Precision Optics Corporation, Inc. Urged To Remediate Noxious Corporate Governance Practices

PRINCETON, NJ / ACCESSWIRE / April 7, 2022 / Eric Weinstein, a private investor and the owner of approximately 2% of the outstanding shares of Precision Optics Corporation, Inc. (OTCQB:PEYE) (the "Company"), today sent a letter to the Company's Board of Directors calling attention to its woeful and harmful corporate governance practices in frustrating the shareholder franchise for the following reasons:

• After not holding an Annual Meeting since 2009, only one of five directors is up for election with the remaining "holdover" directors having apparently extended their terms unilaterally through 2026 and 2027.
• There has not been a shareholder vote in nearly 13 years, even simply by written action, over which time more than 2.6 million shares have been awarded under equity compensation plans not approved by security holders equal to 15% of the Company's current outstanding shares and in violation of the Dodd-Frank Act.
• Since Class II Directors were last elected to three-year terms in 2007, the Company's stock price is down nearly 75%. Excluding Mr. Anania, who recently joined as a director per terms of the Company's acquisition of Lighthouse Imaging LLC, our entrenched Board and other insiders own just 6% of the Company's outstanding shares.
• While the Company is highly encouraged to seek uplisting to the Nasdaq Capital Market, doing so by showcasing past infractions without first remediating them will unlikely attract the institutional and sophisticated investors the Company seeks and instead continue to add reputational harm. This assumes the proposed Annual Meeting is even considered valid.
• Simply put, continued entrenchment by "holdover" directors using the avoidance of annual meetings and tactics designed to frustrate the intent of state and federal law and the primary legal rights of shareholders, the Board continues to breach its duty of loyalty and care to stockholders.

Mr. Weinstein calls on the Board to provide stockholders with evidence justifying the harmful practices outlined herewith. Given nearly 13 years have passed since the last annual meeting, he urges the Company to act with haste and put all directors up for election immediately, declassify the Board, adopt a majority voting standard for directors in uncontested elections, and for God's sake, commit to holding an annual meeting every year if it truly desires to regain shareholder trust.

The full text of the letter follows:

Eric Weinstein
April 7, 2022

VIA ELECTRONIC DELIVERY

Mr. Peter H. Woodward, Chairman of the Board
Mr. Andrew J. Miclot, Director
Mr. Peter V. Anania, Director
Dr. Joseph N. Forkey, CEO, President, Treasurer and Director
Dr. Richard B. Miles, Director

Precision Optics Corporation, Inc.
22 East Broadway
Gardner, Massachusetts 01440
Attn: Board of Directors

Dear Gentlemen of the Board:

I have been a significant stockholder in Precision Optics Corporation, Inc. ("PEYE" or the "Company") since February 2020. Today, I own approximately 2% of the Company's outstanding shares. Throughout the last two years, I have conducted research and enjoyed an open dialogue with the Company's leadership team. While I have a significant ownership position because I believe PEYE is a valuable asset, I have become increasingly concerned with the Company's abhorred corporate governance practices. This letter is a follow-up to my prior communications with the Company's CEO, Dr. Jospeh Forkey.

I am alarmed by the Board of Directors' (the "Board") blatant disregard for good governance and dereliction of duties to stockholders. The Company has not held an annual meeting or shareholder vote in 13 years, has put only one of five directors up for election at the proposed 2022 Annual Meeting, and appears to be manipulating other "holdover" director class terms that should be up for election at this year's Annual Meeting to 2026 and 2027. With an opportunity to remedy the last 13 years of dereliction, our Board continues to selfishly focus on employing strategies to further entrench itself and thwart the basic rights of stockholders like myself.

My concerns were communicated to management by both email and private conversation and met with the response that the Company would only do the minimum it believed required for uplisting associated with its application to trade on the Nasdaq Capital Market. As the Company emerges from the obscurity of the OTC markets and presents itself to a broader investment community where premium valuations only come with meeting greater scrutiny and certain institutional requirements, our Board must meet the most basic requirement of representing its voting stockholders' interests.

This is a disturbing trend, as I am not the first stockholder to have asked and been ignored by the Board to honor the most basic right to be able to annually elect directors as evidenced by Mr. Klarquist's October 2020 public PX14A6G filing urging the same and likely many more such requests occurring privately. Our Board appears unlikely to provide a basic level of duty and care to the shareholders it purports to represent unless compelled to do so by the Massachusetts courts if it otherwise does not desire to do so despite the statutory scheme in which it exists. The negligible cost of holding an annual meeting by written consent or otherwise is simply not an excuse to avoid holding one and is somewhat suspect given low insider ownership over this lapse.

The Board's manipulative tactics are self-serving and an improper use of the Company's corporate machinery to insulate themselves. Such practices deviate from generally accepted norms and frustrate the Company's By-Laws, Chapter 156D of the Massachusetts General Laws, Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), and seemingly even board diversity requirements associated with any Nasdaq Capital Markets uplisting assuming the proposed Annual Meeting is even considered valid.

According to our Company's own By-Laws and Massachusetts corporation law, the annual meeting should be held each year which by any reasonable definition means not skipping a decade. The ability of stockholders to select directors each year is an important check on the performance of the Board. It is critical in allowing stockholder input on the direction and state of the Company and ensuring the best individuals are on the Board to oversee their investment.

PEYE has not held an annual meeting or even acted by shareholder written consent to elect directors since 2009. After the Company announced FY2021 earnings results on February 14th as well as intentions to uplist to the NASDAQ Capital Markets, it filed a 2022 Proxy Statement proposing the election of one Class I Director despite the Board being comprised of five directors. The last time a Class I Director was elected was in 2009. The last two Class II Directors were elected in 2007 and the last two Class III Directors were elected in 2008. Only two of the current five directors were elected by stockholders. Excluding Mr. Anania, who just recently joined as a Director per terms of the Company's acquisition of Lighthouse Imaging LLC, our entrenched Board owns just 6% of the Company's outstanding shares.

Per the Company's By-Laws and the 2007, 2008 and 2009 Annual Meeting Proxy Statements, directors are elected to serve a three-year term. While Massachusetts permits the creation of a classified board, it limits the maximum term of any director on such a board to three years. Nevertheless, only one director is up for election despite the last elections having been held 13 to 15 years ago. Two Class II Directors are not up for up for election despite this being the third annual meeting since Class II Directors were last elected to three-year terms back in 2007. Furthermore, the 2022 Proxy Statement states that Class II and Class III directors will serve terms ending in 2026 and 2027, respectively. This implies 19 and 20 year-terms since last elected by shareholders in 2007 and 2008.

The avoidance of meetings ought not to deprive stockholders the right to elect directors at an annual meeting. The Company's By-Laws state that the Board may fill newly created directorships only until the next election by stockholders at term expiration. As holdover directors, it is not clear the Board even had the power to appoint past replacements much more re-elect themselves and extend their terms as suggested by new term expirations in the 2022 Proxy Statement.

Avoidance of holding annual meetings has insulated and entrenched the current Board members for over a decade without shareholder involvement. The majority of the current Board has never stood for election by stockholders and its current move to unilaterally extend the terms of those who should but are not currently standing at the 2022 Annual Meeting beyond the three-year limit shows its true intent. The statutory scheme generally anticipates that election of directors will be by the stockholders on an annual basis. I challenge the Board to identify any public policy logic behind its position and note that the Massachusetts courts might find the following Delaware precedent quite pursuasive: Comac Partners, L.P. v. Ghaznavi, 793 A.2d 372, 373-74 (Del. Ch. 2001).

The Company has not held a shareholder vote since 2009, where directors were elected to three-year terms. The holdover directors which now comprise the Board have restricted powers and may not elect themselves and extend their own terms without involvement from stockholders. With extended terms running through 2026 and 2027, in any case beyond an additional three years, and the one director up for election at the 2022 Annual Meeting having a term ending in 2025 it would appear the Board is signaling it is simply not committed to holding an annual meeting every year unless compelled to do so in the state courts. With just $1 million in cash and perhaps dubious D&O insurance given last year's $3.7 million total S,G&A, the Board's behavior has put a target on the Company's back at potentially stockholder expense. Our Company remains in a precarious position due to the continued harmful actions of the Board until remediated.

As proposed, the upcoming 2022 Annual Meeting attempts to legitimize the Board's past actions and makes newly appointed Mr. Anania culpable for the continuation of such manipulative practices, and potentially, exposed him to personal liability together with the holdover directors. Indeed, all directors must ask themselves how comfortable each is with pursuing certain maneuvers and strategies that have entrenched themselves and worked to frustrate the shareholder franchise since 2009 on an ongoing basis. By not properly investigating and moving to remediate these actions, all directors are culpable of creating further serious and irreversible damage, continuing to harm our Company, and by operating ultra vires as holdover directors puts you at serious risk of personal liability. Each of you are urged to consult with your personal legal advisors to advise you of your responsibilities and risks as directors. I believe that you will learn, if you do not already know, that although directors do not conduct the Company's day to day management, under Massachusetts law, each of you owes a duty of loyalty, good faith and care to the Company and its stockholder. If directors see what is happening at the Company, understand that it is not in the Company's best interests but nevertheless let it continue to occur without making efforts to stop it, they likely have breached their duty of care and can also be held PERSONALLY LIABLE for that breach.

With respect to federal law, for a decade now the Board has disregarded shareholder advisory votes on executive compensation required by Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). A say-on-pay vote on whether to approve the Company's compensation for its named executive officers as disclosed, pursuant to the SEC's executive compensation disclosure standards (Item 402 of Regulation S-K) must be held at least once every three years. While this is included as an agenda item and up for shareholder vote at the proposed 2022 Annual Meeting, this does not serve as a remedy for the 2.6 million shares granted under incentive plans without shareholder approval equal to 15% of the Company's current outstanding shares of which a significant portion has been awarded to Board itself.

With regards to the proposed 2022 Annual Meeting, assuming it is even valid, being held in part to comply with NASDAQ Capital Market listing requirements, I would caution that by electing one director to a three-year term and unilaterally extending the terms of other directors to 2026 and 2027 the Company is structuring itself for non-compliance with Nasdaq Listing Rule 5605(f) on board diversity.

In short, the Company suffers from abysmal corporate governance practices that minimize accountability and serve to entrench the existing Board and management team. After a long wait, recent operational and financial improvements are now in danger of being offset by continued missteps in governance while our Board, severely lacking credibility, claims to seek the creation of shareholder value.

I call on the Board to provide stockholders with evidence justifying the harmful practices outlined herewith. Given nearly 13 years have passed since the last annual meeting, I urge the Company to act with haste and put all directors up for election immediately, declassify the Board, adopt a majority voting standard for directors in uncontested elections, and for God's sake, commit to holding an annual meeting every year if the Company desires to regain shareholder trust.

Sincerely,

/s/ Eric Weinstein

Eric Weinstein

THIS LETTER IS DIRECTED TO THE BOARD OF DIRECTORS OF PRECISION OPTICS CORPORATION, INC., A MASSACHUSSETTS CORPORATION ("PEYE"). ACCORDINGLY, THE INFORMATION CONTAINED IN THIS LETTER DOES NOT HAVE REGARD TO THE SPECIFIC INVESTMENT OBJECTIVE, FINANCIAL SITUATION, SUITABILITY, OR THE PARTICULAR NEED OF ANY SPECIFIC PERSON WHO MAY READ THIS LETTER, AND SHOULD NOT BE TAKEN AS ADVICE ON THE MERITS OF ANY INVESTMENT DECISION, INCLUDING, BUT NOT LIMITED TO, ANY VOTING DECISION WITH RESPECT TO PEYE'S 2022 ANNUAL MEETING. THE VIEWS EXPRESSED HEREIN REPRESENT THE OPINION OF ERIC WEINSTEIN, AND ARE BASED ON PUBLICLY AVAILABLE INFORMATION WITH RESPECT TO PEYE. CERTAIN FINANCIAL INFORMATION AND DATA USED HEREIN HAVE BEEN DERIVED OR OBTAINED FROM FILINGS MADE WITH THE SECURITIES AND EXCHANGE COMMISSION ("SEC") BY PEYE.

ERIC WEINSTEIN HAS NOT SOUGHT OR OBTAINED CONSENT FROM ANY THIRD PARTY TO USE ANY STATEMENTS OR INFORMATION INDICATED HEREIN AS HAVING BEEN OBTAINED OR DERIVED FROM STATEMENTS MADE OR PUBLISHED BY THIRD PARTIES. ANY SUCH STATEMENTS OR INFORMATION SHOULD NOT BE VIEWED AS INDICATING THE SUPPORT OF SUCH THIRD PARTY FOR THE VIEWS EXPRESSED HEREIN. NO WARRANTY IS MADE THAT DATA OR INFORMATION, WHETHER DERIVED OR OBTAINED FROM FILINGS MADE WITH THE SEC OR FROM ANY THIRD PARTY, ARE ACCURATE.

ERIC WEINSTEIN SHALL NOT BE RESPONSIBLE OR HAVE ANY LIABILITY FOR ANY MISINFORMATION CONTAINED IN ANY SEC FILING OR THIRD-PARTY REPORT. THE ESTIMATES, PROJECTIONS, PRO FORMA INFORMATION AND POTENTIAL IMPACT OF ERIC WEINSTEIN'S VIEWS SET FORTH HEREIN ARE BASED ON ASSUMPTIONS WHICH ERIC WEINSTEIN BELIEVES TO BE REASONABLE, BUT THERE CAN BE NO ASSURANCE OR GUARANTEE THAT ACTUAL RESULTS OR PERFORMANCE OF PEYE WILL NOT DIFFER, AND SUCH DIFFERENCES MAY BE MATERIAL.

ERIC WEINSTEIN RESERVES THE RIGHT TO CHANGE ANY OF HIS OPINIONS OR RECOMMENDATIONS EXPRESSED HEREIN AT ANY TIME AS HE DEEMS APPROPRIATE IN HIS SOLE DISCRETION. ERIC WEINSTEIN DISCLAIMS ANY OBLIGATION TO UPDATE THE INFORMATION CONTAINED HEREIN.

ERIC WEINSTEIN CURRENTLY HOLDS SHARES OF COMMON STOCK REPRESENTING AN AGGREGATE OWNERSHIP OF APPROXIMATELY 2% OF THE OUTSTANDING COMMON STOCK OF PEYE. IT IS POSSIBLE THAT THERE WILL BE DEVELOPMENTS IN THE FUTURE THAT MAY CAUSE ERIC WEINSTEIN FROM TIME TO TIME TO SELL ALL OR A PORTION OF HIS SHARES IN OPEN MARKET TRANSACTIONS OR OTHERWISE (INCLUDING VIA SHORT SALES), BUY ADDITIONAL SHARES (IN OPEN MARKET OR PRIVATELY NEGOTIATED TRANSACTIONS OR OTHERWISE), OR TRADE IN OPTIONS, PUTS, CALLS OR OTHER DERIVATIVE INSTRUMENTS RELATING TO SUCH SHARES.

UNDER NO CIRCUMSTANCES IS THIS LETTER TO BE USED OR CONSIDERED AS A SOLICITATION OF ANY PROXY WITH RESPECT TO THE COMMON STOCK OF PEYE OR ANY VOTE WITH RESPECT TO ANY OTHER MATTER TO BE VOTED UPON AT THE 2022 ANNUAL MEETING OF PEYE'S STOCKHOLDERS. UNDER NO CIRCUMSTANCES IS THIS LETTER TO BE CONSTRUED AS A RECOMMENDATION TO ANY STOCKHOLDER WITH RESPECT TO HOW SUCH STOCKHOLDER SHOULD VOTE WITH RESPECT TO THE 2022 ANNUAL MEETING OF PEYE'S STOCKHOLDERS.

SOURCE: Private Investor