(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

If an emerging growth company, indicated by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

As of ~~May 6,~~November 7, 2019, there were ~~9,644,469~~9,692,378 shares of common stock ($0.01 par value per share) are outstanding.

	March 31,			June 30,			September 30,			June 30,
(In Thousands, Except Per Share Amount)	2019			2018			2019			2019
	(unaudited)						(unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	5,429		$	5,830		$	3,998		$	4,585
Short-term investments		741			877			722			1,431
Receivables:
Billed receivables, net of allowance for doubtful accounts of $528 and $404, respectively		24,979			31,797
Unbilled receivables		6,634			-
Billed receivables, net of allowance for doubtful accounts of $509 and $541, respectively								26,541			27,449
Unbilled receivables, net								8,339			5,394
Other receivables		424			346			256			200
Inventories, net of reserves of $1,931 and $2,115, respectively		11,905			13,829
Inventories, net of reserves of $1,814 and $1,778 respectively								10,056			10,810
Other current assets		2,280			1,327			2,304			1,529
Total current assets		52,392			54,006			52,216			51,398

Property and Equipment, Net		6,529			6,613			6,457			6,538
Goodwill		7,699			7,985			1,675			1,741
Intangible Assets, Net		3,165			3,820			1,812			1,816
Long-Term Investments		725			725
Long-Term Deferred Income Tax Asset		658			1,055
Right of Use Assets								3,850			-
Long-Term Investment								725			725
Other Long-Term Assets								85			-
Long-Term Deferred Income Tax Assets								424			620

Total Assets	$	71,168		$	74,204		$	67,244		$	62,838

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Line of credit and short-term notes payable	$	17		$	175
Accounts payable		6,642			7,592			7,248			7,397
Accrued liabilities and expenses		4,237			4,256			3,355			3,609
Accrued compensation		1,636			3,155			2,033			1,646
Current portion of taxes payable		369			526			252			320
Income taxes payable		630			768			621			536
Short-term operating lease liability								514			-
Reserves for restructuring and other charges		-			675			-			44
Deferred revenue		6,155			8,691			7,305			6,649
Total current liabilities		19,686			25,838			21,328			20,201

Long-Term Taxes Payable		194			450			44			114
Long-Term Deferred Income Tax Liability		1,748			1,717			35			41
Long-Term Operating Lease Liability								3,384			-
Other Long-Term Liabilities		573			601			541			556
Total Liabilities	$	22,201		$	28,606		$	25,332		$	20,912

Shareholders' Equity
Preferred stock, no par value, authorized 1,000 shares, issued none		-			-
Common stock, $0.01 par value, authorized 19,000 shares, issued and outstanding 9,644 and 9,554, respectively		96			96
Preferred stock, no par value, authorized 1,000 shares, issued NaN								-			-
Common stock, $0.01 par value, 19,000 shares authorized; 9,667 issued and 9,658 outstanding at September 30, 2019								97			97
Accumulated other comprehensive loss		(2,957	)		(2,098	)		(3,937	)		(3,079	)
Additional paid-in capital		48,915			48,110			49,301			49,083
Retained earnings (deficit)		2,913			(510	)
Retained deficit								(3,549	)		(4,175	)
Total Shareholders' Equity	$	48,967		$	45,598		$	41,912		$	41,926

Total Liabilities and Shareholders' Equity	$	71,168		$	74,204		$	67,244		$	62,838

The notes to the consolidated financial statements are an integral part of these statements.

	Three Months Ended						Nine Months Ended						Three Months Ended
	March 31,						March 31,						September 30,
(In Thousands, Except Per Share Amounts)	2019			2018			2019			2018			2019			2018
																(As Revised)
Net Sales	$	15,632		$	21,397		$	58,627		$	61,099		$	17,850		$	21,442
Cost of Sales		10,485			13,475			37,338			38,120			10,808			13,150
Gross Profit		5,147			7,922			21,289			22,979			7,042			8,292

Operating Expenses
Selling, general and administrative		4,415			4,700			13,992			13,621			4,243			4,635
Engineering, research and development		1,812			2,132			6,090			5,662			1,828			2,198
Severance, impairment and other charges		-			(3	)		(609	)		603
Total operating expenses		6,227			6,829			19,473			19,886			6,071			6,833

Operating (Loss) Income		(1,080	)		1,093			1,816			3,093
Operating Income														971			1,459

Other Income and (Expenses)
Interest expense, net		(16	)		(53	)		(72	)		(137	)		(24	)		(27	)
Foreign currency (loss) gain, net		(127	)		63			(178	)		(16	)		(211	)		(202	)
Other income, net		28			24			33			49			33			-
Total other (expense) and income		(115	)		34			(217	)		(104	)
Total other income and (expense)														(202	)		(229	)

(Loss) Income Before Income Taxes		(1,195	)		1,127			1,599			2,989
Income Before Income Taxes														769			1,230

Income Tax Benefit (Expense)		130			(107	)		(225	)		(45	)
Income Tax Expense														(143	)		(276	)

Net (Loss) Income	$	(1,065	)	$	1,020		$	1,374		$	2,944
Net Income													$	626		$	954

(Loss) Income Per Common Share
Income Per Common Share
Basic	$	(0.11	)	$	0.11		$	0.14		$	0.31		$	0.06		$	0.10
Diluted	$	(0.11	)	$	0.11		$	0.14		$	0.31		$	0.06		$	0.10

Weighted Average Common Shares Outstanding
Basic		9,627			9,539			9,601			9,468			9,661			9,560
Dilutive effect of stock options		-			152			110			74			3			212
Diluted		9,627			9,691			9,711			9,542			9,664			9,772

The notes to the consolidated financial statements are an integral part of these statements.

	Three Months Ended					Nine Months Ended					Three Months Ended
	March 31,					March 31,					September 30,
(In Thousands)	2019			2018		2019			2018		2019			2018
Net (Loss) Income	$	(1,065	)	$	1,020	$	1,374		$	2,944
														(As Revised)
Net Income											$	626		$	954
Other Comprehensive (Loss) Income:
Foreign currency translation adjustments		(93	)		884		(859	)		2,290		(858	)		(397	)

Comprehensive (Loss) Income	$	(1,158	)	$	1,904	$	515		$	5,234	$	(232	)	$	557

The notes to the consolidated financial statements are an integral part of these statements.

		Nine Months Ended							Three Months Ended
		March 31,							September 30,
(In Thousands)		2019			2018				2019			2018
												(As Revised)
Cash Flows from Operating Activities
Net income		$	1,374		$	2,944			$	626		$	954
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			1,692			1,701
Depreciation and amortization, includes $116 amortization of ROU assets (imputed)										480			567
Stock compensation expense			533			791				214			211
Asset impairment and related inventory write-down			-			(59	)
Non-cash lease expense										2			-
Deferred income taxes			186			(593	)			171			(194	)
Loss on disposal of assets			15			14
Loss (gain) on disposal of assets										8			(15	)
Allowance for doubtful accounts			124			121				(32	)		(6	)
Changes in assets and liabilities:
Receivables			1,216			3,594				(3,130	)		(243	)
Inventories			339			(3,237	)			524			700
Accounts payable			(783	)		(1,010	)			67			229
Accrued liabilities and expenses			(1,406	)		(105	)			316			(657	)
Deferred revenue			(462	)		(431	)			841			498
Other assets and liabilities			(2,200	)		(1,136	)			(880	)		(240	)
Net cash provided by operating activities			628			2,594
Net cash (used for) provided by operating activities										(793	)		1,804

Cash Flows from Investing Activities
Purchases of short-term investments			(2,199	)		(4,569	)			(607	)		(669	)
Sales of short-term investments			2,431			3,686				1,245			988
Capital expenditures			(809	)		(481	)			(249	)		(502	)
Capital expenditures - intangibles			(311	)		(322	)			(125	)		(93	)
Net cash used for investing activities			(888	)		(1,686	)
Net cash provided by (used for) investing activities										264			(276	)

Cash Flows from Financing Activities
Payments on lines of credit and short-term borrowings, net			(155	)		(137	)			-			(53	)
Proceeds from stock plans			329			471				1			201
Cash payment for shares surrendered upon vesting of restricted stock units to cover taxes			(55	)		(19	)
Cash payment for shares surrendered upon vesting of RSU's to cover taxes										-			(15	)
Net cash provided by financing activities			119			315				1			133

Effect of Exchange Rate Changes on Cash and Cash Equivalents			(150	)		271				(89	)		(54	)

Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash			(291	)		1,494				(617	)		1,607
Cash, Cash Equivalents and Restricted Cash, July 1			5,996			3,943				4,843			5,996
Cash, Cash Equivalents and Restricted Cash, March 31		$	5,705		$	5,437
Cash, Cash Equivalents and Restricted Cash, September 30									$	4,226		$	7,603

Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest		$	73		$	211			$	24		$	29
Cash paid during the period for income taxes		$	553		$	605			$	104		$	277

		March 31, 2019			June 30, 2018				September 30, 2019			June 30, 2019
Cash and Cash Equivalents		$	5,429		$	5,830			$	3,998		$	4,585
Restricted Cash included in Short-term Investments			276			166				228			258
Total Cash, Cash Equivalents and Restricted Cash		$	5,705		$	5,996			$	4,226		$	4,843

The notes to the consolidated financial statements are an integral part of these statements.	The notes to the consolidated financial statements are an integral part of these statements.							The notes to the consolidated financial statements are an integral part of these statements.

	Three Months Ended						Nine Months Ended						Three Months Ended
	March 31,						March 31,						September 30,
(In Thousands)	2019			2018			2019			2018			2019			2018
Common Stock																(As Revised)
Beginning balance	$	96		$	95		$	96		$	94		$	97		$	96
Issued		-			1			-			2			-			-
Ending balance		96			96			96			96			97			96

Accumulated Other Comprehensive (Loss) Income
Accumulated Other Comprehensive Loss
Beginning balance		(2,864	)		(1,315	)		(2,098	)		(2,721	)		(3,079	)		(2,096	)
Other comprehensive (loss) income		(93	)		884			(859	)		2,290
Other comprehensive loss														(858	)		(397	)
Ending balance		(2,957	)		(431	)		(2,957	)		(431	)		(3,937	)		(2,493	)

Additional Paid-In Capital
Beginning balance		48,753			47,336			48,110			46,688			49,083			48,110
Stock-based compensation		39			137			533			533			172			211
Stock plans		123			455			272			707			46			186
Ending balance		48,915			47,928			48,915			47,928			49,301			48,507

Retained Earnings (Deficit)
Beginning balance		3,978			(2,302	)		(510	)		(4,226	)		(4,175	)		567
Adoption of ASC 606 - modified retrospective transition method		-			-			2,049			-			-			2,049
Net (loss) income		(1,065	)		1,020			1,374			2,944
Net income														626			954
Ending balance		2,913			(1,282	)		2,913			(1,282	)		(3,549	)		3,570

Total Shareholders' Equity	$	48,967		$	46,311		$	48,967		$	46,311		$	41,912		$	49,680

The notes to the consolidated financial statements are an integral part of these statements.

Perceptron, Inc. (“Perceptron” “we”, “us” or “our”) develops, produces and sells a comprehensive range of automated industrial metrology products and solutions to manufacturers for dimensional gauging, dimensional inspection and 3D scanning. Our products provide solutions for manufacturing process control as well as sensor and software technologies for non-contact measurement, scanning and inspection applications. We also offer value added services such as training and customer support.

The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and within the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. Our Consolidated Financial Statements include the accounts of Perceptron and our wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. In our opinion, these statements include all normal recurring adjustments necessary for a fair presentation of the financial statements for the periods presented. The results of operations for any interim period are not necessarily indicative of the results of operations for a full fiscal year. The accompanying unaudited Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements in our ~~2018~~2019 Annual Report on Form 10-K for the fiscal year ended June 30, ~~2018.~~2019.

Management is required to make certain estimates and assumptions under U.S. GAAP during the preparation of these Consolidated Financial Statements. These estimates and assumptions may affect the reported amounts of assets and liabilities as well as the 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.

During the fourth quarter of fiscal 2019, an error was identified related to the accounting for our deferred tax liabilities associated with certain amortizable intangible assets acquired in 2015. The error relates to not appropriately reducing the associated deferred tax liabilities for the tax effect of amortization on the intangible assets since 2016. The error was immaterial to our previously issued financial statements, but the cumulative correction would have had a material effect on the 2019 financial statements. Accordingly, the results for the quarter ended September 30, 2018 have been adjusted to incorporate the revised amounts, where applicable. See Note 1, of the Notes to the Consolidated Financial Statements, “Summary of Significant Accounting Policies - Revision of Previously Issued Financial Statements” contained in Item 8 of our Annual Report on Form 10-K for further discussion.

	Three Months ended September 30, 2018								Three Months ended September 30, 2017
	(In Thousands Except Per Share Amounts)								(In Thousands Except Per Share Amounts)

	As Previously					As			As Previously					As
	Reported			Adjustment		Revised			Reported			Adjustment		Revised

Net Sales	$	21,442		$	-	$	21,442		$	19,269		$	-	$	19,269
Cost of Sales		13,150			-		13,150			11,619			-		11,619
Gross Profit		8,292			-		8,292			7,650			-		7,650

Operating Expenses		6,833			-		6,833			6,105			-		6,105

Operating Income		1,459			-		1,459			1,545			-		1,545

Other Income and (Expense)		(229	)		-		(229	)		(34	)		-		(34	)

Income Before Income Taxes		1,230			-		1,230			1,511			-		1,511

Income Tax Benefit (Expense)		(338	)		62		(276	)		47			62		109

Net Income	$	892		$	62	$	954		$	1,558		$	62	$	1,620

Income Per Common Share
Basic	$	0.09		$	0.01	$	0.10		$	0.16		$	0.01	$	0.17
Diluted	$	0.09		$	0.01	$	0.10		$	0.16		$	0.01	$	0.17

Weighted Average Common Shares Outstanding
Basic		9,560			-		9,560			9,453			-		9,453
Dilutive effect of stock options		212			-		212			49			-		49
Diluted		9,772			-		9,772			9,502			-		9,502

As a result of the above revision, Total Comprehensive Income was increased from $495 to $557 for the three months ended September 30, 2018.

The consolidated statements of cash flow are not presented because there is no impact on total cash flows from operating activities, investing activities, and financing activities. Certain components of net cash provided by operating activities changed, as caused by the revision, but the net change amounted to 0 for the three months ended September 30, 2018.

The consolidated balance sheets are not presented because there is no impact of this revision for the three months ended September 30, 2019 or for the fiscal year ended June 30, 2019.

As a result of the above revision, in the consolidated statement of shareholder’s equity, net income was increased from $892 to $954 for the three months ended September 30, 2018.

~~Certain prior period amounts have been reclassified in the Consolidated Statements of Cash Flow due to the adoption of Accounting Standards Update No. 2016-18,~~ ~~Statement of Cash Flows (Topic 230): Restricted Cash~~ ~~(ASU 2016-18).~~

In ~~February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-02~~ ~~Leases~~ (ASU 2016-2), which establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02, as amended, is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. In January 2018, the FASB issued Accounting Standards Update No. 2018-01, ~~Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842~~, which permits an entity to elect an optional transition practical expedient to not evaluate land easements under Topic 842. A modified retrospective transition approach was originally required for lessees with capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. In July 2018, the FASB issued ASU 2018-11 ~~Leases (Topic 842): Targeted Improvements,~~ which created an optional transition method to adopt ASU 2016-02. The optional method is a modified retrospective approach whereby an entity can initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to their opening balance of retained earnings. In March 2019, the FASB issued ASU 2019-01 ~~Leases (Topic 842): Codification Improvements,~~ ~~which clarified three specific issues related to Topic 842.~~ We have commenced a detailed analysis of ASU 2016-02 (as amended) and have noted that not all of the items that we have been including in prior Annual Reports on Form 10-K as a “lease” meet the definition of a lease under Topic 842. Furthermore, we have determined that we will use the modified retrospective approach as our transition method. We believe that our Consolidated Balance Sheet will be impacted as we record a ROU and lease liability for all leases that meet the new definition. In addition, our disclosures will be enhanced as we provide the required level of detail related to our leasing activities.

In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments – Credit Losses (Topic 326) (ASU 2016-13), which requires the measurement of all expected credit losses for financial assets held at the reporting date to be based on historical experience, current conditions as well as reasonable and supportable forecasts. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses (ASU 2018-19). ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of ASU 2016-13. ASU 2016-13, as amended, is effective for ~~fiscal years beginning after December 15, 2019 including interim periods within those fiscal years,~~Perceptron on July 1, 2020, with early adoption permitted. We ~~are currently evaluating~~do not expect the impact of the adoption of ASU 2016-13 to be material on our consolidated financial statements.

~~In February 2018, the FASB issued Accounting Standards Update 2018-02—Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income~~ ~~(ASU 2018-02), which~~allows for a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. ASU 2018-02 is effective for Perceptron on July 1, 2019 and is not expected to have a significant impact on our consolidated financial statements or disclosures.

In July 2018, the FASB issued Accounting Standards Update No. 2018-09 — Codification Improvements (ASU 2018-09), which clarifies, corrects and makes minor improvements on a wide variety of Topics in the Codification. The amendments make the Codification easier to understand and apply by eliminating inconsistencies and providing clarifications. The transition and effective dates are based on the facts and circumstances of each amendment, including some amendments that will be effective upon issuance of the update and many of them will be effective for annual periods beginning after December 31, 2018. For the amendments that were effective upon issuance of the Update, there was no material impact to our consolidated financial statements or disclosures. ~~We are currently evaluating the impact of the remaining amendments of ASU 2018-09 on our consolidated financial statements and disclosures.~~

In August 2018, the FASB issued Accounting Standards Update No. 2018-13 – Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirement for Fair Value Measurement (ASU 2018-13), which changes the disclosures related to, among other aspects of fair value, unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurement and the narrative description of measurement uncertainty. ASU 2018-13 is effective for Perceptron on July 1, ~~2020. We are currently evaluating the~~2020 and is not expected to have a significant impact ~~of the adoption of ASU 2018-13~~ on our consolidated financial statements of disclosures.

In August 2018, the FASB issued Accounting Standards Update No. 2018-15 – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract (ASU 2018-15), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing costs incurred to develop or obtain inter-use software. ASU 2018-15 is effective for Perceptron on July 1, 2020. We are currently evaluating the impact of ~~the adoption of ASU 2018-15~~this standard on our consolidated financial statements and disclosures.

In ~~May 2014,~~February 2016, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. ~~2014-09,~~2016-02 ~~Revenue from Contracts with Customers~~Leases ~~(ASU 2014-09)~~(ASU 2016-2), which ~~supersedes nearly~~establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition processleases with terms longer than were required under previous U.S. GAAP. In March 2016, the FASB issued the final guidance to clarify the principal versus agent guidance (i.e., whether an entity should report revenue gross or net). In April 2016, the FASB issued final guidance to clarify identifying performance obligation and the licensing implementation guidance. In May 2016, FASB updated implementation of certain narrow topics within ASU 2014-09. Finally, in December 2016, the FASB issued several technical corrections and improvements, which clarified the previously issued standards and corrected unintended application of previous guidance. These standards (collectively “ASC 606”) were effective for annual periods beginning after December 15, 2017 (as amended in August 2015, by ASU 2015-14, ~~Deferral of the Effective Date~~), and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the applications of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a modified retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures).

12 months. We adopted ~~the new standard effective~~this guidance on July 1, ~~2018~~2019, using the modified retrospective approach.

The adoption of the standard resulted in the recognition of net operating lease right-of-use assets of $4.0 million and operating lease liabilities of $3.9 million on the condensed consolidated balance sheet as of July 1, 2019 primarily related to our real estate operating leases. The operating lease right-of-use asset includes the impact of deferred rent. We do not have any finance leases.

We elected to apply the package of practical expedients upon transition, ~~method only~~which includes no reassessment of whether existing contracts are or contain leases and allowed for the ~~contracts that were open~~lease classification for existing leases to be retained. We did not elect the practical expedient to use hindsight, and accordingly the initial lease term did not differ under the new standard versus prior accounting practice. After transition, in certain instances, the cost of renewal options will be recognized earlier in the term of the lease than under the previous lease accounting rules. We have selected as our accounting policy to keep leases with a term of ~~June 30, 2018 with~~twelve months or less off the ~~cumulative effect recorded~~balance sheet and recognize these lease payments on a straight-line basis over the lease term.

See Note 10 of the Notes to the ~~opening balance of retained earnings as of the date of adoption. Results~~Consolidated Financial Statements, “Leases” contained in this Quarterly Report on Form 10-Q for ~~reporting periods beginning July 1, 2018 are presented under ASC 606, while prior period amounts were not adjusted and continue to be reported in accordance with our historic accounting under ASC 605,~~ ~~Revenue Recognition~~. Under ASC 606, certain of our services are recognized over time instead of at a point in time upon completion of those services as recognized under superseded guidance. Additionally, for our contracts with multiple performance obligations in which the payment terms do not correspond with

performance, we are no longer required to limit the revenue recognized for satisfied performance obligations to the amount for which payment is not delayed until the satisfaction of additional performance obligations. Instead, we record revenue for each of the performance obligations as control transfers to the customer, which generally accelerates the revenue recognized for such contracts compared to revenue recognized under superseded guidance. We also capitalize amounts related to certain commissions paid which qualify as costs to obtain a contract. The revenues associated with our Measurement Solutions and Value Added Services that were impacted beginning at July 1, 2018, which were included in the modified transition method adjustment, aggregated to $3.8 million. The net impactfurther information on ~~retained earnings associated with these revenues was an increase of $2,049,000~~. We have also implemented new business processes and internal controls in order to recognize revenue in accordance with the new standard. See Note 5 “Revenue from Contracts with Customers” for the further details regarding the impact of the ~~adoption of this Standard.~~new standard.

~~The following table summarizes the cumulative effect of the changes to our unaudited Consolidated Balance Sheet as of July 1, 2018 from the adoption of ASC 606:~~

Under the modified retrospective method of adoption, we are required to disclose in the first year of adoption the hypothetical impact to our financial statements as if we had continued to follow our accounting policies under ASC 605 for the period. See Note 5 “Revenue from Contracts with Customers” for a summary of the impact as of and for the three and nine months ended March 31, 2019.

~~In January 2016, the FASB issued Accounting Standards Update No. 2016-01,~~ ~~Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities~~ ~~(ASU 2016-01), which amends certain aspects of recognition, measurement, presentation and disclosure of financial instruments.~~ In February 2018, the FASB issued Accounting Standards Update ~~No. 2018-03~~ 2018-02—~~Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10)~~Income Statement—Reporting Comprehensive Income (Topic 220): ~~Recognition and Measurement~~Reclassification of ~~Financial Assets and Financial Liabilities~~ Certain Tax Effects from Accumulated Other Comprehensive Income~~(ASU 2018-03)~~ (ASU 2018-02), which ~~contains technical corrections~~allows for a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and ~~improvements related to~~Jobs Act. ASU ~~2016-01.~~We2018-02 was adopted ~~both ASU 2016-01 and ASU 2018-03~~ on July 1, ~~2018. Adoption of these standards~~2019 and did not have a ~~material~~significant impact on our consolidated financial statements or disclosures.

~~In August 2016, the FASB issued Accounting Standards Update No. 2016-15,~~ ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~ (ASU 2016-15), which made eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. We adopted ASU 2016-15 on July 1, 2018. Adoption of this standard did not have a material impact on our Consolidated Statement of Cash Flow.

~~In October 2016, the FASB issued Accounting Standards Update No. 2016-16,~~ ~~Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory~~ (ASU 2016-16), which requires that an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. We adopted ASU 2016-16 on July 1, 2018. Adoption of this standard did not have a material impact on our consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, which requires a company to present their Statement of Cash Flow including amounts generally described as restricted cash or restricted cash equivalents with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. We adopted ASU 2016-18 on July 1, 2018. We hold restricted cash in short-term bank guarantees to provide financial assurance that we will fulfill certain customer obligations in China. These balances are part of “Short-term investments” on our Consolidated Balance Sheet. The activity in this account is no longer considered an investing activity on our Consolidated Statement of Cash Flow.

~~In January 2017, the FASB issued Accounting Standards Update No. 2017-01,~~ ~~Business Combinations (Topic 805): Clarifying the Definition of a Business~~ (ASU 2017-01), which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. We adopted ASU 2017-01 on July 1, 2018. ~~Adoption of this standard did not have a material impact on our consolidated financial statements.~~

~~In February 2017, the FASB issued Accounting Standards Update No. 2017-05,~~ ~~Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets~~ (ASU 2017-05), which clarifies the scope of Subtopic 610-20 and adds guidance for partial sales of nonfinancial assets. Subtopic 610-20, which was issued in May 2014 as a part of Accounting Standards Update No. 2014-09, provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. We adopted ASU 2017-05 on July 1, 2018. Adoption of this standard did not have a material impact on our consolidated financial statements.

~~In May 2017, the FASB issued Accounting Standards Update No. 2017-09,~~ ~~Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting~~ ~~(ASU 2017-09), which provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718,~~ ~~Compensation—Stock Compensation~~, to a change to the terms or conditions of a share-based payment award. We adopted ASU 2017-09 on July 1, 2018. Adoption of this standard did not have a material impact on our consolidated financial statements.

Goodwill ~~represents the excess purchase price over the fair value of the net amounts assigned~~is not subject to ~~assets acquired~~amortization and ~~liabilities assumed~~is reviewed at least annually in ~~connection with our acquisitions. Under the FASB’s Accounting Standards Codification (“ASC”) Topic 350,~~ ~~Intangibles – Goodwill and Other~~, we are required to test goodwill for impairment annually or more frequently, whenever events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit with goodwill below its carrying amount. Application of the goodwill impairment test requires judgment, including assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units and determination of the fair value of each reporting unit. The qualitative events or circumstances that could affect the fair value of a reporting unit could include economic conditions; industry and market considerations, including competition; increases in raw materials, labor, or other costs; overall financial performance such as negative or declining cash flows; relevant entity-specific events such as changes in management, key personnel, strategy, or customers; sale or disposition of a significant portion of a reporting unit; and regulatory or political developments.

Companies have the option to evaluate goodwill based upon these qualitative factors, and if it is more likely than not that the fair value of the reporting unit is greater than its carrying amount, then no further goodwill impairment tests are necessary. If the qualitative review indicates it is more likely than not that the fair value of the reporting unit is less than its carrying amount, or if we choose not to perform a qualitative assessment, a quantitative impairment test is performed to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized, if any. During the fourth quarter of ~~fiscal 2018, we elected~~each year using data as of March 31 of that year, or earlier if an event occurs or circumstances change and there is an indicator of impairment. The impairment test consists of comparing a reporting unit’s fair value to ~~complete a quantitative~~its carrying value. A reporting unit is defined as an operating segment or one level below an operating segment. Goodwill is recorded in our CMM reporting unit. A significant amount of judgment is involved in determining if an indicator of goodwill impairment ~~test which resulted~~has occurred. Such indicators may include, among others: a significant decline in ~~no impairment.~~expected future cash flows; a significant adverse change in legal factors or in the business climate; unanticipated competition; and the testing for recoverability of a significant asset group. Our goodwill impairment analysis also includes a comparison of the aggregate estimated fair value of all reporting units to our total market capitalization. Therefore, our stock may trade below our book value and a significant and sustained decline in our stock price and market capitalization could result in goodwill impairment charges.

The quantitative goodwill impairment test contains estimates regarding future revenue growth and expense levels. To the extent that actual results do not meet projected results, it could result in a material impairment to goodwill which could negatively impact our results of operations.

In the fourth quarter of fiscal 2019, we completed our annual goodwill impairment testing. The impairment test consisted of a quantitative assessment due to a decrease in our stock price in the fourth quarter 2019 and uncertainty with future revenue growth primarily due to companies postponing decisions about purchasing new capital goods such as CMMs. Based on the results of the 2019 annual impairment test, the fair value of our CMM reporting unit was less than its carrying value. As a result, we recorded a non-cash goodwill impairment charge of $6.0 million due to the lack of projected growth in the sales of our Off-Line Measurement Solutions. This impairment is not deductible for income tax purposes.

Goodwill is recorded on the local books of ~~Coord3 and NMS.~~our CMM reporting unit. Foreign currency effects will impact the balance of goodwill in future periods. Our goodwill balance was ~~$7,699,000~~$1,675,000 and ~~$7,985,000~~$1,741,000 as of ~~March 31,~~September 30, 2019 and June 30, ~~2018,~~2019, respectively, with the decrease due to the differences in foreign currency rates at ~~March 31,~~September 30, 2019 compared to June 30, ~~2018.~~2019.

At September 30, 2019, there are no indications of potential impairment of goodwill.

We acquired intangible assets consisting of a Trade Name and Customer/Distributor Relationships in addition to goodwill in connection with the acquisitions of Coord3 and NMS in the third quarter of fiscal ~~2015.~~2015 which is considered our CMM reporting unit. Furthermore, we continue to develop intangibles, primarily software. These assets are susceptible to shortened estimated useful lives and changes in fair value due to changes in their use, market or economic changes, or other events or circumstances. ~~We evaluate~~The amortization periods for customer/distributor relationships, trade name and software are five years, ten years and five years, respectively.

During the ~~potential~~fourth quarter of fiscal 2019, due to the impairment indicators discussed in Note 1, we assessed whether the carrying amounts of ~~these intangible~~our long-lived assets whenever events or circumstances indicate their carrying value may not be recoverable. Factors that could trigger an impairment review include historical or projected results that are less than the assumptions used in the ~~original valuation of an intangible~~CMM reporting unit (the asset ~~a change in our business strategy or our use of an intangible asset or negative economic or industry trends.~~

~~If an event or circumstance indicates that the carrying value of an intangible asset~~group) may not be recoverable weand therefore may be impaired. To assess the recoverability, the undiscounted cash flows of the asset ~~by comparing~~group were analyzed over a range of potential remaining useful lives with the customer relationships as the primary asset. The result was that the asset group carrying value ~~of the asset to~~exceeded the sum of the undiscounted ~~future~~ cash ~~flows that the asset is expected to generate over its remaining economic life. If the carrying value exceeds the sum of the undiscounted future cash flows, we compare the~~flows. After a fair value ~~of the intangible asset to the carrying value~~analysis, we determined that our trade name and ~~record an~~customer relationships were impaired. We recorded a non-cash impairment loss ~~for the difference. We generally estimate the fair value of our~~related to these definite-lived intangible assets ~~using the income approach based on a discounted cash flow model. The income approach requires the use~~ of ~~many assumptions and estimates including future revenues and expenses, discount factors, income tax rates, the identification of groups of~~$1.4 million. There were no impairment indicators for other long-lived assets with highly independent cash flows, and assets’ economic lives. Volatility in the global economy makes these assumptions and estimates more judgmental. Actual future operating results and the remaining economic lives of our intangible assets could differ from those used in assessing the recoverability of these assets and could result in an impairment of intangible assets in future periods. Through March 31,subject to amortization.

At September 30, 2019, there are no indications of potential impairment of these intangible assets.

	March 31,					March 31,		June 30,					June 30,		September 30,					September 30,		June 30,											June 30,
	2019					2019		2018					2018		2019					2019		2019											2019
	Gross					Net		Gross					Net		Gross					Net		Gross					Impact of						Net
	Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying		Carrying		Impairments			Foreign			Accumulated			Carrying
	Amount		Amortization			Amount		Amount		Amortization			Amount		Amount		Amortization			Amount		Amount					Currency			Amortization			Amount
Customer/Distributor Relationships	$	3,206	$	(2,618	)	$	588	$	3,329	$	(2,219	)	$	1,110	$	-	$	-		$	-	$	3,249	$	(589	)	$	(7	)	$	(2,653	)	$	-
Trade Name		2,490		(1,017	)		1,473		2,586		(862	)		1,724		1,655		(1,048	)		607		2,523		(795	)		(8	)		(1,059	)		661
Software		1,798		(694	)		1,104		1,490		(504	)		986		2,027		(822	)		1,205		1,902		-			-			(747	)		1,155
Other		-		-			-		124		(124	)		-
Total	$	7,494	$	(4,329	)	$	3,165	$	7,529	$	(3,709	)	$	3,820	$	3,682	$	(1,870	)	$	1,812	$	7,674	$	(1,384	)	$	(15	)	$	(4,459	)	$	1,816

Amortization expense was ~~$306,000~~$104,000 and ~~$312,000~~$291,000 for the three months ended ~~March 31, 2019 and 2018, respectively. Amortization expense was $877,000 and $874,000 for the nine months ended March 31,~~September 30, 2019 and 2018, respectively.

The estimated amortization of the remaining intangible assets by year is as follows (in thousands):

Years Ending June 30,	Amount		Amount
2019 (excluding the nine months ended March 31, 2019)		334
2020		901
2020 (excluding the three months ended September 30, 2019)				252
2021		474		373
2022		474		412
2023		430		377
after 2023		552
2024				324
after 2024				74
	$	3,165	$	1,812

The FASB has issued ASC 606 which supersedes the revenue recognition requirements in ASC 605 and requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.

~~We adopted~~ ~~ASC~~ 606 as of July 1, 2018 using the modified retrospective transition method. The cumulative effect of initially applying the new standard was recorded as an adjustment to the opening balance of retained earnings within our Consolidated Balance Sheet. The adjustment to retained earnings was the result of changing the timing of our revenue for several performance obligations and the number of performance obligations in our contracts with multiple performance obligations, as well as ceasing the deferral of revenue on satisfied performance obligations for the portion of the sales price of the contract that is not payable until additional performance obligations are satisfied. The revenues associated with our Measurement Solutions and Value Added Services that were impacted beginning July 1, 2018 which were included in the modified transition method adjustment aggregated $3.8 million. The net impact on retained earnings associated with these revenues was an increase of $2,049,000. For all adjustments and changes as a result of adopting ~~ASC~~ ~~606 for the current period, please refer to the section “Financial Statement Impact of Adopting ASC 606~~” below. In accordance with the modified retrospective transition method, the historical information within the financial statements has not been restated and continues to be reported under the accounting standard in effect for those periods. As a result, we have disclosed the accounting policies in effect prior to July 1, 2018, as well as the policies applied starting July 1, 2018.

~~Revenue is recognized in accordance with ASC 605. Revenue related to products and services is recognized upon shipment when title and risk of loss has passed to the customer or upon completion~~of the service, there is persuasive evidence of an arrangement, the sales price is fixed or determinable, collection of the related receivable is reasonably assured and customer acceptance criteria, if any, have been successfully demonstrated.

We also have multiple element arrangements in our Measurement Solutions product line which may include elements such as: equipment, installation, labor support and/or training. Each element has value on a stand-alone basis and the delivered elements do not include general rights of return. Accordingly, each element is considered a separate unit of accounting. When available, we allocate arrangement consideration to each element in a multiple element arrangement based upon vendor specific objective evidence (“VSOE”) of fair value of the respective elements. When VSOE cannot be established, we attempt to establish the selling price of each element based on relevant third-party evidence. Our products contain a significant level of proprietary technology, customization or differentiation; therefore, comparable pricing of products with similar functionality cannot be obtained. In these cases, we utilize our best estimate of selling price (“BESP”). We determine the BESP for a product or service by considering multiple factors including, but not limited to, pricing practices, internal costs, geographies and gross margin.

For multiple element arrangements, we defer from revenue recognition the greater of the relative fair value of any undelivered elements of the contract or the portion of the sales price of the contract that is not payable until the undelivered elements are completed. As part of this evaluation, we limit the amount of revenue recognized for delivered elements to the amount that is not contingent on the future delivery of products or services, including a consideration of payment terms that delay payment until those future deliveries are completed.

Some multiple element arrangements contain installment payment terms with a final payment (“final buy-off”) due upon the completion of all elements in the arrangement or when the customer’s final acceptance is received. We recognize revenue for each completed element of a contract when it is both earned and realizable. A provision for final customer acceptance generally does not preclude revenue recognition for the delivered equipment element because we rigorously test equipment prior to shipment to ensure it will function in our customer’s environment. The final acceptance amount is assigned to specific element(s) identified in the contract, or if not specified in the contract, to the last element or elements to be delivered that represent an amount at least equal to the final payment amount.

Our Measurement Solutions are designed and configured to meet each customer’s specific requirements. Timing for the delivery of each element in the arrangement is primarily determined by the customer’s requirements and the number of elements ordered. Delivery of all of the multiple elements in an order will typically occur over a three to 15-month period after the order is received. We do not have price protection agreements or requirements to buy back inventory. Our history demonstrates that sales returns have been insignificant.

Revenue is recognized when or as our customer obtains control of promised goods or services in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To achieve this principle, we analyze our contracts under the following five steps:

We have contracts with multiple performance obligations in our Measurement Solutions product line such as: equipment, installation, labor support and/or training. Each performance obligation is distinct and we do not provide general rights of return for transferred goods and services. Accordingly, each performance obligation is considered a separate unit of accounting. Our Measurement Solutions are designed and configured to meet each customer’s specific requirements. Timing for the delivery of each performance obligation in the arrangement is primarily determined by the customer’s requirements. Delivery of all of performance obligations in an order will typically occur over a three to 15-month period after the order is received. For the equipment performance obligation, we typically recognize revenue when we ship or when the equipment is received by our customer, depending on the specific terms of the contract with our customer. We have elected to treat shipping and handling costs as an activity necessary to fulfill the performance obligation to transfer product to the customer and not as a separate performance obligation. For the installation, labor support and training performance obligations, we generally recognize revenue over time as we perform because of the continuous transfer of control to the customer. Because control transfers over time, based on labor hours, revenue is recognized based on the extent of progress toward completion of the performance obligation. We do not have price protection agreements or requirements to buy back inventory. Our history demonstrates that sales returns have been insignificant.

We manage our business under three operating segments: Americas, Europe and Asia. All of our operating segments rely on our core technologies and sell the same products, primarily in the global automotive industry. The segments also possess similar economic characteristics, resulting in similar long-term expected financial performance. In addition, we sell to substantially the same customers in all of our operating segments. Accordingly, our operating segments are aggregated into one reportable segment.

The following tables summarizes our ~~revenue~~ disaggregated ~~by geography,~~revenue, based on our shipping location (in thousands):

	Three Months Ended		Nine Months Ended		Three Months Ended September 30,
Geographic Region:	March 31, 2019		March 31, 2019		2019		2018
Americas Sales	$	4,376	$	19,747	$	6,167	$	8,379
Europe Sales		8,013		25,666		7,120		8,782
Asia Sales		3,243		13,214		4,563		4,281
Total Net Sales	$	15,632	$	58,627	$	17,850	$	21,442

~~We have three major product lines: Measurement Solutions, 3D Scanning Solutions and Value Added Services.~~ Sales by our product lines are as follows (in thousands):

	Three Months Ended		Nine Months Ended		Three Months Ended September 30,
Product Lines	March 31, 2019		March 31, 2019		2019		2018
Measurement Solutions	$	13,849	$	53,257	$	16,168	$	19,908
3D Scanning Solutions		773		2,485		945		730
Value Added Service		1,010		2,885		737		804
Total Net Sales	$	15,632	$	58,627	$	17,850	$	21,442

Our revenues can be disaggregated between two categories (1) Goods transferred at a point in time, which typically includes the equipment performance obligation of our Measurement Solutions and contracts that include a single performance obligation and (2) Services transferred over time, which include installation, labor support and training performance obligations.

The following table summarizes ~~these two~~our revenue categories for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2019 (in thousands):

	Three Months Ended		Nine Months Ended		Three Months Ended September 30,
Timing of Revenue Recognition	March 31, 2019		March 31, 2019		2019		2018
Goods transferred at a point of time	$	11,613	$	43,394	$	13,176	$	15,200
Services transferred over time		4,019		15,233		4,674		6,242
Total Net Sales	$	15,632	$	58,627	$	17,850	$	21,442

Backlog represents orders or bookings we have received but have not yet been filled, that is, our unsatisfied performance obligations as of the reporting date. Although most of the backlog is subject to cancellation by our customers, we expect to fill substantially all of the orders. Our history demonstrates that cancellations have not been significant. Obligations

The estimated recognition of our ~~Backlog by~~remaining unsatisfied performance obligations beyond one year is as follows (in thousands):

Years Ending June 30,	Amount		Amount
2019 (excluding the nine months ended March 31, 2019)	$	16,309
2020		16,894
2020 (excluding the three months ended September 30, 2019)			$	14,866
2021		2,506		1,663
2022		15		1,026
2023		-		-
after 2023		-
Total Backlog	$	35,724
2024				-
after 2024				-
Total			$	17,555

The timing of revenue recognition, billings and cash collections results in “Billed receivables”, “Unbilled receivables” and “Deferred revenue” on our Consolidated Balance Sheets. Our collections are typically 45 to 90 days after invoicing, depending on region and individual contracts with our customers, which does not always align with the timing of revenue recognition. In addition, we defer certain costs incurred to obtain a contract, primarily related to sales commissions.

~~Billed receivables, net~~ – Billed receivables, net includes amounts billed and currently due from our customers. The amounts due are stated at their net estimated realizable value. Billed receivables are stated net of an allowance for doubtful accounts. Billed receivables outstanding longer than the contractual payment terms are considered past due. We determine our allowance for doubtful accounts by considering a number of factors, including the length of time trade accounts receivable are past due, our previous loss history, our customers’ current ability to pay their outstanding balance due to us, the condition of the general economy and the industry as a whole. We write-off billed receivables when they become uncollectible and payments subsequently received on such receivables are credited to the allowance for doubtful accounts.

~~Unbilled receivables~~ – Our unbilled receivables include unbilled amounts typically resulting from our Measurement Solutions as we recognize revenue when or as performance obligations are satisfied; however, the revenue amount exceeds the amount billed to the customer and the right to payment is not solely due to the passage of time. Amounts may not exceed their net realizable value.

~~Deferred revenues~~ ~~– We record deferred revenues when billings are issued in advance of our satisfaction of specific performance obligations.~~

~~Our Unbilled receivables and Deferred revenues are reported in a net position on a contract-by-contract basis at the end of each reporting period.~~

Impairment losses recognized on our Billed and Unbilled receivables were $65,000 in the three months ended March 31, 2019. Impairment losses recognized on our Billed and Unbilled receivables were $170,000 in the nine months ended March 31, 2019.

Deferred commissions – Our incremental direct costs of obtaining a contract, which consist primarily of sales commissions, are deferred and amortized based on the timing of revenue recognition over the period of contract performance. As of ~~March 31,~~September 30, 2019, capitalized commissions of ~~$203,000~~$198,000 were included in “Other current assets” on our Consolidated Balance Sheet. Commission expense recognized during the three ~~and nine~~ months ended ~~March 31,~~September 30, 2019 and 2018, was ~~$136,000~~$190,000 and ~~$694,000,~~$253,000, respectively, is included in “Selling, general and administrative expense” in our Consolidated Statement of Operations.

The change in our net Unbilled receivables / (Deferred revenue) from July 1, ~~2018~~2019 to ~~March 31,~~September 30, 2019 was primarily due to the amount of revenue recognized as we satisfied performance obligations during the ~~nine~~three months ended ~~March 31,~~September 30, 2019, partially offset by the amount and timing of invoicing during that same timeframe related to our Measurement Solutions and 3D Scanning Solutions. During the ~~nine~~three months ended ~~March 31,~~September 30, 2019, we recognized revenue of ~~$4,990,000~~$3,573,000 that was included in “Deferred revenue” at July 1, ~~2018.~~

2019. ~~Financial Statement Impact~~During the three months ended September 30, 2018, we recognized revenue of ~~Adopting ASC 606~~$3,331,000 that was included in ‘Deferred revenue’ at July 1, 2018.

The following table summarizes the cumulative effect of the changes to our unaudited Consolidated Balance Sheet as of March 31, 2019 from the adoption of ASC 606 (in thousands, except per share amount):

As reported

Balances

March 31,

ASC 606

without adoption

2019

Adjustments

of ASC 606

(unaudited)

ASSETS

Current Assets

Cash and cash equivalents

$
5,429

$
-

$
5,429

Short-term investments

741

-

741

Receivables:

Billed receivables, net

24,979

-

24,979

Unbilled receivables, net

6,634

(6,634
)

-

Other receivables

424

-

424

Inventories, net

11,905

4,134

16,039

Other current assets

2,280

(251
)

2,029

Total current assets

52,392

(2,751
)

49,641

Property and Equipment, Net

6,529

-

6,529

Goodwill

7,699

-

7,699

Intangible Assets, Net

3,165

-

3,165

Long-Term Investments

725

-

725

Long-Term Deferred Income Tax Asset

658

-

658

Total Assets

$
71,168

$
(2,751
)

$
68,417

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities

Line of credit and short-term notes payable

$
17

$
-

$
17

Accounts payable

6,642

-

6,642

Accrued liabilities and expenses

4,237

-

4,237

Accrued compensation

1,636

-

1,636

Current portion of taxes payable

369

-

369

Income taxes payable

630

630

Reserves for restructuring and other charges

-

-

-

Deferred revenue

6,155

2,936

9,091

Total current liabilities

19,686

2,936

22,622

Long-Term Taxes Payable

194

-

194

Long-Term Deferred Income Tax Liability

1,748

(1,320
)

428

Other Long-Term Liabilities

573

-

573

Total Liabilities

$
22,201

$
1,616

$
23,817

Shareholders' Equity

Preferred stock

-

-

-

Common stock

96

-

96

Accumulated other comprehensive loss

(2,957
)

119

(2,838
)
Additional paid-in capital

48,915

-

48,915

Retained earnings (deficit)

2,913

(4,486
)

(1,573
)
Total Shareholders' Equity

$
48,967

$
(4,367
)

$
44,600

Total Liabilities and Shareholders' Equity

$
71,168

$
(2,751
)

$
68,417

~~The following tables summarize the effect of adopting ASC 606 on our unaudited Consolidated Statement of Operations for the three and nine months ended March 31, 2019 (in thousands):~~

As reported

Three Months Ended

ASC 606

Balances without

March 31, 2019

Adjustments

adoption of ASC 606

Net Sales

$
15,632

$
(3,254
)

$
12,378

Cost of Sales

10,485

(1,463
)

9,022

Gross Profit

5,147

(1,791
)

3,356

Operating Expenses

Selling, general and administrative

4,415

2

4,417

Engineering, research and development

1,812

-

1,812

Severance, impairment and other charges

-

-

-

Total operating expenses

6,227

2

6,229

Operating Loss

(1,080
)

(1,793
)

(2,873
)

Other Income and (Expenses)

Interest expense, net

(16
)

-

(16
)
Foreign currency gain, net

(127
)

-

(127
)
Other income (expenses), net

28

-

28

Total other income and (expenses)

(115
)

-

(115
)

Loss Before Income Taxes

(1,195
)

(1,793
)

(2,988
)

Income Tax Benefit

130

381

511

Net Loss

$
(1,065
)

$
(1,412
)

$
(2,477
)

As reported

Nine Months Ended

ASC 606

Balances without

March 31, 2019

Adjustments

adoption of ASC 606

Net Sales

$
58,627

$
(5,831
)

$
52,796

Cost of Sales

37,338

(2,784
)

34,554

Gross Profit

21,289

(3,047
)

18,242

Operating Expenses

Selling, general and administrative

13,992

202

14,194

Engineering, research and development

6,090

-

6,090

Severance, impairment and other charges

(609
)

-

(609
)
Total operating expenses

19,473

202

19,675

Operating Income (Loss)

1,816

(3,249
)

(1,433
)

Other Income and (Expenses)

Interest expense, net

(72
)

-

(72
)
Foreign currency loss, net

(178
)

-

(178
)
Other income (expenses), net

33

-

33

Total other income and (expenses)

(217
)

-

(217
)

Income (Loss) Before Income Taxes

1,599

(3,249
)

(1,650
)

Income Tax (Expense) Benefit

(225
)

830

605

Net Income (Loss)

$
1,374

$
(2,419
)

$
(1,045
)

~~We account for our investments in accordance with ASC 320,~~ ~~“Investments – Debt and Equity Securities~~”. Investments with a term to maturity between three months to one year are considered short-term investments. Our investments are recorded at fair value. Upon adoption of ASU 2016-01 effective July 1, 2018, changes in the fair value of our equity securities are recognized in net income. Prior to the adoption of ASU 2016-01, unrealized gains and losses on available-for-sale equity investments were recorded in other comprehensive income, and at each balance sheet date, we evaluated our investments for possible other-than-temporary impairment, which involved significant judgment. In making this judgment, we reviewed factors such as the length of time and extent to which fair value had been below the cost basis, the anticipated recovery period, the financial condition of the issuer, the credit rating of the instrument and our ability and intent to hold the investment for a period of time which may be sufficient for recovery of the cost basis. Any losses determined to be other-than-temporary were charged as an impairment loss and recorded in earnings.

As of ~~March 31,~~September 30, 2019, and June 30, ~~2018,~~2019, we held restricted cash in short-term bank guarantees. The restricted cash provides financial assurance that we will fulfill certain customer obligations in China. The cash is restricted as to withdrawal or use while the related bank guarantee is outstanding. Interest is earned on the restricted cash and recorded as interest income. As of ~~March 31,~~September 30, 2019, and June 30, ~~2018~~2019, we had short-term bank guarantees of ~~$276,000~~$228,000 and ~~$166,000,~~$258,000, respectively.

At ~~March 31,~~September 30, 2019, we held a long-term investment in preferred stock that is not registered under the Securities Act of 1933, as amended and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The preferred stock investment is currently recorded at $725,000 after consideration of impairment charges recorded in fiscal years 2008 and 2009. ~~We estimated that~~At September 30, 2019 there were no changes to the ~~fair market~~carrying value of ~~this~~the investment ~~at March 31, 2019 exceeded $725,000 based on~~resulting from observable price changes in orderly transactions for an ~~internal valuation model, which included~~identical or similar investment in the ~~use of a discounted cash flow model.~~issuer. ~~The fair market analysis considered the following key inputs:~~

~~Under ASC 820~~ ~~“Fair Value Measurements and Disclosures”~~ ~~(“ASC 820”) such valuation assumptions are defined as Level 3 inputs.~~

The following table presents our Short-Term and Long-Term Investments by category at ~~March 31,~~September 30, 2019 and June 30, ~~2018~~2019 (in thousands):

	March 31, 2019				September 30, 2019
	Cost		Fair Value or Carrying Value		Cost		Fair Value or Carrying Value
Short-Term Investments
Bank Guarantees	$	276	$	276	$	228	$	228
Mutual Funds		13		13
Time/Fixed Deposits		452		452		494		494
Total Short-Term Investments	$	741	$	741	$	722	$	722

Long-Term Investments
Preferred Stock	$	3,700	$	725	$	3,700	$	725
Total Long-Term Investments		3,700		725		3,700		725

Total Investments	$	4,441	$	1,466	$	4,422	$	1,447


	June 30, 2018				June 30, 2019
	Cost		Fair Value or Carrying Value		Cost		Fair Value or Carrying Value
Short-Term Investments
Bank Guarantees	$	166	$	166	$	258	$	258
Mutual Funds		23		23
Time/Fixed Deposits		688		688		1,173		1,173
Total Short-Term Investments	$	877	$	877	$	1,431	$	1,431

Long-Term Investments
Preferred Stock	$	3,700	$	725	$	3,700	$	725
Total Long-Term Investments	$	3,700	$	725	$	3,700	$	725

Total Investments	$	4,577	$	1,602	$	5,131	$	2,156

~~For a discussion on our fair value measurement policies~~ASC 820, “Fair Value Measurements and Disclosures” is applicable for Financial Instruments, refer to Note 1 in our Consolidated Financial Statements, “Summary of Significant Accounting Policies – Financial Instruments”, of our Annual Report on Form 10-K for fiscal year ended ~~June 30, 2018~~.

~~We have not changed our valuation techniques in measuring the fair value of any~~all financial assets and liabilities ~~during~~as well as nonfinancial assets and liabilities that are recognized or disclosed at fair value in the ~~period.~~financial statements on a recurring basis. ASC 820 defines fair value, establishes a framework for measuring fair value and required specific disclosures about fair value measurements. Our financial instruments include investments classified as available for sale, mutual funds, fixed deposits and certificate of deposits at September 30, 2019.

ASC 820 establishes a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs) or reflect our assumptions of market participant valuation (unobservable inputs). These two types of inputs create the following fair value hierarchy:

ASC 820 requires the use of observable market data if such data is available without undue cost and effort.

The following table presents our investments at ~~March 31,~~September 30, 2019 and June 30, ~~2018~~2019 that are measured and recorded at fair value on a recurring basis consistent with the fair value hierarchy provisions of ASC 820 (in thousands). The fair value of our short-term investments approximates their cost basis.

Description	March 31, 2019		Level 1		Level 2		Level 3		September 30, 2019		Level 1		Level 2		Level 3
Mutual Funds	$	13	$	13	$	-	$	-
Time/Fixed Deposits and Bank Guarantees		728		-		728		-	$	722	$	-	$	722	$	-
Preferred Stock		725		-		-		725
Total	$	1,466	$	13	$	728	$	725	$	722	$	-	$	722	$	-

Description	June 30, 2018		Level 1		Level 2		Level 3		June 30, 2019		Level 1		Level 2		Level 3
Mutual Funds	$	23	$	23	$	-	$	-
Time/Fixed Deposits and Bank Guarantees		854		-		854		-	$	1,431	$	-	$	1,431	$	-
Preferred Stock		725		-		-		725
Total	$	1,602	$	23	$	854	$	725	$	1,431	$	-	$	1,431	$	-

Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates. At September 30, 2019 we did 0t record any other-than-temporary impairments on our financial assets required to be measured on a recurring basis.

We also measure certain assets and liabilities at fair value on a nonrecurring basis. These assets are tested for impairment when events or circumstances occur which may indicate that the derived fair value is below carrying cost or on an annual basis in accordance with applicable GAAP. For these assets, we do not periodically adjust carrying value fair value except in the event of an impairment.

There were 0 assets or liabilities measured at fair value on a non-recurring basis at September 30, 2019.

Inventory is stated at the lower of cost or net realizable value using the first-in, first-out (“FIFO”) method. We provide a reserve for obsolescence to recognize inventory impairment for the effects of engineering change orders, and for age and use of inventory that affect the value of the inventory. The reserve for obsolescence creates a new cost basis for the impaired inventory. When inventory that has previously been impaired is sold or disposed of, the related obsolescence reserve is reduced resulting in the reduced cost basis being reflected in cost of goods sold. A detailed review of the inventory is performed annually with quarterly updates for known changes that have occurred since the annual review. Inventory, net of reserves of ~~$1,931,000~~$1,814,000 and ~~$2,115,000~~$1,778,000 at ~~March 31,~~September 30, 2019 and June 30, ~~2018~~,2019, respectively, is comprised of the following (in thousands):

	At March 31,		At June 30,		At September 30,		At June 30,
	2019		2018		2019		2019
Component Parts	$	5,345	$	5,156	$	5,146	$	5,229
Work in Process		1,686		3,525		1,434		1,383
Finished Goods		4,874		5,148		3,476		4,198
Total	$	11,905	$	13,829	$	10,056	$	10,810

Our property and equipment consisted of the following as of ~~March 31,~~September 30, 2019 and June 30, ~~2018~~2019 (in thousands):

	At March 31,			At June 30,			At September 30,			At June 30,
	2019			2018			2019			2019
Building and Land	$	7,658		$	7,844		$	7,624		$	7,647
Machinery and Equipment		14,633			14,578			11,679			11,616
Furniture and Fixtures		1,176			1,060			1,278			1,286
		23,467			23,482			20,581			20,549
Less: Accumulated Depreciation		(16,938	)		(16,869	)		(14,124	)		(14,011	)
	$	6,529		$	6,613		$	6,457		$	6,538

Depreciation expense was ~~$252,000~~$260,000 and ~~$250,000~~$276,000 for the three months ended ~~March 31, 2019 and 2018, respectively. Depreciation expense was $815,000 and $827,000 for the nine months ended March 31,~~September 30, 2019 and 2018, respectively.

We lease office space for our manufacturing, sales and service operations, vehicles and office equipment under operating leases.

In accordance with Accounting Standard Codification Topic 842 (“ASC 842”) we have elected not to apply ASC 842 to arrangements with lease terms less than 12 months.

Operating lease right-of-use assets and liabilities are reflected within the captions “Right-of-use assets”, “Short-term operating lease liability” and “Long-term operating lease liability”, respectively, on the Consolidated Balance Sheet. Right-of-use assets, Short-term operating lease liability and Long-term operating lease liability were $3,850,000, $514,000 and $3,384,000 as of September 30, 2019, respectively.

When readily determinable, the discount rate used to calculate the lease liability is the rate implicit in the lease. Otherwise we applied judgement and used our incremental borrowing rate based on the information available at lease commencement.

Some of our leases include one or more renewal or termination options at our discretion, which are included in the determination of the lease term if we are reasonably certain to exercise the option.

There were 0 Right-of-use leased assets obtained in exchange for new operating lease liabilitiesfor the three months ended September 30, 2019.

Lease expense, recorded in the cost of sales and selling, general & administrative expense categories in our Consolidated Statement of Operations total $184,000 for the first quarter of fiscal 2020.

Cash paid for operating leases was $182,000 during the three months ended September 30, 2019 and is included in operating cash flows.

The weighted average remaining lease term for operating leases was 7 years and the weighted average discount rate was 5.3% as of September 30, 2019.

Our In-Line and Near-Line Measurement Solutions generally carry a one to three-year warranty for parts and a one-year warranty for labor and travel related to warranty. Product sales to the forest products industry carry a three-year warranty for TriCam® sensors. Sales of ScanWorks® have a one-year warranty for parts. Sales of WheelWorks® products have a two-year warranty for parts. We provide a reserve for warranty based on our experience and knowledge. Our Off-Line Measurement Solutions generally carry a 12-month warranty after the machine passes the acceptance test or a 15-month warranty from the date of shipment, whichever date comes first, on parts only. We provide a reserve for warranty based on our experience and knowledge.

Factors affecting our warranty reserve include the number of units sold or in service as well as historical and anticipated rates of claims and cost per claim. We periodically assess the adequacy of our warranty reserve based on changes in these factors. If a special circumstance arises which requires a higher level of warranty, we make a special warranty provision commensurate with the facts. Changes to our warranty reserve are as follows (in thousands):

	Nine Months Ended March 31,						Three Months Ended September 30,
	2019			2018			2019			2018
Beginning Balance at July 1,	$	391		$	548		$	341		$	391
Accruals - Current Year		509			712			153			255
Settlements/Claims (in cash or in kind)		(642	)		(863	)		(170	)		(286	)
Effects of Foreign Currency		(2	)		7			(2	)		-
Ending Balance at March 31,	$	256		$	404
Ending Balance at September 30,							$	322		$	360

We had ~~approximately $17,000 and $175,000~~0 borrowings outstanding under our ~~line~~lines of credit and short-term notes payable at ~~March 31,~~September 30, 2019 and June 30, ~~2018,~~2019, respectively.

On December 4, 2017, we entered into a Loan Agreement (the “Loan Agreement”) with Chemical Bank (“Chemical”), and related documents, including a Promissory Note. The Loan Agreement is an on-demand line of credit and is cancelable at any time by either Perceptron or Chemical and any amounts outstanding would be immediately due and payable. The Loan Agreement is guaranteed by our U.S. subsidiaries. The Loan Agreement allows for maximum permitted borrowings of $8.0 million. The borrowing base is calculated at the lesser of (i) $8.0 million or (ii) the sum of 80% of eligible accounts receivable balances of U.S. customers and subject to limitations, certain foreign customers, plus the lesser of 50% of eligible inventory or $3.0 million. At ~~March 31,~~September 30, 2019, our available borrowing under this facility was approximately ~~$3.5~~$4.6 million. Security for the Loan Agreement is substantially all of our assets in the U.S. Interest is calculated at 2.65% above the 30 day LIBOR rate. We are not allowed to pay cash dividends under the Loan Agreement. We had no0 borrowings outstanding under the Loan Agreement at ~~March 31,~~September 30, 2019 or June 30, ~~2018.~~

Prior to December 4, 2017, we were party to an Amended and Restated Credit Agreement with Comerica Bank. On December 4, 2017, in connection with entering into the Loan Agreement, we repaid in full and terminated our Amended and Restated Credit Agreement with Comerica Bank and related documents. There were no prepayment fees payable in connection with the repayment of the loan.

During the third quarter of fiscal 2016, our Italian subsidiary, Coord3, exercised an option to purchase their current manufacturing facility. The total remaining principal payment of €15,000 (equivalent to approximately $17,000) payable during the fourth quarter of fiscal 2019~~at a 7.0% annual interest rate is recorded in ‘Line of credit and short-term notes payable’ on our Consolidated Balance Sheet at~~ ~~March 31, 2019~~.2019.

Our Brazilian subsidiary (“Brazil”) has a credit line and overdraft facility with their current local bank. Brazil can borrow a total of B$300,000 (equivalent to approximately ~~$76,000)~~$72,000). The Brazil facility is cancelable at any time by either Brazil or the bank and any amounts then outstanding would become immediately due and payable. The monthly interest rate for the facility is ~~12.85%~~12.0%. We had no0 borrowings under these facilities at ~~March 31,~~September 30, 2019 and June 30, ~~2018,~~2019, respectively.

During the third quarter of fiscal 2016, we announced a financial improvement plan that resulted in a reduction in global headcount of approximately 11%. This plan was implemented to re-align our fixed costs with our near-term to mid-term expectations for our business. In addition, during the first quarter of fiscal 2017, we decided to terminate production and marketing of a specific product line due to limitations in its design. Since this decision was made, we have written off $290,000, net related to inventory and impaired certain customer receivable balances in the amount of $127,000. By the second quarter of fiscal 2018, we had substantially completed the plan that was announced; we incurred total pre-tax cash and non-cash charges relating to the original restructuring plan, as well as the additional charges from the terminated product line, of $3,531,000.

In January 2018, a judge in a trade secrets case brought by Perceptron granted the defendants’ motions for recovery of their attorney fees (see Note ~~17,~~18, “Commitments and Contingencies” for further discussion relating to this matter). A charge in the amount of $675,000 was recorded as a liability in the second quarter of fiscal 2018. We appealed this court decision. In January 2019, we settled with the defendants and ended our appeal in return for a net payment due to them in the amount of $66,000. As a result, in the second quarter of fiscal 2019, we adjusted our accrual.

~~The charges recorded as Severance, Impairment and Other Charges are as follows (in thousands):~~

~~For~~In the first three months ~~ended March 31, 2018,~~of fiscal 2020 we completed the ~~decrease~~payments on the amounts accrued as part of ~~the inventory write-off was due to finding other uses for some of the inventory originally designated as impaired.~~

Severance expense for the nine months ended March 31, 2018 was associated with adjustments at our China (income of $15,000) and U.S. (expense of $2,000) locations as we reached final settlements related to several individuals impacted by the reduction in ~~force. The decrease~~force in the U.S. during fiscal 2019. We have 0 severance, impairment ~~for~~or other charges expense in the ~~nine months~~first quarter ended March 31, 2018 was due to a collection of an accounts receivable balance that was previously written off. The decrease of the inventory write-off was due to finding other uses for some of the inventory originally designated as impaired.September 30, 2019, and 0 liability recorded at September 30, 2019.

The following table reconciles the activity for the Reserves for Restructuring and Other Charges (in thousands):

	Nine Months Ended March 31,						Three Months Ended September 30,
	2019			2018			2019			2018
Beginning Balance at July 1,	$	675		$	1,113		$	44		$	675
Accruals - Severance Related		-			(13	)
Accruals / Adjustments - Court Award		(609	)		675			-			-
Payments		(66	)		(849	)		(44	)		-
Ending Balance at March 31,	$	-		$	926
Ending Balance at September 30,							$	-		$	675

We acquired current and long-term taxes payable as part of the purchase of Coord3. The tax liabilities represent income and payroll related taxes that are payable in accordance with government authorized installment payment plans. These installment plans require varying monthly payments through January 2021.

Other long-term liabilities at ~~March 31,~~September 30, 2019 and June 30, ~~2018~~2019 include ~~$573,000~~$541,000 and ~~$601,000,~~$556,000, respectively for long-term contractual and statutory severance liabilities acquired as part of the purchase of Coord3 that represent amounts that will be payable to employees upon termination of employment.

We maintain a 2004 Stock Incentive Plan (“2004 Plan”) covering substantially all company employees, non-employee directors and certain other key persons. The 2004 Plan is administered by a committee of our Board of Directors: The Management Development, Compensation and Stock Option Committee (“MDCSOC”).

Awards under the 2004 Plan may be in the form of stock options, stock appreciation rights, restricted stock or restricted stock units, performance share awards, director stock purchase rights and deferred stock units, or any combination thereof. The terms of the awards are determined by the MDCSOC, except as otherwise specified in the 2004 Plan.

Options outstanding under the 2004 Plan generally become exercisable at 25% or 33.3% per year beginning one year after the date of grant and expire ten years after the date of grant. Option prices from options granted under these plans must not be less than the fair market value of our stock on the date of grant. We use the Black-Scholes model for determining stock option valuations. The Black-Scholes model requires subjective assumptions, including future stock price volatility and expected time to exercise, which affect the calculated values. The expected term of option exercises is derived from historical data regarding employee exercises and post-vesting employment termination behavior. The risk-free rate of return is based on published U.S. Treasury rates in effect for the corresponding expected term. The expected volatility is based on historical volatility of our stock price. These factors could change in the future, which would affect the stock-based compensation expense in future periods.

We recognized operating expense for non-cash stock-based compensation costs related to stock options in the amount of ~~$59,000~~$56,000 and ~~$342,000~~$87,000 in the three ~~and nine~~ months ended ~~March 31,~~September 30, 2019 ~~respectively. We recognized operating expense for non-cash stock-based compensation costs related to stock options in the amount of $78,000~~ and ~~$275,000 in the three and nine months ended March 31,~~ 2018, respectively. As of ~~March 31,~~September 30, 2019, the total remaining unrecognized compensation cost related to non-vested stock options amounted to approximately ~~$169,000.~~$91,000. We expect to recognize this cost over a weighted average vesting period of ~~1.3~~1.0 years.

We granted ~~8,000~~0 stock options in ~~both~~each of the three ~~and nine~~ months ended ~~March 31, 2019. We granted zero~~September 30, 2019 and ~~100,000 stock options in the three and nine months ended March 31,~~ 2018, respectively. ~~The estimated fair value as of the date options were granted during the periods presented, using the Black-Scholes option-pricing model, is shown in the table below.~~

We received approximately ~~$124,000~~0 and ~~$318,000~~$191,000 in cash from option exercises under our share-based payment arrangements for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2019 ~~respectively. We received $441,000 cash from option exercises under our share-based payment arrangements for both the three~~ and ~~nine months ended March 31, 2018.~~2018, respectively.

Our restricted stock and restricted stock units under the 2004 Plan generally have been awarded by four methods, as follows:

The grant date fair value associated with granted restricted stock is calculated in accordance with ASC 718 “Compensation – Stock Compensation”. Compensation expense related to restricted stock awards is based on the closing price of our Common Stock on the grant date authorized by our MDCSOC, multiplied by the number of restricted stock and restricted stock unit awards expected to be issued and vested and is amortized over the combined performance and service periods. The non-cash stock-based compensation expense recorded for restricted stock and restricted stock unit awards for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2019 ~~was $47,000~~ and ~~$191,000, respectively.The non-cash stock-based compensation expense recorded for restricted stock and restricted stock unit awards for the three and nine months ended March 31,~~ 2018, was ~~$27,000~~$65,000 and ~~$159,000,~~$55,000, respectively. As of ~~March 31,~~September 30, 2019, the total remaining unrecognized compensation cost related to the restricted stock and restricted stock unit awards is approximately ~~$334,000.~~$237,000. We expect to recognize this cost over a weighted average vesting period of ~~2.0~~1.5 years.

A summary of the status of restricted stock and restricted stock unit awards outstanding at ~~March 31,~~September 30, 2019 is presented in the table below.

				Weighted Average					Weighted Average
	Nonvested			Grant Date		Nonvested			Grant Date
	Shares			Fair Value		Shares			Fair Value
Non-vested at June 30, 2018		77,570		$	7.77
Non-vested at June 30, 2019							93,420		$	7.49
Granted		51,650			7.21		-			-
Vested		(24,857	)		7.71		(8,384	)		7.34
Forfeited or Expired		-			-		(5,800	)		8.13
Non-vested at March 31, 2019		104,363		$	7.50
Non-vested at September 30, 2019							79,236		$	7.47

During the second quarter of fiscal 2019, our MDCSOC granted certain employees Performance Share Units (“PSUs”) as part of the Fiscal Year 2019 Long-Term Incentive Compensation Plan. The Performance Measures were defined by the Committee as a specific Target level of Revenue and Operating Income Before Incentive Compensation for each of the following: plan year 2019 (October 1, 2018 to September 30, 2019), fiscal year 2020 and fiscal year 2021. Up to one-third of the PSUs can be earned each year, determined based upon actual performance levels achieved in that year. One half of the award earned each year is based upon the achievement of the ~~two~~2 Performance Targets in that year, provided that a minimum level of Operating Income Before Incentive Compensation is achieved for that year. The actual award level for each year can range from 50% to 150% (for Revenue Target) or 75% to 200% (for Operating Income Target) of the target awards depending on actual performance levels achieved in each year compared to that year’s target. If Operating Income Before Incentive Compensation is less than 75% of the targeted Operating Income Before Incentive Compensation for the year, then no PSU’s will vest for that year and the PSU’s vesting that year will expire.

During the second quarter of fiscal 2018, our MDCSOC granted certain employees PSUs as part of the Fiscal Year 2018 Long-Term Incentive Compensation Plan. For fiscal 2018, actual Revenue and Operating Income Before Incentive Compensation exceeded the Fiscal Year 2018 Targets, resulting in 161.5% of the target level of PSU’s vesting.

The non-cash stock-based compensation expense recorded for performance share unit awards during the first half of fiscal 2019 was fully reversed in the third quarter of fiscal 2019, because at this time we estimate that the level of actual performance as measured against the Operating Income Before Incentive Compensation target levels will be less than 75% for the fiscal year 2019, the threshold performance level for the vesting of these awards in fiscal 2019.The non-cash stock-based compensation expense recorded for performance share unit awards for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2019 and 2018, was ~~$33,000~~$51,000 and ~~$100,000,~~$65,000, respectively. As of ~~March 31,~~September 30, 2019, the total remaining unrecognized compensation cost related to performance share unit awards is approximately ~~$355,000.~~$274,000. We expect to recognize this cost over a weighted average vesting period of ~~1.6~~1.2 years.

A summary of the status of the PSUs outstanding at ~~March 31,~~September 30, 2019 is presented in the table below.


				Weighted Average					Weighted Average
	Nonvested			Grant Date		Nonvested			Grant Date
	Shares			Fair Value		Shares			Fair Value
Non-vested at June 30, 2018		39,350		$	7.95
FY 2018 Performance results		8,054			7.95
Non-vested at June 30, 2019							69,701		$	7.46
Granted		51,650			7.21		-			-
Vested		(21,170	)		7.95		-			-
Forfeited or Expired		-			-		(14,252	)		7.84
Non-vested at March 31, 2019		77,884		$	7.46
Non-vested at September 30, 2019							55,449		$	7.36

Our Board of Directors’ fees are typically payable in cash on September 1, December 1, March 1, and June 1 of each fiscal year; however, under our 2004 Plan each director can elect to receive our stock in lieu of cash on a calendar year election. Each of our Directors elected a combination of cash and stock for calendar year of 2019. During the first quarter of fiscal year 2019, we issued 9,359 shares to our directors and recorded expense of $42,000.

Basic earnings per share (“EPS”) is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Other obligations, such as stock options and restricted stock awards, are considered to be potentially dilutive common shares. Diluted EPS assumes the issuance of potential dilutive common shares outstanding during the period and adjusts for any changes in income and the repurchase of common shares that would have occurred from the assumed issuance, unless such effect is anti-dilutive. The calculation of diluted shares also takes into account the average unrecognized non-cash stock-based compensation expense and additional adjustments for tax benefits related to non-cash stock-based compensation expense. Furthermore, we exclude all outstanding options to purchase common stock from the computation of diluted EPS in periods of net losses because the effect is anti-dilutive.

Options to purchase ~~76,300~~36,000 and ~~20,910~~6,200 shares of common stock outstanding in the three months ended March 31, 2019 and 2018, respectively, were not included in the computation of diluted EPS because the effect would have been anti-dilutive. Options to purchase 110,576 and 63,365 shares of common stock outstanding in the nine months ended March 31,September 30, 2019 and 2018, respectively, were not included in the computation of diluted EPS because the effect would have been anti-dilutive.

We may, from time to time, be subject to litigation and other claims in the ordinary course of our business. We accrue for estimated losses arising from such litigation or claims if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. To estimate whether a loss contingency should be accrued by a charge to income, we evaluate, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of the loss. Since the outcome of litigation and claims is subject to significant uncertainty, changes in the factors used in our evaluation could materially impact our financial position or results of operations.

We are currently unaware of any significant pending litigation affecting us other than the matters set forth below.

In May 2017, a judge in a trade secrets case brought by Perceptron, granted the defendants’ motions for summary disposition. In January 2018, the judge granted defendants’ motions for recovery of their attorney fees in the amount of $675,000, plus interest. In the second quarter of fiscal 2018, we recorded a charge in the amount of $675,000 relating to this matter. We appealed this court’s decision to grant summary disposition and the award of the attorney fees. In January 2019, we settled with the defendants and ended our appeal in return for a net payment due to them in the amount of $66,000. As a result, in the second quarter of fiscal 2019, we adjusted our accrual and paid the settlement amount in the third quarter of fiscal 2019 (see Note 1213 “Severance, Impairment and Other Charges” for further discussion).

In the third quarter of fiscal 2018, the Canadian Revenue Agency (“CRA”) completed a Goods and Services Tax/Harmonized Sales Tax Returns (GST/HST) audit. Based on this audit, the CRA preliminarily proposed to assess us approximately CAD $1,218,000 (equivalent to approximately $923,000) in taxes plus interests and penalties related to sales from 2013 through 2018. CRA has indicated that we are entitled to invoice our customers to recover this amount and our customers are required to remit payment. Our response to the CRA preliminary assessment was delivered in April 2018. In June 2018, we received the final assessment, which confirmed the preliminary assessment. In August 2018, we filed a formal appeal request and posted a surety bond as security for this claim. We have not recorded an accrual related to this preliminary audit finding because we are disputing several of the CRA’s conclusions and because, we expect to ultimately receive the funds from our customers (excluding any interest or penalties), although there may be a timing difference between when we must pay the CRA and when we collect the funds from our customers.

~~18.~~In the fourth quarter of fiscal 2019, we identified a potential concern regarding the residency status of certain U.S. employees as it relates to payroll taxes and withholdings in their country of residency. We estimated the range of correcting this issue, including interest and penalties to range from $0.2 million to $0.3 million. We are not able to reasonably estimate the amount within this range that we would be required to pay for this matter. As a result, we recorded a reserve of $0.2 million representing the minimum amount we estimated would be paid.

On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted by the U.S. The Act implements comprehensive tax legislation which, among other changes, ~~reduces~~reduced the federal statutory corporate tax rate from 35% to 21% and ~~implements~~implemented a territorial tax system that ~~eliminates~~eliminated the ability to credit certain foreign taxes. ~~Additionally, in~~ ~~December 2017,~~ ~~the Securities and Exchange Commission staff issued Staff Accounting Bulletin~~ ~~No. 118 (“SAB 118”),~~ ~~which addressed how a company recognized provisional amounts when a company did not~~

As we have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the effect of the changes in the Tax Act. The measurement period, as defined in SAB 118, ends when a ~~company has obtained, prepared and analyzed the information necessary to finalize its accounting, but could not extend beyond~~ ~~one~~ ~~year.~~

~~Due to our~~ June 30 fiscal year end, the lower ~~United States~~ income tax rates were phased in, resulting in a blended rate for our fiscal year 2018 and a 21% rate for years ~~starting with our fiscal year 2019.~~thereafter. Based on the provisions of the Act, we re-measured our U.S. deferred tax assets and related valuation allowance ~~and adjusted our estimated annual federal income tax rate to incorporate~~at the ~~lower corporate tax rate into our tax provision for the quarter the Act was enacted as the change represents a discrete item for purposes~~date of ~~income tax accounting.~~enactment The re-measurement of U.S. deferred tax assets and related valuation allowance at the lower enacted corporate tax rate resulted in a net change of ~~zero.~~0.

Furthermore, the new Act repealed the Alternative Minimum Tax (“AMT”) on corporations. Any AMT credit carryforwards can be used to offset regular tax for any tax year and is refundable, subject to limitation in 2018 - 2021. With this change, we expect to be able to use or monetize the AMT credit within the stated limitation period, and therefore, the valuation allowance recorded against the credit was removed in the second quarter of fiscal 2018.

The Act also imposed a tax on the untaxed foreign earnings of foreign subsidiaries of U.S. companies by deeming those earnings to be repatriated (the “Transition Tax”). Generally, foreign earnings held in the form of cash and cash equivalents are taxed by the U.S. at a 15.5% rate and the remaining earnings are taxed at an 8% rate. The Transition Tax generally may be paid in installments over an eight-year period. At the date of enactment, we were not in a position to present either a final or provisional estimate with respect to the Transition Tax. As of June 30, 2018, we estimated the impact of the Transition Tax by incorporating assumptions made based upon our then-current interpretation and analysis of the Act. We completed our evaluation and related calculations related to the Transition Tax during the second quarter of fiscal 2019, which confirmed our previous conclusion that our foreign tax credits would completely offset any ~~Transition Tax~~tax calculated. As a result, we have ~~not~~0t made any cash payments related to the Transition Tax.

Certain statements in this report, including statements made in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, may be “forward-looking statements” within the meaning of the Securities Exchange Act of 1934, including our expectation as to our fiscal year ~~2019~~2020 and future results, operating data, new order bookings, revenue, expenses, net income and backlog levels, trends affecting our future revenue levels, the rate of new orders, the timing of revenue and net income increases from new products which we have recently released or have not yet released, the timing of the introduction of new products and our ability to fund our fiscal year ~~2019~~2020 and future cash flow requirements. We may also make forward-looking statements in our press releases or other public or shareholder communications. Whenever possible, we have identified these forward-looking statements by words such as “target,” “will,” “should,” “could,” “believes,” “expects,” “anticipates,” “estimates,” “prospects,” “outlook,” “guidance” or similar expressions. We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for all of our forward-looking statements. While we believe that our forward-looking statements are reasonable, you should not place undue reliance on any such forward-looking statements, which speak only as of the date made. Because these forward-looking statements are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control or are subject to change, actual results could be materially different. Factors that might cause such a difference include, without limitation, the risks and uncertainties discussed from time to time in our periodic reports filed with the Securities and Exchange Commission, including those listed in “Item 1A: Risk Factors” of our Annual Report on Form 10-K for our fiscal year ~~2018.~~2019. Except as required by applicable law, we do not undertake, and expressly disclaim, any obligation to publicly update or alter our statements whether as a result of new information, events or circumstances occurring after the date of this report or otherwise.

Perceptron, Inc. (“Perceptron”, “we”, “us” or “our”) develops, produces and sells a comprehensive range of automated industrial metrology products and solutions to manufacturing organizations for dimensional gauging, dimensional inspection and 3D scanning. Our primary operations are in North America, Europe and Asia. All of our products rely on our core technologies and are divided into the following:

The largest end-use sector we serve is the automotive industry. New automotive tooling programs represent the most important selling opportunity for our In-Line and Near-Line Measurement Solutions. The number and timing of new vehicle tooling programs vary based on the plans of the individual automotive manufacturers. The existing installed base of In-Line and Near-Line Measurement Solutions also provides a continuous revenue stream in the form of system additions, upgrades and modifications as well as Value Added Services such as customer training and support.

Our Off-Line Measurement and 3D Scanning Solutions are utilized by a wide variety of targeted industrial customers, with the automotive industry representing the largest source of customers for industrial metrology products.

While we experienced softness in our bookings due to macro headwinds in our key industry segment ~~and delayed customer order timing, primarily in the Americas region,~~ during the ~~third~~first quarter of fiscal ~~2019,~~2020, we believe that our new products are starting to gain traction ~~especially~~ in all of our ~~Europe and Asia~~ regions. Backlog of ~~$19.5~~$18.6 million in our Europe region, reflecting an increase from ~~March 2018~~June 2019 of ~~$0.6~~$0.4 million, is evidence of continued strength in customer demand in that region. We remain committed to the implementation of our strategic plan and the operational performance improvements made to-date have positioned us well for additional long-term growth opportunities. Furthermore, due to the lower bookings and backlog levels, we took further actions to reduce fixed and variable costs during the ~~third~~first quarter ~~and we expect~~that should continue to ~~complete these actions during~~improve our margins in fiscal 2020.

~~Results~~2019, an error was identified related to the accounting for ~~reporting periods beginning July 1,~~our deferred tax liabilities associated with certain amortizable intangible assets acquired in 2015. The error relates to not appropriately reducing the associated deferred tax liabilities for the tax effect of amortization on the intangible assets since 2016. The error was immaterial to our previously issued financial statements, but the cumulative correction would have had a material effect on the 2019 financial statements. Accordingly, the results for the quarter ended September 30, 2018 ~~are presented under ASC 606, while prior period~~and the year ended June 30, 2018 have been adjusted to incorporate the revised amounts, ~~were not adjusted and continue to be reported in accordance with our historic accounting under ASC 605, Revenue Recognition.~~ where applicable. See Note 21, of the Notes to the Consolidated Financial Statements, ~~“New~~“Summary of Significant Accounting ~~Pronouncements”~~Policies - Revision of Previously Issued Financial Statements” contained in Item 8 of our Annual Report on Form 10-K for further discussion. See Note 1 of the Notes to the Consolidated Financial Statements, “Accounting Policies” contained in this Quarterly Report on Form 10-Q for further ~~discussion. As a result,~~information on the results of operations for periods prior to and after July 1, 2018 are not directly comparable to one another. Under the modified retrospective transition method we used to adopt ASC 606, we are required to disclose in the first year of adoption, the hypothetical impact ~~to our financial statements as if we had continued to follow revenue recognition rules under ASC 605 for the period. See Note 5~~ of the Notes to the Consolidated Financial Statements, “Revenue from Contracts with Customers” contained in this Quarterly Report on Form 10-Q for a summary of the impact as of and for the three and nine months ended March 31, 2019.revision.

Three Months Ended ~~March 31,~~September 30, 2019 Compared to Three Months Ended ~~March 31,~~September 30, 2018

Overview – We reported a net ~~loss~~income of ~~$1.1~~$0.6 million income, or ~~$(0.11)~~$0.06 per diluted share, for the ~~third~~first quarter of fiscal ~~2019~~2020 compared with revised net income of $1.0 million, or ~~$0.11~~$0.10 per diluted share, for the ~~third~~first quarter of fiscal ~~2018.~~2019.

Our quarterly results vary from quarter to quarter, and are dependent upon delivery and installation schedules determined by our customers. These schedules are ~~subject~~customer directed, and we have limited to ~~change by the customer and are not controlled by us.~~no ability to control schedule changes.

Bookings – Bookings represent new orders received from our customers. We expect the level of new orders to fluctuate from quarter to quarter and do not believe new order bookings during any particular period are indicative of our future operating performance.

	Three Months Ended March 31,													Three Months Ended September 30,
	2019				2018				Increase/(Decrease)					2019				2018				Increase/(Decrease)
Geographic Region
Americas	$	3.3	25.0	%	$	10.3	42.7	%	$	(7.0	)	(68.0	%)	$	6.9	40.1	%	$	3.6	21.3	%	$	3.3		91.7	%
Europe		5.9	44.7	%		9.4	39.0	%		(3.5	)	(37.2	%)		7.5	43.6	%		9.3	55.0	%		(1.8	)	(19.4	%)
Asia		4.0	30.3	%		4.4	18.3	%		(0.4	)	(9.1	%)		2.8	16.3	%		4.0	23.7	%		(1.2	)	(30.0	%)
Totals	$	13.2	100.0	%	$	24.1	100.0	%	$	(10.9	)	(45.2	%)	$	17.2	100.0	%	$	16.9	100.0	%	$	0.3		1.8	%

The ~~decrease~~increase in bookings in the ~~third~~first quarter of fiscal 2020 as compared to the first quarter of fiscal 2019 ~~as compared to the third quarter~~ of ~~fiscal 2018 of $10.9~~$0.3 million, including an unfavorable currency impact of $0.5 million, is primarily due to ~~a decrease~~an increase of ~~$8.0~~$1.9 million in our In-Line and Near-Line Measurement Solutions, partially offset by a decrease of ~~$2.0 million in our Off-Line Measurement Solutions, a decrease of $0.5~~$0.9 million in our 3D Scanning Solutions, a decrease of $0.6 in our Off-Line Measurement Solutions, and a decrease of ~~$0.4~~$0.1 million in our Value Added Services. On a geographic basis, the ~~$7.0~~$3.3 million ~~decrease~~increase in our Americas region is primarily due to ~~a decrease~~an increase of ~~$6.6~~$3.6 million in our In-Line and Near-Line Measurement Solutions, ~~a decrease~~an increase of ~~$0.2~~$0.1 million in our Off-Line Measurement Solutions, partially offset by a decrease of ~~$0.1~~$0.4 million in our Value Added ~~Services and a decrease of $0.1 million in our 3D Scanning Solutions.~~Services. The ~~$3.5~~$1.8 million decrease in our Europe region is primarily due to a decrease of ~~$1.9~~$1.1 million in our 3D Scanning Solutions, a decrease of $1.0 million in our In-Line and Near-Line Measurement Solutions, partially offset by an increase of $0.3 million in our Value Added Services. The $1.2 million decrease in our Asia region is primarily due to a decrease of ~~$1.0~~$0.7 million in our Off-Line Measurement Solutions, a decrease of $0.5 million in our 3D Scanning Solutions and a decrease of $0.1 million in our Value Added Services. The $0.4 million decrease in our Asian region is primarily due to a decrease of $0.8 million in our Off-Line Measurement Solutions and a decrease of $0.2 million in our Value Added Services, partially offset by an increase of $0.5$0.7 million in our In-Line and Near-Line Measurement Solutions, ~~and~~partially offset by an increase of ~~$0.1~~$0.2 million in our 3D Scanning Solutions.

Backlog – Backlog represents orders or bookings we have received but have not yet been filled, that is, our unsatisfied performance obligations as of the reporting date. We believe that the level of backlog during any particular period is not necessarily indicative of our future operating performance. Although most of the backlog is subject to cancellation by our customers, we expect to fill substantially all of the orders in our backlog. See Note 5 of the Notes to the Consolidated Financial Statements, “Revenue from Contracts with Customers” contained in this Quarterly Report on Form 10-Q for our current expectation on the timing of the revenue recognition for our current backlog level.

	As of March 31,													As of September 30,
	2019				2018				Increase/(Decrease)					2019				2018				Increase/(Decrease)
Geographic Region
Americas	$	7.9	22.1	%	$	20.2	39.5	%	$	(12.3	)	(60.9	%)	$	12.3	32.6	%	$	13.0	33.2	%	$	(0.7	)	(5.4	%)
Europe		19.5	54.6	%		18.9	36.9	%		0.6		3.2	%		18.6	49.3	%		18.5	47.2	%		0.1		0.5	%
Asia		8.3	23.3	%		12.1	23.6	%		(3.8	)	(31.4	%)		6.8	18.1	%		7.7	19.6	%		(0.9	)	(11.7	%)
Totals	$	35.7	100.0	%	$	51.2	100.0	%	$	(15.5	)	(30.3	%)	$	37.7	100.0	%	$	39.2	100.0	%	$	(1.5	)	(3.8	%)

The current quarter ending backlog decreased by ~~$15.5~~$1.5 million compared to the ending backlog at ~~March 31,~~September 30, 2018. ~~As a result of our adoption of ASC 606 as of July 1, 2018, our total backlog decreased by $3.8 million. See Note 5 of the Notes to the~~Consolidated Financial Statements, “Revenue from Contracts with Customers” contained in this Quarterly Report on Form 10-Q for further discussion on how the timing of our net sales have been impacted by the change in revenue recognition rules. The decrease in our backlog was primarily due to a decrease of ~~$12.7 million in In-Line and Near-Line Measurement Solutions, a decrease of $3.0~~$1.7 million in our Off-Line Measurement Solutions, ~~and~~ a decrease of ~~$0.2~~$0.3 million in our 3D Scanning Solutions, a decrease of $0.1 million in our Value Added Services, partially offset by an increase of ~~$0.4~~$0.6 million in our ~~3D Scanning~~In-Line and Near-Line Measurement Solutions. On a geographic basis, the ~~$12.3~~$0.7 million decrease in our Americas region is due to a decrease of ~~$12.0~~$0.4 million in our In-Line and Near-Line Measurement and a decrease of $0.3 million in our Value Added Services. The $0.9 million decrease in our Asia region is primarily due to a decrease of $1.8 million in our Off-Line Measurement Solutions, partially offset by an increase of $0.9 million in our In-Line and Near-Line Measurement Solutions. The $0.1 million increase in our Europe region is primarily due to an increase of $0.1 million in our In-Line and Near-Line Measurement Solutions, an increase of $0.1 million in our Off-Line Measurement Solutions, an increase of $0.1 million in our Value Added Services, partially offset by a decrease of $0.2 million in our 3D Scanning Solutions.

	Three Months Ended September 30,
	2019			% of Sales			2018			% of Sales
							(As Revised)
Americas Sales	$	6.2			34.6	%	$	8.3			38.8	%
Europe Sales		7.1			39.7	%		8.8			41.1	%
Asia Sales		4.6			25.7	%		4.3			20.1	%
Net Sales	$	17.9			100.0	%	$	21.4			100.0	%

Cost of Sales		10.8			60.3	%		13.1			61.2	%

Gross Profit		7.1			39.7	%		8.3			38.8	%

Operating Expenses
Selling, General and Administrative		4.3			24.0	%		4.6			21.5	%
Engineering, Research and Development		1.8			10.1	%		2.2			10.3	%
Severance, Impairment and Other Charges		-			0.0	%		-			0.0	%

Operating Income		1.0			5.7	%		1.5			7.0	%

Other Income and (Expenses), net
Interest Expense, net		-			0.0	%		-			0.0	%
Foreign Currency Gain (Loss), net		(0.2	)		(1.2	%)		(0.2	)		(0.9	%)
Other Income and (Expense), net		-			0.0	%		-			0.0	%

Income Before Income Taxes		0.8			4.5	%		1.3			6.1	%
Income Tax Expense		(0.2	)		(1.1	%)		(0.3	)		(1.4	%)

Net Income	$	0.6			3.4	%	$	1.0			4.7	%

Sales – Net sales of $17.9 million for the first quarter of our fiscal year 2020 decreased $3.5 million, or (16.4%), including an unfavorable currency impact of $0.5 million, when compared to the same period a year ago. The decrease is primarily due to a decrease of $2.6 million in our In-Line and Near-Line Measurement Solutions, a decrease of $1.1 million in our Off-Line Measurement Solutions, and a decrease of $0.1 million in our Value Added Services. The $3.8 million decrease in our Asian region is primarily due to a decrease of $2.1 million in our Off-Line Measurement Solutions and a decrease of $1.7 million in our In-Line and Near-Line Measurement Solutions. The $0.6 million increase in our Europe region is primarily due to an increase of $1.0 million in our In-Line and Near-Line Measurement Solutions and an increase of $0.4 million in our 3D Scanning Solutions, partially offset by a decrease of $0.7 million in our Off-Line Measurement Solutions and a decrease of $0.1 million in our Value Added Services.

Three Months Ended March 31,

2019

% of Sales

2018

% of Sales

Americas Sales

$
4.4

28.2
%

$
8.1

37.8
%
Europe Sales

8.0

51.3
%

10.1

47.2
%
Asia Sales

3.2

20.5
%

3.2

15.0
%
Net Sales

$
15.6

100.0
%

$
21.4

100.0
%

Cost of Sales

10.5

67.3
%

13.5

63.1
%

Gross Profit

5.1

32.7
%

7.9

36.9
%

Operating Expenses

Selling, General and Administrative

4.4

28.2
%

4.7

22.0
%
Engineering, Research and Development

1.8

11.5
%

2.1

9.8
%
Severance, Impairment and Other Charges

-

0
%

-

0.0
%

Operating (Loss) Income

(1.1
)

(7.0
%)

1.1

5.1
%

Other Income and (Expenses), net

Interest Expense, net

-

0.0
%

-

0.0
%
Foreign Currency Gain (Loss), net

(0.1
)

(0.7
%)

-

0.0
%
Other Income and (Expense), net

-

0.0
%

-

0.0
%

(Loss) Income Before Income Taxes

(1.2
)

(7.7
%)

1.1

5.1
%
Income Tax Benefit (Expense)

0.1

0.6
%

(0.1
)

(0.4
%)

Net (Loss) Income

$
(1.1
)

(7.1
%)

$
1.0

4.7
%

~~Sales~~ – Net sales of $15.6 million for the third quarter of our fiscal year 2019 decreased $5.8 million, or (27.1%), including an unfavorable currency impact of $0.9 million, when compared to the same period a year ago. See Note 5 of the Notes to theConsolidated Financial Statements, “Revenue from Contracts with Customers” contained in this Quarterly Report on Form 10-Q for further discussion on how our net sales have been impacted by the change in revenue recognition rules that we adopted as of July 1, 2018. The decrease is primarily due to a decrease of $4.9 million in our In-Line and Near-Line Measurement Solutions and a decrease of $1.1 million in our Off-Line Measurement Solutions,Services, partially offset by an increase of ~~$0.2~~$0.3 million in our 3D Scanning Solutions. On a geographic basis, the decrease of ~~$3.7~~$2.1 million in our Americas region is primarily due to a decrease of ~~$3.5~~$2.3 million in our In-Line and Near-Line Measurement Solutions, ~~a decrease~~partially offset by an increase of $0.1 million in our Off-Line Measurement Solutions and ~~a decrease~~an increase of $0.1 million in our 3D Scanning Solutions. The decrease of ~~$2.1~~$1.7 million in our Europe region is primarily due to a decrease of ~~$1.4~~$0.7 million in our In-Line and Near-Line Measurement Solutions, ~~and~~ a decrease of $0.7 million in our Off-Line Measurement ~~Solutions. There was no material change~~Solutions, a decrease of $0.2 million in our ~~Asian~~3D Scanning Solutions and a decrease of $0.1 million in our Value Added Services. The increase of $0.3 million in our Asia region is primarily due to an increase of ~~$0.3~~$0.4 million in our 3D Scanning Solutions, an increase of $0.4 million in our In-Line and Near-Line Measurement Solutions, partially offset by a decrease of ~~$0.3~~$0.5 million in our Off-Line Measurement Solutions.

Gross Profit –Gross profit percentage was ~~32.7%~~39.7% in the ~~third~~first quarter of fiscal ~~2019~~2020 compared to ~~36.9%~~38.8% in the same period a year ago. The ~~lower~~higher gross profit percentage in the ~~third~~first quarter of fiscal ~~2019~~2020 was primarily due to the ~~level and~~ mix of revenue ~~as well as~~and the ~~timing~~impact of ~~certain expenses in~~our cost ~~of goods sold in fiscal 2018 under prior accounting rules, partially offset by lower warranty costs in the third quarter of fiscal 2019.~~reduction initiatives.

Selling, General and Administrative (SG&A) Expenses – SG&A expenses were approximately ~~$4.4~~$4.3 million in the ~~third~~first quarter of fiscal ~~2019,~~2020, a decrease of $0.3 million compared to the same period a year ago. The decrease is primarily due to a decrease of in our legal expenses, commissions, amortization expense, employee-related ~~expenses of $0.8 million, including a reduction of~~costs given the ~~accrual related to our short-term incentive compensation plan due to our estimate that the level~~benefit of our actual performance for fiscal year 2019 will not meet the targets set to earn this incentive compensation and a decrease in our Board of Directors fees due to a change in the composition of the Board. These decreases are partially offset by increases in legal and audit fees, other third party expenses and building-related expenses.cost cutting initiatives.

Engineering, Research and Development (R&D) Expenses – Engineering, research and development expenses were approximately $1.8 million in the ~~third~~first quarter of fiscal ~~2019,~~2020, a decrease of ~~$0.3~~$0.4 million compared to the ~~third~~first quarter of fiscal ~~2018.~~2019. The decrease is primarily due to decreases in employee-related costs of $0.2 million including a reduction of the accrual related to our short-term incentive compensation plan due to our estimate that the level of our actual performance for fiscal year 2019 will not meet the targets set to earn this incentive compensation, as well as a decrease ~~of $0.1 million~~ related to specialized supplies utilized in the development of our products.

Foreign Currency Gain (Loss), net – Foreign Currency Gain (Loss), net was a loss of ~~$0.1~~$0.2 million in the ~~third~~first quarter of fiscal ~~2019~~2020 compared to ~~an immaterial gain~~$0.2 million loss in ~~third~~first quarter of fiscal ~~2018.~~2019. The ~~net~~ loss in the ~~third~~first three months of fiscal 2020 was primarily related to changes in the value of the Euro and Chinese Yuan in relation to the US Dollar. The loss in the first quarter of fiscal 2019 was primarily related to ~~the~~ changes in ~~value~~the values of the ~~Euro~~Brazilian Real and the Japanese Yen in relation to the US Dollar.

Income Taxes – Our effective tax rate for the ~~third~~first quarter of fiscal year ~~2019~~2020 was ~~10.9%~~18.6% compared to ~~9.5%~~a revised 22.4% in the ~~third~~first quarter of fiscal year ~~2018.~~2019. We have previously established full valuation allowances against our U.S. Federal, Germany, Japan ~~Singapore~~ and Brazil net deferred tax assets. The effective tax rates in fiscal ~~2019~~2020 and fiscal ~~2018~~2019 were impacted by not recognizing tax expense on pre-tax income or tax benefits on pre-tax losses in some of the jurisdictions where we have previously established full valuation allowances against our net deferred tax assets.

~~Nine Months Ended March 31, 2019 Compared to Nine Months Ended March 31, 2018~~

~~Overview~~ – We reported net income of $1.4 million, or $0.14 per diluted share, for the first nine months of fiscal 2019 compared with a net income of $2.9 million, or $0.31 per diluted share, for the first nine months of fiscal 2018.

~~Bookings~~– Bookings represent new orders received from our customers. We expect the level of new orders to fluctuate from quarter to quarter and do not believe new order bookings during any particular period are indicative of our future operating performance.

The decrease in bookings in the first nine months of fiscal 2019 as compared to the first nine months of fiscal 2018 of $16.7 million, including an unfavorable currency impact of $2.4 million, is primarily due to a decrease of $13.0 million in our In-Line and Near-Line Measurement Solutions, a decrease of $4.6 million in our Off-Line Measurement Solutions and a decrease of $0.3 million in our Value Added Services, partially offset by an increase of $1.2 million in our 3D Scanning Solutions. On a geographic basis, the $16.9 million decrease in our Americas region is primarily due to a decrease of $15.8 million in our In-Line and Near-Line Measurement Solutions, a decrease of $0.8 million in our Off-Line Measurement Solutions, a decrease of $0.2 million in our 3D Scanning Solutions and a decrease of $0.1 million in our Value Added Services. The $0.2 million decrease in our Asian region is primarily due to a decrease of $1.6 million in our Off-Line Measurement Solutions and a decrease of $0.1 million in our Value Added Services, partially offset by an increase of $0.9 million in our In-Line and Near-Line Measurement Solutions and an increase of $0.6 million in our 3D Scanning Solutions. The $0.4 million increase in our Europe region is primarily due to an increase of $1.9 million in our In-Line and Near-Line Measurement Solutions and an increase of $0.8 million in our 3D Scanning Solutions, partially offset by a decrease of $2.2 million in our Off-Line Measurement Solutions and a decrease of $0.1 million in our Value Added Services.

Nine Months Ended March 31,

(in million)

2019

% of Sales

2018

% of Sales

Americas Sales

$
19.7

33.6
%

$
26.1

42.7
%
Europe Sales

25.7

43.9
%

24.3

39.8
%
Asia Sales

13.2

22.5
%

10.7

17.5
%
Net Sales

$
58.6

100.0
%

$
61.1

100.0
%

Cost of Sales

37.3

63.7
%

38.1

62.4
%

Gross Profit

21.3

36.3
%

23.0

37.6
%

Operating Expenses

Selling, General and Administrative

14.0

23.9
%

13.6

22.3
%
Engineering, Research and Development

6.1

10.4
%

5.7

9.2
%
Severance, Impairment and Other Charges

(0.6
)

(1.1
%)

0.6

1.0
%

Operating Income

1.8

3.1
%

3.1

5.1
%

Other Income and (Expenses), net

Interest Expense, net

-

0.0
%

(0.1
)

(0.2
%)
Foreign Currency Gain (Loss), net

(0.2
)

(0.4
%)

-

0.0
%
Other Income and (Expense), net

-

0.0
%

-

0.0
%

Income Before Income Taxes

1.6

2.7
%

3.0

4.9
%
Income Tax Expense

(0.2
)

(0.3
%)

(0.1
)

(0.2
%)

Net Income

$
1.4

2.4
%

$
2.9

4.7
%

~~Sales~~ – Net sales of $58.6 million for the first nine months of our fiscal year 2019 decreased $2.5 million, or (4.1%), including an unfavorable currency impact of $1.9 million, when compared to the same period a year ago. The decrease is primarily due to a decrease of $2.8 million in our In-Line and Near-Line Measurement Solutions and a decrease of $0.6 million in our Value Added Services, partially offset by an increase of $0.5 million in our 3D Scanning Solutions and an increase of $0.4 million in our Off-Line Measurement Solutions. On a geographic basis, the decrease of $6.4 million in our Americas region is primarily due to a decrease of $4.7 million in our In-Line and Near-Line Measurement Solutions, a decrease of $0.8 million in our Off-Line Measurement Solutions, a decrease of $0.6 million in our 3D Scanning Solutions and a decrease of $0.3 million in our Value Added Services. The increase of $2.5 million in our Asian region is primarily due to an increase of $1.7 million in our Off-Line Measurement Solutions, an increase of $0.7 million in our 3D Scanning Solutions and an increase of $0.2 million in our In-Line and Near-Line Measurement Solutions, partially offset by a decrease of $0.1 million in our Value Added Services. The increase of $1.4 million in our Europe region is primarily due to an increase of $1.7 million in our In-Line and Near-Line Measurement Solutions and an increase of $0.4 million in our 3D Scanning Solutions, partially offset by a decrease of $0.5 million in our Off-Line Measurement Solutions and a decrease of $0.2 million in our Value Added Services.

~~Gross Profit–Gross profit percentage was 36.3%in the first nine months of fiscal 2019 compared to 37.6%~~in the same period a year ago. The lower gross profit percentage in the first nine months of fiscal 2019 was primarily due to the level and mix of revenue and the timing of certain expenses in cost of goods sold in fiscal 2018 under prior accounting rules, partially offset by lower warranty costs in fiscal 2019.

~~Selling, General and Administrative (SG&A)Expenses~~– SG&A expenses were approximately $14.0 million in the first nine months of fiscal 2019, an increase of $0.4 million compared to the same period a year ago. The increase is primarily due to an increase in our legal and audit fees, other third party expenses, building-related expenses and advertising and marketing costs, partially offset by decreases in employee-related costs of $0.2 million, including a reduction of the accrual related to our short-term incentive compensation plan due to our estimate that the level of actual performance for fiscal year 2019 will not meet the targets set to earn this incentive compensation and a decrease of $0.1 million in depreciation and amortization.

~~Engineering, Research and Development (R&D) Expenses~~– Engineering, research and development expenses were approximately $6.1 million in the first nine months of fiscal 2019, an increase of $0.4 million compared to the same period of fiscal 2018. The increase is primarily due to increases in employee-related costs of $0.3 million as well as an increase of $0.1 million related to specialized supplies utilized in the development of our products.

~~Severance, Impairments and Other Charges~~ – Severance, impairments and other charges for the first nine months of fiscal 2019 was due to an adjustment recorded in the second quarter of fiscal 2019 to an accrual we originally recorded in the second quarter of fiscal 2018 related to the trade secrets case brought by us. The $0.6 million charge in the first nine months of fiscal 2018 was primarily due to the charge we recorded related to the trade secrets case brought by us, partially offset by an adjustment related to severance at our Chinese location, a collection of an accounts receivable balance that was previously written off, as well as a reduction in the inventory write-off due to finding other uses for some of the inventory originally designated as impaired. In January 2019, we settled with the defendants and ended our appeal in return for a net payment due to them in the amount of $0.1 million and adjusted our prior accrual for this case. We have incurred $3.5 million of expense related to the financial improvement plan that commenced in March 2016, and we have substantially completed the plan that was announced. See Note 12 of the Notes to the Consolidated Financial Statements, “Severance, Impairment and Other Charges” contained in this Quarterly Report on Form 10-Q for further discussion.

~~Interest Expense, net~~ – Net interest expense was immaterial for the first nine months of fiscal 2019 compared to a net expense of $0.1 million in the first nine months of fiscal 2018. The improvement was primarily due to less usage of the U.S. credit facility during the first nine months of fiscal 2019 compared to the first nine months of fiscal 2018, as well as the continued pay-down of liabilities incurred in the acquisition of Coord3.

~~Foreign Currency Gain (Loss), net~~ – Foreign Currency Gain (Loss), net was a loss of $0.2 million in the first nine months of fiscal 2019 compared to an immaterial loss in first nine months of fiscal 2018. The loss in the first nine months of fiscal 2019 was primarily related to the changes in the value of the Euro in relation to the US Dollar.

~~Income Taxes~~ – Our effective tax rate for the first nine months of fiscal 2019 was 14.1% compared to 1.5% in the first nine months of fiscal 2018. We have previously established full valuation allowances against our U.S. Federal, Germany, Japan, Singapore and Brazil net deferred tax assets. The effective tax rate in fiscal 2019 was impacted by a one-time withholding tax required to be recognized in our China location in the amount of $0.2 million. The effective tax rate for fiscal 2018 is impacted by not recognizing tax expense on pre-tax income in some of the jurisdictions where we have previously established full valuation allowances against our net deferred tax assets.

Our primary liquidity needs are to fund product development and capital expenditures as well as support working capital requirements. In general, our principal sources of liquidity are cash and cash equivalents on hand, cash flows from operating activities and borrowings under available credit facilities.

Cash on Hand. Our cash and cash equivalents were ~~$5.4~~$4.0 million at ~~March 31,~~September 30, 2019, compared to ~~$5.8~~$4.6 million at June 30, ~~2018.~~2019.

Cash Flow. The ~~$0.3~~$0.6 million decrease in cash, cash equivalents and restricted cash from June 30, ~~2018~~2019 to ~~March 31,~~September 30, 2019 ~~was primarily related to $0.9~~resulted from $0.8 million of cash ~~used~~use for operating activities, $0.3 million cash provided from investing activities and a $0.1 million unfavorable impact from changes in exchange ~~rates, partially offset by $0.6 million of~~rates. There was no impact to cash ~~provided by operations and $0.1 million of cash provided by~~from financing ~~activities.~~activities in the period.

Cash ~~used for~~provided by investing activities in the first ~~nine~~three months of fiscal ~~2019~~2020 is due to the net sales of short-term investments of $0.7 million partially offset by capital expenditures, including development of intangibles, of ~~$1.1 million partially offset by net sales of short-term investments of $0.2~~$0.4 million.

During the ~~nine-month~~three-month period ended ~~March 31,~~September 30, 2019, cash provided by operations resulted from our net income of ~~$1.4~~$0.6 million ~~and $2.6~~favorably adjusted by $0.8 million ~~in adjustments from~~of non-cash items, ~~partially~~ offset by cash outflows related to working capital changes of ~~$3.4 million. The cash used for working capital items included cash utilized for other assets and liabilities of~~ $2.2 million, ~~net payments of accrued liabilities and expenses of $1.4 million,~~primarily arising from a ~~decrease~~change in accounts payable of $0.8 million and cash used for deferred revenue of $0.5 million, partially offset by cash provided by accounts receivable of $1.2 million and cash provided by net inventory reductions of $0.3 million.receivables.

Cash provided by financing activities in the first nine months of fiscal 2019 was primarily due to cash received from proceeds on our stock compensation plan of $0.3 million, partially offset by cash paid on our short-term borrowings of $0.2 million.

Working Capital Reserves. We provide a reserve for obsolescence to recognize inventory impairment for the effects of engineering change orders as well as the age and usage of inventory that affect the value of the inventory. The reserve for obsolescence creates a new cost basis for the impaired inventory. When inventory that has previously been impaired is sold or disposed, the related obsolescence reserve is reduced resulting in the reduced cost basis being reflected in cost of goods sold. A detailed review of the inventory is performed annually with quarterly updates for known changes that have occurred since the annual review. During the ~~nine-month period~~three months ended ~~March 31,~~September 30, 2019, we ~~decreased our~~increased the reserve for obsolescence ~~by $0.2 million.~~modestly.

We determine our allowance for doubtful accounts by considering a number of factors, including the length of time trade accounts receivable are past due, our previous loss history, our customer’s current ability to pay their outstanding balance due to us, and the condition of the general economy and the industry as a whole. We write off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. During the ~~nine-month period~~three months ended ~~March 31,~~September 30, 2019, we ~~increased our~~decreased the allowance for doubtful accounts ~~by $0.1 million.~~modestly.

Investments. At ~~March 31,~~September 30, 2019, we had short-term investments totaling ~~$0.8~~$0.7 million and a long-term investment recorded at $0.7 million compared to short-term investments totaling ~~$0.9~~$1.4 million and a long-term investment recorded at $0.7 million at June 30, ~~2018.~~2019. See Note 6 of the Notes to the Consolidated Financial Statements, “Short-Term and Long-Term Investments” contained in this Quarterly Report on Form 10-Q for further information on our investments and their current valuation. The market for our long-term investment is currently illiquid. We have $0.2 million of our short-term investments serving as collateral for bank guarantees for certain customer obligations in China. The cash is restricted as to withdrawal or use while the related bank guarantees are outstanding. Interest is earned on the restricted cash and recorded as interest income.

Credit Facilities. We had ~~an immaterial amount and $0.2 million~~ nooutstanding borrowings under our line of credit and short-term notes payable at ~~March 31,~~September 30, 2019 and June 30, ~~2018,~~2019, respectively.

On December 4, 2017, we entered into a Loan Agreement (the “Loan Agreement”) with Chemical Bank (“Chemical”), and related documents, including a Promissory Note. The Loan Agreement is an on-demand line of credit and is cancelable at any time by either Perceptron or Chemical and any amounts outstanding would be immediately due and payable. The Loan Agreement is guaranteed by our U.S. subsidiaries. The Loan Agreement allows for maximum permitted borrowings of $8.0 million. The borrowing base is calculated at the lesser of (i) $8.0 million or (ii) the sum of 80% of eligible accounts receivable balances of U.S. customers and, subject to limitations, certain foreign customers, plus the lesser of 50% of eligible inventory or $3.0 million. At ~~March 31,~~September 30, 2019, our available borrowing under this facility was approximately ~~$3.5~~$4.6 million. Security for the Loan Agreement is substantially all of our assets in the U.S. Interest is calculated at 2.65% above the ~~30 day~~30-day LIBOR rate. We are not allowed to pay cash dividends under the Loan Agreement. We had no borrowings outstanding under our Loan Agreement at ~~March 31,~~September 30, 2019.

During the third quarter of fiscal 2016, our Italian subsidiary, Coord3, exercised an option to purchase their current manufacturing facility. The total remaining principal payment of less than $0.1 million is payable during the fourth quarter of fiscal 2019 at a 7.0% annual interest rate and is recorded in “Short-term notes payable” on our Consolidated Balance Sheet at March 31, 2019.

Our Brazilian subsidiary (“Brazil”) has a credit line and overdraft facility with their current local bank. Brazil can borrow a total of B$0.3 million (equivalent to approximately $0.1 million). The Brazil facility is cancelable at any time by either Brazil or the bank and any amounts then outstanding would become immediately due and payable. The monthly interest rate for the facility is 12.85%. We had no borrowings under these facilities at ~~March 31,~~September 30, 2019 and June 30, ~~2018,~~2019, respectively.

Commitments and Contingencies. In May 2017, a judge in a trade secrets case brought by Perceptron granted the defendants’ motions for summary disposition and in January 2018 granted their motion for recovery of their attorney fees in the amount of $0.7 million, plus interest. In the second quarter of fiscal 2018, we recorded a charge in the amount of $0.7 million relating to this matter. We appealed this court’s decision to grant summary disposition and the award of attorney fees. In January 2019, we settled with the defendants and ended our appeal in return for a net payment due to them in the amount of $0.1 million. As a result, in the second quarter of fiscal 2019, we adjusted our accrual and paid the settlement amount in the third quarter of fiscal 2019 (see Note ~~12,~~13, of the Notes to the Consolidated Financial Statements, “Severance, Impairment and Other Charges” contained in this Quarterly Report on Form 10-Q).

In the third quarter of fiscal 2018, the Canadian Revenue Agency (CRA) completed a Goods and Services Tax/Harmonized Sales Tax Returns (GST/HST) audit. Based on this audit, the CRA has preliminarily proposed to assess us approximately C$1.2 million (equivalent to approximately $0.9 million) in taxes related to sales from 2013 through 2018. CRA has indicated that we are entitled to invoice our customers to recover this amount and our customers are required to remit payment. In addition, we will be charged interest and penalties if this preliminary finding is finalized. Our response to the CRA was delivered in April 2018. In June 2018, we received the final assessment, which confirmed the preliminary assessment. In August 2018, we filed a formal appeal request and posted a surety bond as security for this claim. We did not record an accrual related to this preliminary audit finding because we are disputing several of the CRA’s conclusions and because, we expect to ultimately receive the funds from our customers (excluding any interest or penalties), although there may be a timing difference between when we must pay the CRA and when we collect the funds from our customers.

In the fourth quarter of fiscal 2019, we identified a potential concern regarding the residency status of certain U.S. employees as it relates to payroll taxes and withholdings in their country of residency. We estimated the range to correct this issue, including interest and penalties to range from $0.2 million to $0.3 million. We are not able to reasonably estimate the amount within this range that we would be required to pay for this matter. As a result, we recorded a reserve of $0.2 million representing the minimum amount we estimate would be paid.

See Note ~~17,~~18, of the Notes to the Consolidated Financial Statements, “Commitments and Contingencies” contained in this Quarterly Report on Form 10-Q. See Item 3, “Legal Proceedings” and Note ~~14,~~16, of the Notes to the Consolidated Financial Statements, “Commitments and Contingencies” contained in our Annual Report on Form 10-K for fiscal year ~~2018~~2019 for a discussion of certain other contingencies relating to our liquidity, financial position and results of operations. See also, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies - Litigation and Other Contingencies” of our Annual Report on Form 10-K for fiscal year ~~2018.~~2019.

Capital Spending. We spent ~~$0.8~~$0.3 million on capital equipment and ~~$0.3~~$0.1 million on intangible projects in the first ~~nine~~three months of fiscal ~~2019~~2020 compared to $0.5 million on capital equipment and ~~$0.3~~$0.1 million on intangible projects in the first ~~nine~~three months of fiscal ~~2018.~~2019. We continue to closely analyze all potential capital projects and review the project’s expected return on investment.

Capital Resources and Outlook. Information in this “Outlook” section should be read in conjunction with the “Safe Harbor Statement,” cautionary statements and discussion of risk factors included elsewhere in this report and in our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2018.~~2019.

At ~~March 31,~~September 30, 2019, we had ~~$6.2~~$4.7 million in cash, cash equivalents and short-term investments of which ~~$5.5~~$3.4 million, or approximately ~~89%~~72%, was held in foreign bank accounts. We have not been repatriating our foreign earnings. On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted by the U.S. The Act implements comprehensive tax legislation which, among other changes, imposes a tax on the untaxed foreign earnings of foreign subsidiaries of U.S. companies by deeming those earnings to be repatriated (the “Transition Tax”). Foreign earnings held in the form of cash and cash equivalents are taxed at a 15.5% rate and the remaining earnings are taxed at an 8% rate. ~~In calculating~~We completed our evaluation and related calculations related to the Transition Tax during the second quarter of fiscal 2019, which confirmed our previous conclusion that our foreign tax credits would completely offset any tax calculated. As a result, we ~~must calculate the cumulative earnings and profits and~~have not made any cash payments related ~~tax pools of each of our non-U.S. subsidiaries back~~ to 1987. We have the option to either pay any such Transition Tax over an eight-year period or to use our net operating loss carry forwards included in our existing deferred tax assets to offset the taxable income resulting from the Transition Tax. ~~In addition, as~~See Note 19 of the Notes to the Consolidated Financial Statements, “Income Taxes” contained in this Quarterly Report on Form 10-Q for further discussion. As a result of the Act and the payment of any Transition Tax due, we may be in a position to repatriate our past and future foreign earnings to the U.S. in a more cost-effective manner than under prior law, which could positively impact our liquidity in the U.S. Any such repatriation may be subject to taxation under foreign laws or the laws of the State of Michigan.

We have estimated the impact of the Transition Tax and determined that our foreign tax credits completely offset any Transition Tax, and therefore, we did not make any cash payments related to the Transition Tax. See Note ~~18,~~20, of the Notes to the Consolidated Financial Statements, “Income Taxes,” and Item 1A, “Risk Factors titled “A“We may have additional tax liabilities, which could change in our effective tax rate can have a significant adverse impact on our business”, contained in our Annual Report on Form 10-K for fiscal year ~~2018~~2019 for further discussion.

Our ~~current~~ outlook for the remainder of fiscal ~~2019~~2020 is based on our internal projections about the market and related economic conditions, estimated foreign currency exchange rate effects, as well as our understanding of our key customers’ plans for their retooling projects. If our key customers’ plans differ from our understanding, this could have an adverse impact on our outlook.

Our current outlook for ~~the fourth quarter of~~full year fiscal ~~2019 will be~~2020 is double-digit forecasted increase in ~~the range of $15.5 million~~bookings, low to ~~$18.5 million. For our full fiscal year 2019, we anticipate~~mid-single digit forecasted revenue ~~to be down approximately 10% compared to our fiscal 2018 revenue.~~growth and mid-single digit forecasted operating income margins.

Based on our internal projections about the market and related economic conditions, estimated foreign currency exchange rate effects, our understanding of our key customers’ plans for their retooling projects and our success at achieving our business plan, including realizing revenue growth objectives, identifying and implementing efficiencies and cost reduction and continuing progress with our long-term growth strategy and diversification program, we believe our level of cash, cash equivalents, short-term investments, credit facilities and expected cash flows in each jurisdiction is sufficient to fund our fiscal ~~2019~~2020 cash flow requirements. If our key

customers’ plans differ from our understanding or actual results differ from our internal projections or estimates, this could have an adverse impact on our level of cash, cash equivalents and short-term investments.

We continue to expect capital spending including development of intangible assets to be less than $2.0 million during fiscal ~~2019,~~2020, although there is no binding commitment to do so. Furthermore, the level of our capital spending is dependent on our continued financial strength.

We will continue to evaluate business opportunities that fit our strategic plans. There can be no assurance that we will identify opportunities that fit our strategic plans or that we will be able to enter into agreements with identified business opportunities on terms acceptable to us. We anticipate that we would finance any such business opportunities from available cash on hand, borrowing from existing credit facilities, additional sources of financing identified at that time, or issuance of additional shares of our stock, as circumstances warrant.

A summary of critical accounting policies is presented in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” of our Annual Report on Form 10-K for fiscal year ~~2018,~~2019, which are unchanged as of ~~March 31,~~September 30, 2019 except for our policies on ~~Revenue Recognition.~~

~~The Company adopted~~ ~~ASC~~ ~~606 as of July 1, 2018 using the modified retrospective transition method.~~

We have contracts with multiple performance obligations in our Measurement Solutions product line such as: equipment, installation, labor support and/or training. Each performance obligation is distinct and we do not provide general rights of return for transferred goods and services. Accordingly, each performance obligation is considered a separate unit of accounting. Our Measurement Solutions are designed and configured to meet each customer’s specific requirements. Timing for the delivery of each performance obligation in the arrangement is primarily determined by the customer’s requirements. Delivery of all of performance obligations in an order will typically occur over a three to 15-month period after the order is received. For the equipment performance obligation, we typically recognize revenue when we ship or when the equipment is received by our customer, depending on the specific terms of the contract with our customer. For the installation, labor support and training performance obligations, we generally recognize revenue over time as we perform because of the continuous transfer of control to the customer. Because of control transferring over time, revenue is recognized based on the extent of progress toward completion of the performance obligation. We do not have price protection agreements or requirements to buy back inventory. Our history demonstrates that sales returns have been insignificant.Lease Accounting.

For a discussion of new accounting pronouncements, see Note 2, of the Notes to the Consolidated Financial Statements, “New Accounting Pronouncements” contained in this Quarterly Report on Form 10-Q.

Our primary market risk is related to foreign exchange rates. The foreign exchange risk is derived from our operations outside the U.S., which are primarily located in Germany, Italy and China. We may, from time to time, have interest rate risk in connection with the investment of our available cash balances.

~~Foreign Currency Risk.~~We have foreign currency exchange risk in our international operations arising from the time between sales commitment and delivery for contracts entered into in currencies other than the U.S. Dollar. For sales backlog entered into in currencies other than the U.S. Dollar, the currency rate risk exposure is predominantly less than one year with the majority in the 120 to 150-day range. At March 31, 2019, our backlog in currencies other than the U.S. Dollar was approximately 79% or $28.3 million, compared to 62% or $31.5 million at March 31, 2018. We are most vulnerable to changes in U.S. Dollar/Euro, U.S. Dollar/Chinese Yuan, U.S. Dollar/Brazilian Real and U.S. Dollar/Japanese Yen exchange rates.

The potential change in our net income that would result from a hypothetical 10% adverse change in quoted foreign currency exchange rates related to the translation of foreign denominated revenues and expenses into U.S. Dollars for both the three and nine months ended March 31, 2019, would have been an immaterial amount. This sensitivity analysis assumes there are no changes other than the exchange rates. This analysis has inherent limitations, including that it disregards the possibility that (i) the exchange rates of multiple foreign currencies may not always move in the same direction or the percentage relative to the value of the U.S. Dollar and (ii) changes in exchange rates may impact the volume of sales.

~~Interest Rate Risk.~~We invest our cash and cash equivalents in high quality, short-term investments, primarily with terms of three months or less. Based on our outstanding credit facilities and invested cash balances at March 31, 2019, a 1% increase in interest rates would have an immaterial impact on our interest expense and a 1% decrease in interest rates would have an immaterial effect on our interest income. As a result, we do not currently hedge these interest rate exposures.

~~Uncertainties in Credit Markets.~~At March 31, 2019, we hold a long-term investment in preferred stock that is not registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. Our long-term investment is subject to risk due to a decline in value of the investment. The investment is currently recorded at $0.7 million, after consideration of impairment charges recorded in fiscal years 2008 and 2009.

Based on our current business plan, cash and cash equivalents and our short-term investments of $6.2 million at March 31, 2019 as well as the existing availability on our credit facilities, we do not currently anticipate that the lack of liquidity in this long-term investment will affect our ability to operate or fund our currently anticipated fiscal 2019 cash flow requirements.

Information required pursuant to this item is incorporated by reference herein from Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk Information.”

Evaluation of disclosure controls and procedures. We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 of the Securities Exchange Act of ~~1934 (the “1934 Act”).~~1934. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, asdue to a material weakness in internal control over financial reporting described in Item 9A of ~~March 31,~~our 2019, Form 10-K, our disclosure controls and procedures were ~~effective. Rule 13a-15(e)~~not effective as of September 30, 2019.Notwithstanding the 1934 Act defines “disclosure controls and procedures” as controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the 1934 Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the 1934 Act is accumulated and communicated to ourmaterial weakness described above, management, including ~~our~~the Company’s Chief Executive Officer and Chief Financial Officer, believes that the consolidated financial statements contained in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial condition, results of operations and cash flows for the fiscal years presented in conformity with U.S. GAAP.

Changes in internal controls. There were no changes in our internal control over financial reporting as ~~appropriate~~defined in Exchange Act Rules 13a-15(f) that occurred during the first quarter of 2020 that have materially affected, or are reasonably likely to ~~allow timely decisions regarding required disclosure.~~materially affect, our internal control over financial reporting, other than as described below under the caption “Remediation Plan.”

Remediation Plan. We have initiated a remediation plan to address the control deficiency that led to the material weakness mentioned above. The remediation plan includes the following:

Our enhanced review procedures and documentation standards will be in place and operating during fiscal 2020. The material weakness cannot be considered remediated until the control has operated for a sufficient period of time and until management has concluded, through testing, that the control is operating effectively. We expect to remediate this material weakness by the end of fiscal year 2020.

There have been no material changes made to the risk factors listed in “Item 1A - Risk Factors” of our Annual Report on Form 10-K for fiscal year ~~2018.~~2019.

Our purchases of our Common Stock during the first quarter of fiscal 2020 were as follows:

(1) During the first quarter of fiscal 2020, we withheld these shares from restricted stock unit grants under our 2004 Stock Incentive Plan (the “Plan”) to satisfy the individual’s tax withholding obligations upon the vesting of the related restricted stock grants, as provided for in the Plan.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	PRCP	NASDAQ Global Market

Large accelerated filer	☐	Accelerated filer	☑

Non-accelerated filer	☐	Smaller reporting company	☑

Emerging growth company	☐

~~Title of each class~~	~~Trading Symbol(s)~~	~~Name of each exchange on which registered~~
~~Common Stock, $0.01 par value~~	~~PRCP~~	~~NASDAQ Global Market~~

		Page Number
COVER		1

INDEX		2

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements		3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		26
~~Item 3. Quantitative and Qualitative Disclosures about Market Risk~~		3522
Item 4. Controls and Procedures		3528

PART II. OTHER INFORMATION
Item 1A. Risk Factors		3629
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		29
Item 6. Exhibits		3730

SIGNATURES		3831

Balance Sheet Account	March 31, 2019			July 1, 2018			Increase / (Decrease)
Unbilled receivables	$	6,634		$	1,864		$	4,770
Deferred revenue		(6,155	)		(6,715	)		560
Net Unbilled receivables / (Deferred revenue)	$	479		$	(4,851	)	$	5,330

							Opening
	At June 30,			ASC 606			Balance at
	2018			Adjustments			July 1, 2018
Assets
Unbilled receivables	$	-		$	1,864		$	1,864
Inventories		13,829			(1,350	)		12,479
Other current assets		1,327			49			1,376

Liabilities and Shareholders' Equity
Deferred revenue		8,691			(1,976	)		6,715
Long-Term Deferred Income Tax Liability		1,717			490			2,207
Retained earnings (deficit)		(510	)		2,049			1,539

	As reported						Balances
	March 31,			ASC 606			without adoption
	2019			Adjustments			of ASC 606
	(unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	5,429		$	-		$	5,429
Short-term investments		741			-			741
Receivables:
Billed receivables, net		24,979			-			24,979
Unbilled receivables, net		6,634			(6,634	)		-
Other receivables		424			-			424
Inventories, net		11,905			4,134			16,039
Other current assets		2,280			(251	)		2,029
Total current assets		52,392			(2,751	)		49,641

Property and Equipment, Net		6,529			-			6,529
Goodwill		7,699			-			7,699
Intangible Assets, Net		3,165			-			3,165
Long-Term Investments		725			-			725
Long-Term Deferred Income Tax Asset		658			-			658

Total Assets	$	71,168		$	(2,751	)	$	68,417

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Line of credit and short-term notes payable	$	17		$	-		$	17
Accounts payable		6,642			-			6,642
Accrued liabilities and expenses		4,237			-			4,237
Accrued compensation		1,636			-			1,636
Current portion of taxes payable		369			-			369
Income taxes payable		630						630
Reserves for restructuring and other charges		-			-			-
Deferred revenue		6,155			2,936			9,091
Total current liabilities		19,686			2,936			22,622

Long-Term Taxes Payable		194			-			194
Long-Term Deferred Income Tax Liability		1,748			(1,320	)		428
Other Long-Term Liabilities		573			-			573
Total Liabilities	$	22,201		$	1,616		$	23,817

Shareholders' Equity
Preferred stock		-			-			-
Common stock		96			-			96
Accumulated other comprehensive loss		(2,957	)		119			(2,838	)
Additional paid-in capital		48,915			-			48,915
Retained earnings (deficit)		2,913			(4,486	)		(1,573	)
Total Shareholders' Equity	$	48,967		$	(4,367	)	$	44,600

Total Liabilities and Shareholders' Equity	$	71,168		$	(2,751	)	$	68,417

	September 30, 2019
Years Ending June 30,	Lease Payments
2020 (excluding the three months ended September 30, 2019)	$	550
2021		608
2022		427
2023		363
2024		346
After 2024		3,002
Future value of operating lease liabilities	$	5,296
Less: Imputed interest		(1,398	)
Present value of operating lease liabilities	$	3,898

	Three Months March 31,					Nine Months Ended March 31,
	2019		2018			2019			2018
Severance and Related Costs	$	-	$	-		$	-		$	(13	)
Court Award		-		-			(609	)		675
Impairment		-		-			-			(42	)
Inventory Write-Off		-		(3	)		-			(17	)
Total	$	-	$	(3	)	$	(609	)	$	603

	Nine Months Ended March 31,
(in million)	2019			% of Sales			2018			% of Sales
Americas Sales	$	19.7			33.6	%	$	26.1			42.7	%
Europe Sales		25.7			43.9	%		24.3			39.8	%
Asia Sales		13.2			22.5	%		10.7			17.5	%
Net Sales	$	58.6			100.0	%	$	61.1			100.0	%

Cost of Sales		37.3			63.7	%		38.1			62.4	%

Gross Profit		21.3			36.3	%		23.0			37.6	%

Operating Expenses
Selling, General and Administrative		14.0			23.9	%		13.6			22.3	%
Engineering, Research and Development		6.1			10.4	%		5.7			9.2	%
Severance, Impairment and Other Charges		(0.6	)		(1.1	%)		0.6			1.0	%

Operating Income		1.8			3.1	%		3.1			5.1	%

Other Income and (Expenses), net
Interest Expense, net		-			0.0	%		(0.1	)		(0.2	%)
Foreign Currency Gain (Loss), net		(0.2	)		(0.4	%)		-			0.0	%
Other Income and (Expense), net		-			0.0	%		-			0.0	%

Income Before Income Taxes		1.6			2.7	%		3.0			4.9	%
Income Tax Expense		(0.2	)		(0.3	%)		(0.1	)		(0.2	%)

Net Income	$	1.4			2.4	%	$	2.9			4.7	%


Period	Total Number of Share/Units Purchased			Average Price Paid Per Share/Unit		Total Number of Shares/Units Purchased as Part of Publicly Announced Plans or Programs (1)		Maximum Number of Shares that May Yet Be Purchased under the Plans or Programs (1)

July 1 to July 31		-	$		-		-		-
August 1 to August 31		-	$		-		-		-
September 1 to September 30		376	$		4.70		-		-

10.59*10.53		~~Amendment No. 1 to Credit Agreement~~Written Descriptions of the Fiscal 2020 Executive Short Term Incentive Plan and ~~Waiver, dated February 20, 2019, between the Company and Chemical Bank~~Fiscal 2020 Executive Long Term Incentive Plan.

31.1*		Certification by the Chief Executive Officer and Chief Financial Officer of the Company pursuant to Rule 13a – 14(a) of the Securities Exchange Act of 1934.

32.1*		Certification by the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 and Rule 13a – 14(b) of the Securities Exchange Act of 1934.

101.INS*		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH*		Inline XBRL Taxonomy Extension Schema Document

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (embedded within the Inline XBRL Document)


	Perceptron, Inc.
	(Registrant)

Date: ~~May 9,~~November 12, 2019	By:	/s/ David L. Watza
		David L. Watza
		President ~~Chief Executive Officer~~ and Chief ~~Financial~~Executive Officer (Principal Executive and Financial Officer)

Date: ~~May 9,~~November 12, 2019	By:	/s/ ~~Michelle O. Wright~~Laura Pecoraro
		~~Michelle O. Wright~~Laura Pecoraro
		~~Corporate Controller and Chief Accounting Officer~~Acting Vice President, Finance
		(Principal Accounting Officer)


Yes ☐	No☑