Selected Consolidated Financial Statement Information

Accounts Receivable, Net

Accounts receivable consists of the following:



	March 31,			June 30,
	2017			2016
Accounts receivable	$	28,751		$	23,840
Less: Allowance for doubtful accounts	(874		)	(712		)
Accounts receivable, net	$	27,877		$	23,128

Inventories

Inventories consist of the following:



	March 31,		June 30,
	2017		2016
Raw materials	$	7,419	$	7,439
Work in process	1,021		1,142
Finished goods	8,165		8,859
Inventories	$	16,605	$	17,440

Property and Equipment, Net

Property and equipment consists of the following:



	March 31,			June 30,
	2017			2016
Land	$	500		$	500
Building	22,420			22,575
Equipment	16,194			14,141
Furniture	2,708			2,709
Leasehold improvements	86			86
Construction in progress	310			1,533
	42,218			41,544
Less: Accumulated depreciation	(12,005		)	(9,073		)
Property and equipment, net	$	30,213		$	32,471

On December 29, 2016, the Company entered into a Purchase and Sale Agreement, as subsequently amended (collectively, the “Sale Agreement”), with Krishna Holdings, LLC (the “Buyer”), providing for the sale to Buyer of the Company’s headquarters facility in St. Paul, Minnesota (the “Facility”), for a cash purchase price of $21,500. On March 30, 2017, the sale of the Facility under the Sale Agreement closed. The Company received proceeds of approximately $20,944 ($21,500, less $556 of transaction expenses). The net proceeds are to be used for working capital and general corporate purposes. In connection with the sale, the Company recorded an impairment charge of $158.

Under the Sale Agreement, the Company entered into a Lease Agreement (the “Lease Agreement”) with Krishna Holdings, LLC, Apex Holdings, LLC, Kashi Associates, LLC, Keva Holdings, LLC, S&V Ventures, LLC, Polo Group LLC, SPAV Holdings LLC, Star Associates LLC, and The Global Villa, LLC (collectively, the “Landlord”). As the lease terms resulted in a capital lease classification, the Company accounted for the sale and leaseback of the Facility as a financing transaction where the assets remain on the Company's balance sheet. See Note 4 for further discussion on future payment obligations under the Lease Agreement.

Accrued Expenses

Accrued expenses consist of the following:



	March 31,		June 30,
	2017		2016
Salaries and bonus	$	5,890	$	4,305
Commissions	7,590		7,788
Accrued vacation	3,430		3,498
Accrued excise, sales and other taxes	3,507		3,372
Accrued litigation	2,600		—
Legal settlement	1,806		3,872
Warranty reserve	1,545		145
Clinical studies	565		1,757
Restructuring	307		1,337
Other accrued expenses	2,597		919
Total Accrued expenses	$	29,837	$	26,993

Legal Settlement

On June 28, 2016, the Company entered into a Settlement Agreement (the “Settlement Agreement”) with the United States of America, acting through the Department of Justice (the “DOJ”) and on behalf of the Office of Inspector General of the Department of Health and Human Services, and Travis Thams, to resolve the investigation by the DOJ and the Civil Action underlying such investigation. Under the Settlement Agreement, the Company agreed to pay $8,000 (the “Settlement Amount”), as follows: an initial payment of $3,000, paid on July 1, 2016, with the remaining $5,000, which bears interest at 1.8% per annum, payable in 11 equal quarterly installments, beginning January 1, 2017. The amount payable within the next twelve months is included in accrued expenses (as noted in the table above) with the long-term portion included in other liabilities (as noted in the table below). Under the Settlement Agreement, if the Company makes a single payment in excess of $2,000, which payment is not covered by an insurance policy, in settlement of any claims before paying the full Settlement Amount, the remaining unpaid balance of the Settlement Amount will become immediately due and payable, with interest accruing on the unpaid principal portion at an interest rate of 1.8% per annum.

Restructuring

On March 31, 2016, the Company announced a restructuring to reduce costs as a part of its plan to progress towards profitability and positive cash flow. As a result, the Company recorded a restructuring expense of $2,364 during the year ended June 30, 2016, which was comprised of severance and other employee related costs.

The following table provides information regarding the restructuring accrual:



	Severance
Restructuring accrual at June 30, 2016	$	1,521
Cash payments	(1,189		)
Restructuring accrual at March 31, 2017	$	332

The Company anticipates that $307 of the restructuring accrual at March 31, 2017 will be paid within the next twelve months and is therefore recorded in accrued expenses on the consolidated balance sheet. Estimated payments of $25 are recorded in other liabilities on the consolidated balance sheet. The Company does not anticipate additional restructuring costs in the near future.

CEO Departure

On February 29, 2016, the Company’s former Chief Executive Officer (“CEO”) resigned from his positions as President and CEO of the Company and as a director of the Company. The Company and the former CEO entered into a Separation Agreement with benefits consistent with the Company’s Amended and Restated Executive Officer Severance Plan. The total expense related to the former CEO’s departure was $1,507 and was recorded in selling, general and administrative expenses for the year ended June 30, 2016. As of March 31, 2017, $570 of the package benefits is recorded in accrued expenses (included in salaries and bonus in the table above) and $19 is recorded in other liabilities (included in accrued severance in the table below) on the consolidated balance sheet, representing the long-term portion of the former CEO’s benefits.

Pump Recall

In April 2017, the Company initiated a voluntary recall of one type of its saline infusion pumps. The Company plans to recall and replace approximately 900 units currently in customer inventory and recorded a reserve for approximately $1,535 of expenses during the three months ended March 31, 2017. The warranty reserve above includes $1,378 of estimated costs related to the recall and replacement of all affected saline infusion pumps. The Company also recorded approximately $60 of accrued consulting fees included in the table above, as well as an inventory reserve of $97 for pumps currently in its inventory.

Other Liabilities

Other non-current liabilities consist of the following:



	March 31,		June 30,
	2017		2016
Legal settlement	2,771		4,128
Deferred compensation	379		684
Deferred grant incentive	476		486
Accrued severance	44		610
Other liabilities	82		102
Total Other liabilities	$	3,752	$	6,010

Deferred Revenue

In November 2016, the Company signed an exclusive distribution agreement with Medikit to sell its Diamondback 360^®Coronary and Peripheral OAS in Japan. To secure exclusive distribution rights, Medikit made an upfront payment of $10,000 to the Company, which is refundable based on the occurrence of certain events during the term of the agreement. The Company has classified the upfront payment as long-term based on its expectation of when revenue will be recognized. The classification will be re-evaluated on a quarterly basis.