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Summary of Significant Accounting Policies | 12 Months Ended
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Jun. 30, 2015
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. During fiscal 2014, the Company combined the line items sales and marketing, general and administrative, research and development, and depreciation and amortization into two line items on the consolidated statements of operations and comprehensive income, namely, commissions and incentives and selling, general and administrative to have a presentation that is more comparable to that of the Company’s peers. The Company reclassified prior period line items to conform to the current period presentation. Certain other prior period balances have also been reclassified to conform to the current period presentation. Use of Estimates We prepare our consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (GAAP). In preparing these statements, we are required to use estimates and assumptions that affect the reported amounts of assets and liabilities, 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 materially from those estimates and assumptions. On an ongoing basis, we review our estimates, including those related to inventory obsolescence, sales returns, income taxes and tax valuation reserves, share-based compensation, and loss contingencies. Foreign Currency Translation A portion of the Company’s business operations occurs outside the United States. The local currency of each of the Company’s subsidiaries is generally its functional currency. All assets and liabilities are translated into U.S. dollars at exchange rates existing at the balance sheet dates, revenue and expenses are translated at weighted-average exchange rates and stockholders’ equity is recorded at historical exchange rates. The resulting foreign currency translation adjustments are recorded as a separate component of stockholders’ equity in the consolidated balance sheets. Transaction gains and losses are included in other income (expense), net in the consolidated statements of operations and comprehensive income. Fair Value of Financial Instruments Accounting guidance on fair value measurements and disclosures requires disclosures about the fair value for all financial instruments, whether or not recognized, for financial statement purposes. Disclosures about fair value of financial instruments are based on pertinent information available to management as of June 30, 2015 and 2014. Accordingly, the estimates presented in these consolidated financial statements are not necessarily indicative of the amounts that could be realized on disposition of the financial instruments. Management has estimated the fair values of cash and cash equivalents, accounts receivable, accounts payable, commissions payable and other accrued expenses to approximate their respective carrying values reported in these consolidated financial statements because of their short maturities. Cash and Cash Equivalents The Company considers only its monetary liquid assets with original maturities of three months or less to be cash and cash equivalents. Accounts Receivable The Company’s accounts receivable for the years ended June 30, 2015 and 2014 consist primarily of credit card receivables. Based on the Company’s verification process for customer credit cards and historical information available, management has determined that an allowance for doubtful accounts on credit card sales related to its customer sales as of June 30, 2015 or 2014 is not necessary. No bad debt expense has been recorded for the years ended June 30, 2015, 2014, and 2013. Inventory As of June 30, 2015 and 2014, inventory consisted of (in thousands):
| June 30,
| 2015 |  | 2014
Finished goods | $ | 5,783 |  |  | $ | 4,749 |
Raw materials | 3,465 |  |  | 4,077 |
Total inventory | $ | 9,248 |  |  | $ | 8,826 |
Inventories are carried and depicted above at the lower of cost or market, using the first-in, first-out method, which includes a reduction in inventory values of $0.3 million and $0.7 million at June 30, 2015 and June 30, 2014, respectively, related to obsolete and slow-moving inventory. Property and Equipment Property and equipment are recorded at cost and depreciated using the straight-line method over the following useful lives:
| Years
Equipment (includes computer hardware and software) | 3
Furniture and fixtures | 5
Leasehold improvements | *
Vehicles | 5
*Leasehold improvements are depreciated over the shorter of estimated useful life of the related asset or the lease term. The cost of normal maintenance and repairs is charged to expense as incurred. When an asset is sold or otherwise disposed of, the cost and associated accumulated depreciation are removed from the accounts and the resulting gain or loss is recognized in the consolidated statements of operations and comprehensive income. Significant expenditures that increase the useful life of an asset are capitalized and depreciated over the estimated useful life of the asset. Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. An impairment loss is recognized if the carrying amount of the asset exceeds its fair value. Intangible Assets Intangible assets are stated at cost less accumulated amortization. Definite-lived intangible assets are amortized over their related useful lives, using a straight-line method, consistent with the underlying expected future cash flows related to the specific intangible asset. Definite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances exist that indicate the carrying amount of an asset may not be recoverable. When indicators of impairment exist, an estimate of undiscounted net cash flows is used in measuring whether the carrying amount of the asset or related asset group is recoverable. Measurement of the amount of impairment, if any, is based upon the difference between the asset’s carrying value and estimated fair value. Indefinite-lived intangible assets are not amortized; however, they are tested at least annually for impairment or more frequently if events or changes in circumstances exist that may indicate impairment. An impairment loss is recognized if the carrying amount of the asset exceeds its fair value. Annual impairment tests were completed resulting in no impairment charges for any of the periods shown. Impairment of Long-Lived Assets Pursuant to guidance established for impairment or disposal of assets, the Company assesses impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. When an assessment for impairment of long-lived assets, long-lived assets to be disposed of, and certain identifiable intangibles related to those assets is performed, the Company is required to compare the net carrying value of long-lived assets on the lowest level at which cash flows can be determined on a consistent basis to the related estimates of future undiscounted net cash flows for such assets. If the net carrying value exceeds the net cash flows, then an impairment is recognized to reduce the carrying value to the estimated fair value, generally equal to the future discounted net cash flow. For the years ended June 30, 2015 and 2014 management has concluded that there are no indications of impairment. Concentration of Credit Risk Accounting guidance for financial instruments requires disclosure of significant concentrations of credit risk regardless of the degree of such risk. Financial instruments with significant credit risk include cash and cash equivalents. At June 30, 2015, the Company had $10.6 million in cash accounts at one financial institution and $3.3 million in other financial institutions. As of June 30, 2015 and 2014 and during the years then ended, the Company’s cash balances exceeded federally insured limits. Revenue Recognition The Company ships the majority of its product directly to the consumer and receives substantially all payment for these sales in the form of credit card receipts. Revenue from direct product sales to customers is recognized upon passage of title and risk of loss. Estimated returns are recorded when product is shipped. Subject to some exceptions based on local regulations, the Company’s return policy is to provide a full refund for product returned within 30 days if the returned product is unopened or defective. After 30 days, the Company generally does not issue refunds to direct sales customers for returned product. The Company allows terminating distributors to return up to 30% of unopened, unexpired product that they have purchased within the prior twelve months for a full refund, less a 10% restocking fee. The Company establishes the returns reserve based on historical experience. The returns reserve is evaluated on a quarterly basis. As of June 30, 2015 and 2014, the Company’s reserve balance for returns and allowances was $0.1 million and $0.6 million, respectively. Commissions and Incentives Commissions and incentives expenses are the Company’s most significant expenses and are classified as operating expenses. Commissions and incentives expenses include sales commissions paid to our independent distributors, special incentives, costs for incentive trips and other rewards. Commission and incentive expenses do not include any amounts we pay to our independent distributors for personal purchases. Commissions paid to independent distributors on personal purchases are considered a sales discount and are reported as a reduction to our net revenue. Shipping and Handling Shipping and handling costs associated with inbound freight and freight out to customers, including independent distributors, are included in cost of sales. Shipping and handling fees charged to all customers are included in sales. Research and Development Costs The Company expenses all costs related to research and development activities as incurred. Research and development expenses for the years ended June 30, 2015, 2014, and 2013 were $2.4 million, $2.0 million, and $2.9 million respectively. Stock-Based Compensation The Company recognizes stock-based compensation by measuring the cost of services to be rendered based on the grant date fair value of the equity award. The Company recognizes stock-based compensation, net of any estimated forfeitures, over the period an employee is required to provide service in exchange for the award, generally referred to as the requisite service period. For awards with market based performance conditions, the cost of the awards is recognized as the requisite service is rendered by employees, regardless of when, if ever, the market based performance conditions are satisfied. The Black-Scholes option pricing model is used to estimate the fair value of stock options. The determination of the fair value of stock options is affected by the Company's stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. The Company uses historical volatility as the expected volatility assumption required in the Black-Scholes model. The Company utilizes a simplified method for estimating the expected life of the options. The Company uses this method because it believes that it provides a better estimate than the Company’s historical data as post vesting exercises have been limited. The risk-free interest rate assumption is based on observed interest rates appropriate for the expected terms of the stock options. The fair value of restricted stock grants is based on the closing market price of the Company's stock on the date of grant less the Company's expected dividend yield. The fair value of performance stock units that include market based performance conditions is based on the closing market price of the Company's stock on the date of grant less the Company's expected dividend yield, with further adjustments made to reflect the market conditions that must be satisfied in order for the units to vest by using a Monte-Carlo simulation model. Key assumptions for the Monte-Carlo simulation model include the risk-free rate, expected volatility, expected dividends and the correlation coefficient. The fair value of cash-settled performance-based awards, accounted for as liabilities, is remeasured at the end of each reporting period and is based on the closing market price of the Company’s stock on the last day of the reporting period. The Company recognizes compensation costs for these awards with performance conditions when it concludes it is probable that the performance conditions will be achieved. The Company reassesses the probability of vesting at each balance sheet date and adjusts compensation costs accordingly. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using statutory tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in income in the period that includes the effective date of the change. The Company recognizes tax benefits from an uncertain position only if it is more likely than not that the position will be sustained upon examination by taxing authorities based on the technical merits of the issue. The amount recognized is the largest benefit that the Company believes has greater than a 50% likelihood of being realized upon settlement. Income Per Share Basic income per share is computed by dividing the net income by the weighted-average number of common shares outstanding during the period, less unvested restricted stock awards. Diluted income per common share is computed by dividing net income by the weighted-average common shares and potentially dilutive common share equivalents using the treasury stock method. The effects of approximately 3.1 million and 0.3 million common shares issuable upon exercise of options and non-vested shares of restricted stock outstanding as of June 30, 2015 and 2014, respectively, are not included in the computations as their effect was anti-dilutive. The following is a reconciliation of earnings per share and the weighted-average common shares outstanding for purposes of computing basic and diluted net income per share (in thousands, except per share amounts):
| Years ended June 30,
| 2015 |  | 2014 |  | 2013
Numerator: |  |  |  |  |
Net income | $ | 6,987 |  |  | $ | 11,383 |  |  | $ | 7,608 |
Denominator: |  |  |  |  |
Basic weighted-average common shares outstanding | 97,293 |  |  | 105,791 |  |  | 112,276 |
Effect of dilutive securities: |  |  |  |  |
Stock awards and options | 1,264 |  |  | 2,652 |  |  | 3,832 |
Warrants | 495 |  |  | 3,156 |  |  | 6,780 |
Diluted weighted-average common shares outstanding | 99,052 |  |  | 111,599 |  |  | 122,888 |
Basic | $ | 0.07 |  |  | $ | 0.11 |  |  | $ | 0.07 |
Diluted | $ | 0.07 |  |  | $ | 0.10 |  |  | $ | 0.06 |
Segment Information The Company operates in a single operating segment by selling products to an international network of independent distributors that operates in an integrated manner from market to market. Commissions and incentives expenses are the Company’s largest expense comprised of the commissions paid to its worldwide independent distributors. The Company manages its business primarily by managing its international network of independent distributors. The Company does not use profitability reports on a regional or divisional basis for making business decisions. However, the Company does report revenue in two geographic regions: Americas and Asia/Pacific. Revenues by geographic area are as follows (in thousands):
| Years ended June 30,
| 2015 |  | 2014 |  | 2013
Americas | $ | 138,118 |  |  | $ | 141,227 |  |  | $ | 133,046 |
Asia/Pacific | 52,218 |  |  | 72,741 |  |  | 75,132 |
Total revenues | $ | 190,336 |  |  | $ | 213,968 |  |  | $ | 208,178 |
Additional information as to the Company’s revenue from operations in the most significant geographical areas is set forth below (in thousands):
| Years ended June 30,
| 2015 |  | 2014 |  | 2013
United States | $ | 132,831 |  |  | $ | 136,758 |  |  | $ | 131,508 |
Japan | $ | 41,428 |  |  | $ | 61,872 |  |  | $ | 69,492 |
As of June 30, 2015 long-lived assets were $6.5 million in the U.S. and $1.5 million in Japan. As of June 30, 2014 long-lived assets were $9.8 million in the U.S. and $2.3 million in Japan. Major Products The Company's revenues are largely attributed to two product lines, Protandim® and the LifeVantage TrueScience® skin care regimen, which each accounted for more than 10% of total revenues for each of the years ended June 30, 2015, 2014 and 2013. On a combined basis, these products represent approximately 83.7%, 88.5% and 87.1% of our worldwide gross revenues for the years ended June 30, 2015, 2014 and 2013, respectively. The following table shows revenues by major product line for the years ended June 30, 2015, 2014 and 2013.
| For the years ended June 30,
| 2015 |  | 2014 |  | 2013
Protandim® | $ | 120,967 |  |  | 63.6 | % |  | $ | 142,935 |  |  | 66.8 | % |  | $ | 138,996 |  |  | 66.8 | %
LifeVantage TrueScience® skin care regimen | 38,287 |  |  | 20.1 | % |  | 46,474 |  |  | 21.7 | % |  | 42,229 |  |  | 20.3 | %
Other | 31,082 |  |  | 16.3 | % |  | 24,559 |  |  | 11.5 | % |  | 26,953 |  |  | 12.9 | %
Total | $ | 190,336 |  |  | 100.0 | % |  | $ | 213,968 |  |  | 100.0 | % |  | $ | 208,178 |  |  | 100.0 | %
New Accounting Pronouncements In August 2014, FASB issued Accounting Standards Update (ASU) No. 2014-15 Preparation of Financial Statements - Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. Under GAAP, continuation of a reporting entity as a going concern is presumed as the basis for preparing financial statements unless and until the entity’s liquidation becomes imminent. Preparation of financial statements under this presumption is commonly referred to as the going concern basis of accounting. If and when an entity’s liquidation becomes imminent, financial statements should be prepared under the liquidation basis of accounting in accordance with Subtopic 205-30, Presentation of Financial Statements-Liquidation Basis of Accounting. Even when an entity’s liquidation is not imminent, there may be conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern. In those situations, financial statements should continue to be prepared under the going concern basis of accounting, but the amendments in this Update should be followed to determine whether to disclose information about the relevant conditions and events. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company will evaluate the going concern considerations in this ASU, but has not elected early application. However, as of and for the current period, management does not believe that conditions exist or events have occurred that would require additional disclosure under the amendments in this update. In January 2015, FASB issued ASU No. 2015-01, Income Statement - Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. This guidance eliminates from GAAP the concept of extraordinary and unusual items, and is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Early application is permitted. The Company does not anticipate that the adoption of this guidance will have a material impact on its consolidated financial statements. In April 2015, FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 825-30): Simplifying the Presentation of Debt Issuance Costs. This guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This update will become effective for the Company in the first quarter of fiscal 2016 and requires retrospective application. The Company does not anticipate that the adoption of this guidance will have a material impact on its consolidated financial statements. In July 2015, FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. This guidance requires an entity to measure in scope inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amendments in this update are effective for annual periods and interim periods within those annual periods beginning after December 15, 2016. The Company does not anticipate that the adoption of this guidance will have a material impact on its consolidated financial statements.

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