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2. BUSINESS ACQUISITION

12 Months Ended

Jun. 30, 2020

Business Combinations [Abstract]

BUSINESS ACQUISITION

(2)

BUSINESS ACQUISITION

On July 1, 2019 the Company acquired the operating assets of Ross Optical Industries, Inc. of El Paso, Texas, a supplier of custom and catalogue optical components sourced through an extensive network of worldwide specialized vendors and sold for industrial, military and medical applications. The acquisition had an effective date of June 1, 2019, and a purchase price of up to $2,000,000. Pursuant to the agreement $1,500,000 was owed at closing subject to certain holdback terms, of which $1,443,341 was recorded as a current liability in the accompanying balance sheet at June 30, 2019 and paid during the quarter ended September 30, 2019. The accompanying financial statements include the results of operations of the Ross Optical division for the month of June 2019 and the entire fiscal year ended June 30, 2020 and the assets and liabilities of the division as of June 30, 2020 and 2019.

The Company agreed to pay the remaining $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. The Company believes the Ross Optical division achieved the financial thresholds for the first year ended June 30, 2020, and therefore $166,667 of the earn out obligation is recorded as a short-term liability in the accompanying balance sheet at June 30, 2020 with the $333,333 balance of the $500,000 earn out recorded as a long-term liability.

To partially fund the acquisition the Company raised gross proceeds of $950,000 on July 1, 2019 through the sale of 760,000 shares of its common stock. See Note 4(f).

(a)

Purchase Price Allocation and Goodwill

The allocation of purchase price is preliminary and subject to change based on future payments made for the earn-out contingent liability. Any unearned portions of the earn-out liability will be recognized in earnings. The acquired assets, contingent consideration and assumed liabilities at the effective date of acquisition include the following:

At Acquisition Effective Date June 1, 2019		Amount
Cash and cash equivalents		$	163,204
Trade accounts receivable, net			652,898
Inventories			728,046
Other current assets			2,889
Fixed assets			232,036
Total Assets Acquired			1,779,073
Accounts payable			401,360
Customer advances			24,350
Accrued compensation and other			41,027
Total Liabilities Assumed			466,737
Net assets acquired			1,312,336
Goodwill			687,664
Total Purchase Price-Initial and Contingent Consideration		$	2,000,000

(b)

Consolidated Pro Forma Results

Consolidated unaudited pro forma results of operations for the Company are presented below for the year ended June 30, 2019 assuming that the acquisition of the Ross Optical division has occurred on July 1, 2018. Pro forma operating results include net adjustments resulting from the acquisition transaction and reducing operating expenses by $447,722 during the fiscal year ended June 30, 2019.

		Fiscal Year Ended June 30,
		2020				2019
		Actual				Pro-Forma
Revenues		$	9,923,355			$	10,539,623
Net (Loss) Income		$	(1,426,150	)		$	121,946
Earnings per Share
Basic		$	(0.11	)		$	0.01
Fully Diluted		$	(0.11	)		$	0.01

Pro forma financial information is not necessarily indicative of the Company’s actual results of operations if the acquisition had been completed at the date indicated, nor is it necessarily an indication of future operating results. Amounts do not include any operating efficiencies or cost saving that the Company believes are achievable.