Commission
file number
|
001-10647
|
PRECISION
OPTICS CORPORATION, INC.
|
(Exact
name of small business issuer as specified in its
charter)
|
Massachusetts
|
04-2795294
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
|
incorporation
or organization)
|
Identification
No.)
|
22
East Broadway, Gardner, Massachusetts 01440-3338
|
|
(Address
of principal executive offices)
(Zip
Code)
|
(978)
630-1800
|
(Issuer's
telephone number, including area
code)
|
Yes
x
|
No
o
|
Yes
o
|
No
x
|
Yes
o
|
No
x
|
December
31, 2006
|
June 30, 2006 | ||||||
CURRENT
ASSETS
|
|||||||
Cash
and Cash Equivalents
|
$
|
552,290
|
$
|
2,030,428
|
|||
Accounts
Receivable, net
|
319,803
|
381,097
|
|||||
Inventories,
net
|
511,559
|
445,802
|
|||||
Prepaid
Expenses
|
105,734
|
45,912
|
|||||
Total
Current Assets
|
1,489,386
|
2,903,239
|
|||||
PROPERTY
AND EQUIPMENT
|
|||||||
Machinery
and Equipment
|
3,516,860
|
3,513,736
|
|||||
Leasehold
Improvements
|
553,596
|
553,596
|
|||||
Furniture
and Fixtures
|
136,762
|
93,545
|
|||||
Vehicles
|
42,343
|
42,343
|
|||||
4,249,561
|
4,203,220
|
||||||
Less:
Accumulated Depreciation
|
(4,119,768
|
)
|
(4,127,287
|
)
|
|||
Net
Property and Equipment
|
129,793
|
75,933
|
|||||
OTHER
ASSETS
|
|||||||
Cash
surrender value of life insurance policies
|
13,246
|
13,246
|
|||||
Patents,
net
|
277,903
|
236,115
|
|||||
Total
Other Assets
|
291,149
|
249,361
|
|||||
TOTAL
ASSETS
|
$
|
1,910,328
|
$
|
3,228,533
|
|||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
CURRENT
LIABILITIES
|
|||||||
Accounts
Payable
|
$
|
294,309
|
$
|
218,658
|
|||
Accrued
Employee Compensation
|
237,505
|
227,892
|
|||||
Accrued
Professional Services
|
46,169
|
90,000
|
|||||
Accrued
Warranty Expense
|
50,000
|
50,000
|
|||||
Other
Accrued Liabilities
|
12
|
2,086
|
|||||
Total
Current Liabilities
|
627,995
|
588,636
|
|||||
STOCKHOLDERS'
EQUITY
|
|||||||
Common
Stock, $.01 par value-
|
|||||||
Authorized
–
20,000,000
shares
|
|||||||
Issued
and Outstanding
–
15,458,212
shares
|
|||||||
at
December 31, 2006 and at June 30, 2006
|
154,582
|
154,582
|
|||||
Additional
Paid-in Capital
|
34,823,671
|
34,729,873
|
|||||
Accumulated
Deficit
|
(33,695,920
|
)
|
(32,244,558
|
)
|
|||
Total
Stockholders' Equity
|
1,282,333
|
2,639,897
|
|||||
TOTAL
LIABILITIES AND
|
|||||||
STOCKHOLDERS'
EQUITY
|
$
|
1,910,328
|
$
|
3,228,533
|
Three
Months
Ended
December 31,
|
Six
Months
Ended
December 31,
|
||||||||||||
(As
reclassified. See Note 1.)
|
|||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
REVENUES
|
$
|
470,811
|
$
|
519,950
|
$
|
898,436
|
$
|
930,382
|
|||||
COST
OF GOODS SOLD
|
316,437
|
403,101
|
699,897
|
837,027
|
|||||||||
Gross
Profit / (Loss)
|
154,374
|
116,849
|
198,539
|
93,355
|
|||||||||
RESEARCH
and DEVELOPMENT EXPENSES
|
378,954
|
346,168
|
643,477
|
633,998
|
|||||||||
SELLING,
GENERAL and
ADMINISTRATIVE
EXPENSES
|
545,994
|
413,339
|
1,029,020
|
836,732
|
|||||||||
GAIN
ON SALE OF FIXED ASSETS
|
-
|
-
|
-
|
(165,700
|
)
|
||||||||
Total
Operating Expenses
|
924,948
|
759,507
|
1,672,497
|
1,305,030
|
|||||||||
Operating
Loss
|
(770,574
|
)
|
(642,658
|
)
|
(1,473,958
|
)
|
(1,211,675
|
)
|
|||||
INTEREST
INCOME
|
7,391
|
6,266
|
22,595
|
15,412
|
|||||||||
Net
Loss
|
$
|
(763,183
|
)
|
$
|
(636,392
|
)
|
$
|
(1,451,363
|
)
|
$
|
(1,196,263
|
)
|
|
Basic
and Diluted Loss Per Share
|
$
|
(0.05
|
)
|
$
|
(0.09
|
)
|
$
|
(0.09
|
)
|
$
|
(0.17
|
)
|
|
Weighted
Average Common Shares Outstanding -
Basic
and Diluted
|
15,458,212
|
7,008,212
|
15,458,212
|
7,008,212
|
Six
Months
|
|||||||
Ended
December 31,
|
|||||||
|
|
2006
|
|
2005
|
|||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|||||||
Net
Loss
|
$
|
(1,451,363
|
)
|
$
|
(1,196,263
|
)
|
|
Adjustments
to Reconcile Net Loss to Net Cash
|
|||||||
Used
In Operating Activities -
|
|||||||
Depreciation
and Amortization
|
57,365
|
83,396
|
|||||
Gain
on Disposal of Asset
|
-
|
(165,700
|
)
|
||||
Stock-based
compensation expense
|
109,259
|
-
|
|||||
Provision
for Inventory Write-Down
|
-
|
38,600
|
|||||
Changes
in Operating Assets and Liabilities-
|
|||||||
Accounts
Receivable
|
61,294
|
(135,458
|
)
|
||||
Inventories
|
(65,757
|
)
|
30,164
|
||||
Prepaid
Expenses
|
(59,822
|
)
|
(20,503
|
)
|
|||
Accounts
Payable
|
75,651
|
26,146
|
|||||
Other
Accrued Expenses
|
(36,292
|
)
|
(44,403
|
)
|
|||
Net
Cash Used In Operating Activities
|
(1,309,665
|
)
|
(1,384,021
|
)
|
|||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|||||||
Purchases
of Property and Equipment
|
(83,304
|
)
|
(8,017
|
)
|
|||
Proceeds
from Disposal of Asset
|
-
|
162,000
|
|||||
Increase
in Other Assets
|
(69,709
|
)
|
(32,203
|
)
|
|||
Net
Cash Provided By (Used In) Investing Activities
|
(153,013
|
)
|
121,780
|
||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||
Payment
of Offering Costs
|
(15,460
|
)
|
-
|
||||
Net
Cash Used In Financing Activities
|
(15,460
|
)
|
-
|
||||
NET
DECREASE IN CASH AND
|
|||||||
CASH
EQUIVALENTS
|
(1,478,138
|
)
|
(1,262,241
|
)
|
|||
CASH
AND CASH EQUIVALENTS AT BEGINNING
|
|||||||
OF
PERIOD
|
2,030,428
|
2,171,693
|
|||||
CASH
AND CASH EQUIVALENTS AT END
|
|||||||
OF
PERIOD
|
$
|
552,290
|
$
|
909,452
|
|||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW
|
|||||||
INFORMATION:
|
|||||||
Cash
Paid for-
|
|||||||
Interest
|
$
|
-
|
$
|
-
|
|||
Income
Taxes
|
$
|
912
|
$
|
912
|
1. |
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES
|
Loss
Per Share
|
Basic
loss per share is computed by dividing net loss by the weighted average
number of shares of common stock outstanding during the period. For
the
three and six months ended December 31, 2006 and 2005, the effect
of stock
options was antidilutive; therefore, they were not included in the
computation of diluted loss per share. The number of shares issuable
upon
the exercise of outstanding stock options that were excluded from
the
computation as their effect would be antidilutive were approximately
2,532,583 and 1,316,783 for the three months ended December 31, 2006
and
2005, respectively and approximately 2,492,583 and 1,336,783 for
the six
months ended December 31, 2006 and 2005, respectively.
|
Three
Months Ended
December
31, 2005
|
Six
Months Ended
December
31, 2005
|
||||||||||||
Currently
Reported
|
Before
Reclassification
|
Currently
Reported
|
Before
Reclassification
|
||||||||||
Revenues
|
$
|
519,950
|
$
|
529,195
|
$
|
930,382
|
$
|
948,777
|
|||||
Gross
Profit
|
$
|
116,849
|
$
|
42,072
|
$
|
93,355
|
$
|
(59,846
|
)
|
||||
Research
and Development Expenses
|
$
|
346,168
|
$
|
269,159
|
$
|
633,998
|
$
|
477,270
|
|||||
Total
Operating Expenses
|
$
|
759,507
|
$
|
684,730
|
$
|
1,305,030
|
$
|
1,151,829
|
|||||
Three
Months Ended
December
31, 2006
|
Six
Months Ended
December
31, 2006
|
||||||||||||
|
Currently
Reported
|
Before
Reclassification
|
Currently
Reported
|
Before
Reclassification
|
|||||||||
Revenues
|
$
|
470,811
|
$
|
489,911
|
$
|
898,436
|
$
|
964,065
|
|||||
Gross
Profit
|
$
|
154,374
|
$
|
98,708
|
$
|
198,539
|
$
|
86,938
|
|||||
Research
and Development Expenses
|
$
|
378,954
|
$
|
322,069
|
$
|
643,477
|
$
|
529,893
|
|||||
Total
Operating Expenses
|
$
|
924,948
|
$
|
869,282
|
$
|
1,672,497
|
$
|
1,560,896
|
|||||
2. |
INVENTORIES
|
December
31, 2006
|
June
30, 2006
|
||||||
Raw
Materials
|
$
|
264,969
|
$
|
251,725
|
|||
Work-In-Progress
|
169,599
|
114,786
|
|||||
Finished
Goods
|
76,991
|
79,291
|
|||||
Total
Inventories
|
$
|
511,559
|
$
|
445,802
|
3. |
STOCK-BASED
COMPENSATION
|
OPTIONS
|
2007
|
2008
|
2009
|
2010
|
2011
|
TOT
AL
|
Compensation
Expense
|
$
85,578
|
$
104,234
|
$
84,720
|
$
21,805
|
$
21,805
|
$
318,142
|
Three
Months Ended
December
31, 2005
|
Six
Months Ended
December
31, 2005
|
||||||
Net
loss as reported
|
$
|
(636,392
|
)
|
$
|
(1,196,263
|
)
|
|
Add:
Employee compensation expense for share options included in reported
net
income, net of income taxes
|
-
|
-
|
|||||
Less:
Total employee compensation expense for share options determined
under the
fair value method, net of income taxes
|
(90,397
|
)
|
(197,679
|
)
|
|||
Pro
forma net loss
|
$
|
(726,789
|
)
|
$
|
(1,393,942
|
)
|
|
Net
loss per share:
|
|||||||
Basic
and diluted - as reported
|
$
|
(0.09
|
)
|
$
|
(0.17
|
)
|
|
Basic
and diluted - pro forma
|
$
|
(0.10
|
)
|
$
|
(0.20
|
)
|
|
Six Months Ended
|
||||||
|
December 31, 2006
|
December 31, 2005
|
|||||
Assumptions:
|
|
|
|||||
Option
life
|
5.3
years
|
5.3
years
|
|||||
Risk-free
interest rate
|
5.00%
|
4.07%
|
|||||
Stock
volatility
|
108%
|
107%
|
|||||
Dividend
yield
|
-0-
|
-0-
|
|||||
Weighted
average fair value of grants
|
$0.27
|
$0.37
|
|
Options Outstanding
|
|||||||||
|
Number of
Shares
|
Weighted Average
Exercise Price
|
Weighted Average
Contractual Life
|
|||||||
|
|
|
|
|||||||
Outstanding
at June 30, 2006
|
2,277,583
|
$
|
0.66
|
|||||||
Grants
|
265,000
|
0.27
|
||||||||
Exercises
|
—
|
|||||||||
Cancellations
|
(10,000
|
)
|
0.55
|
|||||||
Outstanding
at December 31, 2006
|
2,532,583
|
$
|
0.63
|
|
9.06
years
|
|||||
Range of Exercise Prices
|
Number of
Shares
|
Weighted-Average
Remaining
Contractual
Life (years)
|
Weighted-Average
Exercise Price
|
Exercisable
Number of
Shares
|
Exercisable
Weighted-Average
Exercise Price
|
|||||||||||
$0.25
|
165,000
|
9.76
|
$
|
0.25
|
60,835
|
$
|
0.25
|
|||||||||
$0.30
|
100,000
|
9.65
|
0.30
|
-
|
0.30
|
|||||||||||
$0.46
|
20,000
|
8.92
|
0.46
|
20,000
|
0.46
|
|||||||||||
$0.55
|
1,313,583
|
9.36
|
0.55
|
553,512
|
0.55
|
|||||||||||
$0.83
|
934,000
|
8.46
|
0.83
|
280,200
|
0.83
|
|||||||||||
$0.25-$0.83
|
2,532,583
|
9.06
|
$
|
0.61
|
914,547
|
$
|
0.63
|
4. |
Sale
of Equipment
|
5. |
Subsequent
Events
|
2006
|
2005
|
||||||
Customer
A
|
29
|
18
|
|||||
Customer
B
|
15
|
15
|
|||||
All
Others
|
56
|
67
|
|||||
100
|
%
|
100
|
%
|
2007
|
2008
|
Thereafter
|
Total
|
||||||||||
Operating
leases
|
$
|
15,959
|
$
|
5,641
|
$
|
371
|
$
|
21,971
|
Item
6
|
Exhibits
|
|
Exhibit
10.1 - Form of Incentive Stock Option Certificate*
|
||
Exhibit
10.2 - Form of Nonstatutory Stock Option Certificate*
|
||
Exhibit
10.3 - 2006 Equity Incentive Plan (incorporated herein by
reference
to the Company’s Current Report on Form 8-K
(No.
001-10647) filed on December 4, 2006)*
|
||
Exhibit
31.1 - Certifications of the Company’s Chief Executive Officer
required
by Rule 13a-14(a)/15d-14(a)
|
||
|
||
Exhibit
31.2 - Certifications of the Company’s Chief Financial
|
||
Officer
required by Rule 13a-14(a)/15d-14(a)
|
||
|
Exhibit
32.1 - Certifications of the Company’s Chief Executive
|
|
Officer
and Chief Financial Officer required by Rule 13a-14(b) and 18 U.S.
C.
1350.
|
PRECISION OPTICS CORPORATION, INC. | ||
|
|
|
Date: February 14, 2007 | By: | /s/ Michael T. Pieniazek |
Michael T. Pieniazek |
||
Vice President and Chief Financial Officer |
Exhibit
10.1 - Form of Incentive Stock Option Certificate*
|
|
Exhibit
10.2 - Form of Nonstatutory Stock Option Certificate*
|
|
Exhibit
10.3 - 2006 Equity Incentive Plan (incorporated herein by reference
to the
Company’s
Current
Report on Form 8-K (No. 001-10647) filed on December 4,
2006)*
|
|
Exhibit
31.1 - Certifications of the Company’s Chief Executive
|
|
Officer
required by Rule 13a-14(a)/15d-14(a)
|
|
Exhibit
31.2 - Certifications of the Company’s Chief Financial
|
|
Officer
required by Rule 13a-14(a)/15d-14(a)
|
|
Exhibit
32.1 - Certifications of the Company’s Chief Executive
|
|
Officer
and Chief Financial Officer required by Rule 13a-14(b) and
|
|
18
U.S. C. 1350
|
1.
|
Grant
of Option.
|
[_______]
Shares on and after [___________________, 20__];
|
||
an
additional
|
[_______]
Shares on and after [___________________, 20__]; and
|
|
an
additional
|
[_______]
Shares on and after [___________________,
20__].
|
2.
|
Exercise
of Stock Option.
|
3.
|
Notice
of Disposition.
|
4.
|
Restrictions
on Transfer of Shares.
|
5.
|
Withholding;
Agreement to Provide
Security.
|
6.
|
Nontransferability
of Stock Option.
|
7.
|
Provisions
of the Plan.
|
PRECISION OPTICS CORPORATION, INC. | ||
|
|
|
By: | ||
Name: |
||
Title: |
|
|
Acknowledged:
|
[Name of Participant] |
||
1.
|
Grant
of Option.
|
[_______]
Shares on and after [___________________, 20__];
|
||
an
additional
|
[_______]
Shares on and after [___________________, 20__]; and
|
|
an
additional
|
[_______]
Shares on and after [___________________,
20__].
|
2.
|
Exercise
of Stock Option.
|
3.
|
Restrictions
on Transfer of Shares.
|
4.
|
Withholding;
Agreement to Provide
Security.
|
5.
|
Nontransferability
of Stock Option.
|
6.
|
Provisions
of the Plan.
|
PRECISION OPTICS CORPORATION, INC. | ||
|
|
|
By: | ||
Name: |
||
Title: |
Acknowledged | ||
|
|
|
[Name of Participant] |
||
1.
|
|
I
have reviewed this Quarterly Report on Form 10-QSB of Precision Optics
Corporation, Inc.;
|
|
2.
|
|
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
|
3.
|
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
small
business issuer as of, and for, the periods presented in this report;
|
|
4.
|
|
The
small business issuer’s other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures
(as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small
business issuer and have:
|
|
|
(a)
Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the small business
issuer,
including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this
report
is being prepared;
|
||
|
(b) Evaluated
the effectiveness of the small business issuer’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of
the period covered by this report based on such evaluation; and
|
||
|
(c) Disclosed
in this report any change in the small business issuer’s internal control
over financial reporting that occurred during the small business
issuer’s
most recent fiscal quarter (the small business issuer’s fourth fiscal
quarter in the case of an annual report) that has materially affected,
or
is reasonably likely to materially affect, the small business issuer’s
internal control over financial reporting; and
|
||
5.
|
|
The
small business issuer’s other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the small business issuer’s auditors and the audit committee
of the small business issuer’s board of directors (or persons performing
the equivalent functions):
|
|
|
(a)
All significant deficiencies and material weaknesses in the design
or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer’s ability
to record, process, summarize and report financial information; and
|
||
|
(b) Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the small business issuer’s
internal control over financial reporting.
|
Date:
February 14
,
2007
|
|
|
/s/
Richard E. Forkey
Richard
E. Forkey
Chief
Executive Officer
|
1.
|
|
I
have reviewed this Quarterly Report on Form 10-QSB of Precision Optics
Corporation, Inc.;
|
2.
|
|
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
small
business issuer as of, and for, the periods presented in this report;
|
4.
|
|
The
small business issuer’s other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures
(as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small
business issuer and have:
|
|
(a)
Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the small business
issuer,
including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this
report
is being prepared;
|
|
(b)
Evaluated the effectiveness of the small business issuer’s disclosure
controls and procedures and presented in this report our conclusions
about
the effectiveness of the disclosure controls and procedures, as of
the end
of the period covered by this report based on such evaluation; and
|
|
(c)
Disclosed in this report any change in the small business issuer’s
internal control over financial reporting that occurred during the
small
business issuer’s most recent fiscal quarter (the small business issuer’s
fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the small
business
issuer’s internal control over financial reporting; and
|
5.
|
|
The
small business issuer’s other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the small business issuer’s auditors and the audit committee
of the small business issuer’s board of directors (or persons performing
the equivalent functions):
|
|
(a)
All significant deficiencies and material weaknesses in the design
or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer’s ability
to record, process, summarize and report financial information; and
|
|
(b)
Any fraud, whether or not material, that involves management or other
employees who have a significant role in the small business issuer’s
internal control over financial reporting.
|
Date:
February 14
,
2007
|
|
|
/s/
Michael T. Pieniazek
Michael
T. Pieniazek
Chief
Financial Officer
|
(1)
|
|
The
Quarterly Report on Form 10-QSB of the Company for the quarterly
period
ended December 31, 2006 (the “Report”) fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of
1934 (15 U.S.C. 78 m or 78o(d)); and
|
(2)
|
|
The
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
|
Date:
February
14,
2007
|
|
|
/s/
Richard E. Forkey
Richard
E. Forkey, Chairman of the Board,
Chief
Executive Officer, President and
Treasurer
|
|
/s/
Michael T. Pieniazek
Michael
T. Pieniazek,
Vice
President and Chief Financial Officer
|