SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): September 24, 2002
(September 23, 2002)
PRECISION OPTICS CORPORATION, INC.
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(Exact name of registrant as specified in its charter)
Massachusetts 001-10647 04-2795294
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(State or other jurisdiction of (Commission (I.R.S. Employer
of incorporation or organization) File Number) Identification No.)
22 East Broadway, Gardner, Massachusetts 01440
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (978) 630-1800
Item 5. Other Events.
On September 23, 2002, the Registrant issued the following press
release announcing operating results on an unaudited basis for the fourth
quarter and year ended June 30, 2002:
FOR IMMEDIATE RELEASE MONDAY, SEPTEMBER 23, 2002
PRECISION OPTICS CORPORATION ANNOUNCES
FOURTH QUARTER AND YEAR END RESULTS
GARDNER, Massachusetts - Precision Optics Corporation, Inc. (Nasdaq: POCI) today
announced operating results for the fourth quarter and year ended June 30, 2002.
OPERATING RESULTS
Revenues for the quarter were $600,977, compared to $1,447,011 for the same
period in fiscal year 2001, a decrease of 58.5%. However, revenues increased
67.5% sequentially from revenues of $358,896 in the quarter ended March 31,
2002. Net loss for the quarter, including a non-cash charge for asset impairment
and restructuring of $332,393, was $1,331,262, or $0.13 per share, compared to a
net loss of $1,339,169 or $0.13 per share, for the same period last year. The
weighted average common shares outstanding were 10,503,908 compared to
10,499,741 for the same period last year.
For the year ended June 30, 2002, revenues were $1,774,283 compared to
$4,247,828 for the same period last year, a decrease of 58.2%. Net loss,
including charges for asset impairment, restructuring and inventory write-down
totaling $4,985,021, was $9,973,442, or $0.95 per share, compared to a net loss
of $3,742,002 or $0.36 per share, for the same period last year. The weighted
average common shares outstanding were 10,503,908 compared to 10,473,348 for the
same period last year.
The revenue decrease from the prior year for the fourth quarter was due
primarily to lower sales of medical products (down 26%) and lower sales of
non-medical products (down 89%). For the quarter ended June 30, 2002, medical
sales were lower due primarily to lower shipments of stereo endoscopes and
related products, and non-medical sales were lower due primarily to
discontinuation of market demand for and sales of Dense Wavelength Division
Multiplexing (DWDM) filters used in Telecommunications.
The revenue decrease from the prior year for the year ended June 30, 2002 was
due to lower sales of medical products (down 51%), and lower sales of
non-medical products (down 73%). For the year ended June 30, 2002, medical sales
were lower due primarily to lower sales of stereo endoscopes and related
products. Non-medical sales were lower due primarily to lower sales of DWDM
filters and DWDM test instrumentation. DWDM filter sales represented 6% of total
revenues during the year ended June 30, 2002 compared to 25% for the prior year
(representing a reduction in filter sales of approximately 90%, or $945,000).
LEASE TERMINATION
The Company has entered into an agreement to terminate the lease on its 37,000
sq. ft. Optical Thin Film Technology Center effective September 30, 2002.
Operations in this facility ceased in November 2001 in connection with the
Company's restructuring and cost reduction measures, as previously announced.
The termination agreement requires payment of a cancellation fee of
approximately $161,000, and relieves the Company of an outstanding lease
obligation estimated at approximately $460,000.
PROVISION FOR ASSET IMPAIRMENT AND RESTRUCTURING AND INVENTORY WRITE-DOWN
The provision for asset impairment and restructuring of $332,393 and $4,445,021
in the quarter and year ended June 30, 2002, respectively, consists of (1) a
provision for restructuring costs of $668,250 recorded in the quarter ended
December 31, 2001 as previously announced, representing the present value of
future lease payments related to idle leased space in the Company's Optical Thin
Film Technology Center and employee severance costs; (2) a provision for asset
impairment of $3,444,378 recorded in the quarter ended September 30, 2001, as
previously announced, and $598,578 recorded in the quarter ended June 30, 2002,
which represents a write-down to the lower of carrying value or fair market
value of certain of the Company's property and equipment invested in its optical
thin films coating business, including the write off of certain patent costs of
approximately $58,000; and (3) a credit of $266,185 recorded in the quarter
ended June 30, 2002, to record the effects of termination of the lease
(effective September 30, 2002) on the Optical Thin Film Technology Center.
The Company determined that certain inventories of DWDM filters and filter test
instrumentation would not be sold within the Company's business cycle or the
products' life cycle. As a result, as previously announced, the Company
recorded, in cost of goods sold, a non-cash provision for excess and obsolete
inventory of approximately $540,000 in the quarter ended September 30, 2001.
OUTLOOK
The Company's asset impairment, restructuring and workforce reduction measures
implemented in fiscal year 2002, and other cost saving measures, are expected to
result in a reduction in future annual operating expenses. These cost reduction
measures are expected to result in expense savings of at least $4 million per
year, of which approximately $3.2 million per year represent actual cash
savings, and the remainder is due to a reduction in annual depreciation and
amortization expense.
For the quarter ended June 30, 2002, cash and cash equivalents decreased by
approximately $905,000, a 10% sequential decrease in cash usage from the
previous quarter ended March 31, 2002. A further reduction in the rate of cash
usage is anticipated during the quarter ending September 30, 2002.
Capital equipment expenditures during the year ended June 30, 2002 were
approximately $91,000, down 97% from the $3.6 million for fiscal year 2001.
Future capital expenditures will be dependent upon future sales and success of
on-going research and development efforts. It is anticipated that the level of
capital spending for the foreseeable future will continue to be substantially
lower than fiscal year 2001.
For the quarter ended June 30, 2002, research and development expenses were
approximately $355,000, down 64% from the $999,000 for the quarter ended June
30, 2001. It is anticipated that the quarterly level of R&D expenses for the
foreseeable future will be substantially lower than fiscal year 2001, but is
ultimately dependent upon the Company's assessment of new product opportunities.
The Company is pursuing advances on several fronts in the medical area and
certain non-medical applications of its optical technology. Among these
initiatives are a new 30 degree line of sight version of the successful 5 mm
laparoscope, a new version of the 4 mm arthroscope for use in carpal-tunnel
surgery, and other new products. Following customer evaluations of a new, longer
version of the Company's standard 10 mm laparoscope, a pilot production order
was received for this instrument for use in bariatric surgery. The Company also
previously announced several major successes related to its medical instrument
business:
- The first production shipment of autoclavable endoscopes in March
2002.
- Receipt of new orders for stereo endoscopes and related products.
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- Receipt of new orders for the development and production of a relay
lens system for use in medical digital photo microscopy.
These initiatives have generated orders from new and existing customers totaling
approximately $780,000, of which approximately $68,000 was shipped in fiscal
year 2002, and approximately $445,000 is scheduled to be shipped during the
first half of fiscal year 2003. The timing of the remaining shipments on these
orders of approximately $267,000 is dependent upon customer delivery
instructions. The Company anticipates additional follow-on orders for these
products.
ACHIEVEMENTS OF ISO 9001 AND CE MARK CERTIFICATION, AS PREVIOUSLY ANNOUNCED, ARE
ALSO EXPECTED TO SUPPORT INCREASED FUTURE SALES OPPORTUNITIES, BOTH FOREIGN AND
DOMESTIC, FOR THE COMPANY'S MEDICAL PRODUCTS.
ABOUT PRECISION OPTICS
Precision Optics Corporation, a leading manufacturer of optical thin films and
optical instruments since 1984, designs and manufactures high-quality optical
thin film coatings, medical instruments, and other advanced optical systems.
Major applications for the Company's thin film coatings have included DWDM
filters used to increase the bandwidth capacity of fiber-optic
telecommunications networks. The Company's medical instrumentation line includes
laparoscopes, arthroscopes and endocouplers and a world-class 3-D endoscope for
use in minimally invasive surgical procedures. 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
www.info@poci.com.
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PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FOURTH QUARTER AND TWELVE MONTHS ENDED
JUNE 30, 2002 AND 2001
-- FOURTH QUARTER -- --TWELVE MONTHS --
2002 2001 2002 2001
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(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
REVENUES $ 600,977 $ 1,447,011 $ 1,774,283 $ 4,247,828
COST OF GOODS SOLD 684,251 1,339,494 3,123,196 3,438,679
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GROSS PROFIT (LOSS) (83,274) 107,517 (1,348,913) 809,149
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RESEARCH and DEVELOPMENT 354,582 999,093 2,270,880 3,215,257
SELLING, GENERAL and
ADMINISTRATIVE EXPENSES 578,780 575,511 2,079,994 2,103,517
PROVISION FOR ASSET IMPAIRMENT and
RESTRUCTURING 332,393 -- 4,445,021 --
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TOTAL OPERATING EXPENSES 1,265,755 1,574,604 8,795,895 5,318,774
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OPERATING LOSS (1,349,029) (1,467,087) (10,144,808) (4,509,625)
INTEREST EXPENSE (6,912) (2,220) (19,963) (11,860)
INTEREST INCOME 25,591 131,050 192,241 780,395
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LOSS BEFORE PROVISION FOR
INCOME TAXES (1,330,350) (1,338,257) (9,972,530) (3,741,090)
PROVISION FOR INCOME TAXES 912 912 912 912
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NET LOSS $(1,331,262) $(1,339,169) $ (9,973,442) $(3,742,002)
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BASIC and DILUTED LOSS PER SHARE ($0.13) ($0.13) ($0.95) ($0.36)
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WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 10,503,908 10,499,741 10,503,908 10,473,348
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PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
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JUNE 30, 2002 JUNE 30, 2001
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CURRENT ASSETS
Cash and Cash Equivalents $ 5,825,601 $10,530,298
Accounts Receivable, Net 374,499 1,003,496
Inventories 1,009,009 1,524,119
Refundable Income Taxes 13,849 --
Prepaid Expenses 93,574 109,760
Assets Held for Sale 847,696 --
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Total Current Assets 8,164,228 13,167,673
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PROPERTY AND EQUIPMENT 3,983,698 9,386,047
Less: Accumulated Depreciation (3,492,403) (3,600,380)
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Net Property and Equipment 491,295 5,785,667
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OTHER ASSETS 224,516 266,671
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TOTAL ASSETS $ 8,880,039 $19,220,011
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LIABILITIES AND STOCKHOLDERS' EQUITY
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TOTAL CURRENT LIABILITIES $ 746,524 $ 1,062,056
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CAPITAL LEASE OBLIGATION AND OTHER 17,705 68,703
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STOCKHOLDERS' EQUITY
Common Stock, $.01 par value-
Authorized--20,000,000 shares
Issued and Outstanding--10,503,908 shares
at June 30, 2002 and June 30, 2001 105,039 105,039
Additional Paid-in Capital 27,682,657 27,682,657
Accumulated Deficit (19,671,886) (9,698,444)
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Total Stockholders' Equity 8,115,810 18,089,252
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,880,039 $19,220,011
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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. Among these risk factors are general economic
and business conditions and growth in the optical communications and medical
product markets, market acceptance of the Company's products, the timing and
level of market acceptance of customers' products for which the Company supplies
components, the impact of competitive products and pricing, performance by the
Company's vendors, availability of third-party components, cost and yields
associated with production of the Company's optical communications and other
products, the ability of the Company to successfully and in a timely manner
complete product and process development efforts, 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, 2001.
# # #
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SIGNATURE
Pursuant to 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 hereunto duly authorized.
PRECISION OPTICS CORPORATION, INC.
Date: September 24, 2002 By: /s/ Jack P. Dreimiller
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Name: Jack P. Dreimiller
Title: Senior Vice President, Finance and
Chief Financial Officer