All right. Hello, everyone. Thank you for joining us throughout the day here at the Lithium Partners Fall 2025 Investor Conference. My name is Robert Blum, Managing Partner at Lithium Partners. Our next presentation comes from Precision Optics Corporation, ticker symbol of POCI on the Nasdaq. And presenting from the company is their Chief Executive Officer, Dr. Joe Forkey. Joe, thanks so much for your participation. The floor is all yours.
Thanks, Robert. Thank you, everyone, for joining us today. I'm happy to be talking with you today, a day after we've reported our fiscal 2025 results. As our name implies, Precision Optics is an optics company. At our core, we're a technology company. We have developed core technology in a couple of specific areas, and we use that core technology in order to engage with customers, develop next-generation products, particularly in medical device and in defense aerospace. The business model is pretty straightforward. We take a look at our customers' requirements. We take a look at our unique proprietary technology. If we and our customer agree that our technology can enable their next-generation product, then we go through a product development process, PD we sometimes call it, or engineering product development.
This is where our engineering team takes the technology that we have developed and turns it into the size, shape, and color of the product that our particular customer needs. We ask that our customers pay us on a time and materials basis as we go through this process. So this is a profit center. But while we're doing that, we insist that we maintain ownership and control of our IP. Sometimes there are exceptions, but basically we continue to own all of the technology that we put into the products. What we're really after here is not just the product development revenue in business, but ultimately, when we get to the point of finishing the product that goes through clinical trials, goes through the testing, we're the ideal partner to do the manufacturing of that product for our customer.
The overall idea here is that we use the product development pipeline as the pump to bring more and more programs into production, into manufacturing. And as we do that, the company's overall size, overall revenue, overall profit will continue to grow because the manufacturing programs typically last for many, many years. You'll hear as I talk through the slide deck that we're really at a bit of an inflection point because we had, over the last fiscal year, the last 12 months, we had two very large programs for us move from the product development pipeline into manufacturing, and we're starting to see the results of that increase now. This slide shows quite nicely what I'm referring to. If you look at the fiscal 2024 and 2025 numbers, you'll see that the total revenue is about the same, about $19 million, a little over $19 million.
But if you look at the two different pieces here, the blue is the manufacturing revenue, the gray is the product development revenue. And so you see that the product development revenue was increasing pretty much continuously year-over-year. This was our team taking our unique technology and putting it into new products. What happened in 2024 to 2025 is one of those projects, two really, but one in particular, our single-use cystoscope program moved from the engineering pipeline into production. That resulted in a reduction in the engineering pipeline, the product development pipeline, because the program moved out of that. I will tell you, we're working now and we're having great success in bringing new programs into the product development pipeline. So we expect this number to go up next year. But importantly, you see that the total manufacturing revenue went up quite substantially.
The product development went down a little bit, the manufacturing went up. The key point here is this manufacturing revenue is going to continue to grow as we move into fiscal 2026 and beyond, and the product development work is going to recover as well. The manufacturing now is growing quite substantially. We reported yesterday that our total revenue was $6.2 million. And so getting to this $25 million guidance number for revenue next year, which will be driven in large part by the increase in manufacturing, is simply the annualized revenue from our fourth quarter of fiscal 2025.
We expect to see significant growth next year, and we expect that this growth, now that we've really primed the pump with the manufacturing revenue going and the product development pipeline recovering and with more programs to go into production, we expect this kind of growth to continue on into the future. Okay, let's talk for a minute about our core technologies. They really fall into three categories. The first one is micro-optics. We make some of the very smallest optics, smallest lenses and prisms anyplace in the world. The smallest prism that we've made is about 50 microns. That's about the width of a human hair. We also have a core capability, core competency in being able to take these individual components, design them into an entire system, and make some of the smallest imaging systems in the world.
This picture is a picture of a one-millimeter diameter camera. We've made some cameras and some systems smaller than this, some small enough to go through blood vessels in the body. So really, the key capability here is to be able to make things that are very, very small that can go places that other systems can't. The second area is in the area of 3D imaging. This really has expanded now. It came out of our 3D imaging program that we developed originally many years ago for Intuitive Surgical for the 3D imaging that's required for robotics. Today, it's turned into a slightly broader capability, which is ultra-high precision imaging.
So that includes 3D imaging for robotic systems in particular, robotic surgical systems in particular, but it also includes things like augmented reality, virtual reality, fluorescence imaging, looking at biomarkers for cancer, those sorts of things where you need to have very, very high resolution and you need to have very high fidelity of multiple images overlaying themselves. There are a lot of next-generation surgical procedures that are being supported by the work that we're doing in this area. And then the third area is in the area of digital imaging. Digital imaging is an area where we take the technology that's been developed for cell phones and for laptops in so-called CMOS digital imaging sensors, and we take those digital imagers and now we put those into camera systems, particularly for medical device applications.
This allows us to make medical endoscopes that have superior image quality than some of the technologies that were used before we had the digital imaging capability. In addition, we're able to make those systems with much lower costs. We can start talking about and making single-use endoscopes. That's one of the programs that just recently went into production that's really driving our substantial growth. Okay, we really have two key markets. The first one is in medical device. I already mentioned a couple of the applications here, but just to be thorough, these different disciplines in minimally invasive surgery here, all of the ones that are circled are areas that we have a product in production or we have a product in the product development pipeline. You can see it's a very broad set of locations that we can work in the body.
The micro-precision optics in particular are very relevant for being able to develop next-generation procedures that can go to places in the body that we couldn't go to before the endoscopes got small enough, so think about places where the incision size is not just nice to have a smaller incision size, but where having the smaller incision size makes the difference between being able to access that part of the body or not being able to access that part of the body, so the kinds of places that we're working in with the micro-precision optics are places like the eyeball, where if the incision is less than a couple of millimeters, the eye will heal on its own and you don't have to put stitches in. Places like the brain, ear, nose, and throat in particular.
There's a lot of work going on in otoscopy in the ear these days. Other places where the incision size or the endoscope size is critical is cardiac. I mentioned we make an endoscope that goes through blood vessels. Other places are urology, cystoscopy, spine. All of those places where a lot of the next-generation procedures are being developed today and really rely on the very small size of the endoscopes that we can make. The 3D endoscopes or the 3D technology, which, as I said in the last slide, is really expanded to ultra-high resolution, supports a lot of robotic surgery systems, but also, as I already mentioned, supports next-generation procedures where we're looking at biomarkers, image overlays, augmented reality, 4K imaging, those sorts of things.
And then finally, for the digital imaging, we can now. I'll talk about this in a minute. With the acquisition we made a few years ago, we can now do full medical device systems, not just the endoscope, but also the console. And the real driver here is in the area of single-use endoscopes. The main benefit here is that you don't have to sterilize a scope between one patient and the next, and so that virtually eliminates the possibility of cross-contamination. There have been cases where patients come into the hospital for one issue and they contract the disease and in some cases have passed away because of an incompletely sterilized endoscope. So there's a lot of interest from a safety standpoint to get to single-use endoscopes.
Turns out hospitals like it because it's easier to keep track of the scopes if they don't have to be sterilized and repaired. Surgeons like it because they have a brand new image with every scope that they open. So this market has been developing over the last few years. Our first single-use endoscope went into production about a year ago. Our second single-use endoscope went into production about six months ago. That first one is part of what's driving our rapid overall revenue growth from this year to next. As a small company, we have focused our marketing efforts on the market that we saw the biggest opportunities in. That has been medical device. As we grow and we have more bandwidth in our sales and marketing team, we've begun to look more carefully at defense aerospace.
One of the programs, again, that's growing substantially year-over-year is in the aerospace market. We believe that there are more applications here and that there are more opportunities. As we continue to grow, we'll access more opportunities in the defense aerospace market as well. The main focus here really is in those areas where optical imaging devices or optical signaling devices or communication devices that use lasers and such. Whenever one of these systems is lifted off the ground, it's always going to be better to make that system smaller. Whether it's being launched into space, whether it's being lifted up and flying on a drone, or whether it's being lifted up and being held by a soldier, in all cases, you would like the size and the weight to be smaller.
The defense industry has an acronym for this called SWaP, which means size, weight, and power. And they're talking about smaller size, weight, and power. So our technology, particularly in micro-optics, is really relevant for these areas. And as I say, we're starting to address these markets and go after these markets more as we grow. One of the things that's quite unique about our company, and we sort of rounded out our capabilities here with the acquisition of Lighthouse Imaging three or four years ago, where we combined their electrical engineering capability with POC's traditional optics capability to be able to do entire digital imaging systems from one end to the other. So we can do all of the different disciplines here that are required to build an entire system, to design and to build an entire system.
This is one of the areas that our customers find is quite beneficial to them. They have one customer or one supplier who can do the whole design and then can roll that whole design into production. That's quite attractive, and it's helping us in the marketplace substantially. One of the things that we've done recently is we've recognized that while every endoscope that we design is going to be different, there are some core elements of those endoscopic designs that are going to be very similar from one system to the next. Over the last couple of years, we have been taking those designs that we've been working on for many years for many different customers. Remember, we maintain ownership and control of the IP when we do projects for individual customers.
So we took all these different designs and we took the best parts of them and modularized the design and came up with a number of baseline designs that we can now use as starting points for the next program that we work on for a digital imaging system, mainly for digital imaging medical endoscopes, a lot of those single-use. And so what this means now is that when our customers come to us, we're not starting with a blank sheet of paper. We're starting with a design that we've already worked on and one where we have modular components that we can move in and out. We expect that for every program, we're still going to have some unique aspect to what we're doing because each customer has a particular application in mind.
But by using these platforms that we're starting with, we can accelerate the time to market, which is better for us and for our customer. We can reduce the overall development cost, and we share some of that reduction in cost with our customer, but we keep some for ourselves. And then finally, because we're using design elements that have already gone through regulatory compliance testing, the risk that some part of the design is not going to pass the regulatory testing on the first try is much lower. It doesn't mean that it's zero, but it means that it's much lower. So this accelerates time to market, reduces development costs, and de-risk the project. We launched this product about six or eight months ago, and the response has been quite positive.
We have a number of programs that we expect will enter the engineering pipeline in the next few months based on this Unity platform. I talked about being able to do digital imaging systems from one end to the other. That really has to do with having the broad horizontally integrated, if you like, engineering capabilities. We also are unique because we're also vertically integrated. This means that we can take a project from the conception stage all the way through to the mass manufacture. And of course, that's part of our business model. So that's the ideal project that we work on. For our customers, again, this is a huge benefit because they don't have to go to multiple companies for the design and then another company for the regulatory compliance and then another company for the manufacturing.
We can help them and work on the project for all of those disciplines, and we have those all under one roof, which again is a major benefit to our customer and a major competitive advantage for Precision Optics. This slide shows our engineering and product development pipeline. Again, this is the pump that's driving more and more programs into production. You can see here that there are two green lines here. These are the two programs that went into production in the last 12 months and sort of rounded out that business model and really have been driving the production revenue to much higher levels, and these are the two programs that in the near term are going to continue to drive that production revenue to higher levels. These programs here all went into production over the last few years. These are also combining together to drive the growth.
These two are the biggest growth, but these are also contributing. We have one program here that was in our main facility. I'll talk about this in a minute. We recently updated our facilities and we're moving this production line from one facility to another. That's why it's pulled back a little bit, but as we go through fiscal 2026, this program will come back into production and contribute to overall revenue growth, manufacturing growth as well. Importantly, you see here we have a number of programs that are still going through the development phase, and you see that there are three here in particular that are going through verification and validation. We expect that these three will go into production in the next 12 months. Some of these four or five down here we expect will go into production in the next 12 to 24 months.
And then we have a number of programs that we don't show down here. We don't put programs onto this slide until we have a pretty substantial development order from them. So we have a handful of other companies here where we're doing initial proof of concept kinds of prototypes for them. Once it gets onto here, we expect these programs all to move forward and to get into production. So these programs down here, as I say, we expect two or three of those will go into production in the 12- to 24-month time period. Our goal here is to have two to three programs go into production every year and to continue by doing that to continue to drive the overall manufacturing growth and therefore the overall revenue of the company as we move forward. There are two recent large orders, the top ones on that last slide.
The first one is a single-use cystoscopy program. This is a program that we're working on with our partner, which has a robotic surgery system that's used for urology. We received a substantial order. It was a record order for us back in May of 2024. That led to production in the June-July 2024 timeframe. We've delivered $2.6 million on this order in fiscal 2025. Our customer has been asking us to ramp the volumes as fast as we can, faster even than they anticipated in the beginning. Our margins have suffered a little bit because we had some startup hiccups with this line, and we also, in trying to ramp as fast as they wanted to, had some challenges on the margin line. But we have a good understanding of what those challenges are. They're typical startup issues, typical issues associated with ramping quickly.
And we're confident we'll be able to get through those and see substantial growth into fiscal 2026 from this program. All indications are that this program will continue well beyond this initial production order into the future and will continue to grow quite substantially over the next few years. The second major program that went into production in the last 12 months was for an aerospace application. We initially started some very limited production in September 2023. We really got going with this program about 12 months ago or so. Walking through the quarters for fiscal 2025, which just ended in the end of June, we announced our earnings yesterday. This program went from $300,000 in the first quarter of fiscal 2025 to $600,000 in the second quarter, to $900,000 in the third quarter, into nearly $2 million in the fourth quarter, and it's still growing.
So this, again, is one of the programs that's been in production that we expect is going to continue to drive the manufacturing revenue growth as we move into the future. The go-forward strategy is pretty much what you would expect. So certainly, in the near term, continue to expand the production lines for those two programs, as well as the other programs that have recently gone from the product development pipeline into production. Importantly, we need to continue to drive programs into the product development pipeline. I talked earlier about how the product development revenue dropped when we moved the single-use cystoscope program from product development to production. That dip in product development is starting to recover. We expect it to recover continuously over fiscal 2026, so that we'll have higher product development revenue from 2026 to 2027.
A lot of that is being repopulated due to the positive response to the Unity platform that I mentioned a couple of slides ago. Obviously, as a technology company, we'll continue to invest in development and in research in order to stay ahead of the competition in these particular areas. And so we have a lot of research and development going on in these areas. We want to continue to invest, particularly in sales and marketing. We want to get after that defense aerospace market in a more deliberate way. We always, of course, are looking at expanding and maintaining our engineering capabilities. To that end, we have recently updated our facilities. Let me take a minute here to talk about this.
Anyone who's listened to any of our talks or any of the earnings calls over the last year or so will know that we've been looking at updating our facilities for some time. There were really two major goals to updating our facilities. One is to get the product development team, which is highly dependent on the critical capabilities of our engineering team, getting those teams closer in Maine to Portland and in Massachusetts closer to Boston because that's where the talent pool for engineering really exists, and then the second reason was to be able to update our production facilities, which now are in Gardner, Massachusetts, to be able to support the growth in manufacturing that we've seen over the last 12 months and we expect to continue on into the future.
I'm happy to report that over the last three months, we've made two important moves in our facilities. In Maine, in August of this year, we moved our facility in Maine from Windham, Maine, which is where Lighthouse Imaging was when we acquired it a few years ago, to South Portland, which again is much closer to Portland where a lot of the technical talent is. Then we moved our headquarters in Massachusetts from our Gardner, Massachusetts facility, where it has been for the last 30 years, to Littleton, which is about 30 minutes closer to Boston, now within an hour commute from Boston. Again, that gets our headquarters and our engineering team who will be there closer to Boston where the engineering talent is.
Importantly, moving the headquarters also opens up space in our Gardner facility so that we can update that facility, consolidate our manufacturing into that facility, and expand that facility to be able to support the ongoing growth in manufacturing that we're seeing now and we expect to go on into the future. Finally, I mentioned that we made an acquisition of Lighthouse Imaging a few years ago. We acquired another company, Ross Optical, about five or six years ago. We will continue to look on an opportunistic basis at acquisitions that make sense to accelerate the organic growth that will be coming from the manufacturing that we've talked about during these slides. Finally, let me talk a little bit more about the financials. We have taken the important step this year, and just yesterday in our earnings call, for the first time, we have provided guidance to the market.
We've done this at this point because with the added level of manufacturing that we're seeing and importantly, with the quite substantial backlogs and those two growing programs that I talked about, we have nearly $18 million in backlog, which is a record for the company. With that kind of backlog and with the ongoing sort of continuous manufacturing, we believe we have better visibility into the next 12 months than we have in the past, and so we're providing some guidance. I've already talked about in the revenue slide, the expected increase from $19 million to 25 million. This is more than a 30% increase in revenue. This will be driven in large part, as I've talked about a number of times on a number of slides. This will be driven in large part by the growth in manufacturing.
We expect this growth to be sustainable on into the future. On the gross margin side, I alluded to the fact that we've had some challenges in getting into manufacturing, both the startup of these production lines and then also because our customers have asked us to increase the volume even faster than they anticipated 12 months ago. As everyone says, it's a good problem to have, but it is a problem nonetheless. It has resulted in lower gross margins over fiscal 2025. The good news is we understand the issues here. We know how to deal with them. We've already started aggressively to deal with them. So we expect on an annualized basis that we'll have our gross margins back up to 30%. What we will see over the next 12 months is a continuous increase from this 18% quarter over quarter.
But, when you average it out over the year, we expect that we'll be at about 30% gross margin. And then finally, when you roll it all together, we expect that we'll be back up to positive Adjusted EBITDA. Really, what we're looking at here is we made a bunch of investments over the last couple of years while the revenue here was moving from predominantly product development more into manufacturing. So we built out the manufacturing team. We've invested in infrastructure. We have new facilities.
And so now we'll see the results of all of this investment through the expansion of the revenue, the recovery of the gross margin, and back to positive Adjusted EBITDA where we were just a couple of years ago. All the details on the balance sheet. The most important thing here is we raised some money a number of months ago. We have the cash available to be able to make the investments in the facilities and other things that I mentioned recently. With that, I will wrap up and turn it back over to you, Robert.
All right, Joe, thank you so much. Greatly appreciate your participation. Thank you to everybody watching here as well. As always, if you have any questions for management, either reach out to myself or the company here, or if you'd like to coordinate a one-on-one here either at the conference or in maybe the days or weeks to come, shoot me an email at blum@lithiumpartners.com. Further, to learn more about Lithium, make sure you visit our website and stay connected with us on LinkedIn as well for future events such as this conversation here with Precision Optics. Thank you, everyone, for your participation in the event today. Joe, thank you for your participation. Hope everyone has a great conference here. Thanks, Robert.