Document and Entity Information
Document and Entity Information - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2018 | Sep. 06, 2018 | Dec. 31, 2017 | |
Document And Entity Information | |||
Entity Registrant Name | PRO DEX INC | ||
Entity Central Index Key | 788,920 | ||
Document Type | 10-K | ||
Trading Symbol | PDEX | ||
Document Period End Date | Jun. 30, 2018 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --06-30 | ||
Entity a Well-known Seasoned Issuer | No | ||
Entity a Voluntary Filer | No | ||
Entity's Reporting Status Current | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 17.8 | ||
Entity Common Stock, Shares Outstanding | 4,341,202 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,018 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2018 | Jun. 30, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 5,188 | $ 4,205 |
Investments | 2,220 | 718 |
Accounts receivable, net of allowance for doubtful accounts of $14 and $3 at June 30, 2018 and 2017, respectively | 2,955 | 3,538 |
Deferred costs | 32 | 12 |
Assets held for sale | 363 | |
Notes receivable (See Note 8) | 1,176 | |
Inventory | 4,393 | 3,084 |
Prepaid expenses and other current assets | 269 | 363 |
Total current assets | 16,233 | 12,283 |
Plant, equipment and leasehold improvements, net | 1,755 | 1,350 |
Intangibles, net | 140 | 149 |
Deferred income taxes, net | 1,678 | 2,048 |
Notes receivable, net of current portion (See Note 8) | 43 | 450 |
Other assets | 68 | 71 |
Total assets | 19,917 | 16,351 |
Current liabilities: | ||
Accounts payable | 1,083 | 1,159 |
Accrued liabilities | 1,266 | 1,344 |
Deferred revenue | 31 | 19 |
Income taxes payable | 123 | |
Note payable | 26 | |
Capital lease obligations | 35 | 32 |
Total current liabilities | 2,538 | 2,580 |
Non-current liabilities: | ||
Deferred rent | 97 | |
Capital lease obligations, net of current portion | 6 | 61 |
Total non-current liabilities | 103 | 61 |
Total liabilities | 2,641 | 2,641 |
Commitments and Contingencies: | ||
Shareholders' equity: | ||
Common stock, no par value, 50,000,000 shares authorized; 4,331,089 and 4,025,193 shares issued and outstanding at June 30, 2018 and 2017, respectively | 19,835 | 17,704 |
Accumulated other comprehensive (loss) income | (153) | 33 |
Accumulated deficit | (2,406) | (4,027) |
Total shareholders' equity | 17,276 | 13,710 |
Total liabilities and shareholders' equity | $ 19,917 | $ 16,351 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2018 | Jun. 30, 2017 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance for doubtful accounts | $ 14 | $ 3 |
Common shares, par value | $ 0 | $ 0 |
Common shares, authorized | 50,000,000 | 50,000,000 |
Common shares, issued | 4,331,089 | 4,025,193 |
Common shares, outstanding | 4,331,089 | 4,025,193 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Income Statement [Abstract] | ||
Net sales | $ 22,465 | $ 21,943 |
Cost of sales | 14,522 | 14,757 |
Gross profit | 7,943 | 7,186 |
Operating (income) expenses: | ||
Selling expenses | 358 | 585 |
General and administrative expenses | 2,287 | 2,529 |
Asset impairment charges | 1,029 | 113 |
Gain on disposal of equipment | (16) | (3) |
Research and development costs | 1,893 | 1,225 |
Total operating expenses | 5,551 | 4,449 |
Operating income | 2,392 | 2,737 |
Other income (expense): | ||
Interest and dividend income | 225 | 27 |
Interest expense | (7) | (12) |
Total other income | 218 | 15 |
Income from continuing operations before income taxes | 2,610 | 2,752 |
Income tax expense (benefit) | 989 | (2,089) |
Net income from continuing operations | 1,621 | 4,841 |
Income from discontinued operations, net of income taxes | 243 | |
Net income | 1,621 | 5,084 |
Other comprehensive income (loss), net of tax: | ||
Unrealized gain (loss) from marketable equity investments, net of income taxes | (186) | 33 |
Comprehensive income | $ 1,435 | $ 5,117 |
Basic income per share: | ||
Net income from continuing operations | $ 0.38 | $ 1.20 |
Income from discontinued operations | 0.06 | |
Net income | 0.38 | 1.26 |
Diluted income per share: | ||
Net income from continuing operations | 0.37 | 1.19 |
Income from discontinued operations | 0.06 | |
Net income | $ 0.37 | $ 1.25 |
Weighted average common shares outstanding: | ||
Basic | 4,304,602 | 4,040,308 |
Diluted | 4,344,765 | 4,077,575 |
CONSOLIDATED STATEMENTS OF SHAR
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) $ in Thousands | Common Shares [Member] | Accumulated Other Comprehensive Income (Loss) [Member] | Accumulated Deficit [Member] | Total | ||
Balance at beginning at Jun. 30, 2016 | $ 17,988 | $ (9,111) | $ 8,877 | |||
Balance at beginning (in shares) at Jun. 30, 2016 | 4,052,987 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income | 5,084 | 5,084 | ||||
Exercise of stock options | [1] | $ 7 | $ 7 | |||
Exercise of stock options (in shares) | 23,632 | [1] | 33,834 | |||
Net change in unrealized gain (loss) from marketable equity investments | 33 | $ 33 | ||||
ESPP shares issued | $ 18 | 18 | ||||
ESPP shares issued (in shares) | 3,794 | |||||
Share-based compensation | $ 3 | 3 | ||||
Shares issued under ATM | [2] | 8,276 | ||||
Share repurchases | $ (312) | (312) | ||||
Share repurchases (in shares) | (63,496) | |||||
Balance at end at Jun. 30, 2017 | $ 17,704 | 33 | (4,027) | 13,710 | ||
Balance at end (in shares) at Jun. 30, 2017 | 4,025,193 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income | 1,621 | $ 1,621 | ||||
Exercise of stock options (in shares) | ||||||
Net change in unrealized gain (loss) from marketable equity investments | (186) | $ (186) | ||||
ESPP shares issued | $ 37 | 37 | ||||
ESPP shares issued (in shares) | 6,733 | |||||
Share-based compensation | $ 194 | 194 | ||||
Shares issued under ATM | [2] | $ 2,120 | 2,120 | |||
Shares issued under ATM, (in shares) | [2] | 332,189 | ||||
Share repurchases | $ (220) | (220) | ||||
Share repurchases (in shares) | (33,026) | |||||
Balance at end at Jun. 30, 2018 | $ 19,835 | $ (153) | $ (2,406) | $ 17,276 | ||
Balance at end (in shares) at Jun. 30, 2018 | 4,331,089 | |||||
[1] | During fiscal 2017, a total of 33,834 stock options were exercised and a total of 10,202 shares were used to effect a cashless exercise. | |||||
[2] | The proceeds raised from the ATM shares issued during fiscal 2017 in the net amount of $48,000 were accounted for as a reduction of prepaid expenses related to establishing the ATM. Additionally, $142,000 of proceeds raised from the ATM shares issued during fiscal 2018 were accounted for as a reduction of prepaid expenses. |
CONSOLIDATED STATEMENTS OF SHA6
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Parenthetical) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Statement of Stockholders' Equity [Abstract] | ||
Options exercised | 33,834 | |
Number of shares issued from cashless exercise of options | 10,202 | |
Proceeds raised from ATM, accounted for as reduction of prepaid expenses | $ 142 | $ 48 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $ 1,621 | $ 5,084 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 557 | 555 |
Gain on sale of OMS | (327) | |
Gain on sale or disposal of equipment | (16) | (3) |
Asset impairment charges | 1,029 | 113 |
Share-based compensation | 194 | 3 |
Deferred income taxes | 391 | (2,048) |
Bad debt expense (recovery) | 14 | (17) |
Changes in operating assets and liabilities: | ||
Accounts receivable, due from factor and other current receivables | 569 | (633) |
Deferred costs | (19) | 226 |
Assets held for sale | 31 | (22) |
Inventory | (1,309) | 279 |
Prepaid expenses and other assets | (45) | (299) |
Accounts payable, accrued expenses and deferred rent | (57) | 518 |
Deferred revenue | 13 | (193) |
Income taxes payable | 123 | (1) |
Net cash provided by operating activities | 3,096 | 3,235 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of equipment and leasehold improvements | (923) | (606) |
Proceeds from sale of OMS | 636 | |
Purchase of notes receivable (See Note 8) | (350) | (450) |
Investment in Loan Participation (See Note 8) | (1,150) | |
Proceeds from sale of investment in Ramsey | 86 | |
Proceeds from sale of equipment | 30 | 3 |
Increase in intangibles | (11) | (32) |
Purchase of investments | (1,711) | (663) |
Net cash used in investing activities | (4,115) | (1,026) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Principal payments on capital lease and note payable | (78) | (59) |
Proceeds from shares issued under ATM | 2,262 | 48 |
Borrowings from Summit loan | 600 | |
Repayments on Summit loan | (600) | |
Repurchases of common stock | (220) | (312) |
Proceeds from exercise of stock options and ESPP contributions | 38 | 25 |
Net cash provided by (used in) financing activities | 2,002 | (298) |
Net increase in cash and cash equivalents | 983 | 1,911 |
Cash and cash equivalents, beginning of year | 4,205 | 2,294 |
Cash and cash equivalents, end of year | 5,188 | 4,205 |
Noncash investing and financing activities: | ||
Promissory note issued in connection with sale of Fineline | 280 | |
Capital lease for the acquisition of equipment | 105 | |
Value of shares surrendered in connection with a stock option exercise | 64 | |
Supplemental disclosures of cash flow information: | ||
Cash paid for income taxes, net of refunds | 401 | 217 |
Cash paid for interest | $ 7 | $ 12 |
DESCRIPTION OF BUSINESS
DESCRIPTION OF BUSINESS | 12 Months Ended |
Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
DESCRIPTION OF BUSINESS | 1. DESCRIPTION OF BUSINESS We specialize in the design, development and manufacture of autoclavable, battery-powered and electric, multi-function surgical drivers and shavers used primarily in the orthopedic and maxocranial facial markets. We have patented adaptive torque-limiting software and proprietary sealing solutions which appeal to our customers, primarily medical device distributors. We also manufacture and sell rotary air motors to a wide range of industries. Our Fineline Molds division (“Fineline”), acquired in fiscal 2015, manufactured plastic injection molding for a variety of industries. As disclosed in a Form 8-K filed with the SEC on May 30, 2018, we sold substantially all of the assets of Fineline on May 23, 2018. The assets relating to Fineline have been reclassified as held for sale in the accompanying June 30, 2017 Consolidated Balance Sheet. Management reviewed ASU 2014-08 Reporting Discontinued Operations and Disposals of Components of an Entity In fiscal 2015, we acquired Huber Precision (“Huber”), a business that made custom machined parts. We made the investment to garner a wider customer base, but the sales to the customers that were serviced by Huber dwindled over time, such that activities became immaterial. As a result, the intangibles relating to Huber were impaired during the first quarter of fiscal 2017. Through January, 2017, we also designed and manufactured multi-axis motion control systems used in factory automation and scientific research markets and these products can be found in scientific research facilities and high tech manufacturing operations around the world. (See Note 3.) Through April, 2017, we provided engineering consulting and placement services, as well as quality and regulatory consulting services through our Engineering Services Division (“ESD”). Although we continue to provide engineering, quality and regulatory consulting services to our customers, we have ceased placement services and accordingly have disbanded our ESD Division. The cessation of placement services did not have a material impact on our financial position or results of operations. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The summary of significant accounting policies presented below is designed to assist the reader in understanding our consolidated financial statements. Such financial statements and related notes are the representations of management, who is responsible for their integrity and objectivity. In the opinion of management, these accounting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) in all material respects, and have been consistently applied in preparing the accompanying consolidated financial statements. Principles of Consolidation The consolidated financial statements include the accounts of the Company. The wholly owned subsidiaries, Pro-Dex Sunfish Lake, LLC and Pro-Dex Riverside, LLC, both Delaware limited liability companies, were legally dissolved during fiscal 2018. There are no inter-company accounts or transactions. Revenue Recognition Revenue on product sales is recognized upon shipment to the customer when risk of loss and title transfer to the customer and all other conditions required by GAAP, as promulgated by the Financial Accounting Standards Board (FASB) in Accounting Standards Codification (ASC) Section 605 Revenue Recognition Revenue from billable product development service portions of development and supply contracts is generally recognized either upon milestone completion or completion of the product development services, in conformity with ASC Section 605. We recognize revenue that is contingent upon the achievement of a substantive milestone in its entirety in the period in which the milestone is achieved. A milestone is considered substantive when the consideration payable to us for such milestone (i) is consistent with our performance necessary to achieve the milestone, (ii) relates solely to our past performance and (iii) is reasonable relative to all of the other deliverables and payments within the arrangement. In making this assessment, we consider all facts and circumstances relevant to the arrangement, including factors such as the scientific, regulatory, commercial and other risks that must be overcome to achieve the milestone, the level of effort and investment required to achieve the milestone and whether any portion of the milestone consideration is related to future performance or deliverables. Accordingly, in certain cases, based upon the evaluation of the criteria above, we record revenue upon milestone completion and in other cases revenue from product development milestone billings to our customers is deferred until completion of all development phases or milestones. Returns of our product for credit are minimal; accordingly, we do not establish a reserve for product returns at the time of sale. We will adopt the requirements of Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers Estimated Losses on Product Development Services Cost and revenue estimates related to the product development service portions of development and supply contracts are reviewed and updated quarterly. When it is probable that total costs from the development portion of such contracts will exceed product development service revenue, the expected loss is recognized immediately in cost of sales. Contract costs include all direct material, labor and those indirect costs related to contract performance. Due to the complexity of many of the contracts we have undertaken, the cost estimation process requires significant judgment. It is based upon the knowledge and experience of our project managers, engineers, and finance professionals. Factors that are considered in estimating the cost of work to be completed and ultimate profitability of the fixed price product development portion of development and supply contracts include, among others, the nature and complexity of the work to be performed, availability and productivity of labor, the effect of change orders, the availability of materials, performance of subcontractors, and expected costs for specific regulatory approvals. Warranties Certain of our products are sold with a warranty that provides for repairs or replacement of any defective parts for a period, generally one to two years, after the sale. At the time of the sale, we accrue an estimate of the cost of providing the warranty based on prior experience with such factors as return rates and repair costs, which factors are reviewed quarterly. The warranty accrual is based on historical costs of warranty repairs and expected future identifiable warranty expenses, and is included in accrued expenses in the accompanying consolidated balance sheets. Warranty expenses are included in cost of sales in the accompanying consolidated statements of operations. Changes in estimates to previously established warranty accruals result from current period updates to assumptions regarding repair costs and warranty return rates, and are included in current period warranty expense. Cash and Cash Equivalents We consider all highly liquid investments with an original maturity of ninety days or less to be cash equivalents. At June 30, 2018 and 2017, cash equivalents consisted of investments in money market funds. Accounts Receivable Trade receivables are stated at their original invoice amounts, less an allowance for doubtful portions of such accounts. Management determines the allowance for doubtful accounts based on facts and circumstances related to specific accounts and on historical experience related to the age of accounts. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously reserved are offset against the allowance when received. Deferred Costs Deferred costs reflect costs incurred related to non-recurring engineering services under the terms of the related development and supply contracts. These costs get recorded to cost of sales in the period that the revenue is recognized pursuant to the terms of the underlying contract with our customer. Inventories Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. Cost includes materials, labor and manufacturing overhead related to the purchase and production of inventories. Reductions to estimated market value are recorded, and charged to cost of sales, when indicated based on a formula that compares on-hand quantities to both historical usage and estimated demand over the ensuing 12 months from the measurement date. On an on-going basis, we evaluate inventory for obsolescence and slow-moving items. This evaluation includes analysis of historical sales and usage, existing demand, as well as specific factors known to management. As of June 30, 2018, there was approximately $301,000 of inventory in-transit. Investments Investments at June 30, 2018 and 2017 consist of marketable equity securities of publicly held companies. The investments were made to realize a reasonable return, although there is no assurance that positive returns will be realized. Investments are marked to market at each measurement date, with unrealized gains and losses, net of income taxes, presented as adjustments to accumulated other comprehensive income or loss. Long-lived Assets We review the recoverability of long-lived assets, consisting of equipment and leasehold improvements, when events or changes in circumstances occur that indicate carrying values may not be recoverable. Equipment and leasehold improvements are recorded at historical cost and depreciation is provided using the straight-line method over the following periods: Equipment Three to ten years Leasehold improvements Shorter of the lease term or the asset’s estimated useful life Goodwill & Intangibles We recorded $353,000 of goodwill and $54,000 of trade name in conjunction with the asset purchase of Fineline during the fiscal year ended June 30, 2015. Accordingly, subsequent to the measurement period described below under “Business Combinations,” we assess potential impairment of goodwill and trade name annually, or more frequently if there are events or changes in circumstances that may indicate potential impairment. Intangibles consist of legal fees incurred in connection with patent applications, capitalized software development costs, covenant not to compete, trade name, and customer lists including backlog. Certain of the patent costs are being amortized over a period of seven years, the estimated life of the product that is currently utilizing the patented technology. The remaining patent costs will be amortized over the estimated life of the product(s) that will be utilizing the technology, or expensed immediately in the event the patent office denies the issuance of the patent. The covenant not to compete and customer list including backlog relate to assets acquired in conjunction with the purchase of Huber and Fineline and will be amortized over their estimated useful lives or, in the case of Fineline, retired in connection with our sale of those assets. The expense associated with the amortization of the covenants not to compete and customer list is recognized in selling expenses. Business Combinations We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. There were no business acquisitions during fiscal 2018 and 2017. Notes Receivable Notes receivable are stated at unpaid principal balance and are subject to impairment losses. Management considers a note impaired when either i) based upon current information or factors it is probable that the principal and interest payments will not be collected, or converted to equity, according to the terms of the secured convertible promissory note or ii) the fair market of the underlying collateral securing the note is less than the book value of the note receivable. Income Taxes We recognize deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities along with net operating losses and tax credit carryovers. Deferred tax assets at both June 30, 2018 and 2017 consisted primarily of basis differences related to research and development tax credit utilization, accrued expenses, inventories and intangible assets. Significant management judgment is required in determining the provision for income taxes and the recoverability of deferred tax assets. Such determination is based on historical taxable income, with consideration given to estimates of future taxable income and the periods over which deferred tax assets will be recoverable. We record a valuation allowance against deferred tax assets to reduce the net carrying value to an amount that we believe is more likely than not to be realized. When we establish or reduce the valuation allowance against deferred tax assets, the provision for income taxes will increase or decrease, respectively, in the period such determination is made. Uncertain Tax Positions We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process whereby (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. Shipping and Handling Payments from customers for shipping and handling are included in net sales . Concentration of Credit Risk Financial instruments that potentially subject us to credit risk consist principally of cash, cash equivalents, and trade receivables. We place our cash and cash equivalents with major financial institutions. At June 30, 2018 and 2017, and throughout the fiscal years then ended, we had deposits in excess of federally insured limits. Credit sales are made to original equipment manufacturers and resellers throughout the world, and sales to such customers account for a substantial portion of our trade receivables. While such receivables are not collateralized, we evaluate their collectability based on several factors including customers’ payment histories. Compensation Plans We recognize compensation expense for the share-based awards under ASC 718 Compensation-Stock Compensation Use of Estimates The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Our operations are affected by numerous factors including market acceptance of our products, changes in technologies, and new laws, government regulations and policies. We cannot predict what impact, if any, the occurrence of these or other events might have on our operations. Significant estimates and assumptions made by management include, but are not limited to, revenue recognition, share-based compensation, the allowance for doubtful accounts, accrued warranty expense, inventory valuation, the carrying value of long-lived assets, the recoverability of notes receivable and the recovery of deferred income tax assets. Basic and Diluted Per Share Information Basic per share amounts are computed on the basis of the weighted-average number of common shares outstanding during each period presented. Diluted per share amounts assume the exercise of all potential common stock equivalents, consisting solely of options to purchase common stock as discussed in Note 11, unless the effect of such exercise is to increase income, or decrease loss, per common share. Fair Value Measurements Fair value is measured based on the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs used to measure fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions. Cash and cash equivalents: Investments: Notes receivable: Although the methods above may produce a fair value calculation that may not be indicative of the net realizable value or reflective of future fair values, we believe our valuation methods are appropriate. Advertising Advertising costs are charged to selling or general and administrative expense as incurred and amounted to $36,000 and $3,000 for the fiscal years ended June 30, 2018 and 2017, respectively. Recent Accounting Standards In May 2014, the FASB issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers In February 2016, the FASB issued ASU 2016-02, (Topic 842) Leases In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments In May 2017, the FASB issued Accounting Standards Update 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting Recently Adopted Accounting Standards In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory In January 2017, the FASB issued its final standard on simplifying the test for goodwill impairment. This standard, issued as ASU 2017-04, eliminates step 2 from the goodwill impairment test and instead requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value. This update is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted. We adopted this guidance during the second quarter of fiscal 2018, in conjunction with the performance of our goodwill impairment test. Reclassifications As described in more detail in Note 1 above, the assets relating to our Fineline division have been reclassified as assets held for sale in accordance with applicable accounting guidance. These balance sheet reclassifications had no impact on our consolidated statement of operations. We have reclassified the gain on disposal of equipment to operating income (expense) as prescribed by GAAP. This reclassification has no impact on our net income. We have changed the allowance for doubtful accounts adjustment to reconcile net income to net cash provided by operating activities to bad debt expense (recovery) as prescribed by GAAP. This reclassification has no impact on net cash provided by or used in operating activities. |
DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS | 12 Months Ended |
Jun. 30, 2018 | |
Discontinued Operations and Disposal Groups [Abstract] | |
DISCONTINUED OPERATIONS | 3. DISCONTINUED OPERATIONS On January 27, 2017, we sold substantially all of the assets and the business operations of our OMS division located in Beaverton Oregon. We sold the business to our long time general manager of the division. The sale was structured as an asset sale as disclosed in a Form 8-K filed with the SEC on January 30, 2017. The aggregate sales price received was $636,000, and no liabilities other than warranty obligations were assumed by the buyer. As a result of the sale, this division has been classified as a discontinued operation in conformity with applicable accounting guidance. Accordingly, unless otherwise indicated, OMSÂ’s results have been reported as discontinued operations and removed from all financial discussions of continuing operations. The divestiture was completed in support of raising capital to invest in our core medical device product development efforts. Operating results of the OMS division are as follows (in thousands): Year ended June 30, Revenues $ 715 Income from discontinued operations: Gain on sale, net of taxes of $126,000 $ 201 Income from discontinued operations, before taxes 68 Income expense (26 ) Net income from discontinued operations $ 243 Income from discontinued operations consists of direct revenues and direct expenses of the OMS business, including cost of revenues, as well as other fixed costs to the extent that such costs will be eliminated as a result of the sale. The Company historically did not allocate corporate overhead to this division. Additionally, the OMS division has historically been the only division that was significant enough to require segment disclosures and as such, effective with this divestiture, we no longer require segment disclosure as our business is currently run. |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS OF FINELINE | 12 Months Ended |
Jun. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL AND INTANGIBLE ASSETS OF FINELINE | 4. GOODWILL AND INTANGIBLE ASSETS OF FINELINE Goodwill represents the excess of the purchase price over the fair value of identifiable net assets from the Fineline acquisition. Indefinite-lived intangibles are intangible assets whose useful lives are indefinite in that their lives extend beyond the foreseeable horizon – that is there is no foreseeable limit on the period of time over which they are expected to contribute to the cash flows of the reporting entity. The amounts included in the table below were included in assets held for sale on the June 30, 2017 Consolidated Balance Sheet. We account for these items in accordance with Accounting Standards Codification (“ASC”) 350 Intangibles – Goodwill and Other The following table presents the changes in the carrying amount of the Fineline goodwill, customer list, covenant not to compete and trade name (in thousands): Goodwill Customer List Covenant not to Compete Trade Name Balance at June 30, 2016 $ 112 $ 133 $ 16 $ 50 Amortization — (24 ) (5 ) — Balance at June 30, 2017 $ 112 $ 109 $ 11 $ 50 Amortization — (12 ) (3 ) — Impairment charge (112 ) (97 ) — (20 ) Amount sold in conjunction with the sale of Fineline — — (8 ) (30 ) Balance at June 30, 2018 $ — $ — $ — $ — The valuation methods utilized to value the long-lived assets and the goodwill discussed above are based on both a market approach and an income approach. The market approach relies on guideline public company and transaction methods which incorporates revenue and earnings multiples from publicly traded companies with operations and other characteristics similar to Fineline. The selected multiples consider Fineline’s relative size and risks relative to the selected publicly traded companies. The income approach incorporates a discounted cash flow analysis based on the amount and timing of expected future cash flows and growth rates and include a determination of an appropriate discount rate. The cash flows utilized in the discounted cash flow analyses were based on financial forecasts developed internally by management. Estimating future cash flows requires significant judgment and projections may vary from the cash flows eventually realized. Determining the fair value using a discounted cash flow method requires significant estimates and assumptions, including market conditions, discount rates, and long-term projections of cash flows. The Company’s estimates are based upon historical experience, current market trends, projected future volumes and other information. The Company believes that the estimates and assumptions underlying the valuation methodology are reasonable; however, different estimates and assumptions could result in a different estimate of fair value. |
COMPOSITION OF CERTAIN FINANCIA
COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS | 12 Months Ended |
Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS | 5. COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS Investments Investments are stated at market value and consist of the following (in thousands): June 30, 2018 2017 Marketable equity securities $ 2,220 $ 718 At June 30, 2018, our investments had an aggregate cost basis of $2,373,000 and net unrealized losses of $153,000 (gross unrealized losses of $196,000 offset by gross unrealized gains of $43,000). At June 30, 2017, our investments had an aggregate cost basis of $663,000 and net unrealized gains of $55,000 (gross unrealized gains of $57,000 offset by gross unrealized losses of $2,000) and related tax expense of approximately $22,000 recorded in other comprehensive income. Of the total marketable equity securities at June 30, 2018 and 2017, $285,000 and $65,000, respectively, represent an investment in the common stock of Air T, Inc. Two of our Board members are also board members of Air T, Inc. and both either individually or through affiliates own an equity interest in Air T, Inc. Our Chairman, one of the two Board members aforementioned, also serves as the Chief Executive Officer and Chairman of Air T, Inc. The shares have been purchased through 10b5-1 Plans, which in accordance with our internal policies regarding the approval of related party transactions, was approved by our three Board members that are not affiliated with Air T, Inc. Inventory Inventory is stated at the lower of cost (first-in, first-out) or net realizable value and consists of the following (in thousands): June 30, 2018 2017 Raw materials /purchased components $ 1,878 $ 1,127 Work in process 974 746 Sub-assemblies /finished components 1,193 1,018 Finished goods 348 193 Total inventory $ 4,393 $ 3,084 Equipment and Leasehold Improvements Equipment and leasehold improvements consist of the following (in thousands): June 30, 2018 2017 Office furnishings and fixtures $ 1,821 $ 1,808 Machinery and equipment 4,488 5,140 Leasehold improvements 2,170 2,119 Total 8,479 9,067 Less: Accumulated depreciation and amortization (6,724 ) (7,717 ) $ 1,755 $ 1,350 Depreciation expense for the years ended June 30, 2018 and 2017 amounted to $522,000 and $505,000, respectively. During fiscal 2018, assets in the amount of approximately $1.2 million were retired and an additional $359,000 of fully depreciated assets were sold. In conjunction with the sale of the Fineline division during fiscal 2018, assets with a cost basis of $160,000 and accumulated amortization totaling $81,000 have been eliminated from the June 30, 2017 balances above, consistent with the assets held for sale presentation previously described. Intangibles Intangibles consist of the following (in thousands): June 30, 2018 2017 Covenant not to compete $ 30 $ 30 Patent-related costs 164 153 Total intangibles 194 183 Less accumulated amortization (54 ) (34 ) $ 140 $ 149 Amortization expense for both years ended June 30, 2018 and 2017 amounted to $20,000. The covenant not to compete relates to assets acquired in conjunction with the Huber business acquisition. Patent-related costs consist of legal fees incurred in connection with both patent applications and a patent issuance, and will be amortized over the estimated life of the product(s) that is or will be utilizing the technology, or expensed immediately in the event the patent office denies the issuance of the patent. Since we do not know when, or if, our patent applications will be issued, the future amortization expense is not predictable. Accrued Liabilities Accrued liabilities consist of the following (in thousands): June 30, 2018 2017 Payroll and related items $ 438 $ 417 Accrued inventory in transit 301 52 Accrued legal and professional fees 155 151 Accrued bonuses 109 390 Warranty 107 159 Accrued losses on development contracts 83 — Accrued sales, use and excise taxes 6 9 Deferred rent — 68 Other 67 98 $ 1,266 $ 1,344 |
WARRANTY ACCRUAL
WARRANTY ACCRUAL | 12 Months Ended |
Jun. 30, 2018 | |
Product Warranties Disclosures [Abstract] | |
WARRANTY ACCRUAL | 6. WARRANTY ACCRUAL Information relating to the accrual for warranty costs for the years ended June 30, 2018 and 2017 is as follows (in thousands): June 30, 2018 2017 Balance at beginning of year $ 159 $ 365 Accruals during the year 102 316 Change in estimates of prior period accruals (97 ) (224 ) Warranty amortization (57 ) (298 ) Balance at end of year $ 107 $ 159 Warranty expense relating to new product sales and changes to estimates was $5,000 and $92,000, respectively, for the fiscal years ended June 30, 2018 and 2017. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | 7. INCOME TAXES On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law. The new legislation represents a fundamental and dramatic shift in US taxation. The new legislation contains several key tax provisions that will impact us including the reduction of the corporate income tax rate to 21% effective January 1, 2018. The new legislation also included a variety of other changes including but not limited to a limitation on the deductibility of interest expense, acceleration of business asset expensing and reduction in the amount of executive pay that could qualify as a tax deduction. The provision (benefit) for income taxes from continuing operations consists of the following amounts (in thousands): Years Ended June 30, 2018 2017 Current: Federal $ 579 $ 34 State 19 40 Deferred: Federal 247 (1,263 ) State 144 (900 ) Income tax expense (benefit) $ 989 $ (2,089 ) Section 15 of the Internal Revenue Code stipulates that our fiscal year ended June 30, 2018 will have a blended federal statutory tax rate of 27.55%, which is based on the applicable tax rates before and after the effectiveness of the Tax Act and the number of days in the year. The effective income tax rate from income (loss) from continuing operations differs from the United States statutory income tax rates for the reasons set forth in the table below (in thousands, except percentages). Years Ended June 30, 2018 2017 Amount Percent Pretax Income Amount Percent Pretax Income Income (loss) from continuing operations before income taxes $ 2,610 100 % $ 2,752 100 % Computed “expected” income tax expense (benefit) on income (loss) from continuing operations before income taxes $ 719 28 % $ 936 34 % State tax, net of federal benefit 73 3 % 270 10 % Tax incentives (47 ) (2 %) (36 ) (1 %) Change in valuation allowance 202 8 % (3,252 ) (118 %) Tax law changes 119 5 % — — Domestic production deduction (84 ) (4 %) — — Other 7 — (7 ) (1 %) Income tax expense (benefit) $ 989 38 % $ (2,089 ) (76 %) On December 22, 2017, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) which addresses income tax accounting implications of the Tax Act. The purpose of the SAB 118 was to address any uncertainty or diversity of view in applying ASC Topic 740, Income Taxes Deferred income taxes reflect the net effects of loss and credit carryforwards and temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities for federal and state income taxes are as follows (in thousands): June 30, 2018 2017 Deferred tax assets: Federal & State NOL carryforward $ 23 $ 181 Research & other credits 1,517 1,832 Reserves and accruals 438 180 Stock based compensation 55 — Inventory 371 446 Other intangibles 70 178 Goodwill — 77 Other 48 1 Total gross deferred tax assets $ 2,522 $ 2,895 Less: valuation allowance (368 ) (89 ) Total deferred tax assets 2,154 2,806 June 30, 2018 2017 Deferred tax liabilities: Property and equipment, principally due to differing depreciation methods $ (318 ) $ (438 ) Deferred state tax (152 ) (295 ) Other intangibles — (2 ) Other (6 ) (23 ) Total gross deferred tax liabilities (476 ) (758 ) Net deferred tax assets $ 1,678 $ 2,048 Realization of our deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. As of June 30, 2018, our deferred tax asset valuation allowance primarily consists of unrealized capital loss for investments held and the state net operating loss carryforwards for states in which we have filed a final return. For the year ended June 30, 2018, the Company recorded a net valuation allowance of $279,000, on the basis of management’s reassessment of the amount of its deferred tax assets that are more likely than not to be realized. As of June 30, 2018, we did not have any net operating losses for federal and state income tax purposes for state jurisdictions in which we currently operate. We have federal research and development and alternative minimum tax credit carry forwards at June 30, 2018 of approximately $877,000, which begin to expire in 2027. State tax research credit carry forwards at June 30, 2018 amount to $640,000, the majority of which do not expire. As of June 30, 2018, we have accrued $462,000 of unrecognized tax benefits related to federal and state income tax matters that would reduce our income tax expense if recognized. If we are eventually able to recognize our uncertain tax positions, our effective tax rate would be reduced. Any adjustment to our uncertain tax positions would result in an adjustment of our tax credit carryforwards rather than resulting in a cash outlay. Information with respect to our accrual for unrecognized tax benefits is as follows (in thousands): June 30, 2018 2017 Unrecognized tax benefits: Beginning balance $ 446 $ 446 Additions based on federal tax positions related to the current year 16 18 Additions based on state tax positions related to the current year — — Additions for tax positions of prior years — 1 Reductions for tax positions of prior years — (19 ) Ending balance $ 462 $ 446 Although it is reasonably possible that certain unrecognized tax benefits may increase or decrease within the next twelve months due to tax examinations, settlement activities, expirations of statute of limitations, or the impact on recognition and measurement considerations related to the results of published tax cases or other similar activities, we do not anticipate any significant changes to unrecognized tax benefits over the next twelve months. We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense when applicable. As of June 30, 2018, no interest or penalties applicable to our unrecognized tax benefits have been accrued since we have sufficient tax attributes available to fully offset any potential assessment of additional tax. We are subject to U.S. federal income tax, as well as income tax of multiple state tax jurisdictions. We are currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended June 30, 2015 and later. However, because of net operating losses and research credit carryovers, substantially all of our tax years are open to audit. |
NOTES RECEIVABLE
NOTES RECEIVABLE | 12 Months Ended |
Jun. 30, 2018 | |
Notes, Loans and Financing Receivable, Net, Noncurrent [Abstract] | |
NOTES RECEIVABLE | 8. NOTES RECEIVABLE Monogram note receivable – long-term On April 19, 2017, we entered into a Secured Convertible Promissory Note (the “Promissory Note”) with Monogram Orthopaedics Inc. (“Monogram”). Monogram is a New York based medical device start-up specializing in precision, patient-specific orthopedic implants. Pursuant to the terms of the Promissory Note, on April 19, 2017, we advanced Monogram $450,000 and an additional $350,000 on November 21, 2017, upon satisfaction of certain milestones, as determined by us in good faith. The Promissory Note bears interest at 4% per annum calculated on a 360-day year and matures on April 19, 2019, upon which the outstanding principal and accrued interest will become due and payable if not converted to Monogram’s common stock. Accordingly, no interest payments have been made and we have placed the note on nonaccrual status since inception, based upon the likely conversion to common stock. During the fourth quarter of fiscal 2018, we fully impaired the note receivable due to indications that Monogram had exhausted its cash and had been unable to obtain additional financing to enable continued research to commercialize their technology. The $800,000 charge is recorded in asset impairment charges on the accompanying Consolidated Statement of Operations. While we do not expect to recover our investment, our contractual rights are intact should Monogram be successful in its endeavors to raise additional financing. Loan Participation note receivable – short-term On September 20, 2017 (the “Closing Date”), we entered into a Participation Agreement with FS Special Opportunities I, L.P., a Minnesota limited partnership (“Principal”), pursuant to which we paid Principal $1,150,000 in cash to purchase a 50% (“Participation Percentage”) undivided interest (the “Participation”) in Principal’s $2,300,000 loan (the “Loan”) to 414 New York LLC, a New York limited liability company (“Borrower”). The Participation constitutes the purchase by us of a property interest in the Loan from Principal and does not create a creditor-debtor relationship between us and Borrower. Borrower used the proceeds from the Loan to acquire a leasehold interest in certain real estate operated as a hotel in Manhattan, New York. If the Borrower were to default on the Loan, the Principal’s recourse would be limited to taking a pledge of the equity interests of the Borrower. This would provide the Principal with the right to step into the Borrower’s shoes to take control of the hotel’s operations. We have no direct recourse, as we are not a party to the Loan. Pursuant to the loan agreement entered into on the Closing Date between Principal and Borrower, the Loan initially bears interest at a fixed rate of 22% per annum, with payments of all accrued and unpaid interest due monthly commencing on October 1, 2017 and on the first day of each month thereafter. Borrower may reduce the interest rate by 1% for each $100,000 repayment of principal up to a maximum reduction of 2%, thereby reducing the interest rate to a minimum amount equal to 20% per annum. Interest income earned during the fiscal year ended June 30, 2018 totaled $199,000. If the principal balance of the Loan is not paid in full by September 30, 2018, commencing on October 1, 2018 and continuing on the first day of the next 83 months thereafter, Borrower shall, in addition to the aforementioned monthly interest payments, pay installments of principal equal to 1/84 th Fineline note receivable On May 23, 2018, we completed the sale of substantially all of the assets of Fineline, which was engaged in the manufacture of plastic injection molds serving customers in a variety of industries. The aggregate purchase price was $310,000, of which $30,000 was paid in cash at closing and the balance of $280,000 is to be paid to us under the terms of a five-year promissory note, which bears interest at 4% per annum and requires sixty equal monthly payments of principal and accrued interest in the amount of $5,156.63 each, beginning February 15, 2019. We have determined that there is uncertainty regarding the collectability of this note. Therefore, we offset the gain on the sale of the division in the amount of approximately $211,000, against the impairment of the note receivable because the fair market value of the collateral securing the note is less than the face amount of the note, as determined by us. |
NOTES PAYABLE AND FINANCING TRA
NOTES PAYABLE AND FINANCING TRANSACTIONS | 12 Months Ended |
Jun. 30, 2018 | |
Notes Payable [Abstract] | |
NOTES PAYABLE AND FINANCING TRANSACTIONS | 9. NOTES PAYABLE AND FINANCING TRANSACTIONS Farmers & Merchants Bank of Long Beach On April 19, 2017, we entered into a Business Loan Agreement, dated effective March 28, 2017, with Farmers & Merchants Bank of Long Beach (“FMB”), providing for a $500,000 revolving loan facility (the “Revolving Loan Facility”). The Revolving Loan Facility is secured by substantially all of our assets and bears interest at prime plus 2 percent (currently 6.75%) and matured on March 28, 2018. During the initial loan period, we did not borrow any funds. As disclosed in a Form 8-K filed with the SEC on April 17, 2018, we entered into a Change in Terms Agreement and an Amendment #1 to Business Loan Agreement, each dated effective April 6, 2018, which extend the maturity date of the Revolving Loan Facility to March 28, 2019. This loan was terminated by us on September 4, 2018 (See Note 15). Summit Financial Resources LP On September 9, 2015, we entered into a Loan and Security Agreement (the “Summit Loan”) with Summit Financial Resources LP, whereby we could borrow up to $1.0 million against our eligible receivables, as defined in the agreement. Borrowed funds bore interest at a rate of prime plus 2 percent and incurred an additional administrative fee of 0.7 percent on the monthly average outstanding balance. The Summit Loan had an initial period of 18 months. During the fiscal year ended June 30, 2017, we borrowed $600,000 on a revolving basis under the Summit Loan, which amounts were paid in full prior to March 9, 2017, when we terminated the Summit Loan in accordance with its terms. Jules & Associates/Hitachi Capital America Corporation On July 21, 2016, we entered a master equipment lease agreement with Jules and Associates, Inc. to lease a specific machine used in our inspection process. The cost of the equipment was approximately $106,000 and the lease provides for 36 monthly payments in the amount of $3,121, as well as interim rent in the amount of $7,388. The lease was subsequently assigned to Hitachi Capital America Corporation. The balance owed on the lease as of June 30, 2018 is approximately $41,000. Fineline Molds In conjunction with our acquisition of the assets of Fineline, we issued a promissory note to Fineline in the amount of $100,000 which bore interest at 4% per annum and required sixteen equal quarterly payments of principal and accrued interest in the amount of $6,794. The note was secured by all of the assets acquired by us from Fineline. During the quarter ended March 31, 2018, we paid the remaining note balance in full in anticipation of our sale of Fineline. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | 10. COMMITMENTS AND CONTINGENCIES Leases We lease our office, production and warehouse facility in Irvine, California, (our “corporate office”) under an agreement that expires in September 2027. We leased our former San Dimas, California office until the sale of our Fineline division in May 2018 at which time it terminated. We leased our former Beaverton, Oregon office under an agreement that expired in July 2017. Upon the sale of the OMS division, we assigned the Beaverton lease to the purchaser of the division and received sublease income in the amount of $43,000 during fiscal 2017, which was recorded as a reduction to rent expense. Our corporate office lease requires us to pay insurance, taxes, and other expenses related to the leased space. Rent expense in fiscal 2018 and 2017 was $551,000 and $515,000, respectively. Minimum lease payments for future fiscal years ending June 30 are as follows (in thousands): Operating Leases Fiscal Year: 2019 $ 448 2020 461 2021 475 2022 489 2023 504 Thereafter 2,316 Total minimum lease payments $ 4,693 Compensation Arrangements Retirement Savings 401(k) Plan The Pro-Dex, Inc. Retirement Savings 401(k) Plan (the “401(k) Plan”) is a defined contribution plan we administer that covers substantially all our employees and is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended. Employees are eligible to participate in the 401(k) Plan when they have attained 19 years of age and then can enter into the 401(k) Plan on the first day of each calendar quarter. Participants are eligible to receive non-discretionary Pro-Dex matching contributions of 25% of their contributions up to 5% of eligible compensation. For the fiscal years ended June 30, 2018 and 2017, we recognized compensation expense amounting to $54,000 and $53,000, respectively, in connection with the 401(k) Plan. Legal Matters We are from time to time a party to various legal proceedings incidental to our business. There can be no certainty, however, that we may not ultimately incur liability or that such liability will not be material and adverse. |
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION | 12 Months Ended |
Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
SHARE-BASED COMPENSATION | 11. SHARE-BASED COMPENSATION Stock Option Plans Through June 2014, we had two equity compensation plans, the Second Amended and Restated 2004 Stock Option Plan (the “Employee Stock Option Plan”) and the Amended and Restated 2004 Directors’ Stock Option Plan (the “Directors’ Stock Option Plan”) (collectively, the “Former Stock Option Plans”). There was no share-based compensation expense related to the Former Stock Option Plans for the fiscal years ended June 30, 2018 and 2017 as all outstanding options under the Former Stock Option Plans are fully vested. The Employee Stock Option Plan and Director’s Stock Option Plan were terminated in June 2015 and September 2014, respectively. In September 2016, our Board approved the establishment of the 2016 Equity Incentive Plan, which was approved by our shareholders at the November 29, 2016 Annual Meeting. The 2016 Equity Incentive Plan provides for the award of up to 1,500,000 shares of the Company’s common stock in the form of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted shares, restricted stock units, performance awards and other stock-based awards. As of June 30, 2018, 200,000 performance awards have been granted under the 2016 Equity Incentive Plan. Stock Options There were no stock options granted during the fiscal years ended June 30, 2018 and 2017. As of June 30, 2018, there was no unrecognized compensation cost under the stock option plans as all outstanding stock options are fully vested. The intrinsic value of stock options outstanding and exercisable at June 30, 2018 was approximately $272,000. The following is a summary of stock option activity under the stock option plans for the fiscal years ended June 30, 2018 and 2017: Outstanding Options Number of Shares Weighted-Average Exercise Price Balance, July 1, 2016 90,834 $ 1.95 Options granted — — Options canceled or expired — — Options exercised (33,834 ) 2.07 Balance, July 1, 2017 57,000 $ 1.88 Options granted — — Options canceled or expired — — Options exercised — — Balance, June 30, 2018 57,000 $ 1.88 Stock Options Exercisable at June 30, 2018 57,000 $ 1.88 Performance Awards In December 2017, the Compensation Committee of our Board of Directors granted 200,000 performance awards to our employees which will generally be paid in shares of our common stock. Whether any performance awards vest, and the amount that does vest, is tied to the completion of service periods that range from 7 months to 9.5 years at inception and the achievement of our common stock trading at certain pre-determined prices. The weighted average fair value of the performance awards granted was $4.46, calculated using the weighted average fair market value for each award, using a Monte Carlo simulation. We recorded share-based compensation expense of $187,000 for the fiscal year ended June 30, 2018 related to these performance awards. On June 30, 2018, there was approximately $100,000 of unrecognized compensation cost related to these non-vested performance awards expected to be expensed over the weighted-average period of 4.89 years. On July 1, 2018, it was determined by the Compensation Committee of our Board of Directors that the first of five tranches of the performance awards had been achieved and participants were awarded 40,000 shares of common stock. Each participant elected a net issuance to cover their individual withholding taxes and therefore the Company issued 24,727 shares. Employee Stock Purchase Plan In September 2014, our Board approved the establishment of an Employee Stock Purchase Plan (the “ESPP”). The ESPP conforms to the provisions of Section 423 of the Internal Revenue Code, has coterminous offering and purchase periods of six months, and bases the pricing to purchase shares of our common stock on a formula so as to result in a per share purchase price that approximates a 15% discount from the market price of a share of our common stock at the end of the purchase period. Our Board of Directors also approved the provision that shares formerly reserved for issuance under the Former Stock Option Plans in excess of shares issuable pursuant to outstanding options, aggregating 704,715 shares, be reserved for issuance pursuant to the ESPP. The ESPP was approved by our shareholders at the December 3, 2014 Annual Meeting. On February 2, 2015, the Company filed a Registration Statement on Form S-8 registering the 704,715 shares issuable under the ESPP under the Securities Act of 1933. During the fiscal years ended June 30, 2018 and 2017, shares totaling 6,733 and 3,794 were purchased respectively, and allocated to participating employees based upon their contributions at weighted average prices of $5.60 and $4.74, respectively. On a cumulative basis, since the inception of the ESPP, employees have purchased a total of 16,123 shares. During the fiscal year ended June 30, 2018 and 2017, we recorded stock compensation expense in the amount of $7,000 and $3,000, respectively, relating to the ESPP. |
MAJOR CUSTOMERS & SUPPLIERS
MAJOR CUSTOMERS & SUPPLIERS | 12 Months Ended |
Jun. 30, 2018 | |
Risks and Uncertainties [Abstract] | |
MAJOR CUSTOMERS & SUPPLIERS | 12. MAJOR CUSTOMERS & SUPPLIERS Customers that accounted for sales in excess of 10% of our total sales in either of fiscal year 2018 or 2017, is as follows (in thousands, except percentages): Years Ended June 30, 2018 2017 Amount Percent of Total Amount Percent of Total Total revenue $ 22,465 100 % $ 21,943 100 % Customer concentration: Customer 1 $ 12,530 56 % $ 10,939 50 % Customer 2 2,625 11 % 1,566 7 % Customer 3 2,232 10 % 1,761 8 % Total $ 17,387 77 % $ 14,266 65 % Information with respect to accounts receivable from those customers who comprised more than 10% of our gross accounts receivable at either June 30, 2018 or June 30, 2017 is as follows (in thousands, except percentages): June 30, 2018 June 30, 2017 Total gross accounts receivable $ 2,969 100 % $ 3,541 100 % Customer concentration: Customer 1 $ 1,673 56 % $ 2,187 62 % Customer 2 679 23 % 554 16 % Total $ 2,352 79 % $ 2,741 78 % During fiscal 2018 and 2017, we had one supplier that accounted for 11 percent and 10 percent of total purchases, respectively. Accounts payable due to this same significant supplier represented 17 percent and 12 percent of total accounts payable as of June 30, 2018 and 2017, respectively. |
NET INCOME PER SHARE
NET INCOME PER SHARE | 12 Months Ended |
Jun. 30, 2018 | |
Earnings Per Share [Abstract] | |
NET INCOME PER SHARE | 13. NET INCOME PER SHARE We calculate basic earnings per share by dividing net income by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share reflects the effects of potentially dilutive securities. The summary of the basic and diluted earnings per share calculations for the years ended June 30, 2018 and 2017 is as follows (in thousands, except per share data): Years Ended June 30, 2018 2017 Basic: Income from continuing operations $ 1,621 $ 4,841 Weighted average shares outstanding 4,305 4,040 Basic earnings per share from continuing operations $ 0.38 $ 1.20 Income from discontinued operations $ — $ 243 Weighted average shares outstanding 4,305 4,040 Basic earnings per share from discontinued operations $ 0.00 $ 0.06 Net income $ 1,621 $ 5,084 Weighted average shares outstanding 4,305 4,040 Basic earnings per share $ 0.38 $ 1.26 Diluted: Income from continuing operations $ 1,621 $ 4,841 Weighted average shares outstanding 4,305 4,040 Effect of dilutive securities – stock options 40 37 Weighted average shares used in calculation of diluted earnings per share 4,345 4,077 Diluted earnings per share from continuing operations $ 0.37 $ 1.19 Income from discontinued operations $ — $ 243 Weighted average shares used in calculation of diluted earnings per share 4,345 4,077 Diluted earnings per share from discontinued operations $ — $ 0.06 Net income $ 1,621 $ 5,084 Weighted average shares used in calculation of diluted earnings per share 4,345 4,077 Diluted earnings per share $ 0.37 $ 1.25 |
COMMON STOCK
COMMON STOCK | 12 Months Ended |
Jun. 30, 2018 | |
Stockholders' Equity Note [Abstract] | |
COMMON STOCK | 14. COMMON STOCK Share Repurchase Program In September 2013, our Board approved a share repurchase program authorizing the Company to repurchase up to 750,000 shares of our common stock. In accordance with, and as part of, this share repurchase program, our Board has approved the adoption of several prearranged share repurchase plans intended to qualify for the safe harbor Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (“10b5-1 Plan” or “Plan”). During the quarter ended September 30, 2016, our Board approved a 10b5-1 Plan, which became effective on September 8, 2016 and terminated on the earlier of September 8, 2017 or when and if the maximum shares were repurchased. During the quarter ended December 31, 2016, the Investment Committee of our Board approved an additional concurrently running 10b5-1 Plan, which became effective on December 8, 2016 and terminates on the earlier of December 8, 2017 or when and if the maximum shares were repurchased. In February, 2017 our Board terminated the two effective 10b5-1 Plans in conjunction with the approval of our At The Market Offering Agreement (“ATM” or “ATM Agreement”) further described below. During the fiscal year ended June 30, 2017, we repurchased 63,496 shares at an aggregate cost of $312,000, inclusive of fees under the Plans. On March 9, 2018, the Investment Committee of our Board approved a 10b5-1 Plan, which became effective on March 14, 2018 and terminates on the earlier of March 13, 2019 or when and if the maximum shares are repurchased. During the fiscal year ended June 30, 2018, we repurchased 33,026 shares at an aggregate cost, inclusive of fees under the plan of $220,000. On a cumulative basis, we have repurchased a total of 265,983 shares under the share repurchase program at an aggregate cost of $1.1 million. All repurchases under the 10b5-1 Plans were administered through an independent broker. At The Market Offering Agreement In February 2017, our Board approved an ATM Agreement with Ascendiant Capital Markets, LLC (“Ascendiant”). The ATM Agreement allows us to sell shares of our common stock pursuant to specific parameters defined by us as well as those defined by the SEC and the ATM Agreement. During the fiscal year ended June 30, 2017, we sold 8,276 shares of common stock at average prices of $6.04 and raised net proceeds of $48,000. The proceeds collected were accounted for as a reduction of the prepaid expenses relating to establishing the ATM. During the fiscal year ended June 30, 2018, we sold 332,189 shares of common stock under the ATM at average prices of $7.02 per share, resulting in proceeds to us of $2.3 million, net of commissions and fees. From the inception of the ATM in February 2017 through December 31, 2017, we have sold 340,465 shares of common stock for gross proceeds of $2,311,000 net of commissions and fees paid to Ascendiant totaling $72,000. In December 2017, our Board suspended the ATM indefinitely. Our Board has the discretion to reactivate the ATM prior to February 16, 2020, the expiration of the ATM Agreement, unless earlier terminated by Ascendiant or us. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Jun. 30, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | 15. SUBSEQUENT EVENTS On September 6, 2018 (the “Effective Date”), as reported in our Current Report filed with the SEC on September 7, 2018, we entered into a Credit Agreement with Minnesota Bank & Trust, a Minnesota state banking corporation (“MBT”), providing for a $5,000,000 term loan (the “Term Loan”) as well as a $2,000,000 revolving loan (the “Revolving Loan” and together with the Term Loan, collectively the “Loans”), evidenced by a Term Note A and a Revolving Credit Note made by us in favor of MBT. The Loans are secured by substantially all of our assets pursuant to a Security Agreement entered into on the Effective Date between us and MBT. We paid loan origination fees to MBT on the Effective Date in the amount of $60,000. The Term Loan matures on October 1, 2025 and bears interest at a fixed rate of 5.53% per annum. An initial payment of interest only is due on October 1, 2018.Commencing November 1, 2018 and continuing on the first day of each subsequent month thereafter until the maturity date, we are required to make payments of principal and interest on the Term Loan of $71,921.43, plus any additional accrued and unpaid interest through the date of payment. The Revolving Loan matures on September 6, 2019 unless earlier terminated pursuant to its terms and bears interest at the greater of (a) 4.5% or (b) the difference of the prime rate as published in the Money Rates section of the Wall Street Journal minus 0.50%. Commencing on the first day of each month after we initially borrow against the Revolving Loan and each month thereafter until maturity, we are required to pay all accrued and unpaid interest on the Revolving Loan through the date of payment. Any principal on the Revolving Loan that is not previously prepaid shall be due and payable on the maturity date (or earlier termination of the Revolving Loan). Any payment on the Loans not made within seven days after the due date is subject to a late payment fee equal to 5% of the overdue amount. Upon the occurrence and during the continuance of an event of default, the interest rate of both Loans will be increased by 3% and MBT may, at its option, declare the Loans immediately due and payable in full. The Credit Agreement and Security Agreement contain representations and warranties, affirmative, negative and financial covenants, and events of default that are customary for loans of this type. In conjunction with the above, we terminated our loan with Farmers & Merchants Bank of Long Beach effective September 4, 2018. On September 10, 2018, we discovered a supplier quality issue in one of our legacy batteries which will require a product recall. We are currently examining the components that may contain particulates which should have been rejected by our supplier and we are identifying all lots that will be included in the recall as well as the customers that are impacted by the recall. No significant current contracts are affected. For illustrative purposes, to describe the magnitude of the recall, we sold $338,000 of these batteries during fiscal 2018. We are currently investigating the issue and will be able to estimate our expected recall related expenses once the affected lots are identified, anticipated units to be returned are quantified, and potential re-work solutions are identified. At this time, we do not know the amount of other costs that may be incurred related to the recall or any amounts that may be recovered either through our supplier or our $1 million commercial product recall insurance policy, which contains a $50,000 deductible per occurrence. As our analysis is ongoing, we do not know at this time whether or not we will file a claim with our insurance. |
SUMMARY OF SIGNIFICANT ACCOUN23
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of the Company. The wholly owned subsidiaries, Pro-Dex Sunfish Lake, LLC and Pro-Dex Riverside, LLC, both Delaware limited liability companies, were legally dissolved during fiscal 2018. There are no inter-company accounts or transactions. |
Revenue Recognition | Revenue Recognition Revenue on product sales is recognized upon shipment to the customer when risk of loss and title transfer to the customer and all other conditions required by GAAP, as promulgated by the Financial Accounting Standards Board (FASB) in Accounting Standards Codification (ASC) Section 605 Revenue Recognition Revenue from billable product development service portions of development and supply contracts is generally recognized either upon milestone completion or completion of the product development services, in conformity with ASC Section 605. We recognize revenue that is contingent upon the achievement of a substantive milestone in its entirety in the period in which the milestone is achieved. A milestone is considered substantive when the consideration payable to us for such milestone (i) is consistent with our performance necessary to achieve the milestone, (ii) relates solely to our past performance and (iii) is reasonable relative to all of the other deliverables and payments within the arrangement. In making this assessment, we consider all facts and circumstances relevant to the arrangement, including factors such as the scientific, regulatory, commercial and other risks that must be overcome to achieve the milestone, the level of effort and investment required to achieve the milestone and whether any portion of the milestone consideration is related to future performance or deliverables. Accordingly, in certain cases, based upon the evaluation of the criteria above, we record revenue upon milestone completion and in other cases revenue from product development milestone billings to our customers is deferred until completion of all development phases or milestones. Returns of our product for credit are minimal; accordingly, we do not establish a reserve for product returns at the time of sale. We will adopt the requirements of Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers |
Estimated Losses on Product Development Services | Estimated Losses on Product Development Services Cost and revenue estimates related to the product development service portions of development and supply contracts are reviewed and updated quarterly. When it is probable that total costs from the development portion of such contracts will exceed product development service revenue, the expected loss is recognized immediately in cost of sales. Contract costs include all direct material, labor and those indirect costs related to contract performance. Due to the complexity of many of the contracts we have undertaken, the cost estimation process requires significant judgment. It is based upon the knowledge and experience of our project managers, engineers, and finance professionals. Factors that are considered in estimating the cost of work to be completed and ultimate profitability of the fixed price product development portion of development and supply contracts include, among others, the nature and complexity of the work to be performed, availability and productivity of labor, the effect of change orders, the availability of materials, performance of subcontractors, and expected costs for specific regulatory approvals. |
Warranties | Warranties Certain of our products are sold with a warranty that provides for repairs or replacement of any defective parts for a period, generally one to two years, after the sale. At the time of the sale, we accrue an estimate of the cost of providing the warranty based on prior experience with such factors as return rates and repair costs, which factors are reviewed quarterly. The warranty accrual is based on historical costs of warranty repairs and expected future identifiable warranty expenses, and is included in accrued expenses in the accompanying consolidated balance sheets. Warranty expenses are included in cost of sales in the accompanying consolidated statements of operations. Changes in estimates to previously established warranty accruals result from current period updates to assumptions regarding repair costs and warranty return rates, and are included in current period warranty expense. |
Cash and Cash Equivalents | Cash and Cash Equivalents We consider all highly liquid investments with an original maturity of ninety days or less to be cash equivalents. At June 30, 2018 and 2017, cash equivalents consisted of investments in money market funds. |
Accounts Receivable | Accounts Receivable Trade receivables are stated at their original invoice amounts, less an allowance for doubtful portions of such accounts. Management determines the allowance for doubtful accounts based on facts and circumstances related to specific accounts and on historical experience related to the age of accounts. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously reserved are offset against the allowance when received. |
Deferred Costs | Deferred Costs Deferred costs reflect costs incurred related to non-recurring engineering services under the terms of the related development and supply contracts. These costs get recorded to cost of sales in the period that the revenue is recognized pursuant to the terms of the underlying contract with our customer. |
Inventories | Inventories Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. Cost includes materials, labor and manufacturing overhead related to the purchase and production of inventories. Reductions to estimated market value are recorded, and charged to cost of sales, when indicated based on a formula that compares on-hand quantities to both historical usage and estimated demand over the ensuing 12 months from the measurement date. On an on-going basis, we evaluate inventory for obsolescence and slow-moving items. This evaluation includes analysis of historical sales and usage, existing demand, as well as specific factors known to management. As of June 30, 2018, there was approximately $301,000 of inventory in-transit. |
Investments | Investments Investments at June 30, 2018 and 2017 consist of marketable equity securities of publicly held companies. The investments were made to realize a reasonable return, although there is no assurance that positive returns will be realized. Investments are marked to market at each measurement date, with unrealized gains and losses, net of income taxes, presented as adjustments to accumulated other comprehensive income or loss. |
Long-lived Assets | Long-lived Assets We review the recoverability of long-lived assets, consisting of equipment and leasehold improvements, when events or changes in circumstances occur that indicate carrying values may not be recoverable. Equipment and leasehold improvements are recorded at historical cost and depreciation is provided using the straight-line method over the following periods: Equipment Three to ten years Leasehold improvements Shorter of the lease term or the assetÂ’s estimated useful life |
Goodwill & Intangibles | Goodwill & Intangibles We recorded $353,000 of goodwill and $54,000 of trade name in conjunction with the asset purchase of Fineline during the fiscal year ended June 30, 2015. Accordingly, subsequent to the measurement period described below under “Business Combinations,” we assess potential impairment of goodwill and trade name annually, or more frequently if there are events or changes in circumstances that may indicate potential impairment. Intangibles consist of legal fees incurred in connection with patent applications, capitalized software development costs, covenant not to compete, trade name, and customer lists including backlog. Certain of the patent costs are being amortized over a period of seven years, the estimated life of the product that is currently utilizing the patented technology. The remaining patent costs will be amortized over the estimated life of the product(s) that will be utilizing the technology, or expensed immediately in the event the patent office denies the issuance of the patent. The covenant not to compete and customer list including backlog relate to assets acquired in conjunction with the purchase of Huber and Fineline and will be amortized over their estimated useful lives or, in the case of Fineline, retired in connection with our sale of those assets. The expense associated with the amortization of the covenants not to compete and customer list is recognized in selling expenses. |
Business Combinations | Business Combinations We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows, useful lives and discount rates. ManagementÂ’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. There were no business acquisitions during fiscal 2018 and 2017. |
Notes Receivable | Notes Receivable Notes receivable are stated at unpaid principal balance and are subject to impairment losses. Management considers a note impaired when either i) based upon current information or factors it is probable that the principal and interest payments will not be collected, or converted to equity, according to the terms of the secured convertible promissory note or ii) the fair market of the underlying collateral securing the note is less than the book value of the note receivable. |
Income Taxes | Income Taxes We recognize deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities along with net operating losses and tax credit carryovers. Deferred tax assets at both June 30, 2018 and 2017 consisted primarily of basis differences related to research and development tax credit utilization, accrued expenses, inventories and intangible assets. Significant management judgment is required in determining the provision for income taxes and the recoverability of deferred tax assets. Such determination is based on historical taxable income, with consideration given to estimates of future taxable income and the periods over which deferred tax assets will be recoverable. We record a valuation allowance against deferred tax assets to reduce the net carrying value to an amount that we believe is more likely than not to be realized. When we establish or reduce the valuation allowance against deferred tax assets, the provision for income taxes will increase or decrease, respectively, in the period such determination is made. |
Uncertain Tax Positions | Uncertain Tax Positions We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process whereby (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. |
Shipping and Handling | Shipping and Handling Payments from customers for shipping and handling are included in net sales . |
Concentration of Credit Risk | Concentration of Credit Risk Financial instruments that potentially subject us to credit risk consist principally of cash, cash equivalents, and trade receivables. We place our cash and cash equivalents with major financial institutions. At June 30, 2018 and 2017, and throughout the fiscal years then ended, we had deposits in excess of federally insured limits. Credit sales are made to original equipment manufacturers and resellers throughout the world, and sales to such customers account for a substantial portion of our trade receivables. While such receivables are not collateralized, we evaluate their collectability based on several factors including customersÂ’ payment histories. |
Compensation Plans | Compensation Plans We recognize compensation expense for the share-based awards under ASC 718 Compensation-Stock Compensation |
Use of Estimates | Use of Estimates The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Our operations are affected by numerous factors including market acceptance of our products, changes in technologies, and new laws, government regulations and policies. We cannot predict what impact, if any, the occurrence of these or other events might have on our operations. Significant estimates and assumptions made by management include, but are not limited to, revenue recognition, share-based compensation, the allowance for doubtful accounts, accrued warranty expense, inventory valuation, the carrying value of long-lived assets, the recoverability of notes receivable and the recovery of deferred income tax assets. |
Basic and Diluted Per Share Information | Basic and Diluted Per Share Information Basic per share amounts are computed on the basis of the weighted-average number of common shares outstanding during each period presented. Diluted per share amounts assume the exercise of all potential common stock equivalents, consisting solely of options to purchase common stock as discussed in Note 11, unless the effect of such exercise is to increase income, or decrease loss, per common share. |
Fair Value Measurements | Fair Value Measurements Fair value is measured based on the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs used to measure fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions. Cash and cash equivalents: Investments: Notes receivable: Although the methods above may produce a fair value calculation that may not be indicative of the net realizable value or reflective of future fair values, we believe our valuation methods are appropriate. |
Advertising | Advertising Advertising costs are charged to selling or general and administrative expense as incurred and amounted to $36,000 and $3,000 for the fiscal years ended June 30, 2018 and 2017, respectively. |
Recent Accounting Standards | Recent Accounting Standards In May 2014, the FASB issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers In February 2016, the FASB issued ASU 2016-02, (Topic 842) Leases In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments In May 2017, the FASB issued Accounting Standards Update 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting |
Recently Adopted Accounting Standards | Recently Adopted Accounting Standards In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory In January 2017, the FASB issued its final standard on simplifying the test for goodwill impairment. This standard, issued as ASU 2017-04, eliminates step 2 from the goodwill impairment test and instead requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value. This update is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted. We adopted this guidance during the second quarter of fiscal 2018, in conjunction with the performance of our goodwill impairment test. |
Reclassifications | Reclassifications As described in more detail in Note 1 above, the assets relating to our Fineline division have been reclassified as assets held for sale in accordance with applicable accounting guidance. These balance sheet reclassifications had no impact on our consolidated statement of operations. We have reclassified the gain on disposal of equipment to operating income (expense) as prescribed by GAAP. This reclassification has no impact on our net income. We have changed the allowance for doubtful accounts adjustment to reconcile net income to net cash provided by operating activities to bad debt expense (recovery) as prescribed by GAAP. This reclassification has no impact on net cash provided by or used in operating activities. |
DISCONTINUED OPERATIONS (Tables
DISCONTINUED OPERATIONS (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Schedule of operating results of the OMS division | Operating results of the OMS division are as follows (in thousands): Year ended June 30, Revenues $ 715 Income from discontinued operations: Gain on sale, net of taxes of $126,000 $ 201 Income from discontinued operations, before taxes 68 Income expense (26 ) Net income from discontinued operations $ 243 |
GOODWILL AND INTANGIBLE ASSET25
GOODWILL AND INTANGIBLE ASSETS OF FINELINE (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of carrying amount of the fineline goodwill, customer list and trade name | The following table presents the changes in the carrying amount of the Fineline goodwill, customer list, covenant not to compete and trade name (in thousands): Goodwill Customer List Covenant not to Compete Trade Name Balance at June 30, 2016 $ 112 $ 133 $ 16 $ 50 Amortization — (24 ) (5 ) — Balance at June 30, 2017 $ 112 $ 109 $ 11 $ 50 Amortization — (12 ) (3 ) — Impairment charge (112 ) (97 ) — (20 ) Amount sold in conjunction with the sale of Fineline — — (8 ) (30 ) Balance at June 30, 2018 $ — $ — $ — $ — |
COMPOSITION OF CERTAIN FINANC26
COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of investments | Investments are stated at market value and consist of the following (in thousands): June 30, 2018 2017 Marketable equity securities $ 2,220 $ 718 |
Schedule of inventory | Inventory is stated at the lower of cost (first-in, first-out) or net realizable value and consists of the following (in thousands): June 30, 2018 2017 Raw materials /purchased components $ 1,878 $ 1,127 Work in process 974 746 Sub-assemblies /finished components 1,193 1,018 Finished goods 348 193 Total inventory $ 4,393 $ 3,084 |
Schedule of equipment and leasehold improvements | Equipment and leasehold improvements consist of the following (in thousands): June 30, 2018 2017 Office furnishings and fixtures $ 1,821 $ 1,808 Machinery and equipment 4,488 5,140 Leasehold improvements 2,170 2,119 Total 8,479 9,067 Less: Accumulated depreciation and amortization (6,724 ) (7,717 ) $ 1,755 $ 1,350 |
Schedule of intangibles | Intangibles consist of the following (in thousands): June 30, 2018 2017 Covenant not to compete $ 30 $ 30 Patent-related costs 164 153 Total intangibles 194 183 Less accumulated amortization (54 ) (34 ) $ 140 $ 149 |
Schedule of accrued liabilities | Accrued liabilities consist of the following (in thousands): June 30, 2018 2017 Payroll and related items $ 438 $ 417 Accrued inventory in transit 301 52 Accrued legal and professional fees 155 151 Accrued bonuses 109 390 Warranty 107 159 Accrued losses on development contracts 83 — Accrued sales, use and excise taxes 6 9 Deferred rent — 68 Other 67 98 $ 1,266 $ 1,344 |
WARRANTY ACCRUAL (Tables)
WARRANTY ACCRUAL (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Product Warranties Disclosures [Abstract] | |
Schedule of accrual warranty costs | Information relating to the accrual for warranty costs for the years ended June 30, 2018 and 2017 is as follows (in thousands): June 30, 2018 2017 Balance at beginning of year $ 159 $ 365 Accruals during the year 102 316 Change in estimates of prior period accruals (97 ) (224 ) Warranty amortization (57 ) (298 ) Balance at end of year $ 107 $ 159 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Schedule of provision (benefit) for income taxes | The provision (benefit) for income taxes from continuing operations consists of the following amounts (in thousands): Years Ended June 30, 2018 2017 Current: Federal $ 579 $ 34 State 19 40 Deferred: Federal 247 (1,263 ) State 144 (900 ) Income tax expense (benefit) $ 989 $ (2,089 ) |
Schedule of reconciliation federal statutory income tax rates | The effective income tax rate from income (loss) from continuing operations differs from the United States statutory income tax rates for the reasons set forth in the table below (in thousands, except percentages). Years Ended June 30, 2018 2017 Amount Percent Pretax Income Amount Percent Pretax Income Income (loss) from continuing operations before income taxes $ 2,610 100 % $ 2,752 100 % Computed “expected” income tax expense (benefit) on income (loss) from continuing operations before income taxes $ 719 28 % $ 936 34 % State tax, net of federal benefit 73 3 % 270 10 % Tax incentives (47 ) (2 %) (36 ) (1 %) Change in valuation allowance 202 8 % (3,252 ) (118 %) Tax law changes 119 5 % — — Domestic production deduction (84 ) (4 %) — — Other 7 — (7 ) (1 %) Income tax expense (benefit) $ 989 38 % $ (2,089 ) (76 %) |
Schedule of deferred income tax assets and liabilities | Significant components of our deferred tax assets and liabilities for federal and state income taxes are as follows (in thousands): June 30, 2018 2017 Deferred tax assets: Federal & State NOL carryforward $ 23 $ 181 Research & other credits 1,517 1,832 Reserves and accruals 438 180 Stock based compensation 55 — Inventory 371 446 Other intangibles 70 178 Goodwill — 77 Other 48 1 Total gross deferred tax assets $ 2,522 $ 2,895 Less: valuation allowance (368 ) (89 ) Total deferred tax assets 2,154 2,806 June 30, 2018 2017 Deferred tax liabilities: Property and equipment, principally due to differing depreciation methods $ (318 ) $ (438 ) Deferred state tax (152 ) (295 ) Other intangibles — (2 ) Other (6 ) (23 ) Total gross deferred tax liabilities (476 ) (758 ) Net deferred tax assets $ 1,678 $ 2,048 |
Schedule of accrual unrecognized tax benefits | Information with respect to our accrual for unrecognized tax benefits is as follows (in thousands): June 30, 2018 2017 Unrecognized tax benefits: Beginning balance $ 446 $ 446 Additions based on federal tax positions related to the current year 16 18 Additions based on state tax positions related to the current year — — Additions for tax positions of prior years — 1 Reductions for tax positions of prior years — (19 ) Ending balance $ 462 $ 446 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of operating lease minimum lease payments | Rent expense in fiscal 2018 and 2017 was $551,000 and $515,000, respectively. Minimum lease payments for future fiscal years ending June 30 are as follows (in thousands): Operating Leases Fiscal Year: 2019 $ 448 2020 461 2021 475 2022 489 2023 504 Thereafter 2,316 Total minimum lease payments $ 4,693 |
SHARE-BASED COMPENSATION (Table
SHARE-BASED COMPENSATION (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of summary of stock option activity | The following is a summary of stock option activity under the stock option plans for the fiscal years ended June 30, 2018 and 2017: Outstanding Options Number of Shares Weighted-Average Exercise Price Balance, July 1, 2016 90,834 $ 1.95 Options granted — — Options canceled or expired — — Options exercised (33,834 ) 2.07 Balance, July 1, 2017 57,000 $ 1.88 Options granted — — Options canceled or expired — — Options exercised — — Balance, June 30, 2018 57,000 $ 1.88 Stock Options Exercisable at June 30, 2018 57,000 $ 1.88 |
MAJOR CUSTOMERS & SUPPLIERS (Ta
MAJOR CUSTOMERS & SUPPLIERS (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Risks and Uncertainties [Abstract] | |
Schedule of sales by major customers | Customers that accounted for sales in excess of 10% of our total sales in either of fiscal year 2018 or 2017, is as follows (in thousands, except percentages): Years Ended June 30, 2018 2017 Amount Percent of Total Amount Percent of Total Total revenue $ 22,465 100 % $ 21,943 100 % Customer concentration: Customer 1 $ 12,530 56 % $ 10,939 50 % Customer 2 2,625 11 % 1,566 7 % Customer 3 2,232 10 % 1,761 8 % Total $ 17,387 77 % $ 14,266 65 % |
Schedule of accounts receivable of major customers | Information with respect to accounts receivable from those customers who comprised more than 10% of our gross accounts receivable at either June 30, 2018 or June 30, 2017 is as follows (in thousands, except percentages): June 30, 2018 June 30, 2017 Total gross accounts receivable $ 2,969 100 % $ 3,541 100 % Customer concentration: Customer 1 $ 1,673 56 % $ 2,187 62 % Customer 2 679 23 % 554 16 % Total $ 2,352 79 % $ 2,741 78 % |
NET INCOME PER SHARE (Tables)
NET INCOME PER SHARE (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Earnings Per Share [Abstract] | |
Schedule of weighted average shares outstanding calculation of basic and diluted per share | The summary of the basic and diluted earnings per share calculations for the years ended June 30, 2018 and 2017 is as follows (in thousands, except per share data): Years Ended June 30, 2018 2017 Basic: Income from continuing operations $ 1,621 $ 4,841 Weighted average shares outstanding 4,305 4,040 Basic earnings per share from continuing operations $ 0.38 $ 1.20 Income from discontinued operations $ — $ 243 Weighted average shares outstanding 4,305 4,040 Basic earnings per share from discontinued operations $ 0.00 $ 0.06 Net income $ 1,621 $ 5,084 Weighted average shares outstanding 4,305 4,040 Basic earnings per share $ 0.38 $ 1.26 Diluted: Income from continuing operations $ 1,621 $ 4,841 Weighted average shares outstanding 4,305 4,040 Effect of dilutive securities – stock options 40 37 Weighted average shares used in calculation of diluted earnings per share 4,345 4,077 Diluted earnings per share from continuing operations $ 0.37 $ 1.19 Income from discontinued operations $ — $ 243 Weighted average shares used in calculation of diluted earnings per share 4,345 4,077 Diluted earnings per share from discontinued operations $ — $ 0.06 Net income $ 1,621 $ 5,084 Weighted average shares used in calculation of diluted earnings per share 4,345 4,077 Diluted earnings per share $ 0.37 $ 1.25 |
SUMMARY OF SIGNIFICANT ACCOUN33
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2015 | |
Property, Plant and Equipment [Line Items] | |||
Inventory in-transit | $ 301 | ||
Goodwill | $ 353 | ||
Trade name | $ 54 | ||
Advertising expense | $ 36 | $ 3 | |
Patent-related costs [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Amortization period of assets | 7 years | ||
Equipment [Member] | Minimum [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Estimated useful life | 3 years | ||
Equipment [Member] | Maximum [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Estimated useful life | 10 years | ||
Leasehold & Improvement [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Description of estimated useful lives | Shorter of the lease term or the assetÂ’s estimated useful life |
DISCONTINUED OPERATIONS (Narrat
DISCONTINUED OPERATIONS (Narrative) (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2018 | Jan. 27, 2017 | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Tax on gain on sale | $ 126 | |
Oregon Micro Systems ("OMS") [Member] | OREGON [Member] | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Aggregate sales price received | $ 636 |
DISCONTINUED OPERATIONS (Operat
DISCONTINUED OPERATIONS (Operating Results of OMS Division) (Details) $ in Thousands | 12 Months Ended |
Jun. 30, 2017USD ($) | |
Discontinued Operations and Disposal Groups [Abstract] | |
Revenues | $ 715 |
Income from discontinued operations: | |
Gain on sale, net of taxes of $126,000 | 201 |
Income from discontinued operations, before taxes | 68 |
Income expense | (26) |
Net income from discontinued operations | $ 243 |
GOODWILL AND LONG-LIVED ASSETS
GOODWILL AND LONG-LIVED ASSETS OF FINELINE (Goodwill) (Details) - Fineline Molds [Member] - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Goodwill [Line Items] | ||
Goodwill, balance at beginning | $ 112 | $ 112 |
Amortization | ||
Impairment charge | (112) | |
Goodwill, balance at end | $ 112 |
GOODWILL AND LONG-LIVED ASSET37
GOODWILL AND LONG-LIVED ASSETS OF FINELINE (Long-lived Assets) (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Finite-Lived Intangible Assets [Line Items] | ||
Balance at beginning | $ 149 | |
Amortization | (20) | $ (20) |
Balance at end | 140 | 149 |
Fineline Molds [Member] | Customer List [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Balance at beginning | 109 | 133 |
Amortization | (12) | (24) |
Impairment charge | (97) | |
Balance at end | 109 | |
Fineline Molds [Member] | Trade Name [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Balance at beginning | 50 | 50 |
Amortization | ||
Impairment charge | (20) | |
Amount sold in conjunction with the sale of Fineline | (30) | |
Balance at end | 50 | |
Fineline Molds [Member] | Covenant not to Compete [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Balance at beginning | 11 | 16 |
Amortization | (3) | (5) |
Impairment charge | ||
Amount sold in conjunction with the sale of Fineline | (8) | |
Balance at end | $ 11 |
COMPOSITION OF CERTAIN FINANC38
COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS (Narrative) (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Depreciation expenses | $ 522 | $ 505 |
Retired assets | 1,200 | |
Depreciated assets | 359 | |
Cost basis of assets classified as discontinued operations | 160 | |
Accumulated amortization recorded for fixed assets classified as discontinued operations | 81 | |
Amortization expense | 20 | 20 |
Aggregate cost | 2,373 | 663 |
Net unrealized gain (loss) on investments | (153) | 55 |
Gross unrealized losses | 196 | 2 |
Gross unrealized gains | 43 | 57 |
Income taxes on investments | 22 | |
Investment in common stock of company affiliated with company board members | $ 285 | $ 65 |
COMPOSITION OF CERTAIN FINANC39
COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS (Schedule of investments) (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Jun. 30, 2017 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Marketable equity securities | $ 2,220 | $ 718 |
COMPOSITION OF CERTAIN FINANC40
COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS (Inventory) (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Jun. 30, 2017 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Raw materials /purchased components | $ 1,878 | $ 1,127 |
Work in process | 974 | 746 |
Sub-assemblies /finished components | 1,193 | 1,018 |
Finished goods | 348 | 193 |
Total inventory | $ 4,393 | $ 3,084 |
COMPOSITION OF CERTAIN FINANC41
COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS (Schedule of Equipment and leasehold improvements) (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Jun. 30, 2017 |
Property, Plant and Equipment [Line Items] | ||
Total gross | $ 8,479 | $ 9,067 |
Less: Accumulated depreciation and amortization | (6,724) | (7,717) |
Property, plant and equipment, net | 1,755 | 1,350 |
Office Furnishings and Fixtures [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total gross | 1,821 | 1,808 |
Machinery and Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total gross | 4,488 | 5,140 |
Leasehold & Improvement [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total gross | $ 2,170 | $ 2,119 |
COMPOSITION OF CERTAIN FINANC42
COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS (Intangible Assets) (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Jun. 30, 2017 |
Finite-Lived Intangible Assets [Line Items] | ||
Total intangibles | $ 194 | $ 183 |
Less accumulated amortization | (54) | (34) |
Intangible assets,net | 140 | 149 |
Covenant not to Compete [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Total intangibles | 30 | 30 |
Patent-related costs [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Total intangibles | $ 164 | $ 153 |
COMPOSITION OF CERTAIN FINANC43
COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS (Accrued liabilities) (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Jun. 30, 2017 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Payroll and related items | $ 438 | $ 417 |
Accrued inventory in transit | 301 | 52 |
Accrued legal and professional fees | 155 | 151 |
Accrued bonuses | 109 | 390 |
Warranty | 107 | 159 |
Accrued losses on development contracts | 83 | |
Accrued sales, use and excise taxes | 6 | 9 |
Deferred rent | 68 | |
Other | 67 | 98 |
Total accrued expenses | $ 1,266 | $ 1,344 |
WARRANTY ACCRUAL (Narrative) (D
WARRANTY ACCRUAL (Narrative) (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Product Warranties Disclosures [Abstract] | ||
Warranty expenses | $ 5 | $ 92 |
WARRANTY ACCRUAL (Schedule of a
WARRANTY ACCRUAL (Schedule of accrual warranty costs) (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Movement in Standard and Extended Product Warranty, Increase (Decrease) [Roll Forward] | ||
Balance at beginning of year | $ 159 | $ 365 |
Accruals during the period | 102 | 316 |
Change in estimates of prior period accruals | (97) | (224) |
Warranty amortization | (57) | (298) |
Balance at end of year | $ 107 | $ 159 |
INCOME TAXES (Narrative) (Detai
INCOME TAXES (Narrative) (Details) - USD ($) $ in Thousands | 1 Months Ended | 12 Months Ended | ||
Jan. 31, 2018 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Operating Loss Carryforwards [Line Items] | ||||
Corporate tax rate | 21.00% | 38.00% | (76.00%) | |
Federal statutory rate | 28.00% | 34.00% | ||
Increase (Decrease) in deferred tax asset valuation allowance | $ 279 | |||
Unrecognized tax benefits | 462 | $ 446 | $ 446 | |
States Tax Authority [Member] | ||||
Operating Loss Carryforwards [Line Items] | ||||
Net operating loss carry forward | 877 | |||
Tax credit carryforward | $ 640 | |||
Federal Tax Authority [Member] | ||||
Operating Loss Carryforwards [Line Items] | ||||
Tax credit carryforward, expiration year | 2,027 |
INCOME TAXES (Provision for inc
INCOME TAXES (Provision for income tax expense (benefit) (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Current: | ||
Federal | $ 579 | $ 34 |
State | 19 | 40 |
Deferred: | ||
Federal | 247 | (1,263) |
State | 144 | (900) |
Income tax expense (benefit) | $ 989 | $ (2,089) |
INCOME TAXES (Effective income
INCOME TAXES (Effective income tax rate on loss from continuing operations) (Details) - USD ($) $ in Thousands | 1 Months Ended | 12 Months Ended | |
Jan. 31, 2018 | Jun. 30, 2018 | Jun. 30, 2017 | |
Effective Income Tax Rate Reconciliation, Amount [Abstract] | |||
Income (loss) from continuing operations before income taxes | $ 2,610 | $ 2,752 | |
Computed "expected" income tax expense (benefit) on income (loss) from continuing operations before income taxes | 719 | 936 | |
State tax, net of federal benefit | 73 | 270 | |
Tax incentives | (47) | (36) | |
Change in valuation allowance | 202 | (3,252) | |
Tax law changes | 119 | ||
Domestic production deduction | (84) | ||
Other | 7 | (7) | |
Income tax expense (benefit) | $ 989 | $ (2,089) | |
Effective Income Tax Rate Reconciliation, Percent [Abstract] | |||
Income (loss) from continuing operations before income taxes | 100.00% | 100.00% | |
Computed "expected" income tax expense (benefit) on income (loss) from continuing operations before income taxes | 28.00% | 34.00% | |
State tax, net of federal benefit | 3.00% | 10.00% | |
Tax incentives | (2.00%) | (1.00%) | |
Change in valuation allowance | 8.00% | (118.00%) | |
Tax law changes | 5.00% | ||
Domestic production deduction | (4.00%) | ||
Other | (1.00%) | ||
Income tax expense (benefit) | 21.00% | 38.00% | (76.00%) |
INCOME TAXES (Deferred tax asse
INCOME TAXES (Deferred tax assets and liabilities for federal and state income taxes) (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Jun. 30, 2017 |
Deferred tax assets: | ||
Federal & State NOL carryforward | $ 23 | $ 181 |
Research & other credits | 1,517 | 1,832 |
Reserves and accruals | 438 | 180 |
Stock based compensation | 55 | |
Inventory | 371 | 446 |
Other intangibles | 70 | 178 |
Goodwill | 77 | |
Other | 48 | 1 |
Total gross deferred tax assets | 2,522 | 2,895 |
Less: valuation allowance | (368) | (89) |
Total deferred tax assets | 2,154 | 2,806 |
Deferred tax liabilities: | ||
Property and equipment, principally due to differing depreciation methods | (318) | (438) |
Deferred state tax | (152) | (295) |
Other intangibles | (2) | |
Other | (6) | (23) |
Total gross deferred tax liabilities | (476) | (758) |
Net deferred tax assets | $ 1,678 | $ 2,048 |
INCOME TAXES (Accrual for unrec
INCOME TAXES (Accrual for unrecognized tax benefits) (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward] | ||
Beginning balance | $ 446 | $ 446 |
Additions based on federal tax positions related to the current year | 16 | 18 |
Additions based on state tax positions related to the current year | ||
Additions for tax positions of prior years | 1 | |
Reductions for tax positions of prior years | (19) | |
Ending balance | $ 462 | $ 446 |
NOTES RECEIVABLE (Details)
NOTES RECEIVABLE (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 12 Months Ended | ||||
May 23, 2018 | Sep. 20, 2017 | Apr. 19, 2017 | Jun. 30, 2018 | Jun. 30, 2018 | Jun. 30, 2017 | Nov. 21, 2017 | |
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||
Asset impairment charges | $ 1,029,000 | $ 113,000 | |||||
Principal paid in cash | $ 600,000 | ||||||
Monogram Orthopaedics Inc. | |||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||
Advanced amount | $ 450,000 | ||||||
Additional amount advanced on promissory note | $ 350,000 | ||||||
Interest rate | 4.00% | ||||||
Maturity date | Apr. 19, 2019 | ||||||
Asset impairment charges | $ 800,000 | ||||||
Monogram Orthopaedics Inc. | 2,300,000 loan [Member] | New York limited liability company [Member] | |||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||
Interest rate | 22.00% | ||||||
Principal paid in cash | $ 1,150,000 | ||||||
Participation Percentage of loan | 50.00% | ||||||
Loan amount | $ 2,300,000 | ||||||
Start date of loan | Oct. 1, 2017 | ||||||
Debt instrument term | Borrower may reduce the interest rate by 1% for each $100,000 repayment of principal up to a maximum reduction of 2%, thereby reducing the interest rate to a minimum amount equal to 20% per annum. Interest income earned during the fiscal year ended June 30, 2018 totaled $199,000. If the principal balance of the Loan is not paid in full by September 30, 2018, commencing on October 1, 2018 and continuing on the first day of the next 83 months thereafter, Borrower shall, in addition to the aforementioned monthly interest payments, pay installments of principal equal to 1/84th of the principal balance outstanding under the Loan as of September 30, 2018. | ||||||
Fineline note receivable [Member] | |||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||
Aggregate purchase price | $ 310,000 | ||||||
Paid in cash | 30,000 | ||||||
Debt instrument face amount | $ 280,000 | ||||||
Debt instrument term | 5 years | ||||||
Interest rate | 4.00% | ||||||
Periodic payment | $ 5,156.63 | ||||||
Gain on sale of assets | $ 211,000 |
NOTES PAYABLE AND FINANCING T52
NOTES PAYABLE AND FINANCING TRANSACTIONS (Details) - USD ($) $ in Thousands | Sep. 09, 2015 | Apr. 19, 2017 | Jul. 21, 2016 | Jun. 30, 2018 | Jun. 30, 2017 |
Short-term Debt [Line Items] | |||||
Borrowed from Summit loan | $ 600 | ||||
Cost of equipment | 8,479 | 9,067 | |||
Capital lease obligations | 6 | 61 | |||
Fineline Molds [Member] | |||||
Short-term Debt [Line Items] | |||||
Debt instrument, face amount | $ 100 | ||||
Promissory note payment terms | Sixteen equal quarterly payments. | ||||
Interest rate | 4.00% | ||||
Promissory note payment of principal and accrued interest | $ 6,794 | ||||
Jules And Associates, Inc [Member] | Master Equipment Lease Agreement [Member] | |||||
Short-term Debt [Line Items] | |||||
Interim rent | $ 7,388 | ||||
Cost of equipment | 106 | ||||
Amount of payment | $ 3,121 | ||||
Duration of lease payment | 36 months | ||||
Capital lease obligations | $ 41 | ||||
Business Loan Agreement ("Loan Agreement") [Member] | Farmers & Merchants Bank of Long Beach [Member] | |||||
Short-term Debt [Line Items] | |||||
Description of interest rate | bears interest at prime plus 2 percent. | ||||
Debt instrument, maturity date | Mar. 28, 2018 | ||||
Debt instrument, face amount | $ 500 | ||||
Interest rate | 6.75% | ||||
Loan and Security Agreement ("Summit Loan") [Member] | Summit Financial Resources LP, (the "Factor") [Member] | |||||
Short-term Debt [Line Items] | |||||
Description of interest rate | bore interest at a rate of prime plus 2 percent. | ||||
Debt instrument, face amount | $ 1,000 | ||||
Percentage of monthly administrative fee | 0.70% | ||||
Debt instrument, term | 18 months | ||||
Borrowed from Summit loan | $ 600 |
COMMITMENTS AND CONTINGENCIES53
COMMITMENTS AND CONTINGENCIES (Narrative) (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Loss Contingencies [Line Items] | ||
Sublease income | $ 43 | |
Rent expense | $ 551 | 515 |
401(k) Plan [Member] | ||
Loss Contingencies [Line Items] | ||
Percentage of matching contributions | 25.00% | |
Percentage of maximum employee contributions | 5.00% | |
Compensation expense | $ 54 | $ 53 |
COMMITMENTS AND CONTINGENCIES54
COMMITMENTS AND CONTINGENCIES (Schedule of operating lease minimum lease payments) (Details) $ in Thousands | Jun. 30, 2018USD ($) |
Fiscal Year: | |
2,019 | $ 448 |
2,020 | 461 |
2,021 | 475 |
2,022 | 489 |
2,023 | 504 |
Thereafter | 2,316 |
Total minimum lease payments | $ 4,693 |
SHARE-BASED COMPENSATION (Narra
SHARE-BASED COMPENSATION (Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | 12 Months Ended | ||
Dec. 31, 2017 | Sep. 30, 2014 | Jun. 30, 2018 | Jun. 30, 2017 | Nov. 29, 2016 | |
2016 Equity Incentive Plan [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Number of shares available to be awarded | 1,500,000 | ||||
Number of awards granted during period | 200,000 | ||||
Employees Stock Option Plan [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Intrinsic value of stock options outstanding | $ 272 | ||||
Intrinsic value of stock options exercisable | 272 | ||||
ESPP [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Aggregate share-based compensation expense | $ 7 | $ 3 | |||
Description of plan | Offering and purchase periods of six months, and bases the pricing to purchase shares of our common stock on a formula so as to result in a per share purchase price that approximates a 15% discount from the market price of a share of our common stock at the end of the purchase period. | ||||
Number of shares reserved for future issuance | 704,715 | ||||
Number of shares purchased and allocated to employee (in shares) | 6,733 | 3,794 | |||
Exercise price (in dollars per share) | $ 5.60 | $ 4.74 | |||
Number of shares options purchased (in shares) | 16,123 | ||||
Performance Award [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Aggregate share-based compensation expense | $ 187 | ||||
Number of awards granted during period | 200,000 | 40,000 | |||
Period for award description | Completion of service periods that range from 7 months to 9.5 years at inception and the achievement of our common stock trading at certain pre-determined prices. | ||||
Unrecognized compensation cost | $ 100 | ||||
Weighted-average period | 4 years 10 months 21 days | ||||
Weighted average fair value | $ 4.46 | ||||
Number of shares issued | 24,727 |
SHARE-BASED COMPENSATION (Summa
SHARE-BASED COMPENSATION (Summary of Stock Option Activity) (Details) - $ / shares | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | ||
Outstanding at beginning of period | 57,000 | 90,834 |
Options granted | ||
Options canceled or expired | ||
Options exercised | (33,834) | |
Outstanding at end of period | 57,000 | 57,000 |
Stock Options Exercisable at end of period | 57,000 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract] | ||
Outstanding at beginning of period (in dollars per share) | $ 1.88 | $ 1.95 |
Options granted (in dollars per share) | ||
Options canceled or expired (in dollars per share) | ||
Options exercised (in dollars per share) | 2.07 | |
Outstanding at end of period (in dollars per share) | 1.88 | $ 1.88 |
Stock Options Exercisable at end of period (in dollars per share) | $ 1.88 |
MAJOR CUSTOMERS & SUPPLIERS (Sa
MAJOR CUSTOMERS & SUPPLIERS (Sales) (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Concentration Risk [Line Items] | ||
Total revenue | $ 22,465 | $ 21,943 |
Percentage of concentrations risk | 100.00% | 100.00% |
Accounts Receivable [Member] | ||
Concentration Risk [Line Items] | ||
Total gross accounts receivable, including amounts due from factor | $ 2,669 | $ 3,541 |
Percentage of concentrations risk | 100.00% | 100.00% |
Accounts Receivable [Member] | Customer 1 [Member] | ||
Concentration Risk [Line Items] | ||
Total gross accounts receivable, including amounts due from factor | $ 1,673 | $ 2,187 |
Percentage of concentrations risk | 56.00% | 62.00% |
Accounts Receivable [Member] | Customer 2 [Member] | ||
Concentration Risk [Line Items] | ||
Total gross accounts receivable, including amounts due from factor | $ 679 | $ 554 |
Percentage of concentrations risk | 23.00% | 16.00% |
Accounts Receivable [Member] | Customer [Member] | ||
Concentration Risk [Line Items] | ||
Total gross accounts receivable, including amounts due from factor | $ 2,352 | $ 2,741 |
Percentage of concentrations risk | 79.00% | 78.00% |
Sales [Member] | Customer 1 [Member] | ||
Concentration Risk [Line Items] | ||
Total revenue | $ 12,530 | $ 10,939 |
Percentage of concentrations risk | 56.00% | 50.00% |
Sales [Member] | Customer 2 [Member] | ||
Concentration Risk [Line Items] | ||
Total revenue | $ 2,625 | $ 1,566 |
Percentage of concentrations risk | 11.00% | 7.00% |
Sales [Member] | Customer 3 [Member] | ||
Concentration Risk [Line Items] | ||
Total revenue | $ 2,232 | $ 1,761 |
Percentage of concentrations risk | 10.00% | 8.00% |
Sales [Member] | Customer [Member] | ||
Concentration Risk [Line Items] | ||
Total revenue | $ 17,387 | $ 14,266 |
Percentage of concentrations risk | 77.00% | 65.00% |
MAJOR CUSTOMERS & SUPPLIERS (Na
MAJOR CUSTOMERS & SUPPLIERS (Narrative) (Details) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Concentration Risk [Line Items] | ||
Percentage of concentrations risk | 100.00% | 100.00% |
Purchase [Member] | Supplier [Member] | ||
Concentration Risk [Line Items] | ||
Percentage of concentrations risk | 11.00% | 10.00% |
Accounts Payable [Member] | Supplier [Member] | ||
Concentration Risk [Line Items] | ||
Percentage of concentrations risk | 17.00% | 12.00% |
NET INCOME PER SHARE (Details)
NET INCOME PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Basic: | ||
Income from continuing operations | $ 1,621 | $ 4,841 |
Weighted average shares outstanding | 4,304,602 | 4,040,308 |
Basic earnings per share from continuing operations | $ 0.38 | $ 1.20 |
Income from discontinued operations | $ 243 | |
Basic earnings per share from discontinued operations | $ 0 | $ 0.06 |
Net income | $ 1,621 | $ 5,084 |
Basic earnings per share | $ 0.38 | $ 1.26 |
Diluted: | ||
Income from continuing operations | $ 1,621 | $ 4,841 |
Weighted average shares outstanding | 4,304,602 | 4,040,308 |
Effect of dilutive securities - stock options | 40 | 37 |
Weighted average shares used in calculation of diluted earnings per share | 4,344,765 | 4,077,575 |
Diluted earnings per share from continuing operations | $ 0.37 | $ 1.19 |
Income from discontinued operations | $ 243 | |
Diluted earnings per share from discontinued operations | $ 0.06 | |
Net income | $ 1,621 | $ 5,084 |
Diluted earnings per share | $ 0.37 | $ 1.25 |
COMMON STOCK (Details)
COMMON STOCK (Details) - USD ($) $ / shares in Units, $ in Thousands | 11 Months Ended | 12 Months Ended | ||
Dec. 31, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Sep. 30, 2013 | |
Class of Stock [Line Items] | ||||
Proceeds from sale of shares | $ 2,262 | $ 48 | ||
At The Market Offering Agreement [Member] | ||||
Class of Stock [Line Items] | ||||
Number of shares sold | 340,465 | 332,189 | 8,276 | |
Proceeds from sale of shares | $ 2,311 | $ 2,300 | ||
Average share price | $ 7.02 | $ 6.04 | ||
Fees paid to Ascendiant | $ 72 | |||
Share Repurchase Program [Member] | 10b5-1 Plan [Member] | ||||
Class of Stock [Line Items] | ||||
Number of authorized shares to repurchase, shares | 33,026 | 63,496 | 750,000 | |
Number of authorized shares to repurchase, value | $ 220 | $ 312 | ||
Expiration date | Dec. 8, 2017 | |||
Share Repurchase Program [Member] | 10b5-1 Plan [Member] | Cumulative basis [Member] | ||||
Class of Stock [Line Items] | ||||
Number of authorized shares to repurchase, shares | 265,983 | |||
Number of authorized shares to repurchase, value | $ 1,100 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - Subsequent Event [Member] - USD ($) | Sep. 06, 2018 | Sep. 10, 2018 |
Subsequent Event [Line Items] | ||
Sales of batteries subject to product recall | $ 338,000 | |
Value of commercial product recall inventory | 1,000,000 | |
Insurance deductible per occurrence of product recall | $ 50,000 | |
Credit Agreement, with Minnesota Bank and Trust [Member] | ||
Subsequent Event [Line Items] | ||
Loan origination fees | $ 60,000 | |
Credit Agreement, with Minnesota Bank and Trust [Member] | Revolving Loan [Member] | ||
Subsequent Event [Line Items] | ||
Proceeds from issuance of debt | $ 2,000,000 | |
Maturity date | Sep. 6, 2019 | |
Interest rate | 4.50% | |
Default interest rate increased | 3.00% | |
Late payment percentage charge | 5.00% | |
Credit Agreement, with Minnesota Bank and Trust [Member] | Revolving Loan [Member] | Prime Rate [Member] | ||
Subsequent Event [Line Items] | ||
Interest rate description | The Revolving Loan matures on September 6, 2019 unless earlier terminated pursuant to its terms and bears interest at the greater of (a) 4.5% or (b) the difference of the prime rate as published in the Money Rates section of the Wall Street Journal minus 0.50%. | |
Interest rate, basis spread on variable rate | 0.50% | |
Credit Agreement, with Minnesota Bank and Trust [Member] | Term Loan [Member] | ||
Subsequent Event [Line Items] | ||
Proceeds from issuance of debt | $ 5,000,000 | |
Maturity date | Oct. 1, 2025 | |
Interest rate | 5.53% | |
Periodic payment | $ 71,921.43 | |
Default interest rate increased | 3.00% |