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Item 9A. Controls and Procedures

2024-09-30 compared with 2023-09-28 · 158 added, 159 removed, 74 unchanged (81% of the section changed)

5 unchanged sentences

Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure

controls and procedures were not effective as of June 30, 2023, because of a material weakness in our internal controls over financial

reporting described below.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial

reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial

statements will not be prevented or detected on a timely basis.

controls and procedures were not effective as of June 30, 2024 due to the existence of the material weaknesses described below.

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

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

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

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, 2024.

3 unchanged sentences

of June 30, 2024.

Changes in Internal Control over Financial

There has been no change in our internal control

over financial reporting that occurred during the 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.

The following is a description of a material weaknesses

in our internal control over financial reporting and planned and implemented remediation:

We did not properly value our

raw material and work-in-process inventory resulting in an overstatement of inventory and an understatement of cost of goods sold in the

amount of $320,000.

We used a manually updated spreadsheet to maintain our records of quantities and costs in inventory, prior to transitioning

to a new ERP system.

The new ERP system was not properly updated to reflect current costs, and proper units of measure for certain items

in inventory.

To address and remediate this material weakness, beginning with the quarter ending September 30, 2024, we will implement

compensating controls, including conducting a thorough review of inventory item costs, updating incorrect item costs and units of measure

in the new ERP system and establishing a methodology to continually monitor changes in costs through an analysis of purchase price variances

and customer margin analysis.

We did not properly expense certain research and development

costs totaling $147,000.

We erroneously believed certain research and development costs were allowed to be capitalized under GAAP.

result was understatement of research and development expense by $147,000.

The remediation of this material weakness has now been completed.

Changes in Internal Control over Financial Reporting

Except as described in the preceding section, there

has been no change in our internal control over financial reporting that occurred during the 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.

OTHER INFORMATION.

DIRECTORS, EXECUTIVE OFFICERS

AND CORPORATE GOVERNANCE.

During the three months ended June 30, 2024, no director or officer of

the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,”

as each term is defined in Item 408(a) of Regulation S-K.

Our loan agreement contains a minimum annual debt service coverage ratio

covenant of 1.2x, for the period ending June 30, 2024.

We did not meet this annual debt service coverage ratio as of June 30, 2024.

lender has agreed to waive compliance with the debt service ratio covenant for the period ending June 30, 2024.

In addition to the waiver,

we have entered into amendments dated September 30, 2024 with our lender to both term loans which provide for a six month period of interest

only payments from September 15, 2024 through February 15, 2025.

We will begin to pay principal and interest under the Notes beginning

with the payments due on March 15, 2025, with a new amortization schedule for the remaining term for such Notes through their maturity

There were no other changes to or modifications to the Loan Agreement or the Notes.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS

THAT PREVENT INSPECTIONS.

Not applicable.

DIRECTORS, EXECUTIVE

OFFICERS AND CORPORATE GOVERNANCE.

The information required under this item is incorporated

by reference to the applicable information set forth in the Proxy Statement for the 2024 Annual Meeting of Stockholders.

COMPENSATION.

Our Board of Directors has adopted a written Code of Business Conduct and

Ethics applicable to all officers, directors and employees, which has been filed as an exhibit to this Annual Report.

EXECUTIVE COMPENSATION.

The information required under this item is incorporated

by reference to the applicable information set forth in the Proxy Statement for the 2024 Annual Meeting of Stockholders.

SECURITY OWNERSHIP OF CERTAIN

BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

SECURITY OWNERSHIP

OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The information required under this item is incorporated

4 unchanged sentences

by reference to the applicable information set forth in the Proxy Statement for the 2024 Annual Meeting of Stockholders.

PRINCIPAL ACCOUNTING FEES AND

The information required under this item is incorporated by reference

to the applicable information set forth in the Proxy Statement for the 2023 Annual Meeting of Stockholders.

EXHIBITS, FINANCIAL STATEMENT

Documents filed as part of this

The following documents are filed as part of this Annual Report

PRINCIPAL ACCOUNTING

FEES AND SERVICES.

The information required under this item is incorporated

by reference to the applicable information set forth in the Proxy Statement for the 2024 Annual Meeting of Stockholders.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

Documents filed as part of this report

The following documents are filed as part of this Annual Report on 10-K:

FINANCIAL STATEMENTS

The following documents are filed in Part II, Item 8

of this Annual Report on Form 10-K:

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

5 unchanged sentences

FINANCIAL STATEMENT SCHEDULES

All financial statement schedules have been omitted as they are not

required, not applicable, or the required information is otherwise included.

All financial statement schedules have been omitted as they are not required,

not applicable, or the required information is otherwise included.

The exhibits listed below are filed with or incorporated by reference

in this report.

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).

Restated Articles of Organization of Precision Optics Corporation, Inc.

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).

to the Amended and Restated Bylaws of Precision Optics Corporation, Inc.

effective May 13, 2022 (included as exhibit 3.5 to the Form

10-Q filed May 16, 2022, and incorporated herein by reference).

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.)

Precision Optics Corporation,

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).

Agreement, by and between the Company and Joseph N.

Forkey, dated August 2, 2018 (included as Exhibit 10.1 to the Form 8-K filed

on August 3, 2018, and incorporated herein by reference).

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).

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

Agreement, by and among Precision Optics Corporation.

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).

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).

Agreement, by and among Precision Optics Corporation, Inc.

(included as Exhibit 3.1 to the Form 10-K filed September 28, 2023, and incorporated herein by reference).

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).

Amendment to the Amended and Restated Bylaws of Precision Optics Corporation, Inc.

effective May 13, 2022 (included as exhibit 3.5 to the Form 10-Q filed May 16, 2022, and incorporated herein by reference).

Articles of Amendment to the Amended Articles of Organization as filed with the Commonwealth of Massachusetts on October 24, 2022;

and Articles of Amendment as filed with the Commonwealth of Massachusetts on October 26, 2022, to override the earlier amendment (included as Exhibit 3.1 to the Current Report on Form 8-K filed November 2, 2022, and incorporated herein by reference).

Articles of Amendment to the Amended Articles of Organization as filed with the Commonwealth of Massachusetts on October 27, 2022, to set revised effective date of reverse stock split (included as Exhibit 3.2 to the Current Report on Form 8-K filed November 2, 2022, and incorporated herein by reference).

Form of Common Stock Certificate

Description of Securities

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.)

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).

Compensation Agreement, by and between the Company and Joseph N.

Forkey, dated August 2, 2018 (included as Exhibit 10.1 to the Form 8-K filed on August 3, 2018, and incorporated herein by reference).

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).

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

Employment Agreement, by and among Precision Optics Corporation.

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).

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).

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).

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).

Purchase Agreement, dated October 4, 2021, by and among Precision Optics Corporation, Inc.

and Lighthouse Imaging, LLC and Anania

& Associates Investment Company, LLC (included as Exhibit 10.1 to the current report on Form 8-K filed on October 8, 2021, and

incorporated herein by reference).

of Securities Purchase Agreement, by and among Precision Optics Corporation, Inc.

and several Investors, dated October 4, 2021 (included

as Exhibit 10.2 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).

of Registration Rights Agreement, by and among Precision Optics Corporation, Inc.

and several Investors, dated October 4, 2021 (included

as Exhibit 10.3 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).

Agreement dated October 4, 2021, by and among Precision Optics Corporation, Inc.

and Main Street Bank (included as Exhibit 10.4 to

the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).

Revolving Line of Credit Note dated October 4, 2021 (included as Exhibit 10.5 to the current report on Form 8-K filed on October

8, 2021, and incorporated herein by reference).

Term Loan Note dated October 4, 2021 (included as Exhibit 10.6 to the current report on Form 8-K filed on October 8, 2021, and incorporated

herein by reference).

Agreement dated October 4, 2021, by and among Precision Optics Corporation, Inc.

and Main Street Bank (included as Exhibit 10.7 to

the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).

side letter agreement dated October 4, 2021 (included as Exhibit 10.8 to the current report on Form 8-K filed on October 8, 2021,

and incorporated herein by reference).

Optics Corporation, Inc.

2022 Equity Incentive Plan (included as Appendix B to the proxy statement on Form DEF14A filed on February

24, 2022, and incorporated herein by reference).

Employment offer letter dated January 5, 2023 between

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).

Asset Purchase Agreement, dated October 4, 2021, by and among Precision Optics Corporation, Inc.

and Lighthouse Imaging, LLC and Anania & Associates Investment Company, LLC (included as Exhibit 10.1 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).

Form of Securities Purchase Agreement, by and among Precision Optics Corporation, Inc.

and several Investors, dated October 4, 2021 (included as Exhibit 10.2 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).

Form of Registration Rights Agreement, by and among Precision Optics Corporation, Inc.

and several Investors, dated October 4, 2021 (included as Exhibit 10.3 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).

Loan Agreement dated October 4, 2021, by and among Precision Optics Corporation, Inc.

and Main Street Bank (included as Exhibit 10.4 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).

$250,000 Revolving Line of Credit Note dated October 4, 2021 (included as Exhibit 10.5 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).

$2,600,000 Term Loan Note dated October 4, 2021 (included as Exhibit 10.6 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).

Security Agreement dated October 4, 2021, by and among Precision Optics Corporation, Inc.

and Main Street Bank (included as Exhibit 10.7 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).

Director side letter agreement dated October 4, 2021 (included as Exhibit 10.8 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).

Precision Optics Corporation, Inc.

Kevin Dahill (included as Exhibit 10.2 to the current report on Form 8-K filed on January

5, 2023, and incorporated herein by reference)

Second Amendment to Loan

Agreement dated June 2, 2023, by and between Precision Optics Corporation, Inc.

and Main Street Bank (included as Exhibit 10.1 to

the current report on Form 8-K filed on June 7, 2023, and incorporated herein by reference).

$750,000 Promissory Note dated June 2, 2023 (included

as Exhibit 10.2 to the current report on Form 8-K filed on June 7, 2023, and incorporated herein by reference).

Second Amendment to Demand

Revolving Line of Credit Note dated June 2, 2023, by and between Precision Optics Corporation, Inc.

and Main Street Bank (included

as Exhibit 10.3 to the current report on Form 8-K filed on June 7, 2023, and incorporated herein by reference).

Form of Securities Purchase

Agreement, by and among Precision Optics Corporation, Inc.

and several investors, dated June 15, 2023 (included as Exhibit 10.1 to

the current report on Form 8-K filed on June 20, 2023, and incorporated herein by reference).

Form of Registration Rights

Agreement, by and among Precision Optics Corporation, Inc.

and several investors, dated June 15, 2023 (included as Exhibit 10.2 to

the current report on Form 8-K filed on June 20, 2023, and incorporated herein by reference).

Placement Agent Agreement,

by and between Precision Optics Corporation, Inc.

and A.G.P./Alliance Global Partners, dated June 15, 2023 (included as Exhibit 10.3

to the current report on Form 8-K filed on June 20, 2023, and incorporated herein by reference).

Employment Agreement dated March 30, 2023 between Precision

Optics Corporation, Inc.

and Mahesh Lawande (included as Exhibit 10.31 to the Form S-1 filed July 20, 2023, and incorporated herein

by reference).

Employment Agreement dated June 7, 2023 between Precision

2022 Equity Incentive Plan (included as Appendix B to the proxy statement on Form DEF14A filed on February 24, 2022, and incorporated herein by reference).

Second Amendment to Loan Agreement dated June 2, 2023, by and between Precision Optics Corporation, Inc.

and Main Street Bank (included as Exhibit 10.1 to the current report on Form 8-K filed on June 7, 2023, and incorporated herein by reference).

$750,000 Promissory Note dated June 2, 2023 (included as Exhibit 10.2 to the current report on Form 8-K filed on June 7, 2023, and incorporated herein by reference).

Second Amendment to Demand Revolving Line of Credit Note dated June 2, 2023, by and between Precision Optics Corporation, Inc.

and Main Street Bank (included as Exhibit 10.3 to the current report on Form 8-K filed on June 7, 2023, and incorporated herein by reference).

Form of Securities Purchase Agreement, by and among Precision Optics Corporation, Inc.

and several investors, dated June 15, 2023 (included as Exhibit 10.1 to the current report on Form 8-K filed on June 20, 2023, and incorporated herein by reference).

Form of Registration Rights Agreement, by and among Precision Optics Corporation, Inc.

and several investors, dated June 15, 2023 (included as Exhibit 10.2 to the current report on Form 8-K filed on June 20, 2023, and incorporated herein by reference).

Placement Agent Agreement, by and between Precision Optics Corporation, Inc.

and A.G.P./Alliance Global Partners, dated June 15, 2023 (included as Exhibit 10.3 to the current report on Form 8-K filed on June 20, 2023, and incorporated herein by reference).

Employment Agreement dated March 30, 2023 between Precision Optics Corporation, Inc.

and Mahesh Lawande (included as Exhibit 10.31 to the Form S-1 filed July 20, 2023, and incorporated herein by reference).

Employment Agreement dated June 7, 2023 between Precision Optics Corporation, Inc.

Coll (included as Exhibit 10.31 to the Form S-1 filed July 20, 2023, and incorporated herein by reference).

Modification to Employment Agreement by and between Precision Optics Corporation, Inc.

and Jeffrey L.

DiRubio dated June 29, 2024 (included as Exhibit 10.1 to the current report on Form 8-K filed on July 3, 2024, and incorporated herein by reference).

Consulting Agreement by and between Precision Optics Corporation, Inc.

and Jeffrey L.

DiRubio dated June 29, 2024 (included as Exhibit 10.2 to the current report on Form 8-K filed on July 3, 2024, and

incorporated herein by reference).

Form of Securities Purchase Agreement for August 13, 2024 securities offering (included as Exhibit 10.1 to the current report on Form 8-K filed on August 14, 2024, and incorporated herein by reference).

Placement Agency Agreement between Precision Optics Corporation, Inc and A.G.P./Alliance Global Partners (included as Exhibit 10.2 to the current report on Form 8-K filed on August 14, 2024, and incorporated herein by reference).

Modification and Amendment of Term Note dated September 30, 2024 by and between Precision Optics Corporation, Inc.

and Main Street Bank

Modification and Amendment of Promissory Note dated September 30, 2024 by and between Precision Optics Corporation, Inc.

and Main Street Bank

Optics Corporation, Inc.

Coll (included as Exhibit 10.31 to the Form S-1 filed July 20, 2023, and incorporated herein

by reference).

Precision Optics Corporation,

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).

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).

Insider Trading Policy

Consent of Independent Registered Public Accounting Firm.

3 unchanged sentences

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 .

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