DISCONTINUED OPERATIONS AND REAL ESTATE HELD FOR SALE

12 Months Ended

Jun. 30, 2013

Discontinued Operations and Disposal Groups [Abstract]

DISCONTINUED OPERATIONS AND REAL ESTATE HELD FOR SALE

NOTE 3 – DISCONTINUED OPERATIONS AND REAL ESTATE HELD FOR SALE

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 (“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

Costs directly related to the sale aggregated $302,000, 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 year ended June 30, 2012 in the accompanying 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, are 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 amount to 6%, 4% and 2% of the Earnout Sales Base in the first, second and third such years, respectively. The earnout payments are recognized in the quarter in which we become entitled to receive them. For the years ended June 30, 2013 and 2012, we recognized income from earnout payments of $165,000 and $65,000, respectively, of which $31,000 and $45,000 was included in other receivables in the accompanying June 30, 2013 and 2012 balance sheets, respectively, and were received in July 2013 and 2012, respectively.

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: 

	Years Ended June 30,
	2013		2012
Revenues	$	166,000	$	2,160,000
Income (loss) before benefit from income taxes	$	130,000	$	(62,000	)

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

	June 30,
	2013		2012
Accounts receivable	$	31,000	$	45,000
Accounts payable		—	$	3,000
Accrued expenses	$	5,000	$	25,000

Real Estate Held For Sale

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 owned in Carson City, Nevada, which are presented as real estate held for sale in the accompanying June 30, 2013 and 2012 consolidated balance sheets with an aggregate carrying amount of $733,000. We evaluated the aggregate carrying amount of the land and building in relation to their aggregate estimated fair value less cost to sell, and we determined that an adjustment to such carrying amount was not required.

On April 22, 2013, we entered into a Purchase Agreement (the “Agreement”) with Aesthetic and Reconstructive Technologies, Inc., a Nevada corporation (“AART”), whereby we agreed to sell the Carson City facility described above.  On July 5, 2013 (the “Closing Date”), we completed the sale and closed the Agreement in conformity with its terms.  The sales price of the property was $980,000, resulting in our receipt at the Closing Date of approximately $915,000 in net proceeds, after deductions for expenses related to the sale, primarily consisting of broker commissions and fees, aggregating approximately $65,000.