NASDAQ: POCI

Effective June 1, 2019, we acquired the operating
assets of Ross Optical Industries, Inc. of El Paso, Texas. This acquisition expanded our optics components and assemblies’ business.
As Ross Optical Industries, we operate as a supplier of custom optical components and assemblies for military and defense, medical and
various other industrial applications. All products sold by us under the Ross Optical name include a custom or catalog optic, which is
sourced through our extensive domestic and worldwide network of optical fabrication suppliers. Most systems make use of optical lenses,
prisms, mirrors and windows and range from individual optical components to complex mechano-optical assemblies. Products often include
thin film optical coatings applied using our in-house coating department.

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Effective October 1, 2021, we acquired the operating
assets of Lighthouse Imaging, LLC of Windham, Maine, which expanded our electrical engineering capabilities in the development of end-to-end
medical visualization devices. The acquisition represented a vertical integration of our established product development capabilities
with a team with extensive experience developing visualization systems that we believe provide our customers with single-source value-added
development services and product offerings. The operations of Lighthouse Imaging have been integrated with other operations of the company,
which continue under the POC brand, so that the company now operates with single systems manufacturing and engineering departments, each
of which includes historical POC and Lighthouse Imaging resources.

During the fiscal year ended June 30, 2026, approximately
72% of our business was from systems manufacturing, 11% was from engineering services primarily relating to the design of medical device
optical assemblies, 15% was from Ross Optical, and 2% from our micro-optics laboratory. During the fiscal year ended June 30, 2025, approximately
43% of our business was from systems manufacturing, 26% was from engineering services primarily relating to the design of medical device
optical assemblies, 20% was from Ross Optical, and 11% from our micro-optics laboratory. We generally expect revenue to increase over
time as the engineering design phase of new product programs is completed and products transition to the commercial phase, leveraging
our unique manufacturing capabilities. Much of the technology we have developed for making smaller medical devices is also used in defense
and aerospace systems where smaller size and weight is crucial.

History

We incorporated in Massachusetts in December 1982,
have been publicly held since November 1990, and have no subsidiaries.

Principal Products and Services

We have been manufacturing medical products such
as endoscopes and endocouplers since our formation in 1982. We design and manufacture custom optical medical devices to satisfy our customers’
specific requirements, incorporating various optical technologies, servicing a variety of minimally invasive surgical and diagnostic procedures,
using both reusable and single-use medical devices. In addition to medical devices, we also manufacture and sell components and assemblies
specially designed for defense/aerospace and industrial uses.

Microprecision™ Lenses and Micro Medical
Cameras. While the size of endoscopes has gradually decreased over time, we believe the widespread use of very small endoscopes, with
diameters of a couple millimeters or smaller, has been limited due in part to the limitations of traditional lens fabrication methods
to combine smaller sizes with acceptable image quality at reasonable manufacturing costs. We believe our Microprecision™ optics
technology provides a solution to this challenge. Combined with recent advances by our supply chain partners in complementary metal-oxide-semiconductor,
or CMOS, image sensor fabrication techniques, our Microprecision™ lens technology and proprietary design and manufacturing techniques
enable the manufacture of micro medical cameras and digital endoscopes at previously unobtainable prices, with sizes on the order of a
couple millimeters or less and image quality superior to most previously available endoscopes, characteristics that make them perfectly
suited for medical imaging applications, particularly single-use or disposable endoscopes.

The technology developed to support the design,
fabrication and manufacturing of Microprecision™ lenses and associated assemblies is also used to satisfy the needs of defense and
aerospace systems that require small size and weight, particularly those required for satellite network communications, which has become
an important driver for our engineering and manufacturing programs

The Unity Platform. In January 2025, we
launched our Unity Imaging Platform (“Unity”), comprising a standard baseline CMOS endoscopic system with customization
options based on existing or newly designed modular sub-components. Unity represents the culmination of many years of research, development,
and collaboration with key industry players. By leveraging insights from many previous projects, Unity incorporates proven design architectures
to meet the unique needs of today’s medical imaging devices. Customers benefit from a modular, adaptable solution that simplifies
every stage of the development process, from prototyping to production using the latest technologies. The consolidation of common design
elements offers flexible, modular architecture, appropriate for both re-usable and single-use endoscopic systems. Unity provides customers
with a functional video pipeline early in the development process. This accelerates their system integration efforts and allows them to
gather feedback from stakeholders much sooner, ultimately shortening the time to market and enhancing overall project efficiency. Unity
is the embodiment of our on-going improvements to the evolution and acceptance of our Microprecision™ and digital imaging technology
platforms.

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Competition and Markets

We sell our products in highly competitive markets,
and we compete for business with both foreign and domestic manufacturers. Many of our current competitors are larger than us and have
substantially greater resources than we do. In addition, there is an ongoing risk that other domestic or foreign companies who do not
currently service or manufacture products for our target markets, some with greater experience in the optics industry and greater financial
resources than we have, may seek to produce products or services that compete directly with ours.

We believe that we compete successfully in this
market through product quality, price, delivery and innovation tailored to our customers’ specifications. Our success will depend,
in part, on our ability to maintain a technological advantage over our competitors and to effectively incorporate that technology into
our custom designs. To this end, we intend to continue to aggressively support and augment our internal engineering, research and development
resources and to pursue patent protection for existing and new technology. We believe that our trade secrets and unique technical capabilities
in the areas of Microprecision™ optics, micro medical cameras, digital imaging, and illumination represent competitive advantages
for us in the markets we serve.

The competitive advantage of our Ross Optical
division is its ability to quickly provide design-for-manufacturability feedback and to provide difficult-to-find optics, and, increasingly,
to provide a broader range of services based on its ability to source optics worldwide, augmented by its ability to provide thin-film
coatings and assembly.

Market Opportunities

We design custom camera module assemblies with
the combined objectives of low cost, small size, range of optical specifications and high image quality required by our customer’s
precise specifications. By enabling the production of millimeter sized cameras with low manufacturing costs and high image quality, we
believe our Microprecision™ and digital imaging technologies will continue to replace existing re-sterilizable endoscopes with single-use
alternatives. The small size of our Microprecision™ lenses and micro medical cameras combined with our proprietary illumination
techniques can provide visualization for existing procedures that are currently performed blind or with sub-optimal imaging, and we believe
can facilitate the development of new surgical procedures that are currently impractical without millimeter-sized visualization instrumentation.

We believe satellite optical communications represents
a significant market opportunity for our advanced defense and aerospace capabilities. Optical Communication Terminals used in emerging
satellite constellations require compact, lightweight and high-performance optical assemblies, creating a strong fit with our Microprecision™
optics, opto-mechanical design, precision alignment and scalable manufacturing capabilities.

Sales and Marketing

Current sales and marketing activities are intended
to broaden awareness of the benefits of our new technology platforms and our successful application of these new technologies to medical
device projects requiring surgery-grade visualization, as well as defense, aerospace and other industrial applications, from sub-millimeter
sized devices and Ultra HD Precision systems, including single-use products and assemblies. We market directly to established medical
device companies primarily in the United States that we believe could benefit from our advanced endoscopy visualization systems. Through
direct marketing, referrals, attendance at trade shows and an online presence with our corporate websites as well as professional association
websites, we continually seek to expand our on-going pipeline of projects to established medical device companies as well as to emerging
medical device companies, and to a growing number of major defense / aerospace companies. Due to our expertise and growing OEM trends
of outsourcing complex projects, we expect our revenues and customer base to continue to expand as development projects transition to
production orders and new customer projects enter the development phase.

International Business

We acquire various optical components from overseas
as necessary to meet the needs of custom device designs. We believe that the availability of specialized components and cost savings from
various overseas production resources is essential to our ability to deliver complex and unique device designs and to compete on a price
basis in the medical products area particularly and to our profitability generally. We have an expanded network of domestic and overseas
suppliers of various types and sizes of optical components and assemblies that enhance our ability to meet the material demands of our
customers’ unique optical and medical device designs.

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Research and Development

We believe that our future success depends, to
a large degree, on our ability to continue to conceive and develop new optical products and technologies to enhance the performance characteristics
and methods of manufacture of existing and new products. Although development work on behalf of customers is performed under revenue generating
contracts and customer purchase orders, research and development expenses are incurred on our own proprietary products and technology,
such as Microprecision™ optics and the Unity platform. Accordingly, we treat engineering expenses not consumed in customer contracted
development and our investment of funds and resources in internal product and intellectual property development as research and development
expense in the accompanying statement of operations.

Raw Materials and Principal Suppliers

A key raw material component for our
products is precision-grade optical glass, which we obtain from a few suppliers, principally SCHOTT North America, Inc. and
Ohara Corporation. We obtain CMOS sensors used in the development and manufacture of endoscope products for our customers from
various suppliers such as OmniVision Technologies, Inc. We believe that while the number of sources of supply is limited for the
precision-grade optical glass and CMOS sensors with the specifications used in the products we produce, the manufacturing capacities
of those suppliers are adequate to meet our demand in the next twelve months.

Patents and Trademarks

We rely, in part, upon patents, trade secrets
and proprietary knowledge as well as personnel policies and employee confidentiality agreements concerning inventions and other creative
efforts to develop and maintain our competitive position. We plan to file for patents, copyrights and trademarks in the United States
and in other appropriate countries to protect our intellectual property rights to the greatest extent practicable. Our current patent
portfolio includes patents and rights to patents that cover various aspects of our technology in the following areas:

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Medical devices;

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3-D endoscopes;

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Microprecision™ lenses and micro medical cameras;

The patents contained in our current patent portfolio
have various expiration dates through January 2041. We are not aware of any infringements of these patents. We intend to continue to innovate
and extend our technological capabilities in the areas of Microprecision™ optics, digital imaging, micro medical cameras, related
illumination techniques, and associated design and manufacturing technology and to aggressively pursue patent protection for such developments.

Employees

As of June 30, 2026, we had 108 employees, all
of which were full-time employees. There were 70 employees in manufacturing, 16 in engineering/research and development, 8 in sales and
marketing, and 14 in finance and administration. We are not a party to any collective bargaining agreements. We believe our relations
with our employees are very good.

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Customers

During the fiscal year ending June 30, 2026, we
sold products and services to 266 customers with one customer accounting for approximately 41% of total revenues and another customer
accounting for 27% of our total revenues. The loss of these customers would have a material impact on our business. For the fiscal year
ended June 30, 2025, we sold products and services to 278 customers with one customer accounting for approximately 22% of total revenues
and another customer accounting for 20% of our total revenues.

Two customer accounts receivable balances accounted
for 34.4% and 22.8% of total receivables on June 30, 2026. Two customer accounts receivable balances accounted for 32.1% and 17.9% of
total receivables on June 30, 2025.

Environmental Matters

Our operations are subject to a variety of federal,
state and local laws and regulations relating to the discharge of materials into the environment or otherwise relative to the protection
of the environment. We believe that we currently comply with all applicable environmental laws and regulations. We use limited amounts
of hazardous materials in our operations, and as such, compliance does not entail significant expense to us. We do not believe the costs
associated with our compliance with environmental laws are material.

Government Regulations

Domestic Regulation. We currently develop,
manufacture and sell several medical products, the marketing of which is subject to governmental regulation in the United States. Medical
devices are regulated in the United States by the Food and Drug Administration, or FDA, and, in some cases, by certain state agencies.
The FDA regulates the research, design, testing, manufacture, safety, effectiveness, labeling, promotion and distribution of medical devices
in the United States. Generally, medical devices require clearance or approval prior to commercial distribution. Additionally, certain
material changes to, and changes in, intended uses of, medical devices are also subject to FDA review and clearance or approval. Non-compliance
with applicable requirements can result in failure of the FDA to grant pre-market clearance or approval, withdrawal or suspension of approval,
suspension of production, or the imposition of various other penalties.

We previously notified the FDA of our intent to
market our endoscopes, image couplers, beamsplitters, adapters and video ophthalmoscopes, and the FDA has determined that we may market
such devices, subject to the general control provisions of the Food, Drug and Cosmetic Act. We obtained this FDA permission without the
need to undergo a lengthy and expensive approval process due to the FDA’s determination that such devices met the regulatory standard
of being substantially equivalent to existing FDA-approved devices.

In the future, we may market additional medical
devices that may require the FDA’s permission to market such products. We may also develop additional products or seek to sell some
of our current or future medical products in a manner that requires us or our customers to obtain the permission of the FDA to market
such products, as well as the regulatory approval or license of other federal, state and local agencies or similar agencies in other countries.
The FDA has authority to conduct detailed inspections of manufacturing plants in order to assure that “good manufacturing practices”
are being followed in the manufacture of medical devices including medical devices or components of medical devices manufactured for other
medical device companies, to require periodic reporting of product defects to the FDA, and to prohibit the sale of devices which do not
comply with law.

We design and manufacture components for the defense
industry, and import, export and manufacture optical products for the defense industry, some of which is controlled by U.S. regulations.
Generally, these regulations require strict control over technical data in documented form and as embodied in products, both within our
company and as part of exported shipments. In particular, we maintain a technology control plan, we are ISO certified, and ITAR (International
Traffic in Arms Regulations) registered with the U.S. State Department, and we maintain a number of technology assistance agreements with
overseas suppliers that have been approved by the U.S. State Department. Non-compliance with applicable requirements can result in U.S.
actions that may result in withdrawal or suspension of approvals, suspension of company imports, exports or production, or the imposition
of fines or various other penalties.

Foreign Requirements. All our medical products
are manufactured in conformity with ISO 13485:2016, using a comprehensive Quality Management System (QMS) that helps meet both international
and EU regulatory standards. Our failure to comply with ISO 13485 or other applicable regulatory requirements would jeopardize our ability
to sell our products to certain customers who place their product on the EU and other international markets.

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Available Information

Our website is www.poci.com. We make available
on our website, free of charge, copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K and amendments to those reports, as soon as reasonably practicable after we electronically file or furnish such materials
to the U.S. Securities and Exchange Commission (SEC). Our website and the information contained therein or connected thereto are not intended
to be incorporated into this report.

The SEC maintains an Internet site that contains
reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.