PRECISION OPTICS CORPORATION, INC.

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 (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. For the three and nine months ended March 31, 2020, the effect of such securities was antidilutive and not included in the fully diluted calculation because of the net loss generated in that period.

The Company executed an unsecured Promissory Note with a bank on May 6, 2020 and received $808,962 of loan proceeds pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). On March 30, 2021, the Small Business Administration forgave the Promissory Note held by the Company in full, including any accrued interest at that date. The forgiveness of the Promissory Note is recorded as other income in the accompanying Consolidated Statements of Operations for the three and nine month periods ended March 31, 2021.

In March 2021, the Company entered into a five-year capital lease in the amount of 161,977 for manufacturing equipment. In January 2020, the Company entered into a five-year capital lease for $47,750 for manufacturing equipment. The net book value of fixed assets under capital lease obligations as of March 31, 2021 is $197,790.

We have sustained recurring net losses from operations for several years. During the year ended June 30, 2020, we incurred a net loss of 1,426,150 and used cash in operating activities of $592,492. During the nine months ended March 31, 2021 we had a net loss from operations of $467,143 and used cash in operating activities of $75,420. At March 31, 2021, cash was $781,845, accounts receivables were $1,533,781 and current liabilities were $2,107,535, including $232,884 of customer advances received for future order deliveries.

On May 6, 2020, we received loan proceeds in the amount of $808,962 under the Paycheck Protection Program, or PPP, from Bank of America. The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act, or CARES Act, provides for loans to qualifying businesses that are forgivable provided the loan proceeds are used for eligible purposes, including payroll, benefits, rent and utilities. The unsecured loan dated May 6, 2020 was forgiven on March 30, 2021 by the Small Business Administration pursuant to the CARES Act. The forgiveness of the Promissory Note is recorded as other income in the accompanying Consolidated Statements of Operations for the three and nine month periods ended March 31, 2021.