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EX-32.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER - PRECISION OPTICS CORPORATION, INC.poci_ex3201.htm
EX-31.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER - PRECISION OPTICS CORPORATION, INC.poci_ex3102.htm
EX-31.1 - CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER - PRECISION OPTICS CORPORATION, INC.poci_ex3101.htm
EX-10.18 - EMPLOYMENT OFFER LETTER DANIEL S. HABHEGGER - PRECISION OPTICS CORPORATION, INC.poci_ex1018.htm

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☒  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended December 31, 2019

 

or

 

  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                      to                     

 

Commission File Number: 001-10647

 

PRECISION OPTICS CORPORATION, INC.

(Exact name of registrant as specified in its charter)

 

Massachusetts 04-2795294
(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

(Registrant’s 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 PEYE OTCQB

  

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 issuer’s common stock, par value $0.01 per share, at February 13, 2020 was 12,880,047 shares.

 

 

 

   

 

 

PRECISION OPTICS CORPORATION, INC.

 

Table of Contents

 

  Page
PART I — FINANCIAL INFORMATION 3
Item 1. Financial Statements 3
Consolidated Balance Sheets at December 31, 2019 and June 30, 2019 3
Consolidated Statements of Operations for the Three and Six Months Ended December 31, 2019 and 2018 4
Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended December 31, 2019 and 2018 5
Consolidated Statements of Cash Flows for the Three and Six Months Ended December 31, 2019 and 2018 6
Notes to Consolidated Financial Statements 7
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
Item 4. Controls and Procedures 17
   
PART II — OTHER INFORMATION 19
Item 1. Legal Proceedings 19
Item 1A. Risk Factors 19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Mine Safety Disclosures (Not applicable.) 19
Item 5. Other Information 19
Item 6. Exhibits 20

 

 

 

 

 

 

 

 

 2 

 

 

PART I. FINANCIAL INFORMATION

  

Item 1. Financial Statements.

   

PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

 

  

December 31,

2019

  

June 30,

2019

 
ASSETS          
Current Assets:          
Cash and cash equivalents  $347,858   $2,288,426 
Accounts receivable (net of allowance for doubtful accounts of $246,953 and $246,953 at December 31, 2019 and June 30, 2019, respectively)   2,000,048    2,165,107 
Inventories   2,019,195    1,734,604 
Prepaid expenses   133,278    180,336 
Total current assets   4,500,379    6,368,473 
           
Fixed Assets:          
Machinery and equipment   2,764,154    2,748,715 
Leasehold improvements   695,981    668,446 
Furniture and fixtures   171,548    168,450 
    3,631,683    3,585,611 
Less—Accumulated depreciation and amortization   3,248,525    3,202,605 
Net fixed assets   383,158    383,006 
           
Operating lease right-to-use asset   145,428     
Patents, net   64,929    54,087 
Goodwill   687,664    687,664 
           
TOTAL ASSETS  $5,781,558   $7,493,230 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current Liabilities:          
Current portion of capital lease obligation  $9,894   $9,572 
Accounts payable   1,162,457    1,174,263 
Customer advances   388,506    450,192 
Accrued compensation and other   405,431    533,944 
Amount due for business acquisition       1,443,341 
Operating lease liability   55,247     
Total current liabilities   2,021,535    3,611,312 
           
Capital lease obligation, net of current portion       5,027 
Acquisition earn out liability   500,000    500,000 
Operating lease liability   90,181     
           
Stockholders’ Equity:          
Common stock, $0.01 par value: 50,000,000 shares authorized; issued and outstanding – 12,880,047 shares at December 31, 2019 and 12,071,139 shares at June 30, 2019   128,801    120,712 
Additional paid-in capital   49,314,969    48,893,172 
Accumulated deficit   (46,273,928)   (45,636,993)
Total stockholders’ equity   3,169,842    3,376,891 
           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $5,781,558   $7,493,230 

 

  

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

 

 

 3 

 

 

PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED

December 31, 2019 AND 2018

(UNAUDITED)

 

 

   Three Months
Ended December 31,
   Six Months
Ended December 31,
 
   2019   2018   2019   2018 
Revenues  $2,796,762   $1,477,851   $5,311,746   $3,037,309 
                     
Cost of Goods Sold   1,878,823    1,122,129    3,419,690    2,219,080 
Gross Profit   917,939    355,722    1,892,056    818,229 
                     
Research and Development Expenses, net   228,576    125,413    380,730    226,211 
Selling, General and Administrative Expenses   1,240,961    355,916    2,148,806    1,016,405 
Total Operating Expenses   1,469,537    481,329    2,529,536    1,242,616 
                     
Operating Loss   (551,598)   (125,607)   (637,480)   (424,387)
                     
Interest Income (Expense)   773    (341)   545    (846)
                     
Net Loss  $(550,825)  $(125,948)  $(636,935)  $(425,233)
                     
Loss Per Share:                    
Basic and Diluted  $(0.04)  $(0.01)  $(0.05)  $(0.04)
                     
Weighted Average Common Shares Outstanding:                    
Basic and Diluted   12,873,971    11,618,878    12,856,218    10,940,074 

 

 

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 THREE AND SIX MONTHS ENDED

December 31, 2019 AND 2018

(UNAUDITED)

 

 

   Six Month Period Ended December 31, 2019 
   Number of
Shares
   Common
Stock
   Additional
Paid-in
Capital
   Accumulated
Deficit
   Total
Stockholders’
Equity
 
                     
Balance, July 1, 2019   12,071,139   $120,712   $48,893,172   $(45,636,993)  $3,376,891 
Issuance of common stock in private placement   760,000    7,600    17,400        25,000 
Proceeds from exercise of stock options   12,500    125    8,550        8,675 
Issuance of common stock for services   25,000    250    44,750        45,000 
Stock-based compensation           76,505        76,505 
Net loss               (86,110)   (86,110)
Balance, September 30, 2019   12,868,639    128,687    49,040,377    (45,723,103)   3,445,961 
Exercise of stock options net of 3,592 shares withheld   11,408    114    (114)        
Stock-based compensation           274,706        274,706 
Net loss               (550,825)   (550,825)
Balance, December 31, 2019   12,880,047   $128,801   $49,314,969   $(46,273,928)  $3,169,842 

 

 

 

   Six Month Period Ended December 31, 2018 
   Number of
Shares
   Common
Stock
   Additional
Paid-in
Capital
   Accumulated
Deficit
   Total
Stockholders’
Equity
 
                     
Balance, July 1, 2018   10,197,139   $101,972   $45,484,186   $(45,022,122)  $564,036 
Stock-based compensation           342,984        342,984 
Issuance of common stock for services   100,000    1,000    (1,000)        
Net loss               (299,285)   (299,285)
Balance, September 30, 2018   10,297,139    102,972    45,826,170    (45,321,407)   607,735 
Proceeds from private placement of common stock, net of issuance costs of $23,000   1,600,000    16,000    1,961,000        1,977,000 
Stock-based compensation           10,228        10,228 
Net loss               (125,948)   (125,948)
Balance, December 31, 2018   11,897,139   $118,972   $47,797,398   $(45,447,355)  $2,469,015 

 

 

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, 2019 AND 2018

(UNAUDITED)

 

 

   Six Months Ended
December 31,
 
   2019   2018 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net Loss  $(636,935)   (425,233)
Adjustments to Reconcile Net Loss to Net Cash Provided From (Used In) Operating Activities -          
Depreciation and Amortization   45,920    15,862 
Stock-based Compensation Expense   351,211    353,212 
Non-cash Consulting Expense   45,000     
Changes in Operating Assets and Liabilities -          
Accounts Receivable, net   165,059    68,287 
Inventories, net   (284,591)   48,543 
Prepaid Expenses   47,058    (65,526)
Accounts Payable   (11,806)   48,482 
Customer Advances   (61,686)   (563,192)
Accrued Liabilities   (128,513)   (57,938)
Net Cash Used In Operating Activities   (469,283)   (577,503)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Cash Paid for Business Acquisition   (1,443,341)    
Additional Patent Costs   (10,842)    
Purchases of Property and Equipment   (46,072)   (76,184)
Net Cash Used In Investing Activities   (1,500,255)   (76,184)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Payment of Capital Lease Obligation   (4,705)   (4,407)
Gross Proceeds from Private Placement of Common Stock   25,000    2,000,000 
Gross Proceeds from Exercise of Stock Options   8,675     
Net Cash Provided From Financing Activities   28,970    1,995,593 
           
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   (1,940,568)   1,341,906 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD   2,288,426    402,738 
           
CASH AND CASH EQUIVALENTS, END OF PERIOD  $347,858   $1,744,644 
           
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND INVESTING ACTIVITIES:          
Offering Costs Included in Current Liabilities  $23,000   $23,000 

 

 

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 second quarter and six months of the Company’s fiscal year 2020. 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, 2019, together with the Report of Independent Registered Public Accounting Firm filed under cover of the Company’s 2019 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on September 26, 2019.

 

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 under different assumptions or conditions.

 

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 or net 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 and warrants. For the three and six months ended December 31, 2019 and 2018, the effect of such securities was antidilutive and not included in the diluted calculation because of the net loss generated in these periods.

 

The following is the calculation of loss per share for the three and six months ended December 31, 2019 and 2018:

 

   Three Months
Ended December 31,
   Six Months
Ended December 31,
 
   2019   2018   2019   2018 
Net Income (Loss) - Basic and Diluted  $(550,825)  $(125,948)  $(636,935)  $(425,233)
                     
Basic and Dilutive Weighted Average Shares Outstanding   12,873,971    11,618,878    12,856,218    10,940,074 
                     
Loss Per Share - Basic and Diluted  $(0.04)  $(0.01)  $(0.05)  $(0.04)

 

The number of shares issuable upon the exercise of outstanding stock options that were excluded from the computation as their effect was antidilutive was approximately 2,047,800 and 1,493,200 for the three and six months ended December 31, 2019 and 2018, respectively.

   

 

 

 7 

 

 

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.

 

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 December 31, 2019.

 

Accounting Pronouncements Recently Adopted

 

On July 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers. Refer to Note 5 for further information.

 

On July 1, 2019, the Company adopted ASU 2016-02, Topic 842 – Leases. Refer to Note 3 for further information.

  

2. INVENTORIES

 

Inventories are stated at the lower of cost (first-in, first-out) or market and consisted of the following:

 

   December 31,
2019
   June 30,
2019
 
Raw Materials  $723,482   $578,856 
Work-In-Progress   429,268    409,019 
Finished Goods   866,445    746,729 
Total Inventories  $2,019,195   $1,734,604 

 

3. LEASE OBLIGATION

 

The Company entered into a five-year capital lease obligation in January 2016 for the acquisition of manufacturing equipment totaling $51,252.

 

 

 

 8 

 

 

In February 2016, FASB issued ASU 2016-02, “Leases” (Topic 842). ASU 2016-02 requires the recognition of lease asset and lease liabilities by lessees for those leases currently classified as operating leases with terms greater than twelve months and make certain changes to the accounting for lease expenses. The Company adopted this standard effective July 1, 2019 and has reflected its impact upon the El Paso, Texas facility operating lease entered into on July 1, 2019 in connection with the Ross Optical acquisition. The facility lease is a three-year operating lease obligation with total remaining minimum lease payments of $154,981 at December 31, 2019. Total rent expense including base rent and common area expenses were $15,190 and $30,381 during the three and six months ended December 31, 2019, respectively. Included in the accompanying balance sheet at December 31, 2019 is a right-of-use asset of $145,428 and current and long-term right-of-use operating lease liabilities of $55,247 and $90,181, respectively.

 

At December 31, 2019, future minimum lease payments under the capital lease and operating lease obligations are as follows:

 

Fiscal Year Ending June 30:  Capital Lease   Operating Lease 
2020  $5,979   $30,380 
2021   5,126    61,779 
2022       62,822 
Total Minimum Payments   11,105   $154,981 
Less: amount representing interest   1,211      
Present value of minimum lease payments   9,894      
Less: current portion   9,894      
   $      

 

4.STOCK-BASED COMPENSATION

 

The following table summarizes stock-based compensation expense for the three and six months ended December 31, 2019 and 2018:

 

   Three Months
Ended December 31,
   Six Months
Ended December 31,
 
   2019   2018   2019   2018 
Cost of Goods Sold  $11,233   $   $22,466   $ 
Research and Development   12,683    2,411    25,368    4,822 
Selling, General and Administrative   250,790    7,817    303,377    348,390 
Stock Based Compensation Expense  $274,706   $10,228   $351,211   $353,212 

  

No compensation has been capitalized because such amounts would have been immaterial.

   

The following tables summarize stock option activity for the six months ended December 31, 2019:

 

    Options Outstanding 
    Number of
Shares
    Weighted Average
Exercise Price
    Weighted Average
Contractual Life
 
Outstanding at June 30, 2019   1,819,500   $0.87    7.05 years 
Granted   270,000         
Exercised   (27,500)        
Expired or Cancelled   (4,200)        
Outstanding at December 31, 2019   2,057,800   $0.94    7.00 years 

  

 

 

 9 

 

 

Information related to the stock options outstanding as of December 31, 2019 is as follows:

 

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
 
$0.27    40,000    1.54   $0.27    40,000   $0.27 
$0.48    60,000    6.25   $0.48    60,000   $0.48 
$0.50    100,000    5.47   $0.50    100,000   $0.50 
$0.55    44,000    4.21   $0.55    44,000   $0.55 
$0.64    25,000    7.86   $0.64    25,000   $0.64 
$0.70    100,000    8.59   $0.70    100,000   $0.70 
$0.73    791,000    6.80   $0.73    791,000   $0.73 
$0.85    6,000    3.01   $0.85    6,000   $0.85 
$0.90    6,000    4.01   $0.90    6,000   $0.90 
$0.95    30,000    4.53   $0.95    30,000   $0.95 
$1.20    207,800    2.17   $1.20    207,800   $1.20 
$1.30    478,000    9.45   $1.30       $1.30 
$1.42    100,000    9.70   $1.42       $1.42 
$1.50    70,000    9.94   $1.50    70,000   $1.50 
$0.27–1.50    2,057,800    7.00   $0.94    1,479,800   $0.79 

 

The aggregate intrinsic value of the Company’s “in-the-money” outstanding and exercisable options as of December 31, 2019 was $1,770,050 and $1,493,050, respectively.

 

Common Stock Award

 

On August 2, 2018, the Company awarded its Chief Executive Officer 300,000 shares of common stock for services performed through June 30, 2018. As of December 31, 2019, 200,000 shares have been issued. The fair market value of the 300,000 shares on the award date equal to $210,000 has been recorded as general and administrative stock-based compensation expense in the three months ended September 30, 2018.

  

5. REVENUE RECOGNITION

 

On July 1, 2018, the Company adopted ASU 2014-09 Revenue from Contracts with Customers (ASC 606) using the modified retrospective method for contracts that were not completed as of July 1, 2018, whereby revenues are recognized as the performance obligations to deliver products or services are satisfied and are recorded based on the amount of consideration the Company expects to receive in exchange for satisfying the performance obligations. Most of the Company’s products and services are marketed to medical device companies almost exclusively in the United States. Products and services are primarily transferred to customers at a point in time based upon when services are performed or product is shipped.

 

Revenues represent the amount of consideration the Company expects to receive from customers in exchange for transferring products and services. Other selling costs to obtain and fulfill contracts are expensed as incurred due to the short-term nature of a majority of its revenues. 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 revenues.

 

 

 

 10 

 

 

The Company disaggregates revenues by product and service types as it believes it best depicts how the nature, amount, timing and uncertainty of revenues and cash flows are affected by economic factors. Revenues are comprised of the following for the three and six months ended December 31, 2019 and 2018:

 

   Three Months
Ended December 31,
   Six Months
Ended December 31,
 
   2019   2018   2019   2018 
Engineering Design Services  $478,441   $318,741   $888,169   $830,639 
Optical Components   1,532,843    225,967    2,949,087    524,024 
Medical Device Products and Assemblies   785,478    933,143    1,474,490    1,682,646 
Total Revenues  $2,796,762   $1,477,851   $5,311,746   $3,037,309 

 

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 December 31, 2019, there were no contract assets recorded in the Company’s Consolidated Balance Sheets.

 

The Company’s contract liabilities arise as a result of 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 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:

 

   Three Months
Ended December 31,
   Six Months
Ended December 31,
 
   2019   2018   2019   2018 
Contract liabilities, beginning of period  $513,623   $400,704   $450,192   $857,842 
Unearned revenue received from customers   97,143        293,019    24,300 
Revenue recognized   (222,260)   (192,722)   (354,705)   (674,160)
Contract liabilities, end of period  $388,506   $207,982   $388,506   $207,982 

 

6. BUSINESS ACQUISITION

 

On July 1, 2019 the Company acquired the operating assets of Ross Optical Industries, Inc. of El Paso, Texas, a supplier of custom and catalogue optical components sourced through an extensive network of worldwide specialized vendors and sold for industrial, military and medical applications. The acquisition had an effective date of June 1, 2019. All of Ross’ results of operations are included in our financial statements for the three and six month periods ended December 31, 2019.

 

 

 

 11 

 

 

Consolidated unaudited actual and pro forma results of operations for the Company are presented below assuming that the acquisition of the Ross Optical division had occurred on July 1, 2018. Pro forma operating results include net adjustments resulting from the acquisition transaction.

 

   Three Months
Ended December 31,
   Six Months
Ended December 31,
 
   2019   2018   2019   2018 
   (Actual)   (Pro Forma)   (Actual)   (Pro Forma) 
Revenues  $2,796,762   $2,521,927   $5,311,746   $4,935,365 
Net income (loss)   (550,825)   11,968    (636,935)   88,398 
Income (loss) per share                    
Basic  $(0.04)  $0.00   $(0.05)  $0.01 
Fully diluted  $(0.04)  $0.00   $(0.05)  $0.01 

 

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 become achievable over time.

 

 

 

 

 

 

 

 

 12 

 

 

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 December 31, 2019 and with our audited consolidated financial statements for the year ended June 30, 2019 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on September 26, 2019.

 

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, 2019 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 medical instrumentation line includes traditional endoscopes and endocouplers as well as other custom imaging and illumination products for use in minimally invasive surgical procedures. Much of our recent development efforts have been targeted at the development of next generation endoscopes. For the last ten years, we have funded internal research and development programs to develop next generation capabilities for designing and manufacturing 3D endoscopes and very small Microprecision™ lenses, anticipating future requirements as the surgical community continues to demand smaller 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, which we began operating as a division of our Company beginning on that date. The accompanying financial statements include the results of operations of the Ross Optical division for the entire six and three-month periods ended December 31, 2019 and the assets and liabilities of the division as of June 30, 2019 and December 31, 2019. The acquisition of the assets of Ross Optical Industries effective June 1, 2019 expands our optics components and assemblies business. All products supplied by Ross Optical include a custom or catalog optic, which is sourced through Ross Optical’s extensive domestic and worldwide network of optical fabrication companies. 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 the in-house coating department. Approximately 76% of Ross Optical revenues are from customers in the United States, 8% from Western Europe and 5% from Canada during the six months ended December 31, 2019. Ross Optical’s sales are mostly resale of specialized optical components with the remainder being assemblies. Ross Optical does not perform revenue generating engineering services or internal research and development. The majority of Ross Optical sales are for industrial applications with the remainder split between military and medical device products.

 

The Management Discussion and Analysis which follows is based on the financial condition and results of operations of our Company including the operating results for the six and three month periods ended December 31, 2019 and the balance sheet as of June 30, 2019 and December 31, 2019 of our new division Ross Optical.

 

Our business is the design and manufacture of high-quality medical devices. Approximately 12% of our revenue in the six months ended December 31, 2019 is from the design, manufacture and resale of optical products for military and defense and 29% is from other industrial, non-medical products. Our medical instrumentation line and unique design and manufacturing capabilities include traditional endoscopes and endocouplers as well as other custom imaging and illumination products for use in minimally invasive surgical procedures. We design and manufacture 3D endoscopes and very small Microprecision™ 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. 

 

 

 

 13 

 

 

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. Our internet website is www.poci.com. Information on our website is not intended to be integrated into this report.

 

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 and through the acquisition of the Ross Optical division in June 2019, 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™ optics, micro medical cameras, illumination, and 3D endoscopes.

 

The Ross Optical division sales are primarily optical components and assemblies for industrial applications in addition to medical and military uses. By combining the unique capabilities of our Company with the Ross Optical division we believe there are opportunities for expanded sales of each division products and services throughout the combined customer base. Additionally, we believe Ross’ expanded worldwide vendor relationships will benefit our traditional efforts to source materials at competitive prices for our development projects and manufacturing activities.

   

For the six months ended December 31, 2019, approximately 24% of our sales were made to our three largest customers and no customer, including these three, made up more than 10% of our total sales. Our three largest customers during the quarter ended December 31, 2019 are in the defense and medical device industries. One represents engineering service revenue for an established defense contractor, and the other two represent production revenue for companies commercializing a cardiovascular endoscope and an ENT scanning device. Each of these three products incorporates our Microprecision™ technologies as enabling design features. In addition to the three largest customers, we made sales to two hundred thirty-eight other customers during the six month period ended December 31, 2019. 

 

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 surgery-grade visualization from sub-millimeter sized devices and 3D endoscopy, including disposable products and assemblies. 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 believe there are opportunities to expand the reach of sales activities of our business and that of our new division, Ross Optical, through the gradual integration of some of the sales and marketing resources of the two operations.

 

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. 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 under different assumptions or conditions.

 

 

 

 14 

 

 

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, 2019 filed with the Securities and Exchange Commission on September 26, 2019.

 

Results of Operations

 

Our total revenues for the quarter ended December 31, 2019, were $2,796,762, as compared to $1,477,851 for the same period in the prior year, an increase of $1,318,911, or 89.2%. Revenues increased during the quarter ended December 31, 2019 compared to the same quarter of the prior year primarily due to the revenues of the Ross Optical division, which were $1,150,844 for the quarter ended December 31, 2019. Our non-Ross revenues increased $168,067 during the quarter ended December 31, 2019 from their levels in the same period of the prior year. The mix of engineering service, production and component sales were consistent between the quarters and changes were considered the result of customary fluctuations within and between the various products during the quarters.

 

Our total revenues for the six months ended December 31, 2019 were $5,311,746, as compared to $3,037,309 for the same period in the prior year, an increase of $2,274,437, or 74.9%. Revenues increased during the six months ended December 31, 2019 compared to the same period of the prior year primarily due to the revenues of the Ross Optical division, which were $2,241,688 for the six months ended December 31, 2019. Our non-Ross revenues increased $32,769 during the six months ended December 31, 2019 from their levels in the same period of the prior year. The mix of engineering service, production and component sales were consistent between the quarters and changes were considered the result of customary fluctuations within and between the various products during the quarters.

    

Gross profit for the quarter ended December 31, 2019 was $917,939, compared to $355,722 for the same period in the prior year, reflecting an increase of $562,217, or 158%. Gross profit for the quarter ended December 31, 2019 as a percentage of our revenues was 32.8%, an increase from the gross profit percentage of 24.1% for the same period in the prior year. Gross profit for the six months ended December 31, 2019 was $1,892,056, as compared to $818,229 for the same period in the prior year, which reflects an increase of $1,073,827 or 131.2%. Gross profit for the six months ended December 31, 2019 as a percentage of our revenues was 35.6%, an increase from the gross profit percentage of 26.9% 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 increase in gross profit dollars and gross profit percentage during the quarter and six month period ended December 31, 2019 compared to the same periods of the prior year is primarily due to the inclusion of the Ross Optical division revenue at a higher gross margin percentage than we realize on non-Ross revenues. Ross Optical division revenues generated a gross margin percentage of 48-50% while non-Ross revenue margin was 26.4% for the six months ended December 31, 2019. The non-Ross gross margin is dependent on a number of factors and is expected to fluctuate from quarter to quarter based on the nature and status of engineering projects. Specifically, periodic margins are impacted by revenue volume, facility utilization, product sales mix, and unanticipated cost over-runs associated with engineering projects and start-up production activities of new products. During the quarter ended December 31, 2019 two non-Ross engineering service projects experienced cost over-runs that negatively impacted gross margins during the period. The two projects collectively represented 18% of total revenue and negatively impacted the gross margin percentage by 6.5% during the quarter ended December 31, 2019. The cost over-runs in each of these cases resulted from design challenges and issues we are addressing and that we believe will only cause a temporary decrease in total realized gross margins. The remainder of our production and engineering jobs resulted in margins within our targeted range with reasonably expected fluctuations.

 

Research and development expenses were $228,576 for the quarter ended December 31, 2019, compared to $125,413 for the same period in the prior year, an increase of $103,163, or 82%. Research and development expenses were $380,730 for the six months ended December 31, 2019, compared to $226,211 for the same period in the prior year, an increase of $154,519, or 68%. In-house research and development 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 quarter ended December 31, 2019 we had a larger staff of engineering personnel and a greater amount of our engineering personnel time was consumed in internal research and development activities; the product of which we believe will benefit various engineering design projects involving specialized fixturing and illumination features.

 

 

 

 15 

 

 

Selling, general and administrative expenses were $2,148,806 for the six months ended December 31, 2019, compared to $1,016,405 for the same period in the prior year, an increase of $1,132,401, or 111%. The increase in the six months ended December 31, 2019, compared to the same quarter of the prior fiscal year was primarily due to the addition of $598,078 of selling, general and administrative expenses incurred by our Ross Optical division. Non-Ross selling, general and administrative expenses reflect a $42,999 increase in stock-based compensation and service fees in the six months ended December 31, 2019 compared to the same period of the prior year, and a $491,322 increase in compensation to existing and newly hired employees.

 

Selling, general and administrative expenses were $1,240,961 for the quarter ended December 31, 2019, compared to $355,916 for the same period in the prior year, an increase of $885,045, or 249%. The increase in the quarter ended December 31, 2019, compared to the same quarter of the prior fiscal year was primarily due to the addition of $325,987 of selling, general and administrative expenses incurred by our Ross Optical division. Non-Ross selling, general and administrative expenses reflect a $264,478 increase in stock-based compensation and service fees in the quarter ended December 31, 2019 compared to the same period of the prior year, and a $294,581 increase in compensation to existing and newly hired employees.

 

Liquidity and Capital Resources

 

We have sustained recurring net losses for several years. During the year ended June 30, 2019 and the six months ended December 31, 2019 we incurred net losses of $614,871 and $636,935, respectively. As a result of our acquisition of the Ross Optical division, our revenue, gross margin and components of our working capital have increased. At December 31, 2019 cash was $347,858, accounts receivables were $2,000,048 and current liabilities were $2,021,535, including $388,506 of customer advances received for future order deliveries.

 

Although our financial performance has improved during the last few fiscal quarters, our operating expenses have also increased and we continue to experience pricing pressure from our customers and challenges in engineering projects and production orders that result in cost over-runs and depressed gross margins. Consequently, critical 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 margins 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, and by customer advances paid against purchase orders and recorded in the current liabilities section of the accompanying financial statements. Our management believes that the opportunities represented by our current production projects and engineering pipeline of Microprecision™ optical elements, micro medical camera assemblies and 3D endoscope projects have the potential to generate increasing revenues and profitable financial results.

 

Capital equipment expenditures and additional patent costs during the six months ended December 31, 2019 and 2018 were $56,914 and $76,184, respectively. Future capital equipment expenditures will be dependent upon the type and amount of future sales revenue and the needs of on-going research and development efforts.

 

We have contractual cash commitments related to open purchase orders as of December 31, 2019 of approximately $976,440, plus a $9,835 commitment remaining under a five-year capital lease obligation for the acquisition of equipment and $145,428 commitment remaining under a three-year facility lease relating the Ross Optical division in El Paso, Texas (see Note 3. Lease Obligations). We have no other contractual cash commitments since leased facilities are currently on a month-to-month basis.

  

 

 

 16 

 

 

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.

 

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, including internal control over financial reporting, were not effective as of December 13, 2019, to ensure the information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934, as amended (i) is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, 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 information is accumulated and communicated to our management. Based on this evaluation, our management concluded that our internal control over financial reporting was not effective as of December 31, 2019.

 

The following is a description of two material weaknesses in our internal control over financial reporting:

 

Segregation of Duties: As previously disclosed in our Annual Reports on Form 10-K for the fiscal years ended June 30, 2008-2019, our management identified a control deficiency during the 2008 fiscal year because we lacked sufficient staff to segregate accounting duties. We believe the control deficiency resulted primarily because we have the equivalent of one and one-half persons performing all accounting-related on-site duties. As a result, we did not maintain adequate segregation of duties within our critical financial reporting applications, the related modules and financial reporting processes. This control deficiency could result in a misstatement of balance sheet and income statement accounts in our interim or annual consolidated financial statements that would not be detected. Accordingly, management has determined that this control deficiency constitutes a material weakness. During the period beginning with fiscal year 2008 through June 30, 2019, no audit adjustments resulting from this condition were required.

 

To address and remediate the material weakness in internal control over financial reporting described above, beginning with the quarter ended September 30, 2008, we instituted a procedure whereby our Chief Executive Officer, our Chief Financial Officer and other members of our Board of Directors perform a higher level review of the quarterly and annual reports on Form 10-Q and Form 10-K prior to filing.

 

We believe that the step outlined above strengthens our internal control over financial reporting and mitigates the material weakness described above. As part of our assessment of internal control over financial reporting for the fiscal year ended June 30, 2019, our management has evaluated this additional control and has determined that it is operating effectively.

 

Inventory Valuation: As previously disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2019, we reported a material weakness with respect to the valuation of our inventories. Specifically, the amounts used to value our inventory at June 30, 2009 with respect to overhead rates and purchased items were often inconsistent with the supporting documentation, due to year-to-year changes in overhead rates and costs of purchased items that were not properly reflected in inventory valuation. Accordingly, management had determined that this control deficiency constituted a material weakness as of June 30, 2009. Periodic fiscal year end audit adjustments of approximately $50,000 have been necessary as a result of this condition.

  

 

 

 17 

 

 

Changes in Internal Control over Financial Reporting

 

There was no change in our internal control over financial reporting that occurred during the second quarter of our fiscal year 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.

 

To address and remediate the material weakness in internal control over financial reporting described above, beginning in the quarter ended September 30, 2009 and continuing through the quarter ended December 31, 2019, we implemented processes to improve our inventory controls and documentation surrounding inventory valuation for overhead rates, and performed procedures to ensure that the pricing of inventory items was consistent with the supporting documentation. We believe that the step outlined above strengthens our internal control over financial reporting and mitigates the material weakness described above.

 

We intend to continue to remediate material weaknesses and enhance our internal controls but cannot guarantee that our efforts will result in remediation of our material weaknesses or that new issues will not be exposed in this process.

 

 

 

 

 

 

 

 

 

 18 

 

 

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.

 

Other than as described below, there have been no material changes from the risk factors previously disclosed in our annual report on Form 10-K for the fiscal year ended June 30, 2019, as filed with the Securities and Exchange Commission on September 26, 2019.

 

We depend on the availability of certain key supplies and services that are available from only a few sources and we may experience difficulty with certain suppliers due to the recent coronavirus outbreak in China and we may have difficulty finding alternative sources of these supplies or services.

 

We source certain key supplies to develop and manufacture our products, particularly our precision grade optical glass, which is available from only a few sources, in China. Due to the recent coronavirus outbreak in China in December 2019, we may experience difficulties with certain suppliers. Our business could be affected if we become unable to procure these essential materials and services in adequate quantities and at acceptable prices. We are always evaluating our suppliers and alternative sources. If we experience a shortage of certain supplies and are unable to find an alternative source, our financial condition and results of operations could be adversely affected.   

 

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

 

We did not issue unregistered securities during the quarter ended December 31, 2019.

 

Item 3. Defaults Upon Senior Securities.

 

Not applicable.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

  

 

 

 

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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   Articles of Organization of Precision Optics Corporation, Inc., as amended (included as Exhibit 3.1 to the Form SB-2 filed March 16, 2007, 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).
     
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   Consulting Agreement by and between the Company and Donald A. Major, dated June 15, 2016 (included as Exhibit 10.1 to the Form 8-K filed on June 23, 2016, and incorporated herein by reference).
     
10.4   Form of Securities Purchase Agreement, by and among the Company and the Investors, dated November 22, 2016 (included as Exhibit 10.1 to the Form 8-K filed November 29, 2016, and incorporated herein by reference).
     
10.5   Form of Registration Rights Agreement, by and among the Company and the Investors, dated November 22, 2016 (included as Exhibit 10.2 to the Form 8-K filed on November 29, 2016, and incorporated herein by reference).
     
10.6   Form of Securities Purchase Agreement, by and the Company and the Investors, dated August 22, 2017 (included as Exhibit 10.1 to the Form 8-K filed on August 25, 2017, and incorporated herein by reference).
     
10.7   Form of Registration Rights Agreement, by and among the Company and the Investors, dated August 22, 2017 (included as Exhibit 10.2 to the Form 8-K filed on August 25, 2017, and incorporated herein by reference).
     
10.8   Compensation Agreement, by and between the Company and Joseph N. Forkey, dated August 2, 2018 (included as Exhibit 10.1 to the Form 8-K filed on August 3, 2018, and incorporated herein by reference).
     
10.9   Offer letter by and between the Company and Donald A. Major, dated August 2, 2018 (included as Exhibit 10.9 to the Form 10-K filed on September 27, 2018, and incorporated herein by reference).
     
10.10   Form of Securities Purchase Agreement by and among the Company and the Investors, dated October 16, 2018 (included as Exhibit 10.1 to the Form 8-K filed on October 18, 2018, and incorporated herein by reference).

 

 

 

 

 20 

 

 

10.11   Form of Registration Rights Agreement by and among the Company and the Investors, dated October 16, 2018 (included as Exhibit 10.2 to the Form 8-K filed on October 18, 2018, and incorporated herein by reference).
     
10.12†+   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).
     
10.13   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).
     
10.14   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).
     
10.15   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).
     
10.16†   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).
     
10.17+   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).
     
10.18*   Employment Offer Letter Daniel S. Habhegger, dated December 2, 2019.
     
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).
     
31.1*   Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
31.2*   Certification of the 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*   XBRL Instance Document
     
101.SCH*   XBRL Taxonomy Extension Schema Document
     
101.CAL*   XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF*   XBRL Taxonomy Extension Definition Linkbase Document
     
101.LAB*   XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE*   XBRL Taxonomy Extension Presentation Linkbase 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.

 

 

 

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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: February 13, 2020 By: /s/ Joseph N. Forkey
    Joseph N. Forkey
   

Chief Executive Officer

(Principal Executive Officer)

     
     
Date: February 13, 2020 By: /s/ Daniel S. Habhegger
    Daniel S. Habhegger
   

Chief Financial Officer 

(Principal Financial Officer and Principal Accounting Officer)

 

 

 

 

 

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