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COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS | 12 Months Ended
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Jun. 30, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS |
| 5. | COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS
Investments Investments are stated at market value and consist of the following (in thousands):
Schedule of investments |  |  |  |  |  |  |  |
|  | June 30, 2022 |  |  | June 30, 2021 |
Marketable equity securities – short-term |  | $ | 755 |  |  | $ | 1,295 |
Marketable equity securities – long-term |  |  | 1,779 |  |  |  | 1,704 |
Total Marketable equity securities |  | $ | 2,534 |  |  | $ | 2,999 |
Investments at June 30, 2022 and 2021 had an aggregate cost basis of $2,796,000 and $3,204,000, respectively. Both current and long-term investments 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, 2022, the investments included net unrealized losses of $262,000 (gross unrealized losses of $369,000 offset by gross unrealized gains of $107,000). At June 30, 2021, the investments included net unrealized losses of $205,000 (gross unrealized losses of $376,000 offset by gross unrealized gains of $171,000). Of the total marketable equity securities at June 30, 2022 and 2021, $755,000 and $847,000, 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. 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):
Schedule of inventory |  |  |  |  |  |  |  |
|  | June 30, |
|  | 2022 |  |  | 2021 |
Raw materials /purchased components |  | $ | 6,323 |  |  | $ | 3,967 |
Work in process |  |  | 3,463 |  |  |  | 2,218 |
Sub-assemblies /finished components |  |  | 2,118 |  |  |  | 1,738 |
Finished goods |  |  | 774 |  |  |  | 514 |
Total inventory |  | $ | 12,678 |  |  | $ | 8,437 |
Land and Building Land and building consist of the following (in thousands):
Schedule of Land and Building |  |  |  |  |  |  |  |
|  | June 30, 2022 |  |  | June 30, 2021 |
Land |  | $ | 3,684 |  |  | $ | 3,684 |
Building |  |  | 2,815 |  |  |  | 2,815 |
Total |  |  | 6,499 |  |  |  | 6,499 |
Less: accumulated depreciation |  |  | (156 | ) |  |  | (62 | )
|  | $ | 6,343 |  |  | $ | 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 million we financed through Minnesota Bank & Trust (“MBT”) (see Note 8). We substantially completed the build-out of the property in the first quarter of fiscal 2022. Currently, we are actively engaged in various verification and validation activities and we moved certain of our employees into the new building during the third quarter of fiscal 2022. 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):
Schedule of equipment and improvements |  |  |  |  |  |  |  |
|  | June 30, |
|  | 2022 |  |  | 2021 |
Office furnishings and fixtures |  | $ | 2,224 |  |  | $ | 2,173 |
Machinery and equipment |  |  | 6,661 |  |  |  | 5,895 |
Automobiles |  |  | 21 |  |  |  | 21 |
Improvements |  |  | 4,271 |  |  |  | 3,536 |
Total |  |  | 13,177 |  |  |  | 11,625 |
Less: accumulated depreciation and amortization |  |  | (8,344 | ) |  |  | (7,780 | )
|  | $ | 4,833 |  |  | $ | 3,845 |
Depreciation expense for the years ended June 30, 2022 and 2021 amounted to $616,000 and $609,000, respectively. During fiscal 2022, $87,000 of assets were retired either due to physical disposal or major part replacement with a net book value of $35,000 recorded as a loss on disposal of equipment in our consolidated income statement. During fiscal 2021, fully depreciated assets in the amount of $49,000 were retired. Intangibles Intangibles consist of the following (in thousands):
Schedule of intangibles |  |  |  |  |  |  |  |
|  | June 30, 2022 |  |  | June 30, 2021 |
Patent-related costs |  | $ | 208 |  |  | $ | 260 |
Less accumulated amortization |  |  | (90 | ) |  |  | (74 | )
|  | $ | 118 |  |  | $ | 186 |
Amortization expense for the years ended June 30, 2022 and 2021 amounted to $16,000 and $14,000, 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. During fiscal 2022, we impaired $84,000 of previously capitalized legal fees due to uncertainty relating to future benefit. This impairment expense is included in research and development costs in our consolidated income statement. 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 four years. Accrued Liabilities Accrued liabilities consist of the following (in thousands):
Schedule of accrued liabilities |  |  |  |  |  |  |  |
|  | June 30, |
|  | 2022 |  |  | 2021 |
Payroll and related items |  | $ | 509 |  |  | $ | 505 |
Accrued inventory in transit |  |  | 177 |  |  |  | 128 |
Accrued legal and professional fees |  |  | 275 |  |  |  | 124 |
Accrued bonuses |  |  | 430 |  |  |  | 300 |
Current portion of lease liability |  |  | 379 |  |  |  | 344 |
Warranty |  |  | 340 |  |  |  | 221 |
Accrued customer rebate |  |  | 517 |  |  |  | 394 |
Other |  |  | 124 |  |  |  | 182 |
Total accrued expenses |  | $ | 2,751 |  |  | $ | 2,198 |

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