Precision Optics Corporation Announces Fourth Quarter and Year End Results

    GARDNER, Mass., Sept. 28 /PRNewswire-FirstCall/ -- Precision Optics
 Corporation, Inc. (Nasdaq:   POCI) today announced operating results on an
 unaudited basis for the fourth quarter of fiscal year 2005 ended June 30,
 2005.
 
     Fourth Quarter Operating Results
     Revenues -- For the quarter ended June 30, 2005, revenues were $362,215
 compared to $292,620 for the same period last year, an increase of 23.7%.
 Revenues in the quarter increased 9.1% from the preceding quarter ended
 March 31, 2005.
 
     Net Loss -- For the quarter ended June 30, 2005, net loss was $1,114,108,
 or $0.16 per share, an increase of $102,583, from the net loss of $1,011,525,
 or $0.58 per share, for the same period last year.  The weighted average
 common shares outstanding for the quarter ended June 30, 2005 and 2004 were
 7,008,212 and 1,752,053, respectively.
 
     Special Charges -- Net loss for the quarter ended June 30, 2005 included
 provisions for restructuring and obsolete and slow moving inventories totaling
 $303,762.  Net loss for the quarter ended June 30, 2004 included provisions
 for obsolete and slow moving inventories of $191,200.
 
     Fiscal Year 2005 Operating Results
     Revenues -- For the year ended June 30, 2005, revenues were $1,349,819
 compared to $1,472,008 for the same period last year, a decrease of 8.3%.
 
     Net Loss -- For the year ended June 30, 2005, net loss was $3,688,361, or
 $0.55 per share, an increase of $4,285 compared to the net loss of $3,684,076,
 or $2.10 per share, for the year ended June 30, 2004.  The weighted average
 common shares outstanding were for the years ended June 30, 2005 and 2004 were
 6,749,003 and 1,752,053, respectively.
 
     Special Charges -- Net loss for the years ended June 30, 2005 and 2004
 included provisions for restructuring and obsolete and slow moving inventories
 totaling $491,412 and $552,208, respectively.
 
     Cash Flow and Expenditures
     For the quarter ended June 30, 2005, cash and cash equivalents decreased
 by $866,229 compared to a decrease of $859,110 for the previous quarter ended
 March 31, 2005. Cash disbursements during the quarter ended June 30, 2005
 included $84,501 paid for employee severance costs.
     Capital equipment expenditures during the year ended June 30, 2005 were
 $32,140, down 4.4% from the same period in 2004.  Future capital expenditures
 will depend on future sales and the success of ongoing research and
 development efforts.
     For the quarter ended June 30, 2005, research and development expenses
 were $233,194, down 31.1% from $338,651 for the quarter ended June 30, 2004.
 Quarterly research and development expenses depend on the Company's assessment
 of new product opportunities.
 
     Customer Relationships
     The Company is now manufacturing ultra-small lenses, prisms, assemblies
 and advanced endoscopes 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.
 
     Expense Reduction
     The Company has taken additional measures to realign its cost structure
 with current revenue expectations.  In June 2005, the Company reduced its
 annual labor cost by approximately $151,000, a 6.9% reduction.  As a result of
 this action, the Company recorded a non-recurring pretax charge to earnings of
 $89,512 for employee severance benefits in the quarter ended June 30, 2005.
 In addition, the Company is in the process of reviewing other expense areas to
 determine where additional reductions in discretionary spending can be
 achieved.
 
     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 development of a new prototype 2.7 mm endoscope,
 and new instruments utilizing the Company's new micro-precision(TM) lens
 technology (patent pending) for endoscopes under 1 mm.  The Company continues
 to explore potential applications of single-molecule technology and
 nanotechnology.
 
     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 AND TWELVE MONTHS ENDED
                             June 30, 2005 AND 2004
                                  (UNAUDITED)
 
                            -- THREE MONTHS --          --TWELVE MONTHS--
 
                             2005         2004         2005         2004
 
     REVENUES              $362,215     $292,620   $1,349,819   $1,472,008
 
     COST OF GOODS SOLD     699,399      547,936    1,997,586    2,062,902
 
       Gross Profit
        (Loss)             (337,184)    (255,316)    (647,767)    (590,894)
 
     RESEARCH and
      DEVELOPMENT           233,194      338,651    1,143,412    1,319,345
 
     SELLING, GENERAL and
      ADMINISTRATIVE
      EXPENSES              463,882      418,433    1,857,332    1,738,757
 
     PROVISION FOR
      IMPAIRMENT AND
      RESTRUCTURING          89,512            -       89,512       52,208
 
       Total Operating
        Expenses            786,588      757,084    3,090,256    3,110,310
 
       Operating Loss    (1,123,772)  (1,012,400)  (3,738,023)  (3,701,204)
 
     INTEREST INCOME         10,576        1,787       50,574       18,089
 
     INTEREST EXPENSE             -            -            -          (49)
 
     LOSS BEFORE
      PROVISION FOR
      INCOME TAXES      $(1,113,196) $(1,010,613) $(3,687,449) $(3,683,164)
 
     PROVISION FOR
      INCOME TAXES              912          912          912          912
 
     NET LOSS           $(1,114,108) $(1,011,525) $(3,688,361) $(3,684,076)
 
     Basic and Diluted
      Loss Per Share         $(0.16)      $(0.58)      $(0.55)      $(2.10)
 
     Weighted Average
      Common Shares
      Outstanding         7,008,212    1,752,053    6,749,003    1,752,053
 
 
 
              PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                                  (UNAUDITED)
 
                                     ASSETS
 
                                                 June 30, 2005  June 30, 2004
     CURRENT ASSETS
       Cash and Cash Equivalents                   $2,171,693       $343,260
       Accounts Receivable, Net                       177,031         80,195
       Inventories                                    599,619        917,998
       Prepaid Expenses                                62,422         80,646
       Deferred Financing Costs                             -        171,885
              Total Current Assets                  3,010,765      1,593,984
     PROPERTY AND EQUIPMENT                         4,231,975      4,199,835
       Less:  Accumulated Depreciation             (4,092,202)    (3,920,593)
              Net Property and Equipment              139,773        279,242
     OTHER ASSETS                                     218,067        224,088
     TOTAL ASSETS                                  $3,368,605     $2,097,314
 
                      LIABILITIES AND STOCKHOLDERS' EQUITY
     TOTAL CURRENT LIABILITIES                       $519,010       $593,342
 
     STOCKHOLDERS' EQUITY
       Common Stock, $.01 par value-
        Authorized -- 20,000,000 shares
        Issued and Outstanding - 7,008,212
        shares at June 30, 2005 and 1,752,053
        at June 30, 2004                               70,082         17,521
       Additional Paid-in Capital                  32,751,598     27,770,175
       Accumulated Deficit                        (29,972,085)   (26,283,724)
              Total Stockholders' Equity            2,849,595      1,503,972
     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY    $3,368,605     $2,097,314
 
 
     Forward-looking statements contained in this news release, including those
 related to the 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 SmallCap 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, 2004.
 
 

SOURCE Precision Optics Corporation, Inc.

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