Precision Sensors 10K-2

Precision Sensors Year 2023 Form 10-K Report

Prepared by:

Thomas Pratt

Khalia Wilson

Phil Buehler

Zack Smith

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Table of Contents

1. Business……………………………………………………………………...……………….3 1A. Risk Factors……………………………………………………………………….6

2. Management’s Decision & Analysis…………………………….……………………………82A. Executive Overview………………………………………………………………….82B. Results of Operations………………………………………………………………102C. Segment Results………...…………………………………………………………..142D. Liquidity and Capital Resources………………………………….………………172E. Cash Flow…………………………………….……………………………………..18

3. Precision Sensors Company Executive Officer Signatures……………………………......21

4. Index to Financial Statements……………………..………………………………………224A. Statement of Income………………………………………………………..….224B. Balance Sheet…………………..……………………………………………….234C. Statement of Cash Flows………………………………………………………244D. Historical Financial Ratios……………………………………....…………….254E. Statement of Shareholder’s Equity……………………………………………264F. Stock Price Performance Graph………………………………………………27

5. Report of Independent Registered Public Accounting Firm………………………….......29

6. Presentation to Board of Directors……………………………………………………...…32

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PART I

Item 1. Business

General

Precision Sensors (“Precision” or the “Company) was created in January 2016 as the

result of a government split of a major sensor manufacturing monopoly, into six equal firms.

Precision Sensors is in the business of designing, manufacturing, and selling sensors to other

manufacturers to be used in electronic devices they sell. As of December 2023, the company

managed its business in five product segments, (1) the traditional segment, (2) the low end

segment, (3) the high end segment, (4) the performance segment, (5) the size segment. Our

products are both designed and built on standards set by customer expectations. We offer our

customers products which provide the desired reliability, size, and performance of sensors.

Precision Sensor seeks to remain an industry leader in all five segments and keep opportunities

open for entrance into new markets.

Precision Sensor’s long-term strategic plan is supported strongly by its internal growth,

research & development, marketing, and annual production, with strong focus on financial

stability. Precision Sensor’s research & development department continues to remain innovative

with the implementation of new sensors as well as keeping current products up to date to match

customer needs. Precision Sensor’s marketing department remains heavily integrated with its

production department to ensure manufacturing quantities are in line with forecasts. In addition,

its marketing department market growth projections assist production in the determination of

ideal levels of capacity. The marketing team also ensures our products remain readily available

and well known to our customers, while pricing them according to customer needs.

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Unless the context otherwise requires, references to “Precision”, the “Company”, and “we”,

“us,” or “our” refers to Precision Sensors.

Research & Development

A strong focus on research and development enables Precision Sensor to consistently

meet the technological needs and personal preferences of our customers for each segment we

serves. Precision Sensor’s R&D department excels at designing innovative products and

redesigning existing product lines to meet customer demand. Our production facilities focused

on high levels of automation for our products, as we invested heavily in TQM (Total Quality

Management) in order to reduce the project completion turnaround time for both new products

and changes to existing products. The higher level of automation allows for our company to

save on labor cost to provide a less expensive product. Our Research and Development

department expenditures for each product total $3,220,000 or 1.1% of revenue for year 2023.

Employees

As of December 31, 2023, the Company employed 684 employees. We invest heavily in

the development of our employees, which drives a reduction in our Turnover Rate and

Productivity Index. Our turnover rate is only 6.5% and our productivity index is 123.1%. Our

high productivity index lowers our per unit labor costs.

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Executive Officers

Each of the executive officers listed above have served the company in executive

positions for the past seven years. Mr. Thomas Pratt began his career in the hospitality industry,

acting as a turnaround specialist for struggling restaurants. He joined Precision Sensors in 2016,

he was previously in charge of the President's House at The Citadel. Mr. Phil Buehler graduated

with a Bachelor of Fine Arts in Media Arts with a minor in Economics from the University of

Arizona. After finishing his undergraduate degree, Mr. Buehler studied at American University

as part of a Journalism Intensive program, including an internship covering Capitol news. Mr.

Buehler joined Precision Sensors in 2016 from a career in freelance writing and producing

documentaries for St. Benedict Press / TAN Books in Charlotte, North Carolina. Mr. Zack

Smith received a bachelor’s of science in Electrical Engineering from the University of South

Carolina. Precision Sensors hired Mr. Smith in 2016, where he left behind a job at Kapstone

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Paper in North Charleston, SC. Ms. Wilson attended the University of South Carolina and

obtained her undergraduate degree in Finance. Before joining the team in 2016, she was a

program planning and control analyst at Honeywell in Charleston, SC.

ITEM 1A. RISK FACTORS

There many risks and uncertainties which have the potential to negatively affect the

operations and financial conditions of Precision Sensor. The risks described below do not reflect

a comprehensive list of all such risks, as there are risks that may not be known at this moment

that could also influence our business.

Precision Sensor faces the risk of its current production facilities not being able to meet

production or quality demands, which could result in lower than projected revenues and

gross profit.

Precision Sensor has seven manufacturing facilities, which are currently operating in

Year 2023. While measures have been taken to reduce the chance of disruption within these

seven manufacturing facilities, there is always potential for unanticipated problems. These

unanticipated problems could include natural disasters such as hurricanes or tornadoes, labor

difficulties, and/or failure of equipment resulting in unscheduled downtime. These problems

could all result in the loss of production capacity for an extended period of time, causing a

reduction in company earnings and revenues.

Precision Sensor is impacted by any changes in the economy which could result in lower

than anticipated sales.

Any unexpected changes in economic condition could result in our customers limiting

their spending on electronic products. With the lower overall demand for electronics, the demand

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for our products will decline in a similar fashion until the economy reverts to better conditions.

The lower demand would result in increased prices for our products to remain competitive. Any

economic slowdown or uncertain economic turnaround could result in inventory issues as sales

of current products decrease, and affect sales forecasting for the uncertain future.

Precision Sensor’s long-term success is dependent upon its ability to develop its

manufacturing facilities.

Our company’s ability to develop our manufacturing facilities drives how well we are able to

meet customer expectations in each product segment. Our success in the development and

upgrades to our manufacturing facilities depend on the following risk factors:

Problems with engineering plans to either upgrade a current facility or build a new

facility, which would delay our ability to meet customer expectation in a timely fashion.

Ability to acquire land in a chosen geographic area in a timely fashion.

The ability to recruit skilled labor to manufacture our products efficiently at desired cost.

The cost of constructing new facilities or adding automation to current facilities.

Poor customer perception of its products or reputation could have negative impact on

business.

The success of our company depends on our reputation and the perception of our

products. With the social media boom, any unwarranted negative reviews put us at risk for the

potential loss to customers. We work hard to manage and respond to such reviews and keep

public relations a top priority, but it is impossible to monitor and control every statement made

about the company or our products.

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PART II

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

ITEM 2A. Executive Overview and Outlook

Precision Sensors will utilize our ability to make sound business decisions in order

generate superior shareholder returns through the efficient production of sensors that meet or

exceed our customers’ expectations.

To achieve this, Precision Sensors has implemented a low cost strategy designed to take

advantage of our company’s advanced automation, training, and business practices. Our

automation advantage has allowed us to compete with products in every sector, Traditional, Low

Cost, High End, Performance, and Size and produce these products at a considerably lower cost

than our competitors. By competing in every market, Precision Sensors has the ability to expand

our potential customer base and eventually gain another cost advantage through scope.

Operationally, Precision Sensors management team is organized by department with each

Department Head controlling a specific responsibility (1)R & D, (2)Marketing, (3)Production,

(4)Finance. Other secondary responsibilities were delegated through board meetings, to the

Department Head that had the best opportunity to succeed at each new endeavor. Our company

was run by a CEO who received a half vote advantage to act as a tie breaker and the CEO serves

a seven year term. Our company competes in all five market segment with just over 37% of our

sales coming from the traditional segment and just over 19% of our net sales coming from new

products. Our strategy is to develop new products in each segment to replace older products as

they become untenable due to the effect of automation on the R & D process. By being proactive

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in each segment and allowing new products to gain a foothold in their new market segment,

Precision Sensors has limited our risk to potential market share loss due poor product

performance.

The management of Precision Sensors prides itself on monitoring the health of the

company through indicators designed to focus on overall stock value. These indicators include

Leverage, ROE, Contribution Margin and Days of Working Capital and Close Cash Position. By

monitoring the changes in these indicators as we make our decisions, Precision Sensors is able to

ensure that investors receive the best return on their investment while maintaining the long term

financial health of the company. We also monitor changes in Market Share in order to properly

position both our products and company.

To achieve our business and financial goals, Precision Sensors has developed a marketing

strategy designed to maximize the return on our investment. The company invested heavily in

marketing programs that showed a good or fair return on investment while ignoring any

fractional gains that may have occurred through programs that had poor results. We also focused

our resources in each market segment to take advantage of the sales programs that showed good

and fair results and cut staff on programs that only showed poor results. By focusing our

resources in this way, we were able to maximize our product accessibility and greatly improve

our product awareness. This allowed us to grow our overall market share to just over 20%.

The investments needed to support growth are raised first through increase retained

earnings due to our company’s efficiencies. But to maximize our potential Precision Sensors also

utilized both long term and short term financing opportunities. By taking advantage of these

opportunities, Precision Sensors maximized leverage to provide working capital for the

company’s initiatives. While early on Precision Sensors did sell stock, we focused our growth

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strategy on long and short term loans and focused our efforts on reducing stock to increase

shareholder value.

ITEM 2B. Results of Operations

Sales

Sales were $319,695 in 2023, up 48% from 2022 with continued growth anticipated as

the market continues to expand. Precision Sensors has a market share of just over 20% with a

projected industry growth rate of 14%. Precision Sensors is beating projected market growth by

34%. Over the last seven years, Precision has managed to beat the projected growth rate every

year.

Sales in the Traditional Segment were $119,041 in 2023, up 60% from 2022 while easily

beating the projected market growth rate of 9.6%. Precision Sensors has a market share of just

over 26%, and anticipates further growth in market share as our new product Bland continues to

establish itself. We also anticipate continued market growth which combined with our projected

increase in market share should lead to an increase in Net Sales next year.

Sales in the Low Cost Segment were $70,186 in 2023, up 85% from 2022 and easily


over 18%, and anticipates further growth in market share as we continue this product continues

to evolve. We also anticipate continued market growth which combined with our projected

increase in market share should lead to another increase in Net Sales next year.

Sales in the High End Segment were $52,025 in 2023, up almost 40% from 2022 and

easily beating the projected market growth rate of 12.1%. Precision Sensors has a market share

of just under 19%, and anticipates further growth in market share as we continue to improve this

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product. We also anticipate continued market growth which combined with our projected


Sales in the Performance Segment were $57,818 in 2023, up 176% from 2022 and easily


over 27%, and anticipates further growth in market share as our new product Brash continues to

establish itself. We also anticipate continued market growth which combined with our projected


Sales in the Size Segment were $20,625 in 2023, up 19% from 2022. While the market

continues to grow at a rate of 19.8%. Precision Sensors market share is now just under 10%. We

planning to release a new product line in this segment in two years but are currently revamping

our existing product and anticipate a quick rebound leading to an increase in Sales next year.

As the company continues to develop new product lines to firm up its market share and

address its weaknesses, Net Sales should continue to grow. Precision Sensors is confident that by

continuing to focus on improving our processes and efficiency, we can continue to innovate and

create outstanding products to drive Net Sales.

Gross Profit/Margin

Precision Sensors gross profit increased almost 28% in 2023 to $141,948 from $110,998

in 2022. Gross Profit continues to be strong year over year and we anticipate continued growth

as we maintain and improve our contribution margins.

Precision Sensors gross margin decreased .1% to 49% in 2023 after being at 49.1% in

2022. Gross Margin is continuing to recover after incurring the expenses of two new product

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lines. We anticipate that margins will level off around 49-50% as we continue to release new

product lines over the next 4 years.

Precision Sensors gross profit increased more than 8% in 2022 to $110,998 from

$102,357 in 2021. Gross Profit continues to be strong year after year and we anticipate continued

growth as we maintain and improve our contribution margins.

Precision Sensors gross margin decreased 3.5% to 49.1% in 2022 after being at 52.6% in

2021. Gross Margin is continuing to recover after incurring the expenses of two new product

lines. We anticipate that margins will level off around 49-50% as we continue to release new

product lines over the next 4 years.

Figure 1. Precision Sensors Gross Profit / Gross Margin

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $40,241 in 2023 and represented

12.5% of Sales. This represents a dramatic decrease from 2022 when the percentage of Sales for

SG & A was 22%. A large reason for the decrease was a decision to hold off on R & D until

2024.

In 2022, advertising decreased less than 1% to $49,931 as compared from $50,004 in

2021, or 22.1% as a percentage of Net sales in 2022 as compared to 25.7% in 2011.

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Selling, general and administrative expenses decreased to $50,004 in 2021 from $41,345

in 2020.

Figure 2. Precision Sensors SG&A Expenses

Operating Profit

In 2023, operating profit increased 60.5% to $98,015 from in 2022. In 2022, operating

profit increased 16.6% to $61,067 from $52,352 in 2021.

Figure 3. Precision Sensors Operating Profit

Income Taxes

The effective income tax rate was 33.4% in 2023 and 23.6% in 2022 and 17.5% in 2021.

The primary reason for the fluctuation in rates is primarily tied to interest on both short and long

term loans. The table below lists the tax rates and amount paid.

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Figure 4. Precision Sensors Income Taxes

ITEM 2C. Segment Results

Precision markets products in five distinct product segments: Traditional, Low End, High

End, Performance and Size. Precision has multiple products in the Traditional and Performance

segment markets. Below is the Net Sales, Combined Variable and SG&A Costs, and Net Income

per segment.

Traditional: Baker & Bland

Baker represented Precision’s second best product in terms of total sales and net margin,

accounting for 22% of the company’s sales for 2023 despite the product’s overall slip in market

share for the Traditional Segment. This was attributed to the product’s age, the segment’s most

important customer criteria. The forecast for Baker is to hit the ideal age in 2024, re-establishing

its position and improving market share. The introduction of Bland product to the traditional

segment helped supplement and strengthen Precision’s overall position in the segment. The

improved position of Baker and the maturity of Bland help Precision capture 27% of the

Traditional market segment.

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Figure 5. Precision Sensors Traditional Segment Net Income, Sales, and Variable Cost

Low End: Bead

Exceptional efficiency in the low-end segment has allowed Precision’s Bead product to

lead the company in annual sales revenue with exceptional contribution margins. Bead gained

significant market share despite higher prices compared to competing products. Bead stocked out

as the company looked to increase capacity for the year. Industry demand outpaced actual unit

sales for the year, as all competitors faced similar stock out issues.

Figure 6. Precision Sensors Low End Segment Net Income, Sales, and Variable Cost

High End: Bid

Precision continues to perform well in the High End segment, despite conceding

significant market share to the High End segment leader. Precision’s Bid product was adjusted to

bring performance and size closer to the ideal position, the most important customer buying

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criteria. With 19% of market share in the high end segment, Precision has an opportunity to

make further inroads. Precision’s Bid product has a significant competitive advantage against the

high end Apple product due to lower labor and material costs. The $52,025 in sales revenue was

the third highest earning segment for Precision in 2023, representing 18% of the company’s

revenue.

Figure 7 Precision Sensors High End Segment Net Income, Sales, and Variable Cost

Performance: Bold & Brash

Precision’s Bold and Brash products make up one of the company’s weaker segments.

Despite the products’ lower net income, together the two combine to take 27% of the

Performance segment market. Because of the need for continuous performance upgrades, Bold

and Brash are difficult products to maintain because of Precision’s commitment to automation.

The performance segment is one area where Precision has reduced automation. Not surprisingly,

it is also the segment that carries the highest labor cost for the company. The introduction of

Brash to the Precision product line helped increase net income for the segment by 46% from the

previous year. With lower labor costs in other segments, Precision can commit the necessary

resources to continue to offer competitive products in this segment.

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Figure 8. Precision Sensors Performance Segment Net Income, Sales, and Variable Cost

Size: Buddy

The Size segment represents the weakest position by Precision products. Despite the

lower performance so far, Buddy is still third in market share for the segment and there is

opportunity for significant improvement as long as Buddy can continue to improve in the

customer buying criteria where performance and size are important. Competitor products in the

segment are older and will need adjustments. Buddy is positioned well for improved market

share as long as upgrades continue to move the product into the ideal position.

Figure 9. Precision Sensors Size Segment Net Income, Sales, and Variable Costs

ITEM 2D. Liquidity and Capital Resources

The Company increased cash balances to $52,573 from $40,237 in 2022. This increase

was a direct result of the sale of plant capacity. Continued cash flow from operations will be

sufficient to support continued growth and will sufficiently support Working Capital needs.

Working Capital is required for the daily production, planning, and general operations. The

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Company will continue to reduce its large debt holdings and will continue to increase cash

holdings.

ITEM 2E. Cash Flow

Net Cash from operations in 2023 increased by $30,882 from $41,276 in 2022 to $72,158

in 2023. This increase in net cash is primarily due to an increase in sales of 28.16% (increased

from $226,186 in 2022 to $289,884 in 2023). This increase in sales is due to product

improvements by the R&D division specifically with the Bland, Bead, and Bid products. Bland,

a recent addition to the product portfolio, yielded a profit in 2023. Net Margin of the Bland

product increased by 418% from -$2,513 in 2022 to $10,501 in 2023. The increase in sales was

offset by an increase in taxes of 227% (increasing from $14,402 in 2022 to $32,726.00 in 2023).

The increase in taxes is directly correlated to an increase in net income. However, a reduction in

Other Expenses by 28.41% (reduction from $7,885 in 2022 to -$2,240 in 2023), as a result of

selling capacity helped to offset the tax increase. In addition, the Company’s Corporate

Accounting department and the Company’s Tax Consultants are investigating methods to further

reduce tax expenditures in the coming years.

The Company defines working capital as the difference between current assets and current

liabilities. The working capital ratio is important when reviewing the Company’s reserves and

the number of days the Company can operate on these reserves without requiring an infusion of

capital via debt financing or stock issuance. The Company experienced an increase in working

capital of 241% from 2022 to 2023. As a result days of working capital also increased from 47.1

to 88.5 days. As previously stated, the Company aims to maintain day’s working capital

between 30 to 90 days, but the Company prefers working capital between 75-90 days. This level

of working capital ensures production will continue without requiring immediate capital.

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Figure 10. Precision Sensors Working Capital Analysis

Net cash from Investing Activities increased by 185% from -$16,800 in 2022 to $31,005

in 2023. According to the Company’s corporate strategy, the objective from 2016 to 2023 was to

create a medium sized, lean production facility. Therefore the Company determined

maintenance of excess capacity was a financial burden and decreased plant efficiency. Therefore

capacity was sold in 2023, and resulted in an increased cash position.

Net cash from financing activities decreased by 123% from -$7,394 to -$90,827 in 2023.

This decrease in net cash is a direct result of a significant increase in dividends paid in 2023.

The Company’s seven-year corporate strategy was to hold the highest stock price of all firms in

the industry. The Company accomplished this goal in 2023 with a stock price of $216.11 -

$78.92 higher than the average stock price in the industry.

Long term debt decreased in 2023 from $66,900 to $53,655, and current debt decreased

to $0.00 from $30,850 in 2022. Both long term and current Debt represents 27% of the

Company’s total capital structure. This is a significant decrease from 2022 where long and short

term debt represented 43% of the capital structure. The Company’s S&P bond rating is A which

allows the firm to borrow at a premium rate. Instead of issuing bonds in 2023, the Company

retired $12,000 in long term debt and retired $30,850 of current debt. An increase in net income

provided sufficient cash to reduce the Company’s total liabilities. This will adjust the

Company’s capital structure and results in a greater reliance on retained earnings to fund

operations.

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2023 2022Current Debt -$ 30,850$ Long Term Debt 53,655$ 66,900$ Long Term Debt Issued in Current Year -$ 15,000$ Total Debt 53,655$ 97,750$

Total Debt

Figure 11. Precision Sensors Total Debt (Long and Short Term)

Dividend payments in 2023 were $20 per share with total expenditures of $36,977. This

was an increase of 108.95% from 2022 where total dividends paid were $3,394. The Company

repurchased $12,000 in stock in 2022, which became a yearly expenditure from 2020 onward.

As a result, the Company has the lowest number of shares in the industry at 1,848,869 shares,

and 25.04% less than the industry average. This exclusivity of owning Company shares will

attract investors to the company and resulted in the highest stock price in the industry. The

Company’s stock price was strong over the past seven years and continues to remain higher than

the industry average. At the close of 2023, Precision was the highest stock price in the industry.

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PART III.

ITEM. 3 Precision Sensors Company Executive Officer Signatures

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PART IV

ITEM 4. Index to Financial Statements

ITEM 4A. Income Statement

52 Weeks Ended December 31, 2023




Sales 289,884$ 226,186$ 194,411$ 196,909$ Variable Costs:Direct Labor 49,660 40,155 31,082 39,856 Direct Material 96,328 73,064 59,051 61,968 Inventory Carry 1,948 1,969 1,921 431 Total Variable Costs 147,936 115,188 92,054 102,255 Contribution Margin 141,948 110,998 102,357 94,654

Period Costs:Depreciation 13,143 16,323 14,803 10,717 SG&A: R&D 3,220 3,865 5,752 3,590 Promotions 8,900 11,800 11,600 10,400 Sales 15,950 15,950 15,950 14,355 Admin 2,719 1,993 1,899 2,283 Total Period 43,932 49,931 50,004 41,345 Net Margin 98,015 61,067 52,352 53,310

Other (2,240) 7,885 14,795 15,755 EBIT 100,255 53,182 37,557 37,555 Short Term Interest - 3,764 2,200 1,446 Long Term Interest 6,751 8,270 9,149 6,049 Taxes 32,726 14,402 9,173 10,521 Profit Sharing 1,216 535 341 391 Net Profit 59,562$ 26,212$ 16,695$ 19,149$

CONSOLIDATED STATEMENTS OF INCOME

Figure 12. Precision Sensors Consolidated Statement of Income

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ITEM 4B. Balance Sheet

December 31, 2023

December 31, 2022

December 31, 2021

December 31, 2020

Current Assets:Cash 52,573 40,237 23,156 41,260 Accounts Receivable 15,884 12,394 10,653 10,790 Inventory 16,232 16,405 16,008 3,595 Total Current Assets 84,689 69,036 49,817 55,645 Plant & Equipment 197,150 244,850 228,050 164,250 Accumulated Depreciation (83,112) (88,003) (71,680) (56,877) Total Fixed Assets 114,038 156,847 156,370 107,373

Total Assets 198,727$ 225,883$ 206,187$ 163,018$

Current Liabilities:Accounts Payable 14,382 9,027 8,147 7,539 Current Debt - 30,850 20,000 13,900 Total Current liabilities 14,382 39,877 28,147 21,439

Long Term Debt 53,655 66,900 72,750 47,750 Total Liabilities 68,037 106,777 129,044 90,628

Shareholder's Equity:Common Stock 16,696 18,395 20,114 20,779 Retained Earnings 113,995 100,711 85,174 73,051 Total Equity 130,691 119,106 105,288 93,830

Total Liab. & O. Equity 198,727$ 225,883$ 234,332$ 184,458$

CONSOLIDATED BALANCE SHEET

ASSETS

LIABILITIES & OWNERS' EQUITY

Figure 13. Precision Sensors Consolidated Balance Sheet

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ITEM 4C. Statement of Cash Flows





Cash flows from Operating Activities:Net Income (Loss) 59,562$ 26,212$ 16,695$ 19,149$ Depreciation 13,143 16,323 14,803 10,717 Extraordinary gains/losses/write-offs (2,585) - - - Accounts Payable 5,355 880 609 (393) Inventory 173 (398) (12,413) 6,939 Accounts Receivable (3,490) (1,741) 137 (2,347) Net Cash from operations 72,158 41,276 19,831 34,065

Cash Flows from Investing Activities:Plant Improvement 31,005 (16,800) (63,800) (32,500)

Cash Flows from Financing Activities:Dividends Paid (36,977) (3,394) (2,236) (2,068) Sales of Common Stock - - - - Purchase of Common Stock (11,000) (9,000) (3,000) (300) Cash from long term debt - 15,000 25,000 15,000 Retirement of long term debt (12,000) (20,850) - (13,900) Change in current debt (net) (30,850) 10,850 6,100 13,900 Net cash from financing activities (90,827) (7,394) 25,864 12,632 Net change in cash position 12,336 17,082 (18,105) 14,197 Closing cash position 52,573$ 40,237$ 23,156$ 41,260$

CONSOLIDATED STATEMENTS OF CASH FLOWS

Figure 14. Precision Sensors Consolidated Statement of Cash Flows

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ITEM 4D. Historical Financial Summary

2023 2022 2021 2020

Current Ratio 5.9 1.7 1.8 2.6 Quick Ratio 4.8 1.3 1.2 2.4 Inventory Turnover 9.1 7.1 9.4 56.9 Avg Days Inv on Hand 40.3 51.4 38.9 6.4 Working Capital 70,307$ 29,159$ 21,670$ 34,206$ Days of Working Capital 88.5 47.1 40.7 63.4

Profit Margin 20.5% 11.6% 8.6% 9.7%Gross Profit Percentage 33.8% 27.0% 26.9% 27.1%Return on Assets 45.60% 11.60% 8.10% 11.70%Return on Equity 45.6% 22.0% 15.9% 20.4%Asset Turnover 1.46 1.00 2.00 1.70

Debt-to-Assets 41.1% 82.1% 88.1% 65.7%Equity-to-Assets 65.8% 52.7% 51.1% 57.6%Debt-to-Equity 0.41 0.82 0.88 0.66 Interest Coverage Ratio 14.85 4.42 3.31 5.01

Cash Flow Yield 25.8% 10.4% -22.3% 0.9%Cash Flow to Sales 35.6% 10.8% -22.6% 0.8%Cash Flow to Assets 51.9% 10.8% -21.3% 1.0%

Price/Earnings (P/E) Ratio 6.7 9.0 11.8 9.0Dividend Yield 9.30% 1.40% 1.10% 1.20%

Market Strength Ratios

Long-Term Solvency Ratios

Profitability Ratios

Liquidity Ratios

Cash Flow Adequacy Ratios

HISTORICAL FINANCIAL SUMMARY

Figure 155. Precision Sensors Historical Financial Summary

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ITEM 4E. Statement of Stockholders Equity

2023 2022 2021 2020

Balance on January 1 119,106$ 105,288$ 93,830$ 77,048$ Issued Shares for Cash - - - - Common Stock Repurchase (11,000) (9,000) (3,000) (300) Net Income 59,562 26,212 16,695 19,149 Cash Dividends (36,977) (3,394) (2,236) (2,068) Balance on December 31 130,691$ 119,106$ 105,289$ 93,829$

STATEMENT OF STOCKHOLDERS EQUITY

Figure 166. Precision Sensors Stockholder’s Equity

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ITEM 4F. Stock Price Performance Graph

The following graphs compare cumulative total stockholder returns on the Company’s

common stock against the industry average and against all competitors in the industry for a seven

year period beginning December 31, 2017 to December 31, 2023.

2017 2018 2019 2020 2021 2022 2023$0.00

$50.00

$100.00

$150.00

$200.00

$250.00

Precision Sensors Stock Price v. Competitors

AndrewsPrecision ChesterDigbyErieFerrisSt

ock

Pric

e

Figure 177. Precision Sensors Stock Price Performance Graph – Precision Sensors v.

Competitors

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2017 2018 2019 2020 2021 2022 2023$0.00

$50.00

$100.00

$150.00

$200.00

$250.00

Precision ; $216.11

Industry Average; $137.19

Precision Stock Price v. Industry AverageSt

ock

Pric

e

Figure 188. Precision Sensors Stock Price Performance Graph – Precision Sensors v. Industry

Average

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Item 5: Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Precision Sensors Company

In our opinion, the consolidated financial statements listed in the accompanying index

present fairly, in all material respects, the financial position of Precision Sensors Company and

its subsidiaries (the Company) at December 31, 2022 and 2023, and the results of their

operations and their cash flows for each of the three years in the period ended December 31,

2023 in conformity with accounting principles generally accepted in the United States of

America. In addition, in our opinion, the financial statement schedule listed in the accompanying

index presents fairly, in all material respects, the information set forth therein when read in

conjunction with the related consolidated financial statements. Also in our opinion, the Company

maintained, in all material respects, effective internal control over financial reporting as of

December 31, 2023, based on criteria established in Internal Control - Integrated Framework

issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

The Company’s management is responsible for these financial statements and the financial

statement schedule, for maintaining effective internal control over financial reporting and for its

assessment of the effectiveness of internal control over financial reporting, included in

Management’s Annual Report on Internal Control over Financial Reporting, appearing under

Item 9A. Our responsibility is to express opinions on these financial statements, on the financial

statement schedule, and on the Company’s internal control over financial reporting based on our

integrated audits. We conducted our audits in accordance with the standards of the Public

Company Accounting Oversight Board (United States). Those standards require that we plan and

perform the audits to obtain reasonable assurance about whether the financial statements are free

of material misstatement and whether effective internal control over financial reporting was

29

maintained in all material respects. Our audits of the financial statements included examining, on

a test basis, evidence supporting the amounts and disclosures in the financial statements,

assessing the accounting principles used and significant estimates made by management, and

evaluating the overall financial statement presentation. Our audit of internal control over

financial reporting included obtaining an understanding of internal control over financial

reporting, assessing the risk that a material weakness exists, and testing and evaluating the design

and operating effectiveness of internal control based on the assessed risk. Our audits also

included performing such other procedures as we considered necessary in the circumstances. We

believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable

assurance regarding the reliability of financial reporting and the preparation of financial

statements for external purposes in accordance with generally accepted accounting principles. A

company’s internal control over financial reporting includes those policies and procedures that

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect

the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance

that transactions are recorded as necessary to permit preparation of financial statements in

accordance with generally accepted accounting principles, and that receipts and expenditures of

the company are being made only in accordance with authorizations of management and

directors of the company; and (iii) provide reasonable assurance regarding prevention or timely

detection of unauthorized acquisition, use, or disposition of the Company’s assets that could

have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or

detect misstatements. Also, projections of any evaluation of effectiveness to future periods are

30

subject to the risk that controls may become inadequate because of changes in conditions, or that

the degree of compliance with the policies or procedures may deteriorate.

/s/ PRICEWATERHOUSECOOPERS LLP

New York, New York

February 21, 2023

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ITEM 6. Presentation to Board of Directors

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Documents

Precision Sensors 10K-2