4. STOCKHOLDERS' EQUITY

12 Months Ended

Jun. 30, 2020

Equity [Abstract]

STOCKHOLDERS' EQUITY

(4) STOCKHOLDERS’ EQUITY

(a) Stock Options

The following table summarizes stock-based compensation expense for the years ended June 30:

	2020		2019
Cost of Goods Sold	$	44,932	$	11,233
Research and Development Expenses		68,061		20,398
Selling, General and Administrative Expenses		389,352		231,695
Stock Based Compensation Expense	$	502,345	$	263,326

(b) 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. As of June 30, 2020, all 300,000 shares have been issued. 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.

No compensation has been capitalized because such amounts would have been immaterial. There was no net income tax benefit recognized related to such compensation for the years ended June 30, 2020 or 2019, as the Company is currently in a loss position. There were 315,000 stock options granted during the year ended June 30, 2020 and 831,000 stock options granted during the year ended June 30, 2019.

As of June 30, 2020, the unrecognized compensation costs related to options vesting in the future is $545,206. The Company uses the Black-Scholes option-pricing model as the most appropriate method for determining the estimated fair value for the stock awards. The Black-Scholes method of valuation requires several assumptions: (1) the expected term of the stock award; (2) the expected future stock volatility over the expected term; and (3) risk-free interest rate. The expected term represents the expected period of time the Company believes the options will be outstanding based on historical information. Estimates of expected future stock price volatility are based on the historic volatility of the Company’s common stock and the risk-free interest rate is based on the U.S. Zero-Bond rate. The Company utilizes a forfeiture rate based on an analysis of the Company’s actual experience. The fair value of options at date of grant was estimated with the following assumptions for options granted in fiscal year 2020:

	Year Ended
	June 30, 2020
Assumptions:
Option life		5.3 years
Risk-free interest rate		3.0%
Stock volatility		131%
Dividend yield		0
Weighted average fair value of grants	$	1.31

Stock Option and Other Compensation Plans:

The type of share-based payments currently utilized by the Company is stock options.

The Company has various stock option and other compensation plans for directors, officers and employees. The Company has the following stock option plans outstanding as of June 30, 2020: The Precision Optics Corporation, Inc. 2011 Equity Incentive Plan (the “2011 Plan”) and the Precision Optics Corporation, Inc. 2006 Equity Incentive Plan (the “2006 Plan”). Vesting periods under the 2011 Plan and the 2006 Plan are at the discretion of the Board of Directors and typically average three years and in some instances are subject to future performance criteria. Options under these Plans are granted at fair market value on the date of grant and typically have a term of ten years from the date of grant.

The 2011 Plan provides eligible participants (certain employees, directors, consultants, etc.) the opportunity to receive a broad variety of equity based and cash awards. Options granted vest and are exercisable for periods determined by the Board of Directors, not to exceed 10 years from the date of grant. On April 16, 2015, the Board of Directors approved an amendment to the 2011 Equity Incentive Plan which increased the maximum number of shares of the Company’s common stock that may be awarded under the Plan from 325,000 to 1,825,000, an increase of 1,500,000 shares. In connection therewith, on April 20, 2015, the Company filed a registration statement on Form S-8 to register the 1,500,000 shares of the Company’s common stock. On May 1, 2019, the Board of Directors approved an amendment to the 2011 Equity Incentive Plan which increased the maximum number of shares of our common stock that may be awarded under the Plan from 1,825,000 to 2,825,000, an increase of 1,000,000 shares. At June 30, 2020, a total of 1,951,502 stock options are outstanding and 356,498 shares of common stock were available for future grants under the 2011 Plan.

The 2006 Plan provides eligible participants (certain employees, directors, consultants, etc.) the opportunity to receive a broad variety of equity based and cash awards. Options granted vest and are exercisable for periods determined by the Board of Directors, not to exceed 10 years from the date of grant. At June 30, 2020 a total of 113,698 stock options are outstanding, and no shares of common stock are available for future grants under the 2006 Plan.

The following tables summarize stock option activity for the years ended June 30, 2020 and 2019:

	Options Outstanding
	Number of Shares			Weighted Average Exercise Price	Weighted Average Contractual Life
Outstanding at July 1, 2018	1,055,700		$	0.76	6.13 years
Grants	831,000		$	0.99
Exercised	(64,500	)	$	0.75
Cancellations	(2,700	)	$	0.86
Outstanding at June 30, 2019	1,819,500		$	0.87	7.05 years
Grants	315,000		$	1.38
Exercised	(47,500	)	$	0.62
Cancellations	(21,800	)	$	0.96
Outstanding at June 30, 2020	2,065,200		$	0.95	6.59 years

Information related to the stock options outstanding as of June 30, 2020 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		1.04	$	0.27		40,000	$	0.27
$	0.48		60,000		5.75	$	0.48		60,000	$	0.48
$	0.50		100,000		4.97	$	0.50		100,000	$	0.50
$	0.55		44,000		3.71	$	0.55		44,000	$	0.55
$	0.70		100,000		8.10	$	0.70		100,000	$	0.70
$	0.73		786,000		6.31	$	0.73		786,000	$	0.73
$	0.85		6,000		2.51	$	0.85		6,000	$	0.85
$	0.90		36,000		3.94	$	0.90		36,000	$	0.90
$	1.20		200,200		1.67	$	1.20		200,200	$	1.20
$	1.25		45,000		9.72	$	1.25		–	$	–
$	1.30		478,000		8.95	$	1.30		126,679	$	1.30
$	1.42		100,000		9.20	$	1.42		–	$	–
$	1.50		70,000		9.44	$	1.50		70,000	$	1.50
$	0.27–1.50		2,065,200		6.59	$	0.95		1,568,879	$	0.83

The aggregate intrinsic value of the Company’s “in-the-money” outstanding and exercisable options as of June 30, 2020 was $1,038,070 and $973,372, respectively.

(d) Sale of Stock in October 2018

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.

(e) Sale of Stock in July 2019

On July 1, 2019, the Company entered into agreements with accredited investors for the sale and purchase of 760,000 unregistered shares of its common stock, $0.01 par value at a purchase price of $1.25 per share. The Company received $950,000 in gross proceeds from the offering, $925,000 of which was received as of June 30, 2019 and is included in the accompanying statement of stockholders’ equity as common stock subscriptions. The Company used the net proceeds from this placement to partially fund the July 1, 2019 acquisition of the operating assets of Ross Optical Industries, Inc. with an effective date of June 1, 2019.

In connection with the placement, the Company also entered into a registration rights agreement with the investors, whereby the Company is obligated to file a registration statement with the Securities Exchange Commission on or before 120 calendar days after July 1, 2019 to register the resale by the investors of 760,000 shares of our common stock purchased in the placement. The registration statement was filed with the Securities and Exchange Commission on October 29, 2019 and Amendment No. 1 to the registration statement was filed with the Securities and Exchange Commission on November 22, 2019. The registration statement became effective on November 26, 2019.

(d) Sale of Stock in April 2020

On April 14, 2020, the Company entered into agreements with accredited investors for the sale and purchase of 200,000 unregistered shares of its common stock, $0.01 par value at a purchase price of $1.25 per share. The Company received $250,000 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 120 calendar days after April 14, 2020 to register the resale by the investors of 200,000 shares of our common stock purchased in the placement. The registration statement was filed with the Securities and Exchange Commission on August14, 2020.