PRECISION OPTICS CORPORATION, INC. 10-K

 false 2025 FY 0000867840 0

 2024-12-31

 2025-09-20

 POCI:EngineeringDesignServicesMember

 POCI:EngineeringDesignServicesMember

 POCI:SystemsManufacturingMember

 POCI:SystemsManufacturingMember

 POCI:MicroOpticsLabMember

 POCI:MicroOpticsLabMember

 POCI:RossOpticalIndustriesMember

 POCI:RossOpticalIndustriesMember

 us-gaap: AccountsReceivableMember
 us-gaap: CustomerConcentrationRiskMember
 POCI:TwoCustomersMember

 us-gaap: AccountsReceivableMember
 us-gaap: CustomerConcentrationRiskMember
 POCI:TwoCustomersMember

 us-gaap: MachineryAndEquipmentMember

 us-gaap: LeaseholdImprovementsMember

 us-gaap: FurnitureAndFixturesMember

 POCI:MainStreetBankMember

 2021-10-03
 2021-10-04

 POCI:MainStreetBankMember

 POCI:MainStreetBankMember

 POCI:MainStreetBank1Member

 POCI:MainStreetBank1Member

 POCI:ManufacturingEquipmentMember

 2021-03-31

 POCI:ManufacturingEquipmentMember

 2020-01-31

 POCI:ManufacturingEquipmentMember

 POCI:ElPasoTexasMember

 POCI:ElPasoTexasMember

 POCI:ElPasoTexasMember

 POCI:WindhamMaineMember

 POCI:WindhamMaineMember

 POCI:WindhamMaineMember

 POCI:GardnerMassachusettsOfficeMember

 POCI:GardnerMassachusettsOfficeMember

 us-gaap: CapitalLeaseObligationsMember

 POCI:OperatingLeaseMember

 us-gaap: CostOfSalesMember

 us-gaap: CostOfSalesMember

 us-gaap: SellingGeneralAndAdministrativeExpensesMember

 us-gaap: SellingGeneralAndAdministrativeExpensesMember

 POCI:StockOptionsMember

 POCI:StockOptionsMember

 POCI:Plan2022Member

 2022-04-08

 POCI:Plan2022Member

 POCI:Plan2021Member

 2021-05-10

 POCI:Plan2021Member

 POCI:Plan2011Member

 POCI:Plan2006Member

 POCI:August2024SaleMember

 2024-08-13
 2024-08-14

 POCI:August2024SaleMember

 2024-08-14

 POCI:February2025SaleMember

 2025-02-18
 2025-02-19

 POCI:February2025SaleMember

 2025-02-19

 srt: MinimumMember

 srt: MaximumMember

 srt: MinimumMember

 srt: MaximumMember

 POCI:FederalMember

 POCI:StateMember

 2025-04-01

 UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

 Washington, D.C. 20549

 FORM 10-K

 (Mark One)

 ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the fiscal year ended June 30, 2025

 or

 TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the transition period from __________ to
__________

 Commission File Number 001-10647

 (Exact name of registrant as specified in its charter)

 Massachusetts

 04-2795294

 (State or other jurisdiction

 (I.R.S. Employer

 of incorporation or organization)

 Identification No.)

 22 East Broadway

 Gardner, Massachusetts 01440

 ( Address of principal executive offices) (Zip
Code)

 ( 978) 630-1800

 (Registrant's telephone number, including
area code)

 Securities registered pursuant to Section 12(b)
of the Act:

 Title of each class

 Trading symbol(s)

 Name of each exchange on which registered

 Common stock, $0.01 par value

 POCI

 Nasdaq Stock Market LLC

 Securities registered pursuant to Section 12(g)
of the Act: None

 Indicate by check mark if
the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

 Indicate by check mark if
the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes No

the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 No

the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes No

the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting
company," and "emerging growth company" in Rule 12b-2 of the Exchange Act:

 Large accelerated filer

 Accelerated filer

 Non-accelerated filer

 Smaller reporting company

 Emerging growth company

 If an emerging growth company,
indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act.

the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report.

 If securities are registered
pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements.

any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).

the registrant is a shell company (as defined in Rule 12b-2 of the Act. Yes No

 The aggregate market value
of the voting and non-voting common stock held by non-affiliates of the registrant on December 31, 2024 was approximately $ 23,911,000
based on a total of 4,960,885 shares of the registrant's common stock held by non-affiliates on such date, at the closing price
of $4.82 per share, as reported on Nasdaq on December 31, 2024.

 The number of shares of outstanding
common stock of the registrant as of September 20, 2025 was 7,714,701.

 Documents incorporated by reference

 Portions of this registrant's definitive
proxy statement for its 2025 Annual Meeting of Stockholders to be filed with the SEC no later than 120 days after the end of the registrant's
fiscal year are incorporated herein by reference in Part III of this Annual Report on Form 10-K.

 FORM 10-K

 PAGE

 Item 1.

 Business

 Item 1A.

 Risk Factors

 Item 1B.

 Unresolved Staff Comments

 Item 1C.

 Cybersecurity

 Item 2.

 Properties

 Item 3.

 Legal Proceedings

 Item 4.

 Mine Safety Disclosures

 Item 5.

 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 Item 6.

 [Reserved]

 Item 7.

 Management's Discussion and Analysis of Financial Condition and Results of Operations

 Item 7A.

 Quantitative and Qualitative Disclosures About Market Risk

 Item 8.

 Financial Statements and Supplementary Data

 Item 9.

 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 Item 9A.

 Controls and Procedures

 Item 9B.

 Other Information

 Item 9C.

 Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

 Item 10.

 Directors, Executive Officers and Corporate Governance

 Item 11.

 Executive Compensation

 Item 12.

 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 Item 13.

 Certain Relationships and Related Transactions, and Director Independence

 Item 14.

 Principal Accounting Fees and Services

 Item 15.

 Exhibits, Financial Statement Schedules

 Item 16.

 Form 10-K Summary

 Signatures

 i

 This Annual Report contains forward-looking
statements as defined under the federal securities laws. All statements other than statements of historical facts included in this Annual
Report on Form 10-K regarding our financial performance, business strategy and plans and objectives of management for future operations
and any other future events are forward-looking statements and based on our beliefs and assumptions. When used in this report, the words
"anticipate," "suggest," "estimate," "plan," "project," "continue,"
"ongoing," "potential," "expect," "predict," "believe," "intend,"
"may," "will," "should," "could," "would" and other similar words are one
way to identify such forward-looking statements. You should not place undue reliance on these forward-looking statements. Actual results
could vary materially from these forward-looking statements. Such statements reflect our current view with respect to future events and
are subject to certain risks, uncertainties, and assumptions including, without limitation, those risks and uncertainties contained in
the Risk Factors section of this Annual Report on Form 10-K and our other filings made with the SEC. Although we believe that our
expectations are reasonable, we can give no assurance that such expectations will prove to be correct. Based upon changing conditions,
any one or more of these events described herein as anticipated, believed, estimated, expected or intended may not occur. All prior and
subsequent written and oral forward-looking statements attributable to our Company or persons acting on our behalf are expressly qualified
in their entirety by this cautionary statement. We do not intend to update any of the forward-looking statements after the date of this
Annual Report to conform these statements to actual results or to changes in our expectations, except as required by law.

 ITEM 1. BUSINESS.

 Overview

 We have been a developer and manufacturer of
advanced optical instruments since 1982, and we operate primarily in two key market segments: medical devices and advanced defense/aerospace products. Within our proprietary optical and imaging technology, our unique custom designs, expert manufacturing
capabilities, and advanced engineering and development capabilities have generated traditional endoscopes and endocouplers, digital
imaging endoscopes using CMOS sensor technology, some designed and manufactured for single-use, as well as other, more advanced,
custom imaging and illumination products for our customers' use in minimally invasive surgical procedures. We design and
manufacture ultra-high precision endoscopes and very small Microprecision lenses, assemblies and complete medical devices to meet
the surgical community's continuing demand for smaller, disposable, and more enhanced imaging systems for minimally invasive
surgery. We also apply our unique technologies to applications in the Defense / Aerospace markets including applications
supporting satellite network communications.

 To support these two critical market categories,
our business operations are conducted in four areas: systems manufacturing, engineering and product development, Ross Optical components
and assemblies, and our micro-optics laboratory. Our systems manufacturing operations assemble and manufacture components and systems
for both medical device and advanced aerospace customers who choose to outsource these services based on our ability to handle high complexity
components, specific optical technologies, micro-optical assemblies and other advanced manufacturing challenges. Our engineering and product
development team assesses specific customer product needs, designs devices to solve those needs, and creates manufacturing processes that
enable higher volume production of these devices and assemblies that can then be executed by our manufacturing operations group.

 Effective June 1, 2019, we acquired the operating
assets of Ross Optical Industries, Inc. of El Paso, Texas. This acquisition expanded our optics components and assemblies' business.
As Ross Optical Industries we operate as a supplier of custom optical components and assemblies for military and defense, medical and
various other industrial applications. All products sold by us under the Ross Optical name include a custom or catalog optic, which is
sourced through our extensive domestic and worldwide network of optical fabrication suppliers. Most systems make use of optical lenses,
prisms, mirrors and windows and range from individual optical components to complex mechano-optical assemblies. Products often include
thin film optical coatings applied using our in-house coating department.

 Effective October 1, 2021, we acquired the operating
assets of Lighthouse Imaging, LLC of Windham, Maine,which expanded our electrical engineering capabilities in the development of end-to-end
medical visualization devices. The acquisition represented a vertical integration of our established product development capabilities
with a team with extensive experience developing visualization systems that we believe provides our customers with single-source value-added
development services and product offerings. The operations of Lighthouse Imaging have been integrated with other operations of the company,
which continue under the POC brand, so that the company now operates with single systems manufacturing and engineering departments, each
of which includes historical POC and Lighthouse Imaging resources.

 During the fiscal year ended June 30, 2025,
approximately 43% of our business was from systems manufacturing, 26% was from engineering services primarily relating to the design of
medical device optical assemblies, 20% was from Ross Optical, and 11% from our micro-optics laboratory. During the fiscal year ended June
30, 2024, approximately 45% of our business was from engineering services primarily relating to the design of medical device optical assemblies,
19% from systems manufacturing, 22% from Ross Optical, and 14% from our micro-optics laboratory. We generally expect revenue to increase
over time as the engineering design phase of new product programs is completed and products transition to the commercial phase, leveraging
our unique manufacturing capabilities. Much of the technology we have developed for making smaller medical devices is also used in defense
and aerospace systems where smaller size and weight is crucial.

 History

 We incorporated in Massachusetts in December 1982,
have been publicly held since November 1990, and have no subsidiaries.

 Principal Products and Services

 We have been manufacturing medical products such
as endoscopes and endocouplers since our formation in 1982. In 1985 we introduced a proprietary product line of endocouplers. We also
design and manufacture custom optical medical devices to satisfy our customers' specific requirements, incorporating various optical
technologies, servicing a variety of minimally invasive surgical and diagnostic procedures, using both reusable and single-use medical
devices. In addition to medical devices, we also manufacture and sell components and assemblies specially designed for defense/aerospace
and industrial uses.

 Microprecision Lenses and Micro Medical
Cameras. While the size of endoscopes has gradually decreased over time, we believe the widespread use of very small endoscopes, with
diameters of a couple millimeters or smaller, has been limited due in part to the limitations of traditional lens fabrication methods
to combine smaller sizes with acceptable image quality at reasonable manufacturing costs. We believe our Microprecision optics
technology provides a solution to this challenge. Combined with recent advances by our supply chain partners in complementary metal-oxide-semiconductor,
or CMOS, image sensor fabrication techniques, our Microprecision lens technology and proprietary design and manufacturing techniques
enable the manufacture of micro medical cameras and digital endoscopes at previously unobtainable prices, with sizes on the order of a
couple millimeters or less and image quality superior to most previously available endoscopes, characteristics that make them perfectly
suited for medical imaging applications, particularly single-use or disposable endoscopes. We believe the technology developed to support
the design, fabrication and manufacturing of Microprecision lenses and associated assemblies can also be used to satisfy the needs
of defense and aerospace systems that require small size and weight, particularly those required for satellite network communications.

 The Unity Platform. In January 2025, we
launched our Unity Imaging Platform ("Unity"), comprising a standard baseline CMOS endoscopic system with customization
options based on existing or newly designed modular sub-components. Unity represents the culmination of many years of research, development,
and collaboration with key industry players. By leveraging insights from many previous projects, Unity incorporates proven design architectures
to meet the unique needs of today's medical imaging devices. Customers benefit from a modular, adaptable solution that simplifies
every stage of the development process, from prototyping to production using the latest technologies. The consolidation of common design
elements offers flexible, modular architecture, appropriate for both re-usable and single-use endoscopic systems. Unity provides customers
with a functional video pipeline early in the development process. This accelerates their system integration efforts and allows them
to gather feedback from stakeholders much sooner, ultimately shortening the time to market and enhancing overall project efficiency.
Unity is the embodiment of our on-going improvements to the evolution and acceptance of our Microprecision and digital imaging
technology platforms.

 Competition and Markets

 We sell our products in highly competitive markets,
and we compete for business with both foreign and domestic manufacturers. Many of our current competitors are larger than us and have
substantially greater resources than we do. In addition, there is an ongoing risk that other domestic or foreign companies who do not
currently service or manufacture products for our target markets, some with greater experience in the optics industry and greater financial
resources than we have, may seek to produce products or services that compete directly with ours.

 While our resources are more limited than those
of some of our competitors, we believe that we compete successfully in this market through product quality, price, delivery and innovation
tailored to our customers' specifications. Our success will depend, in part, on our ability to maintain a technological advantage
over our competitors and to effectively incorporate that technology into our custom designs. To this end, we intend to continue to aggressively
support and augment our internal engineering, research and development resources and to pursue patent protection for existing and new
technology. We believe that our unique technical capabilities in the areas of Microprecision optics, micro medical cameras, digital
imaging, and illumination represent competitive advantages for us in the minimally invasive surgical device market.

 The competitive advantage of our Ross Optical
division is its ability to quickly provide design-for-manufacturability feedback and to provide difficult-to-find optics, and, increasingly,
to provide a broader range of services based on its ability to source optics worldwide, augmented by its ability to provide thin-film
coatings and assembly.

 Market Opportunities

 We design custom camera module assemblies with
the combined objectives of low cost, small size, range of optical specifications and high image quality required by our customer's
precise medical device specifications. By enabling the production of millimeter sized cameras with low manufacturing costs and high image
quality, we believe our Microprecision and digital imaging technologies open the possibility to replace existing re-sterilizable
endoscopes with single-use alternatives. The small size of our Microprecision lenses and micro medical cameras combined with our
proprietary illumination techniques can provide visualization for existing procedures that are currently performed blind or with sub-optimal
imaging, and we believe can facilitate the development of new surgical procedures that are currently impractical without millimeter-sized
visualization instrumentation.

 Sales and Marketing

 Current sales and marketing activities are intended
to broaden awareness of the benefits of our new technology platforms and our successful application of these new technologies to medical
device projects requiring surgery-grade visualization, as well as defense, aerospace and other industrial applications, from sub-millimeter
sized devices and Ultra HD Precision systems, including single-use products and assemblies. We market directly to established medical
device companies primarily in the United States that we believe could benefit from our advanced endoscopy visualization systems. Through
direct marketing, referrals, attendance at trade shows and an online presence with our corporate websites as well as professional association
websites, we continually seek to expand our on-going pipeline of projects to established medical device companies as well as to emerging
medical device companies, and to a growing number of major defense / aerospace companies. Due to our expertise and growing OEM trends
of outsourcing complex projects, we expect our revenues and customer base to continue to expand as development projects transition to
production orders and new customer projects enter the development phase.

 International Business

 We acquire various optical components from overseas
as necessary to meet the needs of custom device designs. We believe that the availability of specialized components and cost savings from
various overseas production resources is essential to our ability to deliver complex and unique device designs and to compete on a price
basis in the medical products area particularly and to our profitability generally. We have an expanded network of domestic and overseas
suppliers of various types and sizes of optical components and assemblies that enhance our ability to meet the material demands of our
customers' unique optical and medical device designs.

 Research and Development

 We believe that our future success depends, to
a large degree, on our ability to continue to conceive and develop new optical products and technologies to enhance the performance characteristics
and methods of manufacture of existing and new products. Although development work on behalf of customers is performed under revenue generating
contracts and customer purchase orders, research and development expenses are incurred on our own proprietary products and technology,
such as Microprecision optics and the Unity platform. Accordingly, we treat engineering expenses not consumed in customer contracted
development and our investment of funds and resources in internal product and intellectual property development as research and development
expense in the accompanying statement of operations.

 Raw Materials and Principal Suppliers

 A key raw material component for our products
is precision-grade optical glass, which we obtain from a few suppliers, principally SCHOTT North America, Inc. and Ohara Corporation. We
obtain CMOS sensors used in the development and manufacture of endoscope products for our customers from various suppliers such as OmniVision
Technologies, Inc. We believe that while the number of sources of supply is limited for the precision-grade optical glass and CMOS sensors
with the specifications used in the products we produce, the manufacturing capacities of those suppliers are adequate to meet our demand
in the next twelve months.

 Patents and Trademarks

 We rely, in part, upon patents, trade secrets
and proprietary knowledge as well as personnel policies and employee confidentiality agreements concerning inventions and other creative
efforts to develop and maintain our competitive position. We plan to file for patents, copyrights and trademarks in the United States
and in other appropriate countries to protect our intellectual property rights to the greatest extent practicable. We currently hold rights
to various United States patents, and have patent applications pending, including applications for our new generation of micro medical
cameras. Our current patent portfolio includes patents, rights to patents and patent applications that cover various aspects of our technology
in the following areas:

 —

 Medical devices;

 —

 3-D endoscopes;

 —

 Microprecision lenses and micro medical cameras;

 —

 Defense/aerospace products.

 The patents contained in our current patent portfolio
have various expiration dates through March 2043. We are not aware of any infringements of these patents. While we believe that our pending
applications relate to patentable devices or concepts, these patents may not ultimately be issued, and we may not be able to successfully
defend these patents or effectively limit the development of competitive products and services. We intend to continue to innovate and
extend our technological capabilities in the areas of Microprecision optics, digital imaging, micro medical cameras, related illumination
techniques, and associated design and manufacturing technology and to aggressively pursue patent protection for such developments.

 Employees

 As of June 30, 2025, we had 90 employees, all
of which were full-time employees. There were 51 employees in manufacturing, 18 in engineering/research and development, 8 in sales and
marketing, and 13 in finance and administration. We are not a party to any collective bargaining agreements. We believe our relations
with our employees are very good.

 C ustomers

 During the fiscal year ending June 30, 2025, we
sold products and services to 278 customers with one customer accounting for approximately 22% of total revenues and another customer
accounting for 20% of our total revenues. The loss of these customers would have a material impact on our business. For the fiscal year
ended June 30, 2024, we sold products and services to 325 customers with one product development customer accounting for approximately
19% of total revenues and another customer accounting for approximately 14% of our total revenues for that year.

 Two customer accounts receivable balances accounted
for 32.1% and 17.9% of total receivables on June 30, 2025. Two customer accounts receivable balances accounted for 15.4% and 12.1% of
total receivables on June 30, 2024.

 Environmental Matters

 Our operations are subject to a variety of federal,
state and local laws and regulations relating to the discharge of materials into the environment or otherwise relative to the protection
of the environment. We believe that we currently comply with all applicable environmental laws and regulations. We use limited amounts
of hazardous materials in our operations, and as such, compliance does not entail significant expense to us. We do not believe the costs
associated with our compliance with environmental laws are material.

 Government Regulations

 Domestic Regulation. We currently develop,
manufacture and sell several medical products, the marketing of which is subject to governmental regulation in the United States. Medical
devices are regulated in the United States by the Food and Drug Administration, or FDA, and, in some cases, by certain state agencies.
The FDA regulates the research, design, testing, manufacture, safety, effectiveness, labeling, promotion and distribution of medical devices
in the United States. Generally, medical devices require clearance or approval prior to commercial distribution. Additionally, certain
material changes to, and changes in, intended uses of, medical devices are also subject to FDA review and clearance or approval. Non-compliance
with applicable requirements can result in failure of the FDA to grant pre-market clearance or approval, withdrawal or suspension of approval,
suspension of production, or the imposition of various other penalties.

 We previously notified the FDA of our intent to
market our endoscopes, image couplers, beamsplitters, adapters and video ophthalmoscopes, and the FDA has determined that we may market
such devices, subject to the general control provisions of the Food, Drug and Cosmetic Act. We obtained this FDA permission without the
need to undergo a lengthy and expensive approval process due to the FDA's determination that such devices met the regulatory standard
of being substantially equivalent to existing FDA-approved devices.

 In the future, we may market additional medical
devices that may require the FDA's permission to market such products. We may also develop additional products or seek to sell some
of our current or future medical products in a manner that requires us or our customers to obtain the permission of the FDA to market
such products, as well as the regulatory approval or license of other federal, state and local agencies or similar agencies in other countries.
The FDA has authority to conduct detailed inspections of manufacturing plants in order to assure that "good manufacturing practices"
are being followed in the manufacture of medical devices including medical devices or components of medical devices manufactured for other
medical device companies, to require periodic reporting of product defects to the FDA, and to prohibit the sale of devices which do not
comply with law.

 We design and manufacture components for the defense
industry, and import, export and manufacture optical products for the defense industry, some of which is controlled by U.S. regulations.
Generally, these regulations require strict control over technical data in documented form and as embodied in products, both within our
company and as part of exported shipments. In particular, we maintain a technology control plan, we are ISO certified, and ITAR (International
Traffic in Arms Regulations) registered with the U.S. State Department, and we maintain a number of technology assistance agreements with
overseas suppliers that have been approved by the U.S. State Department. Non-compliance with applicable requirements can result in U.S.
actions that may result in withdrawal or suspension of approvals, suspension of company imports, exports or production, or the imposition
of fines or various other penalties.

 Foreign Requirements. All our medical products
are manufactured in conformity with ISO 13485:2016, using a comprehensive Quality Management System (QMS) that helps meet both international
and EU regulatory standards. ISO 13485 is an internationally recognized standard that emphasizes risk management throughout the product
lifecycle, from design to post-market surveillance, and aligns with the European Union Medical Device Regulation ("EU MDR")
focus on ensuring the safety and performance of medical devices. ISO 13485 provides a solid foundation for meeting the QMS requirements
of the EU MDR. It ensures that manufacturers maintain detailed documentation and traceability of their devices, which is required for
compliance with the EU MDR's requirements. Conformity with ISO 13485 conveys our commitment to maintaining a robust QMS specifically
for medical device manufacturing, and consistent quality and regulatory compliance, which is essential to helping our customers achieve
compliance with the EU MDR and other international regulatory standards. Our failure to comply with ISO 13485 or other applicable regulatory
requirements would jeopardize our ability to sell our products to certain customers who place their product on the EU and other international
markets.

 Available Information

 Our website is www.poci.com. We make available
on our website, free of charge, copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K and amendments to those reports, as soon as reasonably practicable after we electronically file or furnish such materials
to the U.S. Securities and Exchange Commission (SEC). Our website and the information contained therein or connected thereto are not intended
to be incorporated into this report.

 The SEC maintains an Internet site that contains
reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at

 ITEM 1A. RISK FACTORS.

 Risks Related to Our Business

 We have a history of losses; we may continue
to incur losses and not achieve profitability in the near term; and we may need to raise additional funds.

 We may continue incurring losses for the foreseeable
future and not achieve sustained profitability in the near term. We must generate sufficient cash flow or raise additional capital to
pursue our product development initiatives and penetrate markets for the sale of our products. We believe that for the time being we have
adequate access to capital resources, however, if in the future we are unable to secure adequate additional capital when needed, we may
be required to curtail our research and development initiatives and take additional measures to reduce costs to conserve our cash in amounts
sufficient to sustain operations and meet our obligations.

 We rely on a small number of customers who
may not consistently purchase our products in the future and if we lose any one of these customers, our revenues may decline.

 A small number of customers may continue to represent
a significant portion of our total revenues in any given period. These customers may not consistently purchase our products at a particular
rate over any subsequent period. A loss of any of these customers could adversely affect our revenues.

 We could suffer unrecoverable losses on
our customers' accounts receivable, which would adversely affect our financial results.

 While we believe we have a varied customer base
and have experienced strong collections in the past, we may experience changes in our customer base, including reductions in purchasing
commitments, which could also have a material adverse effect on our revenues and liquidity. Additionally, our customers could become unable
or unwilling to pay amounts owed to us. Over the past three years, we have not had significant accounts receivable write-offs or significant
additions to our accounts receivable reserve and. we have not purchased insurance on our accounts receivable balances. Nonetheless, large
uncollectible accounts receivable balances could arise in the future and could have a material adverse effect on our financial condition.

 We rely heavily upon the talents of our
Chief Executive Officer and other senior officers, the loss of whom could damage our business.

 Our performance depends on a small number of key
scientific, technical, managerial and manufacturing personnel. In particular, we believe our success is highly dependent upon the services
and reputation of our Chief Executive Officer, Dr. Joseph N. Forkey. The loss of Dr. Forkey's services could damage our business.
Dr. Forkey provides highly valuable contributions to our capabilities in optical instrument development, in management of new technology
and in potentially significant longer-term Company initiatives.

 We must continue to be able to attract and
retain employees with the scientific and technical skills that our business requires and if we are unable to attract and retain such individuals,
our business could be severely damaged.

 Our ability to attract and retain employees with
a high degree of scientific and technical talent is crucial to the success of our business. There is intense competition for the services
of such persons, and we cannot guarantee that we will be able to attract and retain individuals possessing the necessary qualifications.
If we cannot attract and retain such individuals, we may not be able to perform the necessary design services for our customers or produce
our products causing damage to our business or an inability to meet customer demand or increase revenues.

 We are subject to a high degree of regulatory
oversight and, if we do not continue to receive the necessary regulatory approvals, our revenues may decline.

 The FDA has granted us the clearance to manufacture
and market the medical products we currently produce or sell in the United States. However, prior FDA approval may be required before
we can market additional medical products that we may develop in the future. We may also seek to sell current or future medical products
in a manner that requires us to obtain FDA permission to market such products. We may also require the regulatory approval or license
of other federal, state or local agencies or comparable agencies in other countries.

 We may lose the FDA's permission to manufacture
and market our current products or may not obtain the necessary regulatory permission, approvals or licenses for the manufacturing or
marketing of any of our future products, as may our customers. Also, we cannot predict the impact on our business of FDA regulations or
determinations arising from future legislation or administrative action. If we or key customers lose the FDA's permission to manufacture
and market our current products or fail to obtain regulatory permission to manufacture and market future products, our revenues may decline,
and our business may be harmed.

 We face risks inherent in product development
and production under fixed-price purchase orders and these purchase orders may not be profitable over time.

 A portion of our business has been devoted to
research, development and production under fixed-price purchase orders. For our purposes, a fixed-price purchase order is any purchase
order under which we will provide products or services for a fixed-price over an extended period of time, usually six months or longer.
We expect that revenues from fixed-price purchase orders will continue to represent a significant portion of our total revenues in future
fiscal years.

 Because they involve performance over time, we
cannot predict with certainty the expenses involved in meeting our obligations under fixed-price purchase orders. Therefore, we can never
be sure at the time we enter into any single fixed-price purchase order that such purchase order will continue to be profitable for us
throughout the fixed-price period.

 We perform engineering and manufacturing
services for our customers who could decide to use another vendor for these services in the future.

 A significant portion of our revenues are derived
from engineering and manufacturing services that we perform to design and fabricate medical device products or sub-assemblies of medical
device products for our customers who in turn sell the products to the end users. Our customers typically own the proprietary rights to
and control commercial distribution of the final products. Therefore, in many of these cases we do not own the proprietary rights to the
medical device products that we manufacture or that our sub-assemblies are made a part of. Our customers could decide to use other suppliers
for these services based on cost, quality, delivery time, production capacities, competitive and regulatory considerations or other factors.
Thus, revenues from our customers and the products and services we provide them are subject to significant fluctuation on a product-to-product
basis from period to period.

 We resell products we purchase from third
parties and our customers could decide to use another supplier to acquire those products.

 Our division Ross Optical primarily acquires specialized
optical components and assemblies from third parties pursuant to specifications provided from its customers, inspects and sometimes further
processes those products before reselling them to its customers. Because Ross Optical does not manufacture the optical components and
assemblies and does not own the intellectual property rights to the products, its customers could choose to obtain those products and
services from other sources or could apply pressure to Ross Optical to lower its prices resulting in reduced future gross margins and
operating results.

 We depend on the availability of certain
key supplies and services that are available from only a few sources and if we experience difficulty with a supplier, we may have difficulty
finding alternative sources of these supplies or services.

 We require certain key supplies to develop and
manufacture our products, particularly our precision grade optical glass, which is available from only a few sources, most which are located
outside of the United States. Additionally, we rely on outside vendors to grind and polish certain of our lenses and other optical components,
such as prisms and windows. We also rely on a limited number of suppliers for specialized CMOS sensors and the electronic wiring of those
sensors. Based upon our ordering experience to date, we believe the materials and services required for the production of our products
are currently available in sufficient quantities to meet our needs. Our requirements are small relative to the total supply, and we are
not currently encountering problems with availability. However, this does not mean that we will continue to have timely access to adequate
supplies of essential materials and services in the future or that supplies of these materials and services will be available on satisfactory
terms when the need arises. Our business could be severely damaged if we become unable to procure these essential materials and services
in adequate quantities and at acceptable prices.

 From time to time, subcontractors may produce
some of our products for us, and our business is subject to the risk that these subcontractors fail to make timely delivery. Our products
and services are also used as components of the products and services of other manufacturers. We are therefore subject to the risk that
manufacturers who integrate our products or services into their own products or services are unable to acquire essential supplies and
services from third parties in a timely fashion. If this occurs, we may not be able to deliver our products on a timely basis and our
revenues may decline.

 Our customers may claim that the products
we sold them were defective and if our insurance is not sufficient to cover such a claim, we would be liable for the excess.

 Like any manufacturer, we are and always have
been exposed to liability claims resulting from the use of products we assist in developing, manufacture and supply to our customers.
Additionally, the products we supply could be used in conjunction with other products in medical device applications, such as certain
endoscope products claimed to be associated with surgical suite contamination resulting from their intended re-use and re-sterilization.
We maintain product liability insurance to cover us in the event of liability claims, and no such claims have been asserted or threatened
against us to date. However, our insurance may not be sufficient to cover all possible future product claims, costs and any resulting
liabilities.

 We would be liable if our business operations
harmed the environment and a failure to maintain compliance with environmental laws could severely damage our business.

 Our operations are subject to a variety of federal,
state and local laws and regulations relating to the protection of the environment. From time to time, we use hazardous materials in our
operations. Although we believe that we have suitable practices and policies in place to address applicable environmental laws and regulations,
our business could be severely damaged by any failure to maintain such compliance.

 Many of our competitors are large, well-financed
companies who have research and marketing capabilities that are superior to ours.

 The industries in which we operate are highly
competitive. Many of our existing and potential competitors have greater financial resources and manufacturing capabilities, more established
and larger marketing and sales organizations and larger technical staffs than we have. Other companies, some with greater experience in
the optics, semiconductor or medical products industries, are seeking to produce products and services that compete with our products
and services.

 Ross Optical is subject to tariffs and
regulatory scrutiny, and it faces the risk of changes to this regulatory environment and business in the future.

 Ross Optical is ISO and ITAR registered and currently
imports, exports, and manufactures optical products for the defense industry, some of which are controlled by regulations promulgated
by the U.S. Departments of State and Commerce. If we fail to comply with the terms of these regulations and registrations, it may lose
its ITAR registration or suffer other consequences, such as the withdrawal or suspension of approvals, suspension of imports, exports
or production, or the imposition of fines or other penalties.

 There is also the risk that new laws or regulations
or changes in enforcement practices applicable to our business could be imposed, which may adversely affect our ability to compete effectively
with other institutions that are not affected in the same way, or which may impact its supplier and customers. In addition, regulations
imposed on market participants such as foreign tariff increases could negatively affect the overall profitability of Ross Optical'
s international business.

 Our business and
financial performance may be adversely affected by cyber-attacks on information technology infrastructure and products, as well as changes
in cybersecurity and if our information technology security systems were infiltrated and confidential and/or proprietary information were
taken, we could be subject to fines, lawsuits and loss of customers.

 We rely on information
technology (IT) systems, including third-party "cloud based" service providers and rely on our electronic information systems
to perform routine transactions to run our business. We transact business over the Internet with customers and suppliers and have implemented
security measures to protect against unauthorized access to this information. We have also implemented security policies that limit access
via the Internet to the Company's systems through geofencing. We routinely receive security patches from software providers for
the software we use. Our primary concerns are inappropriate access to personnel information, information covered under the International
Traffic in Arms Regulation, product designs and manufacturing information, financial information and our intellectual property, trade
secrets and know-how. Our business may be impacted by disruptions to our own or third-party information technology infrastructure, which
could result from, among other causes, cyberattacks on or failures of such infrastructure or compromises to its physical security. Cybersecurity
threats are continuously evolving and include, but are not limited to, both attacks on our IT infrastructure and attacks on the IT infrastructure
of our customers, suppliers, subcontractors and other third parties with whom we do business routinely, attempting to gain unauthorized
access to our confidential, proprietary, or otherwise protected information, classified information, or information relating to our employees,
customers and other third parties, or to disrupt our systems or the systems of third parties. We are also exposed to the risk of insider
threat attacks. Any such attacks could disrupt our systems or those of third parties, impact business operations, result in unauthorized
release of confidential, proprietary, or otherwise protected information, and corrupt our data or that of third parties. The threats we
face are continuous and evolving and vary in degree of severity and sophistication. In addition, as a result of the rapid pace of technological
change, we and our customers, suppliers, subcontractors and other third parties with whom we conduct business continue to rely on legacy
systems and software, which can be more vulnerable to cyber threats and attacks. The sophistication, availability and use of artificial
intelligence by threat actors present an increased level of risk. Due to the evolving threat landscape, we expect to experience more frequent
and increasingly advanced cyber-attacks. In addition, changes in domestic and international cybersecurity-related laws and regulations
have expanded cybersecurity-related compliance requirements, and cybersecurity regulatory enforcement activity has grown. We expect the
regulatory environment to continue to evolve, and staying apace with these regulatory changes could increase our operational and compliance
expenditures and those of our suppliers, and lead to new or additional information technology and product development expenses. We also
face reputational, litigation and financial risks in relation to potential required disclosures and increased risk of enforcement. We
continue to make investments and adopt measures designed to enhance our protection, detection, response, and recovery capabilities, and
to mitigate potential risks to our technology, products, services and operations from potential cybersecurity threats, as well as to comply
with evolving regulations. However, given the unpredictability, nature and scope of cyber-attacks, it is possible that we are unable to
defend against all cyber-attacks, that potential vulnerabilities could go undetected and persist in the environment for an extended period,
or that we may otherwise be unable to mitigate customer losses and other potential consequences of these attacks. In some cases, we must
rely on the safeguards put in place by our customers, suppliers, subcontractors and other third parties to protect against and report
cyber threats and attacks. We could potentially be subject to production downtimes, operational delays, other detrimental impacts on our
operations or ability to provide products and services to our customers, the compromise of confidential information, intellectual property
or otherwise protected information, misappropriation, destruction or corruption of data, security breaches, other manipulation or improper
use of our or third-party systems, networks or products, financial losses from remedial actions, loss of business, or potential liability,
penalties, fines and/or damage to our reputation. Any of these could have a material adverse effect on our competitive position, results
of operations, financial condition or liquidity. Due to the evolving nature of such risks, the impact of any potential incident cannot
be predicted.

 Risks Related to Our Intellectual Property

 Third parties may infringe on our intellectual
property and, as a result, we could incur significant expense in protecting our patents or not have sufficient resources to protect them.

 We utilize numerous licensed patents that are
important to our business. Although we are not currently aware of any past or present infringements of these patents, we would expect
to protect these patents from infringement. Protecting and obtaining patents, however, is both time consuming and expensive. We therefore
may not have the resources necessary to assert all potential patent infringement claims or pursue all patents that might be available
to us. If our competitors or other third parties infringe on our patents, our business may be harmed.

 Third parties may claim that we have infringed on their patents
and, as a result, we could be prohibited from using all or part of any technology used in our products.

 Should third parties claim a proprietary right
to all or part of any technology that we use in our products, such a claim, regardless of its merit, could involve us in costly litigation.
If successful, such a claim could also result in us being unable to freely use the technology that was the subject of the claim or sell
products embodying such technology. If we engage in litigation, our expenses may increase, and our business may be harmed. If we are prohibited
from using a particular technology in our products, our revenues may decline, and our business may be harmed.

 We may be subject
to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

 As is common in the technology
industry, we employ individuals who were previously employed at other technology companies, including our competitors or potential competitors.
We may be subject to claims that these employees, or we, have used or disclosed trade secrets or other proprietary information of their
former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims,
litigation could result in substantial costs and be a distraction to management.

 If we are not able
to adequately prevent disclosure of trade secrets and other proprietary information, the value of our technology and products could be
significantly diminished.

 We rely on trade secrets
to protect our proprietary technologies, especially where we do not believe patent protection is appropriate or obtainable. However, trade
secrets are difficult to protect. We rely in part on confidentiality agreements with our employees, consultants, outside scientific collaborators,
and other advisors to protect our trade secrets and other proprietary information. These agreements may not effectively prevent disclosure
of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information.
In addition, others may independently discover our trade secrets and proprietary information. Costly and time-consuming litigation could
be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could
adversely affect our competitive business position.

 We will not be
able to protect our intellectual property rights throughout the world.

 Our business relies on
our patents. Filing, prosecuting and defending patents in all countries throughout the world would be prohibitively expensive, and we
do not have patent protection outside of the United States. In addition, the laws of some foreign countries do not protect intellectual
property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties
from practicing our inventions in all countries outside the United States or from selling or importing products made using our inventions
in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained
patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent
protection, but enforcement is not as strong as that in the United States. These infringing products may compete with the product we develop,
without any available recourse.

 The laws of some other
countries do not protect intellectual property rights to the same extent as the laws of the United States. Patent protection must ultimately
be sought on a country-by-country basis, which is an expensive and time-consuming process with uncertain outcomes. Accordingly, we may
choose not to seek patent protection in certain countries, and we will not have the benefit of patent protection in such countries. In
addition, the legal systems of some countries, particularly developing countries, do not favor the enforcement of patents and other intellectual
property protection. As a result, many companies have encountered significant problems in protecting and defending intellectual property
rights in foreign jurisdictions. Because the legal systems of many foreign countries do not favor the enforcement of patents and other
intellectual property protection, it could be difficult for us to stop the infringement, misappropriation or violation of our patents
or marketing of competing products in violation of our proprietary rights. Proceedings to enforce our intellectual property and other
proprietary rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects
of our business, could put our patents at risk of being invalidated or interpreted narrowly, could put our patent applications at risk
of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the
damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property
rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop
or license.

 Risks Related to our Stock

 Trading in our common stock may be subject
to substantial volatility.

 Our common stock is quoted on the Nasdaq Stock
Market under the symbol POCI. The price of our common stock may be volatile as a result of a number of factors, including, but not limited
to, the following:

 our ability to successfully conceive and to develop new products and services to enhance the performance characteristics and methods of manufacture of existing products;

 our ability to retain existing customers and customers' continued demand for our products and services;

 the timing of our research and development expenditures and of new product introductions;

 the timing and level of acceptance of new products or enhanced versions of our existing products; and

 price and volume fluctuations in the stock market at large which do not relate to our operating performance.

 Our quarterly financial results vary quarter
to quarter and depend on many factors. As a result, we cannot predict with a high degree of certainty our operating results in any particular
fiscal quarter.

 Our quarterly operating results may vary significantly
depending upon factors such as:

 the timing of completion of significant customer orders;

 the timing and amount of our research and development expenditures;

 the costs of initial product production in connection with new products;

 the timing of new product introductions—both by us and by our competitors;

 the timing and level of market acceptance of new products or enhanced versions of our existing products;

 our ability to retain existing customers and customers' continued demand for our products and services;

 our customers' inventory levels, and levels of demand for our customers' products and services; and

 competitive pricing pressures.

 We may not be able to grow or sustain revenues
or achieve or maintain profitability on a quarterly or annual basis and levels of revenue and/or profitability may vary from one such
period to another.

 We are contractually obligated to issue
shares in the future, diluting your percentage interest in us.

 We have reserved shares for future issuance under
all currently outstanding stock options, we expect to issue additional shares and stock options from time to time to compensate employees,
consultants and directors, and we may in the future issue additional shares to raise capital. Any such issuances will have the effect
of diluting the percentage interests of other holders of our common stock.

 Failure to maintain our internal control over our financial reporting
could cause our financial reports to be inaccurate.

 We are required to maintain
internal control over financial reporting and to assess and report on the effectiveness of those controls. This assessment includes disclosure
of any material weaknesses identified by our management in our internal control over financial reporting. Our management concluded that
our internal control over financial reporting was effective as of June 30, 2025, however, if we are not able to maintain effective internal
control over financial reporting, our financial statements, including related disclosures, may be inaccurate, which could have a material
adverse effect on our business

 Failure to maintain
our accounting systems and controls could impair our ability to comply with the financial reporting and internal controls requirements
for publicly traded companies.

 As a public company,
we operate in an increasingly demanding regulatory environment, which requires us to comply with the Sarbanes-Oxley Act of 2002, and the
related rules and regulations of the SEC. Company responsibilities required by the Sarbanes-Oxley Act include establishing corporate oversight
and adequate internal control over financial reporting and disclosure controls and procedures. Effective internal controls are necessary
for us to produce reliable financial reports and are important to help prevent financial fraud.

 Because we are a smaller reporting company and
a non-accelerated filer, we are not required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
Act. However, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management
to report on the effectiveness of our internal control over financial reporting in this report and future annual reports on Form 10-K,
as required by Section 404 of the Sarbanes-Oxley Act. This requires that we incur substantial additional professional fees and internal
costs to expand our accounting and finance functions and that we expend significant management efforts.

 Our internal control over financial reporting
will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable,
not absolute, assurance that the control system's objectives will be met. Because of the inherent limitations in all control systems,
no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues
and instances of fraud will be detected.

 If we are not able to
comply with the requirements of Section 404 of the Sarbanes-Oxley Act, or if we are unable to maintain proper and effective internal controls,
we may not be able to produce timely and accurate financial statements. If we cannot provide reliable financial reports or prevent fraud,
our business and results of operations could be harmed, and investors could lose confidence in our reported financial information.

 Certain provisions in our organizational
documents could enable our board of directors to prevent or delay a change of control.

 Our organizational documents contain provisions
that may have the effect of discouraging, delaying or preventing a change of control of, or unsolicited acquisition proposals, that a
stockholder might consider favorable. These include provisions:

 requiring advance notice of director nominations and of business to be brought before a meeting of stockholders;

 requiring a majority vote of the outstanding shares of common stock to amend the bylaws; and

 limiting the persons who may call special stockholders' meetings.

 In addition, we are subject to the provisions
of Chapter 110F of the MBCA. In general, Chapter 110F prohibits a publicly held Massachusetts corporation from engaging in a "business
combination" with an "interested stockholder" for a three-year period following the time that the stockholder becomes
an interested stockholder, unless the business combination is approved in a prescribed manner. A "business combination" includes,
among other things, a merger, asset or stock sale or other transaction resulting in a financial benefit to the interested stockholder.
An "interested stockholder" is a person who, together with affiliates and associates, owns, or did own within three years
prior to the determination of interested stockholder status, five percent or more of the corporation's voting stock.

 A Massachusetts corporation may "opt out"
of these provisions with an express provision in its original articles of organization or an express provision in its articles of organization
or bylaws resulting from a stockholders' amendment approved by at least a majority of the outstanding voting shares. We have not
opted out of these provisions. The restrictions contained in Chapter 110F are also not applicable, among other certain exclusions, if
the corporation does not have two hundred or more stockholders of record. As of September 25, 2025, we had 121 stockholders of record.
As a result, if Chapter 110F is applicable, mergers or other takeover or change in control attempts of us may be discouraged or prevented.

 General Risk Factors

 Your ownership may be diluted if additional
capital stock is issued to raise capital, to finance acquisitions or in connection with strategic transactions.

 We intend to seek to raise additional funds, finance
acquisitions or develop strategic relationships by issuing equity or convertible debt securities, which would reduce the percentage ownership
of our existing stockholders. Our board of directors has the authority, without action or vote of the stockholders, to issue all or any
part of our authorized but unissued shares of common stock. Our articles of organization authorize us to issue up to 50,000,000 shares
of common stock. Future issuances of common stock would reduce your influence over matters on which stockholders vote and would be dilutive
to earnings per share.

 Negative research about our business published
by analysts or journalists could cause our stock price to decline. A lack of regularly published research about our business could cause
trading volume or our stock price to decline.

 The trading market for our common stock depends
in part on the research and reports that analysts and journalists publish about us or our business. If analysts or journalists publish
inaccurate or unfavorable research about our business, our stock price would likely decline. If we fail to meet the expectations of analysts
for our operating results, or if the analysts who covers us downgrade our stock, our stock price would likely decline. If one or more
of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could
cause our stock price and trading volume to decline.

 Claims for indemnification by our directors
and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available
to us.

 Our bylaws contain provisions that eliminate,
to the maximum extent permitted by the MBCA, the personal liability of our directors and executive officers for monetary damages for breach
of their fiduciary duties as a director or officer. Our bylaws also provide that we will indemnify our directors and executive officers
and may indemnify our employees and other agents to the fullest extent permitted by the MBCA. Any claims for indemnification made by our
directors or officers could impact our cash resources and our ability to fund the business.

 We have no intention of declaring dividends
in the foreseeable future.

 The decision to pay cash dividends on our common
stock rests with our board of directors and will depend on our earnings, unencumbered cash, capital requirements and financial condition.
We do not anticipate declaring any dividends in the foreseeable future, as we intend to use any excess cash to fund our operations. Investors
in our common stock should not expect to receive dividend income on their investment, and investors will be dependent on the appreciation
of our common stock to earn a return on their investment.

 Artificial intelligence presents risks and
challenges that can impact our business, including by posing security risks to our confidential information, proprietary information and
personal data.

 Issues in the development and use of artificial
intelligence, combined with an uncertain regulatory environment, may result in reputational harm, liability, or other adverse consequences
to our business operations. As with many technological innovations, artificial intelligence presents risks and challenges that could
impact our business. We may adopt and integrate generative artificial intelligence tools into our systems for specific use cases reviewed
by legal and information security. Our vendors may incorporate generative artificial intelligence tools into their offerings without
disclosing this use to us, and the providers of these generative artificial intelligence tools may not meet existing or rapidly evolving
regulatory or industry standards with respect to privacy and data protection and may inhibit our or our vendors' ability to maintain
an adequate level of service and experience. If we, our vendors, or our third-party partners experience an actual or perceived breach
or privacy or security incident because of the use of generative artificial intelligence, we may lose valuable intellectual property
and confidential information and our reputation and the public perception of the effectiveness of our security measures could be harmed.
Further, bad actors around the world use increasingly sophisticated methods, including the use of artificial intelligence, to engage
in illegal activities involving the theft and misuse of personal information, confidential information, and intellectual property. Any
of these outcomes could damage our reputation, result in the loss of valuable property and information, and adversely impact our business.

 Changes in U.S. Tariff Policy and Related
Trade Actions Could Adversely Affect Our International Supply Chain, Costs, and Competitive Position

 Our business is subject to risks associated with
changes in U.S. tariff policy and related trade actions, which could materially and adversely affect our operations, financial condition,
and results of operations. We rely on a global supply chain for the procurement of specialized optical components and assemblies, many
of which are sourced from overseas suppliers. The imposition of new tariffs increases in existing tariffs, or other trade restrictions
by the United States government on goods imported from certain countries—including, but not limited to, China and other key trading
partners—could increase our cost of goods sold and disrupt the availability of critical components necessary for our products.

 In response to evolving U.S. trade policy, affected
countries may implement retaliatory tariffs or other trade barriers on U.S. goods, which could further impact our ability to source materials
at competitive prices or to sell our products in certain international markets. These developments may also result in increased volatility
in global markets, supply chain disruptions, and reduced demand for our products due to higher prices or decreased competitiveness relative
to foreign and domestic competitors not subject to similar tariffs.

 While we seek to mitigate the impact of tariffs
through supply chain diversification and price negotiations, such measures may not be successful or may result in increased costs, delays,
or operational inefficiencies. Sustained or additional tariffs could require us to raise prices, which may reduce customer demand and
adversely affect our revenues and market share. Furthermore, uncertainty regarding future U.S. trade policy and the potential for further
changes in tariffs or trade agreements may make it more difficult for us to plan and conduct our business effectively.

 Any significant increase in tariffs, expansion
of trade restrictions, or prolonged uncertainty regarding U.S. trade policy could materially adversely affect our ability to source components,
manage costs, and compete effectively in our markets, which could have a material adverse effect on our business, financial condition,
and results of operations.

 ITEM 1B. UNRESOLVED
STAFF COMMENTS.

 None.

 ITEM
1C. CYBERSECURITY.

 Risk Management and Strategy

 As a company selling products, including those
for defense applications, we may be the target of cyber-attacks from a variety of threat actors. Cybersecurity threats include attacks
on, or other attempts to infiltrate, our information technology (IT) infrastructure and the IT infrastructure of our customers, suppliers,
subcontractors and other third parties, attempting to gain unauthorized access to our confidential or other proprietary information, classified
information, or information relating to our employees, customers, and other third parties, or to disrupt our systems or the systems of
our customers, suppliers, subcontractors, and other third parties. Cybersecurity threats also include attempts to infiltrate our products
or services, including attacks targeting the security, confidentiality, integrity and/or availability of the hardware, software and information
installed, stored or transmitted in our products, including after the purchase of those products and when they are incorporated into third-party
products, facilities, or infrastructure.

 Our Cybersecurity Program.

 Our products and services are normally classified
as EAR 99 by the U.S. government, but our defense customers generally require compliance with the International Traffic in Arms Regulation
("ITAR"). Moreover, our products sold for defense applications are integrated with our customers' products and these
customers may provide us with Controlled Unclassified Information (CUI) that requires, safeguarding and dissemination controls in accordance
with laws, regulations, or Government-wide policies. Given the nature of our business and the cybersecurity risks we face, we have instituted
cybersecurity measures for identifying, assessing, and managing cybersecurity risks, which include material risks from cybersecurity threats
to our internal systems, our products, services and programs for customers, and our supply chain.

 The goals of our enterprise cybersecurity program
align with the National Institute of Standards and Technology (NIST) standards, among others. The program includes processes and controls
for the deployment of new IT systems by the Company and controls over new and existing system operations. We, or contracted third parties,
monitor and conduct regular testing of these controls and systems, including vulnerability management through active discovery and testing
to regularly assess patching and configuration status. In addition, we require our employees to complete data security training, and we
regularly conduct simulated phishing and cyber-related communications.

 Incident Response.

 Our cybersecurity program includes monitoring
for potential security threats that may lead to vulnerabilities. We evaluate and assign severity levels to incidents, escalate and engage
an incident response team based on severity, and manage and mitigate the related risks. Incidents are reported internally to members of
senior management and/or the Board of Directors as appropriate based on severity and incident type and are also analyzed for external
reporting requirements. Our incident response process is also designed to coordinate functions to enable continuity of essential business
operation in the event of a cyber crisis.

 Third Party Service Providers.

 We engage third party service providers to expand
the capabilities and capacity of our cybersecurity program, including for design, monitoring and testing of the program's risk prevention
and protection measures, and process execution including incident detection, investigation, analysis and response, eradication, and recovery.
Our Chief Financial Officer and Vice President of Engineering meet regularly with third party service providers to review their performance
and progress towards our cybersecurity initiatives.

 Program Assessment.

 We continuously evaluate and seek to improve and
mature our cybersecurity processes against government standards. Our cybersecurity program is regularly assessed through management self-evaluation
and ongoing monitoring procedures to evaluate our program effectiveness, including assessments associated with internal controls over
financial reporting as well as vulnerability management through active discovery and testing to validate patching and configuration. As
cybersecurity threats are continuously evolving, we also periodically engage with third parties to perform maturity assessments of our
program to identify potential risk areas and improvement opportunities. This includes assessment of our overall program, policies and
processes, compliance with regulatory requirements and an overall assessment of key vulnerabilities. We use these assessments to supplement
our own evaluation of the overall health of our program and target improvement areas.

 Board Oversight and Management's Role

 Our Board of Directors has primary oversight responsibility
for enterprise cybersecurity risks. The Audit Committee also considers enterprise cybersecurity risks in connection with its financial
and compliance risk oversight role. The Chief Financial Officer regularly reports to the Board of Directors on the status of the Company's
cybersecurity program and provides the Board with the annual assessment by a third party on the Company's cybersecurity program.

 For more
information on risks related to cybersecurity, see Item IA. "Risk Factors" of this Form 10-K.

 ITEM 2. PROPERTIES.

 We conduct our domestic operations at four facilities
in Gardner, Massachusetts, one facility in El Paso, Texas, and one facility in Windham, Maine. The facilities in El Paso and Windham are
leased from unrelated parties. The Company leases its primary facility in Gardner, Massachusetts from Equity Assets, Inc. ("EAI"),
an entity formerly owned by the Company's founder Richard E. Forkey and then later owned by a trust controlled by his step-daughter,
established for the benefit of the step-daughter and four siblings (including Joseph N. Forkey, who is Chief Executive Officer, President,
Treasurer and a Director of the Company). The original lease for the principal facility in Gardner expired in 1999, and the Company has
since been a tenant-at-will, paying rent to EAI of $9,000 per month for that facility. On July 19, 2023, the trust distributed the EAI
shares equally among the five beneficiaries (20% each). Those shareholders then entered into a shareholder agreement under which all five
were elected as directors of EAI and under which Joseph N. Forkey has been elected as president. The shareholder agreement provides that
Dr. Forkey will be recused from any matters involving negotiations with the Company, including without limitation any lease negotiations.
Dr. Forkey is not compensated by EAI for his services as president or a director, and his present 20% interest in rents being received
from the Company is $21,600 per year.

 On May 13, 2025, the Company entered into a First
Lease Extension Agreement (the "Extension") with Texzona Industries, Inc., pursuant to which the Company will continue to
lease approximately 9,375 square feet of commercial space located at 1410 Gail Borden, El Paso, Texas. The term of Extension is for a
period of 36 months commencing on June 1, 2025 and shall end on May 31, 2028. Base rent for each year of the term is $49,219, $50,695
and $52,216. In addition to base rent, the Company is responsible for taxes, insurance and common area maintenance ("CAM").
Beginning June 1, 2025, the total estimated monthly rental payment including CAM is $5,773.

 On May 14, 2025, the Company entered into a Lease
Agreement (the "Southborough Lease") with 500 Southborough, LLC, pursuant to which the Company has leased approximately 8,750
square feet of commercial space located at 500 Southborough Drive, City of South Portland, County of Cumberland, Maine. The commencement
date was August 1, 2025. The Southborough Lease provides the Company with two options to extend the term for additional five-year periods,
exercisable with at least nine months' prior written notice. Base rent for the initial term is abated for the first five months
following the commencement date, after which annual base rent payable is $131,250 (or $10,937.50 per month), with annual increases of
3%. Base rent for any extension term will be as agreed by the parties or, if not agreed, at 95% of the then-current fair market base rental
rate for similar space in South Portland, as determined by appraisal, with annual increases of 3% during each extension term.

 In addition to base rent, the Company is responsible
for its proportionate share (19.34%) of Operating Expenses, as defined in the Lease. The Lease is structured as a triple net lease. The
Company was entitled to a tenant improvement allowance of $25 per rentable square foot for fit-up costs and $0.15 per rentable square
foot for architectural costs, to be disbursed as costs are incurred. The Landlord was responsible for completing certain improvements
to the Premises prior to occupancy, including interior wall construction, loading area, and separate utility metering. The lease commencement
date of the Southborough Lease was August 1, 2025.

 On June 2, 2025, the Company entered into a Lease
Agreement (the "Lease") with 550 King Street, LLC (the "Landlord"), pursuant to which the Company has leased approximately
19,590 rentable square feet of commercial space located at 550 King Street, Building A, Suite 100, Littleton, Massachusetts (the "Premises").
The Lease provides for an initial term of seven and one half (7.5) years, commencing upon substantial completion of tenant improvements
and receipt of a certificate of occupancy (the "Term Commencement Date"). The Term Commencement Date was September 10, 2025.

 The Lease includes two options to extend the term
for additional five-year periods, exercisable with at least nine months' prior written notice. Base rent for the initial term is
abated for the first six months following the Term Commencement Date, after which base rent is payable as follows: The annual base rent
for the first year of the lease is $361,435.50 (or $30,119.63 per month), and such annual base rent increases by three percent (3%) each
lease year over the previous year's annual base rent. In addition to base rent, the Company is responsible for its pro-rata share
(7.22%) of real estate taxes and operating expenses, as further defined in the Lease. The Lease provides for the permitted use of the
Premises for general office, laboratory, manufacturing, warehousing, showroom, and related legal uses. The Lease grants the Company a
right of first offer on contiguous space that becomes available in the building during the lease term or any extension.

 The extensions associated with the leases discussed
above have been accounted for with the assumption that they will not be extended.

 ITEM 3. LEGAL
PROCEEDINGS.

 Our Company, on occasion, may become involved
in legal matters arising in the ordinary course of our business, which could have a material adverse effect on our business,
financial condition or results of operations. We are not currently aware of any pending or threatened litigation against us or our officers
and directors in their capacity as such that could have a material impact on our operations or finances.

 ITEM 4. MINE
SAFETY DISCLOSURES.

 Not applicable.

 ITEM 5.

 MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

 Market Information

 Our common stock is quoted on the Nasdaq Stock
Market under the symbol POCI.

 Holders

 As of September 25, 2025, we had approximately
121 holders of record of our common stock. Holders of record include nominees who may hold shares on behalf of multiple owners.

 Dividends

 We have not declared any dividends during the
last two fiscal years. At present, we intend to retain our earnings, if any, to finance research and development and the expansion of
our business.

 Recent Sales of Unregistered Securities

 All information related
to equity securities sold by us during the period covered by this report that were not registered under the Securities Act have been included
in our Form 10-Q filings or in a Form 8-K filing.

 Purchases of Equity Securities by the Issuer
and Affiliated Purchasers

 We did not repurchase any of our equity securities
during the year ended June 30, 2025.

 ITEM 6. [RESERVED]

 ITEM 7. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 The following discussion and analysis should be
read in conjunction with the Financial Statements and Notes thereto, and other financial information included elsewhere in this Annual
Report on Form 10-K. This Management's Discussion and Analysis of Financial Condition and Results of Operations contains descriptions
of our expectations regarding future trends affecting our business. The following discussion sets forth certain factors we believe could
cause actual results to differ materially from those contemplated by the forward-looking statements.

 Critical Accounting Policies and Estimates

 Allowance for Credit Losses

 We are subject to credit risk primarily
in our trade accounts receivable. We generally do not require collateral or other security as a condition of sale, rather we rely on credit
approval, balance limitation and monitoring procedures to control credit risk in trade account financial instruments. Our customer base
includes many large medical device and defense/aerospace companies, as well as newly incorporated entities pursuing emerging technologies.
In those cases when we cannot determine the creditworthiness of our customer, we obtain prepayments and deposits that we judge will be
sufficient to mitigate the risk of a significant financial loss. We establish reserves against losses that include both a review of specific
account balances and current payment characteristics which are monitored contemporaneously to determine the adequacy of our reserve. Nevertheless,
our customers may be adversely impacted by economic factors beyond our understanding and control, and which are difficult to foresee or
estimate. A 1% increase in the accounts receivable reserve would increase our costs by approximately $44,000. We recognized bad debt expenses
of $38,000 and $202,000 for the years ending June 30, 2025, and June 30, 2024, respectively.

 Reserve for Excess and Obsolete
Inventory

 Inventories, consisting of raw materials,
work in process and finished goods, are primarily accounted for using the first-in first-out method, and are valued at the lower of cost
and net realizable value. This valuation requires us to make judgments, based on currently available information, regarding product demand
and the potential for a future financial loss resulting from the liquidation and disposal of unusable or unsaleable inventory. These assumptions
about the future disposition of inventory are inherently uncertain, and changes in our estimates and assumptions may require us to realize
write-downs. In addition, we enter into binding supplier commitments which are based on forecasted customer demand. If our customers reduce
their forecasts, we may incur additional costs. An increase in the calculation of the reserve for excess and obsolete inventory equivalent
to 1% of gross inventory value would increase our costs by approximately $39,000.

 Other significant accounting policies are included in the
Notes to our Financial Statements contained elsewhere in this Annual Report on Form 10-K.

 Results of Operations for the Fiscal Year Ended
June 30, 2025 as Compared to the Fiscal Year Ended June 30, 2024

 Revenue

 Year
 Ended June 30,

 2025

 Percent of Sales

 2024

 Percent of Sales

 Increase
 (Decrease)

 Percent Change

 Engineering Design Services

 4,938,158

 25.9

 8,519,130

 44.6

 (3,580,972
)

 (42.0
)

 Systems Manufacturing

 8,290,225

 43.4

 3,731,754

 19.5

 4,558,471

 122.2

 MicroOptics Lab

 2,135,562

 11.2

 2,720,925

 14.3

 (585,363
)

 (21.5
)

 Ross Optical Industries

 3,727,324

 19.5

 4,132,541

 21.6

 (405,217
)

 (9.8
)

 Total Revenues

 19,091,269

 100.0

 19,104,350

 100.0

 (13,081
)

 (0.1
)

 Total revenues for the fiscal year ended June
30, 2025 were $19,091,269, as compared to $19,104,350 for the same period in the prior year, a decrease of $13,081, or 0.1%.

 Revenue from Engineering Design Services decreased
42.0% during the year ending June 30, 2025 from the prior year ending June 30, 2024. Revenue decreases in the engineering category resulted
from decreased demand for services, primarily from the transfer of our single-use cystoscope program from development (Engineering Design
Services) to production (Systems Manufacturing), and increases in internal research and development. Engineering revenue in the year was
reduced due to unplanned increases in non-billable sustaining engineering activity to support manufacturing scale up along with delayed
revenue opportunities within the product development pipeline.

 Revenue from Systems Manufacturing increased 122.2%
during the year ending June 30, 2025 from the prior year ending June 30, 2024. Revenue increases in this category resulted from increased
demand for manufacturing services as design services engagements concluded and progressed to manufacturing.

 Revenue from the MicroOptics Lab decreased 21.5%
during the year ending June 30, 2025 from the prior year ending June 30, 2024, primarily due to reorder timing.

 Revenue from Ross Optical Industries decreased
9.8% for the year ending June 30, 2025 from the prior year ending June 30, 2024. We believe the decrease continues to be attributable
to a general, industry-wide slowdown, coupled with uncertainty driven by evolving tariff costs, which has led customers to postpone deliveries.

 Gross Profit

 Gross margin decreased to 17.8% during the year
ended June 30, 2025, compared to 30.3% for the year ended June 30, 2024. Gross profit decreased to $3,404,433 during the year ended June
30, 2025, compared to $5,797,777 for the year ended June 30, 2024, primarily driven by yield issues associated with new manufacturing
lines, lower utilization of billable engineering resources, and the decreases in revenue discussed above.

 Research & Development

 R&D expenses increased $176,182 to $1,157,963
during the year ended June 30, 2025, compared to $981,781 during the year ended June 30, 2024. R&D expenses for the period primarily
represent employee-related expenses to support product improvements, the development of new technologies and standardized approaches to
address the opportunities for an evolving single-use medical device environment.

 Selling, General and Administrative Expenses

 SG&A expenses increased $257,432, or 3.4%
to $7,797,761 during the year ended June 30, 2025, compared to $7,540,329 during the year ended June 30, 2024. The increase in SG&A
for the year was primarily due to increased personnel costs, most related to stock-based compensation and recruiting expense.

 Liquidity and Capital Resources

 Based on our current plans and business conditions,
management believes that the Company's available cash and cash equivalents, the cash generated from operations, availability on
our line of credit, and our ability to raise funds in the capital markets will be sufficient to provide for the Company's working
capital and capital expenditure requirements for at least 12 months from the date of this filing. However, our cash on hand and cash generated
solely from operations may be insufficient to meet working capital needs for such period and we may be required to raise external financing
in the short-term.

 Net Cash Used in Operating Activities

 During the year ended June 30, 2025, net cash
used in operating activities totaled $3,547,400 as compared to $2,683,012 during the year ended June 30, 2024. The increase in net cash
used in operating activities was primarily due to the increase in net loss, accounts receivable and inventory during the year ended June
30, 2025, partially offset by the increase in accounts payable and customer advances during such period.

 Net Cash Used in Investing Activities

 During the year ended June 30, 2025, net cash
used in investing activities was $233,473, consisting of purchases of property and equipment net of adjustments in patent costs. During
the year ended June 30, 2024, net cash used in investing activities was $293,883, consisting of purchases of property and equipment and
patent costs.

 Net Cash Provided by Financing Activities

 During the year ended June 30, 2025, we made payments
of $321,554 on term notes and capital leases and repaid $1,000,000 on our revolving line of credit. We raised a net of $6,270,136 from
two registered direct offerings made in August 2024 and February 2025 pursuant to our shelf registration statement. During the year ended
June 30, 2024, we made payments of $556,468 on term notes and capital leases offset by borrowings on the line of credit of $1,000,000.

 On October 4, 2021, the Company entered into a
Loan Agreement with Main Street Bank of Marlborough, Massachusetts (the "Lender"), which provided for a $2,600,000 Term Loan
and a $250,000 Revolving Line of Credit Loan Facility (the "Revolver"), which was increased to $500,000 effective May 17,
2022, and $1,250,000 effective June 2, 2023. Borrowings under the Revolver are limited by the borrowing base comprised of a percentage
of accounts receivable and inventory and secured by all assets of the Company. Borrowings under the Revolver will bear interest payable
monthly at the prime lending rate plus 1.5% per annum and shall not be less than 4.75% per annum. Borrowings under the Revolver are due
upon demand. There were no borrowings under the Revolver at June 30, 2025.

 The Company's Loan Agreement with the Lender
contains a minimum annual debt service coverage ratio covenant of 1.2x. As the Company did not meet this annual debt service coverage
ratio for the fiscal year ended June 30, 2024, the Company's Lender had agreed to waive compliance with such debt service ratio
covenant for the period ending June 30, 2024. In addition to such waiver, the Lender and the Company entered into an amendment dated September
30, 2024 to that certain Term Loan dated October 4, 2021, as amended and that certain Promissory Note dated June 2, 2023 (collectively,
the "Notes") which amendments provide for a six month period of interest only payments from October 15, 2024 through March
15, 2025 for the Notes. The Company commenced payments of principal and interest under the Notes beginning with the payments due on April
15, 2025, with a new amortization schedule for the remaining term for such Notes through their maturity date. On February 14, 2025, the
lender agreed to waive compliance with the annual debt service coverage ratio covenant for the fiscal year ending June 30, 2025, subject
to a $30,000 waiver fee and the completion of an equity raise of at least $4,500,000 by February 24, 2025, which the Company satisfied
on February 21, 2025. Any future advances are contingent on the Company achieving a minimum Debt Service Coverage ratio of 1.20x based
on quarterly testing which the company was not in compliance with as of June 30, 2025. There were no other changes to or modifications to the Loan Agreement or the Notes.

 On August 14. 2024 we entered into securities
purchase agreements with institutional and accredited investors in addition to certain directors and officers of the Company for the purchase
and sale of 265,868 shares of the Company's common stock resulting in gross proceeds of approximately $1.4 million before deducting
placement agent commissions and other estimated offering expenses. Net proceeds were approximately $1.2 million.

 Contractual cash commitments for the fiscal
periods subsequent to June 30, 2025, are summarized as follows:

 Fiscal Year 2026

 Thereafter

 Total

 Capital lease for equipment, including interest

 $
 28,004

 $
 –

 $
 28,004

 Minimum operating lease payments

 $
 60,619

 $
 98,687

 $
 159,306

 We have contractual cash commitments related to
open purchase orders as of June 30, 2025, of approximately $6,260,000.

 Off-Balance Sheet Arrangements

 We currently have no off-balance sheet arrangements
that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK.

 As a smaller reporting company, as defined by
Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are not required to provide the information requested
by this Item.

 ITEM 8. FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA.

 Index to Financial Statements

 Page

 Report of Independent Registered Public Accounting Firm (PCAOB No. 577)

 Balance Sheets at June 30, 2025 and 2024

 Statements of Operations for the Years Ended June 30, 2025 and 2024

 Statements of Stockholders' Equity for the Years Ended June 30, 2025 and 2024

 Statements of Cash Flows for the Years Ended June 30, 2025 and 2024

 Notes to Financial Statements

 Report of Independent Registered Public Accounting
Firm

 To the Board of Directors and

Stockholders of Precision Optics Corporation, Inc.

 Opinion on the Financial Statements

 We have audited the accompanying balance sheets
of Precision Optics Corporation, Inc. (the "Company") as of June 30, 2025 and 2024, and the related statements of operations,
stockholders' equity, and cash flows for each of the years in the two year period ended June 30, 2025, and the related notes (collectively
referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects,
the financial position of the Company as of June 30, 2025 and 2024, and the results of its operations and its cash flows for each of the
years in the two year period ended June 30, 2025, in conformity with accounting principles generally accepted in the United States of
America.

 Basis for Opinion

 These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (PCAOB) and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.

 We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding
of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such opinion.

 Our audits included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 Critical Audit Matters

 The critical audit matters communicated below
is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to
the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our
especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion
on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions
on the critical audit matters or on the accounts or disclosures to which they relate.

 Revenue Recognition — Refer to Note
A to the Financial Statements

 Critical Audit Matter Description

 The Company recognizes revenue upon transfer of
control of promised products to customers in an amount that reflects the consideration the Company expects to receive in exchange for
those products. The Company may enter into certain customer contracts that contain unique, customer-specific terms and conditions, variable
consideration, as well as multiple performance obligations. For such contracts, significant interpretation may be required to determine
the appropriate accounting, including the identification of performance obligations, the allocation of the transaction price to performance
obligations in the arrangement, the timing of the transfer of control of promised goods for each of those performance obligations, estimates
of variable consideration and agent versus principal consideration.

 Our assessment of managements' evaluation
of the above referenced matters related to proper revenue recognition is significant to our audit because of the nature and extent of
audit effort required to address the matter, the amounts are material to the financial statements, the assessment process involves significant
auditor judgment, and the application of U.S. generally accepted accounting principles in this area is complex.

 F- 1

 How the Critical Audit Matter Was Addressed in the Audit

 Our principal audit procedures related to the
Company's revenue recognition for customer contracts included the following:

 We evaluated the appropriateness of management's revenue recognition policies.

 We tested the mathematical accuracy of management's calculations of revenue and the associated timing of revenue recognized in the financial statements.

 We selected a sample of revenue transactions and performed the following procedures:

 o

 Obtained and read source documents for each selection, including master agreements, purchase orders and other documents that evidenced the customer arrangement.

 o

 Tested management's identification and treatment of the key contract terms, including performance obligations and variable consideration.

 o

 Assessed the terms in the customer agreement and evaluated the appropriateness of management's application of the Company's accounting policies, along with their use of estimates, in the determination of revenue recognition conclusions.

 /s/ Stowe & Degon LLC

 Westborough, Massachusetts

 We have served as the Company's auditor
since 2008

 F- 2

 Balance Sheets at June 30, 2025 and 2024

 2025

 2024

 ASSETS

 Current Assets:

 Cash and cash equivalents

 $
 1,773,735

 $
 405,278

 Accounts receivable, net of allowance for credit losses of $ 80,192 at June 30, 2025 and $ 118,872 at June 30, 2024

 4,336,730

 3,545,491

 Inventories, net

 3,562,112

 2,868,100

 Prepaid expenses

 385,390

 299,364

 Total current assets

 10,057,967

 7,118,233

 Fixed Assets:

 Machinery and equipment

 3,385,958

 3,341,194

 Leasehold improvements

 871,356

 810,914

 Furniture and fixtures

 538,428

 416,425

 Total fixed assets

 4,795,742

 4,568,533

 Less—Accumulated depreciation and amortization

 4,261,950

 4,074,960

 Net fixed assets

 533,792

 493,573

 Operating lease right-of-use asset

 141,825

 189,999

 Patents, net

 232,493

 286,559

 Goodwill

 8,824,210

 8,824,210

 Total other assets

 9,198,528

 9,300,768

 TOTAL ASSETS

 $
 19,790,287

 $
 16,912,574

 LIABILITIES AND STOCKHOLDERS' EQUITY

 Current Liabilities:

 Revolving line of credit

 $
 –

 $
 1,000,000

 Current portion of capital lease obligation

 27,368

 41,113

 Current maturities of long-term debt

 577,898

 276,928

 Accounts payable

 2,909,100

 1,397,313

 Customer advances

 1,821,929

 1,172,350

 Accrued compensation and other

 764,004

 840,662

 Operating lease liability

 50,995

 178,450

 Total current liabilities

 6,151,294

 4,906,816

 Capital lease obligation, net of current portion

 –

 27,369

 Long-term debt, net of current maturities

 1,289,205

 1,899,052

 Operating lease liability, net of current portion

 90,954

 11,549

 Total liabilities

 7,531,453

 6,844,786

 Stockholders' Equity:

 Common stock, $ 0.01 par value: 50,000,000 shares authorized; issued and outstanding – 7,714,701 shares at June 30, 2025 and 6,073,939 shares at June 30, 2024

 77,147

 60,739

 Additional paid-in capital

 69,152,317

 61,197,433

 Accumulated deficit

 ( 56,970,630
)

 ( 51,190,384
)

 Total stockholders' equity

 12,258,834

 10,067,788

 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 $
 19,790,287

 $
 16,912,574

 The accompanying notes are an integral part
of these financial statements.

 F- 3

 Statements of Operations

 for the Years Ended June 30, 2025 and 2024

 2025

 2024

 Revenues

 $
 19,091,269

 $
 19,104,350

 Cost of goods sold

 15,686,836

 13,306,573

 Gross profit

 3,404,433

 5,797,777

 Research and development expenses, net

 1,157,963

 981,781

 Selling, general and administrative expenses

 7,797,761

 7,540,329

 Total operating expenses

 8,955,724

 8,522,110

 Operating loss

 ( 5,551,291
)

 ( 2,724,333
)

 Other expense

 Interest expense

 ( 227,019
)

 ( 225,108
)

 Loss before provision for income taxes

 ( 5,778,310
)

 ( 2,949,441
)

 Provision for income taxes

 1,936

 1,936

 Net loss

 $
)

 $
)

 Loss per share:

 Basic and fully diluted

 $
 ( 0.85
)

 $
 ( 0.49
)

 Weighted average common shares outstanding:

 Basic and fully diluted

 6,790,466

 6,068,329

 The accompanying notes are an integral part
of these financial statements.

 F- 4

 Statements of Stockholders' Equity

 for the Years Ended June 30, 2025 and 2024

 Number of
 Shares

 Common
 Stock

 Additional
 Paid-in
 Capital

 Accumulated
 Deficit

 Total
 Stockholders'
 Equity

 Balance, June 30, 2023

 6,066,518

 $
 60,665

 $
 60,224,934

 $
 ( 48,239,007
)

 $
 12,046,592

 Proceeds from exercise of stock option

 4,333

 12,746

 –

 12,789

 Exercise of stock options net of 2,916 shares withheld

 3,088

 ( 31
)

 –

 –

 Stock-based compensation

 –

 –

 959,784

 –

 959,784

 Net loss

 –

 –

 –

)

)

 Balance, June 30, 2024

 6,073,939

 $
 60,739

 $
 61,197,433

 $
 ( 51,190,384
)

 $
 10,067,788

 Issuance of common stock in a registered direct offering

 1,538,368

 15,384

 6,254,752

 –

 6,270,136

 Proceeds from exercise of stock option

 71,979

 88,329

 –

 89,050

 Issuance of common stock for consulting services and employees

 30,415

 151,395

 –

 151,698

 Stock-based compensation

 –

 –

 1,460,408

 –

 1,460,408

 Net loss

 –

 –

 –

)

)

 Balance, June 30, 2025

 7,714,701

 $
 77,147

 $
 69,152,317

 $
 ( 56,970,630
)

 $
 12,258,834

 The accompanying notes are an integral part
of these financial statements.

 F- 5

 Statements of Cash Flows

 For the Years Ended June 30, 2025 and 2024

 2025

 2024

 Cash Flows from Operating Activities:

 Net loss

 $
)

 $
)

 Adjustments to reconcile net loss to net cash (used in) provided by operating activities-

 Depreciation and amortization

 212,439

 212,382

 Stock-based compensation expense

 1,460,408

 959,784

 Non-cash legal expense

 34,881

 –

 Non-cash interest expense

 11,563

 17,504

 Non-cash operating lease expense

 –

 Changes in operating assets and liabilities:

 Accounts receivable, net

 ( 791,239
)

 361,916

 Inventories

 ( 694,012
)

 ( 91,884
)

 Prepaid expenses

 ( 86,026
)

 ( 49,683
)

 Accounts payable

 1,511,787

 ( 1,034,951
)

 Contract liabilities

 649,579

 ( 2,340
)

 Accrued compensation and other

 ( 76,658
)

 ( 104,363
)

 Net cash used in operating activities

 ( 3,547,400
)

 ( 2,683,012
)

 Cash Flows from Investing Activities:

 Reclassification/additional patent costs

 ( 6,264
)

 ( 21,448
)

 Purchases of property and equipment

 ( 227,209
)

 ( 272,435
)

 Net cash used in investing activities

 ( 233,473
)

 ( 293,883
)

 Cash Flows from Financing Activities:

 Payment of capital lease obligations

 ( 41,114
)

 ( 43,209
)

 Principal payments of long-term debt

 ( 280,440
)

 ( 513,259
)

 Payment of debt issuance costs

 ( 40,000
)

 –

 (Repayments)/Borrowings on line of credit

 ( 1,000,000
)

 1,000,000

 Gross proceeds from registered direct offerings of common stock

 6,270,136

 –

 Stock issued for services

 151,698

 –

 Gross proceeds from exercise of stock options

 89,050

 12,789

 Net cash provided by financing activities

 5,149,330

 456,321

 Net increase (decrease) in cash and cash equivalents

 1,368,457

 ( 2,520,574
)

 Cash and cash equivalents, beginning of year

 405,278

 2,925,852

 Cash and cash equivalents, end of year

 $
 1,773,735

 $
 405,278

 Supplemental disclosure of cash flow information:

 Cash paid during the year for income taxes

 $
 1,936

 $
 1,936

 Cash paid during the year for interest

 $
 216,456

 $
 207,604

 Operating right-of-use assets obtained in exchange for operating lease liabilities

 $
 133,650

 $
 –

 The accompanying notes are an integral part
of these financial statements.

 F- 6

 Notes to Financial Statements

 (1)

 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 (a)

 Nature of Business

 Precision Optics Corporation, Inc. (the "Company")
designs, develops, manufactures and sells specialized optical and illumination systems and related components. The Company conducts business
in one industry segment only and its customers are primarily domestic. The Company performs advanced optical and illumination system design,
development, assembly and manufacturing services, and sources for resale specialized optical components for products that fall into two
principal areas: (i) medical products for use by hospitals and physicians; and (ii) products used by defense contractors, aerospace and
industrial customers.

 (b)

 Revenues

 The Company determines revenue recognition for
arrangements that we determine are within the scope of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers,
("ASC 606"), by performing the following five steps: (i) identify the contract with a customer; (ii) identify the performance
obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations
in the contract; and (v) recognize revenue when, or as, we satisfy the performance obligations. At contract inception, once the contract
is determined to be within the scope of ASC 606, we assess the goods or services promised within the contract and determine those that
are performance obligations and assess whether each promised good or service is distinct based on the contract.

 The Company disaggregates revenues by product
and service types as it believes best depicts how the nature, amount, timing and uncertainty of revenues and cash flows are affected by
economic factors. Revenues are comprised of the following for year ended June 30, 2025, and 2024:

 Schedule of disaggregation of revenues

 Year Ended June 30,

 2025

 2024

 Engineering Design Services

 $
 4,938,158

 $
 8,519,130

 Systems Manufacturing

 8,290,225

 3,731,754

 Micro Optics Lab

 2,135,562

 2,720,925

 Ross Optical Industries

 3,727,324

 4,132,541

 Total Revenues

 $
 19,091,269

 $
 19,104,350

 Selling costs to obtain and fulfill contracts
are expensed as incurred due to the short-term nature of a majority of contracts. The Company extends terms of payment to its customers
based on commercially reasonable terms for the markets of its customers, while also considering their credit quality. Shipping and handling
costs charged to customers are included in revenue.

 Revenue recognition policies for each of the three
product and service types appear below.

 Engineering Design Services

 The Company enters into contractual agreements
with our customers, including design services agreements, statements of work and receive purchase orders for development projects. These
agreements provide costs on an estimated basis for the services we have agreed to provide. Engineering Design Services are rendered on
a time and materials basis. The Company recognizes revenue as customers are invoiced for the actual engineering services provided in the
period. Revenue is also recognized on materials purchased for development projects at the time of receipt. Engineering Design Services
are provided on a best-efforts basis; no warranty is provided as there is no guarantee that the work will result in the attainment of
the customer's project objectives. The Company may obtain customer deposits in advance of rendering engineering design services.
Customer deposits are treated as contractual liabilities until the terms of customer agreements are satisfied and are not a component
of revenue.

 F- 7

 Systems Manufacturing, Micro Optics Laboratory,
Ross Optical Industries

 The Company provides fixed price quotations to
our customers and requires purchase orders for items manufactured and distributed through the Systems Manufacturing, Micro Optics Laboratory
and Ross Optical Industries business units. Revenue is recognized at the time title passes to our customer based on our review of the
customer contract, generally at the time of shipment from our facilities. Occasionally the Company may enter into "bill and hold"
contractual arrangements where title is held by our customers while goods are stored at our facilities for their convenience.

 Contract Assets and Liabilities

 The nature of the Company's products and
services does not generally give rise to contract assets as it typically does not incur costs to fulfill a contract before a product or
service is provided to a customer. The Company's costs to obtain contracts are typically in the form of sales commissions paid to
employees. The Company has elected to expense sales commissions associated with obtaining a contract as incurred as the amortization period
is generally less than one year. These costs have been recorded in selling, general and administrative expenses. As of June 30, 2025 and
2024, there were no contract assets recorded in the Company's Balance Sheets.

 The Company's contract liabilities arise
as a result of unearned revenue received from customers at inception of contracts or where the timing of billing for services precedes
satisfaction of performance obligations. The Company generally satisfies performance obligations within one year from the contract inception
date.

 Contract liabilities, which were recorded as customer
advances in the Company's Balance Sheets, and unearned revenue are comprised of the following:

 Schedule of contract liabilities

 Year Ended June 30,

 2025

 2024

 Contract liabilities, beginning of period

 $
 1,172,350

 $
 1,174,690

 Unearned revenue received from customers

 1,364,332

 1,946,946

 Revenue recognized

 ( 714,753
)

 ( 1,949,286
)

 Contract liabilities, end of period

 $
 1,821,929

 $
 1,172,350

 (c)

 Cash and Cash Equivalents

 The Company includes in cash equivalents all highly
liquid investments with original maturities of three months or less at the time of acquisition. Cash and cash equivalents of $ 1,773,735
and $ 405,278 on June 30, 2025 and 2024, respectively, consist primarily of cash at banks and money market funds. The Company maintains
its cash and cash equivalents in bank deposit accounts that, at times, may exceed federally insured limits. The Company has not experienced
any losses in such accounts. The Company believes it is not exposed to any significant credit risk on its cash and cash equivalents.

 (d)

 Inventories

 Inventories are stated at the lower of cost (first-in,
first-out) and net realizable value and include material, labor and manufacturing overhead. The components of inventories on June 30,
2025 and 2024 are as follows:

 Schedule of inventory

 2025

 2024

 Raw material

 $
 1,799,624

 $
 1,570,135

 Work-in-progress

 598,720

 157,406

 Finished goods

 1,163,768

 1,140,559

 Total Inventories (Net)

 $
 3,562,112

 $
 2,868,100

 F- 8

 The Company provides for estimated
obsolescence on unmarketable inventory based upon assumptions about future demand and market conditions. If actual demand and market
conditions are less favorable than those projected by management, additional inventory write-downs may be required. Inventory, once
written down, is not subsequently written back up, as these adjustments are considered permanent adjustments to the carrying value
of the inventory. The reserve for excess and obsolete inventory for the years ended June 30, 2025 and 2024, were $ 272,894
and $ 266,843,
respectively.

 (e)

 Fixed Assets

 Fixed assets are recorded at cost. Maintenance
and repair items are expensed as incurred. The Company provides for depreciation and amortization by charges to operations, using the
straight-line and declining-balance methods, which allocate the cost of fixed assets over the following estimated useful lives:

 Schedule of estimated useful lives

 Asset Classification

 Estimated Useful Life

 Machinery and equipment

 2-7 years

 Leasehold improvements

 Shorter of lease term or estimated useful life

 Furniture and fixtures

 5 years

 Depreciation expense was $ 186,990 and $ 212,382
for the years ended June 30, 2025 and 2024, respectively.

 (f)

 Significant Customers and Concentration of Credit Risk

 Financial instruments that subject the Company
to credit risk consist primarily of cash equivalents and trade accounts receivable. The Company places its investments with highly rated
financial institutions. The Company has not experienced any losses on these investments to date. At June 30, 2025, and 2024, two
individual customers accounted for more than 10 % of the Company's total accounts receivable.

 The allowance for credit losses was $ 80,192 at
June 30, 2025, and $ 118,872 at June 30, 2024.

 Schedule of allowance for credit losses

 Year Ended June 30,

 2025

 2024

 Allowance for credit losses, beginning of period

 $
 118,872

 $
 606,715

 Change in the provision for expected credit losses

 ( 44,858
)

 ( 23,541
)

 Writeoffs charged against the allowance

 6,178

 ( 464,302
)

 Allowance for credit losses, end of period

 $
 80,192

 $
 118,872

 The Company generally does not require collateral
or other security as a condition of sale, rather it relies on credit approval, balance limitation and monitoring procedures to control
credit risk in trade account financial instruments. Management believes the allowance for credit losses, which is established based upon
review of specific account balances and historical experience, is adequate at June 30, 2025.

 (g)

 Loss per Share

 Basic income (loss) per share is computed by dividing
net income or net loss by the weighted average number of shares of common stock outstanding during the period. Diluted income (loss) per
share is computed by dividing net income or net loss by the weighted average number of shares of common stock outstanding during the period,
plus the number of potentially dilutive securities outstanding during the period such as stock options and warrants. For the years ended
June 30, 2025 and 2024, the effect of such securities was antidilutive and not included in the diluted calculation because of the net
loss generated in those periods.

 F- 9

 The following is the calculation of loss per share
for the years ended June 30, 2025 and 2024:

 Schedule of loss per share

 Year Ended June 30,

 2025

 2024

 Net Loss– Basic and Diluted

 $
)

 $
)

 Basic and diluted weighted average shares outstanding

 6,790,466

 6,068,329

 Loss per share

 Basic and fully diluted

 $
 ( 0.85
)

 $
 ( 0.49
)

 The number of shares issuable upon the exercise
of outstanding stock options and warrants that were excluded from the computation as their effect was antidilutive was approximately 1,623,576
and 1,357,735 for the years ended June 30, 2025 and 2024, respectively.

 (h)

 Stock-Based Compensation

 The measurement and recognition of compensation
costs for all stock-based awards made to employees and the Board of Directors are based upon fair value over the requisite service period
for awards expected to vest. The Company estimates the fair value of share-based awards on the date of grant using the Black-Scholes option-pricing
model. Stock-based compensation costs recognized for the years ended June 30, 2025, and 2024 amounted to $ 1,612,106 and $ 959,784, respectively.

 (i)

 Goodwill and Patents

 Long-lived assets such as goodwill and patents
are capitalized when acquired and reviewed for impairment on an annual basis or whenever events or changes in circumstances indicate that
the book value of the asset may not be recoverable. Impairment of the carrying value of long-lived assets such as goodwill and patents
would be indicated if the best estimate of future undiscounted cash flows expected to be generated by the asset grouping is less than
its carrying value. If an impairment is indicated, any loss is measured as the difference between estimated fair value and carrying value
and is recognized in operating income or loss. Assets to be disposed of are reported at the lower of the carrying amount or fair value
less costs to sell. No such impairments of goodwill or patents have been estimated by management during the years ended June 30, 2025
or 2024. Amortization expense for the year ended June 30, 2025 and 2024 was $ 25,448 and $ 0, respectively.

 (j)

 Fair Value of Financial Instruments

 Financial instruments consist principally of cash
and cash equivalents, accounts receivable and accounts payable. The estimated fair value of these financial instruments approximates their
carrying value due to their short-term nature.

 (k)

 Research and Development

 Research and development expenses are charged
to operations as incurred. The Company groups development and prototype costs and related reimbursements in research and development.
There were no reimbursements for research and development recorded in research and development for the years ended June 30, 2025, and
2024.

 (l)

 Comprehensive Income

 Comprehensive income or loss is defined as the
change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.
The Company's comprehensive loss or income for the years ended June 30, 2025 and 2024 was equal to its net loss for the same periods.

 F- 10

 (m)

 Income Taxes

 Income taxes are accounted for under the asset
and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax
credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes the enactment date. In assessing the likelihood of utilization
of existing deferred tax assets, management has considered historical results of operations and the current operating environment.

 (n)

 Segment Reporting

 Operating segments are identified as components
of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker,
or decision-making group, in making decisions about how to allocate resources and assess performance. The Company's chief decision-maker
is its Chief Executive Officer. To date, the Company has viewed its operations and manages its business as principally one segment.

 (o)

 Use of Estimates

 The preparation of financial statements in conformity
with accounting standards generally accepted in the United States requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 (p)

 Recent Accounting Pronouncements

 In December 2023, the FASB issued ASU No. 2023-09,
Improvements to Income Tax Disclosures (Topic 740). The guidance requires disclosure of disaggregated income taxes paid, prescribes standardized
categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. The standard
will be effective for us beginning with our annual reporting for fiscal year 2026, with early adoption permitted. We are currently evaluating
the impact of this standard on our income tax disclosures.

 In November 2024, the FASB issued ASU 2024-03,
Income Statement - Reporting Comprehensive Income (Topic 220): Expense Disaggregation Disclosures. Additionally, in January 2025, the
FASB issued ASU 2025-01 to clarify the effective date of ASU 2024- 03. This ASU provides guidance to expand disclosures related to the
disaggregation of income statement expenses. This ASU also requires, in the notes to the financial statements, disclosure of specified
information about certain costs and expenses which includes purchases of inventory, employee compensation, depreciation, and intangible
asset amortization included in each relevant expense caption. ASU 2025-01 is effective for fiscal years beginning after December 15, 2026,
and interim periods within annual reporting periods beginning after December 15, 2027, on a retrospective or prospective basis, with early
adoption permitted. This ASU will be effective for the Company's Form 10-K for fiscal 2028 and Form 10-Q filed thereafter. The Company
is currently evaluating the impact this ASU may have on our financial statement disclosures.

 (2)

 COMMITMENTS

 (a)

 Bank Financing Activities

 Bank Term Loan and Line of Credit

 On October 4, 2021, the Company entered into a
Loan Agreement with Main Street Bank of Marlborough, Massachusetts (the "Lender"), which provided for a $2,600,000 Term Loan
and a $250,000 Revolving Line of Credit Loan Facility (the "Revolver"), which was increased to $500,000 effective May 17,
2022, and $1,250,000 effective June 2, 2023. Borrowings under the Revolver are limited by the borrowing base comprised of a percentage
of accounts receivable and inventory and secured by all assets of the Company. Borrowings under the Revolver will bear interest payable
monthly at the prime lending rate plus 1.5% per annum and shall not be less than 4.75% per annum. Borrowings under the Revolver are due
upon demand. There were no borrowings under the Revolver at June 30, 2025.

 F- 11

 The Company's Loan Agreement with the Lender
contains a minimum annual debt service coverage ratio covenant of 1.2x. The Company did not meet this annual debt service coverage ratio
for the fiscal year ended June 30, 2024. The Company's Lender has agreed to waive compliance with such debt service ratio covenant
for the period ending June 30, 2024. In addition to such waiver, the Lender and the Company have entered into an amendment dated September
30, 2024 to that certain Term Loan dated October 4, 2021, as amended and that certain Promissory Note dated June 2, 2023 (collectively,
the "Notes") which amendments provide for a six-month period of interest only payments from October 15, 2024 through March
15, 2025 for the Notes. The Company commenced payments of principal and interest under the Notes beginning with the payments due on April
15, 2025, with a new amortization schedule for the remaining term for such Notes through their maturity date. On February 14, 2025, the
lender agreed to waive compliance with the annual debt service coverage ratio covenant for the fiscal year ending June 30, 2025, subject
to a $30,000 waiver fee and the completion of an equity raise of at least $4,500,000 by February 24, 2025, which the Company satisfied
on February 21, 2025. Any future advances are contingent on the Company achieving a minimum Debt Service Coverage ratio of 1.20x based
on quarterly testing. There were no other changes to or modifications to the Loan Agreement or the Notes.

 Long-Term Debt

 Long-term debt consists of the following at June
30, 2025 and 2024:

 Schedule of long-term debt

 2025

 2024

 Term Loan Note payable to Main Street Bank with monthly principal payments of $ 35,271, excluding six months in Fiscal 2025, plus interest at a fixed rate of 7.0 % per annum. Secured by all assets of the Company, and subject to certain periodic reporting to the bank and other conditions including an annual minimum EBITDA plus stock-based compensation to debt service coverage ratio of 1.20:1 commencing with the fiscal year ending June 30, 2023. The Term Loan Note matures on October 15, 2028.

 $
 1,410,853

 $

 1,609,524

 Permanent Working Capital Loan payable to Main Street Bank with monthly principal payments of $ 14,423, excluding six months in Fiscal 2025, plus interest at a fixed rate of 8.625 % per annum. Secured by all assets of the Company, and subject to certain periodic reporting to the bank and other conditions including an annual minimum EBITDA plus stock-based compensation to debt service coverage ratio of 1.20:1 commencing with the fiscal year ending June 30, 2023. The Permanent Working Capital Loan matures on June 15, 2028.

 519,231

 600,000

 Less current maturities

 ( 577,898
)

 ( 276,928

)

 Less debt issuance costs, net of accumulated amortization of $ 29,756
 and $14,360, respectively.

 ( 62,981
)

 ( 33,544

)

 Long-term debt, net of current portion of debt issuance costs

 $
 1,289,205

 $

 1,899,052

 At June 30, 2025 principal payments due
on long-term debt are as follows:

 Schedule of principal payments due on term loan note payable

 Fiscal Year Ending June 30:

 2026

 $
 596,333

 2027

 596,333

 2028

 596,333

 2029

 141,085

 Total long-term debt

 $
 1,930,084

 F- 12

 (b)

 Lease Obligation

 In March 2021 the Company entered into a five-year
capital lease in the amount of $ 161,977 and in January 2020, the Company entered into a five-year capital lease for $ 47,750, both for
manufacturing equipment. The net book value of fixed assets under capital lease obligations as of June 30, 2025 is $ 27,368.

 On July 1, 2019 the Company entered into a three-year
operating lease for its facility in El Paso, Texas, and in February 2022 the Company entered into an extension of the lease for an additional
three years through June 2025. In May 2025, this lease was extended for an additional three years through May 2028. Remaining minimum
lease payments at June 30, 2025 total $ 148,029. Total lease costs including base rent and common area expenses was $ 67,552 and $ 64,621
during the fiscal years ended June 30, 2025 and 2024, respectively. On October 4, 2021 the Company assumed the remaining term of the Windham
Maine lease as part of the Lighthouse acquisition. The lease expired on July 31, 2025. Remaining minimum lease payments at June 30, 2025
total $ 11,477. Total lease costs including base rent and common area expenses was $ 137,728 and $ 137,728 during the fiscal year ended June
30, 2025 and 2024, respectively. The amount of variable lease payments is immaterial. Included in the accompanying balance sheet at June
30, 2025 is a right-of-use asset of $ 141,825 and current and long-term right-of-use operating lease liabilities of $ 50,995 and $ 90,954,
respectively.

 On May 15, 2025 the Company entered into an seven-year
lease in South Portland, Maine with two five-year extension options. On June 2, 2025 the Company entered into a seven-year operating lease
in Littleton, Massachusetts with two five-year extension options.

 As of June 30, 2025, the Company had entered into
additional operating leases with total fixed payment obligations of $ 3.8 million that have not yet commenced. The leases are expected
to commence in fiscal year 2026 and have initial lease terms of approximately 8 years.

 At June 30, 2025 future minimum lease payments
under the capital lease and operating lease obligations are as follows:

 Schedule of future minimum lease payments under capital lease and operating lease obligations

 Fiscal Year Ending June 30:

 Capital Leases

 Operating Lease

 2026

 $
 28,004

 $
 60,819

 2027

 –

 50,823

 2028

 –

 47,864

 Total Minimum Payments

 28,004

 159,506

 Less: amount representing interest

 17,557

 Present value of minimum lease payments

 27,368

 141,949

 Less: current portion

 27,368

 50,995

 Future minimum long-term lease liability

 $
 –

 $
 90,954

 The Company's four facilities in Gardner,
Massachusetts, which are used for offices, production and storage spaces, are leased primarily on a tenant-at-will basis. Rent expense
on these operating leases was $ 206,309 and $ 200,678 for the fiscal years ended June 30, 2025 and 2024, respectively.

 (3)

 STOCKHOLDERS' EQUITY

 (a)

 Stock-Based Compensation Expense

 The following table summarizes stock-based compensation
expense for the years ended June 30:

 Schedule of stock-based compensation
expense

 2025

 2024

 Cost of Goods Sold

 $
 154,559

 $
 93,713

 Selling, General and Administrative Expenses

 1,457,547

 866,071

 Stock Based Compensation Expense

 $
 1,612,106

 $
 959,784

 F- 13

 As of June 30, 2025, the unrecognized compensation
costs related to options vesting in the future was $ 1,409,980. No compensation has been capitalized because such amounts would have been
immaterial. There was no net income tax benefit recognized related to such compensation for the years ended June 30, 2025, or 2024, as
the Company is currently in a loss position. There were 520,000 stock options granted during the year ended June 30, 2025, and 285,527
stock options granted during the year ended June 30, 2024.

 The Company uses the Black-Scholes option-pricing
model as the most appropriate method for determining the estimated fair value for the stock awards. The Black-Scholes method of valuation
requires several assumptions: (1) the expected term of the stock award; (2) the expected future stock volatility over the expected term;
and (3) risk-free interest rate. The expected term represents the expected period of time the Company believes the options will be outstanding
based on historical information. Estimates of expected future stock price volatility are based on the historic volatility of the Company's
common stock, and the risk-free interest rate is based on the U.S. Zero-Bond rate. The Company utilizes a forfeiture rate based on an
analysis of the Company's actual experience. The fair value of options at date of grant was estimated with the following assumptions
for options granted in fiscal year 2025:

 Schedule of fair value of option assumptions

 Year Ended

 June 30, 2025

 June 30, 2024

 Assumptions:

 Option life

 6.25 years

 6.25 years

 Risk-free interest rate

 4.02 - 4.52 %

 4.35 - 4.47 %

 Weighted average stock volatility

 98.12 %

 99.4 %

 Dividend yield

 0.0 %

 0.0 %

 Weighted average fair value of grants

 $
 3.84

 $
 4.69

 (b)
 Stock Option Plans

 The type of share-based payments currently utilized
by the Company is stock options.

 The Company has four stock option plans outstanding
as of June 30, 2025, namely the Precision Optics Corporation, Inc. 2022 Equity Incentive Plan (the "2022 Plan"), the Precision
Optics Corporation, Inc. 2021 Equity Incentive Plan (the "2021 Plan"), the Precision Optics Corporation, Inc. 2011 Equity
Incentive Plan (the "2011 Plan") and the Precision Optics Corporation, Inc. 2006 Equity Incentive Plan (the "2006 Plan").
Vesting periods under each of the Plans are at the discretion of the Board of Directors and typically average three years and in some
instances are subject to future performance criteria. Options under these Plans are granted at fair market value on the date of grant
and typically have an initial term of ten years from the date of grant, subject to certain cancellation provisions such as upon employment
termination. The Company has filed Registration Statements on Form S-8 with the Securities and Exchange Commission to register all shares
of common stock issuable under the 2022, 2021, 2011, and 2006 Plans.

 On April 8, 2022, our Shareholders approved the
2022 Plan which provides eligible participants (certain employees, directors, consultants, etc.) the opportunity to receive a broad variety
of equity based and cash awards. A maximum of 933,333 shares of the Company's common stock may be issued pursuant to stock options
or other awards under the 2022 Plan. At June 30, 2025, options for a total of 876,091 shares of common stock were outstanding and 57,242
shares of common stock were available for future grants under the 2022 Plan. The 2022 Plan permits the Board of Directors to authorize
and increase up to 5% of the then outstanding shares on an annual basis.

 On May 10, 2021, our Board of Directors approved
the 2021 Plan which likewise authorizes a broad variety of equity based and cash awards. A maximum of 333,333 shares of the Company's
common stock may be issued under the 2021 Plan. At June 30, 2025, options for a total of 264,495 shares of common stock were outstanding
under the 2021 Plan. No further shares may be issued from this plan.

 The 2011 Plan and 2006 Plan likewise provided
for a broad variety of equity based and cash awards, but terminated in 2021 and 2016, respectively. At June 30, 2025, options for 482,990
shares of common stock were outstanding under the 2011 Plan. At June 30, 2025, options for a total of zero shares of common stock were
outstanding under the 2006 Plan.

 F- 14

 The following tables summarize stock option activity
for the years ended June 30, 2025 and 2024:

 Schedule of stock option activity

 Options Outstanding

 Number of
 Shares

 Weighted
 Average
 Exercise Price

 Weighted
 Average
 Contractual
 Life

 Outstanding at June 30, 2023

 1,127,140

 $
 4.54

 6.88 years

 Grants

 285,257

 5.76

 Exercised

 ( 10,332
)

 2.70

 Cancellations

 ( 44,330
)

 4.18

 Outstanding at June 30, 2024

 1,357,735

 $
 4.72

 6.60 years

 Grants

 520,000

 4.78

 Exercised

 ( 129,329
)

 2.79

 Cancellations

 ( 84,664
)

 5.34

 Outstanding at June 30, 2025

 1,623,576

 $
 4.85

 7.15 years

 The aggregate intrinsic value of the Company's
"in-the-money" outstanding and exercisable options as of June 30, 2025, was $ 833,438 and $ 787,363, respectively.

 (c)

 Sale of Stock in August 2024

 On August 14, 2024, the Company entered into agreements
with certain institutional and accredited investors, in addition to certain directors and officers of the Company, for the sale and purchase
of 265,868 shares of the Company's common stock pursuant to a registered direct offering at a purchase price of $ 5.25 per share
for the institutional and unaffiliated accredited investors and $ 5.79 per share for the directors and officers, resulting in gross proceeds
of approximately $1.4 million before deducting placement agent commissions and other estimated offering expenses. Net proceeds were approximately
$ 1.2 million.

 (d)

 Sale of Stock in February 2025

 On February 19, 2025, the Company entered into
agreements with certain institutional and accredited investors for the sale and purchase of 1,272,500 unregistered shares of its common
stock, $ 0.01 par value at a purchase price of $ 4.00 per share, resulting in gross proceeds of approximately $ 5.1 million before deducting
placement agent commissions and other estimated offering expenses. The Company used the net proceeds from this placement for general
working capital needs and paydown of the Company's line of credit.

 (4)

 INCOME TAXES

 The Company has identified its federal tax return
and its state tax return in Massachusetts as "major" tax jurisdictions. The periods subject to examination for its federal
and state income tax returns are the years ended in 2018 and thereafter. The Company believes its income tax filing positions and deductions
will be sustained on audit and it does not anticipate any adjustments that would result in a material change to its financial position.
Therefore, no liabilities for uncertain income tax positions have been recorded.

 The provision for income taxes in the accompanying
consolidated statements of operations consists of the state income tax liability of $ 1,936 for the years ended June 30, 2025, and 2024.

 F- 15

 A reconciliation of the federal statutory rate
to the Company's effective tax rate for the fiscal years ended June 30, 2025 and 2024 is as follows:

 Schedule of effective income tax rate reconciliation

 2025

 2024

 Income tax expense (benefit) at federal statutory rate

 ( 21.0
)%

 ( 21.0
)%

 Increase (decrease) in tax resulting from:

 State taxes, net of federal benefit

 ( 6.3
)%

 ( 6.3
)%

 Change in valuation allowance

 20.8
 %

 16.3
 %

 Stock based compensation

 6.9
 %

 10.5
 %

 Nondeductible items

 ( 0.4
)%

 0.4
 %

 Effective tax rate

 0.0

 %

 0.0
 %

 The components of deferred tax assets and liabilities
at June 30, 2025 and 2024 are approximately as follows:

 Schedule of deferred tax assets and liabilities

 2025

 2024

 Deferred tax assets:

 Net operating loss carry forwards

 $
 4,854,000

 $
 3,999,000

 Tax credit carry forwards

 338,000

 353,000

 Reserves and accruals not yet deducted for tax purposes

 778,000

 254,000

 Total deferred tax assets

 5,970,000

 4,606,000

 Valuation allowance

 ( 5,970,000
)

 ( 4,606,000
)

 Net deferred tax asset

 $
 –

 $
 –

 The Company has provided a valuation allowance
to reduce the net deferred tax asset to an amount the Company believes is "more likely than not" to be realized.

 At June 30, 2025, the Company had federal and
state net operating loss carry forwards of approximately $ 23,116,000 and $ 11,674,000, respectively, which will, if not used, expire at
various dates beginning in fiscal year 2026.

 (6)

 PROFIT SHARING PLAN

 The Company has a defined contribution 401(k)
profit sharing plan. Employer profit sharing and matching contributions to the plan are discretionary. No employer profit sharing or matching
contributions were made to the plan in fiscal years 2025 and 2024.

 F- 16

 ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

 None.

 ITEM 9A. CONTROLS AND PROCEDURES.

 Management's Evaluation of Disclosure Controls and Procedures

 Our Chief Executive Officer and our Chief Financial
Officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report
on Form 10-K. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure
controls and procedures were effective as of June 30, 2025.

 Management's Annual Report on Internal
Control Over Financial Reporting

 Our disclosure controls and procedures include
components of our internal control over financial reporting. In designing and evaluating our disclosure controls and procedures, management
recognizes that any controls, no matter how well designed and operated, can provide only reasonable, but not absolute, assurance that
misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, with our Company have been
detected.

 Under the supervision and with the participation
of our management, including our Chief Executive Officer and our Chief Financial Officer, we conducted an assessment of the effectiveness
of our internal control over financial reporting as of June 30, 2025. In making this assessment, management used the criteria set forth
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework
(2013). Based on our evaluation, our management concluded that our internal control over financial reporting was effective as of June
30, 2025.

 Changes in Internal Control over Financial
Reporting

 There has been no change in our internal control
over financial reporting that occurred during the fiscal year covered by this Annual Report on Form 10-K that has materially affected,
or is reasonably likely to materially affect, our internal control over financial reporting.

 ITEM 9B. OTHER INFORMATION.

 During the three months ended June 30, 2025, no
director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading
arrangement," as each term is defined in Item 408(a) of Regulation S-K.

 ITEM 9C. DISCLOSURE
REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

 Not applicable.

 ITEM 10. DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

by reference to the applicable information set forth in the Proxy Statement for the 2025 Annual Meeting of Stockholders.

 Our Board of Directors has adopted a written Code
of Business Conduct and Ethics applicable to all officers, directors and employees, which has been filed as an exhibit to this Annual
Report.

 ITEM 11. EXECUTIVE
COMPENSATION.

by reference to the applicable information set forth in the Proxy Statement for the 2025 Annual Meeting of Stockholders.

 ITEM 12. SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

by reference to the applicable information set forth in the Proxy Statement for the 2025 Annual Meeting of Stockholders.

 ITEM 13. CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

by reference to the applicable information set forth in the Proxy Statement for the 2025 Annual Meeting of Stockholders.

 ITEM 14. PRINCIPAL
ACCOUNTING FEES AND SERVICES.

by reference to the applicable information set forth in the Proxy Statement for the 2025 Annual Meeting of Stockholders.

 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

 a.

 Documents filed as part of this report

 The following documents are filed as part of this Annual Report
on 10-K:

 1.

 FINANCIAL STATEMENTS

 The following documents are filed in Part II, Item 8 of
this Annual Report on Form 10-K:

 Report of Independent Registered Public Accounting Firm

 Balance Sheets at June 30, 2025 and 2024

 Statements of Operations for the years ended June 30, 2025 and 2024

 Statements of Stockholders' Equity for the years
ended June 30, 2025 and 2024

 Statements of Cash Flows for the years ended June 30,
2025 and 2024

 Notes to Financial Statements

 2.

 FINANCIAL STATEMENT SCHEDULES

 All financial statement schedules have been omitted
as they are not required, not applicable, or the required information is otherwise included.

 b.

 Exhibits

 The exhibits listed below are filed with or incorporated by reference
in this report.

 Exhibit

 Description

 3.1

 Restated
 Articles of Organization of Precision Optics Corporation, Inc. (included
 as Exhibit 3.1 to the Form 10-K filed September 28, 2023, and incorporated herein by reference).

 3.2

 Amended
 and Restated Bylaws of Precision Optics Corporation, Inc. (included
 as Exhibit 3.1 to the Current Report on Form 8-K filed July 11, 2014, and incorporated herein by reference).

 3.3

 Amendment
 to the Amended and Restated Bylaws of Precision Optics Corporation, Inc. effective May 13, 2022 (included
 as exhibit 3.5 to the Form 10-Q filed May 16, 2022, and incorporated herein by reference).

 3.4

 Articles
 of Amendment to the Amended Articles of Organization as filed with the Commonwealth of Massachusetts on October 24, 2022; and Articles
 of Amendment as filed with the Commonwealth of Massachusetts on October 26, 2022, to override the earlier amendment (included
 as Exhibit 3.1 to the Current Report on Form 8-K filed November 2, 2022, and incorporated herein by reference).

 3.5

 Articles
 of Amendment to the Amended Articles of Organization as filed with the Commonwealth of Massachusetts on October 27, 2022, to set
 revised effective date of reverse stock split (included
 as Exhibit 3.2 to the Current Report on Form 8-K filed November 2, 2022, and incorporated herein by reference).

 4.1

 Form of Common Stock Certificate (incorporated by
 reference from Exhibit 4.1 to the annual report on Form 10-K filed on September 30, 2024).

 4.2

 Description of Securities (incorporated by reference from
 Exhibit 4.2 to the annual report on Form 10-K filed on September 30, 2024)

 Exhibit

 Description

 10.1

 Precision Optics Corporation, Inc. 2011 Equity Incentive Plan, dated October 13, 2011 (included as Exhibit 10.2 to Form S-8 filed October 14, 2011, and incorporated herein by reference.)

 10.2

 Precision Optics Corporation, Inc. Amended 2011 Equity Incentive Plan, dated October 14, 2011, as amended on April 16, 2015 (included as Exhibit 10.1 to the Company's Registration Statement on Form S-8 filed April 20, 2015, and incorporated herein by reference).

 10.3

 Compensation Agreement, by and between the Company and Joseph N. Forkey, dated August 2, 2018 (included as Exhibit 10.1 to the Form 8-K filed on August 3, 2018, and incorporated herein by reference).

 10.4

 Form of Purchase Agreement, by and among Precision Optics Corporation, Inc. and several Investors, dated July 1, 2019 (included as Exhibit 10.2 to the Form 8-K filed on July 8, 2019, and incorporated herein by reference).

 10.5

 Form of Registration Rights Agreement, by and among Precision Optics Corporation, Inc. and several Investors, dated July 1, 2019 (included as Exhibit 10.3 to the Form 8-K filed on July 8, 2019, and incorporated herein by reference

 10.6

 Employment Agreement, by and among Precision Optics Corporation. Inc. and Divaker Mangadu, dated July 1, 2019 (included as Exhibit 10.4 to the Form 8-K filed on July 8, 2019, and incorporated herein by reference).

 10.7

 Employment Agreement, by and among Precision Optics Corporation, Inc. and Jeff DiRubio, dated April 26, 2019 (included as Exhibit 10.16 to the annual report on Form 10-K filed on September 26, 2019, and incorporated herein by reference).

 10.8+

 Lease Agreement, by and among Precision Optics Corporation, Inc. and Texzona Industries Ltd. dated July 1, 2019 (included as Exhibit 10.17 to the annual report on Form 10-K filed on September 26, 2019, and incorporated herein by reference).

 10.9 +

 Asset Purchase Agreement, dated October 4, 2021, by and among Precision Optics Corporation, Inc. and Lighthouse Imaging, LLC and Anania & Associates Investment Company, LLC (included as Exhibit 10.1 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).

 10.10

 Form of Securities Purchase Agreement, by and among Precision Optics Corporation, Inc. and several Investors, dated October 4, 2021 (included as Exhibit 10.2 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).

 10.11

 Form of Registration Rights Agreement, by and among Precision Optics Corporation, Inc. and several Investors, dated October 4, 2021 (included as Exhibit 10.3 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).

 10.12+

 Loan Agreement dated October 4, 2021, by and among Precision Optics Corporation, Inc. and Main Street Bank (included as Exhibit 10.4 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).

 10.13

 $250,000 Revolving Line of Credit Note dated October 4, 2021 (included as Exhibit 10.5 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).

 10.14

 $2,600,000 Term Loan Note dated October 4, 2021 (included as Exhibit 10.6 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).

 10.14

 Security Agreement dated October 4, 2021, by and among Precision Optics Corporation, Inc. and Main Street Bank (included as Exhibit 10.7 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).

 Exhibit

 Description

 10.16

 Director
 side letter agreement dated October 4, 2021 (included
 as Exhibit 10.8 to the current report on Form 8-K filed on October 8, 2021, and incorporated herein by reference).

 10.17

 Precision
 Optics Corporation, Inc. 2022 Equity Incentive Plan (included
 as Appendix B to the proxy statement on Form DEF14A filed on February 24, 2022, and incorporated herein by reference).

 10.18

 Second
 Amendment to Loan Agreement dated June 2, 2023, by and between Precision Optics Corporation, Inc. and Main Street Bank (included as Exhibit 10.1 to the current report on Form
 8-K filed on June 7, 2023, and incorporated herein by reference).

 10.19

 $750,000
 Promissory Note dated June 2, 2023 (included
 as Exhibit 10.2 to the current report on Form 8-K filed on June 7, 2023, and incorporated herein by reference).

 10.20

 Second
 Amendment to Demand Revolving Line of Credit Note dated June 2, 2023, by and between Precision Optics Corporation, Inc. and Main
 Street Bank (included as Exhibit 10.3 to the
 current report on Form 8-K filed on June 7, 2023, and incorporated herein by reference).

 10.21

 Form
 of Securities Purchase Agreement, by and among Precision Optics Corporation, Inc. and several investors, dated June 15, 2023 (included as Exhibit 10.1 to the current report on Form
 8-K filed on June 20, 2023, and incorporated herein by reference).

 10.22

 Form
 of Registration Rights Agreement, by and among Precision Optics Corporation, Inc. and several investors, dated June 15, 2023 (included as Exhibit 10.2 to the current report on Form
 8-K filed on June 20, 2023, and incorporated herein by reference).

 10.23

 Placement
 Agent Agreement, by and between Precision Optics Corporation, Inc. and A.G.P./Alliance Global Partners, dated June 15, 2023 (included as Exhibit 10.3 to the current report on Form
 8-K filed on June 20, 2023, and incorporated herein by reference).

 10.24

 Employment
 Agreement dated March 30, 2023 between Precision Optics Corporation, Inc. and Mahesh Lawande (included
 as Exhibit 10.31 to the Form S-1 filed July 20, 2023, and incorporated herein by reference).

 10.25

 Employment
 Agreement dated June 7, 2023 between Precision Optics Corporation, Inc. and Wayne M. Coll (included
 as Exhibit 10.31 to the Form S-1 filed July 20, 2023, and incorporated herein by reference).

 10.26

 Modification
 to Employment Agreement by and between Precision Optics Corporation, Inc. and Jeffrey L. DiRubio dated June 29, 2024 (included
 as Exhibit 10.1 to the current report on Form 8-K filed on July 3, 2024, and incorporated herein by reference).

 10.27

 Consulting
 Agreement by and between Precision Optics Corporation, Inc. and Jeffrey L. DiRubio dated June 29, 2024 (included
 as Exhibit 10.2 to the current report on Form 8-K filed on July 3, 2024, and incorporated herein by reference).

 10.28

 Form
 of Securities Purchase Agreement for August 13, 2024 securities offering (included
 as Exhibit 10.1 to the current report on Form 8-K filed on August 14, 2024, and incorporated herein by reference).

 10.29

 Placement
 Agency Agreement between Precision Optics Corporation, Inc and A.G.P./Alliance Global Partners (included
 as Exhibit 10.2 to the current report on Form 8-K filed on August 14, 2024, and incorporated herein by reference).

 10.30

 Modification and Amendment of Term Note dated September 30, 2024 by and between Precision Optics Corporation, Inc. and Main Street Bank (incorporated by reference from Exhibit 10.30 to the annual
 report on Form 10-K filed on September 30, 2024)

 Exhibit

 Description

 10.31

 Modification and Amendment of Promissory Note dated September 30, 2024 by and between Precision Optics Corporation, Inc. and Main Street Bank (incorporated by reference from Exhibit 10.31 to the annual
 report on Form 10-K filed on September 30, 2024)

 10.32

 Form of Securities Purchase Agreement dated February 19, 2025 (incorporated by reference from Exhibit 10.1 to the current report on Form 8-K filed on February
 20, 2025)

 10.33

 Waiver Letter from Main Street Bank dated February 14, 2025 (incorporated by reference from Exhibit 10.2 to the current report on Form 8-K filed on February
 20, 2025)

 10.34

 First Lease Extension Agreement, dated May 13, 2025, by and between Texzona Industries, Inc and Precision Optics Corporation, Inc. (incorporated by reference from
 Exhibit 10.1 to the current report on Form 8-K filed on May 19, 2025)

 10.35

 Lease, dated May 14, 2025, by and between 400 Southborough, LLC and Precision Optics Corporation, Inc. (incorporated by reference from Exhibit 10.1 to the current
 report on Form 8-K filed on May 20, 2025)

 14.1

 Precision
 Optics Corporation, Inc. Corporate Code of Ethics and Conduct (included
 as Exhibit 14.1 to the Form 10-K filed September 28, 2008, and incorporated herein by reference).

 19.1

 Insider Trading Policy (incorporated by reference from
 Exhibit 19.1 to the annual report on Form 10-K filed on September 30, 2024)

 23.1*

 Consent of Independent Registered Public Accounting Firm.

 31.1*

 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 31.2*

 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 32.1*

 Certification of Officers pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 97.1

 Precision Optics, Corporation, Inc. Restatement Recoupment Policy (incorporated
 by reference from Exhibit 97.1 to the annual report on Form 10-K filed on September 30, 2024)

 101.INS*

 101.SCH*

 Schema Document

 101.CAL*

 Calculation Linkbase Document

 101.DEF*

 Definition Linkbase Document

 101.LAB*

 Label Linkbase Document

 101.PRE*

 Presentation Linkbase Document

 104*

 Cover Page Interactive

 *

 Filed Herewith.

 Certain portions of the agreement have been omitted to preserve the confidentiality of such information. The Company will furnish copies of any such information to the SEC upon request.

 +

 The schedules to agreement have been omitted from this filing pursuant to Item 601(a)(5) of Regulation S-K. The Company will furnish copies of any such schedules to the SEC upon request.

 Copies of above exhibits not contained herein
are available to any stockholder, upon written request to: Chief Financial Officer, Precision Optics Corporation, Inc., 22 East Broadway,
Gardner, MA 01440.

 ITEM 16. FORM 10-K SUMMARY.

 None.

 SIGNATURES

 Pursuant to the requirements of Section 13
or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

 Date: September 29, 2025

 By:

 /s/ Joseph N. Forkey

 Joseph N. Forkey

 President and Chief Executive Officer

 (Principal Executive Officer)

 Date: September 29, 2025

 By:

 /s/ Wayne M. Coll

 Wayne M. Coll

 Chief Financial Officer

 (Principal Financial Officer and Principal Accounting Officer)

 Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.

 Signature

 Capacity

 Date

 /s/ Joseph N. Forkey

 Joseph N. Forkey

 Chief Executive Officer, President, Treasurer and Director

(Principal Executive Officer)

 /s/ Wayne M. Coll

 Wayne M. Coll

 Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

 /s/ Buell V. Duncan

 Director

 Buell V. Duncan

 /s/ Andrew J. Miclot

 Director

 Andrew J. Miclot

 /s/ Joseph P. Pellegrino

 Director

 Joseph P. Pellegrino

 /s/ Peter H. Woodward

 Director, Chairman

 Peter H. Woodward