Precision Optics Reports Second Quarter Fiscal Year 2024 Financial Results

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Feb 14, 2024, 16:30 ET

Conference Call Scheduled for today, February 14, 2024, at 5:00pm ET.

GARDNER, Mass., Feb. 14, 2024 /PRNewswire/ -- Precision Optics Corporation, Inc. (NASDAQ: POCI), a leading designer and manufacturer of advanced optical instruments for the medical and defense industries, announced operating results on an unaudited basis for its second quarter fiscal year 2024 for the period ended December 31, 2023.

Q2 2024 Financial Highlights (3 Months Ended December 31, 2023):

Revenue decreased 18% to $4.8 million, compared to $5.9 million in the same quarter of the previous fiscal year, but up 12% from the most recent sequential quarter. The year ago second quarter included a one-time sale of $600,000 of technology rights relating to a single-use medical device developed for a customer.
Engineering revenue increased 33% to $2.3 million compared to $1.7 million in the same quarter of the previous fiscal year, and up 19% from the most recent sequential quarter.
Production revenue was $2.6 million compared to $3.6 million in the same quarter of the previous fiscal year, and $2.4 million in the most recent sequential quarter.
Gross margins were 30.1% compared to 44.2% in the same quarter of the previous year. Removing the impact of the technology rights revenue, gross margins a year ago would have been 37.8%.
Net loss for the quarter was ($758,802), compared to a net income of $508,668 in the same quarter of the previous year.
Adjusted EBITDA was ($269,034) for the quarter compared to $866,450 in the same quarter of the previous year.

Recent Additional Highlights:

In November 2023, the Company announced the receipt of initial purchase orders towards a $1.4 million total program development project to develop a highly complex imaging sub-assembly for a next generation ophthalmoscope for one of the world's largest technology-focused medical device companies.
In December 2023, the Company announced the signing of a production and technology license agreement with a leading surgical robotics company to supply a single-use endoscope assembly used in their cystoscopy robotic surgery system.

Precision Optics' CEO, Joseph Forkey, commented, "The Company's results for Q2 were generally in-line with our expectations and consistent with what we have communicated previously. While revenue was lower compared to last year due to timing differences between reorders for ongoing production, the exit of certain mature customer programs and the introduction of new customer programs, we have begun to see the rebound we expected with two new programs moving to production in the quarter and another restarting after a pandemic-related hold. These programs contributed to a 6% quarter-over-quarter increase in production revenue, which, combined with record engineering revenue led to a 12% increase in total revenue compared to the first quarter. Margins for the second quarter were lower than the first quarter, due to a differing sales mix, lower than normal production yields on certain programs starting or re-starting production as well as other one-time charges. We believe these margin issues are transient and will be substantially resolved in the second half of the year, with gross margins returning to historical levels.

Dr. Forkey continued, "The growth we expect in the second half of fiscal 2024 is supported by the strength of our engineering pipeline, a leading indicator of future production volumes. Engineering revenue was $2.3 million during the second quarter – a new quarterly record, up 33% year-over-year, and up 19% sequentially. We anticipate volumes from production orders coming on-line to lift our overall revenue to new quarterly record run-rates in this fiscal year. Precision Optics' core competencies -- micro-optics, digital imaging, 3D endoscopy, and single-use medical devices -- uniquely position us at the center of market segments that are significantly outpacing the growth of the broader medical device and defense / aerospace industries, providing us with an ongoing opportunity to significantly grow into the future. I look forward to an exciting second half of fiscal 2024."

The following table summarizes the second quarter and fiscal year to date (unaudited) results for the periods ended December 31, 2023, and 2022:

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

Gross Profit		1,450,976	2,599,472	2,914,587	4,238,913

Stock Compensation Expenses		382,431	108,746	491,177	319,776
Other		1,772,707	1,919,661	3,532,865	3,449,874
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

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

Note: The Common Shares in this table reflect shares on a post reverse split basis for all periods presented.

Conference Call Details
Date and Time: Wednesday, February 14, 2024, at 5:00pm ET

Call-in Information: Interested parties can access the conference call by dialing (844) 735-3662 or
(412) 317-5705.

Live Webcast Information: Interested parties can access the conference call via a live webcast, which is available at https://app.webinar.net/5l19x2DzRKG.

Replay: A teleconference replay of the call will be available until February 21, 2024, at (877) 344-7529 or (412) 317-0088, replay access code 9304851. A webcast replay will be available at https://app.webinar.net/5l19x2DzRKG.

About Precision Optics Corporation
Founded in 1982, Precision Optics is a vertically integrated optics company primarily focused on leveraging its proprietary micro-optics and imaging technologies to the healthcare and defense/aerospace industries by providing services ranging from new product concept through mass manufacture. Utilizing its leading-edge in-house design, prototype, regulatory and fabrication capabilities as well as its Lighthouse Imaging division's electronic imaging expertise and its Ross Optical division's high volume world-wide sourcing, inspecting and production resources, the Company designs and manufactures next-generation product solutions to meet the most challenging customer requirements. Within healthcare, Precision Optics enables next generation medical device companies around the world to meet the increasing demands of the surgical community who require more enhanced and smaller imaging systems for minimally invasive surgery, including single-use medical devices, as well as 3D endoscopy systems to support the rapid proliferation of surgical robotic systems. In addition to these next generation applications, Precision Optics has supplied top tier medical device companies with a wide variety of optical products for decades, including complex endocouplers and specialized endoscopes. The Company is also leveraging its technical proficiency in micro-optics to enable leading edge defense/aerospace applications which require the highest quality standards and the optimization of size, weight and power. For more information, please visit www.poci.com.

Non-GAAP Financial Measures
Precision Optics has provided in this press release financial information that has not been prepared in accordance with accounting principles generally accepted in the Unites States of America ("non-GAAP"). The non-GAAP financial measure is Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization). Adjusted EBITDA also excludes from Net Income (Loss) the effect of stock-based compensation, restructuring and other acquisition-related items.

This non-GAAP financial measure assists Precision Optics management in comparing its operating performance over time because certain items may obscure the underlying business trends and make comparisons of long-term performance difficult, as they are of a nature and/or size that occur with inconsistent frequency or relate to discrete acquisition or restructuring plans that are fundamentally different from the ongoing productivity of the Company. Precision Optics management also believes that presenting this measure allows investors to view its performance using the same measures that the Company uses in evaluating its financial and business performance and trends.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information calculated in accordance with GAAP. Investors are encouraged to review the reconciliation of non-GAAP measures to their most directly comparable GAAP financial measures. A reconciliation of the non-GAAP financial measure presented above to GAAP results has been provided in the financial tables included with this press release.

About Forward-Looking Statements
This press release contains forward-looking statements. Forward-looking statements include, but are not limited to, statements that express the Company's intentions, beliefs, expectations, strategies, predictions or any other statements related to the Company's future activities or future events or conditions. These statements are based on current expectations, estimates and projections about the Company's business based, in part, on assumptions made by the Company's management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in the forward-looking statements due to numerous risk factors. Any forward-looking statements speak only as of the date on which they are made, and the Company does not undertake any obligation to update any forward-looking statement, except as required by law.

Company Contact:
PRECISION OPTICS CORPORATION
22 East Broadway
Gardner, Massachusetts 01440-3338
Telephone: 978-630-1800

Investor Contact:
LYTHAM PARTNERS, LLC
Robert Blum
Telephone: 602-889-9700
[email protected]

PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	December 31,		June 30,
	2023		2023
ASSETS
Current Assets:
Cash and cash equivalents	$	987,044	$	2,925,852
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		3,099,986		2,776,216
Prepaid expenses		234,121		249,681
Total current assets		7,832,695		9,859,156

Fixed Assets:
Machinery and equipment		3,253,746		3,227,481
Leasehold improvements		832,305		825,752
Furniture and fixtures		362,287		242,865
Total fixed assets		4,448,338		4,296,098
Less—Accumulated depreciation and amortization		3,966,839		3,862,578
Net fixed assets		481,499		433,520

Operating lease right-to-use asset		275,329		358,437
Patents, net		283,643		265,111
Goodwill		8,824,210		8,824,210

TOTAL ASSETS	$	17,697,376	$	19,740,434

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of capital lease obligation	$	44,519	$	43,209
Current maturities of long-term debt		513,259		513,259
Accounts payable		1,675,742		2,432,264
Customer advances		1,158,242		1,174,690
Accrued compensation and other		747,793		927,521
Operating lease liability		173,503		168,677
Total current liabilities		4,313,058		5,259,620

Capital lease obligation, net of current portion		45,890		68,482
Long-term debt, net of current maturities and debt issuance costs		1,919,350		2,175,980
Operating lease liability, net of current portion		101,826		189,760

Stockholders' Equity:
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		60,718,801		60,224,934
Accumulated deficit		(49,462,224)		(48,239,007)
Total stockholders' equity		11,317,252		12,046,592

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	17,697,376	$	19,740,434

PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 2023 AND 2022 (UNAUDITED)

		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

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

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

PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
ADJUSTED EBITDA

	Three Months				Six Months
	Ended December 31,				Ended December 31,
	2023		2022		2023		2022
Net Income (loss) (GAAP)	$	(758,802)	$	508,668	$	(1,223,217.00)	$	349,944

Stock based compensation		382,431		244,786		491,177.00		319,776

Depreciation and Amortization		52,697		52,667		104,261.00		105,078

Interest expense		54,640		60,329		113,762.00		117,251

Adjusted EBITDA (non-GAAP)	$	(269,034)	$	866,450	$	(514,017)	$	892,049