Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Sep. 30, 2020 | Nov. 04, 2020 | |
Document And Entity Information | ||
Entity Registrant Name | PRO DEX INC | |
Entity Central Index Key | 0000788920 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2020 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --06-30 | |
Entity's Reporting Status Current | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Emerging Growth Company | false | |
Entity Common Stock, Shares Outstanding | 3,858,251 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2021 | |
Entity Incorporation State Country Code | CO | |
Entity File Number | 0-14942 |
CONDENSED BALANCE SHEETS (Unaud
CONDENSED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands | Sep. 30, 2020 | Jun. 30, 2020 |
Current Assets: | ||
Cash and cash equivalents | $ 5,202 | $ 6,421 |
Investments | 2,400 | 2,560 |
Accounts receivable, net of allowance for doubtful accounts of $9 and $6 at September 30, 2020 and at June 30, 2020, respectively | 6,138 | 5,155 |
Deferred costs | 142 | 155 |
Inventory | 8,313 | 8,238 |
Prepaid expenses and other current assets | 343 | 145 |
Total current assets | 22,538 | 22,674 |
Equipment and leasehold improvements, net | 2,629 | 2,686 |
Right of use asset, net | 2,861 | 2,943 |
Intangibles, net | 159 | 162 |
Deferred income taxes, net | 259 | 259 |
Investments | 2,309 | 2,360 |
Other assets | 42 | 42 |
Total assets | 30,797 | 31,126 |
Current Liabilities: | ||
Accounts payable | 1,834 | 1,965 |
Accrued expenses | 1,757 | 2,411 |
Deferred revenue | 200 | 200 |
Note payable and capital lease obligations | 660 | 651 |
Total current liabilities | 4,451 | 5,227 |
Lease liability, net of current portion | 2,695 | 2,750 |
Income taxes payable | 486 | 804 |
Notes and capital leases payable, net of current portion | 3,114 | 3,283 |
Total non-current liabilities | 6,295 | 6,837 |
Total liabilities | 10,746 | 12,064 |
Shareholders' equity: | ||
Common shares; no par value; 50,000,000 shares authorized; 3,858,251 and 3,811,137 shares issued and outstanding at September 30, 2020 and June 30, 2020, respectively | 12,583 | 12,752 |
Accumulated other comprehensive loss | (1,693) | (1,586) |
Retained earnings | 9,161 | 7,896 |
Total shareholders' equity | 20,051 | 19,062 |
Total liabilities and shareholders' equity | $ 30,797 | $ 31,126 |
CONDENSED BALANCE SHEETS (Paren
CONDENSED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2020 | Jun. 30, 2020 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, net of allowance for doubtful accounts | $ 9 | $ 6 |
Common shares, no par value (in dollars per share) | $ 0 | $ 0 |
Common shares, authorized | 50,000,000 | 50,000,000 |
Common shares, issued | 3,858,251 | 3,811,137 |
Common shares, outstanding | 3,858,251 | 3,811,137 |
CONDENSED STATEMENTS OF OPERATI
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Income Statement [Abstract] | ||
Net sales | $ 8,590 | $ 7,240 |
Cost of sales | 5,115 | 4,460 |
Gross profit | 3,475 | 2,780 |
Operating expenses: | ||
Selling expenses | 130 | 142 |
General and administrative expenses | 705 | 663 |
Research and development costs | 1,091 | 484 |
Total operating expenses | 1,926 | 1,289 |
Operating income | 1,549 | 1,491 |
Other income (expense): | ||
Interest and miscellaneous income | 53 | 35 |
Interest expense | (54) | (59) |
Total other income (expense) | (1) | (24) |
Income before income taxes | 1,548 | 1,467 |
Provision for income taxes | 283 | 363 |
Net income | 1,265 | 1,104 |
Other comprehensive income (loss), net of tax: | ||
Unrealized loss from marketable equity investments, net of taxes | (107) | (57) |
Comprehensive income | $ 1,158 | $ 1,047 |
Basic and diluted income per share: | ||
Basic net income per share | $ 0.33 | $ 0.28 |
Diluted net income per share | $ 0.32 | $ 0.27 |
Weighted average common shares outstanding: | ||
Basic | 3,850,838 | 4,008,017 |
Diluted | 3,975,063 | 4,110,414 |
Common shares outstanding | 3,858,251 | 3,990,995 |
CONDENSED STATEMENTS OF SHAREHO
CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) - USD ($) $ in Thousands | Common shares [Member] | Accumulated other comprehensive income (loss) [Member] | Retained earnings/(accumulated deficit) [Member] | Total |
Balance at beginning at Jun. 30, 2019 | $ 15,815 | $ (549) | $ 1,742 | $ 17,008 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Share-based compensation expense | 12 | |||
Stock option exercise | ||||
Share repurchases | (681) | |||
Shares withheld from common stock issued to employees to pay employee payroll taxes | ||||
ESPP shares issued | 15 | |||
Cumulative effect of change in accounting principle | 43 | |||
Net income | 1,104 | 1,104 | ||
Net change in unrealized loss from marketable securities, net of taxes | (57) | |||
Balance at end at Sep. 30, 2019 | 15,161 | (606) | 2,889 | 17,444 |
Balance at beginning at Jun. 30, 2020 | $ 12,752 | (1,586) | 7,896 | 19,062 |
Balance at beginning (in shares) at Jun. 30, 2020 | 3,811,137 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Share-based compensation expense | $ 26 | |||
Stock option exercise | 39 | |||
Share repurchases | ||||
Shares withheld from common stock issued to employees to pay employee payroll taxes | (259) | |||
ESPP shares issued | 25 | |||
Cumulative effect of change in accounting principle | ||||
Net income | 1,265 | 1,265 | ||
Net change in unrealized loss from marketable securities, net of taxes | (107) | |||
Balance at end at Sep. 30, 2020 | $ 12,583 | $ (1,693) | $ 9,161 | $ 20,051 |
CONDENSED STATEMENTS OF CASH FL
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $ 1,265 | $ 1,104 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 150 | 138 |
Share-based compensation | 26 | 12 |
Non-cash lease expense | 9 | 13 |
Amortization of loan fees | 2 | 2 |
Gain on sale of investments | (12) | |
Deferred income tax | (41) | |
Bad debt expense | 3 | 12 |
Changes in operating assets and liabilities: | ||
Accounts receivable and other receivables | (986) | 931 |
Deferred costs | 13 | (63) |
Inventory | (75) | (605) |
Prepaid expenses and other assets | (198) | 391 |
Accounts payable and accrued expenses | (767) | (1,040) |
Deferred revenue | 25 | |
Income taxes payable | (318) | 29 |
Net cash provided by (used in) operating activities | (888) | 908 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of equipment | (89) | (61) |
Purchases of investments | (1,258) | |
Increase in intangibles | (1) | (4) |
Proceeds from sale of investments | 115 | |
Net cash provided by (used in) investing activities | 25 | (1,323) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Principal payments on capital lease and notes payable | (161) | (159) |
Payment of employee payroll taxes on net issuance of common stock | (259) | |
Proceeds from stock option exercises and ESPP contributions | 64 | 15 |
Repurchases of common stock | (681) | |
Net cash used in financing activities | (356) | (825) |
Net decrease in cash and cash equivalents | (1,219) | (1,240) |
Cash and cash equivalents, beginning of period | 6,421 | 7,742 |
Cash and cash equivalents, end of period | 5,202 | 6,502 |
Cash paid during the period for: | ||
Interest | 54 | 63 |
Income taxes, net of refunds | $ 747 |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 3 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
BASIS OF PRESENTATION | NOTE 1. BASIS OF PRESENTATION The accompanying unaudited condensed financial statements of Pro-Dex, Inc. (we, us, our, Pro-Dex, or the Company) have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Regulation S-K. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These financial statements should be read in conjunction with the financial statements presented in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. The results of operations for such interim periods are not necessarily indicative of the results that may be expected for the full year. For further information, refer to the financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended June 30, 2020. Recently Adopted Accounting Standards On July 1, 2019, we adopted Accounting Standards Update 2016-02, (Topic 842) Leases, using a modified retrospective approach through a cumulative effect adjustment to retained earnings as of the beginning of fiscal 2020. The objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The impact of adoption was an increase to long-term assets and total liabilities of approximately $3.3 million as of July 1, 2019. |
DESCRIPTION OF BUSINESS
DESCRIPTION OF BUSINESS | 3 Months Ended |
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
DESCRIPTION OF BUSINESS | NOTE 2. DESCRIPTION OF BUSINESS We specialize in the design, development and manufacture of autoclavable, battery-powered and electric, multi-function surgical drivers and shavers used primarily in the orthopedic, thoracic, and maxocranial facial markets. We have patented adaptive torque-limiting software and proprietary sealing solutions which appeal to our customers, primarily medical device distributors. We also manufacture and sell rotary air motors to a wide range of industries. |
COMPOSITION OF CERTAIN FINANCIA
COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS | 3 Months Ended |
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS | NOTE 3. COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS Investments Investments are stated at fair market value and consist of the following (in thousands): September 30, June 30, Marketable equity securities- short-term $ 2,400 $ 2,560 Marketable equity securities- long-term 2,309 2,360 Total marketable equity securities $ 4,709 $ 4,920 Investments at September 30, 2020 and June 30, 2020, had an aggregate cost basis of $6,380,000 and $6,483,000, respectively. The long-term investments include equity investments of thinly traded securities that we classified as long term in nature because if we decide to sell these securities we may not be able to sell our position within one year. At September 30, 2020, the investments included unrealized losses of $1,671,000 (gross unrealized losses of $1,903,000 offset by gross unrealized gains of $233,000). At June 30, 2020, the investments included net unrealized losses of $1,563,000 (gross unrealized losses of $1,703,000 offset by gross and unrealized gains of $140,000). Of the total long-term marketable equity securities at September 30, 2020 and June 30, 2020, $759,000 and $847,000, respectively, represent an investment in the common and preferred stock of Air T, Inc. Two of our Board members are also board members of Air T, Inc. and both either individually or through affiliates own an equity interest in Air T, Inc. Our Chairman, one of the two Board members aforementioned, also serves as the Chief Executive Officer and Chairman of Air T, Inc. The common stock was purchased through 10b5-1 Plans, and the preferred stock was purchased through the exercise of issued warrants and, in both cases, in accordance with our internal policies regarding the approval of related-party transactions, the purchases were approved by our three Board members that are not affiliated with Air T, Inc. We invest surplus cash from time to time through our Investment Committee, which is comprised of one management director, Mr. Van Kirk, and two non-management directors, Mr. Cabillot and Mr. Swenson, who chairs the committee. Both Mr. Cabillot and Mr. Swenson are active investors with extensive portfolio management expertise. We leverage the experience of these committee members to make investment decisions for the investment of our surplus operating capital or borrowed funds. Additionally, many of our securities holdings include stocks of public companies that either Messrs. Swenson or Cabillot or both may own from time to time either individually or through the investment funds that they manage, or other companies whose boards they sit on, such as Air T, Inc. Inventory Inventory is stated at the lower of cost (first-in, first-out) or net realizable value and consists of the following (in thousands): September 30, June 30, Raw materials/purchased components $ 3,841 $ 4,241 Work in process 2,333 2,339 Sub-assemblies/finished components 1,712 1,438 Finished goods 427 220 Total inventory $ 8,313 $ 8,238 Intangibles Intangibles consist of the following (in thousands): September 30, June 30, Patent-related costs $ 222 $ 222 Less accumulated amortization (63 ) (60 ) $ 159 $ 162 Patent-related costs consist of legal fees incurred in connection with both patent applications and a patent issuance, and will be amortized over the estimated life of the product(s) that is or will be utilizing the technology, or expensed immediately in the event the patent office denies the issuance of the patent. Since we do not know when, or if, our patent applications will be issued, the future amortization expense is not predictable. |
WARRANTY
WARRANTY | 3 Months Ended |
Sep. 30, 2020 | |
Product Warranties Disclosures [Abstract] | |
WARRANTY | NOTE 4. WARRANTY The warranty accrual is based on historical costs of warranty repairs and expected future identifiable warranty expenses, and is included in accrued expenses in the accompanying balance sheets. As of September 30, 2020 and June 30, 2020, the warranty reserve amounted to $190,000 and $213,000, respectively. Warranty expenses are included in cost of sales in the accompanying statements of operations. Changes in estimates to previously established warranty accruals result from current period updates to assumptions regarding repair costs and warranty return rates, and are included in current period warranty expense. Information regarding the accrual for warranty costs for the three months ended September 30, 2020 and 2019, are as follows (in thousands): As of and for the 2020 2019 Beginning balance $ 213 $ 136 Accruals during the period 80 24 Changes in estimates of prior period warranty accruals (8 ) (13 ) Warranty amortization/utilization (95 ) (21 ) Ending balance $ 190 $ 126 |
NET INCOME PER SHARE
NET INCOME PER SHARE | 3 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share [Abstract] | |
NET INCOME PER SHARE | NOTE 5. NET INCOME PER SHARE The Company calculates basic net income per share by dividing net income by the weighted-average number of common shares outstanding during the reporting period. Diluted income per share reflects the effects of potentially dilutive securities, which consist entirely of outstanding stock options and performance awards. The following table presents reconciliations of the numerators and denominators of the basic and diluted income per share computations. In the tables below, income amounts represent the numerator, and share amounts represent the denominator (in thousands, except per share amounts): Three Months Ended 2020 2019 Basic: Net income $ 1,265 $ 1,104 Weighted average shares outstanding 3,851 4,008 Basic earnings per share $ 0.33 $ 0.28 Diluted: Net income $ 1,265 $ 1,104 Weighted average shares outstanding 3,851 4,008 Effect of dilutive securities 124 102 Weighted average shares used in calculation of diluted earnings per share 3,975 4,110 Diluted earnings per share $ 0.32 $ 0.27 |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | NOTE 6. INCOME TAXES Deferred income taxes are provided on a liability method whereby deferred tax assets and liabilities are recognized for temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Significant management judgment is required in determining our provision for income taxes and the recoverability of our deferred tax assets. Such determination is based primarily on our historical taxable income or loss, with some consideration given to our estimates of future taxable income or loss by jurisdictions in which we operate and the period over which our deferred tax assets would be recoverable. We recognize accrued interest and penalties related to unrecognized tax benefits when applicable. As of September 30, 2020 and June 30, 2020, no interest or penalties applicable to our unrecognized tax benefits have been accrued since we have sufficient tax attributes available to fully offset any potential assessment of additional tax. Our effective tax rate for the three months ended September 30, 2020 and 2019, is 18% and 25%, respectively. The current year effective tax rate is less than the statutory rate due primarily to a tax benefit recognized as a result of the common stock awarded to our employees (See Note 7). We are subject to U.S. federal income tax, as well as income tax of multiple state tax jurisdictions. We are currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended June 30, 2017 and later. Our state income tax returns are open to audit under the statute of limitations for the years ended June 30, 2016 and later. However, because of research credit carryovers, substantially all of our tax years are subject to audit. We do not anticipate a significant change to the total amount of unrecognized tax benefits within the next 12 months. |
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION | 3 Months Ended |
Sep. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
SHARE-BASED COMPENSATION | NOTE 7. SHARE-BASED COMPENSATION Through 2014, we had two equity compensation plans, the Second Amended and Restated 2004 Stock Option Plan (the Employee Stock Option Plan) and the Amended and Restated 2004 Directors Stock Option Plan (the Directors Stock Option Plan) (collectively, the Former Stock Option Plans). The Employee Stock Option Plan and Directors Stock Option Plan were terminated in June 2014 and December 2014, respectively. In September 2016, our Board approved the establishment of the 2016 Equity Incentive Plan, which was approved by our shareholders at our 2016 Annual Meeting. The 2016 Equity Incentive Plan provides for the award of up to 1,500,000 shares of our common stock in the form of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted shares, restricted stock units, performance awards, and other stock-based awards. As of September 30, 2020, 200,000 performance awards have been granted under the 2016 Equity Incentive Plan. Stock Options There were no stock options granted during the three months ended September 30, 2020 and 2019. As of September 30, 2020, there was no unrecognized compensation cost under our stock option plans as all outstanding stock options are fully vested. As of September 30, 2020, there were 34,000 options outstanding at weighted-average exercise prices of $1.80 per share. These outstanding options had a weighted average remaining contractual life of 1.2 years and an intrinsic value of $911,000. During the first quarter ended September 30, 2020, 20,000 options were exercised at an exercise price of $1.97 per share. Performance Awards In December 2017, the Compensation Committee of our Board of Directors granted 200,000 performance awards to our employees, which will generally be paid in shares of our common stock. Whether any performance awards vest, and the amount that does vest, is tied to the completion of service periods that range from 7 months to 9.5 years at inception and the achievement of our common stock trading at certain pre-determined prices. The weighted average fair value of the performance awards granted was $4.46, calculated using the weighted average fair market value for each award, using a Monte Carlo simulation. In February 2020, the Compensation Committee reallocated 48,000 previously forfeited awards, having the same remaining terms and conditions, to certain employees. The weighted average fair value of the performance awards granted in 2020 was $16.90, calculated using the weighted average fair market value for each award, using a Monte Carlo simulation. We recorded share-based compensation expense of $21,000 and $8,000 for the three months ended September 30, 2020 and 2019, respectively, related to these performance awards. On September 30, 2020, there was approximately $223,000 of unrecognized compensation cost related to these non-vested performance awards expected to be expensed over the weighted-average period of 3.74 years. On July 1, 2020, it was determined by the Compensation Committee of our Board of Directors that the second of five tranches of 40,000 performance awards had been achieved and participants were awarded 40,000 shares of common stock. Each participant elected a net issuance to cover their individual withholding taxes and therefore the Company issued 25,629 shares and paid $259,000 of participant-related payroll tax liabilities. Employee Stock Purchase Plan In September 2014, our Board approved the establishment of an Employee Stock Purchase Plan (the ESPP). The ESPP conforms to the provisions of Section 423 of the Internal Revenue Code, has coterminous offering and purchase periods of six months, and bases the pricing to purchase shares of our common stock on a formula so as to result in a per-share purchase price that approximates a 15% discount from the market price of a share of our common stock at the end of the purchase period. The Board of Directors also approved the provision that shares formerly reserved for issuance under the Former Stock Option Plans in excess of shares issuable pursuant to outstanding options, aggregating 704,715 shares, be reserved for issuance pursuant to the ESPP. The ESPP was approved by our shareholders at our 2014 Annual Meeting. During the first quarters ended September 30, 2020 and 2019, 1,485 and 1,292 shares were purchased, respectively, under the ESPP and allocated to employees based upon their contributions at discount prices of $16.94 and $11.76, respectively, per share. On a cumulative basis, since the inception of the ESPP plan, employees have purchased a total of 23,271 shares. During the three months ended September 30, 2020 and 2019, we recorded stock compensation expense in the amount of $5,000 and $4,000, respectively, relating to the ESPP. |
MAJOR CUSTOMERS & SUPPLIERS
MAJOR CUSTOMERS & SUPPLIERS | 3 Months Ended |
Sep. 30, 2020 | |
Risks and Uncertainties [Abstract] | |
MAJOR CUSTOMERS AND SUPPLIERS | NOTE 8. MAJOR CUSTOMERS & SUPPLIERS Information with respect to customers that accounted for sales in excess of 10% of our total sales in either of the three-month periods ended September 30, 2020 and 2019, is as follows (in thousands, except percentages): Three Months Ended September 30, 2020 2019 Amount Percent of Total Amount Percent of Total Total revenue $ 8,590 100 % $ 7,240 100 % Customer concentration: Customer 1 $ 5,169 60 % $ 5,412 75 % Customer 2 2,171 25 % 425 6 % Total $ 7,340 85 % $ 5,837 81 % Information with respect to accounts receivable from those customers that comprised more than 10% of our gross accounts receivable at either September 30, 2020 and June 30, 2020, is as follows (in thousands, except percentages): September 30, 2020 June 30, 2020 Total gross accounts receivable $ 6,147 100 % $ 5,161 100 % Customer concentration: Customer 1 $ 2,923 48 % $ 2,205 42 % Customer 2 2,716 44 % 1,593 31 % Customer 3 278 4 % 972 19 % Total $ 5,917 96 % $ 4,770 92 % During the three months ended September 30, 2020 and 2019, we had two suppliers that each accounted for more than 10% of total inventory purchases. Amounts owed to the fiscal 2021 significant suppliers at September 30, 2020 totaled $200,000 and $113,000, respectively, and at June 30, 2020 totaled $161,000 and $245,000, respectively. |
NOTES PAYABLE AND FINANCING TRA
NOTES PAYABLE AND FINANCING TRANSACTIONS | 3 Months Ended |
Sep. 30, 2020 | |
Notes Payable [Abstract] | |
NOTES PAYABLE AND FINANCING TRANSACTIONS | NOTE 9. NOTES PAYABLE AND FINANCING TRANSACTIONS Minnesota Bank & Trust On September 6, 2018, we entered into a Credit Agreement with Minnesota Bank & Trust, a Minnesota state banking corporation (MBT), providing for a $5,000,000 term loan (the Term Loan) as well as a $2,000,000 revolving loan (the Revolving Loan and together with the Term Loan, collectively the Loans), evidenced by a Term Note A and a Revolving Credit Note made by us in favor of MBT. The Loans are secured by substantially all of our assets pursuant to a Security Agreement entered into on September 6, 2018, between us and MBT. We paid loan origination fees to MBT in the amount of $60,000. The Term Loan matures on October 1, 2025, and bears interest at a fixed rate of 5.53% per annum. An initial payment of interest only in the amount of $18,433 was paid on October 1, 2018. Commencing November 1, 2018, and continuing on the first day of each subsequent month thereafter until the maturity date, we are required to make payments of principal and interest on the Term Loan of approximately $72,000, plus any additional accrued and unpaid interest through the date of payment. The Revolving Loan matures on November 6, 2020, which we plan to renew, and bears interest at the greater of (a) 4.5% or (b) the difference of the prime rate as published in the Money Rates section of the Wall Street Journal minus 0.50%. Commencing on the first day of each month after we initially borrow against the Revolving Loan, which we have yet to do, and each month thereafter until maturity, we are required to pay all accrued and unpaid interest on the Revolving Loan through the date of payment. Any principal on the Revolving Loan that is not previously prepaid shall be due and payable on the maturity date (or earlier termination of the Revolving Loan). Any payment on the Loans not made within seven days after the due date is subject to a late payment fee equal to 5% of the overdue amount. Upon the occurrence and during the continuance of an event of default, the interest rate of both Loans will be increased by 3% and MBT may, at its option, declare the Loans immediately due and payable in full. The Credit Agreement and Security Agreement contain representations and warranties, affirmative, negative, and financial covenants, and events of default that are customary for loans of this type. We are currently working with MBT to obtain a credit facility to purchase commercial real estate and to refinance our existing notes payable, however there can be no assurance that we will be successful in these endeavors. |
COMMON STOCK
COMMON STOCK | 3 Months Ended |
Sep. 30, 2020 | |
Stockholders' Equity Note [Abstract] | |
COMMON STOCK | NOTE 10. COMMON STOCK Share Repurchase Program In December 2019, our Board approved a new share repurchase program authorizing us to repurchase up to 1 million shares of our common stock, as the prior repurchase plan authorized by our Board in 2013 was nearing completion. In accordance with, and as part of, these share repurchase programs, our Board has approved the adoption of several prearranged share repurchase plans intended to qualify for the safe harbor Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (10b5-1 Plan or Plan). During the quarter ended September 30, 2020, we did not repurchase any shares. During the quarter ended September 30, 2019, we repurchased 49,788 shares at an aggregate cost, inclusive of fees under the plan, of $681,000. On a cumulative basis, we have repurchased a total of 819,325 shares under the share repurchase programs at an aggregate cost, inclusive of fees, of $8.5 million. All repurchases under the 10b5-1 Plans were administered through an independent broker. |
LEASES
LEASES | 3 Months Ended |
Sep. 30, 2020 | |
Leases [Abstract] | |
LEASES | NOTE 11. LEASES Effective July 1, 2019, we adopted the new lease accounting standard using the modified retrospective method of applying the new standard at the adoption date. In addition, we elected the practical expedient, which allowed us to carry forward the historical lease classification of our sole operating lease for our corporate office, which includes our manufacturing and research and development facilities. Adoption of this standard resulted in the recording of net operating lease right-of-use (ROU) asset and corresponding operating lease liability of $3.3 million. Our operating lease ROU asset and long-term liability are presented separately on our Condensed Balance Sheet. The current portion of our operating lease liability as of September 30, 2020, in the amount of $320,000, is presented within accrued expenses on the Condensed Balance Sheet. As of September 30, 2020, our operating lease has a remaining lease term of seven years and an imputed interest rate of 5.3%. Cash paid for amounts included in the lease liability was $116,000 for the three months ended September 30, 2020. As of September 30, 2020, the maturity of our lease liability is as follows: Operating Fiscal Year: 2021 $ 359 2022 489 2023 504 2024 519 2025 535 Thereafter 1,261 Total lease payments 3,667 Less imputed interest: (652 ) Total $ 3,015 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Sep. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 12. COMMITMENTS AND CONTINGENCIES Legal Matters We are from time to time a party to various legal proceedings incidental to our business. There can be no certainty, however, that we may not ultimately incur liability or that such liability will not be material and adverse. |
BASIS OF PRESENTATION (Policies
BASIS OF PRESENTATION (Policies) | 3 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Recently Adopted Accounting Standards | Recently Adopted Accounting Standards On July 1, 2019, we adopted Accounting Standards Update 2016-02, (Topic 842) Leases, using a modified retrospective approach through a cumulative effect adjustment to retained earnings as of the beginning of fiscal 2020. The objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The impact of adoption was an increase to long-term assets and total liabilities of approximately $3.3 million as of July 1, 2019. |
COMPOSITION OF CERTAIN FINANC_2
COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS (Tables) | 3 Months Ended |
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of inventory | Investments are stated at fair market value and consist of the following (in thousands): September 30, June 30, Marketable equity securities- short-term $ 2,400 $ 2,560 Marketable equity securities- long-term 2,309 2,360 Total marketable equity securities $ 4,709 $ 4,920 |
Schedule of investments | Inventory is stated at the lower of cost (first-in, first-out) or net realizable value and consists of the following (in thousands): September 30, June 30, Raw materials/purchased components $ 3,841 $ 4,241 Work in process 2,333 2,339 Sub-assemblies/finished components 1,712 1,438 Finished goods 427 220 Total inventory $ 8,313 $ 8,238 |
Schedule of intangibles | Intangibles consist of the following (in thousands): September 30, June 30, Patent-related costs $ 222 $ 222 Less accumulated amortization (63 ) (60 ) $ 159 $ 162 |
WARRANTY (Tables)
WARRANTY (Tables) | 3 Months Ended |
Sep. 30, 2020 | |
Product Warranties Disclosures [Abstract] | |
Schedule of accrual warranty costs | Information regarding the accrual for warranty costs for the three months ended September 30, 2020 and 2019, are as follows (in thousands): As of and for the 2020 2019 Beginning balance $ 213 $ 136 Accruals during the period 80 24 Changes in estimates of prior period warranty accruals (8 ) (13 ) Warranty amortization/utilization (95 ) (21 ) Ending balance $ 190 $ 126 |
NET INCOME PER SHARE (Tables)
NET INCOME PER SHARE (Tables) | 3 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share [Abstract] | |
Schedule of reconciliations of the numerators and denominators of the basic and diluted earnings (loss) per share computations for net income (loss) | The following table presents reconciliations of the numerators and denominators of the basic and diluted income per share computations. In the tables below, income amounts represent the numerator, and share amounts represent the denominator (in thousands, except per share amounts): Three Months Ended 2020 2019 Basic: Net income $ 1,265 $ 1,104 Weighted average shares outstanding 3,851 4,008 Basic earnings per share $ 0.33 $ 0.28 Diluted: Net income $ 1,265 $ 1,104 Weighted average shares outstanding 3,851 4,008 Effect of dilutive securities 124 102 Weighted average shares used in calculation of diluted earnings per share 3,975 4,110 Diluted earnings per share $ 0.32 $ 0.27 |
MAJOR CUSTOMERS & SUPPLIERS (Ta
MAJOR CUSTOMERS & SUPPLIERS (Tables) | 3 Months Ended |
Sep. 30, 2020 | |
Risks and Uncertainties [Abstract] | |
Schedule of sales by major customers | Information with respect to customers that accounted for sales in excess of 10% of our total sales in either of the three-month periods ended September 30, 2020 and 2019, is as follows (in thousands, except percentages): Three Months Ended September 30, 2020 2019 Amount Percent of Total Amount Percent of Total Total revenue $ 8,590 100 % $ 7,240 100 % Customer concentration: Customer 1 $ 5,169 60 % $ 5,412 75 % Customer 2 2,171 25 % 425 6 % Total $ 7,340 85 % $ 5,837 81 % |
Schedule of accounts receivable of major customers | Information with respect to accounts receivable from those customers that comprised more than 10% of our gross accounts receivable at either September 30, 2020 and June 30, 2020, is as follows (in thousands, except percentages): September 30, 2020 June 30, 2020 Total gross accounts receivable $ 6,147 100 % $ 5,161 100 % Customer concentration: Customer 1 $ 2,923 48 % $ 2,205 42 % Customer 2 2,716 44 % 1,593 31 % Customer 3 278 4 % 972 19 % Total $ 5,917 96 % $ 4,770 92 % |
LEASES (Tables)
LEASES (Tables) | 3 Months Ended |
Sep. 30, 2020 | |
Leases [Abstract] | |
Schedule of Maturities of Lease Liabilities | As of September 30, 2020, the maturity of our lease liability is as follows: Operating Fiscal Year: 2021 $ 359 2022 489 2023 504 2024 519 2025 535 Thereafter 1,261 Total lease payments 3,667 Less imputed interest: (652 ) Total $ 3,015 |
BASIS OF PRESENTATION (Details)
BASIS OF PRESENTATION (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Jun. 30, 2020 | Jul. 01, 2019 |
Accounting Policies [Abstract] | |||
Long-term assets | $ 3,300 | ||
Total liabilities | $ 10,746 | $ 12,064 | $ 3,300 |
COMPOSITION OF CERTAIN FINANC_3
COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS (Details) (Narrative) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Jun. 30, 2020 | |
Aggregate cost | $ 6,380 | $ 6,483 |
Net unrealized losses | 1,671 | 1,563 |
Gross unrealized losses | 1,903 | 1,703 |
Gross unrealized gains | 233 | 140 |
Marketable equity securities | 2,400 | 2,560 |
Air T, Inc. [Member] | ||
Marketable equity securities | $ 759 | $ 847 |
COMPOSITION OF CERTAIN FINANC_4
COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS (Marketable Equity Securities) (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Jun. 30, 2020 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Marketable equity securities - short-term | $ 2,400 | $ 2,560 |
Marketable equity securities - long-term | 2,309 | 2,360 |
Total marketable equity securities | $ 4,709 | $ 4,920 |
COMPOSITION OF CERTAIN FINANC_5
COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS (Inventory) (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Jun. 30, 2020 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Raw materials/purchased components | $ 3,841 | $ 4,241 |
Work in process | 2,333 | 2,339 |
Sub-assemblies/finished components | 1,712 | 1,438 |
Finished goods | 427 | 220 |
Total inventory | $ 8,313 | $ 8,238 |
COMPOSITION OF CERTAIN FINANC_6
COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS (Intangible Assets) (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Jun. 30, 2020 |
Finite-Lived Intangible Assets [Line Items] | ||
Less accumulated amortization | $ (63) | $ (60) |
Intangible assets,net | 159 | 162 |
Patent-related costs [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Total intangibles | $ 222 | $ 222 |
WARRANTY (Narrative) (Details)
WARRANTY (Narrative) (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Jun. 30, 2020 | Sep. 30, 2019 | Jun. 30, 2019 |
Product Warranties Disclosures [Abstract] | ||||
Warranty reserves | $ 190 | $ 213 | $ 126 | $ 136 |
WARRANTY (Movement in Warranty)
WARRANTY (Movement in Warranty) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Movement in Standard and Extended Product Warranty, Increase (Decrease) [Roll Forward] | ||
Beginning balance | $ 213 | $ 136 |
Accruals during the period | 80 | 24 |
Changes in estimates of prior period warranty accruals | (8) | (13) |
Warranty amortization/utilization | (95) | (21) |
Ending balance | $ 190 | $ 126 |
NET INCOME PER SHARE (Details)
NET INCOME PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Basic: | ||
Net income - Basic | $ 1,265 | $ 1,104 |
Weighted average shares outstanding | 3,850,838 | 4,008,017 |
Basic earnings per share | $ 0.33 | $ 0.28 |
Diluted: | ||
Net income - Diluted | $ 1,265 | $ 1,104 |
Weighted average shares outstanding | 3,850,838 | 4,008,017 |
Effect of dilutive securities | 124,000 | 102,000 |
Weighted average shares used in calculation of diluted earnings per share | 3,975,063 | 4,110,414 |
Diluted earnings per share | $ 0.32 | $ 0.27 |
INCOME TAXES (Narrative) (Detai
INCOME TAXES (Narrative) (Details) | 3 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | ||
Expected annual effective tax rate | 18.00% | 25.00% |
SHARE-BASED COMPENSATION (Narra
SHARE-BASED COMPENSATION (Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands | Jul. 02, 2020 | Feb. 28, 2020 | Dec. 31, 2017 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2014 | Sep. 30, 2020 | Sep. 30, 2016 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Aggregate share-based compensation expense | $ 26 | $ 12 | ||||||
Board of Directors [Member] | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Number of forfeited awards shares during period | 48,000 | |||||||
Weighted average fair value | $ 16.90 | |||||||
Performance Award [Member] | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Aggregate share-based compensation expense | $ 21 | 8 | ||||||
Number of awards granted during period | 40,000 | 200,000 | ||||||
Period for award description | Whether any performance awards vest, and the amount that does vest, is tied to the completion of service periods that range from 7 months to 9.5 years at inception and the achievement of our common stock trading at certain pre-determined prices. | |||||||
Unrecognized compensation cost | $ 223 | $ 223 | ||||||
Weighted-average period | 3 years 8 months 26 days | |||||||
Weighted average fair value | $ 4.46 | |||||||
Shares issued | 25,629 | |||||||
Payment of payroll tax liabilities | $ 259 | |||||||
Common shares [Member] | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Number of awards granted during period | 40,000 | |||||||
2016 Equity Incentive Plan [Member] | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Number of shares available to be awarded | 1,500,000 | |||||||
Awards outstanding | 200,000 | 200,000 | ||||||
Employees Stock Option Plan [Member] | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Intrinsic value of stock options outstanding | $ 911,000 | $ 911,000 | ||||||
Weighted average remaining contractual life | 1 year 2 months 12 days | |||||||
Options exercised | 20,000 | |||||||
Options exercised price | $ 1.97 | |||||||
Awards outstanding | 34,000 | 34,000 | ||||||
Weighted-average exercise price | $ 1.80 | $ 1.80 | ||||||
ESPP [Member] | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Aggregate share-based compensation expense | $ 5 | $ 4 | ||||||
Description of plan | The ESPP conforms to the provisions of Section 423 of the Internal Revenue Code, has coterminous offering and purchase periods of six months, and bases the pricing to purchase shares of our common stock on a formula so as to result in a per-share purchase price that approximates a 15% discount from the market price of a share of our common stock at the end of the purchase period. | |||||||
Number of shares reserved for future issuance | 704,715 | |||||||
Number of shares purchased (in shares) | 1,485 | 1,292 | 23,271 | |||||
Weighted average fair value | $ 16.94 | $ 11.76 |
MAJOR CUSTOMERS & SUPPLIERS (Na
MAJOR CUSTOMERS & SUPPLIERS (Narrative) (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | Jun. 30, 2020 | |
Concentration Risk [Line Items] | |||
Accounts payable | $ 1,834 | $ 1,965 | |
Accounts Payable [Member] | Supplier One [Member] | |||
Concentration Risk [Line Items] | |||
Percentage of concentrations risk | 10.00% | 10.00% | 10.00% |
Purchase [Member] | Supplier One [Member] | |||
Concentration Risk [Line Items] | |||
Percentage of concentrations risk | 10.00% | 10.00% | |
Accounts payable | $ 200 | $ 161 | |
Purchase [Member] | Supplier Two [Member] | |||
Concentration Risk [Line Items] | |||
Percentage of concentrations risk | 10.00% | 10.00% | |
Accounts payable | $ 113 | $ 245 |
MAJOR CUSTOMERS & SUPPLIERS (Sa
MAJOR CUSTOMERS & SUPPLIERS (Sales) (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | Jun. 30, 2020 | |
Concentration Risk [Line Items] | |||
Net sales | $ 8,590 | $ 7,240 | |
Total gross accounts receivable | 6,147 | ||
Total accounts payable | 1,834 | $ 1,965 | |
Sales [Member] | |||
Concentration Risk [Line Items] | |||
Net sales | $ 8,590 | $ 7,240 | |
Percentage of concentrations risk | 100.00% | 100.00% | |
Sales [Member] | Customer 1 [Member] | |||
Concentration Risk [Line Items] | |||
Net sales | $ 5,169 | $ 5,412 | |
Percentage of concentrations risk | 60.00% | 75.00% | |
Sales [Member] | Customer 2 [Member] | |||
Concentration Risk [Line Items] | |||
Net sales | $ 2,171 | $ 425 | |
Percentage of concentrations risk | 25.00% | 6.00% | |
Sales [Member] | Customer [Member] | |||
Concentration Risk [Line Items] | |||
Net sales | $ 7,340 | $ 5,837 | |
Percentage of concentrations risk | 85.00% | 81.00% | |
Accounts Receivable [Member] | |||
Concentration Risk [Line Items] | |||
Total gross accounts receivable | $ 6,147 | $ 5,161 | |
Percentage of concentrations risk | 100.00% | 100.00% | |
Accounts Receivable [Member] | Customer 1 [Member] | |||
Concentration Risk [Line Items] | |||
Total gross accounts receivable | $ 2,923 | $ 2,205 | |
Percentage of concentrations risk | 48.00% | 42.00% | |
Accounts Receivable [Member] | Customer 2 [Member] | |||
Concentration Risk [Line Items] | |||
Total gross accounts receivable | $ 2,716 | $ 1,593 | |
Percentage of concentrations risk | 44.00% | 31.00% | |
Accounts Receivable [Member] | Customer [Member] | |||
Concentration Risk [Line Items] | |||
Total gross accounts receivable | $ 5,917 | $ 4,770 | |
Percentage of concentrations risk | 96.00% | 92.00% | |
Accounts Receivable [Member] | Customer 3 [Member] | |||
Concentration Risk [Line Items] | |||
Total gross accounts receivable | $ 278 | $ 972 | |
Percentage of concentrations risk | 4.00% | 19.00% |
NOTES PAYABLE AND FINANCING T_2
NOTES PAYABLE AND FINANCING TRANSACTIONS (Narrative) (Details) - USD ($) | Oct. 02, 2018 | Sep. 06, 2018 | Sep. 30, 2020 | Sep. 30, 2019 | Jun. 30, 2020 |
Debt Instrument [Line Items] | |||||
Interest expense | $ 54,000 | $ 59,000 | |||
Minnesota Bank & Trust [Member] | |||||
Debt Instrument [Line Items] | |||||
Debt instrument, origination fee | $ 60,000 | ||||
Percentage of late payment fee | 5.00% | ||||
Increased percentage of default late payment | 3.00% | ||||
Minnesota Bank & Trust [Member] | Business Loan Agreement ("Revolving Loan Agreement") [Member] | |||||
Debt Instrument [Line Items] | |||||
Debt instrument, maturity date | Nov. 6, 2020 | ||||
Debt instrument, face amount | $ 2,000,000 | ||||
Interest rate | 4.50% | ||||
Minnesota Bank & Trust [Member] | Business Loan Agreement ("Term Loan Agreement") [Member] | |||||
Debt Instrument [Line Items] | |||||
Debt instrument, maturity date | Oct. 1, 2025 | ||||
Debt instrument, face amount | $ 5,000,000 | ||||
Interest rate | 5.53% | ||||
Interest expense | $ 18,433 | ||||
Debt instrument, periodic payment of principal and interest beginning November 1, 2018 | $ 72,000 |
COMMON STOCK (Details)
COMMON STOCK (Details) - Share Repurchase Program [Member] - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Cumulative basis [Member] | ||
Class of Stock [Line Items] | ||
Shares repurchased during the year, number of shares | 819,325 | |
Shares repurchased during year, value | $ 8,500 | |
10b5-1 Plan [Member] | ||
Class of Stock [Line Items] | ||
Number of authorized shares to repurchase, shares | 1,000,000 | |
Shares repurchased during the year, number of shares | 49,788 | |
Shares repurchased during year, value | $ 681 |
LEASES (Narrative) (Details)
LEASES (Narrative) (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Sep. 30, 2020 | Jun. 30, 2020 | Jul. 01, 2019 | |
Leases [Abstract] | |||
Operating lease right-of-use | $ 2,861 | $ 2,943 | $ 3,300 |
Operating lease liability | $ 3,015 | $ 3,300 | |
Interest rate | 5.30% | ||
Cash paid lease liability | $ 116 | ||
Operating lease liability current portion | $ 320 |
LEASES (Schedule of Future Mini
LEASES (Schedule of Future Minimum Base Rental Payment) (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Jul. 01, 2019 |
Leases [Abstract] | ||
2021 | $ 359 | |
2022 | 489 | |
2023 | 504 | |
2024 | 519 | |
2025 | 535 | |
Thereafter | 1,261 | |
Total lease payments | 3,667 | |
Less imputed interest: | (652) | |
Total | $ 3,015 | $ 3,300 |