3. COMMITMENTS

12 Months Ended

Jun. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS

(3) COMMITMENTS

(a) Related Party Transactions

Transactions with Officers and Directors

In March 2019 the Company’s board of directors approved the payment of $10,000 per quarter to the Company’s Chairman of the Board for the performance of services to the Company beginning retroactively for the quarter ended December 31, 2018. The agreement has no maturity date and $20,000 was paid prior to June 30, 2019 and $10,000 is included in accounts payable at June 30, 2019.

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

At June 30, 2019 the Company had received payments for common stock subscriptions totaling $925,000 at $1.25 per share. On July 1, 2019 the Company received an additional $25,000 and closed the placement on that date by issuing 760,000 unregistered common shares. The placement proceeds were used to partially fund the business acquisition of the Ross Optical division. In conjunction with the placement, the Company also entered into a registration rights agreement with the investors requiring submission of a registration statement with the Securities and Exchange Commission within ninety days of the placement. Ms. Sandra Pessin acquired 200,000 shares in this placement for $250,000 or $1.25 per share, and at that time Ms. Pessin was an owner of more than 5% of the Company’s outstanding common stock.

On April 14, 2020 the Company sold 200,000 shares of its common stock for cash at $1.25 per share or $250,000 to be used for general working capital needs. In compliance with the registration rights agreement entered into with the investors, on August 14, 2020 the Company filed registration statement for the shares with the Securities and Exchange Commission. Hershey Strategic Capital, LP acquired 20,000 shares in this placement for $25,000 or $1.25 per share, and at that time Hershey Strategic Capital, LP was an owner of more than 5% of the Company’s outstanding common stock.

(b) Note Payable to Bank

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”). The Promissory Note bears interest at a fixed rate of 1% per annum, with principal and interest payments commencing on November 6, 2020. However, if the Small Business Administration confirms forgiveness of the Company’s loan and reimburses the bank for the total outstanding balance of principal and interest, the Company’s obligations under the Promissory Note will be deemed fully satisfied and paid in full. Although the bank and the SBA have not yet begun accepting applications for forgiveness of the CARES Act loans, the Company expects that it will ultimately qualify for full forgiveness. Any portion of the Company’s CARES Act loan that is not forgiven shall be converted to a term loan with the bank with monthly payments bearing interest at no more than 1% per annum and a maturity date two years from the Promissory Note date, or May 6, 2022. 

(c) Lease Obligation

The Company entered into a five-year capital lease obligation in January 2016 for the acquisition of manufacturing equipment totaling $51,252. In January 2020 the Company entered into a five-year capital lease and a twelve-month operating lease for $47,750 and $65,463 respectively for the acquisition of manufacturing equipment. The net book value of fixed assets under capital lease obligations as of June 30, 2020 is $107,478.

In February 2016, FASB issued ASU 2016-02, “Leases” (Topic 842). ASU 2016-02 requires the recognition of lease asset and lease liabilities by lessees for those leases currently classified as operating leases with terms greater than twelve months and make certain changes to the accounting for lease expenses. The Company adopted this standard effective July 1, 2019 and has reflected its impact upon the El Paso, Texas facility operating lease entered into on July 1, 2019 in connection with the Ross Optical acquisition. The facility lease is a three-year operating lease obligation with total remaining minimum lease payments of $124,601 at June 30, 2020. Total rent expense including base rent and common area expenses were $62,717 in the fiscal year ended June 30, 2020, and $4,976 in June 2019 as included in the accompanying financial statements since the acquisition of the Ross Optical division effective June 1, 2019. Included in the accompanying balance sheet at June 30, 2020 is a right-of-use asset of $118,403 and current and long-term right-of-use operating lease liabilities of $57,156 and $61,247, respectively.

At June 30, 2020, future minimum lease payments under the capital lease and operating lease obligations are as follows:

Fiscal Year Ending June 30:	Capital Leases		Operating Lease
2021		54,593		61,779
2022		11,280		62,822
2023		11,280		–
2024		11,280		–
2025		6,580		–
Total Minimum Payments		95,013	$	124,601
Less: amount representing interest		7,442
Present value of minimum lease payments		87,571
Less: current portion		51,761
	$	35,810

The Company’s operating leases for its three Gardner, Massachusetts office, production and storage spaces plus an equipment lease have expired and are continuing on a month to month tenant at will basis. Rent expense on these operating leases was $145,655 and $166,228 for the years ended June 30, 2020 and 2019, respectively.