PRO DEX INC 10-K

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is quoted under the symbol “PDEX” on the automated quotation system of the Nasdaq Capital Market (“NASDAQ”). The following table sets forth for the quarters indicated the high and low sales prices of our common stock as reported by NASDAQ. The quotations reflect inter-dealer prices, without retail markup, markdown, or commissions, and may not necessarily represent actual transactions. On September 4, 2020, the last sale price of our common stock as reported by NASDAQ was $28.69 per share. High Low Year ended June 30, 2020: First Quarter $ 15.80 $ 13.08 Second Quarter 17.55 11.68 Third Quarter 22.25 14.04 Fourth Quarter 19.95 14.48 Year ended June 30, 2019: First Quarter $ 12.65 $ 6.20 Second Quarter 16.00 8.80 Third Quarter 16.00 11.69 Fourth Quarter 17.78 10.45 Holders As of September 4, 2020, there were 99 holders of record of our common stock. This number does not include beneficial owners including holders whose shares are held in nominee, or “street,” name. Dividends We have never paid a cash dividend with respect to our common stock. The current policy of our Board of Directors is to retain any future earnings to provide funds for the operation and expansion of our business. Any determinations to pay dividends in the future will be at the discretion of our Board of Directors. Repurchases During the fourth quarter of fiscal 2020 and 2019, we repurchased 26,353 and 96,700 shares, respectively, at an aggregate cost of $411,000 and $1.3 million, respectively, through Board approved prearranged share repurchase plans intended to qualify for the safe harbor under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. ITEM 6. SELECTED FINANCIAL DATA Not applicable. 13 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of our financial condition and results of operations should be read in conjunction with our Financial Statements and the Notes thereto contained elsewhere in this report, as well as the Risk Factors included in Item 1A of this report. The following discussion contains forward-looking statements. (See “Cautionary Note Regarding Forward-Looking Statements” included in Part 1 of this report.) Overview The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our results of operations and financial condition for the fiscal years ended June 30, 2020 and 2019. The Company, headquartered in Irvine, California, specializes in the design, development, and manufacture of autoclavable, battery-powered and electric, multi-function surgical drivers and shavers used primarily in the orthopedic, thoracic, and maxocranial facial markets. Additionally, we provide engineering, quality, and regulatory consulting services to our customers. We also sell rotary air motors. Our products are found in hospitals, medical engineering labs, scientific research facilities, and high-tech manufacturing operations around the world. COVID-19 Pandemic We are continuing our business operations under the California exemption for “essential critical infrastructure sectors” based on our determination that we fall within the Healthcare and Public Health Sector exemption. As we continue to operate, we have adjusted certain policies and procedures based on applicable national, state, and local emergency orders and safety guidance that may be issued from time to time, including: · Non-essential employees that are able to work remotely are doing so; · Increased frequency of disinfectant cleanings, especially for high-touch surfaces; · Curtailed business travel; · Multiple, staggered work shifts have been implemented in order to achieve effective social distancing; and · Provided training, education and appropriate personal protective equipment. While we have yet to see any decline in our customer orders, we have received and accepted some customer requests to delay the shipment of their existing orders. We provide our largest customer with a device used primarily in elective surgeries and although this customer has not requested a reduction or delay to their planned shipments, if this pandemic continues to adversely impact the United States and other markets where our products are sold, coupled with the recommended deferrals of elective procedures by governments and other authorities, we would expect to see a decline in demand from our principal customer. We are focused on the health and safety of all those we serve – our customers, our communities, our employees, and our suppliers. We are supporting our customers according to their priorities and working with them to the degree that we can offer relief in the form of delayed shipments. We are focused on continuity of supply by working with our suppliers. To date, a total of six of our employees including one temporary agency worker have tested positive for COVID-19 and all of them have made full recoveries and returned to work as of August 18, 2020. While the COVID-19 pandemic did not materially adversely affect our financial results and business operations in our fiscal year ended June 30, 2020, economic and health conditions in the United States and across much of the globe have changed rapidly since the end of the quarter, and we cannot predict the full impact of the COVID-19 pandemic on our business. 14 Critical Accounting Policies Our financial statements are prepared in accordance with U.S. GAAP. The preparation of our financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Revenue Recognition Effective July 1, 2018, we adopted new revenue recognition guidance issued by the Financial Accounting Standards Board (“FASB”) related to contracts with customers. Under Accounting Standards Update (“ASU”) 2014-09, (Topic 606) “ Revenue From Contracts with Customers ,” we recognize revenue from the sales of products and services by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. We utilized the modified retrospective method of adoption and there was no impact on our financial statements as a result of adopting Topic 606 for the year ended June 30, 2019. We primarily sell finished products and recognize revenue at point of sale or delivery and the timing of revenue recognition has not changed with the adoption of the new guidance. However, we also perform services when we are engaged to design a product for a customer and there is more judgment involved in determining the amount and timing of revenue recognition under those types of contracts. In fiscal 2020, the revenue from NRE and Prototypes represents approximately 2% of total revenue. Returns of our product for credit are not material; accordingly, we do not establish a reserve for product returns at the time of sale. Estimated Losses on Product Development Services Cost and revenue estimates related to the product development service portions of development and supply contracts are reviewed and updated quarterly. An expected loss on development service contracts is recognized immediately in cost of sales. Owing to the complexity of many of the contracts we have undertaken, the cost estimation process requires significant judgment. It is based upon the knowledge and experience of our project managers, engineers, and finance professionals. Factors that are considered in estimating the cost of work to be completed and ultimate profitability of the fixed price product development portion of development and supply contracts include the nature and complexity of the work to be performed, availability and productivity of labor, the effect of change orders, the availability of materials, performance of subcontractors, and expected costs for specific regulatory approvals. Warranties Most of our products are sold with a warranty that provides for repairs or replacement of any defective parts for a period, generally one to two years, after the sale. At the time of the sale, we accrue an estimate of the cost of providing the warranty based on prior experience with such factors as return rates and repair costs, which factors are reviewed quarterly. Warranty expenses, including changes of estimates, are included in cost of sales in our statements of operations. Inventories Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. Reductions to estimated net realizable value are recorded, and charged to cost of sales, when indicated based on a formula that compares on-hand quantities to both historical usage and estimated demand over the ensuing 12 months from the measurement date. 15 Accounts Receivable Trade receivables are stated at their original invoice amounts, less an allowance for doubtful portions of such accounts. Management determines the allowance for doubtful accounts based on facts and circumstances related to specific accounts, and on historical experience related to the age of accounts. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously reserved are offset against the allowance when received. Deferred Costs Deferred costs reflect costs incurred related to non-recurring engineering services under the terms of the related development and supply contracts. These costs get recorded to cost of sales in the period that the revenue is recognized. Investments Investments consist of marketable equity securities of publicly held companies. The investments were made to realize a reasonable return, although there is no assurance that positive returns will be realized. Investments are marked to market at each measurement date, with unrealized gains and losses, net of income taxes, presented as adjustments to accumulated other comprehensive income or loss. We hold investments in the common stock of public companies that are thinly traded. These investments were subject to an independent valuation as of June 30, 2020. Long-lived Assets We review the recoverability of long-lived assets, consisting of equipment and leasehold improvements, when events or changes in circumstances occur that indicate carrying values may not be recoverable. Equipment and leasehold improvements are recorded at historical cost and depreciation is provided using the straight-line method over the following periods: Equipment Three to ten years Leasehold improvements Shorter of the lease term or the asset’s estimated useful life Intangibles Other intangibles consist of legal fees incurred in connection with patent applications. The legal fees will be amortized over the estimated life of the product(s) that will be utilizing the technology, or expensed immediately in the event the patent office denies the issuance of the patent. The expense associated with the amortization of the patent costs is recognized in research and development costs. Income Taxes We recognize deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities, along with net operating loss and tax credit carryovers. Deferred tax assets at June 30, 2020 and 2019, consisted primarily of basis differences related to unrealized gain/loss related to investments, fixed assets, accrued expenses and inventories. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Significant management judgment is required in determining our provision for income taxes and the recoverability of our deferred tax assets. Such determination is based on our historical taxable income, with consideration given to our estimates of future taxable income and the periods over which deferred tax assets will be recoverable. In evaluating our ability to recover our deferred tax assets, we consider all available positive and negative evidence, including reversals of deferred tax liabilities, projected future taxable income, and results of recent operations. The assumptions about future taxable income require significant judgment and are consistent with the plans and estimates we are using to manage the underlying business. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income (loss). 16 Results of Operations for the Fiscal Year Ended June 30, 2020 Compared to the Fiscal Year Ended June 30, 2019 The following tables set forth results from continuing operations for the fiscal years ended June 30, 2020 and 2019: Years Ended June 30, 2020 2019 Dollars in thousands % of Net Sales % of Net Sales Net sales $ 34,834 100 % $ 27,172 100 % Cost of sales 21,692 62 % 17,392 64 % Gross profit 13,142 38 % 9,780 36 % Selling expenses 577 2 % 415 2 % General and administrative expenses 3,189 9 % 2,492 9 % Gain from disposal of equipment (5 ) — (7 ) — Research and development costs 2,315 7 % 1,882 7 % 6,076 18 % 4,782 18 % Operating income 7,066 20 % 4,998 18 % Other income, net 836 2 % 449 2 % Income before income taxes 7,902 22 % 5,447 20 % Income tax expense 1,790 5 % 1,299 5 % Net income $ 6,112 17 % $ 4,148 15 % Net Sales The majority of our revenue is derived from designing, developing, and manufacturing powered surgical instruments for medical device original equipment manufacturers and rotary air motors. The proportion of total sales by product/service type is as follows: Years Ended June 30, Increase (Decrease) From 2019 To 2020 2020 2019 Dollars in thousands % of Net Sales % of Net Sales Net sales: Medical devices $ 26,639 77 % $ 24,412 90 % 9 % Industrial and scientific 787 2 % 940 3 % (16 %) NRE & Prototype services 834 2 % 264 1 % 216 % Dental and component 259 1 % 409 2 % (37 %) Repairs 6,342 18 % 1,137 4 % 458 % Discounts & Other (27 ) — 10 — (370 %) $ 34,834 100 % $ 27,172 100 % 28 % Net sales in fiscal 2020 increased by $7.7 million, or 28%, as compared to fiscal 2019, due primarily to an increase in repair revenue of $5.2 million generated mostly from our largest customer. During fiscal 2020, sales to our largest customer increased by $5.6 million to $22.7 million, up from $17.1 million in fiscal 2019. We manufacture a surgical handpiece designed to be used in orthopedic surgery applications for this customer and we have continued to see increased demand from this customer. Sales of our industrial and scientific products, which consists primarily of our compact pneumatic air motors, decreased $153,000, or 16% for fiscal 2020 compared to fiscal 2019. The revenue decline relates to a lack of marketing efforts for these legacy products. 17 Our dental and component revenue is generated from sales to many distributors and end-users whose purchasing activity can vary widely from year to year. These are legacy products which have not had a product line refresh in several years. In January 2018, we sent notifications to our dental product customers that we were discontinuing the manufacture of these products and that same month we accepted final purchase orders to be fulfilled over the next six months. At this point we are focusing our product development and sales efforts almost exclusively on our medical device products, which prompted our decision to terminate the sales of our dental products. Sales of our dental products and components have declined as we are no longer manufacturing this line of products, but rather are simply selling remaining component inventory. The cessation of our dental line of products is not expected to have a material impact on our financial position or results of operations. Our fiscal 2020 repair revenue has increased approximately $5.2 million, or 458%, over fiscal 2019 to $6.3 million, due largely to repairs of the orthopedic device we sell to our largest customer. Typically, upon initial product launch, repair revenue is minimal as most repairs are typically covered under warranty, but as the products mature in the marketplace and after a certain number of routine duty cycles in the operating room, repairs generally increase. We expect similar repair revenue in fiscal 2021. At June 30, 2020, we had a backlog of $7.0 million compared with a backlog of $17.7 million at June 30, 2019. Our backlog represents firm purchase orders received and acknowledged from our customers and does not include all revenue expected to be generated from existing customer contracts. Our entire backlog at June 30, 2020, as well as purchase orders received and yet to be received subsequent to June 30, 2020, is expected to be delivered during fiscal 2021. We have experienced, and may continue to experience, variability in our new order bookings due to, among other reasons, the launch of new products, the timing of customer orders based on end-user demand, and customer inventory levels. We do not typically experience seasonal fluctuations in our shipments and revenues. Cost of Sales and Gross Margin Years Ended June 30, Increase (Decrease) From 2019 To 2020 2020 2019 Dollars in thousands % of Net Sales % of Net Sales Cost of sales: Product costs $ 20,404 58 % $ 16,773 62 % 22 % NRE and Prototype services costs 1,204 3 % 192 1 % 527 % Under (over)-absorption of manufacturing overhead (140 ) — 166 — (184 %) Inventory and warranty charges 224 1 % 261 1 % (14 %) Total cost of sales $ 21,692 62 % $ 17,392 64 % 25 % Cost of sales in fiscal 2020 increased $4.3 million, or 25%, from fiscal 2019, primarily due to the increase in product costs, consistent with the 28% increase in net sales. During fiscal 2020, we incurred costs of $1.2 million to generate $834,000 in revenue related to NRE and Proto-type services, netting losses in the amount of $370,000 from the development services portion of certain contracts compared to none in fiscal 2019. During fiscal 2020, we experienced over-absorption of manufacturing costs compared to an under-absorption in fiscal 2019, due primarily to adjustments to our standard labor and overhead rates at the beginning of fiscal 2020 in anticipation of higher manufacturing volumes. Costs related to inventory and warranty charges remained relatively flat in fiscal 2020 compared to fiscal 2019. 18 Operating Expenses Years Ended June 30, Increase (Decrease) From 2019 To 2020 2020 2019 (Dollars in thousands) % of Net Sales % of Net Sales Operating expenses: $ $ Selling expenses 577 2 % 415 2 % 39 % General and administrative expenses 3,189 9 % 2,492 9 % 28 % Research and development costs 2,315 7 % 1,882 7 % 23 % $ 6,081 18 % $ 4,789 18 % 27 % Selling expenses consist of salaries and other personnel-related expenses related to our business development department, as well as trade show attendance, advertising and marketing expenses, and travel and related costs incurred in generating and maintaining customer relationships. Selling expenses increased $162,000, or 39%, compared to fiscal 2019, primarily related to increased personnel expenses in the amount of $95,000 as well as consulting expenses of $96,000, offset by decreases in recruitment fees of $40,000 due to filling the previously vacant position of Director of Business Development during the first quarter of fiscal 2019. General and administrative expenses (“G&A”) consist of salaries and other personnel-related expenses for corporate, accounting, finance, and human resource personnel, as well as costs for outsourced information technology services, professional fees, directors’ fees, and costs associated with being a public company. The $697,000 increase in G&A expenses from fiscal 2019 to 2020 is due primarily to $277,000 in increased fiscal 2020 bonus accruals, $93,000 in increased personnel expenses, $249,000 in increased equity compensation expense due to the reallocation of previously forfeited performance awards, and increased professional fees related to outsourced information technology services and audit fees in the amount of $85,000. Research and development costs consist of salaries and other personnel-related costs of our product development and engineering personnel, related professional and consulting fees, and costs related to intellectual property, laboratory usage, materials, and travel and related costs incurred in the development and support of our products. The $433,000 increase in research and development costs from fiscal 2019 to fiscal 2020 is due primarily to increased personnel-related costs in the amount of $386,000 and increased recruiting expenses as we hired new engineers during the fiscal 2020. Although the majority of our research and development costs relate to sustaining activities related to products we currently manufacture and sell, we have created a product roadmap to develop future products. Research and development costs represent between 38% and 39% of total operating expenses during fiscal 2019 and 2020 and are expected to increase in the future as we continue to invest in product development. The amount spent on projects under development is summarized below (in thousands): Years Ended June 30, Expected Market Launch Estimated Annual Revenue 2020 2019 Dollars in thousands Total Research and Development costs: $ 2,315 $ 1,882 Products in development: Thoracic Driver $ 41 $ 339 * $ 4,000 Arthroscopic Shaver (1) . 6 297 06/21 $ 600 ENT Shaver 475 11 01/21 $ 1,000 Arthroscopic Attachment — 17 (2) $ 150 CMF Driver 194 9 12/20 $ 1,000 Sustaining & Other 1,599 1,209 Total $ 2,315 $ 1,882 * We substantially completed this product and began initial shipments of a private-labeled version to an existing CMF customer beginning in the third quarter of fiscal 2020, generating $3.1 million in revenue during fiscal 2020. 19 (1) This project has been internally pushed back to focus on our new internal Pro-Dex branded ENT shaver. (2) Internal development of this project is complete, but we are looking for the most attractive sales channel and have yet to sell this product. As we previously discussed, in early fiscal 2019 we entered a development contract with a current significant customer to private-label our thoracic driver for their unique specifications. We shipped initial launch quantities of this product during the third quarter ended March 31, 2020. Additionally, the customer CMF driver listed in the prior year was completed during fiscal 2020 and we began shipping initial quantities to this customer during the fourth quarter of fiscal 2020 and generated $556,000 in revenue related to this new product. Approximately $6,000 in expenses included in fiscal 2020 sustaining and other is related to the Jet Propulsion Laboratory’s Ventilator Intervention Technology Accessible Locally (“VITAL”), a high-pressure, lower cost ventilator. In the fourth quarter, we were one of eight US-based companies awarded a license to manufacture the VITAL. We are currently in the process of creating proto-types for testing and look forward to adding this as a formal product under development in our next fiscal quarter. We are excited about the opportunity to commercialize this product, which may alleviate some of the ventilator supply chain shortages experienced by hospitals during the COVID-19 pandemic. Other Income (Expense) Interest and Dividend Income Our interest and dividend income earned in fiscal 2020 includes $95,000 earned from our interest-bearing money market accounts and portfolio of equity investments. The fiscal 2019 interest and dividend income included $183,000 of interest related to an investment in a hotel as well as $83,000 of interest and dividend income earned from our interest-bearing money market accounts and portfolio of equity investments. Other Income During the fourth quarter of fiscal 2020, the Monogram Orthopaedics Inc. (“Monogram”) note was repaid with interest and we collected a total of $952,000 during fiscal 2020. We invested in Monogram, a medical device start-up specializing in precision, patient-specific orthopedic implants in April 2017. In conjunction with making the loan to Monogram, we were granted the exclusive right to develop, engineer, manufacture, and supply certain products on behalf of Monogram. We impaired our entire $800,000 investment during the fourth quarter of fiscal 2018 due to indications that Monogram had exhausted its cash and had been unable to obtain additional financing to enable continued research to commercialize their technology. Gain on Sale of Investments During the fourth quarter of fiscal 2020, we liquidated one of the stocks in our portfolio of equity investments receiving proceeds of $128,000 and recording a gain of $25,000. During the quarter ended December 31, 2018, we liquidated one of the stocks in our portfolio of equity investments receiving proceeds of $1.9 million and recording a gain on the sale in the amount of $356,000. Interest Expense Interest expense incurred in fiscal 2020 and 2019, consists primarily of interest expense related to the Term Loan from Minnesota Bank & Trust (“MBT”) described more fully in Note 6 to the Financial Statements contained elsewhere in this report and capital lease obligations for leased equipment. Income Taxes The effective tax rate for the years ended June 30, 2020 and 2019, was consistent at 23% and 24%, respectively. 20 Liquidity and Capital Resources The following table is a summary of our Statements of Cash Flows and Cash and Working Capital as of and for the fiscal years ended June 30, 2020 and 2019: As of and for the Years Ended June 30, 2020 2019 (In thousands) Cash provided by (used in): Operating activities $ 4,945 $ 3,326 Investing activities $ (2,287 ) $ (1,222 ) Financing activities $ (3,979 ) $ 450 Cash, cash equivalents and working capital: Cash and cash equivalents $ 6,421 $ 7,742 Working capital $ 17,447 $ 16,575 Cash Flows from Operating Activities Cash provided by operating activities during fiscal 2020 relates primarily to our net income of $6.1 million, the non-cash depreciation and amortization and stock compensation expense of $573,000 and $286,000, respectively, offset by a gain on collection of a note receivable in the amount of $952,000, an increase in inventory in the amount of $2.0 million due to projected increased demand relating to two of our newest product launches, and an increase in accounts receivable in the amount of $1.1 million. Offsetting the use of cash for inventory purchases and accounts receivable increases, our accounts payable, accrued expenses and deferred rent increased by $604,000 and our income taxes payable increased by $642,000, while our prepaid expenses and other assets decreased by $476,000. Cash provided by operating activities during fiscal 2019 was $3.3 million and relates primarily to our net income of $4.1 million, non-cash depreciation and amortization in the amount of $438,000, and the non-cash decrease in the deferred income taxes of $1.4 million, offset by an increase in inventory in the amount of $1.8 million due to projected increased sales, and an increase in accounts receivable of $1.1 million. Cash Flows from Investing Activities Net cash used in investing activities in fiscal 2020 was $2.3 million and related primarily to the purchase of $2.8 million in marketable equity securities as well as purchases of $519,000 in equipment and leasehold improvements offset by the collection of a previously impaired note receivable due from Monogram in the amount of $952,000. Net cash used in investing activities in fiscal 2019 was $1.2 million. During the 2019 fiscal year, we invested $3.0 million in the purchase of marketable equity securities and generated $1.9 million in proceeds from sales of marketable equity securities under the direction of the Investment Committee of our Board, made capital expenditures in the amount of $1.4 million primarily for manufacturing equipment, and collected $1.2 million from collection of a note receivable. Cash Flows from Financing Activities Net cash used in financing activities for fiscal 2020 totaled $4.0 million and related primarily to the $3.4 million repurchase of 231,274 shares of our common stock pursuant to our share repurchase program, as well as $630,000 of principal payments on our term loan from Minnesota Bank and Trust (“MBT”) and an equipment lease more fully described in Note 6 to the Financial Statements contained elsewhere in this report. Net cash provided by financing activities for fiscal 2019 included $5.0 million in a term loan from MBT more fully described in Note 6 to the Financial Statements contained elsewhere in this report, offset by $433,000 of principal payments on the MBT term loan and an equipment lease, as well as $4.0 million related to the repurchase of 322,068 shares of our common stock pursuant to our share repurchase program. 21 Liquidity Requirements for the Next 12 Months As of June 30, 2020, our working capital was $17.4 million. We currently believe that our existing cash and cash equivalent balances, together with our account receivable balances, and anticipated cash flows from operations will provide us sufficient funds to satisfy our cash requirements as our business is currently conducted for at least the next 12 months. We may also borrow against our $2.0 million revolving loan with MBT, which we anticipate renewing (See Note 6 of Notes to Financial statements contained elsewhere in this report). We are focused on preserving our cash balances by monitoring expenses, identifying cost savings, and investing only in those development programs and products that we believe will most likely contribute to our profitability. As we execute our current strategy, however, we may require debt and/or equity capital to fund our working capital needs and requirements for capital equipment to support our manufacturing and inspection processes. In particular, we have experienced negative operating cash flow in the past, especially as we procure long-lead time materials to satisfy our backlog, which can be subject to extensive variability. We believe that if we need additional capital to fund our operations, we can borrow against our revolving loan with MBT. Surplus Capital Investment Policy During fiscal 2013, our Board approved a Surplus Capital Investment Policy (the “Policy”) that provides, among other items, for the following: (a) Determination by our Board of Directors of (i) our surplus capital balance and (ii) the portion of such surplus capital balance to be invested according to the Policy; (b) Selection of an Investment Committee responsible for implementing the Policy; and (c) Objectives and criteria under which investments may be made. The Investment Committee is comprised of Messrs. Swenson (Chair), Cabillot, and Van Kirk. The Investment Committee approved each of the investments comprising the $4.9 million of marketable public equity securities held at June 30, 2020, which amount includes unrealized holding losses in the amount of $1.6 million at June 30, 2020. In December 2019, our Board approved a new share repurchase program authorizing us to repurchase up to 1 million shares of our common stock, as the prior repurchase plan, authorized by our Board in 2013, authorizing the repurchase of 750,000 shares of common stock was nearing completion. In accordance with, and as part of, these share repurchase programs, our Board has approved the adoption of several prearranged share repurchase plans intended to qualify for the safe harbor Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (“10b5-1 Plan” or “Plan”). During the fiscal year ended June 30, 2020, we repurchased 231,274 shares at an aggregate cost, inclusive of fees under the Plan, of $3.4 million. During the fiscal year ended June 30, 2019, we repurchased 322,068 shares at an aggregate cost, inclusive of fees under the Plan, of $4.0 million. On a cumulative basis, we have repurchased a total of 819,325 shares under the share repurchase programs at an aggregate cost, inclusive of fess under the Plan, of $8.5 million. All repurchases under the 10b5-1 Plans were administered through an independent broker. Recent Accounting Pronouncements On July 1, 2019, we adopted ASU 2016-02, (Topic 842) “ Leases ,” using a modified retrospective approach through a cumulative effect adjustment to retained earnings as of the beginning of fiscal 2020. The objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The impact of adoption was an increase to long-term assets and total liabilities each in the amount of approximately $3.3 million as of July 1, 2019. 22 On July 1, 2018, we adopted ASU 2014-09, (Topic 606) " Revenue from Contracts with Customers ." This guidance outlines a single, comprehensive model of accounting for revenue from contracts with customers. We adopted the standard using the modified retrospective transition method, under which prior periods were not revised to reflect the impacts of the new standard. Our revenue is primarily generated from the sale of finished product to customers. Those sales predominantly contain a single delivery element and revenue is recognized at a single point in time when ownership, risks and rewards transfer. We also perform services when we are engaged to design a product for a customer and there is more judgment involved in determining the amount and timing of revenue recognition under those types of contracts. In fiscal 2020, the revenue from these activities represented approximately 2% of total revenue. Accordingly, the timing of revenue recognition is not materially impacted by the new standard. No other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material impact on our Financial Statements. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable.