Item 9A. Controls and Procedures
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 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 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, 2024. 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, 2024.
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. The
result was understatement of research and development expense by $147,000. The remediation of this material weakness has now been completed.
23
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.
ITEM 9B. OTHER INFORMATION.
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. Our
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
date. There were no other changes to or modifications to the Loan Agreement or the Notes.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS
THAT PREVENT INSPECTIONS.
Not applicable.
24
PART III
ITEM 10. 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.
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.
ITEM 11. 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.
ITEM 12. SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
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.
ITEM 13. CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
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.
ITEM 14. 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.
25
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, 2024 and 2023
Consolidated Statements of Operations for the years ended June 30, 2024 and 2023
Consolidated Statements of Stockholders’ Equity for the years ended June 30, 2024 and 2023
Consolidated Statements of Cash Flows for the years ended June 30, 2024 and 2023
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
3.1
Restated Articles of Organization of Precision Optics Corporation, Inc. (included as Exhibit 3.1 to the Form 10-K filed September 28, 2023, and incorporated herein by reference).
3.2
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).
3.3
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).
3.4
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).
3.5
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).
4.1 *
Form of Common Stock Certificate
4.2*
Description of Securities
26
Exhibit
Description
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 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).
10.4
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).
10.5
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
10.6
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).
10.7†
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).
10.8+
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).
10.9†+
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).
10.10
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).
10.11
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).
10.12+
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).
10.13
$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).
10.14
$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).
10.14
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).
27
Exhibit
Description
10.16
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).
10.17
Precision 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).
10.18
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).
10.19
$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).
10.20
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).
10.21
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).
10.22
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).
10.23
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).
10.24
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).
10.25
Employment Agreement dated June 7, 2023 between Precision Optics Corporation, Inc. and Wayne M. Coll (included as Exhibit 10.31 to the Form S-1 filed July 20, 2023, and incorporated herein by reference).
10.26
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).
10.27
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).
10.28
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).
10.29
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).
10.30*
Modification and Amendment of Term Note dated September 30, 2024 by and between Precision Optics Corporation, Inc. and Main Street Bank
28
Exhibit
Description
10.31*
Modification and Amendment of Promissory Note dated September 30, 2024 by and between Precision Optics Corporation, Inc. and Main Street Bank
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).
19.1*
Insider Trading Policy
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 .
97.1*
Precision Optics, Corporation, Inc.
Restatement Recoupment Policy
101.INS*
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH*
Inline XBRL Taxonomy Extension Schema Document
101.CAL*
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*
Cover Page Interactive Data File (embedded within the Inline XBRL 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.
29
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 30, 2024
By:
/s/ Joseph N. Forkey
Joseph N. Forkey
President and Chief Executive Officer
(Principal Executive Officer)
Date: September 30, 2024
By:
/s/ Wayne M. Coll
Wayne M. Coll
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 30, 2024
/s/ Wayne M. Coll
Wayne M. Coll
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
September 30, 2024
/s/ Peter V. Anania
Director
September 30, 2024
Peter V. Anania
/s/ Andrew J. Miclot
Director
September 30, 2024
Andrew J. Miclot
/s/ Richard B. Miles
Director
September 30, 2024
Richard B. Miles
/s/ Peter H. Woodward
Director, Chairman
September 30, 2024
Peter H. Woodward
30