COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS

12 Months Ended

Jun. 30, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS

4. COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS

Investments

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

	Years Ended June 30,
	2024		2023
Current:
Marketable equity securities – short-term	$	4,217	$	1,134
Long-term:
Monogram Warrant		—		6,160
Marketable equity securities – long-term		1,563		1,361
Total Investments	$	5,780	$	8,655

Marketable equity securities at June 30, 2024 and 2023 had an aggregate cost basis of $3,964,000 and $2,714,000, respectively. Both current and long-term marketable equity securities include equity securities of public companies that are thinly traded. We classified certain investments as long term in nature because even if we decide to sell the stocks, we may not be able to sell our position within one year. At June 30, 2024, the investments included net unrealized gains of $1.8 million (gross unrealized gains of $2.1 million offset by gross unrealized losses of $261,000). 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 June 30, 2024 and 2023, $987,000 and $1,134,000, respectively, represent an investment in the common stock of Air T, Inc. Two of our Board members, Messrs. Swenson and Cabillot, are also board members of Air T, Inc. and both either individually or through affiliates own an equity interest in Air T, Inc. Mr. Swenson, our Chairman, also serves as the chief executive officer and chairman of Air T, Inc. Another of our Board members is employed by Air T as its Chief of Staff. The shares have been 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.

On October 6, 2023, in conjunction with the execution of a supply agreement with Monogram Technologies Inc., formerly Monogram Orthopaedics Inc. (“Monogram”), we exercised the Monogram Warrant in full in cash totaling $1,250,000 and received 1,828,551 shares of Monogram common stock (NasdaqCM: MGRM). On the date of exercise our unrealized loss on the investment was approximately $38,000. The fair value of the Monogram common stock of $3.2 million, is reflected in marketable equity securities – short term in the table above as of June 30, 2024. Our Chief Executive Officer, Richard Van Kirk (“Rick”), is also a Monogram board member.

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

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

We invest surplus cash from time to time through our Investment Committee, which is comprised of one management director, Mr. Van Kirk, and two non-management directors, Mr. Cabillot and Mr. 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.

Inventory

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

	June 30,
	2024		2023
Raw materials /purchased components	$	6,703	$	8,824
Work in process		5,103		3,686
Sub-assemblies /finished components		2,342		2,387
Finished goods		1,121		1,270
Total inventory	$	15,269	$	16,167

Land and Building

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

	June 30,
	2024			2023
Land	$	3,684		$	3,684
Building		2,815			2,815
Total		6,499			6,499
Less: accumulated depreciation		(344	)		(250	)
	$	6,155		$	6,249

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 million we financed through Minnesota Bank & Trust (“MBT”) (See Note 7). We substantially completed the build-out of the property in the first quarter of fiscal 2022. In the fourth quarter of fiscal 2023, we substantially completed all of our validation activities, and we moved our repairs and assembly departments to the new facility. The building is being amortized on a straight-line basis over a period of 30 years.

Equipment and Improvements

Equipment and improvements consist of the following (in thousands):

	June 30,
	2024			2023
Office furnishings and fixtures	$	1,982		$	1,957
Machinery and equipment		7,292			6,675
Automobiles		21			21
Improvements		4,993			4,737
Total		14,288			13,390
Less: accumulated depreciation and amortization		(9,264	)		(8,311	)
	$	5,024		$	5,079

Depreciation expense for the years ended June 30, 2024 and 2023 amounted to $1,038,000 and $727,000, respectively. During fiscal 2024 and 2023, fully depreciated assets in the amount of $85,000 and $760,000, respectively, were retired.

Intangibles

Intangibles consist of the following (in thousands):

	June 30,
	2024			2023
Patent-related costs	$	208		$	208
Less accumulated amortization		(154	)		(127	)
	$	54		$	81

Amortization expense for the years ended June 30, 2024 and 2023 amounted to $28,000 and $37,000, respectively.

Patent-related costs consist of legal fees incurred in connection with both patent applications and patent issuances, 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 no more than $30,000 per year and all remaining costs are expected to be fully amortized within two years.

Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

	June 30,
	2024		2023
Payroll and related items	$	668	$	650
Accrued inventory in transit		276		637
Accrued legal and professional fees		301		216
Accrued bonuses		353		400
Current portion of lease liability		455		416
Warranty		277		200
Accrued customer rebate		840		480
Other		189		136
	$	3,359	$	3,135