0001683168-19-000350.txt : 20190212 0001683168-19-000350.hdr.sgml : 20190212 20190212160114 ACCESSION NUMBER: 0001683168-19-000350 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 43 CONFORMED PERIOD OF REPORT: 20181231 FILED AS OF DATE: 20190212 DATE AS OF CHANGE: 20190212 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRECISION OPTICS CORPORATION, INC. CENTRAL INDEX KEY: 0000867840 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 042795294 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10647 FILM NUMBER: 19590686 BUSINESS ADDRESS: STREET 1: 22 EAST BROADWAY CITY: GARDNER STATE: MA ZIP: 01440 BUSINESS PHONE: 978-630-1800 MAIL ADDRESS: STREET 1: 22 EAST BROADWAY CITY: GARDNER STATE: MA ZIP: 01440 FORMER COMPANY: FORMER CONFORMED NAME: PRECISION OPTICS Corp INC DATE OF NAME CHANGE: 20111027 FORMER COMPANY: FORMER CONFORMED NAME: PRECISION OPTICS CORPORATION INC DATE OF NAME CHANGE: 19930328 FORMER COMPANY: FORMER CONFORMED NAME: PRECISION OPTICS CORP INC DATE OF NAME CHANGE: 19600201 10-Q 1 poci_10q-123118.htm FORM 10-Q

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended December 31, 2018

 

or

 

o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                      to                     

 

Commission File Number: 001-10647

 

PRECISION OPTICS CORPORATION, INC.

(Exact name of registrant as specified in its charter)

 

Massachusetts 04-2795294
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

 

22 East Broadway, Gardner, Massachusetts 01440-3338

(Address of principal executive offices) (Zip Code)

 

(978) 630-1800

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

   

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer o   Accelerated filer o
         
Non-accelerated filer x   Smaller reporting company x
         
      Emerging growth company o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes o No x

   

The number of shares outstanding of the issuer’s common stock, par value $0.01 per share, at February 12, 2019 was 11,997,139 shares.

 

 

 

   
 

 

PRECISION OPTICS CORPORATION, INC.

 

Table of Contents

 

  Page
PART I — FINANCIAL INFORMATION 3
Item 1. Financial Statements 3
Consolidated Balance Sheets at December 31, 2018 and June 30, 2018 3
Consolidated Statements of Operations for the Three and Six Months Ended December 31, 2018 and 2017 4
Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended December 31, 2018 and 2017 5
Consolidated Statements of Cash Flows for the Three and Six Months Ended December 31, 2018 and 2017 6
Notes to Consolidated Financial Statements 7
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
Item 4. Controls and Procedures 15
   
PART II — OTHER INFORMATION 16
Item 1. Legal Proceedings 16
Item 1A. Risk Factors 16
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Mine Safety Disclosures (Not applicable.) 16
Item 5. Other Information 16
Item 6. Exhibits 17

 

 

 

   
 

 

 

 

PART I. FINANCIAL INFORMATION

  

Item 1. Financial Statements.

   

PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

   December 31,
2018		   June 30,
2018		 
ASSETS          
CURRENT ASSETS          
Cash and Cash Equivalents  $1,744,644   $402,738 
Accounts Receivable, net   728,636    796,923 
Inventories, net   1,095,525    1,144,068 
Prepaid Expenses   136,517    70,991 
Total Current Assets   3,705,322    2,414,720 
PROPERTY AND EQUIPMENT          
Machinery and Equipment   2,574,579    2,511,638 
Leasehold Improvements   566,839    553,596 
Furniture and Fixtures   148,303    148,303 
    3,289,721    3,213,537 
           
Less: Accumulated Depreciation and Amortization   (3,178,645)   (3,164,051)
Net Fixed Assets   111,076    49,486 
           
Patents, net   46,007    47,275 
           
TOTAL ASSETS  $3,862,405   $2,511,481 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
CURRENT LIABILITIES          
Current Portion of Capital Lease Obligation  $9,262   $8,962 
Accounts Payable   752,020    703,538 
Customer Advances   294,650    857,842 
Accrued Employee Compensation   228,314    238,590 
Accrued Professional Services   74,250    98,000 
Accrued Warranty Expense   25,000    25,000 
Other Accrued Liabilities   –    912 
Total Current Liabilities   1,383,496    1,932,844 
           
Capital Lease Obligation, net of current portion   9,894    14,601 
           
STOCKHOLDERS’ EQUITY          
Common Stock, $0.01 par value - Authorized - 50,000,000 shares; Issued and Outstanding – 11,897,139 shares at December 31, 2018 and 10,197,139 shares at June 30, 2018   118,972    101,972 
Additional Paid-in Capital   47,797,398    45,484,186 
Accumulated Deficit   (45,447,355)   (45,022,122)
Total Stockholders’ Equity   2,469,015    564,036 
           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $3,862,405   $2,511,481 

 

The accompanying notes are an integral part of these consolidated interim financial statements.

 

 

 

 3 
 

 

 

PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED

December 31, 2018 AND 2017

(UNAUDITED)

 

 

   Three Months
Ended December 31,		   Six Months
Ended December 31,		 
   2018   2017   2018   2017 
Revenues  $1,477,851   $812,773   $3,037,309   $1,841,519 
                     
Cost of Goods Sold   1,122,129    512,551    2,219,080    1,154,555 
Gross Profit   355,722    300,222    818,229    686,964 
                     
Research and Development Expenses, net   125,413    90,031    226,211    208,458 
Selling, General and Administrative Expenses   355,916    270,035    1,016,405    566,619 
Total Operating Expenses   481,329    360,066    1,242,616    775,077 
                     
Operating Loss   (125,607)   (59,844)   (424,387)   (88,113)
                     
Interest Expense   (341)   (482)   (846)   (998)
                     
Net Loss  $(125,948)  $(60,326)  $(425,233)  $(89,111)
                     
Loss Per Share:                    
Basic  $(0.01)  $(0.01)  $(0.04)  $(0.01)
Diluted  $(0.01)  $(0.01)  $(0.04)  $(0.01)
                     
Weighted Average Common Shares Outstanding:                    
Basic   11,618,878    9,979,197    10,940,074    9,543,810 
Diluted   11,618,878    9,979,197    10,940,074    9,543,810 

 

The accompanying notes are an integral part of these consolidated interim financial statements.

 

 

 

 

 4 
 

 

PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE AND SIX MONTHS ENDED

December 31, 2018 AND 2017

(UNAUDITED)

 

 

   Six Month Period Ended December 31, 2018 
   Number of
Shares		   Common
Stock		   Additional
Paid-in
Capital		   Accumulated
Deficit		   Total
Stockholders’
Equity		 
                     
Balance, July 1, 2018   10,197,139   $101,972   $45,484,186   $(45,022,122)  $564,036 
Stock-based compensation   –    –    342,984    –    342,984 
Issuance of common stock for services   100,000    1,000    (1,000)   –    – 
Net loss   –    –    –    (299,285)   (299,285)
Balance, September 30, 2018   10,297,139    102,972    45,826,170    (45,321,407)   607,735 
                          
Proceeds from private placement of common stock, net of issuance costs of $23,000   1,600,000    16,000    1,961,000    –    1,977,000 
Stock-based compensation   –    –    10,228    –    10,228 
Net loss   –    –    –    (125,948)   (125,948)
Balance, December 31, 2018   11,897,139   $118,972   $47,797,398   $(45,447,355)  $2,469,015 

 

 

 

   Six Month Period Ended December 31, 2017 
   Number of
Shares		   Common
Stock		   Additional
Paid-in
Capital		   Accumulated
Deficit		   Total
Stockholders’
Equity		 
                     
Balance, July 1, 2017   8,872,916   $88,729   $45,140,383   $(44,670,732)  $558,380 
Proceeds from private placement of common stock, net of issuance costs of $2,963   555,556    5,556    241,482    –    247,038 
Stock-based compensation   –    –    26,057    –    26,057 
Net loss   –    –    –    (28,785)   (28,785)
Balance, September 30, 2017   9,428,472    94,285    45,407,922    (44,699,517)   802,690 
                          
Proceeds from exercise of stock purchase warrants   666,667    6,667    –    –    6,667 
Stock-based compensation   –    –    6,971    –    6,971 
Net loss   –    –    –    (60,326)   (60,326)
Balance, December 31 , 2017   10,095,139   $100,952   $45,414,893   $(44,759,843)  $756,002 

 

The accompanying notes are an integral part of these consolidated interim financial statements.

 

 

 

 

 

 

 

 

 5 
 

 

 

PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED

December 31, 2018 AND 2017

(UNAUDITED)

 

 

   Six Months
Ended December 31,		 
   2018   2017 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net Loss  $(425,233)  $(89,111)
Adjustments to Reconcile Net Loss to Net Cash Provided From (Used In) Operating Activities -          
Depreciation and Amortization   15,862    15,804 
Stock-based Compensation Expense   353,212    33,028 
Non-cash Consulting Expense   –    (3,387)
Changes in Operating Assets and Liabilities -          
Accounts Receivable, net   68,287    (284,604)
Inventories, net   48,543    67,656 
Prepaid Expenses   (65,526)   (22,447)
Accounts Payable   48,482    41,586 
Customer Advances   (563,192)   283,152 
Accrued Liabilities   (57,938)   26,318 
Net Cash Provided From (Used In) Operating Activities   (577,503)   67,995 
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Additional Patent Costs   –    (17,189)
Purchases of Property and Equipment   (76,184)   – 
Net Cash Used In Investing Activities   (76,184)   (17,189)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Payment of Capital Lease Obligation   (4,407)   (4,127)
Gross Proceeds from Private Placement of Common Stock   2,000,000    210,001 
Gross Proceeds from Exercise of Stock Purchase Warrants   –    6,667 
Net Cash Provided From Financing Activities   1,995,593    212,541 
           
NET INCREASE IN CASH AND CASH EQUIVALENTS   1,341,906    263,347 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD   402,738    118,405 
           
CASH AND CASH EQUIVALENTS, END OF PERIOD  $1,744,644   $381,752 
           
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND INVESTING ACTIVITIES:          
Issuance of Common Stock in Settlement of Accounts Payable  $–   $40,000 
Offering Costs Included in Current Liabilities  $23,000   $2,963 

 

The accompanying notes are an integral part of these consolidated interim financial statements.

 

 

 

 6 
 

 

PRECISION OPTICS CORPORATION, INC.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

 

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

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 second quarter and six months of the Company’s fiscal year 2019. 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, 2018, together with the Report of Independent Registered Public Accounting Firm filed under cover of the Company’s 2018 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on September 27, 2018.

 

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.

 

Revenue Recognition

 

On July 1, 2018, the Company adopted ASU 2014-09 Revenue from Contracts with Customers (ASC 606) using the modified retrospective method for contracts that were not completed as of July 1, 2018, whereby revenues are recognized as the performance obligations to deliver products or services are satisfied and are recorded based on the amount of consideration the Company expects to receive in exchange for satisfying the performance obligations. Most of the Company’s products and services are marketed to medical device companies almost exclusively in the United States. Products and services are primarily transferred to customers at a point in time based upon when services are performed or product is shipped.

 

Revenues represent the amount of consideration we expect to receive from customers in exchange for transferring products and services. Other selling costs to obtain and fulfill contracts are expensed as incurred due to the short-term nature of a majority of our revenues. The Company extends terms of payment to its customers based on commercially reasonable terms for the markets of its customers, while also considering their credit quality. Shipping and handling costs charged to customers are included in revenues.

 

The Company disaggregates revenues by product and service types as it believes it best depicts how the nature, amount, timing and uncertainty of revenues and cash flows are affected by economic factors.

 

   Three Months
Ended December 31,		   Six Months
Ended December 31,		 
   2018   2017   2018   2017 
Engineering Design Services  $318,741   $342,855   $830,639   $762,779 
Optical Components   225,967    225,595    524,024    669,186 
Medical Device Products and Assemblies   933,143    244,323    1,682,646    409,554 
Total Revenues  $1,477,851   $812,773   $3,037,309   $1,841,519 

 

Contract Assets and Liabilities

 

The nature of the Company’s products and services does not generally give rise to contract assets as it typically does not incur costs to fulfill a contract before a product or service is provided to a customer. The Company’s costs to obtain contracts are typically in the form of sales commissions paid to employees. The Company has elected to expense sales commissions associated with obtaining a contract as incurred as the amortization period is generally less than one year. These costs have been recorded in selling, general and administrative expenses. As of December 31, 2018, there were no contract assets recorded in the Company’s Consolidated Balance Sheets.

 

 

 7 
 

 

The Company’s contract liabilities arise as a result of unearned revenue received from customers at inception of contracts or where the timing of billing for services precedes satisfaction of the Company’s performance obligations. The Company generally satisfies performance obligations within one year from the contract inception date. As of July 1, 2018, contract liabilities were $857,842, which were recorded as customer advances in the Company’s Consolidated Balance Sheets, $192,722 and $674,360 of which was recognized in sales during the three and six months ended December 31, 2018, respectively. As of December 31, 2018, contract liabilities recorded as customer advances were $294,650. 

 

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 and warrants. For the three and six months ended December 31, 2018 and 2017, the effect of such securities was antidilutive and not included in the diluted calculation because of the net loss generated in these periods.

 

The following is the calculation of loss per share for the three and six months ended December 31, 2018 and 2017:

 

   Three Months
Ended December 31,		   Six Months
Ended December 31,		 
   2018   2017   2018   2017 
Net Income (Loss) - Basic and Diluted  $(125,948)  $(60,326)  $(425,233)  $(89,111)
                     
Basic and Dilutive Weighted Average Shares Outstanding   11,618,878    9,979,197    10,940,074    9,543,810 
                     
Loss Per Share - Basic and Diluted  $(0.01)  $(0.01)  $(0.04)  $(0.01)

 

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 1,493,200 and 1,708,867 for the three months ended December 31, 2018 and 2017, respectively, and approximately 1,493,200 and 4,732,960 for the six months ended December 31, 2018 and 2017, respectively.

   

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.

  

2. INVENTORIES

 

Inventories are stated at the lower of cost (first-in, first-out) or market and consisted of the following:

 

   December 31,
2018		   June 30,
2018		 
Raw Materials  $482,553   $500,908 
Work-In-Progress   407,619    434,536 
Finished Goods   205,353    208,624 
Total Inventories  $1,095,525   $1,144,068 

 

 

 

 

 8 
 

 

3. CAPITAL LEASE OBLIGATION

 

The Company entered into a five-year capital lease obligation in January 2016 for the acquisition of manufacturing equipment totaling $51,252. At December 31, 2018, future minimum lease payments under the capital lease obligation are as follows:

 

Fiscal Year Ending June 30:  Amount 
2019  $5,126 
2020   10,250 
2021   5,126 
Total minimum payments   20,502 
Less: amount representing interest   1,346 
Present value of minimum lease payments   19,156 
Less: current portion   9,262 
   $9,894 

 

4. STOCK-BASED COMPENSATION

 

The following table summarizes stock-based compensation expense for the three and six months ended December 31, 2018 and 2017:

 

   Three Months
Ended December 31,		   Six Months
Ended December 31,		 
   2018   2017   2018   2017 
Cost of Goods Sold  $–   $–   $–   $8,669 
Research and Development   2,411    320    4,822    7,012 
Selling, General and Administrative   7,817    6,651    348,390    17,347 
Stock Based Compensation Expense  $10,228   $6,971   $353,212   $33,028 

  

No compensation has been capitalized because such amounts would have been immaterial.

   

The following tables summarize stock option activity for the six months ended December 31, 2018:

 

      Options Outstanding  
      Number of
Shares		       Weighted Average
Exercise Price		       Weighted Average
Contractual Life		  
Outstanding at June 30, 2018     1,055,700     $ 0.76       6.13 years  
Granted     450,000                  
Expired or Cancelled     (13,700 )                 
Outstanding at December 31, 2018     1,492,000     $ 0.75       6.83 years  

  

 

 

 

 

 

 9 
 

 

Information related to the stock options outstanding as of December 31, 2018 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		  
$ 0.27       40,000       2.54     $ 0.27       40,000     $ 0.27  
$ 0.40       15,000       8.33     $ 0.40       10,000     $ 0.40  
$ 0.48       60,000       7.25     $ 0.48       60,000     $ 0.48  
$ 0.50       100,000       6.47     $ 0.50       100,000     $ 0.50  
$ 0.55       42,000       5.31     $ 0.55       37,000     $ 0.55  
$ 0.64       25,000       8.86     $ 0.64       15,000     $ 0.64  
$ 0.70       100,000       9.59     $ 0.70       33,333     $ 0.70  
$ 0.73       853,000       7.70     $ 0.73       658,000     $ 0.73  
$ 0.85       9,000       4.01     $ 0.85       9,000     $ 0.85  
$ 0.90       9,000       5.01     $ 0.90       9,000     $ 0.90  
$ 0.95       30,000       5.53     $ 0.95       30,000     $ 0.95  
$ 1.20       207,800       3.17     $ 1.20       207,800     $ 1.20  
$ 1.35       1,200       0.90     $ 1.35       1,200     $ 1.35  
$ 0.27–$1.35       1,492,000       6.83     $ 0.75       1,210,333     $ 0.76  

 

The aggregate intrinsic value of the Company’s “in-the-money” outstanding and exercisable options as of December 31, 2018 was $891,580 and $711,496, respectively.

 

Common Stock Award

 

On August 2, 2018, the Company awarded its Chief Executive Officer 300,000 shares of common stock for services performed through June 30, 2018. The fair market value of the 300,000 shares on the award date equal to $210,000 has been recorded as general and administrative stock-based compensation expense in the quarter ended September 30, 2018. As of December 31, 2018, 100,000 shares have been issued. Another 100,000 shares were issued on January 1, 2019, and the remaining 100,000 shares will be issued on January 1, 2020.

  

5. SALE OF STOCK

 

On October 16, 2018, the Company entered into agreements with accredited investors for the sale and purchase of 1,600,000 unregistered shares of its common stock, $0.01 par value at a purchase price of $1.25 per share. The Company received $2,000,000 in gross proceeds from the offering. The Company is using the net proceeds from this placement for general working capital purposes.

  

In connection 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 90 calendar days after October 16, 2018 to register the resale by the investors of 1,600,000 shares of our common stock purchased in the placement. The registration statement was filed with the Securities and Exchange Commission on January 3, 2019 and Amendment No. 1 to the registration statement was filed with the Securities and Exchange Commission on January 16, 2019. The registration statement became effective on February 5, 2019.

 

 

 

 

 10 
 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and notes to those statements included elsewhere in this Quarterly Report on Form 10-Q for the quarter and six months ended December 31, 2018 and with our audited consolidated financial statements for the year ended June 30, 2018 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on September 27, 2018.

 

This Quarterly Report on Form 10-Q contains forward-looking statements. When used in this report, the words “anticipate,” “suggest,” “estimate,” “plan,” “project,” “continue,” “ongoing,” “potential,” “expect,” “predict,” “believe,” “intend,” “may,” “will,” “should,” “could,” “would” and similar expressions are intended to identify forward-looking statements. You should not place undue reliance on these forward-looking statements.  Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described in this report, the risks described in our Annual Report on Form 10-K for the year ended June 30, 2018 and other reports we file with the Securities and Exchange Commission. Although we believe the expectations reflected in the forward-looking statements are reasonable, they relate only to events as of the date on which the statements are made.  We do not intend to update any of the forward-looking statements after the date of this report to conform these statements to actual results or to changes in our expectations, except as required by law.

 

Overview

 

We have been developing and manufacturing advanced optical instruments since 1982. Today, the majority of our business is the design and manufacture of high-quality medical devices and 10% to 20% of our business is the design and manufacture of military and industrial products. Our medical instrumentation line includes traditional endoscopes and endocouplers as well as other custom imaging and illumination products for use in minimally invasive surgical procedures. Much of our recent development efforts have been targeted at the development of next generation endoscopes. During the last ten to fifteen years, we funded internal research and development programs to develop next generation capabilities for designing and manufacturing 3D endoscopes and very small Microprecision™ lenses, anticipating the surgical community’s future demand for smaller and more enhanced imaging systems for minimally invasive surgery. Over the last few years demand for these products has increased, and our engineering personnel resources and capabilities are now mostly consumed in revenue generating optical design and development projects for our customers.

 

Our unique proprietary technology in the areas of micro optical lenses and prisms, micro medical fiber and CMOS based cameras, and custom design of medical grade instruments, combined with recent developments in the areas of 3D displays, has allowed us to begin commercialization of related product and service offerings to a widening group of customers addressing various medical device, defense and aerospace applications. Thus, a portion of our revenues are now derived from engineering and design services we performed for our customers to incorporate our technologies and capabilities into their medical device products. We believe that new products based on these technologies provide enhanced imaging for existing surgical procedures and can enable development of many new medical device products and related medical procedures.

 

We are registered to the ISO 9001:2015 and ISO 13485:2016 Quality Standards and comply with the FDA Good Manufacturing Practices and the European Union Medical Device Directive for CE marking of our medical products. Our internet website is www.poci.com. Information on our website is not intended to be integrated into this report.

 

The markets in which we do business are highly competitive and include both foreign and domestic competitors. Many of our competitors are larger and have substantially greater resources than we do. Furthermore, other domestic or foreign companies, some with greater financial resources than we have, may seek to produce products or services that compete with ours. We routinely outsource specialized materials and production efforts as required to obtain the most cost effective production.

 

We believe that competition for sales of our medical products and services, which have been principally sold to original equipment manufacturers, or OEM, customers, is based on our ability to design and produce technical features, performance, engineering service and production scheduling, on-time delivery, quality control and product reliability, and competitive pricing.

  

We believe that our future success depends to a large degree on our ability to develop new optical products and services to enhance the performance characteristics and methods of manufacture of existing products. Accordingly, we expect to continue to seek and obtain product-related design and development contracts with customers and to selectively invest our own funds on research and development, particularly in the areas of Microprecision™ optics, micro medical cameras and 3D endoscopes.

   

For the six months ended December 31, 2018, approximately 77% of our sales were made to seven customers. Of these, four were medium to large, international, medical device companies and one was a large defense contractor. Each of these customers has been our customer for numerous years. The other two customers were early-stage companies developing endoscopic products that incorporate our unique design capabilities. Sales to these seven customers included both products we developed over five years ago and products we are currently developing which rely heavily on our unique, proprietary Microprecision™ lens technology and optical visualization system expertise.

 

 

 11 
 

 

 

Current sales and marketing activities are intended to broaden awareness of the benefits of our new technology platforms, which we believe are ready for general application to medical device projects requiring surgery-grade visualization from sub-millimeter sized devices and 3D endoscopy. Successful engineering projects for us eventually transition to manufacturing orders as our customers bring their products to market. We market directly to established medical device companies primarily in the United States that we believe could benefit from our advanced endoscopy visualization systems. Through this direct marketing, referrals, attendance at trade shows including Medical Design and Manufacturing West (MD&M) and MD&M East, our objective is to maintain our pipeline of engineering projects with the potential for future growth from manufacturing orders, thereby increasing our overall revenues from a growing number of manufacturing medical device customers.

 

General

 

This management’s discussion and analysis of financial condition and results of operations is based upon our unaudited consolidated financial statements, which have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base our 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.

 

There have been no significant changes in our critical accounting policies as disclosed in the Notes to our Financial Statements contained in our Annual Report on Form 10-K for the year ended June 30, 2018 filed with the Securities and Exchange Commission on September 27, 2018.

 

Results of Operations

 

Our total revenues for the quarter ended December 31, 2018, were $1,477,851, as compared to $812,773 for the same period in the prior year, an increase of $665,078, or 81.8%. Revenues were relatively unchanged in the components and engineering categories during the quarter ended December 31, 2018 compared to the same quarter of the prior year. Production revenues increased to $933,143 during the quarter ended December 31, 2018, from $244,323 during the same quarter of the prior year, an increase of $688,820 or 282%. The majority of our revenues are derived from engineering design and manufacturing services related to products marketed or under development by our OEM customers. Therefore, our revenues are subject to fluctuations on a product by product basis from period to period.

 

Engineering projects continue to range in type and include CMOS, Microprecision™, 3D and robotic visualization and illumination systems. While the number of revenue generating engineering projects decreased from eighteen during the quarter ended December 31, 2017 to six during the quarter ended December 31, 2018, engineering design service revenues during the quarters ended December 31, 2018 and 2017 were $318,741 and $342,855, respectively. The slight decrease in engineering service revenue during the quarter ended December 31, 2018 when compared to the same quarter of the prior year was due primarily to a $135,534 decrease caused by one project transitioning to production during fiscal year 2018, which was offset by a $142,942 increase in engineering service revenue from one 3D robotic project in the quarter ended December 31, 2018 compared to revenue from that project in the same quarter of the prior year. Other increases and decreases in individual project revenues between the quarters are considered to be normal fluctuations for the types of development services provided to our customers.

 

The $688,820 or 282% increase in production revenue during the quarter ended December 31, 2018 compared to the same quarter of the prior year resulted primarily from a $572,016 increase in sales from two projects transitioned from engineering to production, plus a $164,460 increase in revenue from a traditional spine product sold to a long-standing customer. The new production products represent a cardiovascular fiberscope incorporating our Microprecision™ technology and an ENT scanning device incorporating CMOS and Microprecision™ technologies.

 

Our total revenues for the six months ended December 31, 2018 were $3,037,309, as compared to $1,841,519 for the same period in the prior year, an increase of $1,195,790, or 64.9%. Engineering design service revenues increased by $67,860 or 8.9% in the six months ended December 31, 2018 compared to the same quarter of the prior year, due primarily from decreases caused by the transition of two engineering projects to production offset by a larger increase of revenue from a 3D robotic engineering project during the six months ended December 31, 2018. Optical component revenues decreased $145,162 or 21.7% during the six months ended December 31, 2018 compared to the same period of the prior year primarily due to decreases in one defense company project and a medical device repair catalogue company, partially offset be an increase in prisms sold to a medical device manufacturer during the six months ended December 31, 2018 compared to the same period of the prior year.

 

 

 12 
 

 

 

Production revenues increased during the six months ended December 31, 2018 compared to the same quarter of the prior year by $1,273,092 or 311%. As in the quarter ended December 31, 2018, the increase in production revenue during the six month period ended December 31, 2018 compared to the same six month period of the prior year resulted primarily from a $1,022,963 increase in sales from two projects transitioned from engineering to production, plus a $173,146 increase in revenue from a traditional spine product sold to a long-standing customer. The new production products represent a cardiovascular fiberscope incorporating our Microprecision™ technology and an ENT scanning device incorporating CMOS and Microprecision™ technologies.

    

Gross profit for the quarter ended December 31, 2018 was $355,722, compared to $300,222 for the same period in the prior year, reflecting an increase of $55,500, or 18.5%. Gross profit for the quarter ended December 31, 2018 as a percentage of our revenues was 24.1%, a decrease from the gross profit percentage of 36.9% for the same period in the prior year. Gross profit for the six months ended December 31, 2018 was $818,229, as compared to $686,964 for the same period in the prior year, which reflects an increase of $131,265 or 19.1%. Gross profit for the six months ended December 31, 2018 as a percentage of our revenues was 26.9%, a decrease from the gross profit percentage of 37.3% for the same period in the prior year. Quarterly gross profit and gross profit percentage depend on a number of factors, including overall sales volume, facility utilization, product sales mix, the costs of engineering services, and production start up costs and challenges in connection with new products.

 

Although the higher level of revenues during the quarter and six month periods ended December 31, 2018 when compared to the same quarter and six month periods of the prior year absorbed a greater amount of fixed manufacturing costs thereby increasing realized gross margins, two projects encountered cost over-runs that were the primary cause of the decreased gross margins as a percentage of sales during the quarter and six months periods ended December 31, 2018. The two projects represent 27%-28% of total revenues for the quarter and six months ended December 31, 2018, one being a production project impacting the gross margin percentage by 3% and 4% in the quarter and six months ended December 31, 2018, respectively, and the other being an engineering service project impacting the gross margin percentage by 9% and 6% in the quarter and six months ended December 31, 2018, respectively. The cost over-runs in each of these cases resulted from design challenges and issues we are addressing and that we believe will only cause a temporary decrease in total realized gross margins. The remainder of our production and engineering jobs resulted in margins within our targeted range with reasonably expected fluctuations.

 

Research and development expenses were $125,413 for the quarter ended December 31, 2018, compared to $90,031 for the same period in the prior year, an increase of $35,382, or 39.3%. Research and development expenses were $226,211 for the six months ended December 31, 2018, compared to $208,458 for the same period in the prior year, an increase of $17,753, or 8.5%. In-house research and development and certain internal functions not directly related to customer engagements are classified as research and development expenses with the majority of our engineering, research and development activities being consumed in revenue generating engagements with our customers for the development of their products. The increase in research and development expenses during the quarter and six months ended December 31, 2018, compared to the same periods of the prior year, resulted from an increase of two engineering positions reflected in the six month period ended December 31, 2018 compared to the same period of the prior year when we were experiencing a temporary reduction in engineering department staffing. Consequently, the amount of wages and related overhead costs not consumed in customer projects was higher during the periods ended December 31, 2018 when compared to the same periods of the prior year.

 

Selling, general and administrative expenses were $1,016,405 for the six months ended December 31, 2018, compared to $566,619 for the same period in the prior year, an increase of $449,786, or 79.4%. The increase in the six months ended December 31, 2018, compared to the same period of the prior fiscal year was primarily due to increased non-cash stock-based compensation expense of $320,184 relating to stock option and common stock awards. Selling, general and administrative expenses were further increased during the quarter ended December 31, 2018 when compared to the same quarter of the prior fiscal year by increased compensation costs for existing personnel, sales commissions, and shipping costs for increased production materials purchased from overseas, which were partially offset by a reduction in bad debt expense related to one isolated customer in the prior year and decreased fees paid to an investor relations firm.

 

Selling, general and administrative expenses were $355,916 for the quarter ended December 31, 2018, compared to $270,035 for the same period in the prior year, an increase of $85,881, or 31.8%, resulting from increases in compensation costs for existing personnel, travel expenses, product liability insurance, and shipping costs for increased production materials purchased from overseas, which were partially offset by decreased fees paid to an investor relations firm.

 

No income tax provision was recorded in the quarter and six month periods ended December, 2018 and 2017 because of the losses generated in those periods.

 

 

 

 13 
 

 

Liquidity and Capital Resources

 

We have sustained recurring net losses for several years, although during the last three fiscal quarters our financial performance has improved somewhat. During the quarter and six month periods ended December 31, 2018, we incurred net losses of $125,948 and $425,233, respectively. We also incurred net losses of $351,390 and $1,006,457 during the fiscal years ended June 30, 2018 and 2017, respectively, Revenues during the quarters ended June 30, September 30, and December 31, 2018 have increased to $1,460,932, $1,559,458 and 1,477,851, respectively. Excluding expenses relating to non-cash stock-based compensation expenses and non-recurring bad debt expense non-GAAP net income was the following during the last three fiscal quarters:

 

   Fiscal Quarter Ended 
   June 30,
2018		   September 30,
2018		   December 31,
2018		 
Net income (loss)  $16,992   $(299,285)  $(125,948)
Non-cash stock-based compensation   10,339    342,948    10,228 
Non-recurring bad debt expense   113,750    –    – 
Non-GAAP net income (loss)  $141,081   $43,663   $(115,720)

 

As of December 31, 2018, cash and cash equivalents were $1,744,644, accounts receivable were $728,636, and current liabilities were $1,383,496. Our working capital was $2,321,826 and $481,876 at December 31, 2018 and June 30, 2018, respectively, with the increase at December 31, 2018 resulting primarily from the recent sale of our common stock. As reported on Form 8-K filed with the Securities and Exchange Commission on October 18, 2018, we received $2,000,000 from the sale of 1,600,000 shares of our common stock at $1.25 per share, which we are using for general working capital purposes. Proceeds from this stock offering, combined with our recently improved financial performance, significantly enhances our working capital position and financial condition. Critical to our ability to maintain our financial condition is achieving a level of quarterly revenues at or greater than the levels achieved during the most recent three fiscal quarters as well as meeting targeted gross margins while limiting the growth of other operating expenses. A combination of lower revenue levels than experienced in the last three quarters, decreasing gross margins, or increasing operating expenses could result in the use of our cash and working capital and an overall decline in our current financial condition.

 

We have traditionally funded working capital needs through product sales, management of working capital components of our business, cash received from public and private offerings of our common stock, warrants to purchase shares of our common stock or convertible notes, and by customer advances paid against purchase orders by our customers and recorded in the current liabilities section of the accompanying financial statements. Our management believes that the opportunities represented by our current production projects and engineering pipeline of Microprecision™ optical elements, micro medical camera assemblies and 3D endoscope projects have the potential to generate increasing revenues and profitable financial results.

 

Capital equipment expenditures during the six months ended December 31, 2018 and 2017 were $76,184 and $0, respectively. Future capital equipment expenditures will be dependent upon the type and amount of future sales revenue and the needs of on-going research and development efforts.

 

We have contractual cash commitments related to open purchase orders as of December 31, 2018 of approximately $402,000, including a $19,156 commitment remaining under a five-year capital lease obligation for the acquisition of equipment (see Note 3. Capital Lease Obligation). We have no other contractual cash commitments since leased facilities are currently on a month-to-month basis.

 

On October 16, 2018, the Company entered into agreements with accredited investors for the sale and purchase of 1,600,000 unregistered shares of its common stock, $0.01 par value at a purchase price of $1.25 per share. The Company received $2,000,000 in gross proceeds from the offering. The Company is using the net proceeds from this placement for general working capital purposes.

  

In connection 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 90 calendar days after October 16, 2018 to register the resale by the investors of 1,600,000 shares of our common stock purchased in the placement. The registration statement was filed with the Securities and Exchange Commission on January 3, 2019 and Amendment No. 1 to the registration statement was filed with the Securities and Exchange Commission on January 16, 2019. The registration statement became effective on February 5, 2019.

  

Off-Balance Sheet Arrangements

 

We currently have no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

 

 14 
 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.

  

Item 4. Controls and Procedures.

 

Management’s Evaluation of Disclosure Controls and Procedures

 

Our Chief Executive Officer and our Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures, including internal control over financial reporting, were not effective, as of December 31, 2018, to ensure the information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934, as amended (i) is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures are intended to be designed to provide reasonable assurance that such information is accumulated and communicated to our management. Based on this evaluation, our management concluded that our internal control over financial reporting was not effective as of December 31, 2018.

  

The following is a description of two material weaknesses in our internal control over financial reporting:

 

Segregation of Duties: As previously disclosed in our Annual Reports on Form 10-K for the fiscal years ended June 30, 2008-2018, our management identified a control deficiency during the 2008 fiscal year because we lacked sufficient staff to segregate accounting duties. We believe the control deficiency resulted primarily because we have the equivalent of one and one-half persons performing all accounting-related on-site duties. As a result, we did not maintain adequate segregation of duties within our critical financial reporting applications, the related modules and financial reporting processes. This control deficiency could result in a misstatement of balance sheet and income statement accounts in our interim or annual consolidated financial statements that would not be detected. Accordingly, management has determined that this control deficiency constitutes a material weakness. During the period beginning with fiscal year 2008 through June 30, 2018, no audit adjustments resulting from this condition were required.

 

To address and remediate the material weakness in internal control over financial reporting described above, beginning with the quarter ended September 30, 2008, we instituted a procedure whereby our Chief Executive Officer, our Chief Financial Officer and other members of our Board of Directors perform a higher level review of the quarterly and annual reports on Form 10-Q and Form 10-K prior to filing.

 

We believe that the step outlined above strengthens our internal control over financial reporting and mitigates the material weakness described above. As part of our assessment of internal control over financial reporting for the fiscal year ended June 30, 2018, our management has evaluated this additional control and has determined that it is operating effectively.

 

Inventory Valuation: As previously disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2018, we reported a material weakness with respect to the valuation of our inventories. Specifically, the amounts used to value our inventory at June 30, 2009 with respect to overhead rates and purchased items were often inconsistent with the supporting documentation, due to year-to-year changes in overhead rates and costs of purchased items that were not properly reflected in inventory valuation. Accordingly, management had determined that this control deficiency constituted a material weakness as of June 30, 2009. Audit adjustments of approximately $58,000 and $41,000 to our audited financial statements as of June 30, 2011 and June 30, 2017, respectively, were necessary as a result of this condition.

   

Changes in Internal Control over Financial Reporting

 

There was no change in our internal control over financial reporting that occurred during the first quarter of our fiscal year covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

To address and remediate the material weakness in internal control over financial reporting described above, beginning in the quarter ended September 30, 2009 and continuing through the quarter ended December 31, 2018, we implemented processes to improve our inventory controls and documentation surrounding inventory valuation for overhead rates, and performed procedures to ensure that the pricing of inventory items was consistent with the supporting documentation. We believe that the step outlined above strengthens our internal control over financial reporting and mitigates the material weakness described above.

 

We intend to continue to remediate material weaknesses and enhance our internal controls but cannot guarantee that our efforts will result in remediation of our material weaknesses or that new issues will not be exposed in this process.

  

 

 

 15 
 

 

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

Our Company, on occasion, may be involved in legal matters arising in the ordinary course of our business. While management believes that such matters are currently insignificant, matters arising in the ordinary course of business for which we are or could become involved in litigation may have a material adverse effect on our business, financial condition or results of operations. We are not aware of any pending or threatened litigation against us or our officers and directors in their capacity as such that could have a material impact on our operations or finances.

 

Item 1A. Risk Factors.

 

There have been no material changes from the risk factors previously disclosed in our annual report on Form 10-K for the fiscal year ended June 30, 2018, as filed with the Securities and Exchange Commission on September 27, 2018; and our quarterly report for the quarter ended September 30, 2018, as filed with the Securities and Exchange Commission on November 14, 2018.

   

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

Other than as previously disclosed, we did not issue unregistered securities during the quarter ended December 31, 2018.

 

Item 3. Defaults Upon Senior Securities.

 

Not applicable.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

  

 

 

 16 
 

 

Item 6. Exhibits.

 

Exhibit   Description
     
2.1   Asset Purchase Agreement between the Company and Optometrics Corporation, dated January 18, 2008 (included as Exhibit 2.1 to the Form 8-K filed January 25, 2008, and incorporated herein by reference).
     
3.1   Articles of Organization of Precision Optics Corporation, Inc., as amended (included as Exhibit 3.1 to the Form SB-2 filed March 16, 2007, and incorporated herein by reference).
     
3.2   Bylaws of Precision Optics Corporation, Inc. (included as Exhibit 3.2 to the Form S-1 filed December 18, 2008, and incorporated herein by reference).
     
3.3   Articles of Amendment to the Articles of Organization of Precision Optics Corporation, Inc., dated November 25, 2008 and effective December 11, 2008 (included as Exhibit 3.1 to the Form 8-K filed December 11, 2008, and incorporated herein by reference).
     
3.4   Amended and Restated Bylaws of Precision Optics Corporation, Inc. (included as Exhibit 3.1 to the Current Report on Form 8-K filed July 11, 2014, and incorporated herein by reference).
     
10.1   Precision Optics Corporation, Inc. 2011 Equity Incentive Plan, dated October 13, 2011 (included as Exhibit 10.2 to Form S-8 filed October 14, 2011, and incorporated herein by reference.)
     
10.2   Precision Optics Corporation, Inc. Amended 2011 Equity Incentive Plan, dated October 14, 2011, as amended on April 16, 2015 (included as Exhibit 10.1 to the Company’s Registration Statement on Form S-8 filed April 20, 2015, and incorporated herein by reference).
     
10.3   Consulting Agreement by and between the Company and Donald A. Major, dated June 15, 2016 (included as Exhibit 10.1 to the Form 8-K filed on June 23, 2016, and incorporated herein by reference).
     
10.4   Form of Securities Purchase Agreement, by and among the Company and the Investors, dated November 22, 2016 (included as Exhibit 10.1 to the Form 8-K filed November 29, 2016, and incorporated herein by reference).
     
10.5   Form of Registration Rights Agreement, by and among the Company and the Investors, dated November 22, 2016 (included as Exhibit 10.2 to the Form 8-K filed on November 29, 2016, and incorporated herein by reference).
     
10.6   Form of Securities Purchase Agreement, by and the Company and the Investors, dated August 22, 2017 (included as Exhibit 10.1 to the Form 8-K filed on August 25, 2017, and incorporated herein by reference).
     
10.7   Form of Registration Rights Agreement, by and among the Company and the Investors, dated August 22, 2017 (included as Exhibit 10.2 to the Form 8-K filed on August 25, 2017, and incorporated herein by reference).
     
10.8   Compensation Agreement, by and between the Company and Joseph N. Forkey, dated August 2, 2018 (included as Exhibit 10.1 to the Form 8-K filed on August 3, 2018, and incorporated herein by reference).
     
10.9   Offer letter by and between the Company and Donald A. Major, dated August 2, 2018 (included as Exhibit 10.9 to the Form 10-K filed on September 27, 2018, and incorporated herein by reference).
     
10.10   Form of Securities Purchase Agreement by and among the Company and the Investors, dated October 16, 2018 (included as Exhibit 10.1 to the Form 8-K filed on October 18, 2018, and incorporated herein by reference).

 

 

 

 17 
 

 

     
10.11   Form of Registration Rights Agreement by and among the Company and the Investors, dated October 16, 2018 (included as Exhibit 10.2 to the Form 8-K filed on October 18, 2018, and incorporated herein by reference).
     
14.1   Precision Optics Corporation, Inc. Corporate Code of Ethics and Conduct (included as Exhibit 14.1 to the Form 10-K filed September 28, 2008, and incorporated herein by reference).
     
21.1   Subsidiaries of the Registrant (included as Exhibit 21.1 to the Form 10-K filed September 26, 2008, and incorporated herein by reference).
     
31.1*   Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
31.2*   Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
32.1*   Certification of Officers pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

  

101.INS*   XBRL Instance Document
     
101.SCH*   XBRL Taxonomy Extension Schema Document
     
101.CAL*   XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF*   XBRL Taxonomy Extension Definition Linkbase Document
     
101.LAB*   XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE*   XBRL Taxonomy Extension Presentation Linkbase Document

  

* Filed herewith.

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  PRECISION OPTICS CORPORATION, INC.
     
Date: February 12, 2019 By: /s/ Joseph N. Forkey
    Joseph N. Forkey
   

Chief Executive Officer

(Principal Executive Officer)

     
     
Date: February 12, 2019 By: /s/ Donald A. Major
    Donald A. Major
   

Chief Financial Officer 

(Principal Financial Officer and Principal Accounting Officer)

 

 

 18 

 

 

 

 

 EX-31.1 2 poci_ex3101.htm CERTIFICATION

Exhibit 31.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

 

I, Joseph N. Forkey, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of Precision Optics Corporation, Inc. for the quarter ended December 31, 2018;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

  By: /s/ Joseph N. Forkey
Date: February 12, 2019   Joseph N. Forkey
    Chief Executive Officer
    (Principal Executive Officer)

 

 

 

 

 

 EX-31.2 3 poci_ex3102.htm CERTIFICATION

Exhibit 31.2

   

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

 

I, Donald A. Major, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of Precision Optics Corporation, Inc. for the quarter ended December 31, 2018;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

  By: /s/ Donald A. Major
Date: February 12, 2019   Donald A. Major
   

Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

 

 

 

 EX-32.1 4 poci_ex3201.htm CERTIFICATION

Exhibit 32.1

 

CERTIFICATION OF OFFICERS PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

 

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officers of Precision Optics Corporation, Inc., a Massachusetts corporation (the “Company”), do hereby certify, to such officers’ knowledge, that:

 

The Quarterly Report on Form 10-Q for the quarter ended December 31, 2018 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: February 12, 2019 By: /s/ Joseph N. Forkey
    Joseph N. Forkey
    Chief Executive Officer
    (Principal Executive Officer)
     
     
Date: February 12, 2019 By: /s/ Donald A. Major
    Donald A. Major
    Chief Financial Officer
    (Principal Financial Officer and Principal Accounting Officer)

 

A signed original of this written statement required by Section 906 has been provided to Precision Optics Corporation, Inc. and will be retained by Precision Optics Corporation, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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Document and Entity Information - shares
 6 Months Ended
Dec. 31, 2018
Feb. 12, 2019
Document And Entity Information    
Entity Registrant Name PRECISION OPTICS CORPORATION, INC.  
Entity Central Index Key 0000867840  
Document Type 10-Q  
Document Period End Date Dec. 31, 2018  
Amendment Flag false  
Current Fiscal Year End Date --06-30  
Is Entity's Reporting Status Current? Yes  
Entity Filer Category Non-accelerated Filer  
Entity Common Stock, Shares Outstanding   11,997,139
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2019  
Entity Small Business true  
Entity Emerging Growth false  
XML 12 R2.htm IDEA: XBRL DOCUMENT v3.10.0.1
CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)
Dec. 31, 2018
Jun. 30, 2018
Current Assets:    
Cash and cash equivalents $ 1,744,644 $ 402,738
Accounts receivable, net 728,636 796,923
Inventories, net 1,095,525 1,144,068
Prepaid expenses 136,517 70,991
Total current assets 3,705,322 2,414,720
Property and Equipment:    
Machinery and equipment 2,574,579 2,511,638
Leasehold improvements 566,839 553,596
Furniture and fixtures 148,303 148,303
Total 3,289,721 3,213,537
Less: Accumulated depreciation and amortization (3,178,645) (3,164,051)
Net fixed assets 111,076 49,486
Patents, net 46,007 47,275
TOTAL ASSETS 3,862,405 2,511,481
Current Liabilities:    
Current portion of capital lease obligation 9,262 8,962
Accounts payable 752,020 703,538
Customer advances 294,650 857,842
Accrued employee compensation 228,314 238,590
Accrued professional services 74,250 98,000
Accrued warranty expense 25,000 25,000
Other accrued liabilities 0 912
Total current liabilities 1,383,496 1,932,844
Capital lease obligation, net of current portion 9,894 14,601
Stockholders' Equity:    
Common Stock, $0.01 par value - Authorized - 50,000,000 shares; Issued and Outstanding; 11,897,139 shares at December 31, 2018 and 10,197,139 shares at June 30, 2018 118,972 101,972
Additional paid-in capital 47,797,398 45,484,186
Accumulated deficit (45,447,355) (45,022,122)
Total stockholders' equity 2,469,015 564,036
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,862,405 $ 2,511,481
XML 13 R3.htm IDEA: XBRL DOCUMENT v3.10.0.1
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares
Dec. 31, 2018
Jun. 30, 2018
STOCKHOLDERS' EQUITY    
Common Stock par value $ 0.01 $ 0.01
Common Stock shares authorized 50,000,000 50,000,000
Common Stock shares issued 11,897,139 10,197,139
Common Stock shares outstanding 11,897,139 10,197,139
XML 14 R4.htm IDEA: XBRL DOCUMENT v3.10.0.1
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)
 3 Months Ended 6 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2018
Dec. 31, 2017
Income Statement [Abstract]        
Revenues $ 1,477,851 $ 812,773 $ 3,037,309 $ 1,841,519
Cost of goods sold 1,122,129 512,551 2,219,080 1,154,555
Gross profit 355,722 300,222 818,229 686,964
Research and development expenses, net 125,413 90,031 226,211 208,458
Selling, general and administrative expenses 355,916 270,035 1,016,405 566,619
Total operating expenses 481,329 360,066 1,242,616 775,077
Operating loss (125,607) (59,844) (424,387) (88,113)
Interest expense (341) (482) (846) (998)
Net loss $ (125,948) $ (60,326) $ (425,233) $ (89,111)
Loss Per Share:        
Basic $ (0.01) $ (0.01) $ (0.04) $ (0.01)
Diluted $ (0.01) $ (0.01) $ (0.04) $ (0.01)
Weighted Average Common Shares Outstanding:        
Basic 11,618,878 9,979,197 10,940,074 9,543,810
Diluted 11,618,878 9,979,197 10,940,074 9,543,810
XML 15 R5.htm IDEA: XBRL DOCUMENT v3.10.0.1
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($)
Common Stock
Additional Paid-In Capital
Retained Earnings / Accumulated Deficit
Total
Beginning balance, shares at Jun. 30, 2017 8,872,916      
Beginning balance, value at Jun. 30, 2017 $ 88,729 $ 45,140,383 $ (44,670,732) $ 558,380
Stock-based compensation   26,057   26,057
Proceeds from private placement of common stock, net, shares 555,556      
Proceeds from private placement of common stock, net, value $ 5,556 241,482   247,038
Net loss     (28,785) (28,785)
Ending balance, shares at Sep. 30, 2017 9,428,472      
Ending balance, value at Sep. 30, 2017 $ 94,285 45,407,922 (44,699,517) 802,690
Beginning balance, shares at Jun. 30, 2017 8,872,916      
Beginning balance, value at Jun. 30, 2017 $ 88,729 45,140,383 (44,670,732) 558,380
Net loss       (89,111)
Ending balance, shares at Dec. 31, 2017 10,095,139      
Ending balance, value at Dec. 31, 2017 $ 100,952 45,414,893 (44,759,843) 756,002
Beginning balance, shares at Sep. 30, 2017 9,428,472      
Beginning balance, value at Sep. 30, 2017 $ 94,285 45,407,922 (44,699,517) 802,690
Stock-based compensation   6,971   6,971
Proceeds from exercise of stock purchase warrants, shares 666,667      
Proceeds from exercise of stock purchase warrants, value $ 6,667     6,667
Net loss     (60,326) (60,326)
Ending balance, shares at Dec. 31, 2017 10,095,139      
Ending balance, value at Dec. 31, 2017 $ 100,952 45,414,893 (44,759,843) 756,002
Beginning balance, shares at Jun. 30, 2018 10,197,139      
Beginning balance, value at Jun. 30, 2018 $ 101,972 45,484,186 (45,022,122) 564,036
Stock-based compensation   342,984   342,984
Issuance of common stock for services, shares 100,000      
Issuance of common stock for services, value $ 1,000 (1,000)    
Net loss     (299,285) (299,285)
Ending balance, shares at Sep. 30, 2018 10,297,139      
Ending balance, value at Sep. 30, 2018 $ 102,972 45,826,170 (45,321,407) 607,735
Beginning balance, shares at Jun. 30, 2018 10,197,139      
Beginning balance, value at Jun. 30, 2018 $ 101,972 45,484,186 (45,022,122) 564,036
Net loss       (425,233)
Ending balance, shares at Dec. 31, 2018 11,897,139      
Ending balance, value at Dec. 31, 2018 $ 118,972 47,797,398 (45,447,355) 2,469,015
Beginning balance, shares at Sep. 30, 2018 10,297,139      
Beginning balance, value at Sep. 30, 2018 $ 102,972 45,826,170 (45,321,407) 607,735
Stock-based compensation   10,228   10,228
Proceeds from private placement of common stock, net, shares 1,600,000      
Proceeds from private placement of common stock, net, value $ 16,000 1,961,000   1,977,000
Net loss     (125,948) (125,948)
Ending balance, shares at Dec. 31, 2018 11,897,139      
Ending balance, value at Dec. 31, 2018 $ 118,972 $ 47,797,398 $ (45,447,355) $ 2,469,015
XML 16 R6.htm IDEA: XBRL DOCUMENT v3.10.0.1
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - USD ($)
 3 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Statement of Stockholders' Equity [Abstract]    
Payment of stock issuance costs $ 23,000 $ 2,963
XML 17 R7.htm IDEA: XBRL DOCUMENT v3.10.0.1
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
 6 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Cash Flows from Operating Activities:    
Net loss $ (425,233) $ (89,111)
Adjustments to reconcile net loss to net cash provided from (used in) operating activities    
Depreciation and amortization 15,862 15,804
Stock-based compensation expense 353,212 33,028
Non-cash consulting expense 0 (3,387)
Changes in operating assets and liabilities    
Accounts receivable, net 68,287 (284,604)
Inventories, net 48,543 67,656
Prepaid expenses (65,526) (22,447)
Accounts payable 48,482 41,586
Customer advances (563,192) 283,152
Accrued liabilities (57,938) 26,318
Net cash provided from (used in) operating activities (577,503) 67,995
Cash Flows from Investing Activities:    
Additional patent costs 0 (17,189)
Purchases of property and equipment (76,184) 0
Net cash used in investing activities (76,184) (17,189)
Cash Flows from Financing Activities:    
Payment of capital lease obligation (4,407) (4,127)
Gross proceeds from private placement of common stock 2,000,000 210,001
Gross Proceeds from Exercise of Stock Purchase Warrants 0 6,667
Net cash provided from financing activities 1,995,593 212,541
Net increase in cash and cash equivalents 1,341,906 263,347
Cash and cash equivalents, beginning of period 402,738 118,405
Cash and cash equivalents, end of period 1,744,644 381,752
Supplemental disclosure of non-cash financing and investing activities:    
Issuance of common stock in settlement of accounts payable 0 40,000
Offering costs included in accounts payable $ 23,000 $ 2,963
XML 18 R8.htm IDEA: XBRL DOCUMENT v3.10.0.1
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 6 Months Ended
Dec. 31, 2018
Accounting Policies [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

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 second quarter and six months of the Company’s fiscal year 2019. 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, 2018, together with the Report of Independent Registered Public Accounting Firm filed under cover of the Company’s 2018 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on September 27, 2018.

 

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.

 

Revenue Recognition

 

On July 1, 2018, the Company adopted ASU 2014-09 Revenue from Contracts with Customers (ASC 606) using the modified retrospective method for contracts that were not completed as of July 1, 2018, whereby revenues are recognized as the performance obligations to deliver products or services are satisfied and are recorded based on the amount of consideration the Company expects to receive in exchange for satisfying the performance obligations. Most of the Company’s products and services are marketed to medical device companies almost exclusively in the United States. Products and services are primarily transferred to customers at a point in time based upon when services are performed or product is shipped.

 

Revenues represent the amount of consideration we expect to receive from customers in exchange for transferring products and services. Other selling costs to obtain and fulfill contracts are expensed as incurred due to the short-term nature of a majority of our revenues. The Company extends terms of payment to its customers based on commercially reasonable terms for the markets of its customers, while also considering their credit quality. Shipping and handling costs charged to customers are included in revenues.

 

The Company disaggregates revenues by product and service types as it believes it best depicts how the nature, amount, timing and uncertainty of revenues and cash flows are affected by economic factors.

 

   Three Months
Ended December 31,		   Six Months
Ended December 31,		 
   2018   2017   2018   2017 
Engineering Design Services  $318,741   $342,855   $830,639   $762,779 
Optical Components   225,967    225,595    524,024    669,186 
Medical Device Products and Assemblies   933,143    244,323    1,682,646    409,554 
Total Revenues  $1,477,851   $812,773   $3,037,309   $1,841,519 

 

Contract Assets and Liabilities

 

The nature of the Company’s products and services does not generally give rise to contract assets as it typically does not incur costs to fulfill a contract before a product or service is provided to a customer. The Company’s costs to obtain contracts are typically in the form of sales commissions paid to employees. The Company has elected to expense sales commissions associated with obtaining a contract as incurred as the amortization period is generally less than one year. These costs have been recorded in selling, general and administrative expenses. As of December 31, 2018, there were no contract assets recorded in the Company’s Consolidated Balance Sheets.

 

The Company’s contract liabilities arise as a result of unearned revenue received from customers at inception of contracts or where the timing of billing for services precedes satisfaction of the Company’s performance obligations. The Company generally satisfies performance obligations within one year from the contract inception date. As of July 1, 2018, contract liabilities were $857,842, which were recorded as customer advances in the Company’s Consolidated Balance Sheets, $192,722 and $674,360 of which was recognized in sales during the three and six months ended December 31, 2018, respectively. As of December 31, 2018, contract liabilities recorded as customer advances were $294,650. 

 

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 and warrants. For the three and six months ended December 31, 2018 and 2017, the effect of such securities was antidilutive and not included in the diluted calculation because of the net loss generated in these periods.

 

The following is the calculation of loss per share for the three and six months ended December 31, 2018 and 2017:

 

   Three Months
Ended December 31,		   Six Months
Ended December 31,		 
   2018   2017   2018   2017 
Net Income (Loss) - Basic and Diluted  $(125,948)  $(60,326)  $(425,233)  $(89,111)
                     
Basic and Dilutive Weighted Average Shares Outstanding   11,618,878    9,979,197    10,940,074    9,543,810 
                     
Loss Per Share - Basic and Diluted  $(0.01)  $(0.01)  $(0.04)  $(0.01)

 

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 1,493,200 and 1,708,867 for the three months ended December 31, 2018 and 2017, respectively, and approximately 1,493,200 and 4,732,960 for the six months ended December 31, 2018 and 2017, respectively.

   

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.
XML 19 R9.htm IDEA: XBRL DOCUMENT v3.10.0.1
2. INVENTORIES
 6 Months Ended
Dec. 31, 2018
Inventory Disclosure [Abstract]  
INVENTORIES

2. INVENTORIES

 

Inventories are stated at the lower of cost (first-in, first-out) or market and consisted of the following:

 

   December 31,
2018		   June 30,
2018		 
Raw Materials  $482,553   $500,908 
Work-In-Progress   407,619    434,536 
Finished Goods   205,353    208,624 
Total Inventories  $1,095,525   $1,144,068 

 
XML 20 R10.htm IDEA: XBRL DOCUMENT v3.10.0.1
3. CAPITAL LEASE OBLIGATION
 6 Months Ended
Dec. 31, 2018
Debt Disclosure [Abstract]  
CAPITAL LEASE OBLIGATION

3. CAPITAL LEASE OBLIGATION

 

The Company entered into a five-year capital lease obligation in January 2016 for the acquisition of manufacturing equipment totaling $51,252. At December 31, 2018, future minimum lease payments under the capital lease obligation are as follows:

 

Fiscal Year Ending June 30:  Amount 
2019  $5,126 
2020   10,250 
2021   5,126 
Total minimum payments   20,502 
Less: amount representing interest   1,346 
Present value of minimum lease payments   19,156 
Less: current portion   9,262 
   $9,894 

 
XML 21 R11.htm IDEA: XBRL DOCUMENT v3.10.0.1
4. STOCK-BASED COMPENSATION
 6 Months Ended
Dec. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
STOCK-BASED COMPENSATION

4. STOCK-BASED COMPENSATION

 

The following table summarizes stock-based compensation expense for the three and six months ended December 31, 2018 and 2017:

 

   Three Months
Ended December 31,		   Six Months
Ended December 31,		 
   2018   2017   2018   2017 
Cost of Goods Sold  $–   $–   $–   $8,669 
Research and Development   2,411    320    4,822    7,012 
Selling, General and Administrative   7,817    6,651    348,390    17,347 
Stock Based Compensation Expense  $10,228   $6,971   $353,212   $33,028 

  

No compensation has been capitalized because such amounts would have been immaterial.

   

The following tables summarize stock option activity for the six months ended December 31, 2018:

 

      Options Outstanding  
      Number of
Shares		       Weighted Average
Exercise Price		       Weighted Average
Contractual Life		  
Outstanding at June 30, 2018     1,055,700     $ 0.76       6.13 years  
Granted     450,000                  
Expired or Cancelled     (13,700 )                 
Outstanding at December 31, 2018     1,492,000     $ 0.75       6.83 years  

  

Information related to the stock options outstanding as of December 31, 2018 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		  
$ 0.27       40,000       2.54     $ 0.27       40,000     $ 0.27  
$ 0.40       15,000       8.33     $ 0.40       10,000     $ 0.40  
$ 0.48       60,000       7.25     $ 0.48       60,000     $ 0.48  
$ 0.50       100,000       6.47     $ 0.50       100,000     $ 0.50  
$ 0.55       42,000       5.31     $ 0.55       37,000     $ 0.55  
$ 0.64       25,000       8.86     $ 0.64       15,000     $ 0.64  
$ 0.70       100,000       9.59     $ 0.70       33,333     $ 0.70  
$ 0.73       853,000       7.70     $ 0.73       658,000     $ 0.73  
$ 0.85       9,000       4.01     $ 0.85       9,000     $ 0.85  
$ 0.90       9,000       5.01     $ 0.90       9,000     $ 0.90  
$ 0.95       30,000       5.53     $ 0.95       30,000     $ 0.95  
$ 1.20       207,800       3.17     $ 1.20       207,800     $ 1.20  
$ 1.35       1,200       0.90     $ 1.35       1,200     $ 1.35  
$ 0.27–$1.35       1,492,000       6.83     $ 0.75       1,210,333     $ 0.76  

 

The aggregate intrinsic value of the Company’s “in-the-money” outstanding and exercisable options as of December 31, 2018 was $891,580 and $711,496, respectively.

 

Common Stock Award

 

On August 2, 2018, the Company awarded its Chief Executive Officer 300,000 shares of common stock for services performed through June 30, 2018. The fair market value of the 300,000 shares on the award date equal to $210,000 has been recorded as general and administrative stock-based compensation expense in the quarter ended September 30, 2018. As of December 31, 2018, 100,000 shares have been issued. Another 100,000 shares were issued on January 1, 2019, and the remaining 100,000 shares will be issued on January 1, 2020.
XML 22 R12.htm IDEA: XBRL DOCUMENT v3.10.0.1
5. SALE OF STOCK
 6 Months Ended
Dec. 31, 2018
Equity [Abstract]  
SALE OF STOCK

5. SALE OF STOCK

 

On October 16, 2018, the Company entered into agreements with accredited investors for the sale and purchase of 1,600,000 unregistered shares of its common stock, $0.01 par value at a purchase price of $1.25 per share. The Company received $2,000,000 in gross proceeds from the offering. The Company is using the net proceeds from this placement for general working capital purposes.

  

In connection 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 90 calendar days after October 16, 2018 to register the resale by the investors of 1,600,000 shares of our common stock purchased in the placement. The registration statement was filed with the Securities and Exchange Commission on January 3, 2019 and Amendment No. 1 to the registration statement was filed with the Securities and Exchange Commission on January 16, 2019. The registration statement became effective on February 5, 2019.
XML 23 R13.htm IDEA: XBRL DOCUMENT v3.10.0.1
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
 6 Months Ended
Dec. 31, 2018
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 second quarter and six months of the Company’s fiscal year 2019. 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, 2018, together with the Report of Independent Registered Public Accounting Firm filed under cover of the Company’s 2018 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on September 27, 2018.
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.
Revenue Recognition

Revenue Recognition

 

On July 1, 2018, the Company adopted ASU 2014-09 Revenue from Contracts with Customers (ASC 606) using the modified retrospective method for contracts that were not completed as of July 1, 2018, whereby revenues are recognized as the performance obligations to deliver products or services are satisfied and are recorded based on the amount of consideration the Company expects to receive in exchange for satisfying the performance obligations. Most of the Company’s products and services are marketed to medical device companies almost exclusively in the United States. Products and services are primarily transferred to customers at a point in time based upon when services are performed or product is shipped.

 

Revenues represent the amount of consideration we expect to receive from customers in exchange for transferring products and services. Other selling costs to obtain and fulfill contracts are expensed as incurred due to the short-term nature of a majority of our revenues. The Company extends terms of payment to its customers based on commercially reasonable terms for the markets of its customers, while also considering their credit quality. Shipping and handling costs charged to customers are included in revenues.

 

The Company disaggregates revenues by product and service types as it believes it best depicts how the nature, amount, timing and uncertainty of revenues and cash flows are affected by economic factors.

 

   Three Months
Ended December 31,		   Six Months
Ended December 31,		 
   2018   2017   2018   2017 
Engineering Design Services  $318,741   $342,855   $830,639   $762,779 
Optical Components   225,967    225,595    524,024    669,186 
Medical Device Products and Assemblies   933,143    244,323    1,682,646    409,554 
Total Revenues  $1,477,851   $812,773   $3,037,309   $1,841,519 

 

Contract Assets and Liabilities

 

The nature of the Company’s products and services does not generally give rise to contract assets as it typically does not incur costs to fulfill a contract before a product or service is provided to a customer. The Company’s costs to obtain contracts are typically in the form of sales commissions paid to employees. The Company has elected to expense sales commissions associated with obtaining a contract as incurred as the amortization period is generally less than one year. These costs have been recorded in selling, general and administrative expenses. As of December 31, 2018, there were no contract assets recorded in the Company’s Consolidated Balance Sheets.

 

The Company’s contract liabilities arise as a result of unearned revenue received from customers at inception of contracts or where the timing of billing for services precedes satisfaction of the Company’s performance obligations. The Company generally satisfies performance obligations within one year from the contract inception date. As of July 1, 2018, contract liabilities were $857,842, which were recorded as customer advances in the Company’s Consolidated Balance Sheets, $192,722 and $674,360 of which was recognized in sales during the three and six months ended December 31, 2018, respectively. As of December 31, 2018, contract liabilities recorded as customer advances were $294,650. 
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 and warrants. For the three and six months ended December 31, 2018 and 2017, the effect of such securities was antidilutive and not included in the diluted calculation because of the net loss generated in these periods.

 

The following is the calculation of loss per share for the three and six months ended December 31, 2018 and 2017:

 

   Three Months
Ended December 31,		   Six Months
Ended December 31,		 
   2018   2017   2018   2017 
Net Income (Loss) - Basic and Diluted  $(125,948)  $(60,326)  $(425,233)  $(89,111)
                     
Basic and Dilutive Weighted Average Shares Outstanding   11,618,878    9,979,197    10,940,074    9,543,810 
                     
Loss Per Share - Basic and Diluted  $(0.01)  $(0.01)  $(0.04)  $(0.01)

 

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 1,493,200 and 1,708,867 for the three months ended December 31, 2018 and 2017, respectively, and approximately 1,493,200 and 4,732,960 for the six months ended December 31, 2018 and 2017, 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.
XML 24 R14.htm IDEA: XBRL DOCUMENT v3.10.0.1
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
 6 Months Ended
Dec. 31, 2018
Accounting Policies [Abstract]  
Disaggregation of revenue
   Three Months
Ended December 31,		   Six Months
Ended December 31,		 
   2018   2017   2018   2017 
Engineering Design Services  $318,741   $342,855   $830,639   $762,779 
Optical Components   225,967    225,595    524,024    669,186 
Medical Device Products and Assemblies   933,143    244,323    1,682,646    409,554 
Total Revenues  $1,477,851   $812,773   $3,037,309   $1,841,519 
Income (Loss) per Share
   Three Months
Ended December 31,		   Six Months
Ended December 31,		 
   2018   2017   2018   2017 
Net Income (Loss) - Basic and Diluted  $(125,948)  $(60,326)  $(425,233)  $(89,111)
                     
Basic and Dilutive Weighted Average Shares Outstanding   11,618,878    9,979,197    10,940,074    9,543,810 
                     
Loss Per Share - Basic and Diluted  $(0.01)  $(0.01)  $(0.04)  $(0.01)
XML 25 R15.htm IDEA: XBRL DOCUMENT v3.10.0.1
2. INVENTORIES (Tables)
 6 Months Ended
Dec. 31, 2018
Inventory Disclosure [Abstract]  
Schedule of inventory
   December 31,
2018		   June 30,
2018		 
Raw Materials  $482,553   $500,908 
Work-In-Progress   407,619    434,536 
Finished Goods   205,353    208,624 
Total Inventories  $1,095,525   $1,144,068 
XML 26 R16.htm IDEA: XBRL DOCUMENT v3.10.0.1
3. CAPITAL LEASE OBLIGATION (Tables)
 6 Months Ended
Dec. 31, 2018
Debt Disclosure [Abstract]  
Future minimum capital lease payments
Fiscal Year Ending June 30:  Amount 
2019  $5,126 
2020   10,250 
2021   5,126 
Total minimum payments   20,502 
Less: amount representing interest   1,346 
Present value of minimum lease payments   19,156 
Less: current portion   9,262 
   $9,894 
XML 27 R17.htm IDEA: XBRL DOCUMENT v3.10.0.1
4. STOCK-BASED COMPENSATION (Tables)
 6 Months Ended
Dec. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Schedule of stock-based compensation expense
   Three Months
Ended December 31,		   Six Months
Ended December 31,		 
   2018   2017   2018   2017 
Cost of Goods Sold  $–   $–   $–   $8,669 
Research and Development   2,411    320    4,822    7,012 
Selling, General and Administrative   7,817    6,651    348,390    17,347 
Stock Based Compensation Expense  $10,228   $6,971   $353,212   $33,028 
Stock option activity
      Options Outstanding  
      Number of
Shares		       Weighted Average
Exercise Price		       Weighted Average
Contractual Life		  
Outstanding at June 30, 2018     1,055,700     $ 0.76       6.13 years  
Granted     450,000                  
Expired or Cancelled     (13,700 )                 
Outstanding at December 31, 2018     1,492,000     $ 0.75       6.83 years  
Stock options outstanding by exercise price range
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		  
$ 0.27       40,000       2.54     $ 0.27       40,000     $ 0.27  
$ 0.40       15,000       8.33     $ 0.40       10,000     $ 0.40  
$ 0.48       60,000       7.25     $ 0.48       60,000     $ 0.48  
$ 0.50       100,000       6.47     $ 0.50       100,000     $ 0.50  
$ 0.55       42,000       5.31     $ 0.55       37,000     $ 0.55  
$ 0.64       25,000       8.86     $ 0.64       15,000     $ 0.64  
$ 0.70       100,000       9.59     $ 0.70       33,333     $ 0.70  
$ 0.73       853,000       7.70     $ 0.73       658,000     $ 0.73  
$ 0.85       9,000       4.01     $ 0.85       9,000     $ 0.85  
$ 0.90       9,000       5.01     $ 0.90       9,000     $ 0.90  
$ 0.95       30,000       5.53     $ 0.95       30,000     $ 0.95  
$ 1.20       207,800       3.17     $ 1.20       207,800     $ 1.20  
$ 1.35       1,200       0.90     $ 1.35       1,200     $ 1.35  
$ 0.27–$1.35       1,492,000       6.83     $ 0.75       1,210,333     $ 0.76  
XML 28 R18.htm IDEA: XBRL DOCUMENT v3.10.0.1
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($)
 3 Months Ended 6 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2018
Dec. 31, 2017
Revenues $ 1,477,851 $ 812,773 $ 3,037,309 $ 1,841,519
Engineering Design Services [Member]        
Revenues 318,741 342,855 830,639 762,779
Optical Components [Member]        
Revenues 225,967 225,595 524,024 669,186
Medical Device Products and Assemblies [Member]        
Revenues $ 933,143 $ 244,323 $ 1,682,646 $ 409,554
XML 29 R19.htm IDEA: XBRL DOCUMENT v3.10.0.1
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Loss per share) - USD ($)
 3 Months Ended 6 Months Ended
Dec. 31, 2018
Sep. 30, 2018
Dec. 31, 2017
Sep. 30, 2017
Dec. 31, 2018
Dec. 31, 2017
Accounting Policies [Abstract]            
Net Income (Loss) - Basic and Diluted $ (125,948) $ (299,285) $ (60,326) $ (28,785) $ (425,233) $ (89,111)
Basic and Diluted Weighted Average Shares Outstanding 11,618,878   9,979,197   10,940,074 9,543,810
Loss Per Share - Basic and Diluted $ (0.01)   $ (0.01)   $ (0.04) $ (0.01)
XML 30 R20.htm IDEA: XBRL DOCUMENT v3.10.0.1
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)
 3 Months Ended 6 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2018
Dec. 31, 2017
Accounting Policies [Abstract]        
Contract liabilities, beginning balance     $ 857,842  
Increase (decrease) in contract liabilities, recognized in sales $ 192,722   674,360  
Contract liabilities, ending balance $ 294,650   $ 294,650  
Outstanding stock options and warrants that were excluded from the computation as their effect was antidilutive 1,493,200 1,708,867 1,493,200 4,732,960
XML 31 R21.htm IDEA: XBRL DOCUMENT v3.10.0.1
2. INVENTORIES (Details) - USD ($)
Dec. 31, 2018
Jun. 30, 2018
Inventory Disclosure [Abstract]    
Raw materials $ 482,553 $ 500,908
Work-in-progress 407,619 434,536
Finished goods 205,353 208,624
Total inventories $ 1,095,525 $ 1,144,068
XML 32 R22.htm IDEA: XBRL DOCUMENT v3.10.0.1
3. CAPITAL LEASE OBLIGATION (Details) - USD ($)
Dec. 31, 2018
Jun. 30, 2018
Debt Disclosure [Abstract]    
2019 $ 5,126  
2020 10,250  
2021 5,126  
Total minimum payments 20,502  
Less: amount representing interest 1,346  
Present value of minimum lease payments 19,156  
Less: current portion 9,262 $ 8,962
Capital lease obligation, noncurrent $ 9,894 $ 14,601
XML 33 R23.htm IDEA: XBRL DOCUMENT v3.10.0.1
3. CAPITAL LEASE OBLIGATION (Details Narrative)
Jan. 31, 2016
USD ($)
Debt Disclosure [Abstract]  
Capital lease obligation $ 51,252
XML 34 R24.htm IDEA: XBRL DOCUMENT v3.10.0.1
4. STOCK-BASED COMPENSATION (Details - Stock based compensation) - USD ($)
 3 Months Ended 6 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2018
Dec. 31, 2017
Stock based compensation expense $ 10,228 $ 6,971 $ 353,212 $ 33,028
Cost of Goods Sold [Member]        
Stock based compensation expense 0 0 0 8,669
Research and Development Expenses [Member]        
Stock based compensation expense 2,411 320 4,822 7,012
Selling, General and Administrative Expenses [Member]        
Stock based compensation expense $ 7,817 $ 6,651 $ 348,390 $ 17,347
XML 35 R25.htm IDEA: XBRL DOCUMENT v3.10.0.1
4. STOCK-BASED COMPENSATION (Details - Option activity) - Stock Options [Member]
 6 Months Ended
Dec. 31, 2018
$ / shares
shares
Number of Shares  
Options outstanding, beginning 1,055,700
Options granted 450,000
Options expired or cancelled (13,700)
Options outstanding, ending 1,492,000
Weighted Average Exercise Price  
Weighted average exercise price, beginning price | $ / shares $ .76
Weighted average exercise price, ending price | $ / shares $ 0.75
Weighted Average Contractual Life  
Weighted Average Contractual Life, beginning 6 years 1 month 17 days
Weighted Average Contractual Life, ending 6 years 9 months 29 days
XML 36 R26.htm IDEA: XBRL DOCUMENT v3.10.0.1
4. STOCK-BASED COMPENSATION (Details - Options by exercise price) - $ / shares
 6 Months Ended
Dec. 31, 2018
Jun. 30, 2018
Stock Options [Member]    
Range of exercise prices $0.27-$1.35  
Number of shares outstanding 1,492,000 1,055,700
Weighted average contractual life 6 years 9 months 29 days  
Weighted average exercise price $ 0.75 $ .76
Exercisable number of shares 1,210,333  
Exercisable weighted average exercise price $ 0.76  
Option 1 [Member]    
Range of exercise prices 0.27  
Number of shares outstanding 40,000  
Weighted average contractual life 2 years 6 months 14 days  
Weighted average exercise price $ 0.27  
Exercisable number of shares 40,000  
Exercisable weighted average exercise price $ 0.27  
Option 2 [Member]    
Range of exercise prices 0.40  
Number of shares outstanding 15,000  
Weighted average contractual life 8 years 3 months 29 days  
Weighted average exercise price $ 0.40  
Exercisable number of shares 10,000  
Exercisable weighted average exercise price $ 0.40  
Option 3 [Member]    
Range of exercise prices 0.48  
Number of shares outstanding 60,000  
Weighted average contractual life 7 years 3 months  
Weighted average exercise price $ 0.48  
Exercisable number of shares 60,000  
Exercisable weighted average exercise price $ 0.48  
Option 4 [Member]    
Range of exercise prices 0.50  
Number of shares outstanding 100,000  
Weighted average contractual life 6 years 5 months 19 days  
Weighted average exercise price $ 0.50  
Exercisable number of shares 100,000  
Exercisable weighted average exercise price $ 0.50  
Option 5 [Member]    
Range of exercise prices 0.55  
Number of shares outstanding 42,000  
Weighted average contractual life 5 years 3 months 22 days  
Weighted average exercise price $ 0.55  
Exercisable number of shares 37,000  
Exercisable weighted average exercise price $ 0.55  
Option 6 [Member]    
Range of exercise prices 0.64  
Number of shares outstanding 25,000  
Weighted average contractual life 8 years 10 months 10 days  
Weighted average exercise price $ 0.64  
Exercisable number of shares 15,000  
Exercisable weighted average exercise price $ 0.64  
Option 7 [Member]    
Range of exercise prices 0.70  
Number of shares outstanding 100,000  
Weighted average contractual life 9 years 7 months 2 days  
Weighted average exercise price $ 0.70  
Exercisable number of shares 33,333  
Exercisable weighted average exercise price $ 0.70  
Option 8 [Member]    
Range of exercise prices 0.73  
Number of shares outstanding 853,000  
Weighted average contractual life 7 years 8 months 12 days  
Weighted average exercise price $ 0.73  
Exercisable number of shares 658,000  
Exercisable weighted average exercise price $ 0.73  
Option 9 [Member]    
Range of exercise prices 0.85  
Number of shares outstanding 9,000  
Weighted average contractual life 4 years 4 days  
Weighted average exercise price $ 0.85  
Exercisable number of shares 9,000  
Exercisable weighted average exercise price $ 0.85  
Option 10 [Member]    
Range of exercise prices 0.90  
Number of shares outstanding 9,000  
Weighted average contractual life 5 years 4 days  
Weighted average exercise price $ 0.90  
Exercisable number of shares 9,000  
Exercisable weighted average exercise price $ 0.90  
Option 11 [Member]    
Range of exercise prices 0.95  
Number of shares outstanding 30,000  
Weighted average contractual life 5 years 6 months 11 days  
Weighted average exercise price $ 0.95  
Exercisable number of shares 30,000  
Exercisable weighted average exercise price $ 0.95  
Option 12 [Member]    
Range of exercise prices 1.20  
Number of shares outstanding 207,800  
Weighted average contractual life 3 years 2 months 1 day  
Weighted average exercise price $ 1.20  
Exercisable number of shares 207,800  
Exercisable weighted average exercise price $ 1.20  
Option 13 [Member]    
Range of exercise prices 1.35  
Number of shares outstanding 1,200  
Weighted average contractual life 10 months 24 days  
Weighted average exercise price $ 1.35  
Exercisable number of shares 1,200  
Exercisable weighted average exercise price $ 1.35  
XML 37 R27.htm IDEA: XBRL DOCUMENT v3.10.0.1
4. STOCK-BASED COMPENSATION (Details Narrative)
 6 Months Ended
Dec. 31, 2018
USD ($)
shares
Aggregate intrinsic value of "in the money" outstanding $ 891,580
Aggregate intrinsic value of "in the money" exercisable $ 711,496
Chief Executive Officer [Member]  
Stock issued for services, shares | shares 300,000
Stock issued for services, value $ 210,000
XML 38 R28.htm IDEA: XBRL DOCUMENT v3.10.0.1
5. SALE OF STOCK (Details Narrative) - Stock Offering [Member]
 6 Months Ended
Dec. 31, 2018
USD ($)
shares
Stock issued new, shares | shares 1,600,000
Proceeds from issuance of stock | $ $ 2,000,000
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