Pennsylvania | 33-0272839 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Large accelerated filer | o | Accelerated filer | o | |||
Non-accelerated filer | o (Do not check if a smaller reporting company) | Smaller reporting company | x | |||
Emerging growth company | o |
TABLE OF CONTENTS | ||
Page | ||
Item I. | ||
Condensed Consolidated Balance Sheets as of March 31, 2018 and June 30, 2017 (Unaudited) | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 6. |
ESCALON MEDICAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | |||||||
March 31, 2018 | June 30, 2017 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 1,127,920 | $ | 544,118 | |||
Accounts receivable, net | 1,311,261 | 1,483,770 | |||||
Inventories, net | 1,991,371 | 1,917,938 | |||||
Other current assets | 201,803 | 209,546 | |||||
Total current assets | 4,632,355 | 4,155,372 | |||||
Property and equipment, net | 59,269 | 54,892 | |||||
Trademarks and trade names | 605,006 | 605,006 | |||||
Patents, net | — | 400 | |||||
License, net | 166,262 | 168,500 | |||||
Total assets | $ | 5,462,892 | $ | 4,984,170 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Line of credit | $ | 165,000 | $ | 250,000 | |||
Current portion of note payable | 3,094 | — | |||||
Accounts payable | 727,662 | 1,047,463 | |||||
Accrued expenses | 1,221,969 | 965,764 | |||||
Related party note payable | — | 545,000 | |||||
Current portion of accrued post-retirement benefits | 101,891 | 101,891 | |||||
Liabilities of discontinued operations | 95,829 | 91,125 | |||||
Total current liabilities | 2,315,445 | 3,001,243 | |||||
Note payable, net of current portion | 18,853 | — | |||||
Accrued post-retirement benefits, net of current portion | 768,391 | 799,347 | |||||
Total long-term liabilities | 787,244 | 799,347 | |||||
Total liabilities | 3,102,689 | 3,800,590 | |||||
Commitments and contingencies | |||||||
Shareholders' equity: | |||||||
Series A convertible preferred stock, $0.001 par value; 2,000,000 shares authorized;2,000,000 issued and outstanding at March 31, 2018 and none issued and outstanding at June 30, 2017 (liquidation value of $645,000) | 645,000 | — | |||||
Common stock, $0.001 par value; 35,000,000 shares authorized; 7,551,430 issued and outstanding | 7,551 | 7,551 | |||||
Additional paid-in capital | 69,701,907 | 69,701,907 | |||||
Accumulated deficit | (67,994,255 | ) | (68,525,878 | ) | |||
Total shareholders’ equity | 2,360,203 | 1,183,580 | |||||
Total liabilities and shareholders’ equity | $ | 5,462,892 | $ | 4,984,170 |
ESCALON MEDICAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) | |||||||||||||||||
For the three-month period ended March 31, | For the nine-month period ended March 31, | ||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||
Net revenues: | |||||||||||||||||
Products | $ | 2,412,598 | $ | 2,660,781 | $ | 8,013,833 | $ | 7,794,775 | |||||||||
Licenses and service plans | 222,884 | 184,764 | 634,301 | 545,323 | |||||||||||||
Revenues, net | 2,635,482 | 2,845,545 | 8,648,134 | — | 8,340,098 | ||||||||||||
Costs and expenses: | |||||||||||||||||
Cost of goods sold | 1,487,707 | 1,542,898 | 4,792,775 | 4,506,442 | |||||||||||||
Marketing, general and administrative | 1,147,475 | 1,096,655 | 3,336,604 | 3,458,958 | |||||||||||||
Research and development | 92,649 | 279,883 | 393,239 | 876,377 | |||||||||||||
Total costs and expenses | 2,727,831 | 2,919,436 | 8,522,618 | 8,841,777 | |||||||||||||
Income (loss) from operations | (92,349 | ) | (73,891 | ) | 125,516 | (501,679 | ) | ||||||||||
Other income (expense) | |||||||||||||||||
Other income | — | — | 500,000 | — | |||||||||||||
Interest income | 1,627 | 84 | 2,471 | 185 | |||||||||||||
Interest expense | (28,354 | ) | (33,049 | ) | (96,364 | ) | (65,851 | ) | |||||||||
Total other income (expense) | (26,727 | ) | (32,965 | ) | — | 406,107 | — | (65,666 | ) | ||||||||
Net income (loss) | (119,076 | ) | (106,856 | ) | 531,623 | (567,345 | ) | ||||||||||
Undeclared dividends on preferred stock | 6,503 | — | 6,503 | — | |||||||||||||
Net income (loss) applicable to common shareholders | $ | (125,579 | ) | $ | (106,856 | ) | $ | 525,120 | $ | (567,345 | ) | ||||||
Net income (loss) per share | |||||||||||||||||
Basic net loss (income) per share | $ | (0.02 | ) | $ | (0.01 | ) | $ | 0.07 | $ | (0.08 | ) | ||||||
Diluted net loss (income) per share | $ | (0.02 | ) | $ | (0.01 | ) | $ | 0.06 | $ | (0.08 | ) | ||||||
Weighted average shares—basic | 7,551,430 | 7,551,430 | 7,551,430 | 7,551,430 | |||||||||||||
Weighted average shares—diluted | 7,551,430 | 7,551,430 | 8,268,097 | 7,551,430 |
ESCALON MEDICAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY FOR THE NINE MONTHS ENDED MARCH 31, 2018 (UNAUDITED) | |||||||||||||||||||||||||||
Common Stock | Preferred Stock | Additional Paid-in Capital | Accumulated Deficit | Total Shareholders' Equity | |||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Balance at June 30, 2017 | 7,551,430 | $ | 7,551 | — | $— | $69,701,907 | $ | (68,525,878 | ) | $ | 1,183,580 | ||||||||||||||||
Issuance of stock for debt | 2,000,000 | 645,000 | — | — | 645,000 | 645,000 | |||||||||||||||||||||
Net income | — | — | — | — | — | 531,623 | 531,623 | ||||||||||||||||||||
Balance at March 31, 2018 | 7,551,430 | $ | 7,551 | $ | 2,000,000 | $ | 645,000 | $ | 69,701,907 | $ | (67,994,255 | ) | $ | 2,360,203 |
ESCALON MEDICAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | |||||||
For the nine-month period ended March 31, | |||||||
2018 | 2017 | ||||||
Cash Flows from Operating Activities: | |||||||
Net income (loss) | $ | 531,623 | $ | (567,345 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided by(used in) operating activities: | |||||||
Gain on sale from source code license agreement | (500,000 | ) | — | ||||
Depreciation and amortization | 35,340 | 34,413 | |||||
Change in operating assets and liabilities: | |||||||
Accounts receivable, net | 172,509 | 158,981 | |||||
Inventories, net | (73,433 | ) | 181,366 | ||||
Other current assets | 7,744 | 71,115 | |||||
Accounts payable and accrued expenses | (63,597 | ) | (479,921 | ) | |||
Change in accrued post-retirement benefits | (30,956 | ) | (27,586 | ) | |||
Change in liabilities of discontinued operations | 4,704 | (3,196 | ) | ||||
Net cash provided by (used in) operating activities | 83,934 | (632,173 | ) | ||||
Cash Flows from Investing Activities: | |||||||
Proceeds from sales of source code licensing agreement | 500,000 | — | |||||
Purchase of property and equipment | (2,206 | ) | — | ||||
Purchase of licenses | (12,500 | ) | — | ||||
Net cash provided by investing activities | 485,294 | — | |||||
Cash Flows from Financing Activities: | |||||||
Proceeds from related party note payable | 100,000 | 270,000 | |||||
Proceeds from (repayment of) line of credit | (85,000 | ) | 250,000 | ||||
Principal payments on the note payable | (426 | ) | — | ||||
Net cash provided by financing activities | 14,574 | 520,000 | |||||
Net increase (decrease) in cash and cash equivalents | 583,802 | (112,173 | ) | ||||
Cash and cash equivalents, beginning of period | 544,118 | 538,114 | |||||
Cash and cash equivalents, end of period | $ | 1,127,920 | $ | 425,941 | |||
Supplemental Schedule of Cash Flow Information: | |||||||
Interest paid | $ | 37,207 | $ | 9,225 | |||
Non-cash Investing and Financing Activities: | |||||||
Note payable for acquisition of vehicle | $ | 22,372 | $ | — | |||
Related party note payable converted to preferred stock | $ | 645,000 | $ | — |
For the three-month period ended March 31, | For the nine-month period ended March 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Numerator: | |||||||||||||||
Numerator for basic earnings per share | |||||||||||||||
Net income (loss) | $ | (119,076 | ) | $ | (106,856 | ) | $ | 531,623 | $ | (567,345 | ) | ||||
Undeclared dividends on preferred stock | 6,503 | — | 6,503 | — | |||||||||||
Net income(loss) applicable to common shareholders | $ | (125,579 | ) | $ | (106,856 | ) | $ | 525,120 | $ | (567,345 | ) | ||||
Numerator for diluted earnings per share: | |||||||||||||||
Net income (loss) applicable to common shareholders | (125,579 | ) | (106,856 | ) | 525,120 | (567,345 | ) | ||||||||
Undeclared dividends on preferred stock | 6,503 | — | 6,503 | — | |||||||||||
Net income (loss) | (119,076 | ) | (106,856 | ) | 531,623 | (567,345 | ) | ||||||||
Denominator: | |||||||||||||||
Denominator for basic earnings per share - weighted average shares outstanding | 7,551,430 | 7,551,430 | 7,551,430 | 7,551,430 | |||||||||||
Weighted average preferred stock converted to common stock | — | — | 716,667 | — | |||||||||||
Denominator for diluted earnings per share - weighted average and assumed conversion | 7,551,430 | 7,551,430 | 8,268,097 | 7,551,430 | |||||||||||
Net income (loss) per share | |||||||||||||||
Basic net loss (income) per share | $ | (0.02 | ) | $ | (0.01 | ) | $ | 0.07 | $ | (0.08 | ) | ||||
Diluted net loss (income) per share | $ | (0.02 | ) | $ | (0.01 | ) | $ | 0.06 | $ | (0.08 | ) |
For the three-month period ended March 31, | For the nine-month period ended March 31, | ||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
Stock options | 367,500 | 502,000 | 367,500 | 502,000 | |||||||
Preferred stock | 2,150,000 | — | — | — | |||||||
Total potential dilutive securities not included in income per share | 2,517,500 | 502,000 | 367,500 | 502,000 |
(In thousands) | March 31, | June 30, | |||||
2018 | 2017 | ||||||
Inventories, net: | |||||||
Raw Material | $ | 790 | $ | 865 | |||
Work-In-Process | 176 | 337 | |||||
Finished Goods | 1,025 | 716 | |||||
Total | $ | 1,991 | $ | 1,918 |
March 31, | June 30, | ||||||
2018 | 2017 | ||||||
Assets | |||||||
Total assets | $ | — | $ | — | |||
Liabilities | |||||||
Accrued lease termination costs | 96 | 91 | |||||
Total liabilities | 96 | 91 | |||||
Net liabilities of discontinued operations | $ | (96 | ) | $ | (91 | ) |
Less than | 3-5 | More than | |||||||||||||
Total | 1 Year | 2-3 Years | Years | 5 Years | |||||||||||
Operating lease agreements | 1,496,838 | 320,093 | 484,428 | 547,788 | 144,529 | ||||||||||
1,496,838 | 320,093 | 484,428 | 547,788 | 144,529 |
For the three-month period ended March 31, | For the nine-month period ended March 31, | ||||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | ||||||||||||||||
Net Revenue: | |||||||||||||||||||||
Products | $ | 2,413 | $ | 2,661 | (9.3 | )% | $ | 8,014 | $ | 7,795 | 2.8 | % | |||||||||
Licenses and service plans | $ | 223 | $ | 185 | 20.5 | % | $ | 634 | $ | 545 | 16.3 | % | |||||||||
Total | $ | 2,635 | $ | 2,846 | (7.4 | )% | $ | 8,648 | $ | 8,340 | 3.7 | % |
For the three-month period ended March 31, | For the nine-month period ended March 31, | ||||||||||||||||||||||||||
2018 | % | 2017 | % | 2018 | % | 2017 | % | ||||||||||||||||||||
Cost of Goods Sold: | |||||||||||||||||||||||||||
$ | 1,488 | 56.4 | % | $ | 1,543 | 54.2 | % | $ | 4,793 | 55.4 | % | $ | 4,506 | 54.0 | % | ||||||||||||
Total | $ | 1,488 | 56.4 | % | $ | 1,543 | 54.2 | % | $ | 4,793 | 55.4 | % | $ | 4,506 | 54.0 | % |
For the three-month period ended March 31, | For the nine-month period ended March 31, | ||||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | ||||||||||||||||
Marketing, General and Administrative: | |||||||||||||||||||||
$ | 1,147 | $ | 1,097 | 4.6 | % | $ | 3,337 | $ | 3,459 | (3.5 | )% | ||||||||||
Total | $ | 1,147 | $ | 1,097 | 4.6 | % | $ | 3,337 | $ | 3,459 | (3.5 | )% |
For the three-month period ended March 31, | For the nine-month period ended March 31, | ||||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | ||||||||||||||||
Research and Development: | |||||||||||||||||||||
$ | 93 | $ | 280 | (66.9 | )% | $ | 393 | $ | 876 | (55.1 | )% | ||||||||||
Total | $ | 93 | $ | 280 | (66.9 | )% | $ | 393 | $ | 876 | (55.1 | )% |
March 31, 2018 | June 30, 2017 | ||||||
Current Ratio: | |||||||
Current assets | $ | 4,632 | $ | 4,155 | |||
Less: Current liabilities | 2,315 | 3,001 | |||||
Working capital | $ | 2,317 | $ | 1,154 | |||
Current ratio | 2.00 to 1 | 1.38 to 1 | |||||
Debt to Total Capital Ratio: | |||||||
Related party note payable and line of credit | $ | 165 | $ | 795 | |||
Note payable | 22 | — | |||||
Total debt | 187 | 795 | |||||
Total equity | 2,360 | 1,184 | |||||
Total capital | $ | 2,547 | $ | 1,979 | |||
Total debt to total capital | 7.3 | % | 40.2 | % |
Less than | 3-5 | More than | ||||||||||||||||||
Total | 1 Year | 2-3 Years | Years | 5 Years | ||||||||||||||||
Operating lease agreements | $ | 1,496,838 | $ | 320,093 | $ | 484,428 | $ | 547,788 | $ | 144,529 | ||||||||||
Total | $ | 1,496,838 | $ | 320,093 | $ | 484,428 | $ | 547,788 | $ | 144,529 |
Escalon Medical Corp. | ||||
(Registrant) | ||||
Date: May 14, 2018 | By: | /s/ Richard J. DePiano, Jr. | ||
Richard J. DePiano, Jr. | ||||
Chief Executive Officer | ||||
Date: May14, 2018 | By: | /s/ Mark Wallace | ||
Mark Wallace | ||||
Chief Operating Officer and Principal Accounting & Financial Officer |
1. | I have reviewed this quarterly report on Form 10Q of Escalon Medical Corp.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Richard J. DePiano Jr. | |
Richard J. DePiano Jr. | |
Chief Executive Officer | |
Date: May 14, 2018 |
1. | I have reviewed this quarterly report on Form 10Q of Escalon Medical Corp.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Mark Wallace | |
Mark Wallace | |
Chief Operating Officer and Principal Accounting & Financial Officer | |
Date: May 14, 2018 |
1. | The Quarterly Report of Escalon Medical Corp. on Form 10Q for the quarterly period ended March 31, 2018 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Richard J. DePiano Jr. | |
Richard J. DePiano Jr. | |
Chief Executive Officer |
1. | The Quarterly Report of Escalon Medical Corp. on Form 10-Q for the quarterly period ended March 31, 2018 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Mark Wallace | |
Mark Wallace | |
Chief Operating Officer and Principal Accounting & Financial Officer |
Document And Entity Information - shares |
9 Months Ended | |
---|---|---|
Mar. 31, 2018 |
May 11, 2018 |
|
Entity Information [Line Items] | ||
Entity Registrant Name | ESCALON MEDICAL CORP. | |
Entity Central Index Key | 0000862668 | |
Current Fiscal Year End Date | --06-30 | |
Entity Filer Category | Smaller Reporting Company | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 7,526,430 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes |
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Mar. 31, 2018 |
Jun. 30, 2017 |
---|---|---|
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 2,000,000 | 2,000,000 |
Preferred stock, shares issued | 0 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 35,000,000 | 35,000,000 |
Common stock, shares issued | 7,526,430 | 7,526,430 |
Common stock, shares outstanding | 7,526,430 | 7,526,430 |
Consolidated Statements Of Operations - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Net revenues: | ||||
Product revenue | $ 2,412,598 | $ 2,660,781 | $ 8,013,833 | $ 7,794,775 |
License and Services Revenue | 222,884 | 184,764 | 634,301 | 545,323 |
Revenues, net | 2,635,482 | 2,845,545 | 8,648,134 | 8,340,098 |
Costs and expenses: | ||||
Cost of goods sold | 1,487,707 | 1,542,898 | 4,792,775 | 4,506,442 |
Marketing, general and administrative | 1,147,475 | 1,096,655 | 3,336,604 | 3,458,958 |
Research and development | 92,649 | 279,883 | 393,239 | 876,377 |
Total costs and expenses | 2,727,831 | 2,919,436 | 8,522,618 | 8,841,777 |
Loss from operations | (92,349) | (73,891) | 125,516 | (501,679) |
Other (expense) income: | ||||
Other Nonoperating Income (Expense) | 0 | 0 | 500,000 | 0 |
Interest income | 1,627 | 84 | 2,471 | 185 |
Interest Expense | (28,354) | (33,049) | (96,364) | (65,851) |
Total other (expense) income | (26,727) | (32,965) | 406,107 | (65,666) |
Net income (loss) | (119,076) | (106,856) | 531,623 | (567,345) |
Preferred Stock Dividends and Other Adjustments | 6,503 | 0 | 6,503 | 0 |
Net Income (Loss) Available to Common Stockholders, Basic | $ (125,579) | $ (106,856) | $ 525,120 | $ (567,345) |
Basic: | ||||
Earnings Per Share, Basic | $ (0.02) | $ (0.01) | $ 0.07 | $ (0.08) |
Diluted: | ||||
Earnings Per Share, Diluted | $ (0.02) | $ (0.01) | $ 0.06 | $ (0.08) |
Weighted Average Number of Shares Outstanding, Basic | 7,551,430 | 7,551,430 | 7,551,430 | 7,551,430 |
Weighted Average Number of Shares Outstanding, Diluted | 7,551,430 | 7,551,430 | 8,268,097 | 7,551,430 |
Consolidated Statements Of Shareholders' Equity and Comprehensive Loass - USD ($) |
Total |
Preferred Stock [Member] |
Common Stock [Member] |
Additional Paid-in Capital [Member] |
Accumulated Deficit [Member] |
---|---|---|---|---|---|
Additional paid-in capital | $ 69,701,907 | ||||
Retained Earnings (Accumulated Deficit) | (68,525,878) | ||||
Stock Issued During Period, Shares, Conversion of Convertible Securities | 2,000,000 | ||||
Stock Issued During Period, Value, Conversion of Convertible Securities, Net of Adjustments | 645,000 | $ 645,000 | $ 0 | $ 0 | |
Balance at Jun. 30, 2017 | 1,183,580 | $ 0 | $ 7,551 | ||
Balance, shares at Jun. 30, 2017 | 0 | 7,551,430 | |||
Net income (loss) | 531,623 | $ 0 | $ 0 | 0 | 531,623 |
Balance at Mar. 31, 2018 | 2,360,203 | $ 645,000 | $ 7,551 | $ 69,701,907 | $ (67,994,255) |
Balance, shares at Mar. 31, 2018 | 7,551,430 | ||||
Preferred Stock, Shares Outstanding | 2,000,000 | ||||
Additional paid-in capital | 69,701,907 | ||||
Retained Earnings (Accumulated Deficit) | $ (67,994,255) |
Note 1. Basis of Presentation |
9 Months Ended |
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Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Business Description and Basis of Presentation [Text Block] | 1. Organization and Basis of Presentation Escalon Medical Corp. (“Escalon” or the “Company” ) is a Pennsylvania corporation initially incorporated in California in 1987, and reincorporated in Pennsylvania in November 2001. Within this document, the “Company” collectively shall mean Escalon and its wholly owned subsidiaries: Sonomed, Inc. (“Sonomed”), Trek, Inc. (“Trek”), Escalon Digital Solutions, Inc. (“EMI”), Escalon Holdings, Inc. (“EHI”), Escalon IP Holdings, Inc., and Sonomed IP Holdings, Inc. All intercompany accounts and transactions have been eliminated. The Company operates in the healthcare market, specializing in the development, manufacture, marketing, and distribution of medical devices and pharmaceuticals in the area of ophthalmology. The Company and its products are subject to regulation and inspection by the United States Food and Drug Administration (the “FDA”). The FDA and other governmental authorities require extensive testing of new products prior to sale and have jurisdiction over the safety, efficacy and manufacture of products, as well as product labeling and marketing. The unaudited condensed consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Security and Exchange Commission, and reflect all adjustments (consisting of only normal and recurring adjustments) which are, in the opinion of management, necessary to present fairly the unaudited condensed financial information required herein. Certain information and note disclosures normally included in financial statement prepared in accordance with accounting principles generally accepted in the United Statements of America ("US GAAP") have been condensed or omitted pursuant to such rules and regulations. While management believes that the disclosures are adequate to make the information presented not misleading, it is suggested that these unaudited condensed financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K filed with the Security and Exchange Commission for the fiscal year ended June 30, 2017. The Company’s common stock trades on the OTCQB Market under the symbol “ESMC.” Since November 18, 2016, the Company's common stock was suspended from trading on the NASDAQ stock market effective at the opening of trading on November 18, 2016. |
Note 2. Going concern (Notes) |
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Risks and Uncertainties [Abstract] | |
Substantial Doubt about Going Concern [Text Block] | 2. Going Concern The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred recurring operating losses and negative cash flows from operating activities and these conditions raise substantial doubt about the Company’s ability to continue as a going concern. These unaudited condensed consolidated financial statements do not include any adjustments relating to the realization of the carrying value of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company's continuance as a going concern is dependent on its future profitability and on the on-going support of its shareholders, affiliates and creditors. In order to mitigate the going concern issues, the Company is actively pursuing business partnerships, managing its continuing operations, implementing cost-cutting measures and seeking to sell certain assets. The Company may not be successful in any of these efforts. If the Company is unable to achieve the mitigating factors mentioned above in the near term, it is likely that its existing cash and cash flow from operations will not be sufficient to fund activities without curtailing certain business activities. |
Note 3. Summary of Significant Accounting policies |
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Significant Accounting Policies [Text Block] | 3. Summary of Significant Accounting Policies Principles of Consolidation The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated. Use of Estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that impact the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents For the purposes of reporting cash flows, the Company considers all cash accounts, which are not subject to withdrawal restrictions or penalties, and highly liquid investments with original maturities of 90 days or less to be cash and cash equivalents. From time to time cash balances exceed federal insurance limits. Accounts Receivable Accounts receivable are recorded at net realizable value. The Company performs ongoing credit evaluations of customers’ financial condition and does not require collateral for accounts receivable arising in the normal course of business. The Company maintains allowances for potential credit losses based on the Company’s historical trends, specific customer issues and current economic trends. Accounts are written off against the allowance when they are determined to be uncollectible based on management’s assessment of individual accounts. The Company recorded an allowance for doubtful accounts of approximately $173,000 and $172,000 as of March 31, 2018 and June 30, 2017, respectively. Inventories Inventories include freight-in, materials, labor and overhead costs and are stated at the lower of cost (on a first-in, first-out basis) or net realizable value. Provision is made for slow-moving, obsolete or unusable inventory. Accrued Warranties The Company provides a limited one year warranty against manufacturer’s defects on its products sold to customers. The Company’s standard warranties require the Company to repair or replace, at the Company’s discretion, defective parts during such warranty period. The Company accrues for its product warranty liabilities based on estimates of costs to be incurred during the warranty period, based on historical repair information for warranty costs. Valuation of Intangible Assets The Company annually, and as circumstances require, evaluates for impairment its intangible assets in accordance with the Financial Accounting Standards Board ("FASB") guidance related to other intangible assets, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. These intangible assets include trademarks and trade names and licenses. Recoverability of these assets is measured by comparison of their carrying amounts to future discounted cash flows the assets are expected to generate. If identifiable intangibles are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds its fair value. The Company does not amortize intangible assets with indefinite useful lives, rather, such assets are required to be tested for impairment at least annually or sooner whenever events or changes in circumstances indicate that the assets may be impaired. The Company performs its intangible asset impairment tests on or about June 30, of each year. Any such impairment charge could be significant and could have a material adverse impact on the Company's financial statements if and when an impairment charge is recorded. Revenue Recognition Product revenue includes the sale of medical device products and the sale and installation of the Company's AXIS image management system software. Revenue is recognized for medical device products at the time of shipment and for software when the software is delivered and installed. The Company provides products to its distributors at agreed wholesale prices and to the balance of its customers at set retail prices. Distributors can receive discounts for accepting high volume shipments. The discounts are reflected immediately in the net invoice price, which is the basis for revenue recognition. No further material discounts or sales incentives are given. The Company’s considerations for recognizing revenue are based on the following: - Persuasive evidence of an arrangement exists - Delivery has occurred -The Company's price or fee is fixed or determinable -Collectability is reasonably assured License and services plan revenues are recognized proportionally over the service period, which for both licenses and service plans are typically one year. Deferred revenue related to licenses and services plans was approximately $463,000 and $388,000 as of March 31, 2018 and June 30, 2017, respectively and included in accrued expenses in the accompanying unaudited condensed consolidated balance sheets. Income Taxes The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. As of March 31, 2018 and June 30, 2017, the Company has a fully recorded valuation allowance against its deferred tax assets. The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying unaudited condensed consolidated statements of operations. As of March 31, 2018 and June 30, 2017, no accrued interest or penalties were required to be included on the related tax liability line in the unaudited condensed consolidated balance sheets. On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act” ("US Tax Reform"). The US Tax Reform provides for significant changes in the U.S. Internal Revenue Code of 1986, as amended. Certain provisions of the US Tax Reform will be effective during the Company’s fiscal year ending June 30, 2018 with all provisions of the US Tax Reform effective as of the beginning of the Company’s fiscal year ending June 30, 2019. As the US Tax Reform was enacted after the Company’s year end of June 30, 2017, it had no impact on the Company’s fiscal 2017 financial results. The US Tax Reform contains provisions with separate effective dates but is generally effective for taxable years beginning after December 31, 2017. Beginning on January 1, 2018, the US Tax Reform lowers the US corporate income tax rate to 21% from that date and beyond. The Company estimates that the revaluation of its US deferred tax assets and liabilities to the 21% corporate tax rate will have no net effect on its deferred tax assets and liabilities as the Company has a full valuation allowance as of March 31, 2018. Although the Company believes it has accounted for the parts of the US Tax Reform that will have the most significant impact on its financials, the ultimate impact of the US Tax Reform on the Company’s reported results in 2018 may differ from the estimates provided herein, due to, among other things, changes in interpretations and assumptions the Company has made, guidance that may be issued, and other actions the Company may take as a result of the US Tax Reform different from that presently contemplated. Fair Value Measurements FASB issued authoritative guidance for fair value measurements that define fair value and establishes a hierarchy for reporting the reliability of input measurements used to assess fair value for all assets and liabilities. The FASB-issued authoritative guidance defines fair value as the selling price that would be received for an asset, or paid to transfer a liability, in the principal or most advantageous market on the measurement date. The hierarchy prioritizes fair value measurements based on the types of inputs used in the valuation technique. The inputs are categorized into the following levels: Level 1—Observable inputs such as quoted prices in active markets for identical assets or liabilities. Level 2—Directly or indirectly observable inputs for quoted and other than quoted prices for identical or similar assets and liabilities in active or non-active markets. Level 3—Unobservable inputs not corroborated by market data, therefore requiring the entity to use the best available information available in the circumstances, including the entity’s own data. Fair Value of Financial Instruments The carrying amounts for cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and related party note payable approximate their fair value because of their short-term maturity. The carrying amount of the accrued post retirement benefits approximates fair value since the Company utilizes approximate current market interest rates to calculate the liability. The Company determined that the carrying amount of the note payable approximates fair value since such debt borrowing bears interest at the approximate current market rate.While the Company believes the carrying value of the assets and liabilities are reasonable, considerable judgment is used to develop estimates of fair value; thus the estimates are not necessarily indicative of the amounts that could be realized in a current market exchange. Earnings (loss) Per Share Earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the year. All outstanding stock options are considered potential common stock. All outstanding convertible preferred stock are considered common stock at the beginning of the year or at the time of issuance, if later, pursuant to the if-converted method. The dilutive effect, if any, of stock options is calculated using the treasury stock method. As of March 31, 2018, the average market prices for the three and nine months periods then ended are less than the exercise price of all the outstanding stock options and, therefore, the inclusion of the the stock options would be anti-dilutive. In addition, since the effect of common stock equivalents is anti-dilutive with respect to losses, the stock options and convertible preferred stock have been excluded from the Company’s computation of loss per common for the three months ended March 31, 2018 and 2017, and the nine-months ended March 31, 2017. Therefore, basic and diluted loss per common share for the three-month period ended March 31, 2018 and 2017 and nine-month period ended March 31, 2017 were the same. For the nine-month period ended March 31, 2018, the if converted method was used for the convertible preferred stock to calculate the dilutive earning per share. The following table sets forth the computation of basic and diluted net (loss) income per share:
The following table summarizes securities that, if exercised would have an anti-dilutive effect on earnings per share.
Reclassifications Certain items in the March 31, 2017 unaudited condensed consolidated statements of operations have been reclassified to conform to the current period presentation. Recently Issued Accounting Standards In May 2014 FASB issued Accounting Standards Update 2014-09 Revenue from Contracts with Customers (Topic 606). Under the new provision, an entity should apply five steps for revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For a public entity, the amendments in this Update were effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. In August 2015 FASB issued accounting Standards Update No. 2015-13 Revenue from Contracts with Customers (Topic 606) deferral of the effective date. The amendments in this Update defer the effective date of Update 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within the reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within the reporting period. Management is evaluating the standard's impact on the consolidated financial statements. In November 2015 FASB issued Accounting Standards Update No. 2015-17 Income Taxes (Topic 740) Balance Sheet Classification of Deferred Taxes to reduce complexity in accounting standards. The amendments require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. For public business entities, the amendments in this Update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The adoption of this standard did not have a material impact to the Company’s consolidated financial statements. In February 2016 FASB issued Accounting Standards Update No. 2016-02 Leases (Topic 842) that changes the recognition of lease assets and lease liabilities by lessess for those leases classified as operating lease. The amendments in this Update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for a public business entity. Early adoption is permitted. Management is evaluating the standard's impact on the consolidated financial statements. In March 2016 FASB issued Accounting Standards Update No. 2016-09 Compensation-Stock Compensation -(Topic 718) Improvements to employee share-based payments accounting as part of simplicity initiatives. This update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Some of the areas for simplification apply only to nonpublic entities. For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The adoption of this standard did not have a material impact to the Company’s consolidated financial statements. In April 2016 FASB issued Accounting Standards Update No. 2016-10 Revenue from Contracts with Customers (Topic 606) Identifying Performance Obligations and Licensing. On May 2016 FASB issued Accounting Standards Update No. 2016-12 Revenue from Contracts with Customers (Topic 606) Narrow-Scope Improvements and Practical Expedients. The amendments in these two updates do not change the the core principle of the guidance in Topic 606, which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, but they clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance and the Update affect only the narrow aspects of Topic 606. An entity should apply five steps to achieve the core principle. The management is evaluating the standard's impact to the Company’s consolidated financial statements. In August 2016 FASB issued Accounting Standards Update No. 2016-15 Statement of Cash Flows (Topic 230)Classification of Certain Cash Receipts and Cash Payments.The amendments in this Update provide guidance on the eight specific cash flow issues and apply to all entities, including both business entities and not-for-profit entities that are required to present a statement of cash flows under Topic 230.The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period.The adoption of this standard is not expected to have a material impact to the Company’s consolidated financial statements. In January 2017 FASB issued Accounting Standards Update No. 2017-04 Intangibles—Goodwill and Other (Topic 350)Simplifying the Test for Goodwill Impairment.Under the amendments in this udpate an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.The amendments in this Update are required for public business entities and other entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill.A public business entity that is a U.S. Securities and Exchange Commission (SEC) filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.The adoption of this standard is not expected to have a material impact to the Company’s consolidated financial statements. In May 2017 FASB issued the amendments in ASU 2017-09- Compensation-Stock Compensation (“ASC Topic 718”): Scope of Modification Accounting: These amendments provide guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718. For public companies, these amendments are effective for annual periods beginning after December 15, 2017, including interim periods within those periods. While early application is permitted, including adoption in an interim period, the Company has not elected to early adopt. The effectiveness of this update is not expected to have a significant effect on the Company’s presentation of consolidated financial position or results of operations. |
Note 4. Inventories Composition of Certain Financial Statement (Notes) |
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Inventory Disclosure [Text Block] | Inventories
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Note 5. Discontinued Operations |
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Discontinued Operations | . Discontinued Operations BH Holdings, S.A.S ("BHH") On January 12, 2012 BHH initiated the filing of an insolvency declaration with the Tribunal de Commerce de Rennes, France ("Commercial Court"). The Commercial Court on January 18, 2012 opened the liquidation proceedings with continuation of BHH's activity for 3 months and named an administrator to manage BHH. Since Drew no longer had a controlling financial interest in BHH it was deconsolidated in the December 31, 2011 quarterly unaudited condensed consolidated financial statements and prior period amounts were presented as discontinued operations. Assets and liabilities of discontinued operations of BHH included in the unaudited condensed consolidated balance sheets are summarized as follows at March 31, 2018 and June 30, 2017 (in thousands):
During fiscal year 2015 the Company was informed by French Counsel that the total amount claimed by the BHH landlord in the liquidation of BHH was approximately $86,000. The Company did not have insight into the French liquidation process due to the Liquidator's reticence to communicate with the Company. As such, the Company had accrued the present value of the maximum amount potentially due under the lease guaranteed by the Company on behalf of BHH. The landlord's claim under liquidation of approximately $86,000 can not be revisited by the landlord and can only be potentially increased by interest or sundry expenses. Beginning in fiscal year end 2016 any changes to this liability are included in continuing operations. As of March 31, 2018 and June 30, 2017, the liability was approximately $96,000 and $91,000, respectively. |
Note 6. Related Party (Notes) |
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Related Party Transaction [Line Items] | |
Related Party Transactions Disclosure [Text Block] | . Related Party Transactions Richard J. DePiano, Sr., the Company’s Chairman, participated in an accounts receivable factoring program that was implemented by the Company. Under the program, Mr. DePiano advanced the Company $275,000 during fiscal year ended June 30, 2016, $270,000 during fiscal year ended June 30, 2017 and $100,000 during the quarter ended September 30, 2017. Interest on the transaction was 1.25% per month. The transactions excluded fees typically charged by the factoring agent and provided much needed liquidity to the Company. Related party interest expense for the three-month periods ended March 31, 2018 and 2017 was $11,663 and $20,164, respectively. Related party interest expense for the nine-month periods ended March 31, 2018 and 2017 was $59,162 and $46,967, respectively. As of March 31, 2018 and June 30, 2017, interest expense of $112,389 and $53,227, respectively, was accrued. On February 14, 2018, the Company entered into a Debt Exchange Agreement (the “Exchange Agreement”) with Richard J. DePiano Sr. (“Mr. DePiano”), the Company's Chairman and DP Associates Inc. Profit-Sharing Plan of which Mr. DePiano is the sole owner and sole trustee (the “Holders”). Pursuant to the terms of the Exchange Agreement, effective February 15, 2018, the Holders exchanged a total of $645,000 principal amount of debt related to the accounts receivable factoring program the Company owes the Holders for 2,000,000 shares of Series A Convertible Preferred Stock (the “Preferred Stock”). Each share of Preferred Stock entitles the Holder thereof to 13 votes per share and will vote together with all other classes and series of stock of the Company as a single class on all actions to be taken by the Company’s stockholders. As a result of this voting power, the Holders as of March 31, 2018 beneficially own approximately 77.49% of the voting power on all actions to be taken by the Company’s shareholders. Subject to the terms and conditions of Preferred Stock, the holder of any share or shares of the Preferred Stock has the right, at its option at any time, to convert each such share of Preferred Stock (except that, upon any liquidation of the Corporation, the right of conversion will terminate at the close of business on the business day fixed for payment of the amounts distributable on the Preferred Stock) into 2.15 shares of Common Stock (the “Conversion Ratio”). The Conversion Ratio is subject standard provisions for adjustment in the event of a subdivision or combination of the Company’s Common Stock and upon any reorganization or reclassification of the capital stock of the Company. If the Holders were to convert their shares of Preferred Stock into Common Stock at the Conversion Ratio the Holders would receive a total of 4,300,000 shares of Common Stock, or approximately 36.28% of the currently outstanding shares of Common Stock assuming such conversion. Each outstanding share of the Preferred Stock accrues dividends calculated cumulatively at the annual rate of $.0258 per share (such amount subject to equitable adjustment in the event of any stock dividend, stock split, combination, reclassification other similar event), payable upon the earlier of (i) a liquidation, dissolution or winding up of the Company or (ii) conversion of the Preferred Stock into Common Stock. Upon either of such events, all such accrued and unpaid dividends, whether or not earned or declared, to and until the date of such event, will become immediately due and payable and will be paid in full. The dividends payable to the holders of the Preferred Stock is payable in cash or, at the election of any such holder, in a number of additional shares of Common Stock equal to the amount of the dividend expressed in dollars divided by the then applicable Conversion Ratio, described above. As of March 31, 2018 the cumulative dividends payable was $6,503 ($0.003 per share). |
Note 7. Line of credit (Notes) |
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Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Line of Credit | . Line of Credit On December 29, 2016, the Company entered into a credit agreement providing the Company up to an aggregate of $250,000 in cash, secured by the Company’s inventory. The Company, and its wholly owned subsidiary Sonomed, Inc., entered into an Inventory Advance Agreement as of December 29, 2016 (the "Agreement"), with CDS Business Services, Inc., doing business as Newtek Business Credit ("Newtek"). Newtek may in its discretion make loans against the Company’s Eligible Inventory in an aggregate amount outstanding at any time up to the lesser of (i) fifty percent (50%) of the Inventory Value or (ii) the Inventory Advance Limit, as those terms are defined in the Agreement, which is currently $250,000. The credit agreement renews annually and can be terminated upon 90 days written notice from the Company or 30 days written notice from NewTek. If, at any time and for any reason, the aggregate amount of the outstanding advances under the Agreement exceeds the Inventory Advance Limit or percentage limitation contained in the preceding sentence, then Company must, upon demand by Newtek, immediately pay to Newtek, in cash, the amount of such excess, or at Newtek’s option Newtek may charge such excess against any reserves held by Newtek. Newtek will maintain reserves against Company’s availability for advances and may maintain reserves against the Company’s accounts and/or ineligible inventory as well, or maintain a cash collateral deposit account, as Newtek in its discretion deems appropriate. Newtek may also increase such reserves or reduce its advance percentages based on eligible inventory without declaring an event of default and without prior notice, if it determines, in its discretion, that such increase in reserves or reduction is necessary, including, without limitation, to protect its interest in the collateral and/or against diminution in the value of any collateral, and/or to insure the prospect of payment or performance by Company of its obligations to Newtek are not impaired. Interest will accrue on the daily balance at the per annum rate of 5.00% above the Prime Rate (currently 4.25%), but not less than 5.0%. The current annual interest rate is 9.25% as of March 31, 2018. The Company’s obligations will, at the option of Newtek, (i) from and after the occurrence of an event of default, or (ii) if the Company’s obligations are not paid in full by the termination date, bear interest at the per annum rate of 10.00% above the prime rate. All interest payable by under the financing documents will be computed on the basis of a 360-day year for the actual number of days elapsed on the daily balance. In consideration of monitoring, ledgering and other administrative functions undertaken by Newtek in connection with the Company’s inventory, and the merchant processor, Company is obligated pay Newtek a monthly collateral monitoring fee calculated by multiplying (i) seventy basis points (0.7% ) (approximately an annual rate of 8.5% (except during the existence of an Event of Default at which time it shall be 1% ) by (ii) the amount of the average daily balances during the calendar month preceding the month for which the calculation is made. As of March 31, 2018 and June 30, 2017, the line of credit balance is at $165,000 and $250,000, respectively. The line of credit interest expense is $16,339 and $12,884 for the three-month period ended March 31, 2018 and 2017, respectively. The line of credit interest expense is $36,849 and $12,884 for the nine-month period ended March 31, 2018 and 2017, respectively. |
Note 8. Other income (Notes) |
9 Months Ended |
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Mar. 31, 2018 | |
Subsequent Event [Line Items] | |
Subsequent Events [Text Block] | Other Income On October 2, 2017 Escalon and Modernizing Medicine Inc. (“MMI”) entered into a Source Code Software Licensing Agreement . The Agreement provided MMI a non-exclusive perpetual license to the source code of Escalon’s proprietary image management software (“AXIS source code”) for a one-time payment of $500,000. MMI continues to be an authorized reseller of the AXIS product. |
Note 9. Commitment and contingencies (Notes) |
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Operating lease agreements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Text Block] | . Commitments and Contingency Lease Commitments The following table presents the Company's operating lease obligations as of March 31, 2018 (excluding interest):
Legal Proceedings The Company, from time to time is involved in various legal proceedings and disputes that arise in the normal course of business. The Company does not believe that the resolution of any of these matters has had or is likely to have a material adverse impact on the Company’s business, financial condition, results of operations or cash flows. |
Note 3. Summary of Significant Accounting policies (Policies) |
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Consolidation, Policy [Policy Text Block] | Principles of Consolidation The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated. |
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Use of Estimates, Policy [Policy Text Block] | Use of Estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that impact the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. |
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Cash and Cash Equivalents, Policy [Policy Text Block] | Cash and Cash Equivalents For the purposes of reporting cash flows, the Company considers all cash accounts, which are not subject to withdrawal restrictions or penalties, and highly liquid investments with original maturities of 90 days or less to be cash and cash equivalents. From time to time cash balances exceed federal insurance limits. |
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Trade and Other Accounts Receivable, Policy [Policy Text Block] | Accounts Receivable Accounts receivable are recorded at net realizable value. The Company performs ongoing credit evaluations of customers’ financial condition and does not require collateral for accounts receivable arising in the normal course of business. The Company maintains allowances for potential credit losses based on the Company’s historical trends, specific customer issues and current economic trends. Accounts are written off against the allowance when they are determined to be uncollectible based on management’s assessment of individual accounts. The Company recorded an allowance for doubtful accounts of approximately $173,000 and $172,000 as of March 31, 2018 and June 30, 2017, respectively. |
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Inventory, Policy [Policy Text Block] | Inventories Inventories include freight-in, materials, labor and overhead costs and are stated at the lower of cost (on a first-in, first-out basis) or net realizable value. Provision is made for slow-moving, obsolete or unusable inventory. |
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Standard Product Warranty, Policy [Policy Text Block] | Accrued Warranties The Company provides a limited one year warranty against manufacturer’s defects on its products sold to customers. The Company’s standard warranties require the Company to repair or replace, at the Company’s discretion, defective parts during such warranty period. The Company accrues for its product warranty liabilities based on estimates of costs to be incurred during the warranty period, based on historical repair information for warranty costs. |
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Goodwill and Intangible Assets, Policy [Policy Text Block] | Valuation of Intangible Assets The Company annually, and as circumstances require, evaluates for impairment its intangible assets in accordance with the Financial Accounting Standards Board ("FASB") guidance related to other intangible assets, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. These intangible assets include trademarks and trade names and licenses. Recoverability of these assets is measured by comparison of their carrying amounts to future discounted cash flows the assets are expected to generate. If identifiable intangibles are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds its fair value. The Company does not amortize intangible assets with indefinite useful lives, rather, such assets are required to be tested for impairment at least annually or sooner whenever events or changes in circumstances indicate that the assets may be impaired. The Company performs its intangible asset impairment tests on or about June 30, of each year. Any such impairment charge could be significant and could have a material adverse impact on the Company's financial statements if and when an impairment charge is recorded. |
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Revenue Recognition, Policy [Policy Text Block] | Revenue Recognition Product revenue includes the sale of medical device products and the sale and installation of the Company's AXIS image management system software. Revenue is recognized for medical device products at the time of shipment and for software when the software is delivered and installed. The Company provides products to its distributors at agreed wholesale prices and to the balance of its customers at set retail prices. Distributors can receive discounts for accepting high volume shipments. The discounts are reflected immediately in the net invoice price, which is the basis for revenue recognition. No further material discounts or sales incentives are given. The Company’s considerations for recognizing revenue are based on the following: - Persuasive evidence of an arrangement exists - Delivery has occurred -The Company's price or fee is fixed or determinable -Collectability is reasonably assured License and services plan revenues are recognized proportionally over the service period, which for both licenses and service plans are typically one year. |
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Income Tax, Policy [Policy Text Block] | Income Taxes The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. As of March 31, 2018 and June 30, 2017, the Company has a fully recorded valuation allowance against its deferred tax assets. The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying unaudited condensed consolidated statements of operations. As of March 31, 2018 and June 30, 2017, no accrued interest or penalties were required to be included on the related tax liability line in the unaudited condensed consolidated balance sheets. On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act” ("US Tax Reform"). The US Tax Reform provides for significant changes in the U.S. Internal Revenue Code of 1986, as amended. Certain provisions of the US Tax Reform will be effective during the Company’s fiscal year ending June 30, 2018 with all provisions of the US Tax Reform effective as of the beginning of the Company’s fiscal year ending June 30, 2019. As the US Tax Reform was enacted after the Company’s year end of June 30, 2017, it had no impact on the Company’s fiscal 2017 financial results. The US Tax Reform contains provisions with separate effective dates but is generally effective for taxable years beginning after December 31, 2017. Beginning on January 1, 2018, the US Tax Reform lowers the US corporate income tax rate to 21% from that date and beyond. The Company estimates that the revaluation of its US deferred tax assets and liabilities to the 21% corporate tax rate will have no net effect on its deferred tax assets and liabilities as the Company has a full valuation allowance as of March 31, 2018. Although the Company believes it has accounted for the parts of the US Tax Reform that will have the most significant impact on its financials, the ultimate impact of the US Tax Reform on the Company’s reported results in 2018 may differ from the estimates provided herein, due to, among other things, changes in interpretations and assumptions the Company has made, guidance that may be issued, and other actions the Company may take as a result of the US Tax Reform different from that presently contemplated. |
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Fair Value Measurement, Policy [Policy Text Block] | Fair Value Measurements FASB issued authoritative guidance for fair value measurements that define fair value and establishes a hierarchy for reporting the reliability of input measurements used to assess fair value for all assets and liabilities. The FASB-issued authoritative guidance defines fair value as the selling price that would be received for an asset, or paid to transfer a liability, in the principal or most advantageous market on the measurement date. The hierarchy prioritizes fair value measurements based on the types of inputs used in the valuation technique. The inputs are categorized into the following levels: Level 1—Observable inputs such as quoted prices in active markets for identical assets or liabilities. Level 2—Directly or indirectly observable inputs for quoted and other than quoted prices for identical or similar assets and liabilities in active or non-active markets. Level 3—Unobservable inputs not corroborated by market data, therefore requiring the entity to use the best available information available in the circumstances, including the entity’s own data. Fair Value of Financial Instruments The carrying amounts for cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and related party note payable approximate their fair value because of their short-term maturity. The carrying amount of the accrued post retirement benefits approximates fair value since the Company utilizes approximate current market interest rates to calculate the liability. The Company determined that the carrying amount of the note payable approximates fair value since such debt borrowing bears interest at the approximate current market rate.While the Company believes the carrying value of the assets and liabilities are reasonable, considerable judgment is used to develop estimates of fair value; thus the estimates are not necessarily indicative of the amounts that could be realized in a current market exchange. |
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Earnings Per Share, Policy [Policy Text Block] | (loss) Per Share Earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the year. All outstanding stock options are considered potential common stock. All outstanding convertible preferred stock are considered common stock at the beginning of the year or at the time of issuance, if later, pursuant to the if-converted method. The dilutive effect, if any, of stock options is calculated using the treasury stock method. As of March 31, 2018, the average market prices for the three and nine months periods then ended are less than the exercise price of all the outstanding stock options and, therefore, the inclusion of the the stock options would be anti-dilutive. In addition, since the effect of common stock equivalents is anti-dilutive with respect to losses, the stock options and convertible preferred stock have been excluded from the Company’s computation of loss per common for the three months ended March 31, 2018 and 2017, and the nine-months ended March 31, 2017. Therefore, basic and diluted loss per common share for the three-month period ended March 31, 2018 and 2017 and nine-month period ended March 31, 2017 were the same. For the nine-month period ended March 31, 2018, the if converted method was used for the convertible preferred stock to calculate the dilutive earning per share. The following table sets forth the computation of basic and diluted net (loss) income per share:
The following table summarizes securities that, if exercised would have an anti-dilutive effect on earnings per share.
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New Accounting Pronouncements, Policy [Policy Text Block] | Recently Issued Accounting Standards In May 2014 FASB issued Accounting Standards Update 2014-09 Revenue from Contracts with Customers (Topic 606). Under the new provision, an entity should apply five steps for revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For a public entity, the amendments in this Update were effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. In August 2015 FASB issued accounting Standards Update No. 2015-13 Revenue from Contracts with Customers (Topic 606) deferral of the effective date. The amendments in this Update defer the effective date of Update 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within the reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within the reporting period. Management is evaluating the standard's impact on the consolidated financial statements. In November 2015 FASB issued Accounting Standards Update No. 2015-17 Income Taxes (Topic 740) Balance Sheet Classification of Deferred Taxes to reduce complexity in accounting standards. The amendments require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. For public business entities, the amendments in this Update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The adoption of this standard did not have a material impact to the Company’s consolidated financial statements. In February 2016 FASB issued Accounting Standards Update No. 2016-02 Leases (Topic 842) that changes the recognition of lease assets and lease liabilities by lessess for those leases classified as operating lease. The amendments in this Update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for a public business entity. Early adoption is permitted. Management is evaluating the standard's impact on the consolidated financial statements. In March 2016 FASB issued Accounting Standards Update No. 2016-09 Compensation-Stock Compensation -(Topic 718) Improvements to employee share-based payments accounting as part of simplicity initiatives. This update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Some of the areas for simplification apply only to nonpublic entities. For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The adoption of this standard did not have a material impact to the Company’s consolidated financial statements. In April 2016 FASB issued Accounting Standards Update No. 2016-10 Revenue from Contracts with Customers (Topic 606) Identifying Performance Obligations and Licensing. On May 2016 FASB issued Accounting Standards Update No. 2016-12 Revenue from Contracts with Customers (Topic 606) Narrow-Scope Improvements and Practical Expedients. The amendments in these two updates do not change the the core principle of the guidance in Topic 606, which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, but they clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance and the Update affect only the narrow aspects of Topic 606. An entity should apply five steps to achieve the core principle. The management is evaluating the standard's impact to the Company’s consolidated financial statements. In August 2016 FASB issued Accounting Standards Update No. 2016-15 Statement of Cash Flows (Topic 230)Classification of Certain Cash Receipts and Cash Payments.The amendments in this Update provide guidance on the eight specific cash flow issues and apply to all entities, including both business entities and not-for-profit entities that are required to present a statement of cash flows under Topic 230.The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period.The adoption of this standard is not expected to have a material impact to the Company’s consolidated financial statements. In January 2017 FASB issued Accounting Standards Update No. 2017-04 Intangibles—Goodwill and Other (Topic 350)Simplifying the Test for Goodwill Impairment.Under the amendments in this udpate an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.The amendments in this Update are required for public business entities and other entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill.A public business entity that is a U.S. Securities and Exchange Commission (SEC) filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.The adoption of this standard is not expected to have a material impact to the Company’s consolidated financial statements. In May 2017 FASB issued the amendments in ASU 2017-09- Compensation-Stock Compensation (“ASC Topic 718”): Scope of Modification Accounting: These amendments provide guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718. For public companies, these amendments are effective for annual periods beginning after December 15, 2017, including interim periods within those periods. While early application is permitted, including adoption in an interim period, the Company has not elected to early adopt. The effectiveness of this update is not expected to have a significant effect on the Company’s presentation of consolidated financial position or results of operations. |
Note 3. Summary of Significant Accounting policies (Tables) |
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Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block] | The following table summarizes securities that, if exercised would have an anti-dilutive effect on earnings per share.
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Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] | The following table sets forth the computation of basic and diluted net (loss) income per share:
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Note 4. Inventories Composition of Certain Financial Statement (Tables) |
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Inventory, Current [Table Text Block] |
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Note 9. Commitment and contingencies (Tables) |
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Operating lease agreements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block] |
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Note 4. Inventories Composition of Certain Assets (Details) - USD ($) |
Mar. 31, 2018 |
Jun. 30, 2017 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Inventory, Raw Materials, Net of Reserves | $ 790,000 | $ 865,000 |
Inventory, Work in Process, Net of Reserves | 176,000 | 337,000 |
Inventory, Finished Goods, Net of Reserves | 1,025,000 | 716,000 |
Inventory, net | $ 1,991,371 | $ 1,917,938 |
Note 5. Discontinued Operations (BH Holdings, S.A.S) (Narrative) (Details) |
Jan. 18, 2012 |
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BH Holdings, S.A.S [Member] | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |
Liquidation period | 3 months |
Note 5. Discontinued Operations (Assets and Liabilities of Discontinued Operations - BH Holdings, S.A.S) (Details) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Jun. 30, 2017 |
Jun. 30, 2014 |
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Liabilities [Abstract] | |||
Total liabilities | $ 96 | $ 91 | |
BH Holdings, S.A.S [Member] | |||
Assets [Abstract] | |||
Total assets | 0 | 0 | |
Liabilities [Abstract] | |||
Other current liabilities | 96 | 91 | |
Total liabilities | 96 | 91 | $ 86 |
Assets (Liabilities) of Disposal Group, Including Discontinued Operation, Net | $ (96) | $ (91) |
Note 6. Related Party (Details) |
3 Months Ended | 9 Months Ended | 12 Months Ended | |||
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Mar. 31, 2018
USD ($)
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Mar. 31, 2017
USD ($)
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Mar. 31, 2018
USD ($)
shares
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Mar. 31, 2017
USD ($)
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Jun. 30, 2017
USD ($)
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Jun. 30, 2016
USD ($)
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Related Party Transaction [Line Items] | ||||||
Conversion of Stock, Shares Converted | shares | 4,300,000 | |||||
Preferred Stock, Voting Rights | 13 | |||||
Dividends, Preferred Stock, Cash | $ 6,503 | |||||
Related Party Transaction, Amounts of Transaction | $ 100,000 | $ 270,000 | $ 275,000 | |||
Related Party Transaction, Rate | 0.00% | |||||
Interest Expense, Related Party | 11,663 | $ 20,164 | $ 59,162 | $ 46,967 | ||
Accrued interest related party | $ 112,389 | $ 112,389 | $ 53,227 | |||
Total voting power | 77.49% | 77.49% | ||||
Debt Instrument, Convertible, Conversion Ratio | 2.15 | |||||
Notes Payable, Related Parties | $ 645,000 | $ 645,000 |
Note 8. Other income (Details) |
9 Months Ended |
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Mar. 31, 2018
USD ($)
| |
Source code [Member] | |
Subsequent Event [Line Items] | |
Proceeds from Sale of Productive Assets | $ 500,000 |
Note 9. Commitment and contingencies (Details) |
Mar. 31, 2018
USD ($)
|
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Operating Leased Assets [Line Items] | |
Operating Leases, Future Minimum Payments Due, Next Twelve Months | $ 320,093 |
Operating Leases, Future Minimum Payments Due | 1,496,838 |
Operating Leases, Future Minimum Payments, Due in Two and Three Years | 484,428 |
Operating Leases, Future Minimum Payments, Due in Four and Five Years | 547,788 |
Operating Leases, Future Minimum Payments, Due Thereafter | $ 144,529 |
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