity Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2021 ($) | June 30, 2020 ($) | | :--- | :--- | :--- | | **Total Assets** | **5,905,975** | **6,351,531** | | Cash and cash equivalents | 781,845 | 1,134,697 | | Total current assets | 4,397,063 | 4,947,085 | | **Total Liabilities** | **2,452,074** | **3,579,770** | | Note payable to bank | – | 808,962 | | Total current liabilities | 2,107,535 | 3,149,380 | | **Total Stockholders' Equity** | **3,453,901** | **2,771,761** | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) Net income for Q3 2021 was $552,278, a turnaround from prior-year losses, primarily driven by a significant gain on loan forgiveness Statement of Operations Summary (Unaudited) | Metric | Three Months Ended Mar 31, 2021 ($) | Three Months Ended Mar 31, 2020 ($) | Nine Months Ended Mar 31, 2021 ($) | Nine Months Ended Mar 31, 2020 ($) | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | **2,458,290** | **2,374,584** | **8,001,641** | **7,686,330** | | Gross Profit | 818,024 | 817,019 | 2,647,642 | 2,709,075 | | Operating Loss | (256,018) | (465,447) | (467,143) | (1,102,927) | | **Net Income (Loss)** | **552,278** | **(466,130)** | **339,617** | **(1,103,065)** | | Basic EPS | 0.04 | (0.04) | 0.03 | (0.09) | - A gain of **$808,962** from the forgiveness of a bank note was recognized in the three and nine months ended March 31, 2021, significantly impacting net income[13](index=13&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities was $75,420 for the nine months ended March 31, 2021, resulting in a net decrease in cash to $781,845 Cash Flow Summary for Nine Months Ended March 31 (Unaudited) | Cash Flow Activity | 2021 ($) | 2020 ($) | | :--- | :--- | :--- | | Net Cash Used In Operating Activities | (75,420) | (84,421) | | Net Cash Used In Investing Activities | (256,134) | (1,586,174) | | Net Cash (Used In) Provided From Financing Activities | (21,298) | 14,300 | | **Net Decrease in Cash** | **(352,852)** | **(1,656,295)** | | **Cash at End of Period** | **781,845** | **632,131** | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail accounting policies, revenue recognition, and inventory, highlighting the **$808,962** PPP loan forgiveness and COVID-19 impact - On March 30, 2021, the Small Business Administration forgave the company's **$808,962** Promissory Note from the Paycheck Protection Program (PPP) in full, including accrued interest, recorded as other income[29](index=29&type=chunk) Revenue by Type for Nine Months Ended March 31 | Revenue Type | 2021 ($) | 2020 ($) | | :--- | :--- | :--- | | Engineering Design Services | 1,986,856 | 1,098,234 | | Optical Components | 4,330,511 | 4,428,409 | | Medical Device Products and Assemblies | 1,684,274 | 2,159,687 | | **Total Revenues** | **8,001,641** | **7,686,330** | - The company acknowledges that the COVID-19 pandemic has had, and could continue to have, an adverse impact on its supply chain, customer orders, and overall financial condition, but the future impact remains uncertain[41](index=41&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 the company's medical device focus, revenue growth driven by engineering services, slight gross margin decrease, and improved profitability aided by PPP loan forgiveness [Overview](index=14&type=section&id=Overview) The company develops optical instruments, primarily for medical devices (**60%** of business), with additional revenue from military/defense and industrial applications - The company's business is segmented with approximately **60%** from medical devices, **8%** from military and defense, and **32%** from other industrial products for the nine months ended March 31, 2021[47](index=47&type=chunk) - Development efforts are focused on next-generation technologies like 3D endoscopes and very small Microprecision™ lenses for minimally invasive surgery[45](index=45&type=chunk)[52](index=52&type=chunk) [Results of Operations](index=15&type=section&id=Results%20of%20Operations) Q3 2021 revenues increased **3.5%** to **$2.46 million**, driven by engineering services, while gross margins slightly decreased due to project costs Revenue Comparison | Period | FY 2021 ($) | FY 2020 ($) | Change ($) | % Change | | :--- | :--- | :--- | :--- | :--- | | **Q3 Revenue** | **2,458,290** | **2,374,584** | **83,706** | **3.5%** | | **9-Month Revenue** | **8,001,641** | **7,686,330** | **315,311** | **4.1%** | - Revenue growth was primarily due to an increase in engineering revenue from new projects, which was partially offset by decreases in production revenue due to COVID-19 related slowdowns experienced by customers[57](index=57&type=chunk)[58](index=58&type=chunk) - Gross margin decreased in Q3 and the nine-month period due to cost over-runs on an engineering project and a decrease in higher-margin production revenues[60](index=60&type=chunk) [Liquidity and Capital Resources](index=16&type=section&id=Liquidity%20and%20Capital%20Resources) The company reported a net operating loss of **$467,143** and held **$781,845** in cash, with liquidity significantly boosted by **$808,962** PPP loan forgiveness - As of March 31, 2021, the company had **$781,845** in cash, **$1,533,781** in accounts receivable, and **$2,107,535** in current liabilities[64](index=64&type=chunk) - The company's ability to maintain its financial condition is critically dependent on achieving and maintaining profitable quarterly revenues and timely collection of receivables[65](index=65&type=chunk) - A PPP loan of **$808,962** was forgiven on March 30, 2021, and the gain was recorded as other income, significantly improving the company's financial results for the period[67](index=67&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=17&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[71](index=71&type=chunk) [Controls and Procedures](index=18&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls were ineffective as of March 31, 2021, due to material weaknesses in segregation of duties and inventory valuation - Management concluded that the company's disclosure controls and procedures were not effective as of March 31, 2021[73](index=73&type=chunk) - A material weakness exists due to a lack of sufficient staff to properly segregate accounting duties, an issue disclosed since fiscal year 2008[74](index=74&type=chunk) - A second material weakness relates to inventory valuation, specifically inconsistencies in applying overhead rates and costs of purchased items, with remediation ongoing since September 2009[77](index=77&type=chunk)[79](index=79&type=chunk) PART II — OTHER INFORMATION [Legal Proceedings](index=19&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 reports no significant legal matters and is not aware of any pending or threatened litigation that would have a material adverse effect[82](index=82&type=chunk) [Risk Factors](index=19&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors have occurred since the last Annual Report on Form 10-K filing - No material changes to risk factors have occurred since the last Annual Report on Form 10-K was filed[83](index=83&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=19&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds during the reporting period - There were no unregistered sales of equity securities during the period[84](index=84&type=chunk) [Other Information](index=19&type=section&id=Item%205.%20Other%20Information) No other information is required to be reported for this item - There is no other information to report for this item[87](index=87&type=chunk) [Exhibits](index=20&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including agreements, corporate governance documents, and certifications - The report includes a list of exhibits, such as asset purchase agreements, bylaws, equity incentive plans, and Sarbanes-Oxley certifications[89](index=89&type=chunk)[90](index=90&type=chunk)

Precision Optics Corporation, Inc. (PEYE) Q2 2021 Earnings Conference Call February 16, 2021 5:00 PM ET Company Participants Robert Blum - Lytham Partners Joe Forkey - Chief Executive Officer Dan Habhegger - Chief Financial Officer Conference Call Participants David Smith - Berkeley Street Partners Operator Good day and welcome to the Precision Optics Reports Second Quarter of Fiscal Year 2021 Financial Results. All participants will be in a listen-only mode. [Operator Instructions] After today's presentati ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2020 or ☐ 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: 001-10647 PRECISION OPTICS CORPORATION, INC. (Exact name of registrant as specified in its charter) Massachusetts 04-2795 ...

Financial Data and Key Metrics Changes - The company reported revenue of $2.8 million for Q1 fiscal 2021, representing a 23% sequential increase and a 10% year-over-year increase [27] - Gross margin improved to 35% from 29% in the previous quarter, although it decreased from 39% in the same quarter a year ago [30] - The company achieved a slight net profit with adjusted EBITDA exceeding $100,000, compared to a loss of $208,000 in the previous quarter [32] Business Line Data and Key Metrics Changes - Production revenue was $2.2 million in Q1 fiscal 2021, up 12% sequentially and 3% year-over-year, primarily driven by the otoscopy product [28] - Engineering Services revenue reached $589,000, a 102% increase from the previous quarter and a 44% increase year-over-year, indicating higher demand for engineering services [29] Market Data and Key Metrics Changes - The company noted a recovery in business activity compared to the early part of the year when inquiries had significantly decreased due to COVID-19 [20] - The market for small CMOS-based endoscopes is expanding rapidly, with increased demand for custom lenses and new endoscope designs [21][22] Company Strategy and Development Direction - The company is focusing on vertical integration of capabilities to enhance customization and meet customer needs, which is seen as a key differentiator in the industry [26] - There is an ongoing effort to expand sales and marketing in the defense and aerospace market, leveraging existing relationships and product offerings [24][25] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery from COVID-19 impacts, noting that customers believe they will work through excess inventory and return to pre-pandemic levels [42] - The company anticipates that commercialized programs will rebound, and new projects in the pipeline will contribute to growth in the coming quarters [44] Other Important Information - The company has approximately $900,000 in cash and an improved net working capital position, positioning it well for future operations [11][33] - The company continues to manage operating expenses carefully, with a reported $974,000 in operating expenses for the quarter, down from $1.1 million year-over-year [31] Q&A Session Summary Question: Can you summarize the current and anticipated impacts of COVID-19 on the business? - Management indicated that while the acute impacts of COVID-19 have lessened, there are still long-term effects as customers work through excess inventory, but they remain optimistic about future growth [41][43]

Financial Data and Key Metrics Changes - For Q4 2020, overall revenue was $2.24 million, a decrease of 6% compared to $2.38 million in Q4 2019 and $2.37 million in Q3 2020 [21] - Adjusted EBITDA improved by more than $150,000 from Q3 2020 due to a decrease in operating expenses [11] - Gross margin for Q4 was 29%, down from 36% in Q4 2019 and 34% in Q3 2020 [26] - The fiscal year ended with a net loss of $1.4 million compared to a loss of $615,000 in fiscal 2019 [39] Business Line Data and Key Metrics Changes - Ross Optical operations generated revenue of $1.13 million in Q4, contributing to a total of $9.9 million for the fiscal year, an increase of $3.1 million compared to fiscal 2019 [24] - The otoscopy product faced a revenue impact of approximately $100,000 due to supply chain issues, while the cardiac program saw a $200,000 revenue reduction due to decreased deliveries [13][14] - Operating expenses for Q4 were $973,000, down from $1.28 million in Q3 2020 [29] Market Data and Key Metrics Changes - The medical devices and defense/aerospace industries are viewed as resilient markets, with expectations for revenue recovery in the first quarter of fiscal 2021 [18][19] - Discussions about new development projects have rebounded to pre-COVID levels, indicating a recovery in market activity [17] Company Strategy and Development Direction - The company is focusing on expanding sales and marketing efforts, investing in proprietary technology, and exploring merger and acquisition opportunities [31] - Strategic investments have been made to enhance customer engagement and develop proprietary intellectual property [33] - The integration of Ross Optical is seen as successful, with plans to leverage combined operations rather than report Ross Optical as a separate unit [43][44] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about returning to normalized operations and improving revenue and gross margins in Q1 2021 [19] - The company is prepared to take steps to reduce expenses if necessary but aims to align revenues from existing and new products quickly [42] - The balance sheet is strong, with a cash balance of $1.1 million at the end of Q4, positioning the company well for growth [40] Other Important Information - The company reported a GAAP net loss of $323,000 in Q4, with adjusted EBITDA showing a loss of $207,000 [38] - The company is exploring high-volume product opportunities and has seen interest in single-use products [34] Q&A Session Summary Question: Opportunities to increase gross margins through acquisitions - Management is confident there are small optics companies with profitable margins but is not currently engaged with any [72] - The focus has been on integrating Ross Optical successfully before pursuing further acquisitions [73] - Management believes that investments made prior to COVID would have led to breakeven without the pandemic's impact [75] Question: Future profitability and acquisition strategy - Management sees growth opportunities even without acquisitions, but acknowledges the optics industry is fragmented and will look for potential candidates [77]