Note O - Subsequent Events |
12 Months Ended |
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Jun. 30, 2026 | |
| Notes to Financial Statements | |
| Subsequent Events [Text Block] |
O. Subsequent Events
In August 2026, one of our largest private-label contract manufacturing customers informed us of a material downward revision in their forecast of projected orders and purchases from us during our fiscal year 2027 caused by growing inventory levels on their behalf. As a result, we made considerable changes to our forecast for fiscal year 2027. Although our overall sales forecast for fiscal 2027 includes an expected increase in sales as compared to fiscal 2026, we currently anticipate we will experience a net loss for fiscal 2027.
Consequently, we anticipate we will not be able to comply with the fixed charge coverage ratio covenant requirement as defined in the Loan and Security Agreement that is based on only domestic operations and will first be measured for the nine months ending September 30, 2026. We have informed Legacy of our pending non-compliance with the fixed charge coverage ratio, and there is no assurance that a waiver, amendment, or remedy will be available or what the difference in amount, cost or other factors may be.
After careful consideration of the Company's current financial position and strategic objectives, management has determined the sale of the manufacturing facility located in Carlsbad, California is in the best interests of the Company and its stockholders. The Board of Directors has concluded that divesting this real property asset will provide the Company with additional liquidity needed to manage cash flows and reduce the overall debt load while improving capacity utilization. In light of the Company's recent operating challenges, management believes unlocking the capital currently held in this facility will allow the Company to extinguish the outstanding term-note on this property, reduce persistent excess capacity in our contract manufacturing segment, and better size the Company for sustainable growth. Management believes production can be effectively consolidated in our Vista, California manufacturing facility with no disruptions to production of customers' products.
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