PRECISION OPTICS CORPORATION, INC. 10-K

ITEM 9A. 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 Annual Report on Form 10-K. 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 June 30, 2021, 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. Management’s Annual Report on Internal Control Over Financial Reporting Our disclosure controls and procedures include components of our internal control over financial reporting. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls, no matter how well designed and operated, can provide only reasonable, but not absolute, assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, with our Company have been detected. A “material weakness” is defined as a significant deficiency, or a combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. A “significant deficiency” is a control deficiency, or a combination of control deficiencies, that adversely affects a company’s ability to initiate, authorize, record, process or report external financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the annual or interim financial statements that is more than inconsequential will not be prevented or detected. Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we conducted an assessment of the effectiveness of our internal control over financial reporting as of June 30, 2021. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on our evaluation, our management concluded that our internal control over financial reporting was not effective as of June 30, 2021. 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, 2008-2020, 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 six persons performing all accounting-related on-site duties at two locations. 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. 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. 19 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 2021 assessment of internal control over financial reporting, our management has evaluated this additional control and has determined that it is operating effectively. Inventory Valuation : As previously disclosed in our Annual Reports on Form 10-K for the fiscal years ended June 30, 2009-2020, 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. One audit adjustment of approximately $58,000 to our audited financial statements as of June 30, 2011 was necessary as a result of this condition. 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 year ended June 30, 2021, we implemented procedures 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. Changes in Internal Control over Financial Reporting There was no change in our internal control over financial reporting that occurred during the fourth quarter of our fiscal year covered by this Annual Report on Form 10-K that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION. None 20 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. Identification of Directors Set forth below is certain information with respect to the individuals who are our directors as of September 21, 2021. Name Age Position(s) or Office(s) Held Dr. Joseph N. Forkey 53 Chief Executive Officer, President, Treasurer and Director Andrew J. Miclot 65 Director Dr. Richard B. Miles 78 Director Peter H. Woodward 48 Chairman of the Board of Directors Board Composition. Our Board of Directors is divided into three classes that are as nearly equal in number as possible, with each class serving for a staggered term of office. Only one class is elected each year. Each director serves a three-year term and until his or her successor has been duly elected and qualified. Our Board currently consists of four directors. Our Class I director is Peter H. Woodward. Our Class II director is Andrew J. Miclot. Our Class III directors are Joseph N. Forkey and Richard B. Miles. Biographies and Qualifications of Our Directors. The biographies of our directors and certain information regarding each director’s experience, attributes, skills and/or qualifications that led to the conclusion that the individual should be serving as a director of our Company are as follows: Dr. Joseph N. Forkey Dr. Joseph N. Forkey has served as our Chief Executive Officer, President and Treasurer since February 8, 2011. Dr. Forkey has been a member of our Board of Directors since 2006. He served as our Chairman of our Board of Directors from February 2011 to July 2014. He served as our Executive Vice President and Chief Scientific Officer from April 2006 to February 2011, and held the position of our Chief Scientist from September 2003 to April 2006. Since joining us, he has been involved in general technical and management activities of our Company, as well as investigations of opportunities that leverage our newly developed technologies. Dr. Forkey holds B.A. degrees in Mathematics and Physics from Cornell University, and a Ph.D. in Mechanical and Aerospace Engineering from Princeton University. Prior to joining us, Dr. Forkey spent seven years at the University of Pennsylvania Medical School as a postdoctoral fellow and research staff member. Dr. Forkey is a valuable member of our Board due to his depth of scientific, operating, strategic, transactional, and senior management experience in our industry. Additionally, Dr. Forkey has held positions of increasing responsibility at our Company and holds an intimate knowledge of our Company due to his longevity in the industry and with us. Andrew J. Miclot Mr. Miclot was appointed to our Board on March 2, 2016. Mr. Miclot has more than 35 years of leadership experience with medical device suppliers and brings substantial global industry knowledge to our Company. Since September 2020, Mr. Miclot was President of Electromedical Products International, Inc., a medical device company treating Anxiety, Insomnia, Depression and Pain. Mr. Miclot was the President and Vice Chairman and Director of WishBone Medical, Inc., a pediatric orthopedic company dedicated to the unmet needs of children suffering from orthopedic challenges from October 2017 to January 2019. He has been on the Indiana University Alumni Association Advisory Board since October 2016. From October 2015 to January 2018, Mr. Miclot served as President, CEO and Director of Micro Machine Co., a supplier of medical products for the orthopedic and spinal industries. Prior to joining Micro Machine Co., from May 2013 to September 2014, Mr. Miclot was Executive Vice President of MicroTechnologies, Inc., a medical device supplier. Mr. Miclot was General Manager and Senior Vice President of ArthroCare Corporation from June 2009 to March 2013. From January 2008 to March 2009, Mr. Miclot was President, CEO and Director of Ascension Orthopedics, Inc. He was Vice President of Marketing for the orthopedic global business unit at Orthofix, Inc. from April 2007 to January 2008, and from March 1994 to April 2007, he served as Senior Vice President with Symmetry Medical Inc., a medical device supplier and was also the Investor Relations Officer, after the NYSE IPO in December 2004 until April 2007. Mr. Miclot has a BA degree in Speech and Hearing and a MA degree in Audiology from Indiana University and an MBA from the Lake Forest Graduate School of Management, earned in 1991. 21 Dr. Richard B. Miles Professor Richard B. Miles was appointed to our Board of Directors in November 2005. He was a member of the Mechanical and Aerospace Engineering faculty at Princeton University from 1972 until 2013, at which time he retired from his Princeton academic appointment and became Professor Emeritus and Senior Scholar. From 1980 to 1996 he served as Chairman of Engineering Physics at Princeton. In 2017 he joined Texas A&M University and was appointed TEES Eminent Professor of Aerospace Engineering. In 2019 he was named Distinguished University Professor and O’Donnell Foundation Chair V. He is a member of the National Academy of Engineering and a Fellow of the National Academy of Inventors. He serves on the Board of Directors of the Hertz Foundation and the Board of Trustees of Pacific University, Oregon and is a Fellow of the Optical Society of America (OSA) and the American Institute Aeronautics and Astronautics (AIAA). Professor Miles is a valuable member of our Board due to his depth of scientific experience and familiarity with the field of our technologies, insight into the academic community, and familiarity with the latest developments and innovations in science and technology. Peter H. Woodward Mr. Woodward was appointed to our Board effective July 9, 2014 and as chairman of the Board in connection with the sale and purchase agreement we entered into in July 2014. Mr. Woodward is the founder of MHW Capital Management, LLC, or MHW, a position he has held since September 2005. MHW specializes in large equity investments in public companies implementing operating strategies to significantly improve their profitability. From 1996 to 2005, Mr. Woodward was the Managing Director for Regan Fund Management, LLC. He served as the President and Chief Executive Officer and Director of Cartesian, Inc. from June 2015 to July 2018, and currently serves as Chairman of the Board and Chairman of the Audit Committee for TSS, Inc., and as the CEO of Innoative Power, LLC. Mr. Woodward holds a BA in economics from Colgate University and a Masters of International Affairs with a concentration in international economics and finance from Columbia University. He is also a Chartered Financial Analyst. Identification of Executive Officers Set forth below is certain information with respect to the individuals who are our executive officers as of September 20, 2021. Name Age Position(s) or Office(s) Held Dr. Joseph N. Forkey 53 Chief Executive Officer, President, Treasurer and Director Daniel S. Habhegger 52 Chief Financial Officer and Secretary Biographies and Qualifications of Our Executive Officers. The biographies of our executive officers and certain information regarding each officer’s experience, attributes, skills and/or qualifications that led to the conclusion that the individual should be serving as an executive officer of our Company are as follows: Dr. Joseph N. Forkey For Dr. Forkey’s full biography, please refer to the section entitled “Biographies and Qualifications of Our Directors.” Daniel S. Habhegger Mr. Habhegger started with us in September 2019 as Director of Finance and became our Chief Financial Officer and Secretary effective December 1, 2019. Prior to joining our Company, he was the Director of Financial Planning and Analysis of SmartBear Software, Inc. from 2015 to August 2019 and of AgaMatrix, Inc. from 2010 to 2015. From 2005 to 2009 he was the Chief Financial Officer of Weather Services International, now The Weather Company, where he led the implementation of the PeopleSoft financial system and the SalesLogix CRM solution and the financial due diligence for two large acquisitions. He earned his Bachelor of Science in Finance from Western International University in 1994 and an MBA in Global Management from the University of Phoenix in 2005. 22 Other Involvement in Certain Legal Proceedings None of our directors or executive officers has been involved in any bankruptcy or criminal proceedings, nor have there been any judgments or injunctions brought against any of our directors or executive officers during the last ten years that we consider material to the evaluation of the ability and integrity of any director or executive officer. DELINQUENT SECTION 16(a) REPORTS Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, executive officers and persons who own more than 10% of a registered class of our securities to file reports of beneficial ownership and changes in beneficial ownership with the Securities and Exchange Commission on Forms 3 (Initial Statement of Beneficial Ownership), 4 (Statement of Changes of Beneficial Ownership of Securities) and 5 (Annual Statement of Beneficial Ownership of Securities). Officers, directors and greater than 10% beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based solely upon a review of reports provided to us by our officers and directors, we believe that, during the fiscal year ended June 30, 2021, no person required to file reports under Section 16(a) of the Securities Exchange Act of 1934 failed to file such reports on a timely basis during such fiscal year, except for four reports by four of our employees, including our Chief Executive Officer, Dr. Forkey, our Chief Financial Officers, Daniel Habhegger, and Divaker Mangadu, for one transaction each, filed late by one day each. We are also aware that Dolphin Offshore Partners LP which owns approximately 20% of our common stock based on available public records as of September 21, 2021 has not filed a Form 3 to date. Dolphin Offshore Partners LP is not affiliated with our Company. Code of Ethics We adopted a Corporate Code of Ethics and Conduct that applies to all employees, officers and directors of our Company, including our principal executive officer, principal financial officer and principal accounting officer or controller, or persons performing similar functions, a copy of which was filed as Exhibit 14.1 to our Annual Report on Form 10-K for the Fiscal Year Ended June 30, 2008 with the Securities and Exchange Commission on September 28, 2008. A copy of our Corporate Code of Ethics and Conduct can be obtained free of charge by contacting our Secretary, c/o Precision Optics Corporation, Inc., 22 East Broadway, Gardner, Massachusetts 01440. Procedure for Nominating Directors There have been no material changes to the procedures by which security holders may recommend nominees to our Board of Directors. The Board of Directors will consider candidates for director positions that are recommended by any of our stockholders. Any such recommendation should be provided to our Secretary. The recommended candidate should be submitted to us in writing addressed to our Secretary, c/o Precision Optics Corporation, Inc., 22 East Broadway, Gardner, Massachusetts 01440. The recommendation should include the following information: name of candidate; address, phone and fax number of candidate; a statement signed by the candidate certifying that the candidate wishes to be considered for nomination to our Board of Directors and stating why the candidate believes that he or she would be a valuable addition to our Board of Directors; a summary of the candidate’s work experience for the prior five years and the number of shares of our stock beneficially owned by the candidate. The Board will evaluate the recommended candidate and shall determine whether or not to proceed with the candidate in accordance with our procedures. We reserve the right to change our procedures at any time to comply with the requirements of applicable laws. Committees of the Board of Directors The Board of Directors has the responsibility for establishing broad corporate policies and reviewing our overall performance rather than day-to-day operations. The Board’s primary responsibility is to oversee management of our Company and, in so doing, serve the best interests of our Company and our stockholders. Our Board of Directors has the ability to establish, or disband, such committees as necessary or appropriate to serve the needs of our Company. In February 2012, our Board of Directors made the determination to restructure and unanimously voted to disband its committees, including its Audit Committee. Our full Board of Directors performs all of the functions normally designated to an audit committee, compensation committee and nominating committee. 23 Audit Committee and Audit Committee Financial Expert As of February 2012, the Board of Directors no longer has a separately designated audit committee. The functions of the audit committee are conducted by the entire Board, whose members are named above. We do not currently have an “audit committee financial expert,” as defined in Item 407(d)(5)(ii) of Regulation S-K. We believe that each member of our Board is financially literate and possesses sufficient experience, both professionally and by virtue of his service on our Board, to be fully capable of discharging his duties as a member of our Board performing audit committee functions. ITEM 11. EXECUTIVE COMPENSATION. Executive Compensation Summary Executive Compensation The following table sets forth all compensation for our fiscal years ended June 30, 2021, and 2020 awarded to, earned by, or paid to our Principal Executive Officer, our most highly compensated executive officer and our most highly compensated employees, all of which are referred to herein as the “Named Executive Officers”. Summary Executive Compensation Table for the Fiscal Years Ended June 30, 2021 and 2020 Name and Principal Position Year June 30, Salary ($) Bonus ($) Option Awards ($) (2) Total ($) Dr. Joseph N. Forkey 2021 250,000 0 190,909 (3) 440,909 Director, Chief Executive Officer, President and Treasurer 2020 235,385 0 0 235,385 Daniel S. Habhegger 2021 176,879 0 101,818 (4) 278,697 Chief Financial Officer, Secretary 2020 131,003 0 126,157 (5) 257,160 Divaker Mangadu 2021 140,000 40,000 (6) 31,818 (7) 211,818 President, Ross Optical Division 2020 140,000 40,000 (6) 115,496 (8) 295,496 (1) Represents the aggregate grant date fair value of stock awards granted in the respective fiscal year as computed in accordance with FASB ASC Topic 718, Compensation — Stock Compensation. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option valuation model. A discussion of the assumptions used in calculating the amounts in this column may be found in the Notes to our audited consolidated financial statements for the year ended June 30, 2021 set forth in this Annual Report on Form 10-K. These amounts do not represent the actual amounts paid to or realized by the executives during the fiscal years presented. (2) Represents the aggregate grant date fair value of stock option awards granted in the respective fiscal year as computed in accordance with FASB ASC Topic 718, Compensation — Stock Compensation. The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option valuation model. A discussion of the assumptions used in calculating the amounts in this column may be found in the Notes to our audited consolidated financial statements for the year ended June 30, 2021 set forth in this Annual Report on Form 10-K. These amounts do not represent the actual amounts paid to or realized by the executives during the fiscal years presented. (3) We granted Dr. Forkey a stock option to purchase up to 150,000 shares of our common stock at an exercise price of $1.68 per share, the closing price of our common stock on June 4, 2021. 75,000 options vested on the date of grant, and provided Dr. Forkey remains eligible under the plan on the future vesting date, the remaining 75,000 options vest on June 4, 2022. 24 (4) We granted Mr. Habhegger a stock option to purchase up to 80,000 shares of our common stock at an exercise price of $1.68 per share, the closing price of our common stock on June 4, 2021. 40,000 options vested on the date of grant, and provided Mr. Habhegger remains eligible under the plan on the future vesting date, the remaining 40,000 options vest on June 4, 2022. (5) We granted Mr. Habhegger a stock option to purchase up to 100,000 shares of our common stock at an exercise price of $1.42 per share, the closing price of our common stock on September 9, 2019. Provided Mr. Habhegger remains eligible under the plan on these dates, the options vest on September 9, 2020, 2021 and 2022 in amounts of 33,334, 33,333 and 33,333 options, respectively. (6) Represents performance bonus awards for the respective fiscal year. (7) We granted Mr. Mangadu a stock option to purchase up to 25,000 shares of our common stock at an exercise price of $1.68 per share, the closing price of our common stock on June 4, 2021. 12,500 options vested on the date of grant, and provided Mr. Mangadu remains eligible under the plan on the future vesting date, the remaining 12,500 options vest on June 4, 2022. (8) We granted Mr. Mangadu a stock option to purchase up to 100,000 shares of our common stock at an exercise price of $1.30 per share, the closing price of our common stock on September 5, 2019. Provided Mr. Mangadu remains eligible under the plan on these dates, the options vest on September 5, 2020, 2021 and 2022 in amounts of 33,000, 33,000 and 34,000 options, respectively. Employment Contracts Agreement with Dr. Forkey On July 27, 2018, our Board of Directors approved a new compensation agreement with our Chief Executive Officer, Dr, Joseph Forkey effective August 2, 2018. Pursuant to the agreement, we agreed to pay Dr. Forkey a base salary of $200,000 per year beginning retroactively on July 1, 2018. Effective October 1, 2019, our Board of Directors approved an increase of Dr. Forkey’s base salary to $250,000 per year. On August 2, 2018, we also granted Dr. Forkey a stock option to purchase up to 350,000 shares of our common stock at an exercise price of $0.73 per share. The options vested as follows: (i) one–half of the options vest if we achieved revenues of $1.5 million or higher for two consecutive fiscal quarters, based on the reported revenues in our Form 10-Ks or 10-Qs; and (ii) one-half of the options vested if our common stock was trading at $1.00 per share or higher for fifteen consecutive trading days. In the event of a change of control all unvested options will vest. As of June 30, 2020, all 350,000 options are vested. We also granted Dr. Forkey 300,000 shares of common stock at a rate of 50,000 shares per fiscal quarter retroactively starting January 1, 2017 and through the quarter ended June 30, 2018. As of June 30, 2020, all 300,000 of such shares have been issued to Dr. Forkey. Agreement with Mr. Habhegger Effective December 1, 2019 we entered into an employment agreement with Mr. Habhegger to serve as our Chief Financial Officer and Secretary pursuant to which we agreed to pay Mr. Habhegger a base salary of $170,000 per year. In the event that Mr. Habhegger is terminated within six months of a change of control he will receive six months’ notice or pay in lieu of notice at his then current salary rate. Agreement with Mr. Mangadu In connection with the acquisition of the Ross Optical division we entered into an employment agreement on July 1, 2019 with Divaker (Divi) Mangadu to serve as President of Ross Optical Industries (a division of Precision Optics Corporation). The agreement covers a period of five years unless terminated sooner under certain conditions by the parties and may be renewed beyond the initial and subsequent terms for additional one-year periods. Mr. Mangadu was also granted a stock option to purchase up to 100,000 shares of our common stock at an exercise price of $1.30 per share, the closing price of our common stock on September 5, 2019. Provided Mr. Mangadu remains eligible under the plan on these dates, the options vest on September 5, 2020, 2021 and 2023 in amounts of 33,000, 33,000 and 34,000 options, respectively. If Mr. Mangadu is terminated without cause by the Company during the initial five year term of the agreement, he shall receive a lump-sum $75,000 cash severance payment and all unexercised stock options shall vest immediately and be exercisable for the remainder of their term. If Mr. Mangadu is terminated without cause subsequent to the initial five-year term, he shall receive a lump-sum cash severance payment equal to one-half his then current annual salary. The agreement also provides that for a period of five years after July 1, 2019 Mr. Mangadu agrees not to compete with the Company, solicit employees, vendors or customers for purposes that do not directly benefit the Company or to interfere in any way with the Company’s relationship with any vendors or customers. 25 Apart from the agreements described above, we have no other employment contracts in place with any Named Executive Officer or any compensatory plan or arrangement with respect to any Named Executive Officer where such plan or arrangement will result in payments to such Named Executive Officer upon or following his resignation, or other termination of employment with us and our subsidiaries, or as a result of a change-in-control of our Company or a change in the Named Executive Officers’ responsibilities following a change-in-control. Outstanding Equity Awards at Fiscal Year-End Table for the Fiscal Year Ended June 30, 2021 The following table shows grants of options outstanding on June 30, 2021, the last day of our fiscal year, to each of the Named Executive Officers included in the Summary Executive Compensation Table. Name Number of securities underlying unexercised options Exercisable Number of securities underlying unexercised options Unexercisable Option exercise price ($) Option expiration date Dr. Joseph N. Forkey 150,000 0 1.20 03/02/2022 350,000 0 0.73 08/02/2028 75,000 (1) 75,000 (1) 1.68 06/04/2031 Daniel S. Habhegger 33,334 66,666 1.42 09/09/2029 40,000 (1) 40,000 (1) 1.68 06/04/2031 Divaker Mangadu 34,000 66,000 1.30 09/05/2029 12,500 (1) 12,500 (1) 1.68 06/04/2031 (1) The options were granted on June 4, 2021 with vesting of one-half of the options on the grant date and one-half on June 4, 2022, subject to the holders’ eligibility under the Equity Incentive Plan on that date. Profit Sharing and 401(k) Plan We have a defined contribution 401(k) profit sharing plan. Employer profit sharing and matching contributions to the plan are discretionary. No employer profit sharing contributions were made to the plan in fiscal years 2021 and 2020. No employer matching contributions were made to the plan in fiscal years 2021 and 2020. Director Compensation The following table sets forth cash amounts and the value of other compensation paid to our directors, but does not include the compensation of Dr. Joseph N. Forkey, our Chief Executive Officer, President, and Treasurer, as his compensation is reflected in the Summary Executive Compensation Table. During the fiscal year ended June 30, 2021, our Board of Directors determined that Dr. Joseph N. Forkey was our employee director and, therefore, would not earn any fees related to service on our Board. Director Compensation Table for the Fiscal Year Ended June 30, 2021 Name Fees earned or paid in cash ($)(1) Option awards ($)(3) Total ($) Andrew J. Miclot 5,000 23,835 28,835 Dr. Richard B. Miles 5,000 23,835 28,835 Peter H. Woodward 40,000 (2) 35,753 75,753 (1) Under our director compensation plan, each non-management, non-Chairman board member shall receive $5,000 annually paid in quarterly amounts of $1,250. The board of directors also approved that each. We also reimburse our directors for travel expenses. (2) Mr. Woodward serves as our Chairman and performs various management services. In March 2019 the Company’s board of directors approved the payment of $10,000 per quarter to Mr. Woodward for the performance of certain management services. 26 (3) In December 2019 the Company’s board of directors approved annual grants of common stock options each year beginning in December 2019 of 20,000 and 30,000 options to each non-management board members and the Chairman, respectively. On November 16, 2020, 20,000 options to purchase the Company’s common stock were granted to Mr. Moclot and Dr. Miles and 30,000 to Mr. Woodward at an exercise price of $1.40 per share. The options are exercisable at the date of grant and expire on November 16, 2031. As of June 30, 2021, the following outstanding stock options were held by each of our directors: Andrew J. Miclot – 100,000, Dr. Richard B. Miles – 113,600, Peter H. Woodward – 150,000. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. The following tables set forth information regarding our common stock owned as of the close of business on September 20, 2021 by the following persons: (i) each person who is known by us to own beneficially more than 5% of our common stock, (ii) each of our directors who beneficially owns our common stock, (iii) each of our Named Executive Officers who beneficially own our common stock and (iv) all executive officers and directors, as a group, who beneficially own our common stock. The information on beneficial ownership in the table and footnotes thereto is based upon data furnished to us by, or on behalf of, the persons listed in the table. We have determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all shares of common stock that they beneficially own, subject to applicable community property laws. In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, we deemed outstanding shares of common stock subject to options held by that person or group that are currently exercisable or exercisable within 60 days after September 20, 2021. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person or group. Stockholders Known by Us to Own Over 5% of Our Common Stock Amount of beneficial ownership (1) Percent of Name and Address of Beneficial Owner Shares Owned Shares – Rights to Acquire Total Number Shares Beneficially Owned (2) Dolphin Offshore Partners LP (3) 4828 First Coast Highway, STE 5 Fernandina, FL 32034 2,070,625 0 2,070,625 15.6% Stuart L Sternberg (4) 85 Bellevue Ave Rye, NY 10580 884,467 0 884,467 6.7% Sandra F. and Norman H. Pessin (5) 500 Fifth Avenue, Suite 2240 New York, NY 10110 1,196,595 0 1,196,595 9.0% Hershey Strategic Capital, LP (6) 888 7 th Ave., 17 th Floor New York, New York 10019 986,480 0 986,480 7.4% MHW Partners, L.P. (7) 150 East 52 nd Street 30 th Fl. New York, New York 10022 674,013 150,000 824,013 5.0% _______________________ (1) Represents shares with respect to which each beneficial owner listed has or will have, upon acquisition of such shares upon exercise or conversion of options, warrants, conversion privileges or other rights exercisable within 60 sixty days, sole voting and investment power. For the purposes of this table, we have not assumed the limitations on exercise set forth in certain options, which limit the number of shares of common stock that the holder, together with all other shares of common stock beneficially owned by such person, does not exceed 4.999% of the total outstanding shares of common stock. 27 (2) As of September 20, 2021, there were 13,282,476 issued shares of our common stock issued and outstanding. Percentages are calculated on the basis of the amount of issued and outstanding common stock plus, for each person or group, any securities that such person or group has the right to acquire within 60 days pursuant to options, warrants, conversion privileges or other rights. (3) We relied, in part, on the Schedule 13D/A filed jointly by Dolphin Offshore Partners, L.P., Dolphin Mgmt. Services, Inc. and Peter E. Salas on December 27, 2017 for this information. Dolphin Offshore Partners, L.P., a Delaware limited partnership, is an investment manager. Dolphin Mgmt. Services, Inc., a Delaware corporation, is the managing general partner of Dolphin Offshore Partners, L.P. Peter E. Salas is the President, sole shareholder and controlling person of Dolphin Mgmt. Services, Inc. Peter Salas is a U.S. citizen. Dolphin Offshore Partners, L.P., Dolphin Mgmt. Services, Inc. and Peter E. Salas each may be deemed to beneficially own an aggregate of 2,070,625 shares of common stock. Dolphin Offshore Partners, L.P., Dolphin Mgmt. Services, Inc. and Peter E. Salas each may be deemed to have shared power to vote or direct the vote, and dispose or direct the disposition, of all such shares of common stock. (4) We relied, in part, on a Schedule 13G/A filed with the SEC by Stuart Sternberg on February 26, 2021, for this information. (5) We relied, in part, on a Schedule 13D/A filed jointly with the SEC on July 5, 2019 by Sandra F. Pessin and Norman H. Pessin. Mr. and Mrs. Pessin are married and considered to beneficially hold each other’s shares. Ms. Pessin owns 963,334 shares and Mr. Pessin owns 233,625 shares for a combined beneficial ownership of 1,196,959 shares. (6) We relied, in part, on the Schedule 13D/A jointly filed by Hershey Strategic Capital, LP, Hershey Management I, LLC and Hershey Strategic Capital GP, LLC on October 10, 2017 for this information. Hershey Management I, LLC, a Delaware limited liability company, is the investment advisor of Hershey Strategic Capital, LP, a Delaware limited partnership. Hershey Strategic Capital GP, LLC, a Delaware limited liability company, is the general partner of Hershey Strategic Capital, LP. Adam Hershey is the sole managing member of both Hershey Management I, LLC and Hershey Strategic Capital GP, LLC. As the investment advisor, Hershey Management I, LLC has the voting and dispositive power with respect to all of the shares of common stock owned by Hershey Strategic Capital, LP. On July 9, 2014, Richard E. Forkey resigned as a director and Hershey Strategic Capital, LP designated Peter H. Woodward and Dr. Kenneth S. Schwartz to our Board of Directors and such designees were so appointed. Hershey Strategic Capital, LP beneficially owns 986,480 shares of common stock. Hershey Strategic Capital, LP is managed by Adam Hershey, and in such capacity, Mr. Hershey holds the power to vote and direct the disposition of all shares of common stock owned by Hershey Strategic Capital, LP. Hershey Management I disclaims beneficial ownership in the shares. (7) We relied, in part, on a Form 4 filed with the SEC on December 1, 2016 by Peter H. Woodward, on a Schedule 13D/A jointly filed with the SEC on November 3, 2015 by MHW Partners, L.P., MHW Capital, LLC, MHW Capital Management, LLC, on a Form 4 filed with the SEC by Peter H. Woodward on December 31, 2019, and on a Form 4 filed with the SEC by Peter H. Woodward on November 16, 2020 for this information.. MHW Partners, L.P. is a Delaware limited partnership. MHW Capital, LLC is a Delaware limited liability company. MHW Capital Management, LLC is a Delaware limited liability company. MHW Capital, LLC is the general partner of MHW Partners, L.P. Mr. Woodward is the principal of MHW Capital Management, LLC and MHW Capital, LLC and in such capacity, Mr. Woodward holds the power to vote and direct the disposition of all shares of common stock owned by MHW Partners, L.P. MHW Partners, L.P., MHW Capital, LLC, MHW Capital Management, LLC and Mr. Woodward share the power to vote and direct the disposition of all shares of common stock owned by MHW Partners, L.P. Mr. Woodward is a citizen of the United States and our current Chairman of our Board of Directors. 28 MHW Partners, L.P. beneficially owns 674,013 shares of common stock, and 150,000 shares that may be acquired upon the exercise of outstanding stock options by Mr. Woodward. 90,000 options vested in three installments: one-third vested immediately on the date of grant; one-third vested on May 18, 2016; the remaining one-third vested on May 18, 2017. The options have an exercise price of $0.73 and expire on May 18, 2025. 30,000 options became immediately exercisable upon their grant on December 6, 2019, have an exercise price of $1.50 per share, and expire on December 6, 2029. The remaining 30,000 options became immediately exercisable upon their grant on November 16, 2020, have an exercise price of $1.40 per share, and expire on November 16, 2030. However, the aggregate number of shares of common stock into which such warrants and options are exercisable, and which MHW Partners, L.P. has the right to acquire beneficial ownership, is limited to the number of shares of common stock that, together with all other shares of common stock beneficially owned by MHW Partners, L.P., does not exceed 4.999% of the total outstanding shares of common stock. Accordingly, such warrants and options are not currently exercisable into common stock until the actual shares of common stock held by MHW Partners, L.P. is less than 4.999% of the total outstanding shares of common stock. MHW Partners, L.P. may waive this 4.999% restriction with 61 days’ notice to us. Officers and Directors Amount of beneficial ownership (2) Percent of Name and address of beneficial owner (1) Nature of beneficial ownership Shares Owned Shares – Rights to Acquire Total Number Shares Beneficially Owned (3) Dr. Joseph N. Forkey (4) Chief Executive Officer, President, Treasurer and Director 333,620 650,000 983,620 7.1% Peter H. Woodward (5) Chairman of the Board of Directors 674,013 150,000 824,013 6.1% Dr. Richard B. Miles (6) Director 15,112 113,600 128,712 * Andrew J. Miclot (7) Director 0 100,000 100,000 * Daniel S. Habhegger (8) Chief Financial Officer, Secretary 0 180,000 180,000 1.3% Divaker Mangadu (9) President, Ross Optical Division 0 125,000 125,000 * All directors and executive officers as a group 1,022,745 1,318,600 2,341,345 16.0% * Percentage of shares beneficially owned does not exceed one percent of issued and outstanding shares of stock. _______________________ (1) Unless otherwise stated, the address of each beneficial owners listed on the table is c/o Precision Optics Corporation, Inc., 22 East Broadway, Gardner, MA 01440. (2) Represents shares with respect to which each beneficial owner listed has or will have, upon acquisition of such shares upon exercise or conversion of options, warrants, conversion privileges or other rights exercisable within 60 sixty days, sole voting and investment power. (3) As of September 20, 2021, we had 13,282,476 shares of our common stock issued and outstanding. Percentages are calculated on the basis of the amount of issued and outstanding common stock plus, for each person or group, any securities that such person or group has the right to acquire within 60 days of September 20, 2021 pursuant to options, warrants, conversion privileges or other rights. (4) Dr. Forkey is a member of our Board of Directors and serves as our Chief Executive Officer, President and Treasurer. Dr. Forkey’s beneficial ownership consists of (a) 333,620 shares of common stock held in joint ownership with his wife, Heather Forkey, with whom he shares voting and dispositive control, and (b) 650,000 shares of common stock that may be acquired upon the exercise of outstanding stock options. 29 (5) Mr. Peter Woodward is the Chairman of our Board of Directors. Mr. Woodward is the managing member and general partner of MHW Partners and in such capacity, Mr. Woodward holds the power to vote and direct the disposition of all shares of common stock owned by MHW Partners. On September 28, 2012, MHW Partners purchased 222,223 shares of our common stock, and warrants to purchase up to 168,386 shares of our common stock at an exercise price of $1.11 per share, subject to adjustment and a call provision if certain market price targets are reached, and an expiration date of September 28, 2017. On July 2, 2014, MHW Partners purchased 125,000 shares of common stock. On October 19, 2015, MHW Partners purchased 100,000 shares of common stock. On November 22, 2016 MHW Partners purchased 156,667 shares of common stock, and warrants to purchase 78,333 shares of common stock at an exercise at a variable exercise price subject to the Companies achievement of certain performance criteria. Mr. Woodward exercised the 78,333 November 22, 2016 warrants on October 16, 2017 at $0.01 per share. Mr. Woodward’s beneficial ownership consists of (a) 674,013 shares of common stock held through MHW Partners, L.P., and (b) 150,000 shares of common stock which may be acquired upon the exercise of outstanding stock options. (6) Dr. Miles is a member of our Board of Directors. Dr. Miles’ beneficial ownership consists of (a) 15,112 shares of common stock, and (b) 113,600 shares of common stock that may be acquired upon the exercise of outstanding stock options. (7) Mr. Andrew Miclot is a member of our Board of Directors. Mr. Miclot’s beneficial ownership consists of 100,000 shares that may be acquired upon the exercise of outstanding stock options. (8) Mr. Habhegger became our Chief Financial Officer and Secretary effective December 1, 2019. Mr. Habhegger’s beneficial ownership consists of 180,000 shares of common stock that may be acquired upon the exercise of outstanding stock options. (9) Mr. Mangadu became our President, Ross Optical Division upon our acquisition of Ross Optical, Inc. effective July 1, 2019. Mr. Mangadu’s beneficial ownership consists of 125,000 shares of common stock that may be acquired upon the exercise of outstanding stock options. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. Certain Relationships and Related Transactions Since the beginning of the last fiscal year ended June 30, 2021 we had the following related party transactions. At June 30, 2019, we had received payments for common stock subscriptions totaling $925,000 at $1.25 per share. On July 1, 2019 we received an additional $25,000 and closed the private placement on that date by issuing 760,000 unregistered common shares. The placement proceeds were used to partially fund the business acquisition of the Ross Optical division. In compliance with the registration rights agreement entered into with the investors, on October 29, 2019 we filed a registration statement for the shares with the Securities and Exchange Commission which became effective on November 22, 2019. Ms. Sandra Pessin acquired 200,000 shares in this placement for $250,000 or $1.25 per share, and at that time Ms. Pessin was an owner of more than 5% of our outstanding common stock. On April 14, 2020 we sold 200,000 shares of common stock for cash at $1.25 per share or $250,000 to be used for general working capital needs. In compliance with the registration rights agreement entered into with the investors, on August 14, 2020 we filed a registration statement for the shares with the Securities and Exchange Commission which became effective on November 4, 2020. Hershey Strategic Capital, LP acquired 20,000 shares in this placement for $25,000 or $1.25 per share, and at that time Hershey Strategic Capital, LP was an owner of more than 5% of our outstanding common stock. Director Independence During the fiscal year ended June 30, 2021, the Board of Directors determined that Dr. Richard B. Miles, and Andrew J. Miclot were “independent” as defined under the standards of independence set forth in the Nasdaq Listing Rules and the rules under the Securities Exchange Act of 1934. 30 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. Independent Registered Public Accounting Firm Fees Our principal and sole independent registered public accounting firm for the fiscal years ending June 30, 2021 and 2020 is Stowe & Degon LLC, referred to as Stowe. The following table presents fees for professional audit services and other services rendered by Stowe, for the fiscal years ended June 30, 2021 and 2020: 2021 2020 Audit Fees (1) $ 94,125 $ 92,337 Audit Related Fees (2) – 1,850 Total Audit and Audit Related Fees 94,125 94,187 Tax Fees (3) 9,850 9,850 Total Fees $ 103,975 $ 104,037 _______________________ (1) Audit fees for fiscal year 2021 are comprised of fees for professional services performed for the audit of our annual financial statements and review of our quarterly financial statements of $94,125, including direct out-of-pocket expenses in the amount of $75. Audit fees for fiscal year 2020 are comprised of fees for professional services performed for the audit of our annual financial statements and review of our quarterly financial statements of $92,337, including direct out-of-pocket expenses in the amount of $3,337. (2) Audit-related fees are comprised of fees for assurance and related attestation services that are reasonably related to the performance of the audit of our annual financial statements, or the review thereof, and fees for due diligence services. (3) Tax fees for fiscal 2021 and 2020 are comprised of fees for professional services performed with respect to corporate tax compliance, tax return preparation and filing, tax planning and tax advice. Pre-Approval Policies Under the direction of our Chief Executive Officer, our Board of Directors pre-approves all services provided by our independent registered public accounting firm. 100% of the above services and fees were reviewed and approved by the Board of Directors either before or after the respective services were rendered. The Board of Directors has considered the nature and amount of fees billed by Stowe and believes that the provision of services for activities unrelated to the audit is compatible with maintaining the firm’s independence. 31 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES. a. Documents filed as part of this report The following documents are filed as part of this Annual Report on 10-K: 1. FINANCIAL STATEMENTS The following documents are filed in Part II, Item 8 of this Annual Report on Form 10-K: Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets at June 30, 2021 and 2020 Consolidated Statements of Operations for the years ended June 30, 2021 and 2020 Consolidated Statements of Stockholders’ Equity for the years ended June 30, 2021 and 2020 Consolidated Statements of Cash Flows for the years ended June 30, 2021 and 2020 Notes to Consolidated Financial Statements 2. FINANCIAL STATEMENT SCHEDULES All financial statement schedules have been omitted as they are not required, not applicable, or the required information is otherwise included. b. Exhibits The exhibits listed below are filed with or incorporated by reference in this report. 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). 32 Exhibit Description 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 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). 33 Exhibit Description 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). 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). 23.1* Consent of Independent Registered Public Accounting Firm. 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. ITEM 16. FORM 10-K SUMMARY. None. 34 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the 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: September 28, 2021 By: /s/ Joseph N. Forkey Joseph N. Forkey President and Chief Executive Officer (Principal Executive Officer) Date: September 28, 2021 By: /s/ Daniel S. Habhegger Daniel S. Habhegger Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Capacity Date /s/ Joseph N. Forkey Joseph N. Forkey Chief Executive Officer, President, Treasurer and Director (Principal Executive Officer) September 28, 2021 /s/ Daniel S. Habhegger Daniel S. Habhegger Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) September 28, 2021 /s/ Andrew J. Miclot Director September 28, 2021 Andrew J. Miclot /s/ Peter H. Woodward Director, Chairman September 28, 2021 Peter H. Woodward /s/ Richard B. Miles Director September 28, 2021 Richard B. Miles 35