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 ~~March~~December 31, 2023

☐ 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	04-2795294
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

22 East Broadway, Gardner, Massachusetts 01440-3338

(Address of principal executive offices) (Zip Code)

(978) 630-1800

(Registrants telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None.

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

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	POCI	~~The~~ Nasdaq ~~Stock Market LLC~~

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 and posted 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 the definitions 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	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		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 by Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the ~~issuers~~issuer’s common stock, par value $0.01 per share, at ~~May 15, 2023~~February 9, 2024 was ~~5,640,995~~6,068,518 shares.

PRECISION OPTICS CORPORATION, INC.

Table of Contents

	Page
PART I FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Consolidated Balance Sheets at ~~March~~December 31, 2023 and June 30, ~~2022~~2023	3
Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~March~~December 31, 2023 and 2022	4
Consolidated Statements of Stockholders’ Equity for the ~~Nine~~Three Months Ended ~~March~~December 31, 2023 and 2022	5
Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~March~~December 31, 2023 and 2022	6
Notes to Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1613
Item 3. Quantitative and Qualitative Disclosures About Market Risk	2017
Item 4. Controls and Procedures	2017

PART II OTHER INFORMATION	2118
Item 1. Legal Proceedings	2118
Item 1A. Risk Factors	2118
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	2118
Item 3. Defaults Upon Senior Securities	2118
Item 4. Mine Safety Disclosures (Not applicable.)	2118
Item 5. Other Information	2118
Item 6. Exhibits	2219

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


	March 31,			June 30,			December 31,			June 30,
	2023			2022			2023			2023
ASSETS
Current Assets:
Cash and cash equivalents	$	612,095		$	605,749		$	987,044		$	2,925,852
Accounts receivable, net of allowance for doubtful accounts of $74,593 at March 31, 2023 and $44,135 at June 30, 2022		4,389,907			2,663,872
Accounts receivable, net of allowance for doubtful accounts of $731,256 at December 31, 2023 and $606,715 at June 30, 2023								3,511,544			3,907,407
Inventories		2,959,732			3,079,938			3,099,986			2,776,216
Prepaid expenses		307,663			213,448			234,121			249,681
Total current assets		8,269,397			6,563,007			7,832,695			9,859,156

Fixed Assets:
Machinery and equipment		3,225,483			3,215,412			3,253,746			3,227,481
Leasehold improvements		794,894			786,112			832,305			825,752
Furniture and fixtures		233,547			219,999			362,287			242,865
Total fixed assets		4,253,924			4,221,523			4,448,338			4,296,098
Less—Accumulated depreciation and amortization		3,809,303			3,651,843			3,966,839			3,862,578
Net fixed assets		444,621			569,680			481,499			433,520

Operating lease right-to-use asset		399,007			517,725			275,329			358,437
Patents, net		249,408			229,398			283,643			265,111
Goodwill		8,824,210			8,824,210			8,824,210			8,824,210

TOTAL ASSETS	$	18,186,643		$	16,704,020		$	17,697,376		$	19,740,434

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Current portion of financing lease obligation	$	42,397		$	40,705
Current portion of capital lease obligation							$	44,519		$	43,209
Current maturities of long-term debt		371,429			367,714			513,259			513,259
Current portion of acquisition earn out liabilities		571,838			166,667
Accounts payable		2,649,248			2,239,175			1,675,742			2,432,264
Contract liabilities		1,387,806			905,113
Customer advances								1,158,242			1,174,690
Accrued compensation and other		1,305,678			716,702			747,793			927,521
Operating lease liability		166,316			150,565			173,503			168,677
Total current liabilities		6,494,712			4,586,641			4,313,058			5,259,620

Financing lease obligation, net of current portion		79,701			111,691
Capital lease obligation, net of current portion								45,890			68,482
Long-term debt, net of current maturities and debt issuance costs		1,681,642			1,961,141			1,919,350			2,175,980
Acquisition earn out liability, net of current portion		–			705,892
Operating lease liability, net of current portion		232,691			367,160			101,826			189,760

Stockholders’ Equity:
Common stock, $0.01 par value: 50,000,000 shares authorized; issued and outstanding – 5,640,995 shares at March 31, 2023 and 5,638,302 June 30, 2022		56,410			56,383
Common stock, $0.01 par value: 50,000,000 shares authorized; issued and outstanding – 6,067,518 shares at December 31, 2023 and 6,066,518 at June 30, 2023								60,675			60,665
Additional paid-in capital		57,784,369			57,009,506			60,718,801			60,224,934
Accumulated deficit		(48,142,882	)		(48,094,394	)		(49,462,224	)		(48,239,007	)
Total stockholders’ equity		9,697,897			8,971,495			11,317,252			12,046,592

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	18,186,643		$	16,704,020		$	17,697,376		$	19,740,434

The accompanying notes are an integral part of these consolidated interim financial statements.

PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE ~~THREE AND NINE~~SIX MONTHS ENDED

~~MARCH~~DECEMBER 31, 2023 AND 2022

(UNAUDITED)

Three Months
Ended March 31, Nine Months
Ended March 31,
2023 2022 2023 2022
Revenues $ 5,048,065 $ 4,651,352 $ 16,020,327 $ 10,884,737

Cost of goods sold 3,311,967 2,923,143 10,045,316 7,397,914
Gross profit 1,736,098 1,728,209 5,975,011 3,486,823

Research and development expenses, net 206,375 214,898 660,518 433,248
Selling, general and administrative expenses 2,022,991 1,574,432 5,338,498 3,974,824
Business acquisition expenses – – – 172,174
Total operating expenses 2,229,366 1,789,330 5,999,016 4,580,246

Operating income (loss) (493,268 ) (61,121 ) (24,005 ) (1,093,423 )

Other income (expense)
Interest expense (48,124 ) (52,778 ) (167,443 ) (104,290 )
Gain on revaluation of contingent earn-out liability 142,960 – 142,960 –

Net income (loss) $ (398,432 ) $ (113,899 ) $ (48,488 ) $ (1,197,713 )

Income (loss) per share:
Basic and fully diluted $ (0.07 ) $ (0.02 ) $ (0.01 ) $ (0.23 )

Weighted average common shares outstanding:
Basic and fully diluted 5,640,473 5,600,953 5,639,015 5,181,896

Three Months
Ended December 31, Six Months
Ended December 31,
2023 2022 2023 2022
Revenues $ 4,824,289 $ 5,886,961 $ 9,145,544 $ 10,972,262

Cost of Goods Sold 3,373,313 3,287,489 6,230,957 6,733,349
Gross Profit 1,450,976 2,599,472 2,914,587 4,238,913

Research and Development Expenses 221,728 155,264 434,486 365,891

Selling, General and Administrative Expenses 1,933,410 1,873,143 3,589,556 3,403,759
–
Total Operating Expenses 2,155,138 2,028,407 4,024,042 3,769,650

Operating Income (Loss) (704,162 ) 571,065 (1,109,455 ) 469,263

Interest Expense (54,640 ) (62,397 ) (113,762 ) (119,319 )

Net Income (Loss) $ (758,802 ) $ 508,668 $ (1,223,217 ) $ 349,944

Income (Loss) Per Share:
Basic $ (0.13 ) $ 0.09 $ (0.20 ) $ 0.06
Fully Diluted $ (0.13 ) $ 0.09 $ (0.20 ) $ 0.06

Weighted Average Common Shares Outstanding:
Basic 6,066,572 5,638,302 6,066,545 5,638,302
Fully Diluted 6,066,572 5,935,911 6,066,545 5,937,471

The accompanying notes are an integral part of these consolidated interim financial statements.

4

PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE ~~NINE~~SIX MONTHS ENDED
~~march~~DECEMBER 31, 2023 AND 2022
(UNAUDITED)

Nine Month Period Ended March 31, 2023
Number of
Shares Common
Stock Additional
Paid-in
Capital Common
Stock
Subscribed Accumulated
Deficit Total
Stockholders’
Equity
Balance, July 1, 2022 5,638,302 $ 56,383 $ 57,009,506 $ – $ (48,094,394 ) $ 8,971,495
Stock-based compensation – – 74,990 – – 74,990
Net loss – – – – (158,724 ) (158,724 )
Balance, September 30, 2022 5,638,302 56,383 57,084,496 – (48,253,118 ) 8,887,761
Stock-based compensation – – 244,786 – – 244,786
Net Income – – – – 508,668 508,668
Balance, December 31, 2022 5,638,302 56,383 57,329,282 – (47,744,450 ) 9,641,215
Stock-based compensation – – 450,014 – – 450,014
Proceeds from exercise of stock option 2,000 20 5,080 – – 5,100
Exercise of stock options net of 307 shares withheld 693 7 (7 ) – – –
Net loss – – – – (398,432 ) (398,432 )
Balance, March 31, 2023 5,640,995 $ 56,410 $ 57,784,369 $ – $ (48,142,882 ) $ 9,697,897

Nine Month Period Ended March 31, 2022
Number of
Shares Common
Stock Additional
Paid-in
Capital Common
Stock
Subscribed Accumulated
Deficit Total
Stockholders’
Equity
Balance, July 1, 2021 4,427,432 $ 44,274 $ 50,552,831 $ – $ (47,165,978 ) $ 3,431,127
Stock-based compensation – – 160,071 – – 160,071
Proceeds from private placement of common stock subscribed, net of estimated issuance costs of $10,000 – – (10,000 ) 1,030,000 – 1,020,000
Net loss – – – – (576,801 ) (576,801 )
Balance, September 30, 2021 4,427,432 44,274 50,702,902 1,030,000 (47,742,779 ) 4,034,397
Stock-based compensation – – 330,451 – – 330,451
Proceeds from private placement of common stock 312,500 3,125 1,496,875 (1,030,000 ) – 470,000
Issuance of common stock in business acquisition 833,333 8,333 4,816,667 – – 4,825,000
Proceeds from exercise of stock option 5,000 50 16,600 – – 16,650
Exercise of stock options net of 478 shares withheld 875 9 (9 ) – – –
Issuance of common stock for employee services 3,031 30 19,970 – – 20,000
Net loss – – – – (507,013 ) (507,013 )
Balance, December 31, 2021 5,582,171 55,821 57,383,456 – (48,249,792 ) 9,189,485
Correction of error in valuation of stock issued in business acquisition – – (825,000 ) – – (825,000 )
Stock-based compensation – – 231,115 – – 231,115
Proceeds from exercise of stock options 14,400 144 46,496 – – 46,640
Exercise of stock options net of 32,018 shares withheld 32,648 327 (327 ) – – –
Net loss – – – – (113,899 ) (113,899 )
Balance, March 31, 2022 5,629,219 $ 56,292 $ 56,835,740 $ – $ (48,363,691 ) $ 8,528,341

Six Month Period Ended December 31, 2023
Number of
Shares Common
Stock Additional
Paid-in
Capital
Common
Stock
Subscribed
Accumulated
Deficit Total
Stockholders’
Equity
Balance, July 1, 2023 6,066,518 $ 60,665 $ 60,224,934 $ – $ (48,239,007 ) $ 12,046,592
Stock-based compensation – – 108,746 – – 108,746
Net loss – – – – (464,415 ) (464,415 )
Balance, September 30, 2023 6,066,518 60,665 60,333,680 – (48,703,422 ) 11,690,923
Stock-based compensation – – 382,431 – – 382,431
Proceeds from the exercise of stock options 1,000 10 2,690 – – 2,700
Net loss – – – – (758,802 ) (758,802 )
Balance, December 31, 2023 6,067,518 $ 60,675 $ 60,718,801 $ – $ (49,462,224 ) $ 11,317,252

Six Month Period Ended December 31, 2022
Number of
Shares Common
Stock Additional
Paid-in
Capital
Common
Stock
Subscribed
Accumulated
Deficit Total
Stockholders’
Equity
Balance, July 1, 2022 5,683,302 $ 56,834 $ 57,009,506 $ – $ (48,094,394 ) $ 8,971,946
Stock-based compensation – – 74,990 – – 74,990
Net loss – – – – (158,724 ) (158,724 )
Balance, September 30, 2022 5,683,302 56,834 $ 57,084,496 – (48,253,118 ) 8,888,212
Stock-based compensation – – 244,786 – – 244,786
Net income – – – – 508,668 508,668
Balance, December 31, 2022 5,683,302 $ 56,834 $ 57,329,282 $ – $ (47,744,450 ) $ 9,641,666
The accompanying notes are an integral part of these consolidated interim financial statements.
5
PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
DECEMBER 31, 2023 AND 2022
(UNAUDITED)

Six Months
Ended December 31,
2023 2022
Cash Flows from Operating Activities:
Net Income (Loss) $ (1,223,217 ) $ 349,944
Adjustments to reconcile net loss to net cash used in by operating activities -
Depreciation and amortization 104,261 104,750
Stock-based compensation expense 491,177 319,776
Non-cash interest expense 8,752 16,966
Changes in operating assets and liabilities -
Accounts receivable, net 395,863 (1,368,650 )
Inventories, net (323,770 ) 232,963
Prepaid expenses 15,560 271
Accounts payable (756,522 ) 216,060
Customer advances (16,448 ) (110,132 )
Accrued compensation and other (188,480 ) 255,162
Net cash (used in) provided by operating activities (1,492,824 ) 17,110

Cash Flows from Investing Activities:
Purchases of fixed assets (152,240 ) (13,583 )
Additional patent costs (18,532 ) (24,054 )
Net cash used in investing activities (170,772 ) (37,637 )

Cash Flows from Financing Activities:
Payments of capital lease obligations (21,282 ) (20,049 )
Payments of long-term debt (256,630 ) (183,855 )
Gross proceeds from the exercise of stock options 2,700 –
Net cash used in financing activities (275,212 ) (203,904 )

Net (decrease) increase in cash and cash equivalents (1,938,808 ) (224,431 )
Cash and cash equivalents, beginning of period 2,925,852 605,749

Cash and cash equivalents, end of period $ 987,044 $ 381,318
The accompanying notes are an integral part of these consolidated interim financial statements.

5
~~PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES~~
~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~
~~FOR THE NINE MONTHS ENDED~~
~~mARCH 31~~~~, 2023 AND 2022~~
~~(UNAUDITED)~~

Nine Months Ended
March 31,
2023 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (48,488 ) $ (1,197,713 )
Adjustments to Reconcile Net Loss to Net Cash Used In Operating Activities -
Gain on revaluation of contingent earn-out liability (142,960 ) –
Depreciation and amortization 157,460 173,887
Stock-based compensation expense 769,790 741,637
Non-cash interest expense 8,906 –
Changes in Operating Assets and Liabilities, net of effects of business acquisition -
Accounts receivable, net (1,726,035 ) (791,959 )
Inventories, net 120,206 (623,817 )
Due from related party – 84,210
Prepaid expenses (94,215 ) (85,791 )
Accounts payable 410,073 1,118,149
Customer advances 482,693 (258,487 )
Accrued compensation and other 588,976 (40,083 )
Net Cash Provided By (Used In) Operating Activities 526,406 (879,967 )

CASH FLOWS FROM INVESTING ACTIVITIES:
Additional patent costs (20,010 ) (23,098 )
Purchases of fixed assets (32,401 ) (59,562 )
Acquisition of business – (421,729 )
Net Cash Used In Investing Activities (52,411 ) (504,389 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of financing lease obligation (30,298 ) (28,546 )
Payments of long-term debt (275,784 ) (154,453 )
Payment of debt issuance costs – (26,000 )
Payment of acquisition earn-out liability (166,667 ) –
Gross proceeds from private placement of common stock – 1,500,000
Gross proceeds from exercise of stock options 5,100 63,290
Net Cash (Used In) Provided By Financing Activities (467,649 ) 1,354,291

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6,346 (30,065 )
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 605,749 861,650

CASH AND CASH EQUIVALENTS, END OF PERIOD $ 612,095 $ 831,585

SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Offering costs included in accrued compensation and other $ – $ 10,000
Issuance of common stock for services $ – $ –
Acquisition of business financed with long-term debt $ – $ 2,600,000
~~The accompanying notes are an integral part of these consolidated interim financial statements.~~
6

PRECISION OPTICS CORPORATION, INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Operations

The accompanying consolidated financial statements include the accounts of Precision Optics Corporation, Inc. and its wholly-owned subsidiaries (the “Company”). All significant intercompany accounts and transactions have been eliminated in consolidation.

These consolidated financial statements have been prepared by the Company, without audit, and reflect normal recurring adjustments which, in the opinion of management, are necessary for a fair statement of the results of the ~~third quarter and nine~~first six months of the Company’s fiscal year ~~2023.~~2024. These consolidated financial statements do not include all disclosures associated with annual consolidated financial statements and, accordingly, should be read in conjunction with footnotes contained in the Company’s consolidated financial statements for the year ended June 30, ~~2022,~~2023, together with the Report of Independent Registered Public Accounting Firm filed under cover of the Company’s ~~2022~~2023 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on September ~~27, 2022.~~28, 2023.
~~Reclassifications~~
~~Certain reclassifications have been made to conform the prior period consolidated financial statements to the current period.~~
~~Reverse Stock Split~~
The Company’s Board of Directors authorized a reverse split of the Company’s outstanding shares of common stock within a stated range of 1:1.5 to 1:3, which was subsequently approved by stockholders holding more than a majority of the outstanding shares of Common Stock at the Company’s Annual Meeting on April 8, 2022. The Company effected the reverse stock split on a ~~one-for-three~~ ~~basis on November 1, 2022 as reported by the Company on Form 8-K filed with the Securities and Exchange Commission on November 2, 2022.~~
As a result of the reverse stock split, every three shares of issued and outstanding common stock were automatically combined into one issued and outstanding share of common stock, without any change in the par value per share or the number of the Company’s authorized shares. The reverse stock split reduced the number of shares of common stock outstanding from ~~16,915,089~~ ~~on November 1, 2022 to approximately~~ ~~5,638,302~~ ~~shares, after reduction for the elimination of fractional shares.~~
Unless otherwise noted, all prior year share amounts and per share calculations throughout this Form 10-Q have been restated to reflect the impact of this 1:3 reverse stock split and to provide data on a comparable basis. Such restatements include calculations regarding the Company’s weighted-average shares, and earnings per share, as well as disclosures regarding the Company’s stock-based compensation plans.
7

Use of Estimates

The preparation of these consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Income (Loss) Per Share

Basic income (loss) per share is computed by dividing net income or net loss by the weighted average number of shares of common stock outstanding during the period. Diluted income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period, plus the number of potentially dilutive securities outstanding during the period such as stock options. For the three months and ~~nine~~six months ended ~~March~~December 31, 2023, ~~and 2022,~~potentially dilutive securities outstanding have been excluded from the ~~effect~~computations of weighted-average shares outstanding because such securities ~~was~~have an antidilutive ~~and not included in the fully diluted calculation because of~~impact due to the net loss ~~generated~~reported during those periods.
~~The following is the calculation of income (loss) per share for the three and nine months ended March 31, 2023 and 2022:~~
Schedule of earnings per share
Three Months
Ended March 31, Nine Months
Ended March 31,
2023 2022 2023 2022
Net Income (Loss) - Basic and Diluted $ (398,432 ) $ (113,899 ) $ (48,488 ) $ (1,197,713 )

Weighted Average Shares Outstanding
Basic and Fully Diluted 5,640,473 5,600,953 5,639,015 5,181,896

Income (Loss) Per Share
Basic and Fully Diluted $ (0.07 ) $ (0.02 ) $ (0.01 ) $ (0.23 )
The number of shares issuable upon the exercise of outstanding stock options that were excluded from the computation ~~as their effect~~of fully dilutive weighted average shares outstanding was ~~antidilutive was~~approximately ~~1,058,630~~1,256,141 for the three and ~~nine~~six months ended ~~March~~December 31, ~~2023, respectively, and~~ ~~939,166~~2023.
7
The following is the calculation of income (loss) per share for the three months and ~~nine~~six months ended ~~March~~December 31, ~~2022.~~2023 and 2022:
Schedule of income (loss) per share
Three Months
Ended December 31, Six Months
Ended December 31,
2023 2022 2023 2022
Net Income (Loss) Basic and Fully Diluted $ (758,802 ) $ 508,668 $ (1,223,217 ) $ 349,944

Weighted Average Shares Outstanding
Basic 6,066,572 5,638,302 6,066,545 5,638,302
Fully Diluted 6,066,572 5,935,911 6,066,545 5,937,471

Income (Loss) Per Share – Basic $ (0.13 ) $ 0.09 $ (0.20 ) $ 0.06
Income (Loss) Per Share - Fully Diluted $ (0.13 ) $ 0.09 $ (0.20 ) $ 0.06

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

In assessing the likelihood of utilization of existing deferred tax assets, management has considered historical results of operations and the current operating environment. Based on this evaluation, a full valuation reserve has been provided for the deferred tax assets.

8
Goodwill and Patents

Long-lived assets such as goodwill and patents are capitalized when acquired and reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. Impairment of the carrying value of long-lived assets such as goodwill and patents would be indicated if the best estimate of future undiscounted cash flows expected to be generated by the asset grouping is less than its carrying value. If an impairment is indicated, any loss is measured as the difference between estimated fair value and carrying value and is recognized in operating income or loss. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. No such impairments of goodwill or patents have been estimated by management as of ~~March~~December 31, 2023.
2. ~~REVISION OF THE FIRST AND SECOND QUARTER FISCAL YEAR 2023 UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
During the third quarter of fiscal year 2023, the Company identified errors in the accrual of certain costs for the fiscal quarters ended September 30, 2022 and December 31, 2022, which resulted in an understatement of accounts payable and costs of goods sold for those two quarters. The corrections of these errors impacted the unaudited condensed consolidated financial statements for the first and second quarters of fiscal year 2023. The Company assessed the applicable guidance issued by the Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB) and concluded these misstatements were not material, individually or in the aggregate, to its unaudited condensed consolidated financial statements for the aforementioned interim periods. However, because of the significance of these items, and to facilitate comparisons among periods, the Company decided to revise the previously issued first and second quarter unaudited condensed consolidated financial information by increasing accounts payable and cost of goods sold by $85,213 and 125,752 in the quarters ended September 30, 2022 and December 31, 2022, respectively. These quarterly and year to date financial statements will be revised in subsequent filings with the Securities and Exchange Commission that include such statements, including when the first and second quarter Form 10-Q’s are filed for fiscal year 2024.
Accumulated deficit at January 1, 2023 in the accompanying statement of stockholders’ equity for the quarter ended March 31, 2023 was made larger by $210,965 due to the effects of the increased expense accruals for the first and second quarters of fiscal year 2023.
~~The following are selected line items from the financial statements illustrating the effect of the error corrections for the quarters ended September 30, 2022 and December 31, 2022:~~
Schedule of error corrections Quarter Ended September 30, 2022
As Previously Reported Adjustment(1) As Revised
Revenues $ 5,085,301 $ – $ 5,085,301
Cost of goods sold 3,360,647 85,213 3,445,860
Gross Profit 1,724,654 (85,213 ) 1,639,441
Operating loss (16,589 ) (85,213 ) (101,802 )
Net loss (73,511 ) (85,213 ) (158,724 )
Net loss per share, basic and fully diluted (0.01 ) (0.02 ) (0.03 )
9
Quarter Ended December 31, 2022
As Previously Reported Adjustment(1) As Revised
Revenues $ 5,886,961 $ – $ 5,886,961
Cost of goods sold 3,161,737 125,752 3,287,489
Gross Profit 2,725,224 (125,752 ) 2,599,472
Operating income 696,817 (125,752 ) 571,065
Net income 634,420 (125,752 ) 508,668
Net income per share, basic 0.11 (0.02 ) 0.09
Net income per share, fully diluted 0.11 (0.02 ) 0.09
~~(1)~~ The errors in each of the two fiscal quarters resulted from the omission of invoices from a small identifiable group of outside contractors used for certain services relating to research and development activities. In addition to the above adjustments, trade accounts payable will be increased in future filings by $85,213 and $210,965 as of September 30, 2022 and December 31, 2022, respectively.

3. ~~BUSINESS ACQUISITION~~
On October 4, 2021, the Company acquired substantially all of the assets of Lighthouse Imaging, LLC, of Windham, Maine, a medical optics and digital imaging business operating as a designer and manufacturer of advanced optical imaging systems and accessories with a strong expertise in electrical engineering and development of end-to-end medical visualization devices. The actual results of operations of the Lighthouse division are included in the accompanying consolidated financial statements as of, and for the three and nine months ended, March 31, 2023, and for the six months ended March 31, 2022.
~~The purchase price for Lighthouse Imaging included $1,500,000~~ as potential earn-out consideration over the subsequent two year period, contingent on the Lighthouse division meeting specified annual gross profit targets. The Lighthouse division did not meet the target for the first $~~750,000~~ ~~portion of the earn-out, and the contingent liability associated with that portion was reversed and recognized as other income in the fiscal quarter ended June 30, 2022.~~
~~The second $750,000~~ ~~portion of the earn-out contingent liability was renegotiated in March 2023 and adjusted to $600,000~~ ~~in return for modifications to the target level of gross profit for the second earnout period. The $150,000~~ ~~reduction in the contingent earn-out liability was recognized as other income in the fiscal quarter ended March 31, 2023. The second portion of the contingent earn-out liability of $600,000~~ ~~will be paid if the adjusted target level of gross profit is earned by the Lighthouse division for the period from October 1, 2022 through September 30, 2023.~~
Consolidated unaudited actual and pro forma results of operations for the Company are presented below assuming that the acquisition of the Lighthouse division had occurred on July 1, 2021. Pro forma operating results include net adjustments resulting from the acquisition transaction during the three months ended September 30, 2021.
Schedule of consolidated pro forma results
Three Months
Ended March 31, Nine Months
Ended March 31,
2023 2022 2023 2022
(Actual) (Actual) (Actual) (Pro Forma)
Revenues $ 5,048,065 $ 4,651,352 $ 16,020,327 $ 12,329,074
Net loss (398,432 ) (113,899 ) (48,488 ) (1,140,418 )
Net loss per share:
Basic and fully diluted $ (0.07 ) $ (0.02 ) $ (0.01 ) $ (0.20 )
Pro forma financial information is not necessarily indicative of the Company’s actual results of operations if the acquisition had been completed at the date indicated, nor is it necessarily an indication of future operating results. Amounts do not include any operating efficiencies or cost saving that the Company believes may be achievable.
10
4.2. INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out) or market and consisted of the following:
Schedule of inventory
Schedule of inventories
March 31,
2023 June 30,
2022 December 31,
2023 June 30,
2023
Raw Materials $ 1,402,292 $ 1,414,996 $ 1,532,752 $ 1,142,816
Work-In-Progress 393,078 518,251 483,960 322,538
Finished Goods 1,164,362 1,146,691 1,083,274 1,310,862
Total Inventories $ 2,959,732 $ 3,079,938 $ 3,099,986 $ 2,776,216
8

5.3. BANK FINANCING ACTIVITIES

Bank Line of Credit

On October 4, 2021, the Company entered into a Loan Agreement with Main Street Bank of Marlborough, Massachusetts, which provided for a $2,600,000 Term Loan and a $~~250,000~~$250,000 Revolving Line of Credit Loan Facility (the “Revolver”), which was increased to $500,000 effective May 17, ~~2022. The~~2022 and $~~500,000~~1,250,000 ~~line of credit is due on demand and had no borrowings outstanding at March 31,~~effective June 2, 2023. Borrowings under the ~~line~~Revolver are limited by the borrowing base comprised of ~~credit~~a percentage of accounts receivable and inventory and secured by all assets of the Company. Borrowings under the Revolver will bear interest payable monthly at the prime lending rate plus 1.5% per annum or ~~9.50% as of March 31, 2023,~~ and shall not be less than 4.75% per annum. Borrowings under the ~~line of credit~~Revolver are ~~limited~~due upon demand. At December 31, 2023 the Revolver was unutilized and fully available to ~~the borrowing base comprised of a percentage of eligible accounts receivable and inventory and are secured by all the assets of~~ the Company.

Long-Term Debt

Long-term debt consists of the following at ~~March~~December 31, 2023:
Schedule of long-term debt
Amount
Term Loan Note payable to Main Street Bank with monthly principal payments of $30,952 plus interest at the rate of 7.00% as of March 31, 2023 is secured by all assets of the Company, and subject to certain periodic reporting to the bank, an annual minimum EBITDA plus stock based compensation to debt service coverage ratio of 1.20:1 commencing with the fiscal year ending June 30, 2023, and other conditions. The Term Loan Note matures on October 15, 2028. $ 2,073,808

Less current maturities (371,429 )
Less debt issuance costs, net of accumulated amortization of $2,789 (20,737 )
Long-term debt, net of current portion of debt issuance costs $ 1,681,642
Schedule of long-term debt
Amount
Term Loan Note payable to Main Street Bank with monthly principal payments of $30,952.38 plus interest at a fixed rate of 7.0% per annum. Secured by all assets of the Company, and subject to certain periodic reporting to the bank and other conditions including an annual minimum EBITDA plus stock-based compensation to debt service coverage ratio of 1.20:1 commencing with the fiscal year ending June 30, 2023. The Term Loan Note matures on October 15, 2028. $ 1,795,238

Permanent Working Capital Loan payable to Main Street Bank with monthly principal payments of $12,500 plus interest at a fixed rate of 8.625% per annum. Secured by all assets of the Company, and subject to certain periodic reporting to the bank and other conditions including an annual minimum EBITDA plus stock-based compensation to debt service coverage ratio of 1.20:1 commencing with the fiscal year ending June 30, 2023. The Permanent Working Capital Loan matures on June 15, 2028. 675,000

Less current maturities (513,259 )
Less debt issuance costs, net of accumulated amortization of $10,275 (37,629 )
Long-term debt, net of current maturities and debt issuance costs $ 1,919,350

At ~~March~~December 31, 2023 principal payments due on the Term Loan Note payable are as follows:
Schedule of principal payments due term loan note payable
Schedule of principal payments due on the term loan note payable
Fiscal Year Ending June 30:
2023 $ 92,856
2024 371,429 $ 256,630
2025 371,429 513,259
2026 371,429 513,259
2027 371,429 513,259
2028 513,259
Thereafter 495,236 160,573
Total long term debt $ 2,073,808 $ 2,470,238

119

6.4. LEASE OBLIGATIONS

In March 2021 the Company entered into a five-year ~~financing~~capital lease in the amount of $161,977 for manufacturing equipment. In January 2020, the Company entered into a five-year ~~financing~~capital lease for $47,750 for manufacturing equipment. The net book value of fixed assets under ~~financing~~capital lease obligations as of ~~March~~December 31, 2023 is $~~114,695~~83,535.

On July 1, 2019, the Company entered into a three-year operating lease for its facility in El Paso, Texas, and in February 2022 the Company entered into an extension of the lease for an additional three years through June 2025. Remaining minimum lease payments at ~~March~~December 31, 2023 total $~~101,928~~66,087. Total rent expense including base rent and common area expenses was $~~15,973~~36,288 and $~~15,705~~35,589 during the ~~three~~six months ended ~~March~~December 31, 2023 and 2022, respectively.
On October 4, 2021, the Company assumed the remaining term of the Windham, Maine lease as part of the Lighthouse acquisition. The lease expires on July 31, 2025. Remaining minimum lease payments ~~at March~~on December 31, 2023 total $~~321,365~~209,242. Total rent expense including base rent and common area expenses was $~~36,495~~68,864 and 70,034 during the ~~three~~six months ended ~~March~~December 31, ~~2023.~~
2023 and 2022, respectively. Included in the accompanying balance sheet at ~~March~~December 31, 2023 is a right-of-use asset of $~~399,007~~275,329 and current and long-term right-of-use operating lease liabilities of $~~166,316~~173,503 and $~~232,691~~101,826, respectively.

At ~~March~~December 31, 2023 future minimum lease payments under the ~~financing~~capital lease and operating lease obligations are as follows:
Future minimum lease payments
Schedule of future minimum lease payments
Fiscal Year Ending June 30: Financing Leases Operating Lease Capital Leases Operating Lease
2023 $ 12,155 $ 45,389
2024 48,619 182,652 $ 24,309 $ 85,330
2025 43,917 183,775 43,918 178,569
2026 28,028 11,477 28,028 11,430
2027 – –
Total Minimum Payments 132,719 $ 423,293 96,255 $ 275,329
Less: amount representing interest 10,621 5,846
Present value of minimum lease payments 122,098 90,409
Less: current portion 42,397 44,519
$ 79,701
Lease Obligation, net of current portion $ 45,890

The Company’s operating leases for its Gardner, Massachusetts office, production and storage spaces plus an equipment lease have expired and ~~are continuing~~continue on a month-to-month ~~tenant at will~~tenant-at-will basis. Rent expense on these operating leases was $~~150,862~~97,581 and $~~152,078~~95,511 for the ~~nine~~six months ended ~~March~~December 31, 2023 and 2022, respectively.

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7.5. STOCK-BASED COMPENSATION

Stock Options

The following table summarizes stock-based compensation expense for the three ~~and nine~~ months ended ~~March~~December 31, 2023 and ~~2022:~~ 2022. The share amounts and prices shown below reflect adjustment for a 1-for-3 reverse stock split that took effect after the close of business on November 1, 2022.
Schedule of stock-based compensation expense
Three Months
Ended March 31, Nine Months
Ended March 31,
2023 2022 2023 2022
Cost of Goods Sold $ 9,556 $ 34,712 $ 25,410 $ 91,542
Research and Development 41,140 70,237 122,198 164,036
Selling, General and Administrative 399,318 126,166 622,182 466,059
Stock Based Compensation Expense $ 450,014 $ 231,115 $ 769,790 $ 721,637

The following table summarizes stock-based compensation expense for the three and six months ended December 31, 2022 and 2021:
Schedule of stock-based compensation expense
Three Months
Ended December 31, Six Months
Ended December 31,
2023 2022 2023 2022
Cost of Goods Sold $ 21,876 $ 9,556 $ 44,502 $ 15,854
Research and Development – 50,302 – 81,058
Selling, General and Administrative 360,555 184,928 446,675 222,864
Stock Based Compensation Expense $ 382,431 $ 244,786 $ 491,177 $ 319,776
No compensation has been capitalized because such amounts would have been immaterial.

10
The following tables summarize stock option activity for the ~~nine~~three months ended ~~March~~December 31, 2023:
Schedule of stock option activity
Options Outstanding
Number of
Shares Weighted Average
Exercise Price Weighted Average
Contractual Life
Outstanding at June 30, 2022 904,626 $ 4.00 7.08 years
Exercised (3,000 ) 2.55 –
Granted 179,003 6.03 –
Cancelled (21,999 ) 5.84 –
Outstanding at March 31, 2023 1,058,630 $ 4.31 6.79 years
13
Schedule of stock option activity
Options Outstanding
Number of
Shares Weighted Average
Exercise Price Weighted Average
Contractual Life
Outstanding at June 30, 2023 1,127,140 $ 4.54 6.88 years
Granted 135,000 5.95 –
Exercised (1,000 ) 2.70 –
Cancelled, forfeited, or expired (4,999 ) 6.00
Outstanding at December 31, 2023 1,256,141 $ 4.65 6.98 years

Information related to the stock options outstanding as of ~~March~~December 31, 2023 is as follows:
Schedule of stock options outstanding by exercise price range
Range of
Exercise Prices Number of
Shares Weighted-
Average
Remaining
Contractual Life
(years) Weighted-
Average
Exercise Price Exercisable
Number of
Shares Exercisable
Weighted-
Average
Exercise Price
$ 1.44 20,000 3.00 $ 1.44 20,000 $ 1.44
$ 1.50 26,666 3.22 $ 1.50 26,666 $ 1.50
$ 1.65 5,000 5.01 $ 1.65 5,000 $ 1.65
$ 2.10 33,333 5.35 $ 2.10 33,333 $ 2.10
$ 2.19 208,996 3.92 $ 2.19 208,996 $ 2.19
$ 2.70 12,000 1.19 $ 2.70 12,000 $ 2.70
$ 3.75 15,000 6.97 $ 3.75 15,000 $ 3.75
$ 3.90 146,325 6.20 $ 3.90 146,325 $ 3.90
$ 4.20 23,332 7.64 $ 4.20 23,332 $ 4.20
$ 4.26 33,333 6.45 $ 4.26 33,333 $ 4.26
$ 4.35 1,666 7.94 $ 4.35 1,666 $ 4.35
$ 4.50 23,332 6.69 $ 4.50 23,332 $ 4.50
$ 5.04 179,997 8.18 $ 5.04 179,997 $ 5.04
$ 5.43 10,000 8.51 $ 5.43 10,000 $ 5.43
$ 5.61 10,000 9.12 $ 5.61 – $ –
$ 5.85 58,336 8.76 $ 5.85 2,780 $ 5.85
$ 5.93 4,000 9.78 $ 5.93 4,000 $ 5.93
$ 6.00 29,997 7.97 $ 6.00 10,000 $ 6.00
$ 6.26 90,000 9.75 $ 6.26 90,000 $ 6.26
$ 6.27 80,653 8.86 $ 6.27 26,884 $ 6.27
$ 6.78 46,664 8.64 $ 6.78 35,554 $ 6.78
1.44–6.78 1,058,630 6.79 $ 4.31 908,198 $ 4.02

The aggregate intrinsic value of the Company’s in-the-money outstanding and exercisable options as of ~~March~~December 31, 2023 was $~~2,623,768~~1,874,731 and $~~2,515,877~~1,872,040, respectively.

8.6. REVENUE RECOGNITION

~~Revenues~~The Company determines revenue recognition for arrangements that we determine are ~~recognized as~~within the scope of Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers,” or ASC 606, by performing the following five steps: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to ~~deliver products~~the performance obligations in the contract; and (v) recognize revenue when, or as, we satisfy the performance obligations. At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within the contract and determine those that are ~~satisfied~~performance obligations and ~~are recorded~~assess whether each promised good or service is distinct based on the contract.
The Company disaggregates revenues by product and service types as it believes best depicts how the nature, amount, timing and uncertainty of ~~consideration the Company expects to receive in exchange for satisfying the performance obligations. Most~~revenues and cash flows are affected by economic factors. Revenues are comprised of the ~~Company’s products~~following for the three and ~~services are marketed to medical device companies with over 93% of all revenues to customers in the United States. Products~~six months ended December 31, 2023 and ~~services are primarily transferred to customers at a point in time based upon when services are performed or product is shipped.~~ 2022:
Schedule of disaggregation revenues
Three Months
Ended December 31, Six Months
Ended December 31,
2023 2022 2023 2022
Engineering Design Services $ 2,265,217 $ 1,701,611 $ 4,166,216 $ 3,344,578
Optical Components 1,979,875 2,580,140 3,883,186 5,232,821
Medical Device Products and Assemblies 579,197 1,005,210 1,096,142 1,794,863
Technology Rights – 600,000 – 600,000
Total Revenues $ 4,824,289 $ 5,886,961 $ 9,145,544 $ 10,972,262
Other selling costs to obtain and fulfill contracts are expensed as incurred due to the short-term nature of a majority of ~~its~~ contracts. The Company extends terms of payment to its customers based on commercially reasonable terms for the markets of its customers, while also considering their credit quality. Shipping and handling costs charged to customers are included in revenue.

Revenue recognition policies for each of the four product and service types appear below.

1411

Engineering Design Services
The Company ~~disaggregates revenues by product~~enters into contractual agreements with our customers, including design services agreements, statements of work and ~~service types~~receive purchase orders for development projects. These agreements provide costs on an estimated basis for the services we have agreed to provide. Engineering Design Services are rendered on a time and materials basis. The Company recognizes revenue as ~~it believes it best depicts how~~customers are invoiced for the ~~nature, amount, timing and uncertainty~~actual engineering services provided in the period. Revenue is also recognized on materials purchased for development projects at the time of ~~revenues and cash flows~~receipt. Engineering Design Services are ~~affected by economic factors. Technology rights revenue represents amounts paid by customers for rights to use~~provided on a best-efforts basis; no warranty is provided as there is no guarantee that the ~~Company’s intellectual property including product designs, patents, and know-how to manufacture and commercialize their products under specified contractual conditions. Revenues are comprised~~work will result in the attainment of the ~~following~~customer’s project objectives. The Company may obtain customer deposits in advance of rendering engineering design services. Customer deposits are treated as contractual liabilities until the terms of customer agreements are satisfied and are not a component of revenue.
Optical Components, Finished Products and Assemblies
The Company provides fixed price quotations to our customers and requires purchase orders for all purchased optical components, medical devices and assemblies. Revenue is recognized at the time title passes to our customer based on our review of the customer contract, generally at the time of shipment from our facilities. Occasionally the Company may enter into “bill and hold” contractual arrangements where title is held by our customers while goods are stored at our facilities for their convenience.
Technology Rights and Royalties
The Company may recognize revenue for the ~~three~~sale of technology rights and ~~nine months ended March 31, 2023~~through the receipt of royalties obtained under a license of our intellectual property. These revenues are recognized in the period in which, in our judgment, they are earned and ~~2022:~~ no longer contingent under the terms and conditions of the relevant customer contract.
Schedule of disaggregation of revenues
Three Months
Ended March 31, Nine Months
Ended March 31,
2023 2022 2023 2022
Engineering Design Services $ 1,400,780 $ 1,532,414 $ 4,745,358 $ 3,659,667
Optical Components 2,609,983 1,927,963 7,842,804 4,873,294
Medical Device Products and Assemblies 1,037,302 1,190,975 2,832,165 2,351,776
Technology Rights – – 600,000 –
Total Revenues $ 5,048,065 $ 4,651,352 $ 16,020,327 $ 10,884,737
Contract Assets and Liabilities

The nature of the Company’s products and services does not generally give rise to contract assets as it typically does not incur costs to fulfill a contract before a product or service is provided to a customer. The Company’s costs to obtain contracts are typically in the form of sales commissions paid to employees. The Company has elected to expense sales commissions associated with obtaining a contract as incurred as the amortization period is generally less than one year. These costs have been recorded in selling, general and administrative expenses. As of ~~March~~December 31, 2023, there were no contract assets recorded in the Company’s Consolidated Balance Sheets.

The Company’s contract liabilities arise from unearned revenue received from customers at inception of contracts or where the timing of billing for services precedes satisfaction of our performance obligations. The Company generally satisfies performance obligations within one year from the ~~contract~~contract’s inception date.

Contract liabilities, which were recorded as customer advances in the Company’s Consolidated Balance Sheets, and unearned revenue are comprised of the following:
Schedule of contract liabilities
Three Months
Ended March 31, Nine Months
Ended March 31,
2023 2022 2023 2022
Contract Liabilities, Beginning of Period $ 794,981 $ 1,137,470 $ 905,113 $450,084
Assumed in Business Acquisition – – – 826,679
Unearned Revenue Received from Customers 1,020,669 774,316 1,917,775 1,388,700
Revenue Recognized (427,844 ) (893,511 ) (1,435,082 ) (1,647,188)
Contract Liabilities, End of Period $ 1,387,806 $ 1,018,275 $ 1,387,806 $1,018,275
Schedule of contract liabilities
Three Months
Ended December 31, Six Months
Ended December 31,
2023 2022 2023 2022
Contract liabilities, beginning of period $ 1,424,983 $ 1,032,891 $ 1,174,690 $ 905,113
Unearned revenue received from customers 272,572 441,493 705,691 897,106
Revenue recognized (539,313 ) (679,403 ) (722,139 ) (1,007,238 )
Contract liabilities, end of period $ 1,158,242 $ 794,981 $ 1,158,242 $ 794,981

9. ~~COVID-19 PANDEMIC~~
The COVID-19 world-wide pandemic that began during the quarter ended March 31, 2020 and the domestic and international impact of policy decisions being made in major countries around the world has had, and could continue to have, an adverse impact on the Company’s sources of supply, current and future orders from its customers, collection of amounts owed to the Company from its customers, its internal operating procedures, and the Company’s overall financial condition.
1512

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

The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and notes to those statements included elsewhere in this Quarterly Report on Form 10-Q for the quarter ended ~~March~~December 31, ~~2032~~2023 and with our audited consolidated financial statements for the year ended June 30, ~~2022~~2023 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on September ~~27, 2022.~~28, 2023.

This Quarterly Report on Form 10-Q contains forward-looking statements. When used in this report, the words anticipate, suggest, estimate, plan, project, continue, ongoing, potential, expect, predict, believe, intend, may, will, should, could, would and similar expressions are intended to identify forward-looking statements. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described in this report, the risks described in our Annual Report on Form 10-K for the year ended June 30, ~~2022~~2023 and other reports we file with the Securities and Exchange Commission. Although we believe the expectations reflected in the forward-looking statements are reasonable, they relate only to events as of the date on which the statements are made. We do not intend to update any of the forward-looking statements after the date of this report to conform these statements to actual results or to changes in our expectations, except as required by law.

Overview

We have been a developer and manufacturer of advanced optical instruments since 1982. Our proprietary medical instrumentation line, ~~includes~~unique custom design and manufacturing capabilities, and expert engineering and development has generated traditional proprietary endoscopes and endocouplers as well as other custom imaging and illumination products for our customers’ use in minimally invasive surgical procedures. ~~Much of our recent development efforts have been targeted at the development of next generation endoscopes.~~ We ~~selectively execute internal research~~design and ~~development programs to develop next generation capabilities for designing and manufacturing~~manufacture 3D endoscopes and very small Microprecision^TM lenses, ~~anticipating future requirements as~~assemblies and complete medical devices to meet the surgical ~~community continues to~~community’s continuing demand for smaller, disposable, and more enhanced imaging systems for minimally invasive surgery.

Effective June 1, 2019 we acquired the operating assets of Ross Optical Industries, Inc. of El Paso, Texas. As Ross Optical Industries ~~of El Paso, Texas~~ we also operate as a supplier of custom optical components and assemblies for military and defense, medical and various other industrial applications. All products sold by us under the Ross Optical name include a custom or catalog optic, which is sourced through our extensive domestic and worldwide network of optical fabrication ~~companies.~~suppliers. Most systems make use of optical lenses, prisms, mirrors and windows and range from individual optical components to complex mechano-optical assemblies. Products often include thin film optical coatings that are applied using our in-house coating department.

AsEffective October 1, 2021 we acquired the operating assets of Lighthouse Imaging, LLC of Windham, ~~Maine we also operate~~Maine. Our Lighthouse Imaging division supplements our operations as a manufacturer of advanced optical imaging systems and ~~accessories. We have a strong~~accessories and has provided further expertise in electrical engineering and development of end-to-end medical visualization devices. Product development competencies at Lighthouse Imaging include Systems, Optical, Mechanical, Electrical and Process Development Engineering. Since the purchase we have integrated these acquired engineering and operational capabilities to provide an expanded, unified offering to our customers. Our product development team has extensive experience developing visualization systems that are used in a variety of clinical applications. Lighthouse Imaging is an industry leader in ~~chip on tip~~chip-on-tip visualization systems.
Approximately 30% our business during the nine months ended March 31, 2023 is from engineering services (primarily relating to the design of medical device optical assemblies), 49% from the sale of both internally manufactured and purchased optical components, and 18% from the manufacture of optical assemblies and sub-assemblies (primarily for medical device instrument applications). Our proprietary medical instrumentation line, unique custom design and manufacturing capabilities, and expert electrical engineering and development services have generated orders for traditional proprietary endoscopes and endocouplers as well as for custom imaging and illumination products for use in minimally invasive surgical procedures. We design and manufacture 3D endoscopes and very small Microprecision^TM ~~lenses, assemblies and complete medical devices to meet the surgical community’s continuing demand for smaller, disposable, and more enhanced imaging systems for minimally invasive surgery.~~
We are registered to the ISO 9001:2015 and ISO 13485:2016 Quality Standards and comply with the FDA Good Manufacturing Practices and the European Union Medical Device Directive for CE marking of our medical products.
16
Our internet websites are www.poci.com, www.rossoptical.com, and www.lighthouseoptics.com. Information on our websites is not intended to be integrated into this report. Investors and others should note that we announce material financial information using our company websites (www.poci.com; www.rossoptical.com; www.lighthouseoptics.com), our investor relations website, SEC filings, press releases, public conference calls and webcasts. Information about Precision Optics, our business, and our results of operations may also be announced by social media posts on our Ross Optical and Lighthouse LinkedIn pages (www.linkedin.com/company/ross-optical-industries/) (https://www.linkedin.com/company/lighthouse-imaging-corporation/) and Twitter feed (http://twitter.com/rossoptical) and on our Lighthouse Facebook page (https://www.facebook.com/lighthouseoptics/).
The information that we post on these social media channels could be deemed to be material information. Therefore, we encourage investors, the media, and others interested in Precision Optics to review the information that we post on these social media channels. These social media channels may be updated from time to time on Precision Optics’ investor relations website. The information on, or accessible through, our websites and social media channels is not incorporated by reference in this Quarterly Report on Form 10-Q.

The markets in which we do business are highly competitive and include both foreign and domestic competitors. Many of our competitors are larger and have substantially greater resources than we do. Furthermore, other domestic or foreign companies, some with greater financial resources than we have, may seek to produce products or services that compete with ours. ~~We routinely outsource specialized production efforts as required to obtain the most cost-effective production.~~ Over the years we have developed extensive experience collaborating with other optical specialists worldwide.

We believe that our future success depends to a large degree on our ability to develop new optical products and services to enhance the performance characteristics and methods of manufacture of existing products. Accordingly, we expect to continue to seek and obtain product-related design and development contracts with customers and to selectively invest our own funds on research and development, particularly in the areas of Microprecision^TM ~~optics, micro medical cameras, illumination, single-use endoscopes and 3D endoscopes.~~

~~Current sales~~
13
The markets for our products have increasingly been driven by the demand for smaller and ~~marketing activities are intended to broaden awareness~~more enhanced imaging systems by the needs of the ~~benefits of our new technology platforms~~surgical community, including applications for the brain, eye, ear, urology, cardiology/angiography and our successful application of these new technologies to medical device projects requiring surgery-grade visualization from sub-millimeter sized devices and 3D endoscopy, including single-use products and assemblies.the spine. We market directly to established medical device companies primarily in the United States that we believe could benefit from our advanced endoscopy visualization systems. Through this direct marketing, referrals, attendance at trade shows and a presence in online professional association websites, we have expanded our on-going pipeline of projects to significant medical device companies as well as well-funded emerging technology companies. We expect our customer pipeline to continue to expand as development projects transition to production orders and new customer projects enter the development phase. Our Ross Optical division markets through existing customers and trade shows, in addition to proactive online marketing strategies executed primarily through its website.
We produce micro-precision optics, which are nominally millimeter sized and smaller cameras with low manufacturing costs. The small size provides visualization for new procedures in new parts of the body and for existing procedures that are currently performed blind or with sub-optimal imaging, facilitating the development of new surgical procedures that are currently impractical. We use patented and patent-pending approaches to fabricating opto-mechanical and opto-electronic systems. We have developed and helped commercialize applications for numerous customers in the medical device and defense/aerospace industries.
We believe that our future success depends to a large degree on our ability to develop new optical products and services to enhance the performance characteristics and methods of manufacture or existing products. Competition amongst medical device companies is increasing with multiple companies now pursuing less expensive, procedure specific robotic systems. We expect to continue to seek and obtain product-related design and development contracts with customers and to selectively invest our own funds on research and development, particularly in the areas of Microprecision™ optics, micro medical cameras, illumination, single-use endoscopes, and 3D endoscopes. We are one of only a handful of companies in the world to design and provide high-quality 3D endoscopes. By designing systems with low manufacturing costs, we have also begun to penetrate the single-use endoscope market. Single-use endoscopes virtually eliminate the potential for patient cross-contamination and support a number of additional operational benefits for hospitals and surgeons. We estimate this segment of the overall minimally invasive surgical market is growing at two to three times the rate of the overall market.
Current sales and marketing activities are intended to broaden awareness of the benefits of our new technology platforms and our successful application of these new technologies to medical device projects requiring surgical-grade visualization from millimeter sized devices and 3D endoscopy, including single-use products and assemblies.
We are registered to the ISO 9001:2015 and ISO 13485:2016 Quality Standards and comply with the FDA Good Manufacturing Practices.
Our websites are www.poci.com, www.rossoptical.com, and www.lighthouseoptics.com. The information contained on our websites does not constitute part of this report.

General

This management’s discussion and analysis of financial condition and results of operations is based upon our unaudited consolidated financial statements, which have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and ~~expenses.~~expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these ~~estimates.~~estimates under different assumptions or conditions and any such differences may be material.

There have been no significant changes in our critical accounting policies as disclosed in the Notes to our Financial Statements contained in our Annual Report on Form 10-K for the year ended June 30, ~~2022~~2023 filed with the Securities and Exchange Commission on September ~~27, 2022.~~
~~Results of Operations~~
Our total revenues for the quarter ended March 31, 2023, were $5,048,065, as compared to $4,651,352 for the same period in the prior year, an increase of $396,713, or 8.5%, primarily due to an increase in component revenue to a large defense contractor. Other fluctuations in revenue categories were considered customary during the quarter ended March 31, 2023 when compared to the same quarter of the prior fiscal year.28, 2023.

1714

Results of Operations
~~Our total~~
Revenue
Three Months
Ended December 31,
2023 Percent
of Sales 2022 Percent
of Sales Increase
(Decrease) Percent
Change
Engineering Design Services 2,265,217 47.0 1,701,611 28.9 563,606 33.1
Optical Components 1,979,875 41.0 2,580,140 43.8 (600,265 ) (23.3 )
Finished Products and Assemblies 579,197 12.0 1,005,210 17.1 (426,013 ) (42.4 )
Technology Rights – – 600,000 10.2 (600,000 ) (100.0 )
Total Revenues 4,824,289 100.0 5,886,961 100.0 (1,062,672 ) (18.1 )
Six Months
Ended December 31,
2023 Percent
of Sales 2022 Percent
of Sales Increase
(Decrease) Percent
Change
Engineering Design Services 4,166,216 45.6 3,344,578 30.5 821,638 24.6
Optical Components 3,883,186 42.4 5,232,821 47.7 (1,349,635 ) (25.8 )
Finished Products and Assemblies 1,096,142 12.0 1,794,863 16.4 (698,721 ) (38.9 )
Technology Rights – – 600,000 5.4 (600,000 ) (100.0 )
Total Revenues 9,145,544 100.0 10,972,262 100.0 (1,826,718 ) (16.6 )
Total revenues for the ~~nine months~~quarter ended ~~March~~December 31, 2023 were ~~$16,020,327,~~$4,824,289, as compared to ~~$10,884,737~~$5,886,961 for the same period in the prior year, ~~an increase of $5,135,590, or 47.2% due in part to~~and for the inclusion of the Lighthouse division since its acquisition on October 4, 2021, increases in component sales in the El Paso and Gardner locations, an increase in engineering revenues, and one-time technology rights revenue in the quartersix months ended December 31, ~~2022.~~
Our two largest customers accounted for 13.0% and 8.4% of our revenue during the quarter ended March 31, 2023, and 8.0% and 13.1%, respectively, of our revenue during the nine months ended March 31, 2023. One of our two largest customers is a defense/aerospace company and the other is a medical device company. We generated revenues from 318 unique customers during the nine months ended March 31, 2023, and no other customer represented over 10% of our revenue during the three and nine months ended March 31, 2023.
The COVID-19 world-wide pandemic that began during the quarter ended March 31, 2020 and the domestic and international impact of policy decisions being made in major countries around the world has had, and could continue to have, an adverse impact on our sources of supply, current and future orders from our customers, collection of amounts owed to us from our customers, our internal operating procedures, and our overall financial condition.
~~Gross profit for the quarter ended March 31,~~ 2023 was $1,736,098, compared to $1,728,209 for the same period in the prior year, an increase of $7,889. Gross profit for the quarter ended March 31, 2023 as a percentage of our revenues was 34.4%, an decrease from the gross profit percentage of 37.2% for the same period in the prior year. Gross profit for the nine months ended March 31, 2023 was $5,975,011$9,145,544 as compared to $3,486,823 for the same period in the prior year, an increase of $2,488,188 or 71.4%. Gross profit for the nine months ended March 31, 2023 as a percentage of our revenues was 37.3%, an increase from the gross profit percentage of 32.0% for the same period in the prior year. Quarterly gross profit and gross profit percentage depend on a number of factors, including overall sales volume, facility utilization, product sales mix, the costs of engineering services, and production start-up costs and challenges in connection with new products, the effects of COVID-19 pandemic policy decisions on various economies and our suppliers and customers, as well as the effects on production efficiencies due to the augmented policies we have incorporated into our operations as a result of the COVID-19 pandemic.
Our gross profit on individual engineering projects is dependent on a number of factors and is expected to fluctuate from quarter to quarter based on the number of new engineering projects, the nature and status of engineering projects, unanticipated cost over-runs, design challenges and changes, start-up production activities, or other customer-imposed project changes or delays. Our increase in gross profit dollars during nine months ended March 31, 2023 compared to the same periods in the previous years was primarily due to inclusion of the Lighthouse division since its acquisition on October 4, 2021, Other fluctuations in gross profit dollars and margins in the quarter and nine months ended March 31, 2023 when compared to the same periods of the prior fiscal year are considered customary considering the factors impacting variability as previously described.
~~Research and development expenses were $206,375 for the quarter ended March 31, 2023, compared to $214,898~~$10,972,262 for the same period in the prior year, a decrease of ~~$8,523,~~$1,826,718, or ~~4.0%~~16.6%. ~~Research and development expenses were $660,518 for~~A decrease of $600,000 in both periods was attributable to the ~~nine months ended March 31, 2023, compared to $433,248 for the same period~~sale of one-time technology rights recognized in the prior ~~year, an increase of $227,270, or 52.5%. In-house research~~year.
Revenue from Engineering Design Services increased 33.1% and ~~development~~24.6% during the three- and certain internal functions not directly related to customer engagements are classified as research and development expenses with the majority of our engineering, research and development activities being consumed in revenue generating engagements with our customers for the development of their products. During the nine months ended Marchsix-month periods ending December 31, 2023 ~~compared to~~from the same periods ~~of the prior year we had an increase in personnel, and an increase in research and development costs incurred~~ in the ~~development~~year ending December 31, 2022. Revenue increases in the engineering category resulted from increasing demand for services and expansion of ~~internal research~~engineering capacity. Engineering sales were driven by customer design engagements that will be transitioning into the later manufacture of new Finished Products and ~~development efforts and projects.~~ Assemblies.

~~Selling, general~~Revenue from Optical Components decreased 23.3% and ~~administrative expenses were $2,022,991 for~~25.8% during the ~~quarter ended March~~three- and six-month periods ending December 31, 2023 compared to $1,574,432 for the same period in the prior year, an increase of $448,559, or 28.4%. Selling, general and administrative expenses were $5,338,498 for the nine months ended March 31, 2023, compared to $3,974,824 for the same period in the prior year, an increase of $1,363,674, or 34.3%. The increase in selling, general and administrative expense in the three months ended March 31, 2023 compared to the same period of the prior fiscal year was primarily the result of increased compensation due to expanded headcount, incentive bonuses and sales commissions resulting from increased revenues, increased sales conference and show costs, and increased stock based compensation. The increase in selling, general and administrative expenses in the nine months ended March 31, 2023 compared to the same periods ofin the ~~prior fiscal~~ year ~~was primarily~~ending December 31, 2022 due in part to reduced industry demand. We believe the decreases in optical components were largely driven by lower order volumes as customers sought to rebalance their inventories, which had previously grown beyond sustainable levels due to ~~inclusion~~increased ordering in response to concerns about supply chain disruptions.
Revenue from Finished Products and Assemblies decreased 42.4% and 38.9% during the three- and six-month periods ending December 31, 2023 from the same periods in the year ending December 31, 2022. The decreases in Finished Products and Assemblies was attributable to timing differences between the exit of certain mature customer programs and reorders for ongoing products and the ~~Lighthouse division since its acquisition in October, 2021, plus increased compensation due to expanded headcount, incentive bonuses~~introduction of new customer programs, primarily single-use medical devices and ~~sales commissions resulting from increased revenues, and increased sales conference and show costs.~~new defense / aerospace opportunities.

1815

Gross Profit
Gross margin decreased to 30.1% during the three months ended December 30, 2023, compared to 44.2% for the three months ended December 31, 2022, and decreased to 31.9% during the six months ended December 31, 2023 compared to 38.6% during the six months ended December 31, 2022. Gross profit decreased to $1,450,976 during the three months ended December 31, 2023, compared to $2,599,472 for the three months ended December 31, 2022, and decreased to $2,914,587 during the six months ended December 31, 2023 compared to $4,238,913 during the six months ended December 31, 2022, primarily driven by changes in the product sales mix and the decreases in revenue discussed above. The $600,000 in Technology rights revenue in the prior year had a significant impact on gross margin as it had no cost of sales associated with it. Excluding that revenue from both sales and gross profit for comparison purposes, the gross margin would have been 37.8% and 35.1% for the three- and six-month periods ending December 31, 2022, respectively. In addition, we recorded an increase in our reserve for excess and obsolete inventory in the amount of $75,000.
Research & Development
R&D expenses increased $66,464 to $221,728 during the three months ended December 31, 2023, compared to $155,264 during the three months ended December 31, 2022, and increased $68,595 to $434,486 during the six months ended December 31, 2023, compared to $365,891 during the six months ended December 31, 2022. The increase in R&D expenses was primarily due to employee-related expenses to support product improvements and the development of new technologies.
Selling, General and Administrative Expenses
SG&A expenses increased $60,267 to $1,933,410 during the three months ended December 31, 2023, compared to $1,873,143 during the three months ended December 31, 2022, and increased $185,797, or 5.5%, to $3,589,556 during the six months ended December 31, 2023, compared to $3,403,759 during the six months ended December 31, 2022. The increase in SG&A was primarily due to increased personnel costs, increased travel-related expenses, increased stock-based compensation and increases in our reserve for doubtful accounts.
Liquidity and Capital Resources

~~We have sustained recurring net losses from operations for several years.~~ During the ~~quarter ended and nine~~six months ended March 31, 2023 we incurred operating losses of $493,268 and 24,005, respectively. During the years ended June 30, 2022 and 2021 we incurred operating losses of $1,513,890 and $905,583, respectively. At MarchDecember 31, 2023, cash ~~was $612,095,~~on hand funded increases in inventory of $323,770 and a net decrease in accounts ~~receivables were $4,389,907~~payable and ~~current liabilities were $6,494,885, including $1,387,806~~accrued expenses of ~~customer advances received for future order deliveries.~~
~~Although our revenue and gross margin have increased, our operating expenses have also increased, and we continue to experience pricing pressure from our customers and challenges~~$945,002, partially offset by decreases in ~~engineering projects and production orders that can result in cost over-runs and depressed gross margins.~~accounts receivable of $395,863. We also ~~experience added uncertainty related~~made payments of $277,912 on our term notes and capital leases. These items, in addition to ~~our vendors ability to supply materials and our customers future order levels as a result~~the impact of the ~~economic impact the COVID-19 world-wide pandemic~~quarterly net loss, net of depreciation, amortization, stock-based compensation and ~~related jurisdictional policies~~other non-cash items, resulted in a decrease of $1,938,808 in our cash and ~~regulations and lingering supply-chain issues. Consequently, critical~~cash equivalents at December 31 2023 from $2,925,852 at June 30, 2023 to our ability to maintain our financial condition is achieving and maintaining a level of quarterly revenues that generate break even or better financial performance as well as timely collection of accounts receivable from our customers. We believe profitable operating results can be achieved through a combination of revenue levels, realized gross profits and controlling operating expense increases, all of which are subject to periodic fluctuations resulting from sales mix and the stage of completion of varying engineering service projects as they progress towards and into production level revenues.
We have traditionally funded working capital needs through product sales, management of working capital components of our business, cash received from public and private offerings of our common stock, warrants to purchase shares of our common stock or convertible notes, manufacturing equipment leases, and by customer advances paid against purchase orders by our customers and recorded in the current liabilities section of the accompanying financial statements. We have incurred year to year and quarter to quarter operating losses during our efforts to develop current products including Microprecision^TM optical elements, micro medical camera assemblies and 3D endoscopes. Our management believes that the opportunities represented by these technical capabilities and related products have the potential to generate sales increases to achieve breakeven and profitable results.$987,044 at December 31, 2023.

In ~~connection with our~~ October 2021 ~~acquisition of Lighthouse Imaging,~~ we entered ~~into~~ a $2,600,000 ~~bank~~ term loan ~~and sold shares~~with a commercial bank. In June 2023 we added a second term loan in the amount of ~~our common stock for gross proceeds of $1,500,000.~~$750,000. We ~~also~~ secured a $250,000 ~~bank~~ line of credit from the same bank in October 2021 for working capital needs, which was increased to $500,000 in May ~~2022.~~2022 and to $1,250,000 in June 2023. There were no borrowings outstanding on the line of credit ~~at March~~on December 31, ~~2023.~~2023 and full availability in the amount of $1,250,000.

Capital equipment expenditures and additional patent costs during the ~~nine~~six months ended ~~March~~December 31, 2023 and in the same period in the prior year were ~~$52,411. Future capital equipment~~$170,772 and ~~patent expenditures will be dependent upon future sales and success~~$37,637, respectively. The increase was primarily attributable to the implementation of ~~on-going research and development efforts.~~a new computer system.

Contractual cash commitments for the fiscal periods subsequent to ~~March~~December 31, 2023, are summarized as follows:

Fiscal 2023 Thereafter Total Fiscal 2024 Thereafter Total
Financing lease for equipment, including interest $ 12,155 $ 120,564 $ 132,719
Capital lease for equipment, including interest $ 24,309 $ 77,792 $ 102,101
Minimum operating lease payments $ 45,389 $ 377,904 $ 423,293 $ 91,326 $ 195,371 $ 286,697
16

We have contractual cash commitments related to open purchase orders as of ~~March~~December 31, 2023 of approximately ~~$2,923,320.~~$3,163,000.

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
19

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.

Item 4. Controls and Procedures.

Management’s Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and our Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures, were not effective as of March 31, 2023, because of a material weakness in our internal controls over financial reporting described below. A material weakness is a deficiency, or a combination of deficiencies, inincluding internal control over financial reporting, ~~such that there is a reasonable possibility that a material misstatement~~were effective as of ~~the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.~~
~~Material Weakness Identified; Remedial Steps Being Taken~~
~~During our review of the results for the fiscal quarter ended March~~December 31, 2023, ~~errors were identified~~to ensure the information we are required to disclose in reports that we file or submit under the ~~Company’s accruals~~Securities Exchange Act of ~~costs associated with services provided by third-party contractors on certain development projects. Those errors caused an understatement of costs of goods sold for~~1934, as amended (i) is recorded, processed, summarized, and reported within the quarters ended September 30, 2022 and December 31, 2022, for which we have concluded such error is not material to those previously reported financial statements. However, because of the significance of these items, and to facilitate comparisons amongtime periods the Company decided to revise the previously issued first and second quarter unaudited condensed consolidated financial information by increasing accounts payable and cost of goods sold by $85,213 and $125,752specified in ~~the quarters ended September 30, 2022 and December 31, 2022, respectively. Such quarterly and year to date financial statements will be revised in subsequent filings with the~~ Securities and Exchange Commission ~~that include such statements.~~
~~To address~~rules and ~~remediate the material weakness in internal control over financial reporting described above, we have implemented processes to improve our accounts payable controls~~forms, and ~~documentation for the recognition of costs incurred for services performed by outside contractors~~(ii) is accumulated and ~~matching those costs, when applicable, to fiscal periods in which those services are billed~~communicated to our ~~customers. Specifically, we have implemented procedures to document the receipt of non-physical work product by~~management, including our outside contractors, accrue for services performed by outside contractors when vendor invoices for such services have not yet been received, and to review billings to customers to ensure related contractor billings are expensed in the same period. Our Chief Executive Officer and our Chief Financial Officer, ~~will monitor~~as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures are intended to be designed to provide reasonable assurance that such ~~accruals in future quarters~~information is accumulated and communicated to ~~confirm~~our management. Based on this evaluation, our management concluded that ~~these steps have properly remediated the material weakness in the timing of third-party expense accruals. We believe that the steps outlined above strengthen~~ our internal control over financial reporting ~~and mitigate the material weakness described above.~~was effective as of December 31, 2023.

Changes in Internal Control over Financial Reporting

~~Except for the material weakness disclosed above, there has been~~There was no change in our internal control over financial reporting that occurred during the ~~quarter of our fiscal year~~period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

2017

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Our Company, on occasion, may be involved in legal matters arising in the ordinary course of our business. While management believes that such matters are currently insignificant, matters arising in the ordinary course of business for which we are or could become involved in litigation may have a material adverse effect on our business, financial condition or results of operations. We are not aware of any pending or threatened litigation against us or our officers and directors in their capacity as such that could have a material impact on our operations or finances.

Item 1A. Risk Factors.

~~There have been no material changes from~~Smaller reporting companies are not required to provide the ~~risk factors previously disclosed in our annual report on Form 10-K for the fiscal year ended June 30, 2022, as filed with the Securities and Exchange Commission on September 27, 2022.~~information required by this item.

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

None

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

(a) Not applicable.
(b) Information about the Company’s process for considering director nominations and recommendations by shareholders appears in the Company’s proxy statement for its upcoming Annual Meeting of Shareholders on December 1, 2023, under the heading “Director Nominations.” A copy of that proxy statement was filed with the Securities and Exchange Commission on October 10, 2023. The Company recently confirmed that its policy is for the Board to seek recommendations from the independent directors as to each person considered for nomination or election as a director. In all other respects, the Company’s current practices on director nominations are identical with its prior practices.
(c) During the period covered by this Quarterly Report on Form 10-Q, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

2118

Item 6. Exhibits.

Exhibit Description

~~2.1~~ ~~Asset Purchase Agreement between the Company and Optometrics Corporation, dated January 18, 2008 (included as Exhibit 2.1 to the Form 8-K filed January 25, 2008 and incorporated herein by reference).~~
3.1 Restated Articles of Organization of Precision Optics Corporation, Inc.~~, as amended~~ (included as Exhibit 3.1 to the Form ~~SB-2~~10-K filed ~~March 16, 2007,~~September 28, 2023, and incorporated herein by reference).

3.2 ~~Bylaws of Precision Optics Corporation, Inc. (included as Exhibit 3.2 to the Form S-1 filed December 18, 2008, and incorporated herein by reference).~~
~~3.3~~ Articles of Amendment to the Articles of Organization of Precision Optics Corporation, Inc., dated November 25, 2008 and effective December 11, 2008 (included as Exhibit 3.1 to the Form 8-K filed December 11, 2008, and incorporated herein by reference).
~~3.4~~ ~~Amended and Restated Bylaws of Precision Optics Corporation, Inc. (included as Exhibit 3.1 to the Current Report on Form 8-K filed July 11, 2014, and incorporated herein by reference).~~
~~3.5~~
~~Amendment to the~~ Amended and Restated Bylaws of Precision Optics Corporation, Inc. effective May 13, 2022 (included as exhibit 3.5 to the Form 10-Q filed May 16, 2022, and incorporated herein by reference).

~~3.6~~ Articles of Amendment to the Articles of Organization of Precision Optics Corporation, Inc., dated October 24, 2022; and Articles of Amendment to the Articles of Organization of Precision Optics Corporation, Inc., dated October 26, 2022 (included as Exhibit 3.1 to the Form 8-K filed November 2, 2022, and incorporated herein by reference).
~~3.7~~ Articles of Amendment to the Articles of Organization of Precision Optics Corporation, Inc., dated October 27, 2022 (included as Exhibit 3.2 to the Form 8-K filed November 2, 2022, and incorporated herein by reference).
~~10.1~~ ~~Precision Optics Corporation, Inc. 2011 Equity Incentive Plan, dated October 13, 2011 (included as Exhibit 10.2 to Form S-8 filed October 14, 2011, and incorporated herein by reference.)~~
~~10.2~~ Precision Optics Corporation, Inc. Amended 2011 Equity Incentive Plan, dated October 14, 2011, as amended on April 16, 2015 (included as Exhibit 10.1 to the Company’s Registration Statement on Form S-8 filed April 20, 2015, and incorporated herein by reference).
~~10.3~~ Compensation Agreement, by and among Precision Optics Corporation, Inc. and Joseph N. Forkey, dated August 2, 2018 (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 3, 2018, and incorporated herein by reference).
~~10.4†+~~ Asset Purchase Agreement dated July 1, 2019, between Precision Optics Corporation, Inc. and Ross Optical Industries, Inc. and the shareholders (included as Exhibit 10.1 to the Form 8-K filed on July 8, 2019, and incorporated herein by reference).
~~10.5~~ Form of Purchase Agreement, by and among Precision Optics Corporation, Inc. and several Investors, dated July 1, 2019 (included as Exhibit 10.2 to the Form 8-K filed on July 8, 2019, and incorporated herein by reference).
~~10.6~~ Form of Registration Rights Agreement, by and among Precision Optics Corporation, Inc. and several Investors, dated July 1, 2019 (included as Exhibit 10.3 to the Form 8-K filed on July 8, 2019, and incorporated herein by reference).
22
~~10.7~~ Employment Agreement, by and among Precision Optics Corporation. Inc. and Divaker Mangadu, dated July 1, 2019 (included as Exhibit 10.4 to the Form 8-K filed on July 8, 2019, and incorporated herein by reference).
~~10.8†~~ Employment agreement, by and among Precision Optics Corporation, Inc. and Jeff DiRubio, dated April 26, 2019 (included as Exhibit 10.16 to the annual report on Form 10-K filed on September 26, 2019, and incorporated herein by reference).
~~10.9+~~ Lease Agreement, by and among Precision Optics Corporation, Inc. and Texzona Industries Ltd. dated July 1, 2019 (included as Exhibit 10.17 to the annual report on Form 10-K filed on September 26, 2019, and incorporated herein by reference).
~~10.10~~ ~~Employment Offer Letter Daniel S. Habhegger, dated December 2, 2019 (included as Exhibit 10.18 to the quarterly report on Form 10-Q filed on February 13, 2020, and incorporated herein by reference).~~
~~10.11~~ Form of Securities Purchase Agreement, by and among Precision Optics Corporation, Inc. and several Investors, dated April 14, 2020 (included as Exhibit 10.1 to the current report on Form 8-K filed on May 7, 2020, and incorporated herein by reference).
~~10.12~~ Form of Registration Rights Agreement, by and among Precision Optics Corporation, Inc. and several Investors, dated April 14, 2020 (included as Exhibit 10.2 to the current report on Form 8-K filed on May 7, 2020, and incorporated herein by reference).
~~10.13†+~~ Asset Purchase Agreement, dated October 4, 2021, by and among Precision Optics Corporation, Inc. and Lighthouse Imaging, LLC and Anania & Associates Investment Company, LLC (included as Exhibit 10.1 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).
~~10.14~~ Form of Securities Purchase Agreement, by and among Precision Optics Corporation, Inc. and several Investors, dated October 4, 2021 (included as Exhibit 10.2 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).
~~10.15~~ Form of Registration Rights Agreement, by and among Precision Optics Corporation, Inc. and several Investors, dated October 4, 2021 (included as Exhibit 10.3 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).
~~10.16+~~ Loan Agreement dated October 4, 2021, by and among Precision Optics Corporation, Inc. and Main Street Bank (included as Exhibit 10.4 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).
~~10.17~~ ~~$250,000 Revolving Line of Credit Note dated October 4, 2021 (included as Exhibit 10.5 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference)~~.
~~10.18~~ ~~$2,600,000 Term Loan Note dated October 4, 2021 (included as Exhibit 10.6 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).~~
~~10.19~~ Security Agreement dated October 4, 2021, by and among Precision Optics Corporation, Inc. and Main Street Bank (included as Exhibit 10.7 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).
~~10.20~~ ~~Director side letter agreement dated October 4, 2021 (included as Exhibit 10.8 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).~~
~~10.21~~ ~~Precision Optics Corporation, Inc. 2022 Equity Incentive Plan (included as Appendix B to the proxy statement on Form DEF14A filed on February 24, 2022, and incorporated herein by reference)~~.
23
~~10.22~~
Employment offer letter dated January 5, 2023 between Precision Optics Corporation, Inc. and Daniel S. Habhegger (included as Exhibit 10.1 to the current report on Form 8-K filed on January 5, 2023, and incorporated herein by reference).
~~10.23~~
Employment offer letter dated January 5, 2023 between Precision Optics Corporation, Inc. and E. Kevin Dahill (included as Exhibit 10.2 to the current report on Form 8-K filed on January 5, 2023, and incorporated herein by reference).
~~14.1~~ ~~Precision Optics Corporation, Inc. Corporate Code of Ethics and Conduct (included as Exhibit 14.1 to the Form 10-K filed September 28, 2008, and incorporated herein by reference).~~
~~21.1~~ ~~Subsidiaries of the Registrant (included as Exhibit 21.1 to the Form 10-K filed September 26, 2008, and incorporated herein by reference).~~
31.1* Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2* Certification of the ~~Principal~~Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1* Certification of Officers 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 (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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 (embedded within the Inline XBRL document)

* Filed Herewith.
† ~~Certain portions of the agreement have been omitted to preserve the confidentiality of such information. The Company will furnish copies of any such information to the SEC upon request.~~
+ ~~The schedules to agreement have been omitted from this filing pursuant to Item 601(a)(5) of Regulation S-K.  The Company will furnish copies of any such schedules to the SEC upon request.~~
Copies of above exhibits not contained herein are available to any stockholder, upon written request to: Chief Financial Officer, Precision Optics Corporation, Inc., 22 East Broadway, Gardner, MA 01440.

2419

SIGNATURES

Pursuant to the requirements 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.

PRECISION OPTICS CORPORATION, INC.

Date: ~~May 15, 2023~~February 14, 2024 By: /s/ Joseph N. Forkey
Joseph N. Forkey

Chief Executive Officer
(Principal Executive Officer)

Date: ~~May 15, 2023~~February 14, 2024 By: /s/ ~~E. Kevin Dahill~~Wayne M. Coll
Wayne M. Coll

~~E. Kevin Dahill~~
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)

2520


	Three Months Ended March 31,						Nine Months Ended March 31,
	2023			2022			2023			2022
Revenues	$	5,048,065		$	4,651,352		$	16,020,327		$	10,884,737

Cost of goods sold		3,311,967			2,923,143			10,045,316			7,397,914
Gross profit		1,736,098			1,728,209			5,975,011			3,486,823

Research and development expenses, net		206,375			214,898			660,518			433,248
Selling, general and administrative expenses		2,022,991			1,574,432			5,338,498			3,974,824
Business acquisition expenses		–			–			–			172,174
Total operating expenses		2,229,366			1,789,330			5,999,016			4,580,246

Operating income (loss)		(493,268	)		(61,121	)		(24,005	)		(1,093,423	)

Other income (expense)
Interest expense		(48,124	)		(52,778	)		(167,443	)		(104,290	)
Gain on revaluation of contingent earn-out liability		142,960			–			142,960			–

Net income (loss)	$	(398,432	)	$	(113,899	)	$	(48,488	)	$	(1,197,713	)

Income (loss) per share:
Basic and fully diluted	$	(0.07	)	$	(0.02	)	$	(0.01	)	$	(0.23	)

Weighted average common shares outstanding:
Basic and fully diluted		5,640,473			5,600,953			5,639,015			5,181,896


	Three Months Ended December 31,						Six Months Ended December 31,
	2023			2022			2023			2022
Revenues	$	4,824,289		$	5,886,961		$	9,145,544		$	10,972,262

Cost of Goods Sold		3,373,313			3,287,489			6,230,957			6,733,349
Gross Profit		1,450,976			2,599,472			2,914,587			4,238,913

Research and Development Expenses		221,728			155,264			434,486			365,891

Selling, General and Administrative Expenses		1,933,410			1,873,143			3,589,556			3,403,759
											–
Total Operating Expenses		2,155,138			2,028,407			4,024,042			3,769,650

Operating Income (Loss)		(704,162	)		571,065			(1,109,455	)		469,263

Interest Expense		(54,640	)		(62,397	)		(113,762	)		(119,319	)

Net Income (Loss)	$	(758,802	)	$	508,668		$	(1,223,217	)	$	349,944

Income (Loss) Per Share:
Basic	$	(0.13	)	$	0.09		$	(0.20	)	$	0.06
Fully Diluted	$	(0.13	)	$	0.09		$	(0.20	)	$	0.06

Weighted Average Common Shares Outstanding:
Basic		6,066,572			5,638,302			6,066,545			5,638,302
Fully Diluted		6,066,572			5,935,911			6,066,545			5,937,471


			Nine Month Period Ended March 31, 2023
	Number of Shares		Common Stock		Additional Paid-in Capital			Common Stock Subscribed			Accumulated Deficit			Total Stockholders’ Equity
Balance, July 1, 2022		5,638,302	$	56,383	$	57,009,506		$	–		$	(48,094,394	)	$	8,971,495
Stock-based compensation		–		–		74,990			–			–			74,990
Net loss		–		–		–			–			(158,724	)		(158,724	)
Balance, September 30, 2022		5,638,302		56,383		57,084,496			–			(48,253,118	)		8,887,761
Stock-based compensation		–		–		244,786			–			–			244,786
Net Income		–		–		–			–			508,668			508,668
Balance, December 31, 2022		5,638,302		56,383		57,329,282			–			(47,744,450	)		9,641,215
Stock-based compensation		–		–		450,014			–			–			450,014
Proceeds from exercise of stock option		2,000		20		5,080			–			–			5,100
Exercise of stock options net of 307 shares withheld		693		7		(7	)		–			–			–
Net loss		–		–		–			–			(398,432	)		(398,432	)
Balance, March 31, 2023		5,640,995	$	56,410	$	57,784,369		$	–		$	(48,142,882	)	$	9,697,897

			Nine Month Period Ended March 31, 2022
	Number of Shares		Common Stock		Additional Paid-in Capital			Common Stock Subscribed			Accumulated Deficit			Total Stockholders’ Equity
Balance, July 1, 2021		4,427,432	$	44,274	$	50,552,831		$	–		$	(47,165,978	)	$	3,431,127
Stock-based compensation		–		–		160,071			–			–			160,071
Proceeds from private placement of common stock subscribed, net of estimated issuance costs of $10,000		–		–		(10,000	)		1,030,000			–			1,020,000
Net loss		–		–		–			–			(576,801	)		(576,801	)
Balance, September 30, 2021		4,427,432		44,274		50,702,902			1,030,000			(47,742,779	)		4,034,397
Stock-based compensation		–		–		330,451			–			–			330,451
Proceeds from private placement of common stock		312,500		3,125		1,496,875			(1,030,000	)		–			470,000
Issuance of common stock in business acquisition		833,333		8,333		4,816,667			–			–			4,825,000
Proceeds from exercise of stock option		5,000		50		16,600			–			–			16,650
Exercise of stock options net of 478 shares withheld		875		9		(9	)		–			–			–
Issuance of common stock for employee services		3,031		30		19,970			–			–			20,000
Net loss		–		–		–			–			(507,013	)		(507,013	)
Balance, December 31, 2021		5,582,171		55,821		57,383,456			–			(48,249,792	)		9,189,485
Correction of error in valuation of stock issued in business acquisition		–		–		(825,000	)		–			–			(825,000	)
Stock-based compensation		–		–		231,115			–			–			231,115
Proceeds from exercise of stock options		14,400		144		46,496			–			–			46,640
Exercise of stock options net of 32,018 shares withheld		32,648		327		(327	)		–			–			–
Net loss		–		–		–			–			(113,899	)		(113,899	)
Balance, March 31, 2022		5,629,219	$	56,292	$	56,835,740		$	–		$	(48,363,691	)	$	8,528,341


	Six Month Period Ended December 31, 2023
	Number of Shares		Common Stock		Additional Paid-in Capital		Common Stock Subscribed		Accumulated Deficit			Total Stockholders’ Equity
Balance, July 1, 2023		6,066,518	$	60,665	$	60,224,934	$	–	$	(48,239,007	)	$	12,046,592
Stock-based compensation		–		–		108,746		–		–			108,746
Net loss		–		–		–		–		(464,415	)		(464,415	)
Balance, September 30, 2023		6,066,518		60,665		60,333,680		–		(48,703,422	)		11,690,923
Stock-based compensation		–		–		382,431		–		–			382,431
Proceeds from the exercise of stock options		1,000		10		2,690		–		–			2,700
Net loss		–		–		–		–		(758,802	)		(758,802	)
Balance, December 31, 2023		6,067,518	$	60,675	$	60,718,801	$	–	$	(49,462,224	)	$	11,317,252


	Six Month Period Ended December 31, 2022
	Number of Shares		Common Stock		Additional Paid-in Capital		Common Stock Subscribed		Accumulated Deficit			Total Stockholders’ Equity
Balance, July 1, 2022		5,683,302	$	56,834	$	57,009,506	$	–	$	(48,094,394	)	$	8,971,946
Stock-based compensation		–		–		74,990		–		–			74,990
Net loss		–		–		–		–		(158,724	)		(158,724	)
Balance, September 30, 2022		5,683,302		56,834	$	57,084,496		–		(48,253,118	)		8,888,212
Stock-based compensation		–		–		244,786		–		–			244,786
Net income		–		–		–		–		508,668			508,668
Balance, December 31, 2022		5,683,302	$	56,834	$	57,329,282	$	–	$	(47,744,450	)	$	9,641,666


	Nine Months Ended March 31,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss	$	(48,488	)	$	(1,197,713	)
Adjustments to Reconcile Net Loss to Net Cash Used In Operating Activities -
Gain on revaluation of contingent earn-out liability		(142,960	)		–
Depreciation and amortization		157,460			173,887
Stock-based compensation expense		769,790			741,637
Non-cash interest expense		8,906			–
Changes in Operating Assets and Liabilities, net of effects of business acquisition -
Accounts receivable, net		(1,726,035	)		(791,959	)
Inventories, net		120,206			(623,817	)
Due from related party		–			84,210
Prepaid expenses		(94,215	)		(85,791	)
Accounts payable		410,073			1,118,149
Customer advances		482,693			(258,487	)
Accrued compensation and other		588,976			(40,083	)
Net Cash Provided By (Used In) Operating Activities		526,406			(879,967	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Additional patent costs		(20,010	)		(23,098	)
Purchases of fixed assets		(32,401	)		(59,562	)
Acquisition of business		–			(421,729	)
Net Cash Used In Investing Activities		(52,411	)		(504,389	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of financing lease obligation		(30,298	)		(28,546	)
Payments of long-term debt		(275,784	)		(154,453	)
Payment of debt issuance costs		–			(26,000	)
Payment of acquisition earn-out liability		(166,667	)		–
Gross proceeds from private placement of common stock		–			1,500,000
Gross proceeds from exercise of stock options		5,100			63,290
Net Cash (Used In) Provided By Financing Activities		(467,649	)		1,354,291

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		6,346			(30,065	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		605,749			861,650

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	612,095		$	831,585

SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Offering costs included in accrued compensation and other	$	–		$	10,000
Issuance of common stock for services	$	–		$	–
Acquisition of business financed with long-term debt	$	–		$	2,600,000

Schedule of earnings per share
	Three Months Ended March 31,						Nine Months Ended March 31,
	2023			2022			2023			2022
Net Income (Loss) - Basic and Diluted	$	(398,432	)	$	(113,899	)	$	(48,488	)	$	(1,197,713	)

Weighted Average Shares Outstanding
Basic and Fully Diluted		5,640,473			5,600,953			5,639,015			5,181,896

Income (Loss) Per Share
Basic and Fully Diluted	$	(0.07	)	$	(0.02	)	$	(0.01	)	$	(0.23	)

Schedule of income (loss) per share
	Three Months Ended December 31,					Six Months Ended December 31,
	2023			2022		2023			2022
Net Income (Loss) Basic and Fully Diluted	$	(758,802	)	$	508,668	$	(1,223,217	)	$	349,944

Weighted Average Shares Outstanding
Basic		6,066,572			5,638,302		6,066,545			5,638,302
Fully Diluted		6,066,572			5,935,911		6,066,545			5,937,471

Income (Loss) Per Share – Basic	$	(0.13	)	$	0.09	$	(0.20	)	$	0.06
Income (Loss) Per Share - Fully Diluted	$	(0.13	)	$	0.09	$	(0.20	)	$	0.06

Schedule of error corrections	Quarter Ended September 30, 2022
	As Previously Reported			Adjustment(1)			As Revised
Revenues	$	5,085,301		$	–		$	5,085,301
Cost of goods sold		3,360,647			85,213			3,445,860
Gross Profit		1,724,654			(85,213	)		1,639,441
Operating loss		(16,589	)		(85,213	)		(101,802	)
Net loss		(73,511	)		(85,213	)		(158,724	)
Net loss per share, basic and fully diluted		(0.01	)		(0.02	)		(0.03	)

	Quarter Ended December 31, 2022
	As Previously Reported		Adjustment(1)			As Revised
Revenues	$	5,886,961	$	–		$	5,886,961
Cost of goods sold		3,161,737		125,752			3,287,489
Gross Profit		2,725,224		(125,752	)		2,599,472
Operating income		696,817		(125,752	)		571,065
Net income		634,420		(125,752	)		508,668
Net income per share, basic		0.11		(0.02	)		0.09
Net income per share, fully diluted		0.11		(0.02	)		0.09

Schedule of consolidated pro forma results
	Three Months Ended March 31,						Nine Months Ended March 31,
	2023			2022			2023			2022
	(Actual)			(Actual)			(Actual)			(Pro Forma)
Revenues	$	5,048,065		$	4,651,352		$	16,020,327		$	12,329,074
Net loss		(398,432	)		(113,899	)		(48,488	)		(1,140,418	)
Net loss per share:
Basic and fully diluted	$	(0.07	)	$	(0.02	)	$	(0.01	)	$	(0.20	)

Schedule of inventory
Schedule of inventories
	March 31, 2023		June 30, 2022		December 31, 2023		June 30, 2023
Raw Materials	$	1,402,292	$	1,414,996	$	1,532,752	$	1,142,816
Work-In-Progress		393,078		518,251		483,960		322,538
Finished Goods		1,164,362		1,146,691		1,083,274		1,310,862
Total Inventories	$	2,959,732	$	3,079,938	$	3,099,986	$	2,776,216

Schedule of long-term debt
	Amount
Term Loan Note payable to Main Street Bank with monthly principal payments of $30,952 plus interest at the rate of 7.00% as of March 31, 2023 is secured by all assets of the Company, and subject to certain periodic reporting to the bank, an annual minimum EBITDA plus stock based compensation to debt service coverage ratio of 1.20:1 commencing with the fiscal year ending June 30, 2023, and other conditions. The Term Loan Note matures on October 15, 2028.	$	2,073,808

Less current maturities		(371,429	)
Less debt issuance costs, net of accumulated amortization of $2,789		(20,737	)
Long-term debt, net of current portion of debt issuance costs	$	1,681,642

Schedule of principal payments due term loan note payable
Schedule of principal payments due on the term loan note payable
Fiscal Year Ending June 30:
2023	$	92,856
2024		371,429	$	256,630
2025		371,429		513,259
2026		371,429		513,259
2027		371,429		513,259
2028				513,259
Thereafter		495,236		160,573
Total long term debt	$	2,073,808	$	2,470,238

Future minimum lease payments
Schedule of future minimum lease payments
Fiscal Year Ending June 30:	Financing Leases		Operating Lease		Capital Leases		Operating Lease
2023	$	12,155	$	45,389
2024		48,619		182,652	$	24,309	$	85,330
2025		43,917		183,775		43,918		178,569
2026		28,028		11,477		28,028		11,430
2027						–		–
Total Minimum Payments		132,719	$	423,293		96,255	$	275,329
Less: amount representing interest		10,621				5,846
Present value of minimum lease payments		122,098				90,409
Less: current portion		42,397				44,519
	$	79,701
Lease Obligation, net of current portion					$	45,890

Schedule of stock-based compensation expense
	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
Cost of Goods Sold	$	9,556	$	34,712	$	25,410	$	91,542
Research and Development		41,140		70,237		122,198		164,036
Selling, General and Administrative		399,318		126,166		622,182		466,059
Stock Based Compensation Expense	$	450,014	$	231,115	$	769,790	$	721,637

Schedule of stock option activity
	Options Outstanding
	Number of Shares			Weighted Average Exercise Price	Weighted Average Contractual Life
Outstanding at June 30, 2022	904,626		$	4.00	7.08 years
Exercised	(3,000	)		2.55	–
Granted	179,003			6.03	–
Cancelled	(21,999	)		5.84	–
Outstanding at March 31, 2023	1,058,630		$	4.31	6.79 years

Schedule of stock option activity
	Options Outstanding
	Number of Shares			Weighted Average Exercise Price		Weighted Average Contractual Life
Outstanding at June 30, 2023		1,127,140		$	4.54		6.88 years
Granted		135,000			5.95		–
Exercised		(1,000	)		2.70		–
Cancelled, forfeited, or expired		(4,999	)		6.00
Outstanding at December 31, 2023		1,256,141		$	4.65		6.98 years

Schedule of stock options outstanding by exercise price range
Range of Exercise Prices		Number of Shares		Weighted- Average Remaining Contractual Life (years)		Weighted- Average Exercise Price		Exercisable Number of Shares		Exercisable Weighted- Average Exercise Price
$	1.44		20,000		3.00	$	1.44		20,000	$	1.44
$	1.50		26,666		3.22	$	1.50		26,666	$	1.50
$	1.65		5,000		5.01	$	1.65		5,000	$	1.65
$	2.10		33,333		5.35	$	2.10		33,333	$	2.10
$	2.19		208,996		3.92	$	2.19		208,996	$	2.19
$	2.70		12,000		1.19	$	2.70		12,000	$	2.70
$	3.75		15,000		6.97	$	3.75		15,000	$	3.75
$	3.90		146,325		6.20	$	3.90		146,325	$	3.90
$	4.20		23,332		7.64	$	4.20		23,332	$	4.20
$	4.26		33,333		6.45	$	4.26		33,333	$	4.26
$	4.35		1,666		7.94	$	4.35		1,666	$	4.35
$	4.50		23,332		6.69	$	4.50		23,332	$	4.50
$	5.04		179,997		8.18	$	5.04		179,997	$	5.04
$	5.43		10,000		8.51	$	5.43		10,000	$	5.43
$	5.61		10,000		9.12	$	5.61		–	$	–
$	5.85		58,336		8.76	$	5.85		2,780	$	5.85
$	5.93		4,000		9.78	$	5.93		4,000	$	5.93
$	6.00		29,997		7.97	$	6.00		10,000	$	6.00
$	6.26		90,000		9.75	$	6.26		90,000	$	6.26
$	6.27		80,653		8.86	$	6.27		26,884	$	6.27
$	6.78		46,664		8.64	$	6.78		35,554	$	6.78
	1.44–6.78		1,058,630		6.79	$	4.31		908,198	$	4.02

Schedule of disaggregation revenues
	Three Months Ended December 31,				Six Months Ended December 31,
	2023		2022		2023		2022
Engineering Design Services	$	2,265,217	$	1,701,611	$	4,166,216	$	3,344,578
Optical Components		1,979,875		2,580,140		3,883,186		5,232,821
Medical Device Products and Assemblies		579,197		1,005,210		1,096,142		1,794,863
Technology Rights		–		600,000		–		600,000
Total Revenues	$	4,824,289	$	5,886,961	$	9,145,544	$	10,972,262

Schedule of disaggregation of revenues
	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
Engineering Design Services	$	1,400,780	$	1,532,414	$	4,745,358	$	3,659,667
Optical Components		2,609,983		1,927,963		7,842,804		4,873,294
Medical Device Products and Assemblies		1,037,302		1,190,975		2,832,165		2,351,776
Technology Rights		–		–		600,000		–
Total Revenues	$	5,048,065	$	4,651,352	$	16,020,327	$	10,884,737

Schedule of contract liabilities
	Three Months Ended March 31,						Nine Months Ended March 31,
	2023			2022			2023			2022
Contract Liabilities, Beginning of Period	$	794,981		$	1,137,470		$	905,113		$450,084
Assumed in Business Acquisition		–			–			–		826,679
Unearned Revenue Received from Customers		1,020,669			774,316			1,917,775		1,388,700
Revenue Recognized		(427,844	)		(893,511	)		(1,435,082	)	(1,647,188)
Contract Liabilities, End of Period	$	1,387,806		$	1,018,275		$	1,387,806		$1,018,275

	Three Months
	Ended December 31,
	2023		Percent of Sales		2022		Percent of Sales		Increase (Decrease)			Percent Change
Engineering Design Services		2,265,217		47.0		1,701,611		28.9		563,606			33.1
Optical Components		1,979,875		41.0		2,580,140		43.8		(600,265	)		(23.3	)
Finished Products and Assemblies		579,197		12.0		1,005,210		17.1		(426,013	)		(42.4	)
Technology Rights		–		–		600,000		10.2		(600,000	)		(100.0	)
Total Revenues		4,824,289		100.0		5,886,961		100.0		(1,062,672	)		(18.1	)

	Six Months
	Ended December 31,
	2023		Percent of Sales		2022		Percent of Sales		Increase (Decrease)			Percent Change
Engineering Design Services		4,166,216		45.6		3,344,578		30.5		821,638			24.6
Optical Components		3,883,186		42.4		5,232,821		47.7		(1,349,635	)		(25.8	)
Finished Products and Assemblies		1,096,142		12.0		1,794,863		16.4		(698,721	)		(38.9	)
Technology Rights		–		–		600,000		5.4		(600,000	)		(100.0	)
Total Revenues		9,145,544		100.0		10,972,262		100.0		(1,826,718	)		(16.6	)

	Fiscal 2023		Thereafter		Total		Fiscal 2024		Thereafter		Total
Financing lease for equipment, including interest	$	12,155	$	120,564	$	132,719
Capital lease for equipment, including interest							$	24,309	$	77,792	$	102,101
Minimum operating lease payments	$	45,389	$	377,904	$	423,293	$	91,326	$	195,371	$	286,697

Exhibit		Description

~~2.1~~		~~Asset Purchase Agreement between the Company and Optometrics Corporation, dated January 18, 2008 (included as Exhibit 2.1 to the Form 8-K filed January 25, 2008 and incorporated herein by reference).~~

3.1		Restated Articles of Organization of Precision Optics Corporation, Inc.~~, as amended~~ (included as Exhibit 3.1 to the Form ~~SB-2~~10-K filed ~~March 16, 2007,~~September 28, 2023, and incorporated herein by reference).

3.2		~~Bylaws of Precision Optics Corporation, Inc. (included as Exhibit 3.2 to the Form S-1 filed December 18, 2008, and incorporated herein by reference).~~

~~3.3~~		Articles of Amendment to the Articles of Organization of Precision Optics Corporation, Inc., dated November 25, 2008 and effective December 11, 2008 (included as Exhibit 3.1 to the Form 8-K filed December 11, 2008, and incorporated herein by reference).

~~3.4~~		~~Amended and Restated Bylaws of Precision Optics Corporation, Inc. (included as Exhibit 3.1 to the Current Report on Form 8-K filed July 11, 2014, and incorporated herein by reference).~~

~~3.5~~		~~Amendment to the~~ Amended and Restated Bylaws of Precision Optics Corporation, Inc. effective May 13, 2022 (included as exhibit 3.5 to the Form 10-Q filed May 16, 2022, and incorporated herein by reference).
~~3.6~~		Articles of Amendment to the Articles of Organization of Precision Optics Corporation, Inc., dated October 24, 2022; and Articles of Amendment to the Articles of Organization of Precision Optics Corporation, Inc., dated October 26, 2022 (included as Exhibit 3.1 to the Form 8-K filed November 2, 2022, and incorporated herein by reference).

~~3.7~~		Articles of Amendment to the Articles of Organization of Precision Optics Corporation, Inc., dated October 27, 2022 (included as Exhibit 3.2 to the Form 8-K filed November 2, 2022, and incorporated herein by reference).

~~10.1~~		~~Precision Optics Corporation, Inc. 2011 Equity Incentive Plan, dated October 13, 2011 (included as Exhibit 10.2 to Form S-8 filed October 14, 2011, and incorporated herein by reference.)~~

~~10.2~~		Precision Optics Corporation, Inc. Amended 2011 Equity Incentive Plan, dated October 14, 2011, as amended on April 16, 2015 (included as Exhibit 10.1 to the Company’s Registration Statement on Form S-8 filed April 20, 2015, and incorporated herein by reference).

~~10.3~~		Compensation Agreement, by and among Precision Optics Corporation, Inc. and Joseph N. Forkey, dated August 2, 2018 (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 3, 2018, and incorporated herein by reference).

~~10.4†+~~		Asset Purchase Agreement dated July 1, 2019, between Precision Optics Corporation, Inc. and Ross Optical Industries, Inc. and the shareholders (included as Exhibit 10.1 to the Form 8-K filed on July 8, 2019, and incorporated herein by reference).

~~10.5~~		Form of Purchase Agreement, by and among Precision Optics Corporation, Inc. and several Investors, dated July 1, 2019 (included as Exhibit 10.2 to the Form 8-K filed on July 8, 2019, and incorporated herein by reference).

~~10.6~~		Form of Registration Rights Agreement, by and among Precision Optics Corporation, Inc. and several Investors, dated July 1, 2019 (included as Exhibit 10.3 to the Form 8-K filed on July 8, 2019, and incorporated herein by reference).

~~10.7~~		Employment Agreement, by and among Precision Optics Corporation. Inc. and Divaker Mangadu, dated July 1, 2019 (included as Exhibit 10.4 to the Form 8-K filed on July 8, 2019, and incorporated herein by reference).

~~10.8†~~		Employment agreement, by and among Precision Optics Corporation, Inc. and Jeff DiRubio, dated April 26, 2019 (included as Exhibit 10.16 to the annual report on Form 10-K filed on September 26, 2019, and incorporated herein by reference).

~~10.9+~~		Lease Agreement, by and among Precision Optics Corporation, Inc. and Texzona Industries Ltd. dated July 1, 2019 (included as Exhibit 10.17 to the annual report on Form 10-K filed on September 26, 2019, and incorporated herein by reference).

~~10.10~~		~~Employment Offer Letter Daniel S. Habhegger, dated December 2, 2019 (included as Exhibit 10.18 to the quarterly report on Form 10-Q filed on February 13, 2020, and incorporated herein by reference).~~

~~10.11~~		Form of Securities Purchase Agreement, by and among Precision Optics Corporation, Inc. and several Investors, dated April 14, 2020 (included as Exhibit 10.1 to the current report on Form 8-K filed on May 7, 2020, and incorporated herein by reference).

~~10.12~~		Form of Registration Rights Agreement, by and among Precision Optics Corporation, Inc. and several Investors, dated April 14, 2020 (included as Exhibit 10.2 to the current report on Form 8-K filed on May 7, 2020, and incorporated herein by reference).

~~10.13†+~~		Asset Purchase Agreement, dated October 4, 2021, by and among Precision Optics Corporation, Inc. and Lighthouse Imaging, LLC and Anania & Associates Investment Company, LLC (included as Exhibit 10.1 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).

~~10.14~~		Form of Securities Purchase Agreement, by and among Precision Optics Corporation, Inc. and several Investors, dated October 4, 2021 (included as Exhibit 10.2 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).

~~10.15~~		Form of Registration Rights Agreement, by and among Precision Optics Corporation, Inc. and several Investors, dated October 4, 2021 (included as Exhibit 10.3 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).

~~10.16+~~		Loan Agreement dated October 4, 2021, by and among Precision Optics Corporation, Inc. and Main Street Bank (included as Exhibit 10.4 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).

~~10.17~~		~~$250,000 Revolving Line of Credit Note dated October 4, 2021 (included as Exhibit 10.5 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference)~~.

~~10.18~~		~~$2,600,000 Term Loan Note dated October 4, 2021 (included as Exhibit 10.6 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).~~

~~10.19~~		Security Agreement dated October 4, 2021, by and among Precision Optics Corporation, Inc. and Main Street Bank (included as Exhibit 10.7 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).

~~10.20~~		~~Director side letter agreement dated October 4, 2021 (included as Exhibit 10.8 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).~~

~~10.21~~		~~Precision Optics Corporation, Inc. 2022 Equity Incentive Plan (included as Appendix B to the proxy statement on Form DEF14A filed on February 24, 2022, and incorporated herein by reference)~~.

~~10.22~~		Employment offer letter dated January 5, 2023 between Precision Optics Corporation, Inc. and Daniel S. Habhegger (included as Exhibit 10.1 to the current report on Form 8-K filed on January 5, 2023, and incorporated herein by reference).

~~10.23~~		Employment offer letter dated January 5, 2023 between Precision Optics Corporation, Inc. and E. Kevin Dahill (included as Exhibit 10.2 to the current report on Form 8-K filed on January 5, 2023, and incorporated herein by reference).

~~14.1~~		~~Precision Optics Corporation, Inc. Corporate Code of Ethics and Conduct (included as Exhibit 14.1 to the Form 10-K filed September 28, 2008, and incorporated herein by reference).~~

~~21.1~~		~~Subsidiaries of the Registrant (included as Exhibit 21.1 to the Form 10-K filed September 26, 2008, and incorporated herein by reference).~~

31.1*		Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of the ~~Principal~~Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of Officers 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 (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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 (embedded within the Inline XBRL document)

*		Filed Herewith.
†		~~Certain portions of the agreement have been omitted to preserve the confidentiality of such information. The Company will furnish copies of any such information to the SEC upon request.~~
+		~~The schedules to agreement have been omitted from this filing pursuant to Item 601(a)(5) of Regulation S-K. The Company will furnish copies of any such schedules to the SEC upon request.~~

	PRECISION OPTICS CORPORATION, INC.

Date: ~~May 15, 2023~~February 14, 2024	By:	/s/ Joseph N. Forkey
		Joseph N. Forkey
		Chief Executive Officer (Principal Executive Officer)


Date: ~~May 15, 2023~~February 14, 2024	By:	/s/ ~~E. Kevin Dahill~~Wayne M. Coll
		Wayne M. Coll
		~~E. Kevin Dahill~~ Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)