All right, hello, everyone. Thank you for continuing to join us throughout the day here at the Lytham Partners 2024 Investor Select Conference. My name is Robert Blum, Managing Partner of Lytham Partners. During this fireside chat, we welcome Precision Optics, ticker symbol of POCI on the NASDAQ, and joining us from the company, as always, is Dr. Joe Forkey, the company's Chief Executive Officer. Before we begin, I do wanna remind everyone that Joe and management are available for one-on-one meetings throughout the conference here today. If you've not already signed up for a one-on-one and would like to do so, you can shoot me an email. That's blum, b-l-u-m, @lythampartners.com, or you can visit our website, lythampartners.com/select2024. From there, you can click on the Investor Registration tab and get your selections in. If things don't work at the conference here today, we can certainly look to coordinate some meetings afterwards as well. With all that aside, Joe, thank you so much for joining us here today. Hi, Robert. Glad to be here. Great. Great. So let's sort of dive right in. I think we have about 30 minutes. For those not familiar with the company, let's sort of give a brief overview on the company and maybe a little bit on your background as well. Yeah, sure. So, Precision Optics, as the name implies, is an optics company. We're a technology company through and through. The company is 40 years old. My father started the company, so I know a lot about the history. The company today is really focused on three specific areas within optics. Optics is a very broad technology space, and as a small company, we recognize we have to be very focused. So today we focus on three specific areas. The first of those is 3D imaging, so we do some very unique and specific products that allow surgeons in particular to see things in three dimensions as opposed to two dimensions, which is typically what's on endoscopes. That's the first area. The second area is a little bit broader. It's in the area of digital imaging, and so we work a lot with so-called CMOS sensors. These are little chips that can go on the distal end of endoscopes or in other imaging systems. We do a lot with both the optics and the image signal processing, the electronics, and all the rest, so we can build entire systems that utilize digital imaging. And then the third area is one we've been working on for quite a few years, even decades, and that is in the area of micro-optics. We make some of the smallest individual optics in the world. We've made some optics as small as 50 microns, which is about the width of a human hair. We use our capability in micro-optics, both in the manufacturing and fabrication area, but also in the design area, to be able to design and manufacture new products that are very, very small and that can be used to image in very small spaces. So, that's the technology areas that we work in. We focus on two specific market areas because, again, we're a small company, so we need to be very focused. The first area, not surprisingly, is medical devices. We can make very small, minimally invasive surgery endoscopes. We can make endoscopes for robotic systems and such, and the technologies I just mentioned fit into those areas quite well. The second area that we're doing more and more with is in the defense aerospace industry, and the real push there is to make things smaller so that they're lighter and easier for the soldier to carry or to launch into the air or into space. So those are the two specific marketing markets that we work in. We have a very unique business model. We work with our customers early on in the design phase, so we basically present to them the technologies that we've developed, and if we believe, and they believe, that that technology can enable their new product, we work on the front end with them on the design. Importantly, we charge them for the work that we do, but we maintain the intellectual property that comes out of that work because at the end of the day, it's really built on the technology that we already have. Ideally, we work with the customer to get through the design phase and into production, and the idea with our business model is that as new programs go into production, they typically last for a long, long time. There are lots of barriers to entry for medical device and for defense, and so as long as we keep replenishing the engineering pipeline and continue to move products into production, we expect to be able to continue the growth that we've seen over the last few years. So that's a quick overview on the company. My background is tied to the company's 'cause, as I said, my father started the company back in 1982. I went off and did my own thing for many years. I worked in academia. I have a technical degree in math and physics. I have a PhD in applied physics, and then I did a postdoc in med school. And I discovered after I did that, when it came time for me to become a professor, that I really enjoyed the technology and the microscopes we were building more so than I did the scientific results. So I came back and joined the company, joined my father in 2003. I took over as CEO in 2011 when my father had to step down for medical reasons. He since has passed away. We came up with this new business model about seven or eight years ago. Fantastic. Thank you for that. You know, let's take a step back. As you said, long history company, the company's been around for 40 years. What have been the biggest changes that you've seen in sort of that, the optics industry, over that period of time, and how has that sort of shaped- Mm ... what it is that you're delivering to your customers? Yeah. Yeah, so the three areas that we focus on, really, the three technology areas really are built on top of the changes that have happened in the last 40 years. So for a long time, our customers have been looking for smaller systems. Minimally invasive surgery has been around for 20, 30, 40 years, and continuously, the focus areas that we focus on, the micro-optics very clearly focuses on getting smaller and smaller. 3D imaging focuses on getting better resolution, on being able to see things better than you could before. We've developed our parts of the technology that deal with the illumination systems, the imaging systems, the creation of the images. Adding digital imaging recently has helped us to contribute to the development on the electronic side as well. But part of what's allowed us to take these core optics capabilities, these core developments in making optics smaller and smaller, or in coming up with devices that can see in 3D, part of what's allowed us to capitalize on those particular hardcore optics pieces, if you like, that we've been working on, are some of the other advances that have been happening in sort of ancillary areas, and the biggest one of those is in the area of CMOS sensors. So CMOS sensors are a type of image sensor. It's what's used in all the cell phones today and in all the consumer electronics and imaging devices. The development that has come from the growth in the consumer imaging market, and in the automotive imaging market, for that matter, has allowed us to partner with companies like OmniVision, who's one of the world leaders in CMOS sensors, to be able to take the technology that they developed for those other areas and combine it with the small optics that we've been making in order to address the requirements for the medical device space, and now more and more for defense aerospace. So, smaller size, better resolution, and now with the ancillary electronic imaging, those things all combined have really allowed us, and others in the optics industry, to make smaller size sensors with better image quality and better kinds of imaging. You mentioned at the beginning, you sort of work with your customers at the beginning stages of the development process. You're sort of instrumental in leveraging- Mm-hmm ... your technology to ultimately produce an end product. What are... And it's probably these couple of key points that you mentioned here, but talk about sort of the key value-add areas that you are bringing to your customers, both on sort of the medical defense, or medical, device side, and on the aerospace defense. Yeah. Yeah, sure. So obviously, the main answer to that is the technologies that we've developed, right? Those are the things that really allow us to help our customers get to the products that they would like to have, that they can't find from anyone else in the world many times. So that's the first thing, is really the technology that we bring to the table. But beyond that, we've wrapped around that technology a company that is able to take our customers from the design stage all the way through to the mass manufacture. That's a bit unique, particularly for these kinds of core technologies. There are some competitors that we have that can make little, tiny lenses, but they don't know about the regulatory requirements for medical device or for defense, and they don't have a design team that can design an entire system, right? So part of the value that we bring to our customers, beyond the hardcore technology itself, is the infrastructure within one company to be able to take those ideas that our customers have, that are enabled by our technology, roll them into a design, and then help our customers move them into production, and then stay with our customers for the long term, in order to be able to produce those, indefinitely. And so, you know, all companies talk about it, but we really look for partners in our customers because we don't take on customers who are just doing designs. We always wanna have a customer that's gonna go to production, because ultimately, that's a critical part of our business model. What we found is, for our customers, there's great value for them to have one partner who can take the program from the very early conception stage all the way through to the mass manufacture. It really is the technology at its core is the real value to our customers, but having all the infrastructure that's required to help them with the design, the prototyping, the regulatory, and then on into the production for the long term, we find has additional value to our customers. You've got, you know, maybe 12 or so product programs that are sort of in that production. You've got another maybe couple dozen- Mm ... that are in the pipeline. Help for people, again, that may not be familiar, help them understand what these, these programs look like, right? What are the end market indications within medical device or, to the extent that you're able to talk about some of the aerospace and defense? Talk about sort of, where these end markets are, and then maybe afterwards I'll follow up and talk about some of the trends that are taking place in those markets. Yeah, sure. So on the medical side, I've already alluded to it quite a bit. The main area within medical device that most of our customers are in, not all of them, but most of them, are in the area of minimally invasive surgery. And so this really is the area of medicine where surgeons are using endoscopes in order to go into a naturally occurring orifice, into the mouth or the nose, or the ear, or someplace in the body, or they're going through a very small incision someplace in the body in order to do some kind of diagnostic or therapeutic procedure. This is why the benefit, that's- this is why there's great benefit to our capability to go smaller and smaller and smaller. The other part of medical device that we work on is for robotic surgery, and in particular, the places in robotic surgery where there are endoscopes involved. So it's really a marrying of the minimally invasive surgery with the robotic systems of today. And so in those cases, that's where we use a lot of our 3D endoscope technology, because in those cases, the surgeon is separated from the patient. They're manipulating and moving a robot. To be able to perceive things in 3D, in three dimensions, gives them a much better ability to control the robot and be able to move things. So those are sort of the two areas within a medical device that our technologies are most ideally suited to. On the defense aerospace side, there are a number of places where we believe our technology is used. We don't always know exactly what program or what the end use of the products we're making is, because we'll often make a sub-assembly for a defense contractor. But we do know that there are many applications in the defense and aerospace industry where our customers are using the acronym SWaP to try and describe where they're trying to go with new products and with redesigns of old products. And SWaP stands for size, weight, and power, and what this means is you wanna get to smaller size and weight. That's what's relevant to us using our micro-optics. The reason for that is pretty obvious, if the soldier is carrying a device, it's obvious that they can, they can carry more, they can do more if the device is lighter, and doesn't take up as much of their pack, right? Similarly, anything that's being launched on a plane or launched into space, the weight of that thing is gonna take up the limited space that's inside of that aircraft or inside of that rocket or satellite. And so you want those things to be smaller and smaller. So those are the sort of the kinds of things, kinds of programs that we're working on. On the defense side, there are a couple of areas in particular. One is directed energy weapons, which is laser weapons. The other is satellite communications, where you're trying to put things in space and then communicate with lasers from satellite to satellite or from a satellite down to Earth. And again, having smaller size optics to be able to do those things has great benefit when it comes to cost and size of the device or of the rocket and those sorts of things. So those are the main areas on the defense aerospace side. You have talked on quarterly conference calls, press releases, other areas, about single use, about sort of the end market adoption of certain products, sort of the growth that's sort of beating traditional reusable devices. Talk about what you sort of see as the end market, and maybe how you go about trying to evaluate which projects you're gonna work on- Yeah ... so that ultimately down the road, you are participating in a bigger market. You're not an investor, but in some ways you're an investor, right? You, you- Yeah, that's right. The end market applicability is for a project- Yeah ... that you may ultimately work on. Yeah. Yeah, so you touched on a couple of things there, Robert. Let me, let me see if I can comment briefly on a, on a couple different things there. So the first is single-use. So we have talked on recent calls and, and really over the last few years, about the movement within minimally invasive surgery to single-use endoscopes. And so this is sort of getting even one layer deeper than, than the answer to the last question, which is that in medical device, we're working on basically endoscopic systems. Much of the endoscopic market is moving into a place where the endoscopes are used once and then discarded. The main driver for this, of course, is that for a reusable endoscope, that scope has to be sterilized after it's used on one patient before it's used on the next patient, and there have been cases where that sterilization process is not 100% efficient, and so, a patient will contract a disease while they're undergoing a procedure for something else, and sometimes this has led to very, dire consequences, including death. So there's a big interest in the industry to being able to go to single use. There are a lot of other requirements, of course, that go with that, the most important of which, or most challenging, I should say, of which, is the price point. Because if you're throwing out the endoscope after each procedure, you have to get the price points low enough to be able to to accomplish that. Without going into all of the details, what I'll say is that, some of the technology we've developed, again, in partnership with some of our CMOS partners, that allows us to make endoscopes that are smaller and smaller, also, it turns out, allows us to make the endoscopes at lower and lower cost. And so we have a number of programs that are just moving from the engineering pipeline into production that will be single-use programs. The business model there has changed a little bit because in order to get a low enough cost, we may need to use some outside resources to get low direct labor costs. To do that, we've engaged with our customers in an arrangement where either we will manufacture the product ourselves at POC, or we will help them to find a lower direct labor cost contract manufacturer and show that contract manufacturer how to manufacture these products. In that case, we would receive a royalty. So this still fits with the overall business model of taking a program through the design phase, and then launching it into production and continuing to derive revenue and profit while it's in production. So that's where the single-use is going, and it is a part of the market that's growing quite substantially. We estimate that the single-use market for endoscopes is growing at two to three times the rate of the endoscope market in general. It's an area that certainly, our customers are quite focused on. It's also an area that we're pretty focused on as well. Let's kind of go into the pipeline here, and you hit on it already, but I wanna make sure folks that aren't familiar understand. You bring products into the pipeline. You are paid for that engineering sort of work that you're doing. It then transitions, you know, sometimes it's government approval, right? Or otherwise- Mm-hmm ... the FDA to have these products come on the market. You are now the embedded producer of that component or that sub-assembly- Mm, mm ... of the device there. Help people understand really the importance of the pipeline and what it means as maybe a leading indicator for what future production revenues can look like. Yeah. So, your summary is exactly right. We, and I've already said, we want our customers to start with us early in the design phase and go all the way through to mass manufacture, 'cause that's a critical part of the business model. And we do get paid when we do the design work, which is critical, and we do maintain ownership of our IP, which is part of what helps us to ensure that we're locked into the long-term manufacturing. As I just said, in single use, we've made some adjustments to that to deal with some of the unique economics of that part of the marketplace. In terms of our overall business growth, being sure that we can continue to backfill our engineering pipeline when new products move from the engineering pipeline into production is critical. So it's been important over the last couple of years, I think, for anyone who's been watching our company, to be watching that engineering pipeline grow from, you know, 4 or 5 programs 4 or 5 years ago to something like 15 or 20 programs today. We are fortunate in a way that we now have more programs coming to us than we can take on, given the limited size of our engineering department. And we're doing things to grow that engineering department because that'll help us to grow even faster. But part of what we do is we evaluate the programs when they come in to determine the likelihood that we believe that they will go into production. Because in the long run, that's really what we're looking for, is the programs that go into production. Because as more and more programs go into production, our revenue will continue to grow. And mainly that's because the programs have a very, very long lifetime. We have some medical products that we've been making for over 25 years, the same product day in and day out. And so as we get more and more programs into production, it allows us to grow the overall revenue of the company. Right. You've made a couple of acquisitions over the past, really, I think it's 3 or 4 years now. Mm-hmm. Talk about, you know, the reasons behind each one of the acquisitions, and then maybe your viewpoint on what you might be looking for for any additional acquisitions. Yeah, sure. So our first acquisition was of a company called Ross Optical, which is down in Texas. They're a company that specializes in sourcing optics from around the world. They have a very robust worldwide sourcing network. They also do some limited manufacturing themselves in El Paso, Texas, and they specialize on optical components and very small sub-assemblies. So they fit into our existing framework, which I've been talking about, where we do design work and then go into production very well, because on the production side, they're able to bolster our supply chain and help us to get the lowest cost for our customers when we get into production. It was also a good acquisition- Mm ... because we were able to take a number of the programs that they were working on in simple sub-assemblies and move up the value chain in order to be able to provide their customers, now our customers, with a higher level sub-assembly or entire system. The second acquisition that we did was a company called Lighthouse Imaging. I've often talked about them as a friendly competitor before we acquired them. So they were also involved in making minimally invasive surgery endoscopes in that part of the business. They were also involved in working on digital imaging. But whereas POC historically had focused on the front end, glass elements and the image-forming lenses and fiber optics and such, Lighthouse Imaging had been focusing more on the back end, on the electronics and the interface with the CMOS sensor and the image signal processing, and those sorts of things. So by combining these two companies, in that case, we were really, broadening our technical capability and broadening our engineering team. And so very quickly after we made that acquisition, which was just about, two years ago, a little over two years ago, we had customers coming to us and saying things like: "We knew POC, we knew Lighthouse Imaging. Neither of you could do our whole project, but now that you're combined, we want you to take on this project, and you're really the best company out there to take on this new program." So, both of these acquisitions have been very successful, but they both ended up contributing slightly different things to POC. In the first case, it was an expansion of the capability into sourcing structure and sub-assemblies that we weren't able to do before. In the second case, it was a bolstering and enhancement of the engineering team that we already had in place. We have said many times that we're not simply going to buy companies to buy companies. We're not a roll-up strategy here. Instead, what we're looking for is potential acquisitions that can broaden our capability or deepen our capability. There has to be some complementarity to the technology and the business that we already have. Having said that, the optics industry is highly fragmented. There are many smaller size optics companies, and so we believe that there are other opportunities to make acquisitions. In addition to looking for a good fit from a technology and business standpoint, we also obviously are looking for a good fit from a financial standpoint. It has to be accretive. And then the third piece is we're always looking at corporate culture. We're still small enough that we can't simply go in and sort of take over a whole set of assets. We're, as a technology company, we're looking for companies that have really good people, and that means that the way that the companies do business has to be aligned well enough that we're confident we'll be able to work together. So those are really the three things that we look for, and we believe that there are other opportunities out there. Right. Couple minutes left here. You have a junior end for everyone that, that may not be familiar. You reported fiscal year 2023 results back at the end of September. Record revenues, I think it was 34% growth in revenues. Margins were up pretty significantly, positive, sort of adjusted EBITDA. I know you don't provide guidance here, but when people look at some of the drivers to revenue, right, whether it's number of programs rolling into the engineering platform or program, whether it's sort of projects on the other side that are coming out and sort of the long-term sustainability, what are kind of the key drivers and benchmarks and metrics that investors should be thinking about as it pertains to how this business continues to grow going forward? Yeah. So let me answer that on sort of a broad perspective, and then I'll talk a little more specifically about the things we talk about on each of the quarter-to-quarter earnings calls. So the first thing with regard to the results from last year, you commented on some of the specific financial metrics, which really were substantial. We had a lot of records last year, both in terms of revenue and positive EBITDA and some other things. Beyond that, though, there are some other developments that I think are important to point out. We uplisted to NASDAQ after many years of being on OTCQB, so we're growing on the business side. Also critically important, we hired two new senior executives. We created the role of Chief Operating Officer for the first time in the company's history, and filled it with an industry veteran who's been working at very large companies and at startups, so he understands the requirements to go from a smaller company to a larger company. We also hired a new CFO, who has a lot of experience with public medical device companies, and also who has been through significant growth that comes both from organic growth and also from significant M&A activity. So from a global standpoint, the company has broader resources internally and externally that we believe sort of set the foundation for us to grow in a substantial way in an ongoing way. Now, to the sort of quarter-to-quarter metrics that people might wanna be looking at, it's. I mean, we keep coming back to this, but it really is the engineering pipeline that is the strongest forward-looking indicator for the revenue growth of the business. Because the engineering pipeline really is the pump that drives programs through the development process and into production. So we've talked many times about the growth of our engineering pipeline over the last few years. In the last few earnings calls, we talked about the fact that the beginning part of this fiscal year, which was June through December, we expect a little bit of a pullback on some of the production programs, and that we had some programs that were finishing up in the engineering pipeline, but wouldn't launch until the second half of the year. So we've talked about the fact that first half of the year will be a little lower, but we expect to come out of the second half of the year with significant growth year over year. And that, again, is really gonna be driven by a number of programs. At this point, I think we're up to something like 4 or 5 programs that are gonna go into production, either are going into production right now, or will be going into production in the next six to 12 months, and those programs are the ones that really are gonna be driving the revenue growth. We expect typically when a program comes out of the engineering pipeline and goes into production, that it goes into production with somewhere around a $1-$3 million run rate, and then continues for some period of time, as... and then grows from there. Fantastic. Well, I know we could go into a number of different areas. We're areas. We're at the end of the time here, Joe, so I greatly appreciate your time today. I found obviously our discussion rather informative. I hope everyone else did as well. Two quick reminders before we wrap things up. Again, if you'd like to schedule a one-on-one meeting with Joe and management here, shoot me an email, blum@lythampartners.com. Whether I coordinated here today at the conference or in the sort of the coming weeks, I'd be happy to take care of that for you. Last, we have a number of additional webcasts coming up here in addition to one-on-ones throughout the day here. Go to the website, lythampartners.com/select2024. There's a Presentations tab up in the top left-hand corner. You can select a number of the presentations coming up there today. So Joe, thank you again so much for your time today. Greatly appreciate it. Thank you, Robert. Thanks, everyone, for tuning in.