COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS

6 Months Ended

Dec. 31, 2021

Composition Of Certain Financial Statement Items

COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS

NOTE 4. COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS

Inventory

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

	December 31,  2021		June 30,  2021
Raw materials/purchased components	$	4,331	$	3,967
Work in process		2,774		2,218
Sub-assemblies/finished components		1,836		1,738
Finished goods		344		514
Total inventory	$	9,285	$	8,437

Investments

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

	December 31, 2021		June 30,  2021
Marketable equity securities - short-term	$	1,241	$	1,295
Marketable equity securities - long-term		1,940		1,704
Total marketable equity securities	$	3,181	$	2,999

Investments at December 31, 2021 and June 30, 2021, had an aggregate cost basis of $3,538,000 and $3,204,000, respectively. The long-term investments include equity investments of thinly traded securities that we classified 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 December 31, 2021, the investments included net unrealized losses of $357,000 (gross unrealized losses of $475,000 offset by gross unrealized gains of $118,000). At June 30, 2021, the investments included net unrealized losses of $215,000 (gross unrealized losses of $386,000 offset by gross unrealized gains of $171,000).

Of the total marketable equity securities at December 31, 2021 and June 30, 2021, $1,170,000 and $1,224,000, 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.

We invest surplus cash from time to time through our Investment Committee, which is comprised of one management director, Richard Van Kirk, and two non-management directors, Raymond Cabillot and Nicholas Swenson, who chairs the committee. Both Mr. Cabillot and Mr. Swenson 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 Messrs. Swenson or Cabillot 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.

Land and building

Land and building consist of the following (in thousands):

	December 31, 2021			June 30,  2021
Land	$	3,684		$	3,684
Building		2,815			2,815
Total		6,499			6,499
Less: accumulated depreciation		(109	)		(62	)
Land and building	$	6,390		$	6,437

On November 6, 2020, we acquired the Franklin Property for a total purchase price of $6.5 million, of which we paid $1.3 million in cash and the balance of $5.2 we financed through Minnesota Bank & Trust (“MBT”) (See Note 10). We substantially completed the build-out of the property in the first quarter of this fiscal year. Currently, we are actively engaged in various verification and validation activities so that we can move certain employees and operations into the new building. We expect that we will begin certain operations in the new facility this fiscal year. The building is being amortized on a straight-line basis over a period of 30 years.

Intangibles

Intangibles consist of the following (in thousands):

	December 31, 2021			June 30, 2021
Patent-related costs	$	238		$	260
Less accumulated amortization		(81	)		(74	)
	$	157		$	186

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. Since we do not know when, or if, our patent applications will be issued, the future amortization expense is not predictable. During the three months ended December 31, 2021, we impaired $46,000 in previously capitalized legal fees because although we were granted the underlying patent, in this case, we currently have no products either in development or sold that utilize the intellectual property protected by the patent.