Precision Optics Corporation Announces Third Quarter Results

    GARDNER, Mass., May 9 /PRNewswire-FirstCall/ -- Precision Optics
 Corporation, Inc. (Nasdaq:   POCI) today announced operating results on an
 unaudited basis for the third quarter of fiscal year 2005 ended March 31,
 2005.
 
     Third Quarter Operating Results
     Revenues - For the quarter ended March 31, 2005, revenues were $326,272
 compared to $313,698 for the same period last year, an increase of 4.0%.
 Revenues in the quarter decreased 17.9% from the preceding quarter ended
 December 31, 2004.
     Net Loss - For the quarter ended March 31, 2005, net loss was $819,916, or
 $0.12 per share, an improvement of $197,396 in spite of nearly flat revenues,
 from the net loss of $1,017,312, or $0.58 per share, for the same period last
 year.  Net loss included provisions for obsolete and slow moving inventories
 of $38,650 and $124,700 for the quarters ended March 31, 2005 and 2004,
 respectively. The weighted average common shares outstanding for the quarters
 ended March 31, 2005 and 2004 were 7,008,212 and 1,752,053, respectively.
 
     Nine Months Operating Results
     Revenues - For the nine months ended March 31, 2005, revenues were
 $987,604 compared to $1,179,388 for the same period last year, a decrease of
 16.3%.
     Net Loss - For the nine months ended March 31, 2005, net loss was
 $2,574,253, or $0.39 per share, an improvement of $98,298 in spite of lower
 revenues, compared to the net loss of $2,672,551, or $1.53 per share, for the
 nine months ended March 31, 2004.  Net loss included provisions for obsolete
 and slow-moving inventories of $187,650 and $308,800 for the nine months ended
 March 31, 2005 and 2004, respectively. The weighted average common shares
 outstanding for the nine months ended March 31, 2005 and 2004 were 6,662,916
 and 1,752,053, respectively.
 
     Cash Flow and Expenditures
     For the quarter ended March 31, 2005, the Company's cash used in operating
 activities was $779,329, compared to $753,564 for the previous quarter ended
 December 31, 2004.  The increase was due primarily to the lower revenues in
 the quarter ended March 31, 2005.
     Capital equipment expenditures for the nine months ended March 31, 2005
 were $28,813, down 9.4% 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 March 31, 2005, research and development expenses
 were $330,743, down 12.9% from $379,518 a year earlier. The decrease reflects
 a shift in certain resources to customer-sponsored development efforts in the
 quarter (the costs of which are included in cost of goods sold), resulting in
 initial shipments of new products to several customers. The level of future
 quarterly R&D expenses will ultimately depend on the Company's assessment of
 new product opportunities.
 
     Customer Relationships
     During the quarter and nine months ended March 31, 2005, the Company's
 revenues included initial shipments to several new customers of optical lenses
 and instruments that utilize the Company's patent-pending micro-precision
 lens(TM) technology for applications that encompass a variety of innovative
 techniques involving minimally invasive surgery. The Company delivered
 prototypes to a new customer of specialized lens systems for use in an
 advanced night vision application and also provided thin film coatings to two
 other new customers for use in environmental monitoring and advanced laser
 instrumentation applications.  These new initiatives accounted for
 approximately 15% of total Company revenues in each of the quarter and nine
 months ended March 31, 2005.
 
     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 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, as well as
 potential near-term applications of the Company's existing technologies in
 non-medical markets.
 
     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 we believe may result in
 lower cost, easier repairability and enhanced durability, as well as 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 NINE MONTHS ENDED
                            MARCH 31, 2005 AND 2004
                                  (UNAUDITED)
 
                                Three Months               Nine Months
                               Ended March 31,           Ended March 31,
                             2005          2004         2005         2004
 
     REVENUES              $326,272     $313,698     $987,604   $1,179,388
 
     COST OF GOODS SOLD     369,232      467,178    1,298,187    1,514,966
 
       Gross Profit (Loss)  (42,960)    (153,480)    (310,583)    (335,578)
 
     RESEARCH and
      DEVELOPMENT           330,743      379,518      910,218      980,694
 
     SELLING, GENERAL and
      ADMINISTRATIVE
      EXPENSES              459,284      436,666    1,393,450    1,320,324
 
     PROVISION FOR
      RESTRUCTURING               -       52,208            -       52,208
 
       Total Operating
        Expenses            790,027      868,392    2,303,668    2,353,226
 
       Operating Loss      (832,987)  (1,021,872)  (2,614,251)  (2,688,804)
 
 
     INTEREST INCOME         13,071        4,560       39,998       16,302
 
     INTEREST EXPENSE             -            -            -          (49)
 
       Net Loss           $(819,916) $(1,017,312) $(2,574,253) $(2,672,551)
 
     Basic and Diluted
      Loss Per Share         $(0.12)      $(0.58)      $(0.39)      $(1.53)
 
 
     Weighted Average
      Common Shares
      Outstanding         7,008,212    1,752,053    6,662,916    1,752,053
 
 
 
              PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                                  (UNAUDITED)
 
                                     ASSETS
 
                                             March 31, 2005    June 30, 2004
     CURRENT ASSETS
       Cash and Cash Equivalents               $3,037,921        $343,260
       Accounts Receivable, Net                   137,606          80,195
       Inventories                                798,228         917,998
       Prepaid Expenses                           101,975          80,646
       Deferred Financing Costs                         -         171,885
       Total Current Assets                     4,075,730       1,593,984
     PROPERTY AND EQUIPMENT                     4,228,648       4,199,835
       Less: Accumulated Depreciation          (4,048,133)     (3,920,593)
             Net Property and Equipment           180,515         279,242
     OTHER ASSETS                                 222,472         224,088
     TOTAL ASSETS                              $4,478,717      $2,097,314
 
                        LIABILITIES AND STOCKHOLDERS' EQUITY
 
     TOTAL CURRENT LIABILITIES                   $515,015        $593,342
 
     STOCKHOLDERS' EQUITY
       Common Stock, $.01 par value-
          Authorized -- 20,000,000 shares
          Issued and Outstanding - 7,008,212
          shares at March 31, 2005 and
          1,752,053 shares at June 30, 2004        70,082          17,521
     Additional Paid-in Capital                32,751,597      27,770,175
       Accumulated Deficit                    (28,857,977)    (26,283,724)
             Total Stockholders' Equity         3,963,702       1,503,972
     TOTAL LIABILITIES AND STOCKHOLDERS'
      EQUITY                                   $4,478,717      $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 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; 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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