Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Jun. 30, 2015 | Sep. 15, 2015 | Dec. 31, 2014 | |
Document And Entity Information | |||
Entity Registrant Name | PRECISION OPTICS CORPORATION, INC. | ||
Entity Central Index Key | 867,840 | ||
Document Type | 10-K | ||
Document Period End Date | Jun. 30, 2015 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --06-30 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 1,260,159 | ||
Entity Common Stock, Shares Outstanding | 6,389,806 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,015 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Jun. 30, 2015 | Jun. 30, 2014 |
Current Assets: | ||
Cash and cash equivalents | $ 241,051 | $ 202,380 |
Accounts receivable (net of allowance for doubtful accounts of $22,500 in 2015 and 2014) | 588,042 | 531,049 |
Inventories | 1,073,256 | 988,878 |
Prepaid expenses | 65,182 | 91,922 |
Total current assets | 1,967,531 | 1,814,229 |
Fixed Assets: | ||
Machinery and equipment | 2,431,127 | 2,368,709 |
Leasehold improvements | 553,596 | 553,596 |
Furniture and fixtures | 148,303 | 148,303 |
Vehicles | 19,674 | 19,674 |
Total | 3,152,700 | 3,090,282 |
Less: Accumulated depreciation and amortization | 3,096,993 | 3,075,722 |
Net fixed assets | 55,707 | 14,560 |
Patents, net | 18,644 | 7,672 |
TOTAL ASSETS | 2,041,882 | 1,836,461 |
Current Liabilities: | ||
Accounts payable | 912,150 | 715,192 |
Customer advances | 118,800 | 26,200 |
Accrued employee compensation | 222,222 | 200,207 |
Accrued professional services | 60,735 | 60,250 |
Accrued warranty expense | 25,000 | 25,000 |
Other accrued liabilities | 36,087 | 69,028 |
Total current liabilities | $ 1,374,994 | $ 1,095,877 |
Commitments (Note 2) | ||
Stockholders' Equity: | ||
Common stock, $0.01 par value: 50,000,000 shares authorized; issued and outstanding - 6,389,806 shares at June 30, 2015 and 4,455,134 shares at June 30, 2014 | $ 63,898 | $ 44,551 |
Additional paid-in capital | 43,232,500 | 42,146,750 |
Accumulated deficit | (42,629,510) | (41,450,717) |
Total stockholders' equity | 666,888 | 740,584 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 2,041,882 | $ 1,836,461 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Jun. 30, 2015 | Jun. 30, 2014 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 22,500 | $ 22,500 |
STOCKHOLDERS' EQUITY | ||
Common Stock par value | $ 0.01 | $ 0.01 |
Common Stock shares authorized | 50,000,000 | 50,000,000 |
Common Stock shares issued | 6,389,806 | 4,455,134 |
Common Stock shares outstanding | 6,389,806 | 4,455,134 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Income Statement [Abstract] | ||
Revenues | $ 3,912,060 | $ 3,651,181 |
Cost of goods sold | 3,113,789 | 2,850,386 |
Gross profit | 798,271 | 800,795 |
Research and development expenses, net | 492,937 | 471,106 |
Selling, general and administrative expenses | 1,545,462 | 1,503,443 |
Gain on sale of assets | (27,075) | (14,028) |
Total operating expenses | 2,011,324 | 1,960,521 |
Operating loss | (1,213,053) | (1,159,726) |
Other income | 35,172 | 0 |
Loss before provision for income taxes | (1,177,881) | (1,159,726) |
Provision for income taxes | 912 | 912 |
Net loss | $ (1,178,793) | $ (1,160,638) |
Income (Loss) Per Share: | ||
Basic | $ (.19) | $ (0.26) |
Diluted | $ (.19) | $ (0.26) |
Weighted Average Common Shares Outstanding: | ||
Basic | 6,272,264 | 4,455,134 |
Diluted | 6,272,264 | 4,455,134 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning balance, value at Jun. 30, 2013 | $ 41,955,717 | $ (40,290,079) | $ 1,710,189 |
Common stock issued for services rendered to the Company, value | 0 | ||
Advance proceeds from private placement of common stock | 50,000 | 50,000 | |
Stock-based compensation, amount | 141,033 | 141,033 | |
Net loss | (1,160,638) | (1,160,638) | |
Ending balance, value at Jun. 30, 2014 | 42,146,750 | (41,450,717) | 740,584 |
Proceeds from private placement of common stock, net of issuance costs of $127,512, value | 835,607 | 852,779 | |
Common stock issued for services rendered to the Company, value | 124,468 | 126,643 | |
Stock-based compensation, amount | 125,675 | 125,675 | |
Net loss | (1,178,793) | (1,178,793) | |
Ending balance, value at Jun. 30, 2015 | $ 43,232,500 | $ (42,629,510) | $ 666,888 |
CONSOLIDATED STATEMENTS OF STO6
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) | 12 Months Ended |
Jun. 30, 2015USD ($) | |
Statement of Stockholders' Equity [Abstract] | |
Stock issuance costs | $ 127,512 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Cash Flows from Operating Activities: | ||
Net loss | $ (1,178,793) | $ (1,160,638) |
Adjustments to reconcile net loss to net cash used in operating activities - | ||
Depreciation and amortization | 21,271 | 20,020 |
Gain on sale of assets | (27,075) | (14,028) |
Stock-based compensation expense | 125,675 | 141,033 |
Non-cash consulting expense | 66,750 | 64,507 |
Non-cash gain on settlement of liabilities by issuing common stock | (35,172) | 0 |
Changes in operating assets and liabilities - | ||
Accounts receivable, net | (56,993) | (252,349) |
Inventories | (84,378) | (92,705) |
Prepaid expenses | 26,740 | (30,355) |
Accounts payable | 210,958 | 425,937 |
Customer advances | 92,600 | (11,844) |
Accrued expenses | 64,624 | 24,391 |
Net cash used in operating activities | (773,793) | (886,031) |
Cash Flows from Investing Activities: | ||
Proceeds from sale of assets | 27,075 | 14,028 |
Additional patent costs | (10,972) | (8,524) |
Purchases of fixed assets | (62,418) | (1,680) |
Net cash provided by (used in) investing activities | (46,315) | 3,824 |
Cash Flows from Financing Activities: | ||
Proceeds from July 2014 private placement of common stock | 980,291 | 50,000 |
Private placement expenses incurred and paid as of June 30, 2015 | (121,512) | 0 |
Net cash provided by financing activities | 858,779 | 50,000 |
Net (decrease) increase in cash and cash equivalents | 38,671 | (832,207) |
Cash and cash equivalents, beginning of year | 202,380 | 1,034,587 |
Cash and cash equivalents, end of year | 241,051 | 202,380 |
Supplemental Disclosure of Cash Flow Informatin: | ||
Cash paid during the year for income taxes | 912 | 912 |
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES: | ||
Issuance of 217,520 shares of common stock for services rendered to the company | 126,643 | 0 |
Private placement expenses incurred but not yet paid as of June 30, 2015 | $ 6,000 | $ 0 |
1. SUMMARY OF SIGNIFICANT ACCOU
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Jun. 30, 2015 | |
Accounting Policies [Abstract] | |
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | (a) Nature of Business and Liquidity Precision Optics Corporation, Inc. (the Company) designs, develops, manufactures and sells specialized optical systems and components and optical thin-film coatings. The Company conducts business in one industry segment only and its customers are primarily domestic. The Companys products and services fall into two principal areas: (i) medical products for use by hospitals and physicians; and (ii) advanced optical system design and development services and products used by military and industrial customers. The Company has sustained recurring net losses for several years. During the year ended June 30, 2015, the Company incurred a net loss from operations of $1,213,053 and used cash in operating activities of $773,793. As of June 30, 2015, cash and cash equivalents were $241,051, accounts receivable were $588,042, and current liabilities were $1,374,994. As of June 30, 2014, cash and cash equivalents were $202,380, accounts receivable were $531,049, and current liabilities were $1,095,877. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. These factors raise substantial doubt about the Companys ability to continue as a going concern. Until the Company achieves breakeven and profitable results, the Company will be required to pursue several options to manage cash flow and raise capital, including issuing debt or equity or entering into a strategic alliance. The sale of additional equity or convertible debt securities, if converted into common stock, would result in additional dilution to the Companys current stockholders, and debt financing, if available, may involve restrictive covenants that could restrict our operations or finances. Financing may not be available in amounts or on terms acceptable to the Company, if at all. If the Company cannot raise funds on acceptable terms or achieve positive cash flow, the Company may not be able to continue to conduct operations, develop new products, grow market share, take advantage of future opportunities or respond to competitive pressures or unanticipated requirements, any of which would negatively impact the Companys business, operating results and financial condition. (b) Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its two wholly-owned subsidiaries. All inter-company accounts and transactions have been eliminated in consolidation. (c) Revenues The Company recognizes revenue when four basic criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the price to the buyer is fixed and determinable; and (4) collectability is reasonably assured. The Companys shipping terms are customarily FOB shipping point. The sales price of products and services sold is fixed and determinable after receipt and acceptance of a customers purchase order or properly executed sales contract, typically before any work is performed. Management reviews each customer purchase order or sales contract to determine that the work to be performed is specified and there are no unusual terms and conditions that would raise questions as to whether the sales price is fixed or determinable. The Company assesses credit worthiness of customers based upon prior history with the customer and assessment of financial condition. Accounts receivable are stated at the amount management expects to collect from outstanding balances. An allowance for doubtful accounts is provided for that portion of accounts receivable considered to be uncollectible, based upon historical experience and managements evaluation of outstanding accounts receivable at the end of the year. Bad debts are written off against the allowance when identified. The Companys revenue transactions typically do not contain multiple deliverable elements for future performance obligations to customers, other than a standard one-year warranty on materials and workmanship, the estimated costs for which are provided for at the time revenue is recognized. Revenues for industrial and medical products sold in the normal course of business are recognized upon shipment when delivery terms are FOB shipping point and all other revenue recognition criteria have been met. Gross shipping charges reimbursable from customers, to deliver product, are insignificant and are included in Revenues section of the Companys consolidated statement of operations, while shipping costs are classified in the selling, general and administrative expenses section of the Companys consolidated statement of operations. (d) Cash and Cash Equivalents The Company includes in cash equivalents all highly liquid investments with original maturities of three months or less at the time of acquisition. Cash and cash equivalents of $241,051 and $202,380 at June 30, 2015 and 2014, respectively, consist primarily of cash at banks and money market funds. The Company maintains its cash and cash equivalents in bank deposit accounts that, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on its cash and cash equivalents. (e) Inventories Inventories are stated at the lower of cost (first-in, first-out) or market and include material, labor and manufacturing overhead. The components of inventories at June 30, 2015 and 2014 are as follows: 2015 2014 Raw material $ 485,266 $ 445,210 Work-in-progress 388,503 385,601 Finished goods 199,487 158,067 $ 1,073,256 $ 988,878 The Company provides for estimated obsolescence on unmarketable inventory based upon assumptions about future demand and market conditions. If actual demand and market conditions are less favorable than those projected by management, additional inventory write-downs may be required. Inventory, once written down, is not subsequently written back up, as these adjustments are considered permanent adjustments to the carrying value of the inventory. (f) Property and Equipment Property and equipment are recorded at cost. Maintenance and repair items are expensed as incurred. The Company provides for depreciation and amortization by charges to operations, using the straight-line and declining-balance methods, which allocate the cost of property and equipment over the following estimated useful lives: Asset Classification Estimated Useful Life Machinery and equipment 2-7 years Leasehold improvements Shorter of lease term or estimated useful life Furniture and fixtures 5 years Vehicles 3 years Depreciation expense was $21,271 and $19,168 for the years ended June 30, 2015 and 2014, respectively. (g) Significant Customers and Concentration of Credit Risk Financial instruments that subject the Company to credit risk consist primarily of cash equivalents and trade accounts receivable. The Company places its investments with highly rated financial institutions. The Company has not experienced any losses on these investments to date. At June 30, 2015, receivables from the Companys four largest customers were 38%, 13%, 12% and 10% of the total accounts receivable. At June 30, 2014, receivables from the Companys three largest customers were 30%, 17% and 11%, of the total accounts receivable. No other customer accounted for more than 10% of the Companys receivables as of June 30, 2015 and 2014. The Company has not experienced any material losses related to accounts receivable from individual customers. The Company generally does not require collateral or other security as a condition of sale, rather it relies on credit approval, balance limitation and monitoring procedures to control credit risk of trade account financial instruments. Management believes that allowances for doubtful accounts, which are established based upon review of specific account balances and historical experience, are adequate. Revenues from the Companys largest customers, as a percentage of total revenues, were as follows: Year Ended June 30 2015 2014 Customer A 23% 21% Customer B 15 14 Customer C 11 1 Customer D 9 21 All others 42 43 100% 100% No other customer accounted for more than 10% of the Companys revenues in fiscal years 2015 and 2014. (h) Loss per Share 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 or net 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 and warrants. For the year ended June 30, 2015 and 2014, the effect of such securities was antidilutive and not included in the diluted calculation because of the net loss generated in those periods. The following is the calculation of loss per share for the years ended June 30, 2015 and 2014: Year Ended June 30 2015 2014 Net Loss Basic and Diluted $ (1,178,793 ) $ (1,160,638 ) Basic Weighted Average Shares Outstanding 6,272,264 4,455,134 Potentially Dilutive Securities Diluted Weighted Average Shares Outstanding 6,272,264 4,455,134 Loss Per Share Basic $ (0.19 ) $ (0.26 ) Diluted $ (0.19 ) $ (0.26 ) The number of shares issuable upon the exercise of outstanding stock options and warrants that were excluded from the computation as their effect was antidilutive was approximately 4,355,000 and 3,393,000 for the years ended June 30, 2015 and 2014, respectively. (i) Stock-Based Compensation The measurement and recognition of compensation costs for all stock-based awards made to employees and the Board of Directors are based upon fair value over the requisite service period for awards expected to vest. The Company estimates the fair value of share-based awards on the date of grant using the Black-Scholes option-pricing model. Stock-based compensation costs recognized for the years ended June 30, 2015 and 2014 amounted to $125,675 and $141,033, respectively. (j) Patents Patent costs are amortized using the straight-line method over the shorter of their legal or estimated useful lives, generally five to ten years. Amortization expense was $0 and $852 for the years ended June 30, 2015 and 2014, respectively. In July 2011, the Company assigned all of its currently issued and pending patents, as well as new inventions that it conceives before July 28, 2012, to Intuitive Surgical Operations, Inc. (k) Fair Value of Financial Instruments Financial instruments consist principally of cash and cash equivalents, accounts receivable and accounts payable. The estimated fair value of these financial instruments approximates their carrying value due to their short-term nature. (l) Long-Lived Assets Long-lived assets and certain identifiable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. (m) Warranty Costs The Company does not incur future performance obligations in the normal course of business other than providing a standard one-year warranty on materials and workmanship to its customers (except in certain unusual and infrequently occurring situations where extended warranty terms beyond one year are negotiated with the customer). The Company provides for estimated warranty costs at the time product revenue is recognized. Warranty costs have been included as a component of cost of goods sold in the accompanying consolidated statements of operations. The following tables summarize warranty reserve activity for the years ended June 30, 2015 and 2014: 2015 2014 Balance at beginning of period $ 25,000 $ 25,000 Provision for warranty claims 32,477 11,917 Warranty claims incurred (32,477 ) (11,917 ) Balance at end of period $ 25,000 $ 25,000 (n) Research and Development Research and development expenses are charged to operations as incurred. The Company groups development and prototype costs and related reimbursements in research and development. For the years ended June 30, 2015 and 2014, research and development expense is shown net of reimbursements of $23,404 and $45,997, respectively, in the accompanying statements of operations. (o) Comprehensive Income Comprehensive income or loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owners sources. The Companys comprehensive loss or income for the years ended June 30, 2015 and 2014 was equal to its net loss for the same periods. (p) Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. In assessing the likelihood of utilization of existing deferred tax assets, management has considered historical results of operations and the current operating environment. (q) Segment Reporting Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions about how to allocate resources and assess performance. The Companys chief decision-maker is its Chief Executive Officer. To date, the Company has viewed its operations and manages its business as principally one segment. For all periods presented, over 90% of the Companys sales have been to customers in the United States. (r) Use of Estimates The preparation of financial statements in conformity with accounting standards generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (s) Recent Accounting Pronouncements In July 2015, the Financial Accounting Standards Board ("FASB") issued new accounting guidance for measuring inventory. The core principal of the guidance is that an entity should measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This guidance does not apply to inventory that is being measured using the Last-In, First-Out (LIFO) or the retail inventory method. The guidance is effective for financial statements issued for annual and interim periods beginning after December 15, 2016 on a prospective basis. Early adoption is permitted. The Company is currently evaluating the impact this will have on the consolidated financial statements. On June 12, 2015, the FASB issued ASU 2015-10, Technical Corrections and Improvements, which amends a number of topics in the FASB Accounting Standards Codification. The update is a part of an ongoing project on the FASBs agenda to facilitate Codification updates for non-substantive technical corrections, clarifications, and improvements that are not expected to have a significant effect on accounting practice or create a significant administrative cost to most entities. The ASU will apply to all reporting entities within the scope of the affected accounting guidance. Certain amendments in the update require transition guidance and are effective for all entities for fiscal years, and interim periods within those years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact this will have on the consolidated financial statements. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09). ASU 2014-09 provides a single, comprehensive accounting model for revenues arising from contracts with customers that supersedes most of the existing revenue recognition guidance, including industry-specific guidance. Under this model, revenue is recognized at an amount that an entity expects to be entitled to upon transferring control of goods or services to a customer, as opposed to when risks and rewards transfer to a customer under existing revenue recognition guidance. ASU 201-09 is effective for the Company beginning in its fiscal year 2018, and may be applied retrospectively to all prior periods presented or through a cumulative adjustment to the opening retained earnings balance in the year of adoption. The Company is currently in the process of evaluating the impact of ASU 2014-09 on its consolidated financial statements. |
2. COMMITMENTS
2. COMMITMENTS | 12 Months Ended |
Jun. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
2. COMMITMENTS | (a) Related Party Transactions The Company leases its main Gardner facility from a corporation owned by Mr. Richard E. Forkey, who resigned from our board of directors on July 9, 2014. The Company is currently a tenant-at-will, paying rent of $9,000 per month. Total rent expense paid or accrued to such related party was $108,000 in each of fiscal years 2015 and 2014, and is included in the Companys accompanying consolidated statements of operations. Transactions with Stockholders Known by the Company to Own 5% or More of the Companys Common Stock On July 1 through July 7, 2014, the Company closed agreements with institutional and accredited investors (the Investors) for the sale and purchase of 1,717,152 shares of the Companys common stock, $0.01 par value at a purchase price of $0.60 per share. The Company received $1,030,291 in gross proceeds from the offering. The Company used the net proceeds from this placement for general working capital purposes. Of this amount, $50,000 was received in June 2014 and the remainder was received in July 2014. In conjunction with the placement, the Company also entered into a registration rights agreement with the Investors, whereby the Company was obligated to file a registration statement with the Securities Exchange Commission on or before 45 calendar days after July 1, 2014 to register the resale by the investors of the 1,717,152 shares of the common stock purchased in the placement. Subsequent to the execution of the agreement, the parties agreed to extend the time period by which the Company was obligated to file a registration statement with the Securities Exchange Commission. The registration statement was filed with the Securities Exchange Commission on October 9, 2014, in accordance with the extended timetable, and became effective on October 30, 2014. Pursuant to the above transaction, Mr. Arnold Schumsky purchased 83,334 shares of common stock in exchange for an aggregate price of $50,000 and MHW Capital Partners, LP purchased 125,000 shares of common stock in exchange for an aggregate price of $75,000. Arnold Schumsky and MHW Capital Partners, LP were beneficial owners of more than 5% of the Companys outstanding common stock at the time of the transaction. Mr. Woodward is the principal of MHW Capital Partners, LP, and holds the power to vote and direct the disposition of the shares of common stock owned by MHW Partners, LP. Pursuant to the transaction described above, Mr. Woodward was subsequently appointed as Chairman of the Companys Board of Directors on July 9, 2014. (b) Operating Lease Commitments The Company has entered into operating leases for its office space and equipment that expire at various dates through fiscal year 2016. Total future minimum rental payments under all non-cancelable operating leases are $13,780 in fiscal year 2015. Rent expense on operating leases, excluding the related party rent described above, was $58,077 and $68,232 for the years ended June 30, 2015 and 2014, respectively. |
3. STOCKHOLDERS' EQUITY
3. STOCKHOLDERS' EQUITY | 12 Months Ended |
Jun. 30, 2015 | |
Equity [Abstract] | |
3. STOCKHOLDERS' EQUITY | (a) Stock Options Stock-based compensation costs recognized during the year ended June 30, 2015 and 2014 amounted to $125,675 and $141,033 respectively, and were included in the accompanying consolidated statements of operations in: selling, general and administrative expenses (2015 $107,300; 2014 $134,800), cost of goods sold (2015 $0; 2014 $4,033), and research and development expenses, net (2015 $18,375; 2014 $2,200). No compensation has been capitalized because such amounts would have been immaterial. There was no net income tax benefit recognized related to such compensation for the years ended June 30, 2015 or 2014, as the Company is currently in a loss position. There were 714,000 stock options granted during the year ended June 30, 2015 and 9,000 stock options granted during the year ended June 30, 2014. As of June 30, 2015, the unrecognized compensation costs related to options vesting in the future is $0. The Company uses the Black-Scholes option-pricing model as the most appropriate method for determining the estimated fair value for the stock awards. The Black-Scholes method of valuation requires several assumptions: (1) the expected term of the stock award; (2) the expected future stock volatility over the expected term; and (3) risk-free interest rate. The expected term represents the expected period of time the Company believes the options will be outstanding based on historical information. Estimates of expected future stock price volatility are based on the historic volatility of the Companys common stock and the risk free interest rate is based on the U.S. Zero-Bond rate. The Company utilizes a forfeiture rate based on an analysis of the Companys actual experience. The fair value of options at date of grant was estimated with the following assumptions for options granted in fiscal 2015: Year Ended June 30, 2015 Assumptions: Option life 5.3 years Risk-free interest rate 2.65% Stock volatility 487% Dividend yield 0 Weighted average fair value of grants $ 0.73 Stock Option and Other Compensation Plans: The type of share-based payments currently utilized by the Company is stock options. The Company has various stock option and other compensation plans for directors, officers, and employees. The Company has the following stock option plans outstanding as of June 30, 2015: the Precision Optics Corporation, Inc. 2011 Equity Incentive Plan (the 2011 Plan); the Precision Optics Corporation, Inc. 2006 Equity Incentive Plan (the 2006 Plan), and the Precision Optics Corporation, Inc. Amended and Restated 1997 Incentive Plan (the 1997 Plan). Vesting periods under the 2011 Plan, the 2006 Plan, and the 1997 Plan are at the discretion of the Board of Directors and typically average three to five years. Options under these Plans are granted at fair market value on the date of grant and have a term of ten years from the date of grant. The 2011 Plan, which provides eligible participants (certain employees, directors, consultants, etc.) the opportunity to receive a broad variety of equity based and cash awards. Options granted vest and are exercisable for periods determined by the Board of Directors, not to exceed 10 years from the date of grant. On April 16, 2015, the Board of Directors approved an amendment to the 2011 Equity Incentive Plan which increased the maximum number of shares of the Companys common stock that may be awarded under the Plan from 325,000 to 1,825,000, an increase of 1,500,000 shares. In connection therewith, on April 20, 2015, the Company filed a registration statement on Form S-8 to register the 1,500,000 shares of the Companys common stock. At June 30, 2015, a total of 889,102 stock options are outstanding and 968,596 shares of common stock were available for future grants under the 2011 Plan. The 2006 Plan, which provides eligible participants (certain employees, directors, consultants, etc.) the opportunity to receive a broad variety of equity based and cash awards. Options granted vest and are exercisable for periods determined by the Board of Directors, not to exceed 10 years from the date of grant. A total of 139,898 shares of common stock, including shares rolled forward from the 1997 Plan, have been reserved for issuance under the 2006 Plan. At June 30, 2015, a total of 139,898 stock options are outstanding and no shares of common stock are available for future grants under the 2006 Plan. The 1997 Plan provided eligible participants (certain employees, directors, consultants, etc.) the opportunity to receive a broad variety of equity based and cash awards. Options granted vested and were exercisable for periods determined by the Board of Directors, not to exceed 10 years from the date of grant. Options for a total of 50,079 shares of common stock were outstanding at June 30, 2015 under the 1997 Plan, as amended and restated in fiscal year 2006. Upon the adoption of the 2006 Plan, no new awards were granted under the 1997 Plan. No shares are available for future grants under the 1997 Plan. The following tables summarize stock option activity for the years ended June 30, 2015 and 2014: Options Outstanding Number of Shares Weighted Average Exercise Price Weighted Average Contractual Life Outstanding at July 1, 2013 400,087 $ 4.49 6.27 years Grants 9,000 $ 0.90 Outstanding at June 30, 2014 409,087 $ 4.41 6.27 years Grants 714,000 $ 0.75 Cancellations (44,008) $ 18.04 Outstanding at June 30, 2015 1,079,079 $ 1.43 8.46 years Information related to the stock options outstanding as of June 30, 2015 is as follows: Range of Exercise Prices Number of Shares Weighted-Average Remaining Contractual Life (years) Weighted-Average Exercise Price Exercisable Number of Shares Exercisable Weighted-Average Exercise Price $ 0.73 319,000 9.89 $ 0.73 0 $ 0.73 $ 0.73 330,000 9.89 $ 0.73 110,000 $ 0.73 $ 0.90 35,000 9.03 $ 0.90 17,500 $ 0.90 $ 0.90 30,000 9.03 $ 0.90 30,000 $ 0.90 $ 1.20 207,800 6.68 $ 1.20 207,800 $ 1.20 $ 0.90 9,000 8.52 $ 0.90 9,000 $ 0.90 $ 0.85 9,000 7.52 $ 0.85 9,000 $ 0.85 $ 0.55 44,000 6.62 $ 0.55 44,000 $ 0.55 $ 0.27 40,000 6.04 $ 0.27 40,000 $ 0.27 $ 1.35 1,200 4.41 $ 1.35 1,200 $ 1.35 $ 1.25 1,200 3.41 $ 1.25 1,200 $ 1.25 $ 6.25 1,600 1.42 $ 6.25 1,600 $ 6.25 $ 7.75 1,200 2.41 $ 7.75 1,200 $ 7.75 $ 11.50 800 0.42 $ 11.50 800 $ 11.50 $ 13.75 49,279 0.86 $ 13.75 49,279 $ 13.75 $ 0.27$20.75 1,079,079 8.46 $ 1.43 522,579 $ 2.17 The aggregate intrinsic value of the Companys in-the-money outstanding and exercisable options as of June 30, 2015 was $40,980 and $30,200, respectively. (b) Warrants As of June 30, 2015, there are warrants outstanding for the issuance of an aggregate of 3,270,444 shares of common stock, at a weighted average exercise price of $1.12 per share. (c) Sale of Stock On July 1 through July 7, 2014, the Company closed on agreements with institutional and accredited investors (the Investors) for the sale and purchase of 1,717,152 shares of the Companys common stock, $0.01 par value at a purchase price of $0.60 per share (the Shares). The Company received $1,030,291 in gross proceeds from the offering. The Company used the majority of the net proceeds from this placement for general working capital purposes. Of this amount, $50,000 was received in June 2014 and the remainder was received in July 2014. In conjunction with the placement, the Company also entered into a registration rights agreement with the Investors, whereby the Company was obligated to file a registration statement with the Securities Exchange Commission on or before forty-five calendar days after July 1, 2014 to register the resale by the Investors of the 1,717,152 shares of the common stock purchased in the placement. Subsequent to the execution of the agreement, the parties agreed to extend the time period by which the Company was obligated to file a registration statement with the Securities Exchange Commission. The registration statement was filed with the Securities Exchange Commission on October 9, 2014, in accordance with the extended timetable, and became effective on October 30, 2014. In conjunction with the offering, certain anti-dilution provisions of the warrants issued in conjunction with the Companys June 25, 2008 and September 28, 2012 financing transactions were triggered. As a result, the number of existing June 25, 2008 warrants increased from 430,678 to 493,398 and the related exercise price of the warrants decreased from $1.18 per share to $1.03 per share. Also, as a result of the offering, the number of existing September 28, 2012 warrants increased from 1,944,475 to 2,189,724 and 194,446 to 217,322, respectively, and the related exercise price decreased from $1.25 to $1.11 and from $0.95 to $0.85, respectively. |
4. INCOME TAXES
4. INCOME TAXES | 12 Months Ended |
Jun. 30, 2015 | |
Income Tax Disclosure [Abstract] | |
4. INCOME TAXES | The Company has identified its federal tax return and its state tax return in Massachusetts as major tax jurisdictions. The periods subject to examination for its federal and state income tax returns are the years ended in 2013 and thereafter. The Company believes its income tax filing positions and deductions will be sustained on audit and it does not anticipate any adjustments that would result in a material change to its financial position. Therefore, no liabilities for uncertain income tax positions have been recorded. The provision for income taxes in the accompanying consolidated statements of operations consists of the minimum statutory state income tax liability of $912 for the years ended June 30, 2015 and 2014. A reconciliation of the federal statutory rate to the Companys effective tax rate for the fiscal years ended June 30, 2015 and 2014 is as follows 2015 2014 Income tax expense (benefit) at federal statutory rate (34.0 )% (34.0 )% Increase (decrease) in tax resulting from: State taxes, net of federal benefit (5.3 ) (5.3 ) Change in valuation allowance 36.9 15.0 Nondeductible items 0.2 0.3 Prior-year tax adjustments (2.1 ) 14.0 Other 4.2 9.9 Effective tax rate (0.1 )% (0.1 )% The components of deferred tax assets and liabilities at June 30, 2015 and 2014 are approximately as follows: 2015 2014 Deferred tax assets: Net operating loss carry forwards $ 3,161,000 $ 2,747,000 Tax credit carry forwards 414,000 405,000 Reserves and accruals not yet deducted for tax purposes 305,000 286,000 Total deferred tax assets 3,880,000 3,438,000 Valuation allowance (3,880,000 ) (3,438,000 ) Net deferred tax asset $ $ The Company has provided a valuation allowance to reduce the net deferred tax asset to an amount the Company believes is more likely than not to be realized. The valuation allowance increased in fiscal 2015, as compared to the prior year, by approximately $442,000. At June 30, 2015, the Company had federal and state net operating loss carry forwards of approximately $7,654,000 and $3,100,000, respectively, which will, if not used, expire at various dates from 2016 through 2034. In addition, the Company had net operating loss carry forwards from its Hong Kong operations of approximately $2,252,000, which carry forward indefinitely. |
5. PROFIT SHARING PLAN
5. PROFIT SHARING PLAN | 12 Months Ended |
Jun. 30, 2015 | |
Compensation and Retirement Disclosure [Abstract] | |
5. PROFIT SHARING PLAN | The Company has a defined contribution 401(k) profit sharing plan. Employer profit sharing and matching contributions to the plan are discretionary. No employer profit sharing or matching contributions were made to the plan in fiscal years 2015 and 2014. |
6. SALE OF ASSETS
6. SALE OF ASSETS | 12 Months Ended |
Jun. 30, 2015 | |
Property, Plant and Equipment Assets Held-for-sale Disclosure [Abstract] | |
6. SALE OF ASSETS | In fiscal year 2015, the Company sold equipment that was previously written off for proceeds totaling $27,075 and recorded a gain of $27,075. In fiscal year 2014, the Company sold equipment that was previously written off for proceeds totaling $14,028 and recorded a gain of $14,028. These gains are included within operating expenses in the accompanying consolidated statements of operations. |
7. OTHER INCOME
7. OTHER INCOME | 12 Months Ended |
Jun. 30, 2015 | |
Other Income and Expenses [Abstract] | |
7. OTHER INCOME | Other income in the amount of $35,172 for the year ended June 30, 2015 represents non-cash gains on the settlement of liabilities for services rendered to the Company, by issuing 82,222 shares of common stock in January and 45,000 shares in May 2015. The non-cash gain is the difference between the recorded amount of the liabilities and the value of the stock when issued. |
1. SUMMARY OF SIGNIFICANT ACC15
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Jun. 30, 2015 | |
Accounting Policies [Abstract] | |
(a) Nature of Business | (a) Nature of Business and Liquidity Precision Optics Corporation, Inc. (the Company) designs, develops, manufactures and sells specialized optical systems and components and optical thin-film coatings. The Company conducts business in one industry segment only and its customers are primarily domestic. The Companys products and services fall into two principal areas: (i) medical products for use by hospitals and physicians; and (ii) advanced optical system design and development services and products used by military and industrial customers. The Company has sustained recurring net losses for several years. During the year ended June 30, 2015, the Company incurred a net loss from operations of $1,213,053 and used cash in operating activities of $773,793. As of June 30, 2015, cash and cash equivalents were $241,051, accounts receivable were $588,042, and current liabilities were $1,374,994. As of June 30, 2014, cash and cash equivalents were $202,380, accounts receivable were $531,049, and current liabilities were $1,095,877. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. These factors raise substantial doubt about the Companys ability to continue as a going concern. Until the Company achieves breakeven and profitable results, the Company will be required to pursue several options to manage cash flow and raise capital, including issuing debt or equity or entering into a strategic alliance. The sale of additional equity or convertible debt securities, if converted into common stock, would result in additional dilution to the Companys current stockholders, and debt financing, if available, may involve restrictive covenants that could restrict our operations or finances. Financing may not be available in amounts or on terms acceptable to the Company, if at all. If the Company cannot raise funds on acceptable terms or achieve positive cash flow, the Company may not be able to continue to conduct operations, develop new products, grow market share, take advantage of future opportunities or respond to competitive pressures or unanticipated requirements, any of which would negatively impact the Companys business, operating results and financial condition. |
(b) Principles of Consolidation | (b) Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its two wholly-owned subsidiaries. All inter-company accounts and transactions have been eliminated in consolidation. |
(c) Revenues | (c) Revenues The Company recognizes revenue when four basic criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the price to the buyer is fixed and determinable; and (4) collectability is reasonably assured. The Companys shipping terms are customarily FOB shipping point. The sales price of products and services sold is fixed and determinable after receipt and acceptance of a customers purchase order or properly executed sales contract, typically before any work is performed. Management reviews each customer purchase order or sales contract to determine that the work to be performed is specified and there are no unusual terms and conditions that would raise questions as to whether the sales price is fixed or determinable. The Company assesses credit worthiness of customers based upon prior history with the customer and assessment of financial condition. Accounts receivable are stated at the amount management expects to collect from outstanding balances. An allowance for doubtful accounts is provided for that portion of accounts receivable considered to be uncollectible, based upon historical experience and managements evaluation of outstanding accounts receivable at the end of the year. Bad debts are written off against the allowance when identified. The Companys revenue transactions typically do not contain multiple deliverable elements for future performance obligations to customers, other than a standard one-year warranty on materials and workmanship, the estimated costs for which are provided for at the time revenue is recognized. Revenues for industrial and medical products sold in the normal course of business are recognized upon shipment when delivery terms are FOB shipping point and all other revenue recognition criteria have been met. Gross shipping charges reimbursable from customers, to deliver product, are insignificant and are included in Revenues section of the Companys consolidated statement of operations, while shipping costs are classified in the selling, general and administrative expenses section of the Companys consolidated statement of operations. |
(d) Cash and Cash Equivalents | (d) Cash and Cash Equivalents The Company includes in cash equivalents all highly liquid investments with original maturities of three months or less at the time of acquisition. Cash and cash equivalents of $241,051 and $202,380 at June 30, 2015 and 2014, respectively, consist primarily of cash at banks and money market funds. The Company maintains its cash and cash equivalents in bank deposit accounts that, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on its cash and cash equivalents. |
(e) Inventories | (e) Inventories Inventories are stated at the lower of cost (first-in, first-out) or market and include material, labor and manufacturing overhead. The components of inventories at June 30, 2015 and 2014 are as follows: 2015 2014 Raw material $ 485,266 $ 445,210 Work-in-progress 388,503 385,601 Finished goods 199,487 158,067 $ 1,073,256 $ 988,878 The Company provides for estimated obsolescence on unmarketable inventory based upon assumptions about future demand and market conditions. If actual demand and market conditions are less favorable than those projected by management, additional inventory write-downs may be required. Inventory, once written down, is not subsequently written back up, as these adjustments are considered permanent adjustments to the carrying value of the inventory. |
(f) Property and Equipment | (f) Property and Equipment Property and equipment are recorded at cost. Maintenance and repair items are expensed as incurred. The Company provides for depreciation and amortization by charges to operations, using the straight-line and declining-balance methods, which allocate the cost of property and equipment over the following estimated useful lives: Asset Classification Estimated Useful Life Machinery and equipment 2-7 years Leasehold improvements Shorter of lease term or estimated useful life Furniture and fixtures 5 years Vehicles 3 years Depreciation expense was $21,271 and $19,168 for the years ended June 30, 2015 and 2014, respectively. |
(g) Significant Customers and Concentration of Credit Risk | (g) Significant Customers and Concentration of Credit Risk Financial instruments that subject the Company to credit risk consist primarily of cash equivalents and trade accounts receivable. The Company places its investments with highly rated financial institutions. The Company has not experienced any losses on these investments to date. At June 30, 2015, receivables from the Companys four largest customers were 38%, 13%, 12% and 10% of the total accounts receivable. At June 30, 2014, receivables from the Companys three largest customers were 30%, 17% and 11%, of the total accounts receivable. No other customer accounted for more than 10% of the Companys receivables as of June 30, 2015 and 2014. The Company has not experienced any material losses related to accounts receivable from individual customers. The Company generally does not require collateral or other security as a condition of sale, rather it relies on credit approval, balance limitation and monitoring procedures to control credit risk of trade account financial instruments. Management believes that allowances for doubtful accounts, which are established based upon review of specific account balances and historical experience, are adequate. Revenues from the Companys largest customers, as a percentage of total revenues, were as follows: Year Ended June 30 2015 2014 Customer A 23% 21% Customer B 15 14 Customer C 11 1 Customer D 9 21 All others 42 43 100% 100% No other customer accounted for more than 10% of the Companys revenues in fiscal years 2015 and 2014. |
(h) Loss per Share | (h) Loss per Share 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 or net 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 and warrants. For the year ended June 30, 2015 and 2014, the effect of such securities was antidilutive and not included in the diluted calculation because of the net loss generated in those periods. The following is the calculation of loss per share for the years ended June 30, 2015 and 2014: Year Ended June 30 2015 2014 Net Loss Basic and Diluted $ (1,178,793 ) $ (1,160,638 ) Basic Weighted Average Shares Outstanding 6,272,264 4,455,134 Potentially Dilutive Securities Diluted Weighted Average Shares Outstanding 6,272,264 4,455,134 Loss Per Share Basic $ (0.19 ) $ (0.26 ) Diluted $ (0.19 ) $ (0.26 ) The number of shares issuable upon the exercise of outstanding stock options and warrants that were excluded from the computation as their effect was antidilutive was approximately 4,355,000 and 3,393,000 for the years ended June 30, 2015 and 2014, respectively. |
(i) Stock-Based Compensation | (i) Stock-Based Compensation The measurement and recognition of compensation costs for all stock-based awards made to employees and the Board of Directors are based upon fair value over the requisite service period for awards expected to vest. The Company estimates the fair value of share-based awards on the date of grant using the Black-Scholes option-pricing model. Stock-based compensation costs recognized for the years ended June 30, 2015 and 2014 amounted to $125,675 and $141,033, respectively. |
(j) Patents | (j) Patents Patent costs are amortized using the straight-line method over the shorter of their legal or estimated useful lives, generally five to ten years. Amortization expense was $0 and $852 for the years ended June 30, 2015 and 2014, respectively. In July 2011, the Company assigned all of its currently issued and pending patents, as well as new inventions that it conceives before July 28, 2012, to Intuitive Surgical Operations, Inc. |
(k) Fair Value of Financial Instruments | (k) Fair Value of Financial Instruments Financial instruments consist principally of cash and cash equivalents, accounts receivable and accounts payable. The estimated fair value of these financial instruments approximates their carrying value due to their short-term nature. |
(l) Long-Lived Assets | (l) Long-Lived Assets Long-lived assets and certain identifiable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. |
(m) Warranty Costs | (m) Warranty Costs The Company does not incur future performance obligations in the normal course of business other than providing a standard one-year warranty on materials and workmanship to its customers (except in certain unusual and infrequently occurring situations where extended warranty terms beyond one year are negotiated with the customer). The Company provides for estimated warranty costs at the time product revenue is recognized. Warranty costs have been included as a component of cost of goods sold in the accompanying consolidated statements of operations. The following tables summarize warranty reserve activity for the years ended June 30, 2015 and 2014: 2015 2014 Balance at beginning of period $ 25,000 $ 25,000 Provision for warranty claims 32,477 11,917 Warranty claims incurred (32,477 ) (11,917 ) Balance at end of period $ 25,000 $ 25,000 |
(n) Research and Development | (n) Research and Development Research and development expenses are charged to operations as incurred. The Company groups development and prototype costs and related reimbursements in research and development. For the years ended June 30, 2015 and 2014, research and development expense is shown net of reimbursements of $23,404 and $45,997, respectively, in the accompanying statements of operations. |
(o) Comprehensive Income | (o) Comprehensive Income Comprehensive income or loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owners sources. The Companys comprehensive loss or income for the years ended June 30, 2015 and 2014 was equal to its net loss for the same periods. |
(p) Income Taxes | (p) Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. In assessing the likelihood of utilization of existing deferred tax assets, management has considered historical results of operations and the current operating environment. |
(q) Segment Reporting | (q) Segment Reporting Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions about how to allocate resources and assess performance. The Companys chief decision-maker is its Chief Executive Officer. To date, the Company has viewed its operations and manages its business as principally one segment. For all periods presented, over 90% of the Companys sales have been to customers in the United States. |
(r) Use of Estimates | (r) Use of Estimates The preparation of financial statements in conformity with accounting standards generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
(s) Recent Accounting Pronouncements | (s) Recent Accounting Pronouncements In July 2015, the Financial Accounting Standards Board ("FASB") issued new accounting guidance for measuring inventory. The core principal of the guidance is that an entity should measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This guidance does not apply to inventory that is being measured using the Last-In, First-Out (LIFO) or the retail inventory method. The guidance is effective for financial statements issued for annual and interim periods beginning after December 15, 2016 on a prospective basis. Early adoption is permitted. The Company is currently evaluating the impact this will have on the consolidated financial statements. On June 12, 2015, the FASB issued ASU 2015-10, Technical Corrections and Improvements, which amends a number of topics in the FASB Accounting Standards Codification. The update is a part of an ongoing project on the FASBs agenda to facilitate Codification updates for non-substantive technical corrections, clarifications, and improvements that are not expected to have a significant effect on accounting practice or create a significant administrative cost to most entities. The ASU will apply to all reporting entities within the scope of the affected accounting guidance. Certain amendments in the update require transition guidance and are effective for all entities for fiscal years, and interim periods within those years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact this will have on the consolidated financial statements. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09). ASU 2014-09 provides a single, comprehensive accounting model for revenues arising from contracts with customers that supersedes most of the existing revenue recognition guidance, including industry-specific guidance. Under this model, revenue is recognized at an amount that an entity expects to be entitled to upon transferring control of goods or services to a customer, as opposed to when risks and rewards transfer to a customer under existing revenue recognition guidance. ASU 201-09 is effective for the Company beginning in its fiscal year 2018, and may be applied retrospectively to all prior periods presented or through a cumulative adjustment to the opening retained earnings balance in the year of adoption. The Company is currently in the process of evaluating the impact of ASU 2014-09 on its consolidated financial statements. |
1. SUMMARY OF SIGNIFICANT ACC16
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Jun. 30, 2015 | |
Accounting Policies [Abstract] | |
Inventories | 2015 2014 Raw material $ 485,266 $ 445,210 Work-in-progress 388,503 385,601 Finished goods 199,487 158,067 $ 1,073,256 $ 988,878 |
Estimated Useful Lives of Property and Equipment | Asset Classification Estimated Useful Life Machinery and equipment 2-7 years Leasehold improvements Shorter of lease term or estimated useful life Furniture and fixtures 5 years Vehicles 3 years |
Significant Customers | Year Ended June 30 2015 2014 Customer A 23% 21% Customer B 15 14 Customer C 11 1 Customer D 9 21 All others 42 43 100% 100% |
Loss per Share | Year Ended June 30 2015 2014 Net Loss Basic and Diluted $ (1,178,793 ) $ (1,160,638 ) Basic Weighted Average Shares Outstanding 6,272,264 4,455,134 Potentially Dilutive Securities Diluted Weighted Average Shares Outstanding 6,272,264 4,455,134 Loss Per Share Basic $ (0.19 ) $ (0.26 ) Diluted $ (0.19 ) $ (0.26 ) |
Warranty Costs | 2015 2014 Balance at beginning of period $ 25,000 $ 25,000 Provision for warranty claims 32,477 11,917 Warranty claims incurred (32,477 ) (11,917 ) Balance at end of period $ 25,000 $ 25,000 |
3. STOCKHOLDERS' EQUITY (Tables
3. STOCKHOLDERS' EQUITY (Tables) | 12 Months Ended |
Jun. 30, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Assumptions for fair value of options granted | Year Ended June 30, 2015 Assumptions: Option life 5.3 years Risk-free interest rate 2.65% Stock volatility 487% Dividend yield 0 Weighted average fair value of grants $ 0.73 |
Stock option activity | Options Outstanding Number of Shares Weighted Average Exercise Price Weighted Average Contractual Life Outstanding at July 1, 2013 400,087 $ 4.49 6.27 years Grants 9,000 $ 0.90 Outstanding at June 30, 2014 409,087 $ 4.41 6.27 years Grants 714,000 $ 0.75 Cancellations (44,008) $ 18.04 Outstanding at June 30, 2015 1,079,079 $ 1.43 8.46 years |
Stock options outstanding by exercise price ranges | Range of Exercise Prices Number of Shares Weighted-Average Remaining Contractual Life (years) Weighted-Average Exercise Price Exercisable Number of Shares Exercisable Weighted-Average Exercise Price $ 0.73 319,000 9.89 $ 0.73 0 $ 0.73 $ 0.73 330,000 9.89 $ 0.73 110,000 $ 0.73 $ 0.90 35,000 9.03 $ 0.90 17,500 $ 0.90 $ 0.90 30,000 9.03 $ 0.90 30,000 $ 0.90 $ 1.20 207,800 6.68 $ 1.20 207,800 $ 1.20 $ 0.90 9,000 8.52 $ 0.90 9,000 $ 0.90 $ 0.85 9,000 7.52 $ 0.85 9,000 $ 0.85 $ 0.55 44,000 6.62 $ 0.55 44,000 $ 0.55 $ 0.27 40,000 6.04 $ 0.27 40,000 $ 0.27 $ 1.35 1,200 4.41 $ 1.35 1,200 $ 1.35 $ 1.25 1,200 3.41 $ 1.25 1,200 $ 1.25 $ 6.25 1,600 1.42 $ 6.25 1,600 $ 6.25 $ 7.75 1,200 2.41 $ 7.75 1,200 $ 7.75 $ 11.50 800 0.42 $ 11.50 800 $ 11.50 $ 13.75 49,279 0.86 $ 13.75 49,279 $ 13.75 $ 0.27$20.75 1,079,079 8.46 $ 1.43 522,579 $ 2.17 |
4. INCOME TAXES (Tables)
4. INCOME TAXES (Tables) | 12 Months Ended |
Jun. 30, 2015 | |
Income Tax Disclosure [Abstract] | |
Reconciliation of federal statutory rate | 2015 2014 Income tax expense (benefit) at federal statutory rate (34.0 )% (34.0 )% Increase (decrease) in tax resulting from: State taxes, net of federal benefit (5.3 ) (5.3 ) Change in valuation allowance 36.9 15.0 Nondeductible items 0.2 0.3 Prior-year tax adjustments (2.1 ) 14.0 Other 4.2 9.9 Effective tax rate (0.1 )% (0.1 )% |
Components of deferred tax assets and liabilities | 2015 2014 Deferred tax assets: Net operating loss carry forwards $ 3,161,000 $ 2,747,000 Tax credit carry forwards 414,000 405,000 Reserves and accruals not yet deducted for tax purposes 305,000 286,000 Total deferred tax assets 3,880,000 3,438,000 Valuation allowance (3,880,000 ) (3,438,000 ) Net deferred tax asset $ $ |
1. SUMMARY OF SIGNIFICANT ACC19
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Inventory) - USD ($) | Jun. 30, 2015 | Jun. 30, 2014 |
Inventory Disclosure [Abstract] | ||
Raw material | $ 485,266 | $ 445,210 |
Work-in-progress | 388,503 | 385,601 |
Finished goods | 199,487 | 158,067 |
Total inventories | $ 1,073,256 | $ 988,878 |
1. SUMMARY OF SIGNIFICANT ACC20
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Property useful lives) | 12 Months Ended |
Jun. 30, 2015 | |
Machinery and equipment | |
Estimated Useful Life | 2 - 7 years |
Leasehold improvements | |
Estimated Useful Life | Shorter of lease term or estimated useful life |
Furniture and fixtures | |
Estimated Useful Life | 5 years |
Vehicles | |
Estimated Useful Life | 3 years |
1. SUMMARY OF SIGNIFICANT ACC21
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Concentrations) - Total Revenues | 12 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Concentration risk percentage | 100.00% | 100.00% |
Customer A | ||
Concentration risk percentage | 23.00% | 21.00% |
Customer B | ||
Concentration risk percentage | 15.00% | 14.00% |
Customer C | ||
Concentration risk percentage | 11.00% | 1.00% |
Customer D | ||
Concentration risk percentage | 9.00% | 21.00% |
All others | ||
Concentration risk percentage | 42.00% | 43.00% |
1. SUMMARY OF SIGNIFICANT ACC22
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Loss per share) - USD ($) | 12 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Accounting Policies [Abstract] | ||
Net Loss - Basic and Diluted | $ (1,178,793) | $ (1,160,638) |
Basic Weighted Average Shares Outstanding | 6,272,264 | 4,455,134 |
Potentially Dilutive Securities | 0 | 0 |
Diluted Weighted Average Shares Outstanding | 6,272,264 | 4,455,134 |
Loss Per Share | ||
Basic | $ (.19) | $ (0.26) |
Diluted | $ (.19) | $ (0.26) |
1. SUMMARY OF SIGNIFICANT ACC23
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Warranty rollforward) - USD ($) | 12 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Warranty roll forward | ||
Balance at beginning of period | $ 25,000 | $ 25,000 |
Provision for warranty claims | 32,477 | 11,917 |
Warranty claims incurred | (32,477) | (11,917) |
Balance at end of period | $ 25,000 | $ 25,000 |
1. SUMMARY OF SIGNIFICANT ACC24
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2013 | |
Net loss from operations | $ (1,213,053) | $ (1,159,726) | |
Net cash used in operating activities | (773,793) | (886,031) | |
Cash and cash equivalents | 241,051 | 202,380 | $ 1,034,587 |
Accounts receivable | 588,042 | 531,049 | |
Current liabilities | 1,374,994 | 1,095,877 | |
Depreciation expense | $ 21,271 | $ 19,168 | |
Outstanding stock options and warrants that were excluded from the computation as their effect was antidilutive | 4,355,000 | 3,393,000 | |
Stock-based compensation costs | $ 125,675 | $ 141,033 | |
Amortization expense related to patents | 0 | 852 | |
Research and development expense reimbursements | $ 23,404 | $ 45,997 | |
Accounts Receivable [Member] | Customer A | |||
Concentration risk percentage | 38.00% | 30.00% | |
Accounts Receivable [Member] | Customer B | |||
Concentration risk percentage | 13.00% | 17.00% | |
Accounts Receivable [Member] | Customer C | |||
Concentration risk percentage | 12.00% | 11.00% | |
Accounts Receivable [Member] | Customer D | |||
Concentration risk percentage | 10.00% |
2. COMMITMENTS (Details Narrati
2. COMMITMENTS (Details Narrative) - USD ($) | 12 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Rent expense | $ 58,077 | $ 68,232 |
Future minimum rental payments under all operating leases for fiscal year 2015 | 13,780 | |
Common stock sold, value | $ 852,779 | |
Investors | ||
Common stock sold, shares issued | 1,717,152 | |
Proceeds from sale of stock | $ 1,030,291 | |
Schumsky | ||
Common stock sold, shares issued | 83,334 | |
Proceeds from sale of stock | $ 50,000 | |
MHW Capital Partners | ||
Common stock sold, shares issued | 125,000 | |
Proceeds from sale of stock | $ 75,000 | |
Richard E. Forkey | ||
Rent expense | $ 108,000 | $ 108,000 |
3. STOCKHOLDERS' EQUITY (Detail
3. STOCKHOLDERS' EQUITY (Details - Assumptions) | 12 Months Ended |
Jun. 30, 2015USD ($)$ / shares | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Option life | 5 years 3 months 18 days |
Risk-free interest rate | 2.65% |
Stock volatility | 487.00% |
Dividend yield | $ | $ 0 |
Weighted average fair value of grants | $ .73 |
3. STOCKHOLDERS' EQUITY (Deta27
3. STOCKHOLDERS' EQUITY (Details - Option activity) - Stock Options - $ / shares | 12 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2013 | |
Stock option activity | |||
Number of stock options outstanding - at beginning | 409,087 | 400,087 | |
Number of Shares options granted | 714,000 | 9,000 | |
Number of Shares options cancelled | (44,008) | ||
Number of stock options outstanding - at ending | 1,079,079 | 409,087 | 400,087 |
Weighted average exercise price options outstanding- at beginning | $ 4.41 | $ 4.49 | |
Weighted average exercise price - grants | .75 | .90 | |
Weighted average exercise price - cancelled | 18.04 | ||
Weighted average exercise price options outstanding - at end | $ 1.43 | $ 4.41 | $ 4.49 |
Weighted average contractual life | 8 years 5 months 16 days | 6 years 3 months 7 days | 6 years 3 months 7 days |
3. STOCKHOLDERS' EQUITY (Deta28
3. STOCKHOLDERS' EQUITY (Details - Option information) - $ / shares | 12 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2013 | |
Stock Options | |||
Range of exercise prices | $0.27-$20.75 | ||
Number of shares outstanding | 1,079,079 | 409,087 | 400,087 |
Weighted average contractual life | 8 years 5 months 16 days | 6 years 3 months 7 days | 6 years 3 months 7 days |
Weighted average exercise price | $ 1.43 | $ 4.41 | $ 4.49 |
Exercisable number of shares | 522,579 | ||
Exercisable weighted average exercise price | $ 2.17 | ||
Option 1 | |||
Range of exercise prices | 0.73 | ||
Number of shares outstanding | 319,000 | ||
Weighted average contractual life | 9 years 10 months 21 days | ||
Weighted average exercise price | $ 0.73 | ||
Exercisable number of shares | 0 | ||
Exercisable weighted average exercise price | $ 0.73 | ||
Option 2 | |||
Range of exercise prices | 0.73 | ||
Number of shares outstanding | 330,000 | ||
Weighted average contractual life | 9 years 10 months 21 days | ||
Weighted average exercise price | $ 0.73 | ||
Exercisable number of shares | 110,000 | ||
Exercisable weighted average exercise price | $ 0.73 | ||
Option 3 | |||
Range of exercise prices | 0.90 | ||
Number of shares outstanding | 35,000 | ||
Weighted average contractual life | 9 years 11 days | ||
Weighted average exercise price | $ 0.90 | ||
Exercisable number of shares | 17,500 | ||
Exercisable weighted average exercise price | $ 0.90 | ||
Option 4 | |||
Range of exercise prices | 0.90 | ||
Number of shares outstanding | 30,000 | ||
Weighted average contractual life | 9 years 11 days | ||
Weighted average exercise price | $ 0.90 | ||
Exercisable number of shares | 30,000 | ||
Exercisable weighted average exercise price | $ 0.90 | ||
Option 5 | |||
Range of exercise prices | 1.20 | ||
Number of shares outstanding | 207,800 | ||
Weighted average contractual life | 6 years 8 months 5 days | ||
Weighted average exercise price | $ 1.20 | ||
Exercisable number of shares | 207,800 | ||
Exercisable weighted average exercise price | $ 1.20 | ||
Option 6 | |||
Range of exercise prices | 0.90 | ||
Number of shares outstanding | 9,000 | ||
Weighted average contractual life | 8 years 6 months 7 days | ||
Weighted average exercise price | $ 0.90 | ||
Exercisable number of shares | 9,000 | ||
Exercisable weighted average exercise price | $ 0.90 | ||
Option 7 | |||
Range of exercise prices | 0.85 | ||
Number of shares outstanding | 9,000 | ||
Weighted average contractual life | 7 years 6 months 7 days | ||
Weighted average exercise price | $ 0.85 | ||
Exercisable number of shares | 9,000 | ||
Exercisable weighted average exercise price | $ 0.85 | ||
Option 8 | |||
Range of exercise prices | 0.55 | ||
Number of shares outstanding | 44,000 | ||
Weighted average contractual life | 6 years 7 months 13 days | ||
Weighted average exercise price | $ 0.55 | ||
Exercisable number of shares | 44,000 | ||
Exercisable weighted average exercise price | $ 0.55 | ||
Option 9 | |||
Range of exercise prices | 0.27 | ||
Number of shares outstanding | 40,000 | ||
Weighted average contractual life | 6 years 15 days | ||
Weighted average exercise price | $ 0.27 | ||
Exercisable number of shares | 40,000 | ||
Exercisable weighted average exercise price | $ 0.27 | ||
Option 10 | |||
Range of exercise prices | 1.35 | ||
Number of shares outstanding | 1,200 | ||
Weighted average contractual life | 4 years 4 months 28 days | ||
Weighted average exercise price | $ 1.35 | ||
Exercisable number of shares | 1,200 | ||
Exercisable weighted average exercise price | $ 1.35 | ||
Option 11 | |||
Range of exercise prices | 1.25 | ||
Number of shares outstanding | 1,200 | ||
Weighted average contractual life | 3 years 4 months 28 days | ||
Weighted average exercise price | $ 1.25 | ||
Exercisable number of shares | 1,200 | ||
Exercisable weighted average exercise price | $ 1.25 | ||
Option 12 | |||
Range of exercise prices | 6.25 | ||
Number of shares outstanding | 1,600 | ||
Weighted average contractual life | 1 year 5 months 1 day | ||
Weighted average exercise price | $ 6.25 | ||
Exercisable number of shares | 1,600 | ||
Exercisable weighted average exercise price | $ 6.25 | ||
Option 13 | |||
Range of exercise prices | 7.75 | ||
Number of shares outstanding | 1,200 | ||
Weighted average contractual life | 2 years 4 months 28 days | ||
Weighted average exercise price | $ 7.75 | ||
Exercisable number of shares | 1,200 | ||
Exercisable weighted average exercise price | $ 7.75 | ||
Option 14 | |||
Range of exercise prices | 11.50 | ||
Number of shares outstanding | 800 | ||
Weighted average contractual life | 5 months 1 day | ||
Weighted average exercise price | $ 11.50 | ||
Exercisable number of shares | 800 | ||
Exercisable weighted average exercise price | $ 11.50 | ||
Option 15 | |||
Range of exercise prices | 13.75 | ||
Number of shares outstanding | 49,279 | ||
Weighted average contractual life | 10 months 10 days | ||
Weighted average exercise price | $ 13.75 | ||
Exercisable number of shares | 49,279 | ||
Exercisable weighted average exercise price | $ 13.75 |
3. STOCKHOLDERS' EQUITY (Deta29
3. STOCKHOLDERS' EQUITY (Details Narrative) - USD ($) | 12 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2013 | |
Stock-based compensation costs | $ 125,675 | $ 141,033 | |
Unrecognized compensation costs related to options vesting | 0 | ||
Aggregate intrinsic value of "in the money" outstanding | 40,980 | ||
Aggregate intrinsic value of "in the money" exercisable | $ 30,200 | ||
Investors | |||
Common stock sold, shares issued | 1,717,152 | ||
Proceeds from sale of stock | $ 1,030,291 | ||
Warrants | |||
Warrants outstanding | 3,270,444 | ||
Warrant weighted average exercise price | $ 1.12 | ||
Warrants | June 2008 | |||
Warrant weighted average exercise price | $ 1.03 | ||
Warrants authorized for issuance | 493,398 | ||
Warrants | September 2012 | |||
Warrant weighted average exercise price | $ 1.11 | ||
Warrants authorized for issuance | 2,189,724 | ||
Warrants | September 2012-2 | |||
Warrant weighted average exercise price | $ 0.85 | ||
Warrants authorized for issuance | 217,322 | ||
2011 Plan | |||
Shares authorized for issuance under the plan | 1,825,000 | ||
Stock options outstanding | 889,102 | ||
Shares available for future grants | 968,596 | ||
2006 Plan | |||
Shares authorized for issuance under the plan | 139,898 | ||
Stock options outstanding | 139,898 | ||
Shares available for future grants | 0 | ||
1997 Plan | |||
Stock options outstanding | 50,079 | ||
Shares available for future grants | 0 | ||
Stock Options | |||
Options granted | 714,000 | 9,000 | |
Stock options outstanding | 1,079,079 | 409,087 | 400,087 |
Selling, General and Administrative Expenses | |||
Stock-based compensation costs | $ 107,300 | $ 134,800 | |
Cost of Goods Sold | |||
Stock-based compensation costs | 0 | 4,033 | |
Research and Development Expenses | |||
Stock-based compensation costs | $ 18,375 | $ 2,200 |
4. INCOME TAXES (Details - Inco
4. INCOME TAXES (Details - Income tax rate) | 12 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Income tax reconcilation | ||
Income tax expense (benefit) at federal statutory rate | (34.00%) | (34.00%) |
Increase (decrease) in tax resulting from: | ||
State taxes, net of federal benefit | (5.30%) | (5.30%) |
Change in valuation allowance | 36.90% | 15.00% |
Nondeductible items | 0.20% | 0.30% |
Prior-year tax adjustments | (2.10%) | 14.00% |
Other | 4.20% | 9.90% |
Effective tax rate | (0.10%) | (0.10%) |
4. INCOME TAXES (Details - Defe
4. INCOME TAXES (Details - Deferred taxes) - USD ($) | Jun. 30, 2015 | Jun. 30, 2014 |
Deferred tax assets: | ||
Net operating loss carry forwards | $ 3,161,000 | $ 2,747,000 |
Tax credit carry forwards | 414,000 | 405,000 |
Reserves and accruals not yet deducted for tax purposes | 305,000 | 286,000 |
Total deferred tax assets | 3,880,000 | 3,438,000 |
Valuation allowance | (3,880,000) | (3,438,000) |
Net deferred tax asset | $ 0 | $ 0 |
4. INCOME TAXES (Details Narrat
4. INCOME TAXES (Details Narrative) - USD ($) | 12 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Provision for income taxes | $ 912 | $ 912 |
Increase in valuation allowance | $ 442,000 | |
Operating loss carryforwards expiration dates | Operating losses expire at various dates from 2016 through 2034 and losses from Hong Kong operations carry forward indefinitely. | |
Federal | ||
Operating loss carryforwards | $ 7,654,000 | |
State | ||
Operating loss carryforwards | 3,100,000 | |
Hong Kong operations | ||
Operating loss carryforwards | $ 2,252,000 |
5. PROFIT SHARING PLAN (Details
5. PROFIT SHARING PLAN (Details Narrative) | 12 Months Ended |
Jun. 30, 2015USD ($) | |
Compensation and Retirement Disclosure [Abstract] | |
Employer matching contribution | $ 0 |
6. SALE OF ASSETS (Details Narr
6. SALE OF ASSETS (Details Narrative) - USD ($) | 12 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Property, Plant and Equipment Assets Held-for-sale Disclosure [Abstract] | ||
Proceeds from sale of assets | $ 27,075 | $ 14,028 |
Gain on sale of assets | $ 27,075 | $ 14,028 |
7. OTHER INCOME (Details Narrat
7. OTHER INCOME (Details Narrative) - USD ($) | 12 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Other income | $ 35,172 | $ 0 |
Gain on settlement of liabilities for services | ||
Other income | $ 35,172 | |
Gain on settlement of liabilities for services | January 2015 | ||
Stock issued for settlement of liabilities for services | 82,222 | |
Gain on settlement of liabilities for services | May 2015 | ||
Stock issued for settlement of liabilities for services | 45,000 |