COMMITMENTS

12 Months Ended

Jun. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS

(3) COMMITMENTS

(a) Related Party Transactions

Transactions with Stockholders Known by the Company to Own 5% or More of the Company’s Common Stock

On October 4, 2021, the Company entered into agreements with accredited investors for the sale and purchase of 937,500 shares of our common stock, $0.01 par value, at a per unit price of $1.60 per share. We received $1,500,000 in gross proceeds from the offering.

The placement proceeds were used to partially fund the business acquisition of the Lighthouse division. In compliance with the registration rights agreement entered into with the investors, on January 31, 2022 the Company filed a registration statement for the shares with the Securities and Exchange Commission which became effective on February 11, 2022. Ms. Sandra Pessin acquired 468,750 shares in this placement for $750,000 or $1.60 per share, and at that time Ms. Pessin was an owner of more than 5% of the Company’s outstanding common stock.

Acquisition Earn Out Obligations

As partial consideration for the July 2019 acquisition of the Ross Optical division the Company agreed to pay $500,000 as an earn-out contingent upon the satisfaction of certain financial thresholds consisting of mutually agreed upon revenue and gross margin targets of the Ross Optical division over a term of three years, beginning on July 1, 2019, at a rate of up to $166,667 per year. As of June 30, 2022 the first and second year portions of $166,667 have been paid and the $166,667 remainder of the obligation is recorded as a short-term liability in the accompanying balance sheet at June 30, 2022.

As partial consideration for the October 2021 acquisition of the Lighthouse division the Company agreed to pay $1,500,000 as an earn-out at the rate of $750,000 per annum from October 1, 2021 contingent upon the Lighthouse division achieving certain levels of gross margin during the two year earn-out periods. As of June 30, 2022 the first annual earn-out liability of $750,000 for the period ending September 30, 2022 has been written off to other income due to the Company’s determination that the Lighthouse division will not achieve the minimum gross margin requirement for the first annual period ending September 30, 2022. The second $750,000 portion of the earn-out contingency remains in long-term liabilities in the accompanying balance sheet at June 30, 2022.

(b) Bank Financing Activities

SBA PPP Loan Forgiveness

The Company executed an unsecured Promissory Note with a bank on May 6, 2020 and received $808,962 of loan proceeds pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). On March 30, 2021, the Small Business Administration forgave the Promissory Note held by the Company in full, including any accrued interest at that date. The forgiveness of the Promissory Note is recorded as other income in the accompanying Consolidated Statements of Operations for the fiscal year ended June 30, 2021.

Bank Line of Credit

On October 4, 2021, the Company entered into a Loan Agreement with Main Street Bank of Marlborough, Massachusetts, which provided for a $2,600,000 Term Loan and a $250,000 Revolving Line of Credit Loan Facility, which was increased to $500,000 effective May 17, 2022. The $500,000 line of credit is due on demand and had zero borrowings outstanding at June 30, 2022. Borrowings under the line of credit bear interest payable monthly at the prime lending rate plus 1.5% per annum and shall not be less than 4.75% per annum. Borrowings under the line of credit are limited to the borrowing base comprised of a percentage of accounts receivable and inventory and are secured by all the assets of the Company.

Long-Term Debt

Long-term debt consists of the following at June 30, 2022: 

	Amount
Term Loan Note payable to Main Street Bank with monthly principal payments of $30,952.38 plus interest at the prime lending rate plus 1.5% per annum. Secured by all assets of the Company, and subject to certain periodic reporting to the bank, an annual minimum debt service coverage ratio of 1.20:1 commencing with the fiscal year ending June 30, 2023, and other conditions. The Term Loan Note matures on October 15, 2028	$	2,352,381
Less current maturities		(367,714	)
Less debt issuance costs, net of accumulated amortization of $2,167		(23,526	)
Long-term debt, net of current portion of debt issuance costs	$	1,961,141

At June 30, 2022 principal payments due on the Term Loan Note payable are as follows:

Fiscal Year Ending June 30:
2023	$	371,429
2024		371,429
2025		371,429
2026		371,429
2027		371,429
Thereafter		495,236
	$	2,352,381

(c) Lease Obligation

In March 2021 the Company entered into a five-year capital lease in the amount of $161,977 for manufacturing equipment. In January 2020, the Company entered into a five-year capital lease for $47,750 for manufacturing equipment. The net book value of fixed assets under capital lease obligations as of June 30, 2022 is $146,154.

On July 1, 2019 the Company entered into a three-year operating lease for its facility in El Paso, Texas, and in February 2022 the Company entered into an extension of the lease for an additional three years through June 2025. Remaining minimum lease payments at June 30, 2022 total $134,799. Total rent expense including base rent and common area expenses was $62,822 and $62,717 during the fiscal years ended June 30, 2022 and 2021, respectively. On October 4, 2021 the Company assumed the remaining term of the Windham Maine lease as part of the Lighthouse acquisition. The lease expires on July 31, 2025. Remaining minimum lease payments at June 30, 2022 total $424,661. Total rent expense including base rent and common area expenses was $105,051 during the fiscal year ended June 30, 2022. Included in the accompanying balance sheet at June 30, 2022 is a right-of-use asset of $517,725 and current and long-term right-of-use operating lease liabilities of $150,565 and $367,160, respectively.

At June 30, 2022 future minimum lease payments under the capital lease and operating lease obligations are as follows:

Fiscal Year Ending June 30:	Capital Leases		Operating Lease
2023	$	48,619	$	181,556
2024		48,619		182,652
2025		43,919		183,775
2026		28,004		11,477
Total Minimum Payments		169,161	$	559,460
Less: amount representing interest		16,765
Present value of minimum lease payments		152,396
Less: current portion		40,705
	$	111,691

The Company’s operating leases for its Gardner, Massachusetts office, production and storage spaces plus an equipment have expired and are continuing on a month-to-month tenant at will basis. Rent expense on these operating leases was $203,355 and $172,903 for the fiscal years ended June 30, 2022 and 2021, respectively.