What changed in this filing

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Item 1. Financial Statements

2024-11-14 compared with 2024-05-15 · 171 added, 181 removed, 218 unchanged (62% of the section changed)

1 unchanged sentence

PRECISION OPTICS CORPORATION, INC.

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

September 30,

Current Assets:

Cash and cash equivalents

Accounts receivable, net of allowance for doubtful accounts of $ 826,434 at March 31, 2024 and $ 606,715 at June 30, 2023

Accounts receivable, net of allowance for doubtful accounts of $ 103,224 at September 30, 2024 and $ 118,872 at June 30, 2024

Prepaid expenses

4 unchanged sentences

Furniture and fixtures

Construction in progress

Total fixed assets

2 unchanged sentences

Operating lease right-to-use asset

Total other assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

4 unchanged sentences

Accounts payable

Customer advances

Contract liabilities

Accrued compensation and other

4 unchanged sentences

Operating lease liability, net of current portion

Total liabilities

Stockholders’ Equity:

1 unchanged sentence

50,000,000 shares authorized;

issued and outstanding – 6,068,518 shares at March 31, 2024 and 6,066,518 at June 30, 2023

issued and outstanding – 6,350,170 shares at September 30, 2024 and 6,073,939 at June 30, 2024

Additional paid-in capital

4 unchanged sentences

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

The accompanying notes are an integral part of these

consolidated interim financial statements.

The accompanying notes are an integral part

of these consolidated interim financial statements.

PRECISION OPTICS CORPORATION, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED

MARCH 31, 2024 AND 2023

Ended March 31,

FOR THE THREE MONTHS ENDED

SEPTEMBER 30, 2024 AND 2023

Ended September 30,

Cost of Goods Sold

5 unchanged sentences

Interest Expense

Gain on Revaluation of Contingent Liability

$ ( 1,311,247 )

$ ( 464,415 )

$ ( 1,540,272 )

Loss Per Share:

2 unchanged sentences

Basic & Fully Diluted

The accompanying notes are an integral part of these

consolidated interim financial statements.

The accompanying notes are an integral part

of these consolidated interim financial statements.

PRECISION OPTICS CORPORATION, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

FOR THE THREE MONTHS ENDED

30, 2024 AND 2023

Month Period Ended March 31, 2024

Three Month Period Ended September 30, 2024

Stockholders’

1 unchanged sentence

$ ( 51,190,384 )

Issuance of common stock in registered direct offering

Proceeds from exercise of stock option

Stock-based compensation

Balance, September 30, 2023

( 1,311,247 )

Stock-based compensation

Proceeds from the exercise of stock options

Balance, December 31, 2023

( 1,311,247 )

Stock-based compensation

Proceeds from the exercise of stock options

Balance, March 31, 2024

Balance, September 30, 2024

$ ( 52,501,631 )

Month Period Ended March 31, 2023

Three Month Period Ended September 30, 2023

Stockholders’

4 unchanged sentences

$ ( 48,703,422 )

Stock-based compensation

Balance, December 31, 2022

( 47,744,450 )

Stock-based compensation

Proceeds from the exercise of stock options

Balance, March 31, 2023

$ ( 48,142,882 )

The accompanying notes are an integral part of these

consolidated interim financial statements.

The accompanying notes are an integral part

of these consolidated interim financial statements.

PRECISION OPTICS CORPORATION, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED

FOR THE THREE MONTHS ENDED

30, 2024 AND 2023

Ended March 31,

Ended September 30,

Cash Flows from Operating Activities:

$ ( 1,311,247 )

$ ( 464,415 )

Adjustments to reconcile net loss to net cash used in by operating activities -

Gain on reevaluation of contingent earn-out liability

Depreciation and amortization

3 unchanged sentences

Accounts receivable, net

( 1,726,035 )

Inventories, net

1 unchanged sentence

Accounts payable

Customer advances

Contract liabilities

Accrued compensation and other

Net cash (used in) provided by operating activities

Net cash used in operating activities

( 1,372,989 )

6 unchanged sentences

Payments of long-term debt

Payment of acquisition earn-out liability

Borrowings on revolving line of credit

Payment of debt modification costs

Payment on revolving line of credit

Proceeds from registered direct sale of common stock, net

Gross proceeds from the exercise of stock options

Net cash used in financing activities

Net (decrease) increase in cash and cash equivalents

Net cash provided by (used in) financing activities

Net increase(decrease) in cash and cash equivalents

( 1,555,383 )

1 unchanged sentence

Cash and cash equivalents, end of period

The accompanying notes are an integral part of these

consolidated interim financial statements.

The accompanying notes are an integral part

of these consolidated interim financial statements.

PRECISION OPTICS CORPORATION, INC.

9 unchanged sentences

prepared by the Company, without audit, and reflect normal recurring adjustments which, in the opinion of management, are necessary for

a fair statement of the results of the first nine months of the Company’s fiscal year 2024.

a fair statement of the results of the first three months of the Company’s fiscal year 2025.

These consolidated financial statements

4 unchanged sentences

Use of Estimates

The preparation of these consolidated financial statements

requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses.

Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances,

the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent

from other sources.

The preparation of these consolidated financial

statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and

The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable

under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities

that are not readily apparent from other sources.

Actual results may differ from these estimates.

5 unchanged sentences

plus the number of potentially dilutive securities outstanding during the period such as stock options.

For the three months and nine

months ended March 31, 2024, potentially dilutive securities outstanding have been excluded from the computations of weighted-average

shares outstanding because such securities have an antidilutive impact due to the net loss reported during those periods.

The number of

shares issuable upon the exercise of outstanding stock options that were excluded from the computation of fully dilutive weighted average

shares outstanding was approximately 1,405,398 for the three and nine months ended March 31, 2024 and 1,058,630 for the three and nine

months ended March 31, 2023.

For the three months ended September

30, 2024 and 2023, potentially dilutive securities outstanding have been excluded from the computations of weighted-average shares outstanding

because such securities have an antidilutive impact due to the net loss reported during those periods.

The number of shares issuable upon

the exercise of outstanding stock options that were excluded from the computation of fully dilutive weighted average shares outstanding

was approximately 1,329,236 for the three months ended September 30, 2024 and 1,123,140 for the three months ended September 30, 2023.

The following is the calculation of income (loss) per share for the

three months and nine months ended March 31, 2024 and 2023:

three months ended September 30, 2024 and 2023:

Schedule of income loss per share

Ended March 31,

Ended September 30,

Net Income (Loss) Basic and Fully Diluted

1 unchanged sentence

$ ( 464,415 )

$ ( 1,540,272 )

Weighted Average Shares Outstanding

1 unchanged sentence

Loss Per Share – Basic & Fully Diluted

Income taxes are accounted for under the asset and

liability method.

Income taxes are accounted for under the asset

and liability method.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between

5 unchanged sentences

of a change in tax rates is recognized in income in the period that includes the enactment date.

In assessing the likelihood of utilization of existing

deferred tax assets, management has considered historical results of operations and the current operating environment.

Based on this evaluation,

a full valuation reserve has been provided for the deferred tax assets.

In assessing the likelihood of utilization of

existing deferred tax assets, management has considered the historical results of operations and the current operating environment.

on this evaluation, a full valuation reserve has been provided for the deferred tax assets.

Goodwill and Patents

Long-lived assets such as goodwill and patents are

capitalized when acquired and reviewed for impairment whenever events or changes in circumstances indicate that the book value of the

asset may not be recoverable.

Impairment of the carrying value of long-lived assets such as goodwill and patents would be indicated if

the best estimate of future undiscounted cash flows expected to be generated by the asset grouping is less than its carrying value.

an impairment is indicated, any loss is measured as the difference between estimated fair value and carrying value and is recognized in

operating income or loss.

Long-lived assets such as goodwill and patents

are capitalized when acquired and reviewed for impairment whenever events or changes in circumstances indicate that the book value of

the asset may not be recoverable.

Impairment of the carrying value of long-lived assets such as goodwill and patents would be indicated

if the best estimate of future undiscounted cash flows expected to be generated by the asset grouping is less than its carrying value.

If an impairment is indicated, any loss is measured as the difference between estimated fair value and carrying value and is recognized

in operating income or loss.

Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

No such impairments of goodwill or patents have been estimated by management as of March 31, 2024.

No such impairments of goodwill or patents have been estimated by management as of September 30, 2024.

Inventories are stated at the lower of cost (first-in,

1 unchanged sentence

Schedule of inventories

September 30,

Raw Materials

4 unchanged sentences

Bank Line of Credit

On October 4, 2021, the Company entered into a Loan

Agreement with Main Street Bank of Marlborough, Massachusetts, which provided for a $ 2,600,000 Term Loan and a $250,000 Revolving Line

of Credit Loan Facility (the “Revolver”), which was increased to $500,000 effective May 17, 2022, and $ 1,250,000 effective

On October 4, 2021, the Company entered into a

Loan Agreement with Main Street Bank of Marlborough, Massachusetts, which provided for a $2,600,000 Term Loan and a $250,000 Revolving

Line of Credit Loan Facility (the “Revolver”), which was increased to $500,000 effective May 17, 2022, and $1,250,000 effective

June 2, 2023.

5 unchanged sentences

Borrowings under the Revolver

at March 31, 2024 were $ 400,000 , with $ 850,000 remaining available for use.

at September 30, 2024 were $ 500,000 , with $ 750,000 remaining available for use.

The Company’s Loan Agreement with the Lender

contains a minimum annual debt service coverage ratio covenant of 1.2x, for the period ending June 30, 2024.

The Company did not meet

this annual debt service coverage ratio as of such fiscal year end date.

The Company’s Lender has agreed to waive compliance with

such debt service ratio covenant for the period ending June 30, 2024.

In addition to such waiver, the Lender and the Company have entered

into an amendment dated September 30, 2024 to that certain Term Loan dated October 4, 2021, as amended and that certain Promissory Note

dated June 2, 2023 (collectively, the “Notes”) which amendments provide for a six month period of interest only payments from

October 15, 2024 through March 15, 2025 for the Notes.

The Company will begin to pay principal and interest under the Notes beginning

with the payments due on April 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.

Long-Term Debt

Long-term debt consists of the following at March

Long-term debt consists of the following at September

Schedule of long-term debt

Term Loan Note payable to Main Street Bank with monthly principal payments of $ 30,952 .38 plus interest at a fixed rate of 7.0 % per annum.

Term Loan Note payable to Main Street Bank with monthly principal payments of $ 35,173 , excluding six months in Fiscal 2025, plus interest at a fixed rate of 7.0 % per annum.

Secured by all assets of the Company, and subject to certain periodic reporting to the bank and other conditions including an annual minimum EBITDA plus stock-based compensation to debt service coverage ratio of 1.20:1 commencing with the fiscal year ending June 30, 2023.

The Term Loan Note matures on October 15, 2028 .

Permanent Working Capital Loan payable to Main Street Bank with monthly principal payments of $ 12,500 plus interest at a fixed rate of 8.625 % per annum.

Permanent Working Capital Loan payable to Main Street Bank with monthly principal payments of $ 14,375 , excluding six months in Fiscal 2025, plus interest at a fixed rate of 8.625 % per annum.

1 unchanged sentence

Less current maturities

Less debt issuance costs, net of accumulated amortization of $ 10,275

Less debt issuance and modification costs, net of accumulated amortization of $ 18,736

Long-term debt, net of current maturities and debt issuance costs

At March 31, 2024 principal payments due on the Term Loan Note payable

are as follows:

Schedule of maturity of principal payments due

At September 30, 2024 principal payments due on the Term Loan Note

payable are as follows:

Schedule of principal payments due on term loan note

Fiscal Year Ending June 30:

1 unchanged sentence

LEASE OBLIGATIONS

In March 2021 the Company entered into a five-year capital lease in the

amount of $ 161,977 for manufacturing equipment.

In January 2020, the Company entered into a five-year capital lease for $ 47,750 for manufacturing

The net book value of fixed assets under capital lease obligations as of March 31, 2024 is $ 44,103 .

In March 2021 the Company entered into a five-year capital lease in

the amount of $ 161,977 for manufacturing equipment.

In January 2020, the Company entered into a five-year capital lease for $ 47,750 for

manufacturing equipment.

The net book value of fixed assets under capital lease obligations as of September 30, 2024 is $ 51,776 .

On July 1, 2019, the Company entered into a three-year

1 unchanged sentence

Remaining minimum lease

payments at March 31, 2024 total $ 55,637 .

Total rent expense including base rent and common area expenses was $ 16,247 and $ 15,973 during

the three months ended March 31, 2024 and 2023, respectively.

payments at September 30, 2024 total $ 34,060 .

Total rent expense including base rent and common area expenses was $ 16,340 and $ 15,973

during the three months ended September 30, 2024 and 2023, respectively.

On October 4, 2021, the Company assumed the remaining

2 unchanged sentences

Remaining minimum lease payments

on March 31, 2024 total $ 177,293 .

Total rent expense including base rent and common area expenses was $ 34,432 and $ 36,495 during the three

months ended March 31, 2024 and 2023, respectively.

Included in the accompanying balance sheet at March 31, 2024 is a right-of-use asset

of $ 232,930 and current and long-term right-of-use operating lease liabilities of $ 175,961 and $ 56,969 , respectively.

At March 31, 2024 future minimum lease payments under

the capital lease and operating lease obligations are as follows:

Schedule of future minimum lease payments under the capital lease and operating lease obligations

on September 30, 2024 total $ 112,187 .

Total rent expense including base rent and common area expenses was $ 34,432 during both the three

months ended September 30, 2024 and 2023.

Included in the accompanying balance sheet at September 30, 2024 is a right-of-use asset of

$ 146,247 and current right-of-use operating lease liabilities of $ 146,247 .

At September 30, 2024 future minimum lease payments

under the capital lease and operating lease obligations are as follows:

Schedule of future minimum lease payments under capital lease and operating lease obligations

Fiscal Year Ending June 30:

6 unchanged sentences

Lease Obligation, net of current portion

The Company’s operating leases for its Gardner,

Massachusetts office, manufacturing and warehousing space and an equipment lease have expired and continue on a month-to-month tenant-at-will

Rent expense on these operating leases was $ 147,544 and $ 150,862 for the nine months ended March 31, 2024 and 2023, respectively.

The Company’s four facilities in Gardner,

Massachusetts which are used for offices, production and storage spaces are leased primarily on a tenant-at-will basis.

Rent expense on

these operating leases was $ 51,797 and $ 48,799 for the three months ended September 30, 2024 and 2023, respectively.

STOCK-BASED COMPENSATION

1 unchanged sentence

The following table summarizes stock-based compensation

expense for the three months ended March 31, 2024 and 2023.

expense for the three months ended September 30, 2024 and 2023.

The share amounts and prices shown below reflect adjustment for a 1-for-3

1 unchanged sentence

Schedule of stock-based compensation

Ended March 31,

Ended September 30,

Cost of Goods Sold

Research and Development

Selling, General and Administrative

3 unchanged sentences

The following tables summarize stock option activity

for the nine months ended March 31, 2024:

for the three months ended September 30, 2024:

Schedule of stock option activity

6 unchanged sentences

Cancelled, forfeited, or expired

Outstanding at March 31, 2024

Outstanding at September 30, 2024

The aggregate intrinsic value of the Company’s

in-the-money outstanding and exercisable options as of March 31, 2024 were both $ 1,511,424 .

in-the-money outstanding and exercisable options as of September 30, 2024 were $ 1,533,439 and $ 1,511,239 , respectively.

REVENUE RECOGNITION

The Company determines revenue recognition for arrangements that

we determine are within the scope of Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers,”

or ASC 606, by performing the following five steps:

The Company determines revenue recognition for

arrangements that we determine are within the scope of Accounting Standards Codification Topic 606, “Revenue from Contracts with

Customers,” or ASC 606, by performing the following five steps:

(i) identify the contract with a customer;

(ii) identify the performance obligations

in the contract;

(ii) identify the performance

obligations in the contract;

(iii) determine the transaction price;

(iv) allocate the transaction price to the performance obligations in the contract;

and (v) recognize revenue when, or as, we satisfy the performance obligations.

At contract inception, once the contract is determined

to be within the scope of ASC 606, we assess the goods or services promised within the contract and determine those that are performance

obligations and assess whether each promised good or service is distinct based on the contract.

The Company disaggregates revenues by product and service types as it believes

best depicts how the nature, amount, timing and uncertainty of revenues and cash flows are affected by economic factors.

comprised of the following for the three and nine months ended March 31, 2024 and 2023:

(iv) allocate the transaction price to the performance obligations

in the contract;

and (v) recognize revenue when, or as, the Company satisfies the performance obligations.

At contract inception, once

the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within the contract

and determine those that are performance obligations and assess whether each promised good or service is distinct based on the contract.

The Company disaggregates revenues by product

and service types as it believes best depicts how the nature, amount, timing and uncertainty of revenues and cash flows are affected by

economic factors.

Revenues are comprised of the following for the three months ended September 30, 2024 and 2023:

Schedule of disaggregation of revenues

Ended March 31,

Ended September 30,

Engineering Design Services

1 unchanged sentence

Medical Device Products and Assemblies

Technology Rights

Total Revenues

Other selling costs to obtain and fulfill contracts are expensed as incurred

due to the short-term nature of a majority of contracts.

The Company extends terms of payment to its customers based on commercially reasonable

terms for the markets of its customers, while also considering their credit quality.

Shipping and handling costs charged to customers

are included in revenue.

Revenue recognition policies for each of the four product and service types

appear below.

Other selling costs to obtain and fulfill contracts

are expensed as incurred due to the short-term nature of a majority of contracts.

The Company extends terms of payment to its customers

based on commercially reasonable terms for the markets of its customers, while also considering their credit quality.

Shipping and handling

costs charged to customers are included in revenue.

Revenue recognition policies for each of the four

product and service types appear below.

Engineering Design Services

The Company enters into contractual agreements with

our customers, including design services agreements, statements of work and receive purchase orders for development projects.

These agreements

provide costs on an estimated basis for the services we have agreed to provide.

Engineering Design Services are rendered on a time and

materials basis.

The Company recognizes revenue as customers are invoiced for the actual engineering services provided in the period.

The Company enters into contractual

agreements with its customers, including design services agreements, statements of work and receive purchase orders for development projects.

These agreements provide costs on an estimated basis for the services the Company has agreed to provide.

Engineering Design Services are

rendered on a time and materials basis.

The Company recognizes revenue as customers are invoiced for the actual engineering services provided

in the period.

Revenue is also recognized on materials purchased for development projects at the time of receipt.

Engineering Design Services are provided

on a best-efforts basis;

no warranty is provided as there is no guarantee that the work will result in the attainment of the customer’s

project objectives.

Engineering Design Services

are provided on a best-efforts basis;

no warranty is provided as there is no guarantee that the work will result in the attainment of

the customer’s project objectives.

The Company may obtain customer deposits in advance of rendering engineering design services.

Customer deposits are

treated as contractual liabilities until the terms of customer agreements are satisfied and are not a component of revenue.

Customer deposits are treated as contractual liabilities until the terms of customer agreements are satisfied and are not a component

Optical Components, Finished Products and Assemblies

The Company provides fixed price quotations to our

customers and requires purchase orders for all purchased optical components, finished devices and assemblies.

Revenue is recognized at

the time title passes to our customer based on our review of the customer contract, generally at the time of shipment from our facilities.

Occasionally the Company may enter into “bill and hold” contractual arrangements where title is held by our customers while

goods are stored at our facilities for their convenience.

The Company provides fixed

price quotations to its customers and requires purchase orders for all purchased optical components, finished devices and assemblies.

Revenue is recognized at the time title passes to the Company’s customers based on its review of the customer contract, generally

at the time of shipment from its facilities.

Occasionally the Company may enter into “bill and hold” contractual arrangements

where title is held by its customers while goods are stored at our facilities for their convenience.

Technology Rights and Royalties

The Company may recognize revenue for the sale of technology

rights and through the receipt of royalties obtained under a license of our intellectual property.

These revenues are recognized in the

period in which, in our judgment, they are earned and no longer contingent under the terms and conditions of the relevant customer contract.

The Company may recognize

revenue for the sale of technology rights and through the receipt of royalties obtained under a license of our intellectual property.

These revenues are recognized in the period in which, in our judgment, they are earned and no longer contingent under the terms and conditions

of the relevant customer contract.

Contract Assets and Liabilities

The nature of the Company’s products and services

does not generally give rise to contract assets as it typically does not incur costs to fulfill a contract before a product or service

is provided to a customer.

The Company’s costs to obtain contracts are typically in the form of sales commissions paid to employees.

The Company has elected to expense sales commissions associated with obtaining a contract as incurred as the amortization period is generally

less than one year.

The nature of the Company’s products and

services does not generally give rise to contract assets as it typically does not incur costs to fulfill a contract before a product or

service is provided to a customer.

The Company’s costs to obtain contracts are typically in the form of sales commissions paid to

The Company has elected to expense sales commissions associated with obtaining a contract as incurred as the amortization period

is generally less than one year.

These costs have been recorded in selling, general and administrative expenses.

As of March 31, 2024, there were

no contract assets recorded in the Company’s Consolidated Balance Sheets.

The Company’s contract liabilities arise from

unearned revenue received from customers at inception of contracts or where the timing of billing for services precedes satisfaction of

our performance obligations.

As of September

30, 2024, there were no contract assets recorded in the Company’s Consolidated Balance Sheets.

The Company’s contract liabilities arise

from unearned revenue received from customers at inception of contracts or where the timing of billing for services precedes satisfaction

of our performance obligations.

The Company generally satisfies performance obligations within one year from the contract’s inception

Contract liabilities, which were recorded as customer

advances in the Company’s Consolidated Balance Sheets, and unearned revenue are comprised of the following:

Contract liabilities, which are recorded in the

Company’s Consolidated Balance Sheets, and unearned revenue are comprised of the following:

Schedule of contract liabilities

Ended March 31,

Ended September 30,

Contract liabilities, beginning of period

1 unchanged sentence

Revenue recognized

( 1,041,369 )

( 1,435,082 )

Contract liabilities, end of period

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 1. Financial Statements