NOTES RECEIVABLE & VARIABLE INTEREST ENTITY CONSIDERATIONS	9 Months Ended
Mar. 31, 2015
Notes Receivable Variable Interest Entity Considerations
NOTES RECEIVABLE & VARIABLE INTEREST ENTITY CONSIDERATIONS	NOTE 6. NOTES RECEIVABLE & VARIABLE INTEREST ENTITY CONSIDERATIONS In November 2014, the Company purchased two promissory notes through a Loan Purchase and Sale Agreement in the amount of $1.2 million. The promissory notes are cross-collateralized and secured by (collectively, the “Collateral”), among other things, real property consisting of 2.3 acres of land and an approximate 30,000 square foot industrial building and a security interest in substantially all of the assets of Riverside Manufacturing, Inc. (“Riverside”) (consisting primarily of machine shop equipment and accounts receivable). The notes are recorded at their purchase price and since the notes remain in default, they have been placed on nonaccrual status, and therefore, the Company has not collected or recognized any interest income since the date of purchase. Additionally, due to uncertainties relating to future cash flows projected to be received on the notes, no accretable yield has been recorded. During the three months ended March 31, 2015, we entered into forbearance agreements with Riverside whereby we have agreed to forbear from enforcing our rights under the promissory notes until July 31, 2015. Additionally, we entered into a revolving loan agreement, whereby we have agreed to advance Riverside from time-to-time up to an aggregate amount of $200,000 at any time prior to July 31, 2015. Through March 31, 2015, we have advanced $96,270 to Riverside and Riverside has repaid $65,686. As of March 31, 2015, the Company has evaluated whether or not the investments in Riverside create a variable interest entity (“VIE”) requiring consolidation. VIEs are legal entities in which the equity investors do not have sufficient equity at risk for the entity to independently finance its activities or the collective holders do not have the power through voting or similar rights to direct the activities of the entity that most significantly impact its economic performance, the obligation to absorb the expected losses of the entity, or the right to receive expected residual returns of the entity. Consolidation of a VIE is considered appropriate if a reporting entity is the primary beneficiary, the party that has both significant influence and control over the VIE. Management performed a qualitative analysis to determine if the Company is the primary beneficiary of Riverside. The Company performed a VIE analysis including a review of Riverside’s capital structure, contractual terms, and primary activities, including the Company’s ability to direct the activities of Riverside and its obligations to absorb losses, or the right to receive benefits, significant to Riverside. The Company has determined that Riverside’s debt represented by the two promissory notes and the revolving loan constitute the majority of its financial support and continuing support for its ongoing operations, and that the equity investment at risk in Riverside was insufficient to permit financing of activities without additional financial support from the Company. Accordingly, it was determined that the Company has a variable interest in Riverside and Riverside is a variable interest entity of the Company. Based on the Company’s analysis as of March 31, 2015, however, it was determined that the Company is not the primary beneficiary of Riverside because the sole shareholder of Riverside has retained the day to day management and control over all key economic decisions of the Riverside business and the Company has no authority as the primary creditor of Riverside to affect any of these management decisions nor does the Company have any obligation to absorb Riverside’s losses or the right to receive any benefits from Riverside. Our total investment in Riverside as of March 31, 2015 is represented by the $1,236,000 notes receivable on our condensed consolidated balance sheet. Our maximum investment at risk, should Riverside remain in default on the notes and borrow fully on the revolving loan agreement, coupled with our inability to foreclose on the Collateral, would be $1,405,000. During the three and nine months ended March 31, 2015 we have provided no support, financial or otherwise, to Riverside other than as contractually required by the revolving loan agreement. The payments we have advanced to Riverside under the revolving loan agreement have generally been made to fund Riverside’s ongoing working capital needs. Riverside is a contract manufacturer providing services to the aerospace,commercial airline, transportation and defense-related sectors and its unaudited revenue for its fiscal year ended December 31, 2014 totaled $ 1.9 million. The Company acquired the notes to achieve a return on capital upon liquidation or operation of the Riverside assets. The Company entered into the forbearance agreements with Riverside to allow further time for Riverside to improve its financial performance and for the Company to evaluate those results prior to liquidating the investment.

NOTES RECEIVABLE & VARIABLE INTEREST ENTITY CONSIDERATIONS

9 Months Ended

Mar. 31, 2015

Notes Receivable Variable Interest Entity Considerations

NOTES RECEIVABLE & VARIABLE INTEREST ENTITY CONSIDERATIONS

NOTE 6. NOTES RECEIVABLE & VARIABLE INTEREST ENTITY CONSIDERATIONS

In November 2014, the Company purchased two promissory notes through a Loan Purchase and Sale Agreement in the amount of $1.2 million. The promissory notes are cross-collateralized and secured by (collectively, the “Collateral”), among other things, real property consisting of 2.3 acres of land and an approximate 30,000 square foot industrial building and a security interest in substantially all of the assets of Riverside Manufacturing, Inc. (“Riverside”) (consisting primarily of machine shop equipment and accounts receivable).

The notes are recorded at their purchase price and since the notes remain in default, they have been placed on nonaccrual status, and therefore, the Company has not collected or recognized any interest income since the date of purchase. Additionally, due to uncertainties relating to future cash flows projected to be received on the notes, no accretable yield has been recorded.

During the three months ended March 31, 2015, we entered into forbearance agreements with Riverside whereby we have agreed to forbear from enforcing our rights under the promissory notes until July 31, 2015. Additionally, we entered into a revolving loan agreement, whereby we have agreed to advance Riverside from time-to-time up to an aggregate amount of $200,000 at any time prior to July 31, 2015. Through March 31, 2015, we have advanced $96,270 to Riverside and Riverside has repaid $65,686.

As of March 31, 2015, the Company has evaluated whether or not the investments in Riverside create a variable interest entity (“VIE”) requiring consolidation. VIEs are legal entities in which the equity investors do not have sufficient equity at risk for the entity to independently finance its activities or the collective holders do not have the power through voting or similar rights to direct the activities of the entity that most significantly impact its economic performance, the obligation to absorb the expected losses of the entity, or the right to receive expected residual returns of the entity. Consolidation of a VIE is considered appropriate if a reporting entity is the primary beneficiary, the party that has both significant influence and control over the VIE. Management performed a qualitative analysis to determine if the Company is the primary beneficiary of Riverside. The Company performed a VIE analysis including a review of Riverside’s capital structure, contractual terms, and primary activities, including the Company’s ability to direct the activities of Riverside and its obligations to absorb losses, or the right to receive benefits, significant to Riverside. The Company has determined that Riverside’s debt represented by the two promissory notes and the revolving loan constitute the majority of its financial support and continuing support for its ongoing operations, and that the equity investment at risk in Riverside was insufficient to permit financing of activities without additional financial support from the Company. Accordingly, it was determined that the Company has a variable interest in Riverside and Riverside is a variable interest entity of the Company. Based on the Company’s analysis as of March 31, 2015, however, it was determined that the Company is not the primary beneficiary of Riverside because the sole shareholder of Riverside has retained the day to day management and control over all key economic decisions of the Riverside business and the Company has no authority as the primary creditor of Riverside to affect any of these management decisions nor does the Company have any obligation to absorb Riverside’s losses or the right to receive any benefits from Riverside.

Our total investment in Riverside as of March 31, 2015 is represented by the $1,236,000 notes receivable on our condensed consolidated balance sheet. Our maximum investment at risk, should Riverside remain in default on the notes and borrow fully on the revolving loan agreement, coupled with our inability to foreclose on the Collateral, would be $1,405,000. During the three and nine months ended March 31, 2015 we have provided no support, financial or otherwise, to Riverside other than as contractually required by the revolving loan agreement. The payments we have advanced to Riverside under the revolving loan agreement have generally been made to fund Riverside’s ongoing working capital needs. Riverside is a contract manufacturer providing services to the aerospace,commercial airline, transportation and defense-related sectors and its unaudited revenue for its fiscal year ended December 31, 2014 totaled $ 1.9 million. The Company acquired the notes to achieve a return on capital upon liquidation or operation of the Riverside assets. The Company entered into the forbearance agreements with Riverside to allow further time for Riverside to improve its financial performance and for the Company to evaluate those results prior to liquidating the investment.