Precision Optics (POCI) - 2025 Q4 - Annual Report

PART I Item 1. Business POCI develops and manufactures advanced optical instruments for medical and defense/aerospace markets - POCI operates in two key market segments: medical devices and advanced defense/aerospace products, leveraging proprietary optical and imaging technology[12] - The company's business operations are conducted in four areas: systems manufacturing, engineering and product development, Ross Optical components and assemblies, and the micro-optics laboratory[13] - POCI launched its Unity Imaging Platform in January 2025, a standard baseline CMOS endoscopic system with customization options, aiming to accelerate time to market for medical imaging devices[20] Revenue Contribution by Business Area (FY2025 vs. FY2024) | Business Area | FY2025 (%) | FY2024 (%) | Change (pp) | | :---------------------- | :--------- | :--------- | :---------- | | Systems Manufacturing | 43 | 19 | +24 | | Engineering Services | 26 | 45 | -19 | | Ross Optical | 20 | 22 | -2 | | Micro-Optics Laboratory | 11 | 14 | -3 | Item 1A. Risk Factors The company faces financial, operational, intellectual property, and market risks, including historical losses and supply chain - The company has a history of losses and may continue to incur losses, potentially requiring additional funds to support product development and market penetration[42] - A small number of customers represent a significant portion of total revenues, and the loss of any of these customers could adversely affect revenues[43] - The company relies on a few sources for key supplies like precision-grade optical glass and CMOS sensors, making it vulnerable to supply chain disruptions[53] - The company's business and financial performance may be adversely affected by cyber-attacks on IT infrastructure and products, as well as evolving cybersecurity threats and regulations[60] - Changes in U.S. tariff policy and related trade actions could adversely affect the international supply chain, increase costs, and impact the company's competitive position[84] Item 1B. Unresolved Staff Comments The company reported no unresolved staff comments from the SEC - There are no unresolved staff comments[88] Item 1C. Cybersecurity POCI implements a NIST-aligned cybersecurity program with board oversight to manage cyber threats and protect sensitive data - The company's cybersecurity program aligns with NIST standards and includes measures for identifying, assessing, and managing risks to internal systems, products, services, and the supply chain[91] - Cybersecurity measures include regular monitoring, vulnerability management, employee data security training, and simulated phishing exercises[92] - The Board of Directors has primary oversight for enterprise cybersecurity risks, with the Audit Committee considering these risks in its financial and compliance role[96] Item 2. Properties The company operates six facilities across Massachusetts, Texas, and Maine, with recent lease extensions and new agreements - The company conducts domestic operations at four facilities in Gardner, Massachusetts, one in El Paso, Texas, and one in Windham, Maine[98] - A First Lease Extension Agreement for the El Paso, Texas facility was entered into on May 13, 2025, extending the lease for 36 months until May 31, 2028[99] - New lease agreements were signed in May and June 2025 for commercial spaces in South Portland, Maine (8,750 sq ft, 7-year term from Aug 2025) and Littleton, Massachusetts (19,590 sq ft, 7.5-year term from Sep 2025)[100][102] Item 3. Legal Proceedings The company is not currently aware of any pending or threatened material litigation - The company is not currently aware of any pending or threatened litigation that could have a material adverse effect on its business, financial condition, or results of operations[105] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[106] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities POCI common stock trades on Nasdaq, with 121 holders, no dividends declared, and no equity repurchases in FY2025 - The common stock is quoted on the Nasdaq Stock Market under the symbol POCI[108] - As of September 25, 2025, there were approximately 121 holders of record of common stock[109] - The company has not declared any dividends during the last two fiscal years and plans to retain earnings for research, development, and business expansion[110] - No equity securities were repurchased by the issuer during the year ended June 30, 2025[112] Item 6. [Reserved] This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations FY2025 revenues were flat, gross profit declined to 17.8%, operating loss widened, and net cash used in operations increased Total Revenues (FY2025 vs. FY2024) | Metric | FY2025 | FY2024 | Change ($) | Change (%) | | :------------- | :------------ | :------------ | :------------ | :--------- | | Total Revenues | $19,091,269 | $19,104,350 | $(13,081) | (0.1)% | Gross Profit and Margin (FY2025 vs. FY2024) | Metric | FY2025 | FY2024 | Change ($) | Change (%) | | :----------- | :------------ | :------------ | :------------ | :--------- | | Gross Profit | $3,404,433 | $5,797,777 | $(2,393,344) | (41.3)% | | Gross Margin | 17.8% | 30.3% | -12.5 pp | | Operating Loss (FY2025 vs. FY2024) | Metric | FY2025 | FY2024 | Change ($) | Change (%) | | :------------- | :------------ | :------------ | :------------ | :--------- | | Operating Loss | $(5,551,291) | $(2,724,333) | $(2,826,958) | 103.8% | - Net cash used in operating activities increased to $3,547,400 in FY2025 from $2,683,012 in FY2024, primarily due to increased net loss, accounts receivable, and inventory[125] - The company raised a net of $6,270,136 from two registered direct offerings in August 2024 and February 2025[127] Item 7A. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, POCI is not required to provide market risk disclosures - As a smaller reporting company, the registrant is not required to provide quantitative and qualitative disclosures about market risk[133] Item 8. Financial Statements and Supplementary Data This section presents audited financial statements for FY2025 and FY2024, with an unqualified opinion - The financial statements for the years ended June 30, 2025 and 2024 were audited by Stowe & Degon LLC, who issued an unqualified opinion[138] - The company's revenue recognition policies are detailed, disaggregating revenue by product and service types: Engineering Design Services, Systems Manufacturing, Micro Optics Lab, and Ross Optical Industries[158][159] Key Financial Highlights (FY2025 vs. FY2024) | Metric | FY2025 | FY2024 | Change ($) | Change (%) | | :-------------------------------------- | :-------------- | :-------------- | :-------------- | :--------- | | Total Revenues | $19,091,269 | $19,104,350 | $(13,081) | (0.1)% | | Gross Profit | $3,404,433 | $5,797,777 | $(2,393,344) | (41.3)% | | Net Loss | $(5,780,246) | $(2,951,377) | $(2,828,869) | 95.8% | | Basic and Fully Diluted Loss per Share | $(0.85) | $(0.49) | $(0.36) | 73.5% | | Cash and Cash Equivalents (End of Year) | $1,773,735 | $405,278 | $1,368,457 | 337.7% | | Total Assets | $19,790,287 | $16,912,574 | $2,877,713 | 17.0% | | Total Liabilities | $7,531,453 | $6,844,786 | $686,667 | 10.0% | | Total Stockholders' Equity | $12,258,834 | $10,067,788 | $2,191,046 | 21.8% | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reported no changes in or disagreements with accountants on accounting and financial disclosure - There were no changes in or disagreements with accountants on accounting and financial disclosure[208] Item 9A. Controls and Procedures Management concluded disclosure controls and internal control over financial reporting were effective as of June 30, 2025 - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025[209] - Management assessed and concluded that internal control over financial reporting was effective as of June 30, 2025, using the COSO framework[211] - No material changes in internal control over financial reporting occurred during the fiscal year[212] Item 9B. Other Information No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q4 FY2025 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[213] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Disclosure regarding foreign jurisdictions that prevent inspections is not applicable to the company[214] PART III Item 10. Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2025 Proxy Statement - Information for this item is incorporated by reference from the Proxy Statement for the 2025 Annual Meeting of Stockholders[217] - The Board of Directors has adopted a written Code of Business Conduct and Ethics applicable to all officers, directors, and employees[217] Item 11. Executive Compensation Executive compensation information is incorporated by reference from the 2025 Proxy Statement - Information for this item is incorporated by reference from the Proxy Statement for the 2025 Annual Meeting of Stockholders[218] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership information for beneficial owners and management is incorporated by reference from the 2025 Proxy Statement - Information for this item is incorporated by reference from the Proxy Statement for the 2025 Annual Meeting of Stockholders[219] Item 13. Certain Relationships and Related Transactions, and Director Independence Information on related transactions and director independence is incorporated by reference from the 2025 Proxy Statement - Information for this item is incorporated by reference from the Proxy Statement for the 2025 Annual Meeting of Stockholders[220] Item 14. Principal Accounting Fees and Services Principal accounting fees and services information is incorporated by reference from the 2025 Proxy Statement - Information for this item is incorporated by reference from the Proxy Statement for the 2025 Annual Meeting of Stockholders[221] PART IV Item 15. Exhibits, Financial Statement Schedules This section lists all documents and exhibits filed as part of the 10-K report, with schedules omitted - The section lists financial statements, including the Report of Independent Registered Public Accounting Firm, Balance Sheets, Statements of Operations, Stockholders' Equity, and Cash Flows, and Notes to Financial Statements[223] - All financial statement schedules have been omitted as they are not required, not applicable, or the required information is otherwise included[224] - A comprehensive list of exhibits, including organizational documents, compensation agreements, lease agreements, and various SEC filings, is provided[225][226][227][228] Item 16. Form 10-K Summary The company has not provided a Form 10-K Summary - No Form 10-K Summary is provided[229] Signatures The Annual Report on Form 10-K was signed on September 29, 2025, by the CEO, CFO, and directors - The report was signed on September 29, 2025, by Joseph N. Forkey (President and CEO) and Wayne M. Coll (CFO), along with other directors[232]