PRECISION OPTICS CORPORATION, INC. Revenue Disclosure

 

(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.

 

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