Precision Optics Corporation Announces First Quarter Results - Highest Quarterly Revenue in 8 Quarters

    GARDNER, Mass., Nov. 14 /PRNewswire-FirstCall/ -- Precision Optics
 Corporation, Inc. (Nasdaq:   POCI) today announced operating results on an
 unaudited basis for the first quarter of fiscal year 2006 ended September 30,
 2005.
 
     OPERATIONAL HIGHLIGHTS:
     During the past 2 years the Company has devoted significant resources
 towards the development of new products and substantial redesigns of a number
 of existing products.  A major effort has been underway to develop
 proprietary, patent pending micro-precision(TM) technologies for use in
 fabricating cost effective micro-optics -- lens, prisms, and optical
 assemblies -- with superior optical performance and dimensions extending down
 to sub millimeter sizes.  The Company has also been engaged in a major
 redesign of its line of endoscopes centered around patent pending lenslock(TM)
 technology which achieves significantly lower manufacturing and repair costs
 of endoscopes while retaining state-of-the-art image quality. Efforts in these
 areas as well as other new product releases have begun to show initial results
 in the first quarter of FY2006:
 
     -- 41% of Q1 FY06 revenues were from newly released or significantly
        redesigned products.
     -- Q1 FY06 had the highest level of revenues of micro-optics to date with
        over 1,000 units now delivered.
     -- Shipments on the first significant production order for micro-optics
        was initiated in Q4 FY05 with follow on orders filled in Q1 FY06 and
        into Q2 FY06.
     -- First prototypes of 2.7 mm endoscopes built with lenslock(TM)
        technology in Q1 FY06.
     -- First production order of 2.7 mm lenslock(TM) endoscopes was received
        in Q1 FY06, with deliveries to start in Q2 FY06.
     -- First prototypes of 4 mm lenslock(TM) arthroscope completed early in Q2
        FY06.
 
     First Quarter Operating Results
     Revenues - For the quarter ended September 30, 2005, revenues were
 $419,582 compared to $263,810 for the same period last year, an increase of
 59%.  Revenues in the quarter increased 16% from the preceding quarter ended
 June 30, 2005.
     Net Loss - For the quarter ended September 30, 2005, net loss was $559,871
 or $0.08 per share, a decrease of $373,587 from the net loss of $933,458 or
 $0.16 per share, for the same period last year.   A gain of $165,700,
 resulting from the sale of equipment previously used in the Company's
 discontinued telecommunication business, is included in results for the
 quarter ended September 30, 2005. The weighted average common shares
 outstanding for the quarters ended June 30, 2005 and 2004 were 7,008,212 and
 5,979,832, respectively.
 
     Cash Flow and Expenditures - For the quarter ended September 30, 2005,
 cash and cash equivalents decreased by $539,375 compared to a decrease of
 $866,229 for the previous quarter ended June 30, 2005. Cash receipts during
 the quarter ended September 30, 2005 included $162,000 received from the sale
 of equipment previously used in the Company's discontinued telecommunication
 business.
     For the quarter ended September 30, 2005, research and development
 expenses were $208,111 down 42% from $356,406 a year earlier. The level of
 future quarterly R&D expenses will ultimately depend on the Company's
 assessment of new product opportunities and available cash resources.
     Expense Reduction - Selling, general and administrative expenses decreased
 by approximately $73,000, or 14.6% for the quarter ended September 30, 2005
 compared to the same period last year.  Savings were achieved through reduced
 professional fees, changing the CFO role to part-time, and through reduced
 premiums from changing the Company's general insurance provider.
 
     Customer Relationships
     The Company has continued development of its new line of endoscopes based
 on unique, patent pending lenslock(TM) technology.  This has resulted in the
 recent completion of a number of prototype instruments.  The Company has
 received first production orders for these newly redesigned scopes and is now
 initiating discussions with leading companies in the endoscopy market.
     The Company is now manufacturing ultra-small lenses, prisms, and
 assemblies with sizes ranging from 0.2 mm to 1 mm, for a number of customers.
 The Company is also in discussions with several customers regarding
 manufacturing of prototypes of similar products.  These optical components and
 instruments utilize a variety of innovative techniques including the Company's
 patent-pending micro-precision(TM) lens technology.
     The Company has also completed a partnership effort for the proprietary
 development of a new class of night vision lenses including a new patent-
 pending eyepiece lens. With prototypes completed, the product incorporating
 the Company's new night vision lenses is currently being evaluated for need
 and use, including field testing.  The partnership agreement ensures that
 Precision Optics Corporation will either be contracted to manufacture the new
 lenses or will receive royalties on lenses manufactured by any other company.
 
     Outlook
     The Company expects its recent pattern of quarter-to-quarter revenue
 fluctuations to continue, due to the uncertain timing of orders from customers
 and their size in relation to total revenues. The Company continues to move
 forward with new products and technical innovations, in particular, the
 development of a new generation (patent pending) of its world-class product
 line of 3-D endoscopes, the extension of lenslock(TM) technology (patent
 pending) to its entire line of endoscopes, and new instruments utilizing the
 Company's micro-precision(TM) lens technology (patent pending) for optical
 components, assemblies and endoscopes under 1 mm.  The Company continues to
 explore potential applications of single-molecule technology and
 nanotechnology.
     Currently, the stockholders' equity is below the minimum required for
 continued listing under the Nasdaq Marketplace Rules.  As a result, the
 Company will likely receive a letter from the Nasdaq Stock Market, stating
 that its securities may be subject to delisting from the Nasdaq Capital
 Market.  The Company will work with Nasdaq to regain compliance, but if we are
 unable to remedy this situation in accordance with the relevant procedures and
 within the timeframe set forth by Nasdaq, the securities of the company may be
 delisted from the Nasdaq Capital Market. In the event our shares are delisted
 from Nasdaq, management believes that the Company's shares will continue to be
 tradable on the Over the Counter Bulletin Board.
 
     About Precision Optics
     Precision Optics Corporation, a leading developer and manufacturer of
 advanced optical instruments since 1982, designs and produces high-quality
 optical thin film coatings, medical instruments, and other advanced optical
 systems.  The Company's medical instrumentation line includes laparoscopes,
 arthroscopes and endocouplers and a world-class product line of 3-D endoscopes
 for use in minimally invasive surgical procedures.
     The Company is currently developing specialty instruments incorporating
 its patent-pending lenslock(TM) technology which ensures lower cost, easier
 repairability and enhanced durability.  The Company is aggressively pursuing
 ultra-small instruments (some with lenses less than one millimeter in
 diameter) utilizing patent pending micro-precision(TM) lens technology.  The
 Company is also exploring new initiatives in single molecule technology and
 nanotechnology for biomedical and other applications.
     Precision Optics Corporation is certified to the ISO 9001 Quality
 Standard, and complies with the FDA Good Manufacturing Practices and the
 European Union Medical Device Directive for CE Marking of its medical
 products.  The Company's Internet Website is http://www.poci.com .
 
 
              PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                           FOR THE THREE MONTHS ENDED
                   SEPTEMBER 30, 2005 AND SEPTEMBER 30, 2004
                                  (UNAUDITED)
 
                                                          Three Months
                                                      Ended September 30,
                                                      2005            2004
 
     REVENUES                                        $419,582       $263,810
 
     COST OF GOODS SOLD                               521,501        356,015
 
       Gross Profit (Loss)                           (101,919)       (92,205)
 
     RESEARCH and DEVELOPMENT EXPENSES                208,111        356,406
       SELLING, GENERAL and
       ADMINISTRATIVE EXPENSES                        424,688        497,439
 
     GAIN ON SALE OF ASSETS                          (165,700)             -
 
       Total Operating Expenses                       467,099        853,845
 
       Operating Loss                                (569,018)      (946,050)
 
     INTEREST INCOME                                    9,147         12,592
 
     Net Loss                                       $(559,871)    $ (933,458)
 
     Basic and Diluted Loss Per Share                 $ (0.08)        $(0.16)
 
     Weighted Average Common Shares Outstanding     7,008,212      5,979,832
 
 
              PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                                  (UNAUDITED)
 
 
                                 ASSETS
     CURRENT ASSETS                        September 30, 2005  June 30, 2005
 
     Cash and Cash Equivalents                     $1,632,318     $2,171,693
     Accounts Receivable, net                         210,602        177,031
     Inventories, net                                 597,847        599,619
     Prepaid Expenses                                  95,898         62,422
       Total Current Assets                         2,536,665      3,010,765
     PROPERTY AND EQUIPMENT
     Machinery and Equipment                        3,490,022      3,539,205
     Leasehold Improvements                           553,595        553,596
     Furniture and Fixtures                            96,831         96,831
     Vehicles                                          42,343         42,343
     Less:  Accumulated Depreciation               (4,079,887)    (4,092,202)
       Net Property and Equipment                     102,904        139,773
 
     OTHER ASSETS
     Cash surrender value of life insurance policies   16,440         16,440
     Patents, net                                     206,059        201,627
       Total Other Assets                             222,499        218,067
     TOTAL ASSETS                                  $2,862,068     $3,368,605
 
                   LIABILITIES AND STOCKHOLDERS' EQUITY
 
     TOTAL CURRENT LIABILITIES                       $572,344       $519,010
 
     STOCKHOLDERS' EQUITY
       Common Stock, $.01 par value-
         Authorized -- 20,000,000 shares
         Issued and Outstanding - 7,008,212 shares
         at September 30, 2005 and at June 30, 2005    70,082         70,082
       Additional Paid-in Capital                  32,751,597     32,751,597
       Accumulated Deficit                        (30,531,955)   (29,972,084)
         Total Stockholders' Equity                 2,289,724      2,849,595
 
         TOTAL LIABILITIES AND
           STOCKHOLDERS' EQUITY                    $2,862,068     $3,368,605
 
     Forward-looking statements contained in this news release, including those
 related to the future success of Company's products under development and
 revenue estimates, are made under "safe harbor" provisions of the Private
 Securities Litigation Reform Act of 1995 and involve a number of risks and
 uncertainties that could materially affect future results. These risks and
 uncertainties, many of which are not within the Company's control, include,
 but are not limited to, the uncertainty and timing of the successful
 development of the Company's new products; the risks associated with reliance
 on a few key customers; the Company's ability to regain and maintain
 compliance with requirements for continued listing on the NASDAQ Capital
 Market; the Company's ability to attract and retain personnel with the
 necessary scientific and technical skills, the timing and completion of
 significant orders; the timing and amount of the Company's research and
 development expenditures; the timing and level of market acceptance of
 customers' products for which the Company supplies components; performance of
 the Company's vendors; the ability of the Company to control costs associated
 with performance under fixed price contracts; and the continued availability
 to the Company of essential supplies, materials and services; and the other
 risk factors and cautionary statements listed from time to time in the
 Company's periodic reports filed with the Securities and Exchange Commission,
 including but not limited to, the Company's Annual Report on Form 10-KSB for
 the year ended June 30, 2005.
 
 

SOURCE Precision Optics Corporation, Inc.

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