What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-16 compared with 2022-02-14 · 75 added, 79 removed, 164 unchanged (48% of the section changed)

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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, 2021 and with our audited consolidated

statements included elsewhere in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 and with our audited consolidated

financial statements for the year ended June 30, 2021 included in our Annual Report on Form 10-K, filed with the Securities and Exchange

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Lighthouse Imaging is an industry leader in chip on tip visualization systems.

Approximately 32% our business during the six

months ended December 31, 2021 is from engineering services primarily relating to the design of medical device optical assemblies, 49%

from the sale of both internally manufactured and purchased optical components, and 19% from the manufacture of optical assemblies and

sub-assemblies primarily for medical device instrument applications.

Our proprietary medical instrumentation line, unique custom design

and manufacturing capabilities, and expert electrical engineering and development has generated traditional proprietary endoscopes and

endocouplers as well as other custom imaging and illumination products for our customers’ use in minimally invasive surgical procedures.

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.

Approximately 34% our business during the nine

months ended March 31, 2022 is from engineering services primarily relating to the design of medical device optical assemblies, 45% from

the sale of both internally manufactured and purchased optical components, and 21% from the manufacture of optical assemblies and sub-assemblies

primarily for medical device instrument applications.

Our proprietary medical instrumentation line, unique custom design and manufacturing

capabilities, and expert electrical engineering and development has generated traditional proprietary endoscopes and endocouplers as well

as other custom imaging and illumination products for our customers’ use in minimally invasive surgical procedures.

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.

We are registered to the ISO 9001:2015 and ISO

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CE marking of our medical products.

Our internet websites are www.poci.com,

www.rossoptical.com, and www.lighthouseoptics.com.

Information on our websites is

not intended to be integrated into this report.

Investors and others should note that we announce material financial information

using our company websites (www.poci.com;

Our internet websites are www.poci.com, www.rossoptical.com,

and www.lighthouseoptics.com.

Information on our websites is not intended to be integrated into this report.

Investors and others should

note that we announce material financial information using our company websites (www.poci.com;

www.rossoptical.com;

www.lighthouseoptics.com), our investor relations website, SEC

filings, press releases, public conference calls and webcasts.

Information about Precision Optics, our

business, and our results of operations may also be

announced by social media posts on our Ross Optical and Lighthouse LinkedIn pages

(www.linkedin.com/company/ross-optical-industries/) (https://www.linkedin.com/company/lighthouse-imaging-corporation/) and Twitter

feed (http://twitter.com/rossoptical) and on our Lighthouse Facebook page (https://www.facebook.com/lighthouseoptics/).

www.lighthouseoptics.com),

our investor relations website, SEC filings, press releases, public conference calls and webcasts.

Information about Precision Optics,

our business, and our results of operations may also be announced by social media posts on our Ross Optical and Lighthouse LinkedIn pages

(www.linkedin.com/company/ross-optical-industries/) (https://www.linkedin.com/company/lighthouse-imaging-corporation/) and Twitter feed

(http://twitter.com/rossoptical) and on our Lighthouse Facebook page (https://www.facebook.com/lighthouseoptics/).

The information that we post on these social media

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Results of Operations

Our total revenues for the quarter ended December

Our total revenues for the quarter ended March

31, 2022, were $4,651,352, as compared to $2,458,290 for the same period in the prior year, an increase of $2,193,062, or 89.2%, primarily

due to inclusion of the Lighthouse division since its acquisition on October 4, 2021 and an increase in medical devise manufacturing revenue.

Excluding the effect of the Lighthouse acquisition, engineering revenue experienced a slight quarter-over-quarter decrease while production

revenue was up 106% and component revenue increased 32% from the quarter ended March 31, 2021 to 2022.

Our total revenues for the nine months ended March 31,

2022 were $10,884,737, as compared to $8,001,641 for the same period in the prior year, an increase of $2,883,096, or 36.0% primarily

due to inclusion of the Lighthouse division since its acquisition on October 4, 2021.

Excluding the effect of the Lighthouse acquisition,

engineering revenue experienced a slight quarter-over-quarter decrease with component and production revenues relatively unchanged from

the quarter ended December 31, 2020 to 2021.

Our total revenues for the six months ended December 31,

2021 were $6,233,385, as compared to $5,543,351 for the same period in the prior year, an increase of $690,034, or 12.4% primarily due

to inclusion of the Lighthouse division since its acquisition on October 4, 2021.

Excluding the effect of the Lighthouse acquisition,

engineering revenue during the six months ended December 31, 2021 decreased approximately $241,000 compared to the same period of the

prior year due primarily to a change in mix of engineering projects.

Component revenues increased during the six months ended December

31, 2021 compared to the same period of the prior year, and production revenue decreased on a quarter-over-quarter basis due primarily

from various customer slow-downs due to the effects of COVID.

Our largest customer during the three and six

months ended December 31, 2021 accounted for 8.8% and 7.6%, respectively, of our revenue and represented manufacturing assembly revenues

engineering revenue during the nine months ended March 31, 2022 decreased approximately $287,000 compared to the same period of the prior

year due primarily to a change in mix of engineering projects.

Component revenues increased approximately $543,000 during the nine months

ended March 31, 2022 compared to the same period of the prior year, and production revenue increased approximately $161,000 over the same

period as production on some products began to return to pre-pandemic levels.

Our largest customer during the three and nine

months ended March 31, 2022 accounted for 10.9% and 9.0%, respectively, of our revenue and represented manufacturing assembly revenues

for a medical diagnostic system.

We generated revenues from 250 unique customers during the six months ended December 31, 2021, and no

single customer accounted for 10% or more of our revenue for the quarter and six months ended December 31, 2021 or the fiscal years ended

June 30, 2021, or 2020.

We generated revenues from 193 unique customers during the nine months ended March 31, 2022, and one

single customer accounted for slightly more than 10% or more of our revenue for the quarter and no single customer accounted for 10% or

more of our revenue for the nine months ended March 31, 2022 or the fiscal year ended June 30, 2021.

The COVID-19 world-wide pandemic that began during

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operating results.

Gross profit for the quarter ended December 31,

Gross profit for the quarter ended March 31, 2022

was $1,728,209, compared to $818,024 for the same period in the prior year, an increase of $910,185, or 111.3%.

Gross profit for the

quarter ended December 31, 2021 as a percentage of our revenues was 28.7%, a decrease from the gross profit percentage of 30.7% for the

same period in the prior year.

Gross profit for the six months ended December 31, 2021 was $1,758,614, as compared to $1,829,618

for the same period in the prior year, a decrease of $71,004 or 3.9%.

Gross profit for the six months ended December 31, 2021 as

a percentage of our revenues was 28.2%, a decrease from the gross profit percentage of 33.0% for the same period in the prior year.

gross profit and gross profit percentage depend on a number of factors, including overall sales volume, facility utilization, product

sales mix, the costs of engineering services, and production start-up costs and challenges in connection with new products, the effects

of COVID-19 pandemic policy decisions on various economies and our suppliers and customers, as well as the effects on production efficiencies

due to the augmented policies we have incorporated into our operations as a result of the COVID-19 pandemic.

Gross profit for the quarter

ended March 31, 2022 as a percentage of our revenues was 37.2%, an increase from the gross profit percentage of 33.3% for the same period

in the prior year.

Gross profit for the nine months ended March 31, 2022 was $3,486,823, as compared to $2,647,642 for the same period

in the prior year, an increase of $839,181 or 31.7%.

Gross profit for the nine months ended March 31, 2022 as a percentage of our

revenues was 32.0%, a decrease from the gross profit percentage of 33.1% for the same period in the prior year.

Quarterly gross profit

and gross profit percentage depend on a number of factors, including overall sales volume, facility utilization, product sales mix, the

costs of engineering services, and production start-up costs and challenges in connection with new products, the effects of COVID-19 pandemic

policy decisions on various economies and our suppliers and customers, as well as the effects on production efficiencies due to the augmented

policies we have incorporated into our operations as a result of the COVID-19 pandemic.

Our gross margin on individual engineering projects

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changes or delays.

Our increase in gross margin dollars during the quarter ended December 31, 2021 was primarily due to inclusion of the

Lighthouse division since its acquisition on October 4, 2021.

Our decrease in gross margin from 30.7% to 28.7% during the fiscal quarter

ended December 31, 2020 compared to 2021 and from 33.0% to 28.2% during the six months ended December 31, 2020 and 2021 was the result

of a gross margin decrease in one engineering project due to cost over-runs, a decrease in higher margin production revenues with customers

due to COVID-19 factors, and inclusion of the Lighthouse division revenues representing engineering and production activity at overall

margins lower than the Ross Optical division revenues.

The remainder of our production, engineering and component revenues resulted in

margins within our targeted range with reasonably expected fluctuations.

Our increase in gross margin dollars during the quarter ended March 31, 2022 was due to inclusion of the Lighthouse

division since its acquisition on October 4, 2021, an increase in medical devise manufacturing revenue, and improved efficiencies in engineering

projects, which is partially offset by inclusion of the Lighthouse division engineering and production revenues at overall margins lower

than the Ross Optical division revenues.

The remainder of our production, engineering and component revenues resulted in margins within

our targeted range with reasonably expected fluctuations.

Research and development expenses were $214,898

for the quarter ended December 31, 2021, compared to $145,970 for the same period in the prior year, a decrease of $32,806, or 22.5%.

Research and development expenses were $218,350 for the six months ended December 31, 2020, compared to $297,546 for the same period

in the prior year, a decrease of $79,196, or 26.6%.

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

and six months ended December 31, 2021 we had a greater amount of our engineering personnel time consumed in customer focused activities

causing decreased research and development expense compared to the same periods of the prior fiscal year.

for the quarter ended March 31, 2022, compared to $146,063 for the same period in the prior year, an increase of $68,835, or 47.1%.

and development expenses were $433,248 for the nine months ended March 31, 2022, compared to $443,609 for the same period in the

prior year, a decrease of $10,361, or 2.3%.

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 and nine

months ended March 31, 2022 we had an increase in research and development costs due to the inclusion of the Lighthouse division offset

by a greater amount of our engineering personnel time consumed in customer focused compared to the same periods of the prior fiscal year.

Selling, general and administrative expenses were

$1,466,768 for the quarter ended December 31, 2021, compared to $921,195 for the same period in the prior year, an increase of $545,573,

Selling, general and administrative expenses were $2,400,392 for the six months ended December 31, 2021, compared to $1,743,197

$1,574,432 for the quarter ended March 31, 2022, compared to $927,979 for the same period in the prior year, an increase of $646,453,

Selling, general and administrative expenses were $3,974,824 for the nine months ended March 31, 2022, compared to $2,671,176

for the same period in the prior year, an increase of $1,303,648, or 48.8%.

The increase in selling, general and administrative expenses

in the three and six months ended December 31, 2021 compared to the same periods of the prior fiscal year was primarily due to inclusion

in the three and nine months ended March 31, 2022 compared to the same periods of the prior fiscal year was primarily due to inclusion

of the Lighthouse division since its acquisition on October 4, 2021, plus increased stock-based compensation and marketing related expenses.

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for several years.

During the six months ended December 31, 2021, we had a net loss of $1,083,814 and used cash in operating activities

At December 31, 2021, cash was $1,263,198, accounts receivables were $2,216,061 and current liabilities were $4,566,314,

including $1,137,470 of customer advances received for future order deliveries.

During the nine months ended March 31, 2022, we had a net loss of $1,197,713 and used cash in operating activities

At March 31, 2022, cash was $831,585, accounts receivables were $3,347,692 and current liabilities were $5,770,887, including

$1,018,275 of customer advances received for future order deliveries.

Although our revenue and gross margin have increased

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Capital equipment expenditures and additional

patent costs during the six months ended December 31, 2021 were $38,092.

patent costs during the nine months ended March 31, 2022 were $82,660.

Future capital equipment and patent expenditures will be dependent

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Contractual cash commitments for the fiscal periods

subsequent to December 31, 2021, are summarized as follows:

subsequent to March 31, 2022, are summarized as follows:

Capital lease for equipment, including interest

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We have contractual cash commitments related to

open purchase orders as of December 31, 2021 of approximately $1,793,652.

open purchase orders as of March 31, 2022 of approximately $1,263,003.

Off-Balance Sheet Arrangements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis