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Accounting Policies, by Policy (Policies)
12 Months Ended
Jun. 30, 2012
Revenue Recognition, Policy [Policy Text Block] Revenue Recognition Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is reasonably assured (less estimated returns, for which provisions are made at the time of sale) in accordance with Accounting Standards Codification ("ASC") 605, "Revenue Recognition." The provision for estimated returns is made based on known claims and estimates of additional returns based on historical data. Revenues from technical support services and other services are recognized at the time the services are performed. Revenues from service contracts entered into with third party service providers are recognized at the time of sale, net of costs. Revenue for established products that have previously satisfied a customer's acceptance requirements and provide for full payment tied to shipment is generally recognized upon shipment and passage of title.In limited cases where a prior history of customer acceptance cannot be demonstrated or sales where customer payment dates are not determinable or when collection is not reasonably assured, revenue is deferred until customer acceptance occurs or payment has been received.On the limited shipments where sales are not recognized, gross profit is generally recorded as deferred profit in our consolidated balance sheet representing the difference between the receivable recorded and the inventory shipped.At June 30, 2012 we had deferred revenue of approximately $156,000 and no deferred profit. At June 30, 2011 we had deferred revenue of approximately $65,000 and no deferred profit.
Cash and Cash Equivalents, Policy [Policy Text Block] Cash and Cash Equivalents Qualstar classifies as cash equivalents only cash and those investments that are highly liquid, interest earning investments with maturity of three months or less from the date of purchase.
Marketable Securities, Policy [Policy Text Block] Marketable Securities Marketable securities consist primarily of high-quality U.S.corporate securities and U.S.federal government debt securities. Our marketable securities portfolio consists of short-term securities with original maturities of greater than three months from the date of purchase and remaining maturities of less than one year and longer term securities with original maturities of greater than one year and less than five years. Marketable securities are classified as available for sale and are recorded at fair value using the specific identification method; unrealized gains and losses are reflected in other comprehensive income until realized; realized gains and losses are included in earnings when the underlying securities are sold and are derived using the specific identification method for determining the cost of securities sold. A $74,000 loss, $18,000 loss and a $4,000 loss from the sale of marketable securities were recorded in fiscal years 2012, 2011 and 2010, respectively. All of Qualstar's marketable securities were classified as available-for-sale at June30, 2012, 2011 and 2010. The Company reviews its marketable securities for any potential investment impairments in accordance with ASC 320, "Investments - Debt and Equity Securities," in order to determine if an impairment exists and if so, the classification of the impairment as "temporary" or "other-than-temporary."A temporary impairment charge results in an unrealized loss being recorded in the other comprehensive income (loss) component of shareholders' equity.An other-than-temporary impairment charge is recorded as a realized loss in the Statement of Operations and reduces net income (loss) for the applicable accounting period.The differentiating factors between temporary and other-than-temporary impairment are primarily the length of time and the extent to which the market value has been less than cost, the financial condition and near-term prospects of the issuer and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in market value. The Company does not believe any unrealized losses represent an other-than-temporary impairment based on our evaluation of available evidence as of June 30, 2012.We believe that our existing cash and short-term investments, and our expected operating cash flows will be sufficient to fund our working capital requirements, capital expenditures and other obligations for the foreseeable future and will not affect our ability to execute our current business plans.If the credit ratings of the security issuers deteriorate or if normal market conditions do not return in the near future, we may be required to reduce the value of our investments through an impairment charge and reflect them as long-term investments.
Concentration Risk, Credit Risk, Policy [Policy Text Block] Concentration of Credit Risk, Other Concentration Risks and Significant Customers Qualstar sells its products primarily through value added resellers located worldwide. Ongoing credit evaluations of customers' financial condition are performed by Qualstar, and generally, collateral is not required. Potential uncollectible accounts have been provided for in the financial statements. We are exposed to foreign currency and interest rate risks.Our interest income is sensitive to changes in the general level of U.S.interest rates, particularly since the majority of our investments are in shorter duration fixed income securities. We have no outstanding debt nor do we utilize auction rate securities or derivative financial instruments in our investment portfolio. Our financial results could be affected by changes in foreign currency exchange rates or weak economic conditions in foreign markets. As all sales are currently made in U.S.dollars, a strengthening of the dollar could make our products less competitive in foreign markets. Sales outside of North America represented approximately 47.0% of net revenues in fiscal 2012, 36.1% of net revenues in fiscal 2011, and 33.4% of net revenues in fiscal 2010. Revenues from Qualstar's largest customer totaled approximately 11.5% of revenues for the year ended June 30, 2012. Revenues from Qualstar's two largest customers totaled approximately 13.8% and 11.9% of revenues for the year ended June 30, 2011, and revenues from Qualstar's largest customer totaled approximately 11.3% of revenues for the year ended June 30, 2010. At June 30, 2012, the largest customer's accounts receivable balance, net of specific allowances, totaled approximately 14.6% of net accounts receivable. At June 30, 2011, the two largest customers' accounts receivable balances, net of specific allowances, totaled approximately 9.0% and 8.0% of net accounts receivable. At June30, 2010, the largest customer's accounts receivable balance, net of specific allowances, totaled approximately 10.1% of net accounts receivable. Suppliers The primary suppliers of our power supplies segment, N2Power, are located in China. If a manufacturer should be unable to deliver products to us in a timely basis or at all, our power supply business could be adversely affected. Though we have many years of favorable experience with these suppliers, there can be no assurance that circumstances might not change and compel a supplier to curtail or terminate deliveries to us
Receivables, Policy [Policy Text Block] Allowance for Doubtful Accounts The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. We determine the allowance based on known troubled accounts, historical experience, and other currently available evidence. Activity in the allowance for doubtful accounts was as follows (in thousands): Description Balance at Beginning of Period Charged to Costs and Expenses Charged to Other Accounts Deductions (1) Balance at End of Period Year Ended June 30, 2012 $ 180 $ 35 $ - $ (177 ) $ 38 Year Ended June 30, 2011 $ 113 $ 67 $ - $ - $ 180 Year Ended June 30, 2010 $ 85 $ 25 $ - $ 3 $ 113 (1) Uncollectible accounts written off, net of recoveries
Inventory, Policy [Policy Text Block] Inventories Inventories are stated at the lower of cost (first-in, first-out basis) or market. Cost includes materials, labor, and manufacturing overhead related to the purchase and production of inventories. We regularly review inventory quantities on hand, future purchase commitments with our suppliers, and the estimated utility of our inventory. If our review indicates a reduction in utility below carrying value, we reduce our inventory to a new cost basis.
Property, Plant and Equipment, Policy [Policy Text Block] Property and Equipment Property and equipment are recorded at cost. Depreciation expense is computed using the straight-line method. Leasehold improvements are amortized over the shorter of the estimated useful life of the asset or the term of the lease. Estimated useful lives are as follows: Machinery and equipment (in years) 5 - 7 Furniture and fixtures (in years) 5 - 7 Computer equipment (in years) 3 - 5 Expenditures for normal maintenance and repair are charged to expense as incurred, and improvements are capitalized. Upon the sale or retirement of property or equipment, the asset cost and related accumulated depreciation are removed from the respective accounts and any gain or loss is included in the results of operations
Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block] Long-Lived Assets Qualstar reviews the impairment of long-lived assets whenever events or changes in circumstances indicate the carrying amount of any asset may not be recoverable, in accordance with ASC 360, "Property, Plant and Equipment." An impairment loss would be recognized when the estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition is less than the carrying amount. If impairment is indicated, the amount of the loss to be recorded is based upon an estimate of the difference between the carrying amount and the fair value of the asset. Fair value is based upon discounted cash flows expected to result from the use of the asset and its eventual disposition and other valuation methods. There was no impairment losses of long-lived assets recognized during the periods presented
Shipping and Handling Cost, Policy [Policy Text Block] Shipping and Handling Costs Qualstar records all charges for outbound shipping and handling and reports net freight revenue. All inbound shipping and fulfillment costs are classified as costs of goods sold
Standard Product Warranty, Policy [Policy Text Block] Warranty Obligations We provide a three year advanced replacement warranty on all XLS, RLS and TLS models that includes replacement of components, or if necessary, complete libraries. XLS libraries sold in North America also include one year of onsite service. Customers may purchase extended advance replacement service coverage and on-site service if they are located in the United States, Canada and most countries within Europe. We provide a three year warranty on all power supplies that includes repair or if necessary, replacement of the power supply. A provision for costs related to warranty expense is recorded when revenue is recognized, which is estimated based on historical warranty costs incurred. Customers may purchase extended advance replacement service coverage and on-site service if they are located in the United States, Canada and most countries within Europe. Activity in the liability for product warranty (included in other accrued liabilities) for the periods presented are as follows (in thousands):
Research, Development, and Computer Software, Policy [Policy Text Block] Research and Development All research and development costs are charged to expense as incurred. These costs consist primarily of engineering salaries, benefits, outside consultant fees, purchased parts and supplies directly involved in the design and development of new products, and facilities and other internal costs
Advertising Costs, Policy [Policy Text Block] Advertising Advertising and promotion expenses include costs associated with direct and indirect marketing, trade shows and public relations. Qualstar expenses all costs of advertising and promotion as incurred. Advertising and promotion expenses for the years ended June30, 2012, 2011 and 2010 were approximately $229,000, $321,000, and $342,000, respectively
Fair Value Measurement, Policy [Policy Text Block] Fair Value of Financial Instruments We adopted ASC 820, "Fair Value Measurements and Disclosures" on July1, 2008 for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually).ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 defines fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk. In addition to defining fair value, ASC 820 expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value is observable in the market.Each fair value measurement is reported in one of the three levels that are determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are: Level 1 - inputs are based upon unadjusted quoted prices for identical instruments traded in active markets. Level 2 - inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - inputs are generally unobservable and typically reflect management's estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques. In general, and where applicable, we use quoted prices in active markets for identical assets to determine fair value.This pricing methodology applies to our Level 1 investments such as U.S. treasuries and agency securities and exchange-traded mutual funds.If quoted prices in active markets for identical assets are not available to determine fair value, then we use quoted prices for similar assets or inputs other than the quoted prices that are observable either directly or indirectly.These investments are included in Level 2 and consist primarily of corporate bonds, mortgage-backed securities, and certain agency securities.While we own certain mortgage-backed fixed income securities, our portfolio as of June 30, 2012 does not contain direct exposure to subprime mortgages or structured vehicles that derive their value from subprime collateral.Our mortgage-backed securities are collateralized by prime residential mortgages and carry a 100% principal and interest guarantee, primarily from Federal National Mortgage Association and Federal Home Loan Mortgage Corporation. Our asset-backed securities are senior tranches in regard to priority of principal repayment and are collateralized by predominantly prime-rated receivables on consumer credit card, automobile loan and utility rate reduction securities. Assets and Liabilities Measured at Fair Value on a Recurring Basis The following table presents our assets and liabilities measured at fair value on a recurring basis at June30, 2012 and 2011 (in thousands): June 30, 2012 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Cash & Cash Equivalents Short-term Marketable Securities Long-term Marketable Securities Level 1: Cash 635 - - 635 635 - - Money Market Funds 6,746 - - 6,746 6,746 - - U.S. Treasury Securities 2,524 - (1 ) 2,523 - 1,508 1,015 Subtotal $ 9,905 $ - (1 ) $ 9,904 $ 7,381 $ 1,508 1,015 Level 2: U.S. Agency Securities 753 1 - 754 - 754 - Corporate securities 2,593 5 (1 ) 2,597 - 1,696 901 Municipal securities 3,471 6 - 3,477 - 1,752 1,725 Asset backed securities 1,629 1 - 1,630 - 1,256 374 Mortgage backed securities 2,525 - (2 ) 2,523 - 169 2,354 Subtotal $ 10,971 $ 13 $ (3 ) $ 10,981 - $ 5,627 $ 5,354 Total $ 20,876 $ 13 $ (4 ) $ 20,885 $ 7,381 $ 7,135 $ 6,369 June 30, 2011 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Cash & Cash Equivalents Short-term Marketable Securities Long-term Marketable Securities Level 1: Cash 865 - - 865 865 - - Money Market Funds 4,105 - - 4,105 4,105 - - U.S. Treasury Securities 2,541 8 - 2,549 - 2,409 140 Subtotal $ 7,511 $ 8 - $ 7,519 $ 4,970 $ 2,409 140 Level 2: - U.S. Agency Securities 6,143 13 - 6,156 - 5,394 762 Corporate securities 3,181 5 - 3,186 - 2,256 930 Asset backed securities 2,964 6 - 2,970 - 467 2,503 Mortgage backed securities 2,826 8 (1 ) 2,833 - 187 2,646 Subtotal $ 15,114 $ 32 $ (1 ) $ 15,145 - $ 8,304 $ 6,841 Total $ 22,625 $ 40 $ (1 ) $ 22,664 $ 4,970 $ 10,713 $ 6,981 The carrying amounts reported in the balance sheets for cash and cash equivalents, short-term marketable securities, accounts receivable and accounts payable approximate their fair values due to the short term nature of these financial instruments
Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block] Share-Based Compensation We account for share-based compensation in accordance with ASC 718, "Compensation - Stock Compensation." In accordance with the provisions of ASC 718, share-based compensation cost is measured at the grant date based on fair value of the award and is recognized as expense over the applicable vesting period of the stock award (generally four years) using the straight-line method
Income Tax, Policy [Policy Text Block] Income Taxes Income taxes are accounted for using the liability method in accordance with ASC 740, "Income Taxes." Under this method, deferred tax liabilities and assets are recognized for the expected future tax consequences of temporary differences between the financial statement and tax bases of assets and liabilities, and for the expected future tax benefit to be derived from tax credits and loss carry forwards. Current income tax expense or benefit represents the amount of income taxes expected to be payable or refundable for the current year. A valuation allowance is established 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
Comprehensive Income, Policy [Policy Text Block] Comprehensive Income (Loss) Comprehensive income (loss) includes unrealized gains and losses on debt and equity securities classified as available-for-sale and included as a component of shareholders' equity
Earnings Per Share, Policy [Policy Text Block] Loss per Share Basic loss per share has been computed by dividing net loss by the weighted average number of common shares outstanding. Diluted loss per share has been computed by dividing net loss by the weighted average common shares outstanding plus dilutive securities or other contracts to issue common stock as if these securities were exercised or converted to common stock. The following table sets forth the calculation for basic and diluted loss per share for the periods indicated: Year Ended June 30, 2012 2011 2010 (In thousands) Loss: Net loss $ (4,107 ) $ (680 ) $ (3,121 ) Shares: Weighted average shares for basic and diluted loss per share 12,253 12,253 12,253 Loss per share (0.34 ) (0.06 ) (0.25 ) Shares issuable under stock options of 529,000, 533,000 and 573,000 for the years ended June30, 2012, 2011 and 2010, respectively, have been excluded from the computation of diluted loss per share as the effect would be antidilutive
Reclassification, Policy [Policy Text Block] Reclassifications Certain prior year amounts have been reclassified to conform to the current year presentation
New Accounting Pronouncements, Policy [Policy Text Block] Recent Accounting Guidance Recently adopted accounting guidance On July 1, 2011, we adopted guidance issued by the Financial Accounting Standards Board ("FASB") on disclosure requirements related to fair value measurements. The guidance requires the disclosure of roll-forward activities on purchases, sales, issuances, and settlements of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). Adoption of this new guidance did not have an impact on our financial statements. On January 1, 2012, we adopted guidance issued by the FASB on accounting and disclosure requirements related to fair value measurements. The guidance limits the highest-and-best-use measure to nonfinancial assets, permits certain financial assets and liabilities with offsetting positions in market or counterparty credit risks to be measured at a net basis, and provides guidance on the applicability of premiums and discounts. Additionally, the guidance expands the disclosures on Level 3 inputs by requiring quantitative disclosure of the unobservable inputs and assumptions, as well as description of the valuation processes and the sensitivity of the fair value to changes in unobservable inputs. Adoption of this new guidance did not have a material impact on our financial statements
Recent Accounting Guidance Not Yet Adopted [Policy Text Block] Recent accounting guidance not yet adopted In December 2011, the FASB issued guidance enhancing disclosure requirements about the nature of an entity's right to offset and related arrangements associated with its financial instruments and derivative instruments. The new guidance requires the disclosure of the gross amounts subject to rights of set-off, amounts offset in accordance with the accounting standards followed, and the related net exposure. The new guidance will be effective for us beginning July 1, 2013, and we will not materially impact our financial statements upon adoption. In September 2011, the FASB issued ASU 2011-08, guidance on testing goodwill for impairment. The new guidance provides an entity the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If an entity determines that this is the case, it is required to perform the currently prescribed two-step goodwill impairment test to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized for that reporting unit (if any). If an entity determines that the fair value of a reporting unit is greater than its carrying amount, the two-step goodwill impairment test is not required. The new guidance will be effective for us beginning July 1, 2012, and will not impact our financial statements upon adoption. In June 2011, the FASB issued ASU 2011-05, guidance on presentation of comprehensive income. The new guidance eliminates the current option to report other comprehensive income and its components in the statement of changes in stockholders' equity. Instead, an entity will be required to present either a continuous statement of net income and other comprehensive income or in two separate but consecutive statements. This portion of the guidance will be effective for us beginning July 1, 2012 and will require financial statement presentation changes only. The new guidance also required entities to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented. However, in December 2011, the FASB issued guidance which indefinitely defers the guidance related to the presentation of reclassification adjustments