XML 24 R11.htm IDEA: XBRL DOCUMENT v2.4.0.6
Discontinued Operations
 9 Months Ended
Mar. 31, 2012
Discontinued Operations [Abstract]  
Discontinued Operations

NOTE 6. DISCONTINUED OPERATIONS

On February 27, 2012 (the "Closing Date"), we completed the sale of our fractional horsepower motor product line, operating under the name Pro-Dex Astromec and located in Carson City, Nevada, to SL Montevideo Technology, Inc. ("MTI"), a wholly owned subsidiary of SL Industries, Inc., pursuant to an Asset Purchase Agreement (the "APA").

Under the terms of the APA, we sold substantially all the assets of Astromec, consisting of inventory, equipment and intangibles, and excluding cash, accounts receivable and the Carson City facility. We retained substantially all of Astromec's liabilities except for those liabilities associated with certain contracts and unfilled purchase orders assumed by MTI.

In accordance with the terms of the APA, MTI paid us $747,000 on the Closing Date, representing (a) the estimated net book value of the assets sold, amounting to $830,000, less (b) a 10% holdback pending completion of a physical count of such assets. Upon the closing of the sale and finalization of the physical count, we recorded proceeds from the sale of $756,000, ($9,000 of which was received in April 2012), equal to the actual net book value of the assets sold as of the Closing Date, summarized as follows (in thousands):

 

Inventories

    $ 664   

Equipment

      82   

Other

      10   
  

 

 

  

Total

    $ 756   
  

 

 

  

Costs directly related to the sale aggregated $302,000 (of which $48,000 is included in accounts payable at March 31, 2012), and consisted primarily of a $100,000 fee paid to our financial advisor in connection with the transaction, other professional fees amounting to $66,000, and employee severance payments amounting to $125,000. Based on the foregoing, we recorded net proceeds from the sale of $454,000, and a loss on the sale, equal to the aforementioned direct costs, of $302,000, which is included in loss from discontinued operations for the three and nine months ended March 31, 2012 in the accompanying condensed consolidated statements of operations

 

Under the terms of the APA, we may also receive earnout payments based on revenues generated from the sale of (i) Astromec products and (ii) MTI products to Astromec prospects (defined in the APA) (collectively, the "Earnout Sales Base"). Such earnout payments, if and when earned, will be paid by MTI to us within 30 days following the end of each of our fiscal quarters during the three years subsequent to the Closing Date, and will amount to 6%, 4% and 2% of the Earnout Sales Base in the first, second and third such years, respectively. The earnout payments will be recognized in the quarter in which we become entitled to receive them. For the quarter ended March 31, 2012, we recognized income from an earnout payment of $20,000, which payment was received in April 2012.

Also on the Closing Date, we entered into a Transition Production Agreement (the "TPA") with MTI, under which we provide MTI with manufacturing and certain administrative support services. MTI pays us for all our costs in providing the manufacturing services, and a fixed monthly amount for the administrative support services. The TPA had an original term of 90 days, subject to MTI's ability to terminate the TPA upon ten business days' written notice. On April 26, 2012, MTI provided us such notice of its election to terminate the TPA effective May 10, 2012.

Based on the foregoing, and in conformity with applicable accounting guidance, the Astromec product line qualifies as a discontinued operation. Accordingly, financial results of Astromec have been reported as discontinued operations in the accompanying consolidated statements of operations for all periods presented. Information regarding revenue and operating results of Astromec included in discontinued operations is as follows:

 

     Three Months Ended March 31,     Nine Months Ended March 31,  
     2012     2011     2012     2011  

Revenues

         

Product sales through the Closing Date

    $ 513,000      $ 750,000      $ 2,389,000      $ 2,298,000   

Manufacturing and administrative services under the TPA

      39,000        —          —          —     

Earnout payments under the TPA

      20,000        —          —          —     
  

 

 

    

 

 

    

 

 

    

 

 

  

Total revenues

    $ 572,000      $ 750,000      $ 2,389,000      $ 2,298,000   
  

 

 

    

 

 

    

 

 

    

 

 

  

Loss before provision for income taxes

    $ (243,000 )    $ (93,000 )    $ (174,000 )    $ (321,000 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Information regarding Astromec assets and liabilities included in the accompanying consolidated balance sheets is as follows:

 

     March 31, 2012      June 30, 2011  

Inventories

    $ —         $ 592,000   

Equipment

    $ —         $ 129,000   

Accounts receivable

    $ 314,000       $ 540,000   

Other assets

    $ 12,000       $ 4,000   

Accounts payable

    $ 100,000       $ 158,000   

Accrued expenses

    $ 260,000       $ 151,000   

In addition, as a result of the sale of the Astromec product line, our intent is to sell the land and building constituting the facility we own in Carson City, Nevada. Accordingly, such land and building have been reclassified to assets held for sale in the accompanying March 31, 2012 consolidated balance sheet. Concurrent with this reclassification, we evaluated the carrying amount of the land and building in relation to its estimated fair value less cost to sell, and we determined that an adjustment to such carrying amount was not required.