PRECISION OPTICS CORPORATION 22 EAST BROADWAY GARDNER, MASSACHUSETTS 01440-3338 Telephone 978 / 630-1800 Telefax 978 / 630-1487 POC:24-0346 Page 1 of 4 NEWS RELEASE FOR IMMEDIATE RELEASE Friday

CORPORATION ANNOUNCES

FOURTH QUARTER AND YEAR END RESULTS

GARDNER, Massachusetts

Corporation, Inc. (Nasdaq: POCI) today announced operating results on an unaudited

basis for the fourth quarter of fiscal year 2004 ended June 30, 2004.

Fourth Quarter Operating

For the quarter ended June 30, 2004, revenues were $285,576 compared

to $363,947 for the same period last year, a decrease of 21.5% . Revenues in

the quarter decreased 9.0% from the preceding quarter ended March 31, 2004.

For the quarter ended June 30, 2004, net loss was $1,011,525, or $0.58

per share, an increase of $3,353, from the net loss of $1,008,172, or $0.58

per share, for the same period last year. The weighted average common shares

outstanding were 1,752,053 during both periods.

Net loss for the quarter ended June 30, 2004 included provisions for

obsolete and slow moving inventories of $191,200. Net loss for the quarter ended

June 30, 2003 included a provision for asset impairment of $123,511.

Fiscal Year 2004 Operating

For the year ended June 30, 2004, revenues were $1,464,964 compared to

$2,399,217 for the same period last year, a decrease of 38.9% .

For the year ended June 30, 2004, net loss was $3,684,076, or $2.10 per

share, an increase of $756,314 compared to the net loss of $2,927,762, or $1.67

per share, for the year ended June 30, 2003. The weighted average common shares

outstanding were 1,752,053 during both periods.

Net loss for the year ended June 30, 2004 and 2003 included provisions

for asset impairment and restructuring of $52,208 and $176,642, respectively.

Net loss for the year ended June 30, 2004 included provisions for obsolete and

slow-moving inventories of $500,000.

Cash Flow and Expenditures

For the quarter ended June

30, 2004, cash and cash equivalents decreased by approximately $602,000 compared

to a decrease of approximately $781,000 for the previous quarter ended March

31, 2004. Cash disbursements during the quarter ended March 31, 2004 included

approximately $52,000 paid for employee severance costs.

Capital equipment expenditures

during the year ended June 30, 2004 were approximately $33,600, up 21% from

the same period in 2003. Future capital expenditures will depend on future sales

and the success of ongoing research and development efforts.

For the quarter ended June

30, 2004, research and development expenses were approximately $339,000, up

2% from $333,000 for the quarter ended June 30, 2003. Quarterly research and

development expenses depend on the Company s assessment of new product

Successful Completion

As previously announced,

in July 2004, the Company completed a rights offering to stockholders. Stockholders

exercised subscription rights to purchase the entire 5,256,159 shares of common

stock offered at a subscription price of $1.00 per share, raising gross proceeds

There were 1,324,666 shares

purchased through the exercise of basic subscription rights and an additional

3,931,493 shares purchased through the over subscription privilege. The Company

received subscriptions for a total of 7,554,093 shares, exceeding the total

number of shares offered by 2,297,934 shares, or 43.7% .

Customer Relationships

The Company is in discussions

with several customers regarding manufacturing of prototypes of advanced endoscopes

incorporating ultra-small lenses, ranging in size from .5 mm to 1 mm, which

include utilization of the Company s patent-pending micro-precisionTM

lens technology. These initiatives encompass a variety of innovative techniques

involving minimally invasive surgery.

As previously announced,

the Company has taken additional measures to realign its cost structure with

current revenue expectations. In January 2004, the Company reduced its workforce

by five full-time employees, a 15% reduction. As a result of this action, the

Company recorded a non-recurring pretax charge to earnings of $52,208 for employee

severance benefits in the quarter ended March 31, 2004. In addition, the Company

is in the process of reviewing other expense areas to determine where additional

reductions in discretionary spending can be achieved.

The Company expects its

recent pattern of quarter-to-quarter revenue fluctuations to continue, due to

the uncertain timing of orders from customers and their size in relation to

total revenues. The Company continues to move forward with new products and

technical innovations, in particular, the development of a new generation (patent

pending) of its world-class product line of 3-D endoscopes, the development

of a new prototype 2.7 mm endoscope, and new instruments utilizing the Company s

new micro-precisionTM

lens technology (patent pending) for endoscopes under 1 mm. The Company continues

to explore potential applications of single-molecule technology and nanotechnology.

Precision Optics Corporation,

a leading developer and manufacturer of advanced optical instruments since 1982,

designs and produces high-quality optical thin film coatings, medical instruments,

and other advanced optical systems. The Company s medical instrumentation

line includes laparoscopes, arthroscopes and endocouplers and a world-class

product line of 3-D endoscopes for use in minimally invasive surgical procedures.

The Company is currently

developing specialty instruments incorporating its patent-pending LENSLOCKTM

technology which ensures lower cost, easier repairability and enhanced durability

as well as ultra-small instruments (some with lenses less than one millimeter

in diameter) utilizing patent-pending micro-precisionTM lens technology.

The Company is also exploring new initiatives in single-molecule technology

and nanotechnology for biomedical and other applications.

Precision Optics Corporation

is certified to the ISO 9001 Quality Standard, and complies with the FDA Good

Manufacturing Practices and the European Union Medical Device Directive for

CE Marking of its medical products. The Company s Internet Website is www.poci.com.

CORPORATION, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND TWELVE

June 30, 2004 AND 2003

CORPORATION, INC. AND SUBSIDIARIES