COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS

3 Months Ended

Sep. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS

NOTE 4. COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS

Investments

Investments are stated at fair market value and consist of the following (in thousands):

	September 30, 2023		June 30, 2023
Current:
Marketable equity securities – short-term	$	1,010	$	1,134
Long-term:
Warrant		3,670		6,160
Marketable equity securities – long-term		1,422		1,361
Total Investments	$	6,102	$	8,655

Investments at September 30, 2023 and June 30, 2023 had an aggregate cost basis of $2,714,000. We classified certain investments as long-term in nature because if we decide to sell these securities, we may not be able to sell our position within one year. At September 30, 2023, the investments, excluding the warrant (“Monogram Warrant”), included unrealized gains of $200,000 (gross unrealized gains of $362,000 offset by gross unrealized losses of $162,000). At June 30, 2023, the investments, excluding the Monogram Warrant, included net unrealized losses of $219,000 (gross unrealized losses of $286,000 offset by gross unrealized gains of $67,000).

Of the total marketable equity securities at September 30, 2023 and June 30, 2023, $1,010,000 and $1,134,000, respectively, represent an investment in the common stock of Air T, Inc. Two of our Board members are also board members of Air T, Inc. and both either individually or through affiliates own an equity interest in Air T, Inc. Our Chairman, one of the two Board members aforementioned, also serves as the Chief Executive Officer and Chairman of Air T, Inc. Another of our Board members is employed by Air T, Inc. as its Chief of Staff. The shares were purchased through 10b5-1 Plans, that, in accordance with our internal policies regarding the approval of related-party transactions, were approved by our then three Board members that are not affiliated with Air T, Inc.

The Monogram Warrant represents our right to purchase up to 5% of the outstanding stock of Monogram Orthopaedics Inc. (“Monogram”) which we were granted on December 18, 2018. On October 6, 2023, in conjunction with the execution of a supply agreement with Monogram, we exercised our Monogram Warrant in full in cash totaling $1,250,000 and have received 1,828,551 shares of Monogram common stock (NasdaqCM: MGRM). The closing price of Monogram stock on October 6, 2023, was $2.67 per share.

At September 30, 2023 and June 30, 2023, the Monogram Warrant was exercisable into a total of 1,825,405 and 1,823,058 shares of Monogram’s outstanding stock, respectively. The estimated fair value of the warrant at September 30, 2023 and June 30, 2023 was $3,670,000 and $6,160,000, respectively, using a Black-Scholes valuation model with the following assumptions:

	September 30, 2023		June 30, 2023
Stock Price (common)	$	2.60	$	3.98
Strike Price (common)	$	.68	$	.69
Time until expiration (years)		2.22		2.48
Volatility		60.0%		60.0%
Risk-free interest rate		5.03%		4.68%

We invest surplus cash from time to time through our Investment Committee, which is comprised of one management director, Richard (“Rick”) Van Kirk, and two non-management directors, Raymond (“Ray”) Cabillot and Nicholas (“Nick”) Swenson, who chairs the committee. Both Nick and Ray are active investors with extensive portfolio management expertise. We leverage the experience of these committee members to make investment decisions for the investment of our surplus operating capital or borrowed funds. Additionally, many of our securities holdings include stocks of public companies that either Nick or Ray or both may own from time to time either individually or through the investment funds that they manage, or other companies whose boards they sit on, such as Air T, Inc.

Inventory

Inventory is stated at the lower of cost (first-in, first-out) or net realizable value and consists of the following (in thousands):

	September 30, 2023		June 30, 2023
Raw materials/purchased components	$	7,964	$	8,824
Work in process		4,516		3,686
Sub-assemblies/finished components		2,146		2,387
Finished goods		1,638		1,270
Total inventory	$	16,264	$	16,167

 Intangibles

Intangibles consist of the following (in thousands):

	September 30, 2023			June 30, 2023
Patent-related costs	$	208		$	208
Less accumulated amortization		(133	)		(127	)
	$	75		$	81

Patent-related costs consist of legal fees incurred in connection with both patent applications and a patent issuance, and will be amortized over the estimated life of the product(s) that is or will be utilizing the technology, or expensed immediately in the event the patent office denies the issuance of the patent. Future amortization expense is estimated to be $27,000 for fiscal 2024 and annually through fiscal 2026. All remaining costs are expected to be fully amortized by June 30, 2026.