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 3, 2021, the last sale price of our common stock as reported by NASDAQ was $26.00 per share. High Low Year ended June 30, 2021: First Quarter $ 31.42 $ 17.01 Second Quarter 42.60 26.96 Third Quarter 33.66 21.97 Fourth Quarter 35.80 25.76 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 Holders As of September 3, 2021, there were 114 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 2021 and 2020, we repurchased 54,880 and 26,353 shares of our common stock, respectively, at an aggregate cost of $1.5 million and $411,000, 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. RESERVED 14 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 I 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, 2021 and 2020. We specialize 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 CMF 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. We are headquartered in Irvine, California. COVID-19 Pandemic 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, in order to effectively manage our business during the pandemic, including: · Non-essential employees that are able to work remotely did so during most of fiscal 2021; · 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; · Provided training, education and appropriate personal protective equipment; · Implemented quarterly, then monthly, company-wide COVID-19 testing through June 2021; and · Daily temperature screenings and personal affidavits of wellness. 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, some of whom have delivered our orders late and are quoting longer lead times. While the COVID-19 pandemic did not materially adversely affect our financial results and business operations in our fiscal year ended June 30, 2021, 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 future impact of the COVID-19 pandemic on our business. 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. 15 Revenue Recognition 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 primarily sell finished products and recognize revenue at point of sale or delivery. 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 2021, the revenue from NRE and Prototype services represents approximately 1% 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. Losses recorded in fiscal 2021 and 2020 related to these services totaled $71,000 and $370,000, respectively. 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. 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. 16 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. Some of our investments include the common stock of public companies that are thinly traded. These investments are classified as long-term in nature, as we may not be able to liquidate the investments in a timely manner even if we wish to sell them. These investments were subject to an independent valuation as of June 30, 2021 and 2020. Long-lived Assets We review the recoverability of long-lived assets, consisting of building, equipment, and improvements, when events or changes in circumstances occur that indicate carrying values may not be recoverable. Building, equipment, and improvements are recorded at historical cost and depreciation is provided using the straight-line method over the following periods: Building Thirty years Equipment Three to ten years Improvements Shorter of the remaining life of the underlying building, 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, 2021 and 2020 consisted primarily of basis differences related to unrealized gain/loss related to investments, stock-based compensation, 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). 17 Results of Operations for the Fiscal Year Ended June 30, 2021 Compared to the Fiscal Year Ended June 30, 2020 The following tables set forth results from continuing operations for the fiscal years ended June 30, 2021 and 2020: Years Ended June 30, 2021 2020 Dollars in thousands % of Net Sales % of Net Sales Net sales $ 38,029 100 % $ 34,834 100 % Cost of sales 24,454 64 % 21,692 62 % Gross profit 13,575 36 % 13,142 38 % Selling expenses 590 2 % 577 2 % General and administrative expenses 4,076 11 % 3,189 9 % Gain from disposal of equipment — — (5 ) — Research and development costs 4,384 11 % 2,315 7 % 9,050 24 % 6,076 18 % Operating income 4,525 12 % 7,066 20 % Other income, net 1,101 3 % 836 2 % Income before income taxes 5,626 15 % 7,902 22 % Income tax expense 1,176 3 % 1,790 5 % Net income $ 4,450 12 % $ 6,112 17 % Net Sales The majority of our revenue is derived from designing, developing, and manufacturing powered surgical instruments for medical device original equipment manufacturers. We also manufacture and sell rotary air motors to a wide range of industries. The proportion of total sales by product/service type is as follows: Years Ended June 30, Increase (Decrease) From 2020 To 2021 2021 2020 Dollars in thousands % of Net Sales % of Net Sales Net sales: Medical devices $ 32,149 85 % $ 26,639 77 % 21 % Industrial and scientific 854 2 % 787 2 % 9 % NRE & Prototype services 324 1 % 834 2 % (61 %) Dental and component 161 — 259 1 % (38 %) Repairs 4,956 13 % 6,342 18 % (22 %) Discounts & Other (415 ) (1 %) (27 ) — 1,437 % $ 38,029 100 % $ 34,834 100 % 9 % 18 Net sales in fiscal 2021 increased by $3.2 million, or 9%, as compared to fiscal 2020, due primarily to an increase in medical device revenue of $5.5 million generated mostly from our second largest customer offset by a $1.4 million reduction in repair revenue. During fiscal 2021, sales to our second largest customer increased by $4.2 million to $10.1 million, up from $5.9 million in fiscal 2020, primarily due to increased sales of the thoracic driver that was launched in the third quarter of fiscal 2020. Details of our medical device sales by type is as follows: Years Ended June 30, Increase (Decrease) From 2020 To 2021 2021 2020 Dollars in thousands % of Net Sales % of Net Sales Medical device sales: Orthopedic $ 18,061 56 % $ 17,109 64 % 6 % CMF 6,212 19 % 6,434 24 % (4 %) Thoracic 7,876 25 % 3,096 12 % 154 % Total $ 32,149 100 % $ 26,639 100 % 21 % Sales of our industrial and scientific products, which consist primarily of our compact pneumatic air motors, increased $67,000, or 9%, for fiscal 2021 compared to fiscal 2020. The revenue increase relates to a continued interest in these legacy products, but is not due to any substantive marketing efforts . Sales of our dental products and components in fiscal 2021 declined $98,000, or 38%, as compared to fiscal 2020, and we expect future declines in this area as we are no longer manufacturing dental products, but rather are simply selling remaining component inventory. Our fiscal 2021 repair revenue has decreased approximately $1.4 million, or 22%, over fiscal 2020 to $5.0 million, due to decreased repairs of the orthopedic handpiece we sell to our largest customer. We expect repair revenue to continue to decrease based upon a downward trend we have seen in the volume of repairs of this orthopedic handpiece. At June 30, 2021, we had a backlog of $9.7 million compared with a backlog of $7.0 million at June 30, 2020. 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, 2021, as well as certain purchase orders received subsequent to June 30, 2021, are expected to be delivered during fiscal 2022. 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 2020 To 2021 2021 2020 Dollars in thousands % of Net Sales % of Net Sales Cost of sales: Product costs $ 23,093 60 % $ 20,404 58 % 13 % NRE and Prototype services costs 395 1 % 1,204 3 % (67 %) Under (over)-absorption of manufacturing overhead 370 1 % (140 ) — 364 % Inventory and warranty charges 596 2 % 224 1 % 166 % Total cost of sales $ 24,454 64 % $ 21,692 62 % 13 % 19 Cost of sales in fiscal 2021 increased $2.8 million, or 13%, from fiscal 2020, primarily due to the increase in product costs, consistent with the 9% increase in net sales. During fiscal 2021, we incurred costs of $395,000 to generate $324,000 in revenue related to NRE and Prototype services, netting losses in the amount of $71,000 compared to $370,000 in fiscal 2020. During fiscal 2021, we experienced a $370,000 under-absorption of manufacturing costs compared to a $140,000 over-absorption in fiscal 2020, due primarily to reduced production hours in fiscal 2021 resulting in part from paid absences related to COVID-19 . Costs related to inventory and warranty charges increased $372,000 in fiscal 2021 compared to fiscal 2020. Both inventory and warranty related expenses tend to increase in periods of higher volume sales and in periods with higher product development activity. Operating Expenses Years Ended June 30, Increase (Decrease) From 2020 To 2021 2021 2020 (Dollars in thousands) % of Net Sales % of Net Sales Operating expenses: Selling expenses $ 590 2 % $ 577 2 % 2 % General and administrative expenses 4,076 11 % 3,189 9 % 29 % Research and development costs 4,384 11 % 2,315 7 % 89 % $ 9,050 24 % $ 6,081 18 % 49 % 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 $13,000, or 2%, compared to fiscal 2020, primarily related to severance accruals in the amount of $43,000 offset by decreases in travel expenses due to the COVID-19 pandemic. We expect a decrease in selling expenses in the near term as we have filled the vacancy caused by the departure of our Director of Business Development late in the fourth quarter of fiscal 2021, with our Director of Engineering, who already had a close working relationship with most of our significant customers and prospects. 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 $887,000 increase in G&A expenses from fiscal 2020 to 2021 is due primarily to $615,000 in increased stock compensation expense related to non-qualified stock options awarded in fiscal 2021. We also incurred $267,000 in expenses related to operating the Franklin Property while we complete its build-out. We incurred no similar expenses during the prior fiscal year, as we purchased the Franklin Property during the second quarter of fiscal 2021. Research and development costs generally consist of salaries, employer-paid benefits, and other personnel- related costs of our engineering and support personnel, as well as allocated facility and information technology costs, professional and consulting fees, patent-related fees, lab costs, materials, and travel and related costs incurred in the development and support of our products. Research and development costs increased $2.1 million from fiscal 2020 to 2021 due to $1.0 million in increased personnel-related expense primarily due to increased engineering consultants and $1.2 million in increased spending on internal product development projects. 20 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 48% of total operating expenses during fiscal 2020 and 2021 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 (1) Estimated Annual Revenue 2021 2020 Dollars in thousands Total Research and Development costs: $ 4,384 $ 2,315 Products in development: ENT Shaver 829 475 Q4 2021 $ 1,000 CMF Driver 826 194 (2) $ 1,000 Vital Ventilator 191 — Q1 2022 $ 1,500 Sustaining & Other 2,538 1,646 Total $ 4,384 $ 2,315 (1) Represents the calendar quarter of expected market launch. (2) The CMF Driver was completed in the third quarter of fiscal 2021 and shipped to our existing largest customer under a distribution agreement we executed in the first quarter of fiscal 2021. We generated revenue of $220,000 related to these initial shipments during the third quarter ended March 31, 2021. This project is now complete and future engineering expenses related to this project will be included in sustaining and other engineering expenses. As we introduce new products into the market, we expect to see an increase in sustaining and other engineering expenses. Typical examples of sustaining engineering activities include, but are not limited to, end-of- life component replacement, especially in electronic components found in our printed circuit board assemblies, analysis of customer complaint data to improve process and design, replacement and enhancement of tooling and fixtures used in the machine shop, assembly operations, and inspection areas to improve efficiency and through-put. Additionally, these costs include development projects that may be in their infancy and may or may not result in a full-fledged product development effort. Other Income (Expense) Interest and Dividend Income Our interest and dividend income earned in fiscal 2021 and 2020 includes 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. Gain on Sale of Investments During fiscal 2021, we liquidated some of the investments in our portfolio of equity investments receiving proceeds of $4.6 million and recording a gain of $1.3 million. 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. Interest Expense Interest expense incurred in fiscal 2021 and 2020 consists primarily of interest expense related to our debt with Minnesota Bank & Trust (“MBT”) described more fully in Note 6 to the consolidated financial statements contained elsewhere in this report. 21 Income Taxes The effective tax rate for the fiscal years ended June 30, 2021 and 2020, decreased slightly from 23% to 21% due to increases in our research and development credit and tax benefits related to stock compensation, as well as, reduced state income taxes resulting from a shift in nexus to states with a more favorable tax rate. 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, 2021 and 2020: As of and for the Years Ended June 30, 2021 2020 (In thousands) Cash provided by (used in): Operating activities $ (2,078 ) $ 4,945 Investing activities $ (3,710 ) $ (2,287 ) Financing activities $ 3,088 $ (3,979 ) Cash, cash equivalents and working capital: Cash and cash equivalents $ 3,721 $ 6,421 Working capital $ 19,141 $ 17,447 Cash Flows from Operating Activities Cash used in operating activities during fiscal 2021 totaled $2.1 million. Our net income was $4.5 million and included $1.3 million of gains on the sales of certain equity investments and $901,000 of non-cash stock compensation. Offsetting this net inflow of cash, our accounts receivable balance increased by $5.8 million primarily because our largest customer changed their payment terms from net 30 to net 90 in conjunction with a contract extension. 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, 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 Flows from Investing Activities Net cash used in investing activities in fiscal 2021 was $3.7 million. During the 2021 fiscal year, we generated $4.6 million in proceeds from sales of marketable equity securities under the direction of the Investment Committee of our Board, purchased the Franklin Property for $6.5 million and made capital expenditures in the amount of $1.8 million primarily for the Franklin Property. 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. Cash Flows from Financing Activities Net cash provided by financing activities for fiscal 2021, totaled $3.1 million and included $9.1 million in various loans from Minnesota Bank and Trust (“MBT”) more fully described in Note 6 to the consolidated financial statements contained elsewhere in this report, offset by $5.5 million related to the repurchase of 216,171 shares of our common stock pursuant to our share repurchase program, $351,000 of principal payments on our loans with MBT, as well as payment of $259,000 of employee payroll taxes related to the award of 40,000 shares of common stock to employees under previously granted performance awards. 22 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 primarily related to our term loan from MBT more fully described in Note 6 to the consolidated financial statements contained elsewhere in this report. Liquidity Requirements for the Next 12 Months As of June 30, 2021, our working capital was $19.1 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 consolidated 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, or sell additional shares of our common stock under our ATM Agreement, which is currently suspended. 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 $3.0 million of marketable public equity securities held at June 30, 2021, which amount includes unrealized holding losses in the amount of $215,000 at June 30, 2021. In December 2019, our Board approved a new share repurchase program authorizing us to repurchase up to one 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, 2021, we repurchased 216,171 shares at an aggregate cost, inclusive of fees under the Plan, of $5.5 million. 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. On a cumulative basis, we have repurchased a total of 1,035,496 shares under the share repurchase programs at an aggregate cost, inclusive of fess under the Plan, of $14.0 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. No other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material impact on our consolidated financial statements. 23 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable.