1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

Principles of Consolidation and Operations

Principles of Consolidation and Operations

The accompanying consolidated financial statements include the accounts of Precision Optics Corporation, Inc. and its wholly-owned subsidiaries (the “Company”). All significant intercompany accounts and transactions have been eliminated in consolidation.

These consolidated financial statements have been prepared by the Company, without audit, and reflect normal recurring adjustments which, in the opinion of management, are necessary for a fair statement of the results of the third quarter and nine months of the Company’s fiscal year 2014. These consolidated financial statements do not include all disclosures associated with annual consolidated financial statements and, accordingly, should be read in conjunction with footnotes contained in the Company’s consolidated financial statements for the year ended June 30, 2013, together with the Report of Independent Registered Public Accounting Firm filed under cover of the Company’s 2013 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on September 30, 2013.

Use of Estimates

Use of Estimates

The preparation of these consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Income (Loss) Per Share

Income (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, warrants, or shares issuable upon conversion of the Company’s 10% Senior Convertible Notes, which were retired in September 2012. For the three and nine months ended March 31, 2014 and 2013, 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 income (loss) per share for the three and nine months ended March 31, 2014 and 2013:

	Three Months Ended March 31						Nine Months Ended March 31
	2014			2013			2014			2013
Net Loss – Basic and Diluted	$	(380,434	)	$	(349,994	)	$	(843,608	)	$	(1,614,572	)
Basic Weighted Average Shares Outstanding		4,455,134			4,279,467			4,455,134			3,211,274
Potentially Dilutive Securities		–			–			–			–
Diluted Weighted Average Shares Outstanding		4,455,134			4,279,467			4,455,134			3,211,274
Loss Per Share
Basic	$	(0.09	)	$	(0.08	)	$	(0.19	)	$	(0.50	)
Diluted	$	(0.09	)	$	(0.08	)	$	(0.19	)	$	(0.50	)

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 3,393,000 and 3,435,000 for the three months ended March 31, 2014 and 2013, respectively, and approximately 3,393,000 and 3,435,000 for the nine months ended March 31, 2014 and 2013, respectively.

Income Taxes

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 carryforwards. 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. Based on this evaluation, a full valuation reserve has been provided for the deferred tax assets.