Electromed (ELMD) 10-Q 8 May 18 2018 Q3 Quarterly report Financial data

Document And Entity Information

Document And Entity Information - shares	9 Months Ended
	Mar. 31, 2018	May 03, 2018
Document And Entity Information [Abstract]
Entity Registrant Name	Electromed, Inc.
Entity Central Index Key	1,488,917
Document Type	10-Q
Document Period End Date	Mar. 31, 2018
Amendment Flag	false
Entity a Voluntary Filer	No
Entity's Reporting Status Current	Yes
Current Fiscal Year End Date	--06-30
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		8,288,659
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2,018

Condensed Balance Sheets (Unaud

Condensed Balance Sheets (Unaudited) - USD ($)	Mar. 31, 2018	Jun. 30, 2017
Current Assets
Cash	$ 7,062,822	$ 5,573,709
Accounts receivable (net of allowances for doubtful accounts of $45,000)	10,075,211	9,949,759
Inventories	2,207,293	2,559,485
Prepaid expenses and other current assets	483,817	393,319
Income Tax Receivable	91,103
Total current assets	19,920,246	18,476,272
Property and equipment, net	3,165,539	3,303,233
Finite-life intangible assets, net	663,928	721,276
Other assets	97,066	99,868
Deferred income taxes	417,000	460,000
Total assets	24,263,779	23,060,649
Current Liabilities
Current maturities of long-term debt	1,112,838	50,703
Accounts payable	614,867	663,376
Accrued compensation	935,613	946,623
Income tax payable		156,524
Warranty reserve	680,000	640,000
Other accrued liabilities	403,260	438,748
Total current liabilities	3,746,578	2,895,974
Long-term debt, less current maturities and net of debt issuance costs		1,097,125
Total liabilities	3,746,578	3,993,099
Commitments and Contingencies
Shareholders' Equity
Common stock, $0.01 par value; authorized: 13,000,000 shares; 8,288,659 and 8,230,167 issued and outstanding at March 31, 2018 and June 30, 2017, respectively	82,887	82,302
Additional paid-in capital	14,694,485	14,028,602
Retained earnings	5,739,829	4,956,646
Total shareholders' equity	20,517,201	19,067,550
Total liabilities and shareholders' equity	$ 24,263,779	$ 23,060,649

Condensed Balance Sheets (Unau3

Condensed Balance Sheets (Unaudited) (Parenthetical) - USD ($)	Mar. 31, 2018	Jun. 30, 2017
Statement of Financial Position [Abstract]
Accounts receivable, allowance for doubtful accounts	$ 45,000	$ 45,000
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	13,000,000	13,000,000
Common stock, shares issued	8,288,659	8,230,167
Common stock, shares outstanding	8,288,659	8,230,167

Condensed Statements of Operati

Condensed Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Mar. 31, 2018	Mar. 31, 2017
Income Statement [Abstract]
Net revenues	$ 7,090,654	$ 6,669,638	$ 20,457,058	$ 18,587,243
Cost of revenues	1,491,156	1,357,093	4,334,441	4,020,615
Gross profit	5,599,498	5,312,545	16,122,617	14,566,628
Operating expenses
Selling, general and administrative	5,071,724	4,195,156	14,534,886	11,979,261
Research and development	42,665	80,613	170,123	532,255
Total operating expenses	5,114,389	4,275,769	14,705,009	12,511,516
Operating income	485,109	1,036,776	1,417,608	2,055,112
Interest income (expense), net	669	(8,831)	(8,425)	(41,135)
Net income before income taxes	485,778	1,027,945	1,409,183	2,013,977
Income tax expense	173,000	380,000	626,000	731,000
Net income	$ 312,778	$ 647,945	$ 783,183	$ 1,282,977
Income per share:
Basic	$ 0.04	$ 0.08	$ 0.1	$ 0.16
Diluted	$ 0.04	$ 0.08	$ 0.09	$ 0.15
Weighted-average common shares outstanding:
Basic	8,210,695	8,167,112	8,203,599	8,167,112
Diluted	8,613,370	8,452,942	8,634,452	8,449,201

Condensed Statements of Cash Fl

Condensed Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Cash Flows From Operating Activities
Net income	$ 783,183	$ 1,282,977
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	495,797	473,813
Amortization of finite-life intangible assets	85,166	89,813
Amortization of debt issuance costs	5,373	10,871
Share-based compensation expense	604,056	373,913
Deferred income taxes	43,000	13,000
Loss on disposal of property and equipment		520
Loss on disposal of intangible assets		111,498
Changes in operating assets and liabilities:
Accounts receivable	(125,452)	(1,321,989)
Inventories	373,417	(65,630)
Prepaid expenses and other assets	(90,132)	(49,140)
Income tax receivable	(91,103)	192,685
Income tax payable	(156,524)	17,024
Accounts payable and accrued liabilities	(55,007)	(323,453)
Net cash provided by operating activities	1,871,774	805,902
Cash Flows From Investing Activities
Expenditures for property and equipment	(379,328)	(425,838)
Expenditures for finite-life intangible assets	(27,818)	(60,131)
Net cash used in investing activities	(407,146)	(485,969)
Cash Flows From Financing Activities
Principal payments on long-term debt including capital lease obligations	(37,927)	(36,473)
Issuance of common stock upon exercise of options	62,412
Payment of deferred financing fees		(4,872)
Net cash provided by (used in) financing activities	24,485	(41,345)
Net increase in cash	1,489,113	278,588
Cash
Beginning of period	5,573,709	5,123,355
End of period	$ 7,062,822	$ 5,401,943

Interim Financial Reporting

Interim Financial Reporting	9 Months Ended
	Mar. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Interim Financial Reporting	Note 1. Interim Financial Reporting Basis of presentation: The accompanying unaudited condensed financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial statements and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. In the opinion of management, the accompanying unaudited condensed financial statements reflect all adjustments consisting of normal recurring adjustments necessary for a fair presentation of the Company’s financial position and results of operations as required by Regulation S-X. Interim results of operations are not necessarily indicative of the results that may be achieved for the full year. The financial statements and related notes do not include all information and footnotes required by U.S. GAAP for annual reports. This interim report should be read in conjunction with the financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2017 (“fiscal 2017”). A summary of the Company’s significant accounting policies follows: Use of estimates: Net income per common share: New accounting pronouncements: The Company has engaged the services of a third-party service provider and has performed a review of the requirements of the new guidance and has initially identified which of our revenue streams will be within the scope of the revised standard. The Company continues to work through an adoption plan which includes a review of customer contracts, applying the five-step model of the new standard to each revenue stream and comparing the results to its current accounting practices; an evaluation of the method of adoption; and assessing changes that might be necessary to its processes, internal controls and changes in financial reporting. The Company is currently evaluating which of the alternative approaches it will apply and the potential impact of adoption of the revised revenue standards on its financial statements. The Company intends to complete its evaluation during its fiscal year ending June 30, 2018 (“fiscal 2018”). In July 2015, FASB issued ASU 2015–11, “Inventory (Topic 330) Related to Simplifying the Measurement of Inventory,” which applies to all inventory except that which is measured using last-in, first-out (“LIFO”) or the retail inventory method. Inventory measured using first-in, first-out (“FIFO”) or average cost is within the scope of the new guidance and should be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable cost of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. The amendments are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The new guidance is applied prospectively, and earlier application is permitted as of the beginning of an interim or annual reporting period. The Company adopted ASU 2015–11 effective July 1, 2017, which had no material impact on its financial statements or financial statement disclosures. In February 2016, FASB issued ASU 2016–02, “Leases (Topic 842).” This standard requires the recognition of all lease transactions with terms in excess of 12 months on the balance sheet as a lease liability and a right-of-use asset (as defined in the standard). ASU 2016–02 will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with earlier application permitted. Upon adoption, the lessee will apply the new standard retrospectively to all periods presented or retrospectively using a cumulative effect adjustment in the year of adoption. The Company has evaluated ASU 2016–02 and expects that it will have no material impact on its financial statements or financial statement disclosures upon adoption based on current facts and circumstances. In March 2016, FASB issued ASU 2016–09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which reduces complexity in accounting standards related to share-based payment transactions, including, among others, (1) accounting for income taxes, (2) classification of excess tax benefits on the statement of cash flow, (3) forfeitures, and (4) statutory tax withholding requirements. ASU 2016–09 is effective for annual reporting periods beginning on or after December 15, 2016, and interim periods within those annual periods. The Company adopted ASU 2016–09 effective July 1, 2017, which had no material impact on its previously reported financial statements in the Company’s Annual Report on Form 10-K for fiscal 2017. The Company has elected to continue to recognize estimated forfeitures as stock-based compensation expense.

Inventories

Inventories	9 Months Ended
	Mar. 31, 2018
Inventory Disclosure [Abstract]
Inventories	Note 2. Inventories The components of inventory were approximately as follows: March 31, 2018 June 30, 2017 Parts inventory $ 1,504,000 $ 1,789,000 Work in process 442,000 205,000 Finished goods 531,000 745,000 Less: Reserve for obsolescence (270,000 ) (180,000 ) Total $ 2,207,000 $ 2,559,000

Finite-life Intangible Assets

Finite-life Intangible Assets	9 Months Ended
	Mar. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]
Finite-life Intangible Assets	Note 3. Finite-life Intangible Assets The carrying value of patents and trademarks includes the original cost of obtaining the patents, periodic renewal fees, and other costs associated with maintaining and defending patent and trademark rights. Patents and trademarks are amortized over their estimated useful lives, generally 15 and 12 years, respectively. There were no abandonments of domestic or foreign patents that occurred during the nine months ended March 31, 2018. During fiscal 2017, the Company abandoned certain domestic and foreign patents with net values of approximately $133,000, which were included as an expense in selling, general and administrative expense on the statements of operations. The majority of the pending patents that were abandoned related to the initial development of the Company’s SQL SmartVest technology. During a review of the Company’s patent portfolio it was determined that certain patents proved redundant to a subsequent SQL patent filing and were therefore abandoned. A smaller portion of expense was related to patents that covered technology that management considered outdated, and was no longer in use. Accumulated amortization was $875,000 and $790,000 at March 31, 2018 and June 30, 2017, respectively. The activity and balances of finite-life intangible assets were approximately as follows: Nine Months Ended March 31, 2018 Fiscal Year Ended June 30, 2017 Balance, beginning $ 721,000 $ 904,000 Additions 28,000 68,000 Abandonments — (133,000 ) Amortization expense (85,000 ) (118,000 ) Balance, ending $ 664,000 $ 721,000

Warranty Liability

Warranty Liability	9 Months Ended
	Mar. 31, 2018
Product Warranties Disclosures [Abstract]
Warranty Liability	Note 4. Warranty Liability The Company provides a lifetime warranty on its products to the prescribed patient for sales within the U.S. and a three-year warranty for all institutional sales and sales to individuals outside the U.S. The Company estimates the costs that may be incurred under its warranty and records a liability in the amount of such costs at the time the product is shipped. Factors that affect the Company’s warranty liability include the number of units shipped, historical and anticipated rates of warranty claims, the product’s useful life and cost per claim. The Company periodically assesses the adequacy of its recorded warranty liability and adjusts the amounts as necessary. Changes in the Company’s warranty liability were approximately as follows: Nine Months Ended March 31, 2018 Fiscal Year Ended June 30, 2017 Beginning warranty reserve $ 640,000 $ 660,000 Accrual for products sold 159,000 129,000 Expenditures and costs incurred for warranty claims (119,000 ) (149,000 ) Ending warranty reserve $ 680,000 $ 640,000

Income Taxes

Income Taxes	9 Months Ended
	Mar. 31, 2018
Income Tax Disclosure [Abstract]
Income Taxes	Note 5. Income Taxes On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act significantly revises future and ongoing U.S. corporate tax obligations by, among other things, lowering U.S. corporate income tax rates. Since the Company has a June 30 fiscal year-end, the lower corporate income tax rate will be phased in, resulting in a blended U.S. statutory federal rate of approximately 28% for fiscal 2018, and 21% for subsequent fiscal years. The Tax Act also eliminates the domestic production manufacturing deduction effective for the Company’s tax year beginning July 1, 2018. For the nine months ended March 31, 2018, these changes under the Tax Act resulted in a net income tax expense of approximately $160,000. On a quarterly basis, the Company estimates its effective tax rate for the full fiscal year and records a quarterly income tax provision based on the anticipated rate. As the year progresses, the Company refines its estimate based on the facts and circumstances by each tax jurisdiction. Income tax expense was estimated at approximately $173,000 and $626,000, respectively, and the effective tax rates were 35.6% and 44.4%, respectively, for the three and nine months ended March 31, 2018. Estimated income tax expense for the nine months ended March 31, 2018 includes a discrete deferred tax expense of approximately $160,000 as a result of re-measuring certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in future periods under the Tax Act. Additionally, a discrete tax benefit of approximately $27,000 was recognized during the nine months ended March 31, 2018 as a result of greater federal and state research and development tax credits than what was originally estimated in the Company’s tax provision for fiscal 2017. The net impact of these discrete events increased the effective tax rate by 9.4% during the nine months ended March 31, 2018. Income tax expense was estimated at $731,000 and the effective tax rate was 36.3% for the nine months ended March 31, 2017. Estimated income tax expense for the nine months ended March 31, 2017 included a recognized tax benefit of approximately $32,000 as a result of the lapse of the statute of limitations on uncertain tax positions, which reduced the effective tax rate for the period by 1.6%.

Financing Arrangements

Financing Arrangements	9 Months Ended
	Mar. 31, 2018
Debt Disclosure [Abstract]
Financing Arrangements	Note 6. Financing Arrangements The Company has a credit facility that provides for a revolving line of credit and a term loan. Effective December 18, 2017, the Company renewed its $2,500,000 revolving line of credit. There was no outstanding principal balance on the line of credit as of March 31, 2018 or June 30, 2017. Interest on borrowings under the line of credit, if any, would accrue at the prime rate less 0.25% (4.75% at March 31, 2018) and is payable monthly. The amount eligible for borrowing on the line of credit is limited to the lesser of $2,500,000 or 57.00% of eligible accounts receivable and the line of credit expires on December 18, 2018, if not renewed. At March 31, 2018, the maximum $2,500,000 was eligible for borrowing. The line of credit is secured by a security interest in substantially all of the tangible and intangible assets of the Company. In connection with the credit facility, the Company also has a term loan, which had an outstanding principal balance of approximately $1,116,000 at March 31, 2018 and $1,154,000 as of June 30, 2017. The term loan was refinanced effective December 18, 2016, reducing the interest rate from 5.00% to 3.88%. The unamortized debt issuance cost associated with this debt was approximately $3,000 and $6,000 as of March 31, 2018 and June 30, 2017, respectively. The term loan bears interest at 3.88%, with monthly payments of principal and interest of approximately $7,900 and a final payment of principal and interest of approximately $1,085,000 due on the maturity date of December 18, 2018. Payment obligations under the term loan are secured by a mortgage on the Company’s real property. The documents governing the line of credit and term loan contain certain financial and nonfinancial covenants that include a minimum tangible net worth covenant of not less than $10,125,000 and restrictions on the Company’s ability to incur certain additional indebtedness or pay dividends.

Stock-Based Compensation

Stock-Based Compensation	9 Months Ended
	Mar. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock-Based Compensation	Note 7. Stock-Based Compensation In November 2017, the Company’s shareholders approved the 2017 Omnibus Incentive Plan (the “2017 Plan”) which supersedes the 2014 Equity Incentive Plan (the “2014 Plan”). The 2017 Plan allows the Company’s Board of Directors to grant stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards, as well as cash incentive awards to all employees, non-employee directors, and advisors or consultants of the Company. The vesting schedule and term for each award are determined by the Board upon each grant. The maximum number of shares of common stock available for issuance under the 2017 Plan is 900,000. There were 893,058 options granted under the 2014 Plan and prior plans outstanding as of March 31, 2018. There were 9,000 options and 10,000 restricted shares issued under the 2017 Plan outstanding and 881,000 shares available for grant under the 2017 Plan as of March 31, 2018. The Company recorded approximately $604,000 and $374,000 of compensation expense related to current and past grants of stock options and restricted stock for the nine months ended March 31, 2018 and 2017, respectively. This expense is included in selling, general and administrative expense. As of March 31, 2018, approximately $844,000 of total unrecognized compensation expense related to non-vested equity awards is expected to be recognized over a weighted average period of approximately 0.8 years. The Company recognizes compensation expense related to share-based payment transactions in the financial statements based on the estimated fair value of the award issued. The fair value of each option is estimated using the Black-Scholes pricing model at the time of award grant. The Company estimates the expected life of options based on the expected holding period by the option holder. The risk-free interest rate is based upon observed U.S. Treasury interest rates for the expected term of the options. The Company makes assumptions with respect to expected stock price volatility based upon the volatility of its stock price. Forfeitures are estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from initial estimates. Forfeitures are estimated based on the percentage of awards expected to vest, taking into consideration the seniority level of the award recipient. The following assumptions were used to estimate the fair value of options granted: Nine Months Ended March 31, 2018 Fiscal Year Ended June 30, 2017 Risk-free interest rate 1.77% - 2.32% 1.14% - 1.27% Expected term (years) 6 6 Expected volatility 125.2% - 166.0% 100.5% - 105.8% Stock Options The Company issued 182,250 stock options pursuant to the 2014 Plan and 9,000 stock options pursuant to the 2017 Plan during the nine months ended March 31, 2018. Stock option transactions during the nine months ended March 31, 2018 are summarized as follows: Number of Shares Weighted Average Exercise Price per Share Outstanding at June 30, 2017 747,634 $ 2.91 Granted 191,250 $ 5.66 Exercised (18,492 ) $ 3.38 Cancelled or Forfeited (18,334 ) $ 3.59 Outstanding at March 31, 2018 902,058 $ 3.47 The intrinsic value of an option is the amount by which the fair value of the underlying stock exceeds its exercise price. At March 31, 2018, the weighted average remaining contractual term for all outstanding stock options was 5.55 years and their aggregate intrinsic value was approximately $1,764,000. Outstanding at March 31, 2018 were 902,058 stock options issued to employees, of which 572,228 were exercisable and had an aggregate intrinsic value of approximately $1,476,000. Restricted Stock The Company’s 2014 Plan permitted and its 2017 Plan permits the grant of other stock-based awards. Historically, the Company makes restricted stock grants to key employees and non-employee directors that vest over six months to three years. During the nine months ended March 31, 2018, the Company issued restricted stock awards to employees totaling 30,000 shares of common stock, with a vesting term of one to three years and a fair value of $5.53 per share, and to directors totaling 10,000 shares of common stock, with a vesting term of six months and a fair value of $5.77 per share. The restricted stock’s fair value per share represents the closing price of its common stock on the date of the grant. Restricted stock transactions during the nine months ended March 31, 2018 are summarized as follows: Number of Shares Weighted Average Grant Date Fair Value per Share Shares of Restricted Stock Unvested at June 30, 2017 29,998 $ 3.15 Granted 40,000 $ 5.59 Vested – – Forfeited – – Shares of Restricted Stock Unvested at March 31, 2018 69,998 $ 4.54

Commitments and Contingencies

Commitments and Contingencies	9 Months Ended
	Mar. 31, 2018
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Note 8. Commitments and Contingencies The Company is occasionally involved in claims and disputes arising in the ordinary course of business. The Company insures its business risks where possible to mitigate the financial impact of individual claims, and establishes reserves for an estimate of any probable cost of settlement or other disposition.

Interim Financial Reporting (Po

Interim Financial Reporting (Policies)	9 Months Ended
	Mar. 31, 2018
Accounting Policies [Abstract]
Use of Estimates	Use of estimates:
Net income per common share	Net income per common share:
New Accounting Pronouncements	New accounting pronouncements: The Company has engaged the services of a third-party service provider and has performed a review of the requirements of the new guidance and has initially identified which of our revenue streams will be within the scope of the revised standard. The Company continues to work through an adoption plan which includes a review of customer contracts, applying the five-step model of the new standard to each revenue stream and comparing the results to its current accounting practices; an evaluation of the method of adoption; and assessing changes that might be necessary to its processes, internal controls and changes in financial reporting. The Company is currently evaluating which of the alternative approaches it will apply and the potential impact of adoption of the revised revenue standards on its financial statements. The Company intends to complete its evaluation during its fiscal year ending June 30, 2018 (“fiscal 2018”). In July 2015, FASB issued ASU 2015–11, “Inventory (Topic 330) Related to Simplifying the Measurement of Inventory,” which applies to all inventory except that which is measured using last-in, first-out (“LIFO”) or the retail inventory method. Inventory measured using first-in, first-out (“FIFO”) or average cost is within the scope of the new guidance and should be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable cost of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. The amendments are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The new guidance is applied prospectively, and earlier application is permitted as of the beginning of an interim or annual reporting period. The Company adopted ASU 2015–11 effective July 1, 2017, which had no material impact on its financial statements or financial statement disclosures. In February 2016, FASB issued ASU 2016–02, “Leases (Topic 842).” This standard requires the recognition of all lease transactions with terms in excess of 12 months on the balance sheet as a lease liability and a right-of-use asset (as defined in the standard). ASU 2016–02 will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with earlier application permitted. Upon adoption, the lessee will apply the new standard retrospectively to all periods presented or retrospectively using a cumulative effect adjustment in the year of adoption. The Company has evaluated ASU 2016–02 and expects that it will have no material impact on its financial statements or financial statement disclosures upon adoption based on current facts and circumstances. In March 2016, FASB issued ASU 2016–09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which reduces complexity in accounting standards related to share-based payment transactions, including, among others, (1) accounting for income taxes, (2) classification of excess tax benefits on the statement of cash flow, (3) forfeitures, and (4) statutory tax withholding requirements. ASU 2016–09 is effective for annual reporting periods beginning on or after December 15, 2016, and interim periods within those annual periods. The Company adopted ASU 2016–09 effective July 1, 2017, which had no material impact on its previously reported financial statements in the Company’s Annual Report on Form 10-K for fiscal 2017. The Company has elected to continue to recognize estimated forfeitures as stock-based compensation expense.

Inventories (Tables)

Inventories (Tables)	9 Months Ended
	Mar. 31, 2018
Inventory Disclosure [Abstract]
Schedule of components of inventories	The components of inventory were approximately as follows: March 31, 2018 June 30, 2017 Parts inventory $ 1,504,000 $ 1,789,000 Work in process 442,000 205,000 Finished goods 531,000 745,000 Less: Reserve for obsolescence (270,000 ) (180,000 ) Total $ 2,207,000 $ 2,559,000

Finite-life Intangible Assets (

Finite-life Intangible Assets (Tables)	9 Months Ended
	Mar. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]
Schedule of finite-life intangible assets	The activity and balances of finite-life intangible assets were approximately as follows: Nine Months Ended March 31, 2018 Fiscal Year Ended June 30, 2017 Balance, beginning $ 721,000 $ 904,000 Additions 28,000 68,000 Abandonments — (133,000 ) Amortization expense (85,000 ) (118,000 ) Balance, ending $ 664,000 $ 721,000

Warranty Liability (Tables)

Warranty Liability (Tables)	9 Months Ended
	Mar. 31, 2018
Product Warranties Disclosures [Abstract]
Schedule of changes in warranty liability	Changes in the Company’s warranty liability were approximately as follows: Nine Months Ended March 31, 2018 Fiscal Year Ended June 30, 2017 Beginning warranty reserve $ 640,000 $ 660,000 Accrual for products sold 159,000 129,000 Expenditures and costs incurred for warranty claims (119,000 ) (149,000 ) Ending warranty reserve $ 680,000 $ 640,000

Stock-Based Compensation (Table

Stock-Based Compensation (Tables)	9 Months Ended
	Mar. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Schedule of assumptions used to estimate fair value of options granted	The following assumptions were used to estimate the fair value of options granted: Nine Months Ended March 31, 2018 Fiscal Year Ended June 30, 2017 Risk-free interest rate 1.77% - 2.32% 1.14% - 1.27% Expected term (years) 6 6 Expected volatility 125.2% - 166.0% 100.5% - 105.8%
Schedule of employee option activity	Stock option transactions during the nine months ended March 31, 2018 are summarized as follows: Number of Shares Weighted Average Exercise Price per Share Outstanding at June 30, 2017 747,634 $ 2.91 Granted 191,250 $ 5.66 Exercised (18,492 ) $ 3.38 Cancelled or Forfeited (18,334 ) $ 3.59 Outstanding at March 31, 2018 902,058 $ 3.47
Schedule of restricted stock awards activity	Restricted stock transactions during the nine months ended March 31, 2018 are summarized as follows: Number of Shares Weighted Average Grant Date Fair Value per Share Shares of Restricted Stock Unvested at June 30, 2017 29,998 $ 3.15 Granted 40,000 $ 5.59 Vested – – Forfeited – – Shares of Restricted Stock Unvested at March 31, 2018 69,998 $ 4.54

Interim Financial Reporting (De

Interim Financial Reporting (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Mar. 31, 2018	Mar. 31, 2017
Common stock equivalents excluded from calculation of diluted earnings per share	194,500	196,500	184,500	196,500
International [Member]
Sales			$ 386,000	$ 487,000

Inventories (Details)

Inventories (Details) - USD ($)	Mar. 31, 2018	Jun. 30, 2017
Inventory Disclosure [Abstract]
Parts inventory	$ 1,504,000	$ 1,789,000
Work in process	442,000	205,000
Finished goods	531,000	745,000
Less: Reserve for obsolescence	(270,000)	(180,000)
Total	$ 2,207,293	$ 2,559,485

Finite-life Intangible Assets21

Finite-life Intangible Assets (Details) - USD ($)	9 Months Ended	12 Months Ended
	Mar. 31, 2018	Jun. 30, 2017
Goodwill and Intangible Assets Disclosure [Abstract]
Balance, beginning	$ 721,276	$ 904,000
Additions	28,000	68,000
Abandonments		(133,000)
Amortization expenses	(85,000)	(118,000)
Balance, ending	$ 663,928	$ 721,276

Finite-life Intangible Assets22

Finite-life Intangible Assets (Details Narrative) - USD ($)	9 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Jun. 30, 2017
Finite-Lived Intangible Assets [Line Items]
Accumulated amortization	$ 875,000		$ 790,000
Patents [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated useful life	15 years
Abandoned patents		$ 133,000
Trademarks [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated useful life	12 years

Warranty Liability (Details)

Warranty Liability (Details) - USD ($)	9 Months Ended	12 Months Ended
	Mar. 31, 2018	Jun. 30, 2017
Product Warranties Disclosures [Abstract]
Warranty reserve, beginning	$ 640,000	$ 660,000
Accrual for products sold	159,000	129,000
Expenditures and costs incurred for warranty claims	(119,000)	(149,000)
Warranty reserve, ending	$ 680,000	$ 640,000

Income Taxes (Details Narrative

Income Taxes (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Mar. 31, 2018	Mar. 31, 2017	Jun. 30, 2019
U.S. statutory federal rate			28.00%
Effective tax rate	35.60%		44.40%	36.30%
Income tax expense	$ 173,000	$ 380,000	$ 626,000	$ 731,000
Income tax expense from changes under Tax Act			160,000
Tax benefit on research and development	$ 2,000		$ 27,000
Tax benefit on uncertain tax positions				$ 32,000
Impact of discrete events on effective tax rate			9.40%
Impact of lapse of statue of limitations on uncertain tax posistions on effective tax rate				(1.60%)
Discrete deferred tax expense remeasurement from Tax Act			$ 160,000
Subsequent Fiscal Years [Member]
U.S. statutory federal rate					21.00%

Financing Arrangements (Details

Financing Arrangements (Details Narrative) - USD ($)	3 Months Ended	9 Months Ended
	Mar. 31, 2018	Mar. 31, 2018	Jun. 30, 2017	Dec. 17, 2016
Term Loan [Member]
Interest rate	3.88%	3.88%		5.00%
Principal loan amount	$ 1,116,000	$ 1,116,000	$ 1,154,000
Unamortized debt issuance cost	3,000	3,000	$ 6,000
Monthly payments of principal and interest		7,900
Final payment of principal and interest	1,085,000	$ 1,085,000
Term loan maturity date		Dec. 18, 2018
Minimum tangible net worth to be maintained	10,125,000	$ 10,125,000
Credit Facility [Member]
Maximum borrowing capacity	$ 2,500,000	$ 2,500,000
Credit facility effective date	Dec. 18, 2017
Credit facility expiration date	Dec. 18, 2018
Basis spread on rate	0.25%
Effective interest rate	4.75%	4.75%
Borrowing capacity of eligible accounts receivable	$ 2,500,000	$ 2,500,000
Borrowing capacity of eligible accounts receivable (percent)	57.00%	57.00%
Available borrowing capacity	$ 2,500,000	$ 2,500,000

Stock-Based Compensation (Detai

Stock-Based Compensation (Details)	9 Months Ended	12 Months Ended
	Mar. 31, 2018	Jun. 30, 2017
Risk free interest rate - minimum		1.14%
Risk free interest rate - maximum		1.27%
Expected term (year)		6 years
Expected volatility - minimum		100.50%
Expected volatility - maximum		105.80%
Stock Options [Member]
Risk free interest rate - minimum	1.77%
Risk free interest rate - maximum	2.32%
Expected term (year)	6 years
Expected volatility - minimum	125.20%
Expected volatility - maximum	166.00%

Stock-Based Compensation (Det27

Stock-Based Compensation (Details 1) - Stock Options [Member]	9 Months Ended
	Mar. 31, 2018$ / sharesshares
Number of Shares
Options outstanding, beginning | shares	747,634
Granted | shares	182,250
Exercised | shares	(18,492)
Cancelled or Forfeited | shares	(18,334)
Options outstanding, ending | shares	902,058
Weighted Average Exercise Price
Options outstanding, beginning | $ / shares	$ 2.91
Granted | $ / shares	5.66
Exercised | $ / shares	3.38
Cancelled or Forfeited | $ / shares	3.59
Options outstanding, ending | $ / shares	$ 3.47

Stock-Based Compensation (Det28

Stock-Based Compensation (Details 2) - Restricted Stock [Member]	9 Months Ended
	Mar. 31, 2018$ / sharesshares
Number of Shares
Outstanding, beginning | shares	29,998
Granted | shares	40,000
Outstanding, ending | shares	69,998
Weighted Average Grant Date Fair Value
Outstanding, beginning | $ / shares	$ 3.15
Granted | $ / shares	5.59
Outstanding, ending | $ / shares	$ 4.54

Stock-Based Compensation (Det29

Stock-Based Compensation (Details Narrative) - USD ($)	9 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Nov. 01, 2017
Share-based compensation expense	$ 604,056	$ 373,913
Unrecognized compensation expense	$ 844,000
Unrecognized compensation expense, period for recognition	9 months 18 days
Weighted average remaining contractual term of outstanding options	5 years 6 months 18 days
Options outstanding, intrinsic value	$ 1,764,000
Options exercisable	572,228
Options exercisable, intrinsic value	$ 1,476,000
2017 Plan [Member]
Shares available for issuance			900,000
Available for grant, shares			881,000
Issuance of stock options under plan	9,000
Options outstanding (shares)	9,000
2014 Plan [Member]
Issuance of stock options under plan	182,250
Options outstanding (shares)	893,058
Restricted Stock [Member]
Fair value of award (per share)	$ 5.59
Restricted Stock [Member] | Employees [Member]
Issuance of restricted stock awards (shares)	30,000
Fair value of award (per share)	$ 5.53
Award vesting term	6 months
Restricted Stock [Member] | Employees [Member] | Minimum [Member]
Award vesting term	1 year
Restricted Stock [Member] | Employees [Member] | Maximum [Member]
Award vesting term	3 years
Restricted Stock [Member] | Directors [Member]
Issuance of restricted stock awards (shares)	10,000
Fair value of award (per share)	$ 5.77
Restricted Stock [Member] | 2017 Plan [Member]
Restricted Stock outstanding (shares)	10,000