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Fair Value Measurements

12 Months Ended

Jun. 30, 2019

9.Fair Value Measurements

We follow the provisions of ASC 820, “Fair Value Measurements and Disclosures” for all financial assets and liabilities as well as nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. ASC 820 defines fair value, establishes a framework for measuring fair value and required specific disclosures about fair value measurements. Our financial instruments include investments classified as available for sale, mutual funds, fixed deposits and certificate of deposits at June 30, 2019.

ASC 820 establishes a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs) or reflect our assumptions of market participant valuation (unobservable inputs). These two types of inputs create the following fair value hierarchy:

(1)

Level 1 – Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities.

(2)

Level 2 – Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly.

(3)

Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable and reflect management’s estimates and assumptions.

ASC 820 requires the use of observable market data if such data is available without undue cost and effort.

The following table presents our investments at June 30, 2019 and 2018 that are measured and recorded at fair value on a recurring basis consistent with the fair value hierarchy provisions of ASC 820 (in thousands). The fair value of our short-term investments approximates their cost basis.

Description	June 30, 2019		Level 1		Level 2		Level 3
Mutual funds	$	-	$	-	$	-	$	-
Time/Fixed Deposits and Bank Guarantees		1,431		-		1,431		-
Total	$	1,431	$	-	$	1,431	$	—

Description	June 30, 2018		Level 1		Level 2		Level 3
Mutual funds	$	23	$	23	$	-	$	-
Time/Fixed Deposits and Bank Guarantees		854		-		854		-
Total	$	877	$	23	$	854	$	-

Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates. During fiscal year 2018, we did not record any other-than-temporary impairments on our financial assets required to be measured on a recurring basis.

We also measure certain assets and liabilities at fair value on a nonrecurring basis. These assets are tested for impairment when events or circumstances occur which may indicate that the derived fair value is below carrying cost or on an annual basis in accordance with applicable GAAP. For these assets, we do not periodically adjust carrying value fair value except in the event of an impairment. The fair value of assets and liabilities measured on a nonrecurring basis are classified in the fair value hierarchy in the table below (in thousands):

Description	June 30, 2019		Level 1		Level 2		Level 3
Goodwill	$	1,741	$	-	$	-	$	1,741
Trade Name		661		-		-		661
Total	$	2,402	$	-	$	-	$	2,402

Based on the results of the 2019 annual impairment test, the fair value of our CMM reporting unit was less than its carrying value. As a result we recorded a non-cash goodwill impairment charge of $6.0 million in the CMM reporting unit, primarily due to the lack of growth in the sales of our off-line product line, principally from the on-going trade war as companies are postponing decisions about purchasing new capital goods such as CMMs. This impairment is not deductible for income tax purposes. The impairment loss is recorded in “Severance, impairment and other charges” on our Consolidated Statements of Operations. After the impairment charge, the adjusted carrying value of CMM’s goodwill was $1.8 million as of June 30, 2019 compared to $8.0 million as of June 30, 2018.

The fair value of goodwill was determined using a combination of the income approach and the market approach. The fair value of the Trade Name was determined using the relief from royalty method. In addition, as described in Note 7 – “Intangible Assets Subject to Amortization”, the Company also fully impaired its Customer Relationships, the fair value of which was determined using the income approach.

There were no assets or liabilities measured at fair value on a non-recurring basis at June 30, 2018.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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