What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-15 compared with 2023-02-14 · 72 added, 67 removed, 158 unchanged (47% 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, 2022 and with our audited consolidated

statements included elsewhere in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2032 and with our audited consolidated

financial statements for the year ended June 30, 2022 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 31% our business during the six

months ended December 31, 2022 is from engineering services (primarily relating to the design of medical device optical assemblies), 48%

Approximately 30% our business during the nine

months ended March 31, 2023 is from engineering services (primarily relating to the design of medical device optical assemblies), 49%

from the sale of both internally manufactured and purchased optical components, and 18% from the manufacture of optical assemblies and

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CE marking of our medical products.

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

and www.lighthouseoptics.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;

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, 2023, were $5,048,065, as compared to $4,651,352 for the same period in the prior year, an increase of $396,713, or 8.5%, primarily

due to an increase in component revenue to a large defense contractor, and a $600,000 one-time sale of technology rights relating to a

medical device instrument developed for a customer.

Our total revenues for the six months ended December 31,

due to an increase in component revenue to a large defense contractor.

Other fluctuations in revenue categories were considered customary

during the quarter ended March 31, 2023 when compared to the same quarter of the prior fiscal year.

Our total revenues for the nine months ended March 31,

2023 were $16,020,327, as compared to $10,884,737 for the same period in the prior year, an increase of $5,135,590, or 47.2% due in part

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Our two largest customers accounted for 13.0%

and 18.1% of our revenue during the quarter ended December 31, 2022, and 15.3% and 11.8% of our revenue during the six months ended December

One of our two largest customers is a defense/aerospace company and the other is developing a medical device instrument.

generated revenues from 207 unique customers during the six months ended December 31, 2022, and no other customer represented over 10%

of our revenue during the three and six months ended December 31, 2022.

and 8.4% of our revenue during the quarter ended March 31, 2023, and 8.0% and 13.1%, respectively, of our revenue during the nine months

ended March 31, 2023.

One of our two largest customers is a defense/aerospace company and the other is a medical device company.

revenues from 318 unique customers during the nine months ended March 31, 2023, and no other customer represented over 10% of our revenue

during the three and nine months ended March 31, 2023.

The COVID-19 world-wide pandemic that began during

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of amounts owed to us from our customers, our internal operating procedures, and our overall financial condition.

Gross profit for the quarter ended December

31, 2022 was $2,725,224, compared to $1,119,582 for the same period in the prior year, an increase of $1,605,642, or 143%.

profit for the quarter ended December 31, 2022 as a percentage of our revenues was 46.3%, an increase from the gross profit

percentage of 28.7% for the same period in the prior year.

Gross profit for the six months ended December 31, 2022 was $4,449,878,

as compared to $1,758,614 for the same period in the prior year, an increase of $2,691,264 or 153%.

Gross profit for the six months

ended December 31, 2022 as a percentage of our revenues was 40.6%, an increase from the gross profit percentage of 28.2% 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.

Gross profit for the quarter ended March 31, 2023

was $1,736,098, compared to $1,728,209 for the same period in the prior year, an increase of $7,889.

Gross profit for the quarter ended

March 31, 2023 as a percentage of our revenues was 34.4%, an decrease from the gross profit percentage of 37.2% for the same period in

the prior year.

Gross profit for the nine months ended March 31, 2023 was $5,975,011 as compared to $3,486,823 for the same period in

the prior year, an increase of $2,488,188 or 71.4%.

Gross profit for the nine months ended March 31, 2023 as a percentage of our

revenues was 37.3%, an increase from the gross profit percentage of 32.0% for the same period in the prior year.

Quarterly gross profit

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

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

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

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

Our gross profit on individual engineering projects

is dependent on a number of factors and is expected to fluctuate from quarter to quarter based on the nature and status of engineering

projects, unanticipated cost over-runs, design challenges and changes, start-up production activities, or other customer-imposed project

changes or delays.

Our increase in gross profit dollars and margin during three and six months ended December 31, 2022 compared to the

same periods in the previous years was due to inclusion of the Lighthouse division since its acquisition on October 4, 2021, increases

in engineering, component and production revenues, greater production and personnel utilization, and recognition of technology rights

revenue with no associated direct incremental costs.

is dependent on a number of factors and is expected to fluctuate from quarter to quarter based on the number of new engineering projects,

the nature and status of engineering projects, unanticipated cost over-runs, design challenges and changes, start-up production activities,

or other customer-imposed project changes or delays.

Our increase in gross profit dollars during nine months ended March 31, 2023 compared

to the same periods in the previous years was primarily due to inclusion of the Lighthouse division since its acquisition on October 4,

2021, Other fluctuations in gross profit dollars and margins in the quarter and nine months ended March 31, 2023 when compared to the

same periods of the prior fiscal year are considered customary considering the factors impacting variability as previously described.

Research and development expenses were $206,375

for the quarter ended December 31, 2022, compared to $113,164 for the same period in the prior year, an increase of $95,502, or 84.4%.

Research and development expenses were $454,143 for the six months ended December 31, 2022, compared to $218,350 for the same period

in the prior year, an increase of $235,793, or 108%.

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

for the quarter ended March 31, 2023, compared to $214,898 for the same period in the prior year, a decrease of $8,523, or 4.0%.

and development expenses were $660,518 for the nine months ended March 31, 2023, compared to $433,248 for the same period in the

prior year, an increase of $227,270, or 52.5%.

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 three

and six months ended December 31, 2022 compared to the same periods of the prior year we had an increase in personnel, and an increase

in research and development costs incurred in the development of internal research and development efforts and projects.

During the nine

months ended March 31, 2023 compared to the same periods of the prior year we had an increase in personnel, and an increase in research

and development costs incurred in the development of internal research and development efforts and projects.

Selling, general and administrative expenses were

$1,819,741 for the quarter ended December 31, 2022, compared to $1,466,768 for the same period in the prior year, an increase of $352,973,

Selling, general and administrative expenses were $3,315,507 for the six months ended December 31, 2022, compared to $2,400,392

$2,022,991 for the quarter ended March 31, 2023, compared to $1,574,432 for the same period in the prior year, an increase of $448,559,

Selling, general and administrative expenses were $5,338,498 for the nine months ended March 31, 2023, compared to $3,974,824

for the same period in the prior year, an increase of $1,363,674, or 34.3%.

The increase in selling, general and administrative expenses

in the six months ended December 31, 2022 compared to the same periods of the prior fiscal year was primarily due to inclusion of the

Lighthouse division since its acquisition in October, 2021, plus increased compensation due to expanded headcount, incentive bonuses and

sales commissions resulting from increased revenues, and marketing related expenses, offset by a decreased amount of stock-based compensation

The increase in selling, general and administrative expense

in the three months ended March 31, 2023 compared to the same period of the prior fiscal year was primarily the result of increased compensation

due to expanded headcount, incentive bonuses and sales commissions resulting from increased revenues, increased sales conference and show

costs, and increased stock based compensation.

The increase in selling, general and administrative expenses in the nine months ended March

31, 2023 compared to the same periods of the prior fiscal year was primarily due to inclusion of the Lighthouse division since its acquisition

in October, 2021, plus increased compensation due to expanded headcount, incentive bonuses and sales commissions resulting from increased

revenues, and increased sales conference and show costs.

Liquidity and Capital Resources

With the exception of the current period ended

December 31, 2022, during which net income was 560,909, which includes one-time technology rights revenue of $600,000, we have sustained

recurring net losses from operations for several years.

During the years ended June 30, 2022 and 2021 we incurred operating losses of

$1,513,890 and $905,583, respectively.

At December 31, 2022, cash was $381,318, accounts receivables were $4,032,522 and current liabilities

were $5,477,991, including $794,981 of customer advances received for future order deliveries.

We have sustained recurring net losses from operations

for several years.

During the quarter ended and nine months ended March 31, 2023 we incurred operating losses of $493,268 and 24,005,

respectively.

During the years ended June 30, 2022 and 2021 we incurred operating losses of $1,513,890 and $905,583, respectively.

March 31, 2023, cash was $612,095, accounts receivables were $4,389,907 and current liabilities were $6,494,885, including $1,387,806

of customer advances received for future order deliveries.

Although our revenue and gross margin have increased,

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We also secured a $250,000 bank line of credit from the same bank in October 2021 for working capital needs, which was increased to $500,000

There were no borrowings outstanding on the line of credit at December 31, 2022.

There were no borrowings outstanding on the line of credit at March 31, 2023.

Capital equipment expenditures and additional

patent costs during the six months ended December 31, 2022 were $37,637.

patent costs during the nine months ended March 31, 2023 were $52,411.

Future capital equipment and patent expenditures will be dependent

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Contractual cash commitments for the fiscal periods

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

subsequent to March 31, 2023, are summarized as follows:

Financing lease for equipment, including interest

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We have contractual cash commitments related to

open purchase orders as of December 31, 2022 of approximately $3,547,236.

open purchase orders as of March 31, 2023 of approximately $2,923,320.

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