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Discontinued Operations
 3 Months Ended
Sep. 30, 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 primarily 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.

Upon closing of the sale and finalization of other items required by the APA, such as a physical inventory count, we recorded proceeds from the sale of $756,000, equal to the actual net book value of the assets sold as of the Closing Date, summarized as follows:

 

         

Inventories

   $ 664,000  

Equipment

     82,000  

Other

     10,000  
   

 

 

  

Total

   $ 756,000  
   

 

 

  

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 three months ended September 30, 2012, we recognized income from earnout payments of $47,000, which was included in other receivables in the accompanying September 30, 2012 balance sheet and was received in October 2012.

Also on the Closing Date, we entered into a Transition Production Agreement (the “TPA”) with MTI, under which we provided MTI with manufacturing and certain administrative support services. MTI paid us for all our costs in providing the manufacturing services, and a fixed monthly amount for the administrative support services. In conformity with its terms, the TPA was terminated 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 September 30,  
    2012     2011  

Revenues

   $ 47,000     $ 985,000  

Income before provision for income taxes

   $ 42,000     $ 100,000  

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

 

                 
    September 30, 2012     June 30, 2012  

Inventories

   $ —       $ —    

Equipment

   $ —       $ —    

Accounts receivable

   $ 11,000     $ —    

Other assets

   $ 10,000     $ —    

Accounts payable

   $ 7,000     $ 3,000  

Accrued expenses

   $ 19,000     $ 25,000  

In addition, as a result of the sale of the Astromec product line, we listed for sale the land and building constituting the facility we own in Carson City, Nevada. Accordingly, effective as of the Closing Date, such land and building were reclassified to assets held for sale and appear as such in the accompanying September 30, 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.