<PAGE>
FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
Commission file number 001-10647
-----------
PRECISION OPTICS CORPORATION, INC.
---------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
<TABLE>
<S> <C>
Massachusetts 04-2795294
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
22 East Broadway, Gardner, Massachusetts 01440-3338
--------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(978) 630-1800
--------------------------------------------------------------
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes (X) No ( )
The number of shares outstanding of issuer's common stock, par value $.01 per
share, at March 31, 2000 was 9,864,708 shares.
Transitional Small Business Disclosure Format (check one):
Yes ( ) No (X)
<PAGE>
PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES
INDEX
-----
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION:
ITEM 1 Consolidated Financial Statements
Consolidated Balance Sheets - ................................. 1
March 31, 2000 and June 30, 1999 (unaudited)
Consolidated Statements of Operations - ....................... 2
Quarter Ended March 31, 2000
and March 31, 1999 (unaudited)
Nine Months Ended March 31, 2000
and March 31, 1999 (unaudited)
Consolidated Statements of Cash Flows - ....................... 3
Nine Months Ended March 31, 2000
and March 31, 1999 (unaudited)
Notes to Consolidated Financial Statements .................... 4-5
ITEM 2
Management's Discussion and Analysis of ....................... 6-10
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
ITEM 1 Not Applicable
ITEM 2 Changes in Securities and Use of Proceeds
ITEMS 3-5 Not Applicable
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibits - Exhibit 27
(b) Reports on Form 8-K
</TABLE>
<PAGE>
PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
------
MARCH 31, 2000 JUNE 30, 1999
CURRENT ASSETS
<S> <C> <C>
Cash and Cash Equivalents ................................................ $16,704,254 $480,732
Accounts Receivable, Net ................................................. 368,463 210,079
Inventories .............................................................. 925,882 979,284
Prepaid Expenses ......................................................... 149,879 47,996
------------ ------------
Total Current Assets ............................................ 18,148,478 1,718,091
------------ ------------
PROPERTY AND EQUIPMENT ............................................................ 4,447,017 3,750,473
Less: Accumulated Depreciation .......................................... (2,775,374) (2,496,949)
------------ ------------
Net Property and Equipment ...................................... 1,671,643 1,253,524
------------ ------------
OTHER ASSETS ...................................................................... 274,405 282,880
------------ ------------
TOTAL ASSETS ...................................................................... $20,094,526 $3,254,495
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts Payable ......................................................... $354,737 $194,619
Accrued Payroll .......................................................... 78,739 75,644
Accrued Professional Services ............................................ 150,481 50,283
Accrued Profit Sharing and Bonuses ....................................... 36,250 25,000
Accrued Income Taxes ..................................................... -- 912
Accrued Vacation ......................................................... 97,457 78,056
Accrued Warranty Expense ................................................. 50,000 50,000
Current Portion of Capital Lease Obligation .............................. 122,880 105,542
Other Accrued Liabilities ................................................ 77,887 35,392
------------ ------------
Total Current Liabilities ....................................... 968,431 615,448
------------ ------------
CAPITAL LEASE OBLIGATION .......................................................... 100,248 166,312
------------ ------------
STOCKHOLDERS' EQUITY
Common Stock, $.01 par value-
Authorized -- 20,000,000 shares
Issued and Outstanding - 9,864,708 and
6,687,595 shares at March 31, 2000
June 30, 1999, respectively ..................................... 98,647 66,876
Additional Paid-in Capital ............................................... 24,546,299 6,206,411
Accumulated Deficit ...................................................... (5,619,099) (3,800,552)
------------ ------------
Total Stockholders' Equity ...................................... 19,025,847 2,472,735
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........................................ $20,094,526 $3,254,495
============ ============
</TABLE>
PAGE 1 OF 14
<PAGE>
PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THIRD QUARTER AND NINE MONTHS ENDED
MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
-- THIRD QUARTER -- -- NINE MONTHS --
2000 1999 2000 1999
---- ---- ---- ----
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES ..................................... $784,503 $790,846 $2,088,791 $2,327,831
COST OF GOODS SOLD ........................... 595,472 472,207 1,372,895 1,493,793
----------- ----------- ----------- -----------
GROSS PROFIT ........................ 189,031 318,639 715,896 834,038
RESEARCH and DEVELOPMENT EXPENSES ............ 442,835 297,134 1,299,480 792,336
SELLING, GENERAL and
ADMINISTRATIVE EXPENSES ...................... 457,823 406,921 1,280,899 1,196,021
----------- ----------- ----------- -----------
TOTAL ............................... 900,658 704,055 2,580,379 1,988,357
----------- ----------- ----------- -----------
OPERATING LOSS ...................... (711,627) (385,416) (1,864,483) (1,154,319)
INTEREST EXPENSE ............................. (6,537) (6,709) (19,414) (20,893)
INTEREST INCOME .............................. 50,502 6,361 65,350 35,940
----------- ----------- ----------- -----------
LOSS BEFORE PROVISION
FOR INCOME TAXES .................... (667,662) (385,764) (1,818,547) (1,139,272)
PROVISION FOR INCOME TAXES ................... -- -- -- 8,655
----------- ----------- ----------- -----------
NET LOSS ............................ $(667,662) $(385,764) $(1,818,547) $(1,147,927)
=========== =========== =========== ===========
BASIC AND DILUTED LOSS PER SHARE ............. ($0.08) ($0.06) ($0.23) ($0.17)
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING ................................ 8,471,946 6,677,595 7,803,594 6,666,121
=========== =========== =========== ===========
</TABLE>
PAGE 2 OF 14
<PAGE>
PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
MARCH 31, 2000 AND MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Loss ............................................................... $(1,818,547) $(1,147,927)
Adjustments to Reconcile Net Loss to Net Cash
(Used In) Provided by Operating Activities -
Depreciation and Amortization ................................... 342,254 283,894
Deferred Income Taxes ........................................... -- 8,655
Non-Cash Royalty Expense ........................................ 2,813 2,813
Changes in Assets and Liabilities-
Accounts Receivable ......................................... (158,384) (83,799)
Inventories ................................................. 53,402 68,786
Prepaid Expenses ............................................ (104,696) (47,696)
Refundable Income Taxes ..................................... -- 136,346
Accounts Payable ............................................ 160,118 125,027
Customer Advances ........................................... -- (116,841)
Accrued Expenses ............................................ 175,527 (93,491)
------------ -----------
Net Cash Used In Operating Activities ....................... (1,347,513) (1,001,805)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of Property and Equipment ................................... (668,632) (327,008)
Increase in Other Assets .............................................. (27,429) (27,198)
------------ -----------
Net Cash Used in Investing Activities .............................. (696,061) (354,206)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Capital Lease Obligation .................................. (104,563) (89,873)
Net Proceeds (Costs) From Private Placements of Common Stock ........... 15,048,960 (54,418)
Proceeds from Exercise of Stock Options and Warrants ................... 3,322,699 76,670
------------ -----------
Net Cash Provided By (Used In) By Financing Activities ............. 18,267,096 (67,621)
------------ -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .......................... 16,223,522 (1,423,632)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .............................. 480,732 2,060,146
------------ -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ................................... $16,704,254 $636,514
============ ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid for-
Interest ............................................................. $ 19,414 $ 20,893
============ ===========
Income Taxes ......................................................... $ 912 $ --
============ ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Capital Lease Obligation ............................................... $ 55,837 $ 72,798
============ ===========
Common Stock Issued for Payment of Royalties ......................... $ -- $ 7,500
============ ===========
</TABLE>
PAGE 3 OF 14
<PAGE>
PRECISION OPTICS CORPORATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
(a) BASIS OF PRESENTATION
The accompanying consolidated financial statements include the
accounts of Precision Optics Corporation, Inc. and its
wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.
These financial statements have been 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 third quarter and first nine months of the
Company's fiscal year 2000. These financial statements do not
include all disclosures associated with annual financial
statements and, accordingly, should be read in conjunction with
footnotes contained in the Company's financial statements for the
period ended June 30, 1999 together with the auditors' report
filed under cover of the Company's 1999 Annual Report on Form
10-KSB.
(b) (LOSS) EARNINGS 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 nine months ended March 31, 2000 and
1999, the effect of stock options and warrants was antidilutive;
therefore, they were not included in the computation of diluted
loss per share. The number of shares that were excluded from the
computation as their effect would be antidilutive were 1,864,648
for the nine months ended March 31, 2000 and 1,621,500 for the
nine months ended March 31, 1999.
(c) FINANCIAL INSTRUMENTS
SFAS No. 107, DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL
INSTRUMENTS, requires disclosures about the fair value of
financial instruments. Financial instruments consist principally
of cash equivalents, accounts receivable, accounts payable, and
capital lease obligations. The estimated fair value of these
financial instruments approximates their carrying value.
PAGE 4 OF 14
<PAGE>
(d) LONG-LIVED ASSETS
In accordance with the provisions of SFAS No. 121, ACCOUNTING FOR
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE
DISPOSED OF, the Company evaluates the realizability of its
long-lived assets as circumstances change based on projected
future cash flows. As of March 31, 2000 and 1999, the Company has
determined that no material adjustment to the carrying value of
its long-lived assets was required.
(e) WARRANTY COSTS
The Company does not incur future performance obligations in the
normal course of business other than providing a standard one-year
warranty on materials and workmanship to its customers. The
Company provides for estimated warranty costs at the time product
revenue is recognized.
2. INVENTORIES
-----------
Inventories are stated at the lower of cost (first-in, first-out) or
market and consist of the following:
<TABLE>
<CAPTION>
March 31, 2000 June 30, 1999
-------------- -------------
<S> <C> <C>
Raw Materials ........................ $579,539 $589,762
Work-In-Process ...................... 202,597 248,085
Finished Goods and Components ........ 143,746 141,437
-------- --------
Total Inventories ........... $925,882 $979,284
======== ========
</TABLE>
3. STOCKHOLDERS' EQUITY
In March 2000, the Company completed a private placement of 789,463
shares of common stock with gross proceeds of $15 million. In
conjunction with this offering, the purchasers were issued warrants to
acquire 465,798 shares of common stock at a weighted average exercise
price of $26.73 per share. The warrants are immediately exercisable and
expire on March 17, 2005.
During the nine months ended March 31, 2000, stock options and warrants
for a total of 1,387,650 shares of common stock were exercised,
resulting in proceeds to the Company of $3,322,699.
PAGE 5 OF 14
<PAGE>
4. RECENT ACCOUNTING PRONOUNCEMENTS
--------------------------------
The Securities and Exchange Commission released Staff Accounting
Bulletin (SAB) No. 101, REVENUE RECOGNITION IN FINANCIAL STATEMENTS,
on December 3, 1999. This SAB provides additional guidance on the
accounting for revenue recognition, including both broad conceptual
discussions as well as certain industry-specific guidance. The guidance
is effective for the fiscal periods after June 30, 2000. The Company
does not expect the adoption of SAB 101 to have a material impact on
the Company's results of operations.
In June 1998, the FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. SFAS No. 133 establishes accounting
and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively
referred to as derivatives) and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities
in the statement of financial position and measure those instruments at
fair value. SFAS No. 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. This new standard is not
anticipated to have significant impact on the Company's consolidated
financial statements based on its current structure and operations.
PAGE 6 OF 14
<PAGE>
PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Important Factors Regarding Forward-Looking Statements
- ------------------------------------------------------
When used in this discussion, the words "believes", "anticipates",
"intends to", and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks and uncertainties which
could cause actual results to differ materially from those projected. 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, particularly in the optical thin
films area; the risks associated with reliance on a few key customers; 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; the level of market acceptance of competitors'
products; 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. Readers are cautioned not
to place undue reliance on these forward-looking statements, which speak only as
of the date hereof. The Company undertakes no obligation to publicly release the
result of any revision to these forward-looking statements which may be made to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
Liquidity and Capital Resources
- -------------------------------
For the nine months ended March 31, 2000, the Company's cash and cash
equivalents increased by approximately $16,223,000 to $16,704,000. The increase
in cash and cash equivalents was due to net proceeds received of approximately
$15,049,000 for two private placements of common stock, and exercise of stock
options and warrants of approximately $3,323,000, partially offset by cash used
by operating activities of approximately $1,348,000, purchases of property and
equipment of approximately $669,000, repayment of capital lease obligations of
approximately $105,000, and an increase in other assets (primarily patents) of
approximately $27,000.
In March 2000, the Company completed a private placement of 789,463
shares of common stock with gross proceeds of $15 million. In conjunction with
this offering, the purchasers were issued warrants to acquire 465,798 shares of
common stock at a weighted average exercise price of $26.73 per share. The
warrants are immediately exercisable and expire on March 17, 2005.
During the nine months ended March 31, 2000, stock options and warrants
for a total of 1,387,650 shares of common stock were exercised, resulting in
proceeds to the Company of $3,322,699.
PAGE 7 OF 14
<PAGE>
The Company intends to continue devoting significant resources to
internally-funded research and development spending on both new products and the
improvement of existing products. The Company also intends to devote resources
to the marketing and product support of its medical and optical thin films
product lines, and the development of new methods of distribution. These
investments may temporarily result in negative cash flow, but the Company
anticipates that the results of these efforts will translate into increased
revenues and profits.
Furthermore, depending upon the market acceptance of the Company's
products, the Company believes that it may need to acquire new facilities, add
additional manufacturing or research and development equipment, or acquire a
business that has complementary products or manufactures or sells to the Company
components, materials, supplies, or services used in the manufacture, marketing,
distribution, or servicing of the Company's new products, as well as the
Company's existing products.
The Company's cash and cash equivalents are considered sufficient to
support working capital and investment needs for at least the next twelve
months.
Results of Operations
- ---------------------
Total revenues for the quarter and nine months ended March 31, 2000
were approximately $785,000 and $2,089,000, respectively, a decrease of
approximately $6,000 or 0.8% and $239,000 or 10.3%, respectively, from the same
periods in the prior year.
The revenue decrease from the prior year for the third quarter was due
to lower sales of medical products (down 35%), partially offset by higher sales
of non-medical products (up 30%). For the quarter ending March 31, 2000, medical
sales were lower due primarily to lower shipments of stereo endoscopes and
cameras, partially offset by higher sales of non-stereo endoscopes and
endocouplers. Non-medical sales were higher for the quarter due primarily to
higher sales of Dense Wavelength Division Multiplexing (DWDM) filters.
The revenue decrease from the prior year for the nine months ended
March 31, 2000 was due to lower sales of medical products (down 9%), and lower
sales of non-medical products (down 22%). For the nine months ended March 31,
2000, medical sales were lower due primarily to lower sales of non-stereo
endoscopes and couplers and lower customer-funded medical research and
development projects, partially offset by higher shipments of stereo endoscopes
and cameras. Non-medical sales were lower year to date due primarily to the
phasing out of night vision products and lower sales of industrial products,
partially offset by higher sales of DWDM filters.
Included in total revenues are sales for customer-funded research and
development projects totaling approximately $0 and $13,000 for the quarter
ending March 31, 2000 and 1999, respectively, and approximately $8,000 and
$217,000 for the nine months ended March 31, 2000 and 1999, respectively. Levels
of customer-funded research and development can fluctuate greatly in any given
period depending upon the level of customer demand during such period.
PAGE 8 OF 14
<PAGE>
Revenues from the Company's two largest customers were approximately
48% and 11% of total revenues for the nine months ended March 31, 2000, and
revenues from the Company's two largest customers were approximately 43% and 10%
of total revenues for the nine months ended March 31, 1999. No other customers
accounted for more than 10% of the Company's revenues during those periods.
Gross profit expressed as a percentage of revenues decreased from 40.3%
to 24.1% for the third quarter, and from 35.8% to 34.3% for the nine months
ended March 31, 2000, compared to the corresponding periods in the prior year.
The decrease in the gross profit percentage is due primarily to production
start-up inefficiencies related to DWDM filters and higher fixed manufacturing
costs such as depreciation, employee recruiting, equipment rental and indirect
labor.
Research and development expenses increased by approximately
$146,000, or 49.0%, for the quarter ending March 31, 2000, and by
approximately $508,000, or 64.0%, for the nine months ending March 31, 2000
compared to the corresponding periods of the prior year. During both years,
internal research and development expenses consisted primarily of development
efforts related to DWDM filters used in telecommunications systems. The
increase was due to a higher level of technical staff resources being devoted
to the DWDM filter project in the current year.
Selling, general and administrative expenses increased by approximately
$51,000, or 12.5%, for the quarter ending March 31, 2000 and by approximately
$85,000, or 9.1%, for the nine months ending March 31, 2000 compared to the
corresponding periods of the prior year. The increase for the current quarter is
due primarily to higher payroll related and employee recruiting expenses. For
the nine months ended March 31, 2000, the increase is due primarily to higher
professional services and payroll related expenses.
Interest expense relates primarily to capital lease obligations.
Interest income increased by approximately $44,000 for the quarter and
by $29,000 for the nine months ending March 31, 2000 compared to the
corresponding periods of the prior year due to the higher base of cash and cash
equivalents related to net proceeds received from private placements of common
stock in August 1999 and March 2000 and from exercise of stock options and
warrants.
No income tax provision was recorded in the first or second quarter of
fiscal year 2000 or 1999 because of the losses generated in those periods.
PAGE 9 OF 14
<PAGE>
Trends and Uncertainties That May Affect Future Results
- -------------------------------------------------------
The Company continues to aggressively pursue sales, marketing, and
technology development efforts for optical thin films in the rapidly growing
telecommunications industry. The success of these products depends upon a number
of factors, including the Company's timely completion of development efforts,
ability to meet a set of rigorous customer specifications, and ability to
reliably manufacture such products in sufficient quantity at acceptable yields
to meet anticipated demand.
The Company has continued its investments in research and development
and capital equipment, particularly in the DWDM and other telecommunication
areas. Efforts were focused on improving manufacturing processes for 200GHz
filters and development of 100GHz filters. Prototypes of 100GHz filters were
displayed at the Optical Fiber Communication (OFC) Conference in Baltimore last
month, and prototypes have been provided to several potential customers for
evaluation.
As previously announced, shipments of 200GHz DWDM filters to a major
customer resumed in late December 1999. Shipments of DWDM filters during the
quarter were limited by production inefficiencies and represented 12.5% of total
revenues for the third quarter. However, DWDM filter production began improving
significantly in early April. DWDM filter shipments for the month through April
28 were made at a weekly rate already 2 1/2 times the average weekly rate of
shipments made in the quarter ending March 31, 2000. The Company believes that
shipments will continue to increase over the next several months as the
manufacturing process is further refined. The Company continues to work closely
with a number of current and potential customers to evaluate and refine
prototype filters.
As also previously announced, the Company has received an order for
$2.0 million from a new customer for 200GHz channel separation DWDM optical
filters used in telecommunications systems. This brings the Company's current
order backlog for DWDM filters to approximately $3.6 million. Approximately
$130,000 of this new order is scheduled for delivery in the quarter ending June
30, 2000. The balance of the order is scheduled for delivery between July 2000
and June 2001.
During fiscal year 1999, the Company commenced deliveries of stereo
endoscopes and cameras to a customer who has developed a computer-enhanced
surgery system. Revenues from this customer were approximately 48% of total
revenues for the nine months ended March 31, 2000. In February 2000, the Company
announced that it had received orders for endoscopes totaling approximately $1.1
million, including a follow-on order from this customer for stereo endoscopes,
which is scheduled for delivery between June and December 2000. This customer
has seen significant acceptance in the international marketplace for its
computer-enhanced surgical device for use in minimally invasive cardiovascular
and general surgery procedures. The stereo endoscopes and cameras manufactured
by Precision Optics Corporation are key components of this system, enabling
surgeons to visualize the operative site in high resolution 3-D imagery.
PAGE 10 OF 14
<PAGE>
The Company anticipates additional follow-on orders from this customer, but the
magnitude of such future business depends upon a number of factors, such as the
customer's own success in marketing its computer-enhanced surgery system and the
customer's continued acceptance of the Company's pricing, performance and
product reliability.
The Company also previously announced that the $1.1 million of new
endoscope orders included an order for its new 5mm laparoscopes from a customer
who is a market leader in the distribution of rigid, monocular laparoscopes.
These instruments are used primarily for diagnostics and minimally invasive
surgical procedures in the abdomen. Of the $1.1 million in new endoscope orders,
approximately $235,000 is scheduled for shipment in the quarter ending June 30,
2000. The balance of the orders is scheduled for delivery between July 2000 and
April 2001.
PAGE 11 OF 14
<PAGE>
PART II. OTHER INFORMATION
<TABLE>
<CAPTION>
ITEM 1 Not Applicable.
<S> <C>
ITEM 2 Changes in Securities and Use of Proceeds.
On March 17, 2000, the Company issued pursuant to Rule
506 of Regulation D under the Securities Act of 1933 an
aggregate of 789,463 shares of its common stock and warrants
(including warrants issued in respect of fees) exercisable for
an additional aggregate of 465,798 shares of its common stock
to qualified institutional and private investors (the
"Investors") in exchange for aggregate cash consideration of
$15 million.
The terms of the warrants provide that the warrants may
be exercised at any time prior to 5:00 pm on March 17, 2005 at
a weighted average exercise price per share of $26.73, subject
to adjustment pursuant to customary anti-dilution provisions
triggered by stock splits, stock dividends, or similar
transactions. The warrants provide that they will terminate if
not exercised within 20 days of the Investor's receipt of a
notice from the Company which may be delivered at the
Company's option in the event that the last sale price of the
Company's common stock on the NASDAQ SmallCap Market equals or
exceeds $55.20 on each of any 10 consecutive trading days.
In connection with the issuance of common stock and
warrants to the Investors, the Company has filed with the
Securities and Exchange Commission a registration statement
covering the resale of shares of common stock issued to, or
issuable upon the exercise of warrants issued to, the
Investors. Pursuant to a Registration Rights Agreement dated
March 17, 2000, the Company would be obligated to pay a cash
penalty to the Investors in the event such registration
statement is not declared effective on or prior to July 15,
2000.
ITEMS 3-5 Not Applicable.
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibits - Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K - The Company filed a Current
Report on Form 8-K on March 20, 2000 in
connection with a press release announcing the
private placement of shares and warrants
described in Item 2 above.
</TABLE>
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
PRECISION OPTICS CORPORATION, INC.
DATE: May 9, 2000 BY: /s/ JACK P. DREIMILLER
------------------------
Jack P. Dreimiller
Senior Vice President, Finance,
Chief Financial Officer and Clerk
PAGE 12 OF 14
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
<S> <C>
27 Financial Data Schedule
</TABLE>
PAGE 13 OF 14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER>1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 16,704,254
<SECURITIES> 0
<RECEIVABLES> 368,463
<ALLOWANCES> 0
<INVENTORY> 925,882
<CURRENT-ASSETS> 18,148,478
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0
0
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</TABLE>
