Good day and welcome to the Precision Optics Reports Third Quarter of Fiscal Year 2022 Financial Results. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Robert Blum with Lytham Partners. Please go ahead.

All right. Thank you very much, Sara and thank all of you for joining us as we discuss Precision Optics' third quarter fiscal year 2022 financial results for the period ended March 31, 2022. With us on the call representing the company today are Dr. Joe Forkey, Precision Optics' Chief Executive Officer; and Dan Habhegger, the company's Chief Financial Officer. At the conclusion of today's prepared remarks, we'll open the call for a question-and-answer session. Today's conference call is also being webcast with replay capabilities available through both the webcast as well as through the dial-in instructions; the details of both were included in today's press release. Before we begin with prepared remarks, we submit for the record the following statements. Statements made by the management team of Precision Optics during the course of this conference call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended and such forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements describe future expectations, plans, results, or strategies, and are generally preceded by words such as may, future, plan or planned, will or should, expected, anticipates, draft, eventually, or projected. Listeners are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events or results to differ materially from those projected in the forward-looking statements, including the risk that actual results may differ materially from those projected in the forward-looking statements as a result of various factors and other risks identified in our filings with the Securities Exchange Commission. All forward-looking statements contained during this conference call speak only as of the date in which they were made and are based on management's assumptions and estimates as of such date. The company does not undertake any obligation to publicly update any forward-looking statements, whether as a result of the receipt of new information, the occurrence of future events or otherwise. So, with that said, let me turn the call over to Dr. Joe Forkey, Chief Executive Officer, Precision Optics. Joe, please proceed.

Thank you, Robert and thank you all for joining our call today to discuss our third quarter fiscal year 2022 financial results. As you can see from the results in the press release that we issued after the close, the third quarter was really a watershed for us as a number of initiatives we have been working on all came together to provide nice improvements in nearly every key business metric. Revenue of $4.7 million was up 89% year-over-year and excluding the effect of the Lighthouse acquisition, organic revenue was up 37% year-over-year. Sequentially, revenues were up 19% compared to the second quarter, including Lighthouse results in both quarters. Consolidated gross margins were 37%, which is the highest level since the September 2019 quarter and excluding Lighthouse, the historical business gross margins were over 40%. This has been a key corporate goal over the last few years and we are very pleased with the operating performance we have achieved to meet this benchmark. Importantly, on the bottom-line, we reported a positive adjusted EBITDA of $218,000 which is a new modern day record for the company. In addition to these great financial results, we also made progress on a number of other key initiatives, including the advancement of our intends to uplift our stock onto the NASDAQ Capital Market Exchange. We successfully received approval from shareholders at our annual meeting to effect the reverse split if needed and we have had a number of productive discussions with the Exchange uncertain other factors that are required for listing. We are working through the final details of the qualification with NASDAQ and hope to have additional updates for you on this in the near future. All told, I am very pleased with operational progress since our last conference call, as the vision we…

Thank you. We will now begin the question-and-answer session.

Sara, while wait to see if anyone likes to ask questions. I've got a couple here for you.

Sure.

Let's talk -- maybe let's chat a little bit about capacity. As you indicated, you've seen a ramp and revenue, an expectation of a further growth and revenue, maybe help everyone understand your manufacturing capacity to meet the demands from the various projects that we have here?

Yes, sure. So, capacity is certainly something that we pay very close attention to while we're going through this growth mode, for sure. It depends a little bit on the location. But in general, I think we have a ways to go before we will reach capacity in terms of our facilities. We're always hiring new people and while the labor market is tight, we've been successful in attracting people, both from the technical side as well as the administrative and the assembly and technician side. From a from a facility standpoint, which I think is probably the most relevant in terms of potential costs. We're looking pretty carefully. In Texas, I think we have quite a bit of room to go before we saturate that facility. In Maine, we're actively looking right now at other potential facility solutions because as I mentioned in our -- in the comments today, we do expect that the group at lighthouse in Maine will outgrow their facility, as some of these programs in the next 12 months go into production. So, we're actively looking for space there and having some success. In Massachusetts, we're actually in a in a pretty good place because we're far enough outside of Boston, that there's a fairly good amount of the kinds of production facilities that we need. We actually have one large facility near us, that we have been able to use as a bit of a flex space and in fact, we opened a new 2,500 square foot space there just in the last year to help support the single-use project that I've talked about a number of times, so and so in that case, in Massachusetts, we can flex that up pretty easily up and down as we need to. So, the main place that we're looking at right now is Maine. But as I say, we're on top of that and looking at it carefully, and we're well prepared for the for the needs that will come.

Okay. Are you seeing any sort of supply chain issues out there that might impact some of the various production projects that you have ongoing?

So, the answer is yes and we hope not, to those two parts of the question. So, I shouldn't say we hope not, we're actually taking some pretty active steps to deal with it. There are a couple of places. So, across the board, supply chain is a concern. From shipments taking longer to electronic components that are that are backordered for 12 months or longer. And really, our team has done a really good job because you have to deal with these things sort of on a case by case basis. But just to give you a couple of examples. The group and lighthouse in particular, uses a lot of electronic components. And that's one of the areas that's been impacted pretty significantly, they've done a good job of redesigning pretty quickly when they need to replace one component with another. And then in a number of places, they've actually -- with the support of our customers been placing long-term orders to have a year or even longer timeframe worth of the particular components even before the product gets into production, because our customers recognize as we do, that, some of these lower cost electronics items can hold things up. There's another place that we have to pay close attention to and that is in the area of glass supply. Many of the products that we make have very specific requirements in terms of glass pipe and glass supplier. Some of those suppliers come from Eastern Europe and with the with the war in Ukraine and the impact on energy supplies, there has been some talk of groups, for instance, in Germany, reducing the production rate of some of the glass types that we use. So, our team has been looking very carefully at -- in a very detailed way at those at those very specific things to make sure that we have enough material on hand. So, the short answer is yes, supply chain is an issue, it's a concern, but our team has done a great job of managing it so far and we'll continue to do that.

All right, maybe one more here. As it relates to aerospace and defense projects, you you've had some success here recently. Normally, these are not ones that sort of get included into your pipeline, those are all sort of medical device related projects. Has there been a sort of an uptick or a focus on aerospace defense here off-late given some of -- either with existing customers or with new customers?

Yes, there is. I think -- so we talk a lot about the medical device work, because given our recent history, we have a bigger footprint there. And now with the with the acquisition of Lighthouse, which was pretty much entirely medical device. The medical device work clearly dominates the pipeline, but as everyone can see from this project that we brought online into production a few months ago, at a $3 million a year run rate, there certainly are opportunities that can be significant to us in the defense and aerospace market. And so, again, the short answer is that we are pursuing those and pursuing those kinds of opportunities aggressively, there are two or three that are in the pipeline that are moving along nicely. I would quickly add, though that I think there are additional opportunities, now with the combination of POC with Lighthouse, because just like in the medical device space, having the added depth that we have with the Lighthouse team on board in the electronics side of things, makes us a stronger supplier, in the defense aerospace market. Just like it did in the medical device space, it also does in the defense aerospace market. And so we've had some of our existing customers, even in the defense space, already asked us for an introduction to the capabilities that we now have as a combined company. So, I think just like -- we've commented a couple of times on this -- the $3 million a year defense aerospace project really came from the combined capabilities of Ross Optical and POC when we merge those groups a couple of years ago, I think there'll be a number of new opportunities in the defense aerospace market that will come directly from the acquisition of Lighthouse. So, I think there's lots and lots of opportunity there for

All right, perfect. I'll leave it there. Sara, I'll turn it back over to you for instructions if there's any other questions.

Thank you. showing no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Thank you, Sarah. And thank you all for joining us on the call today. I look forward to speaking to all of you very soon. Thanks and have a good evening.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.