Item 7. Management’s Discussion and Analysis
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion
of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the
notes thereto contained elsewhere in this report, as well as the Risk Factors included in Item 1A of this report. The following discussion
contains forward-looking statements. (See “Cautionary Note Regarding Forward-Looking Statements” included in Part I of this
report.)
Overview
The following discussion and analysis
provides information that management believes is relevant to an assessment and understanding of our results of operations and financial
condition for the fiscal years ended June 30, 2023 and 2022.
We specialize in the design, development,
and manufacture of autoclavable, battery-powered and electric, multi-function surgical drivers and shavers used primarily in the orthopedic,
thoracic, and CMF markets. Additionally, we provide engineering, quality, and regulatory consulting
services to our customers. We also sell rotary air motors. Our products are found in hospitals, medical engineering labs, scientific
research facilities, and high-tech manufacturing operations around the world. We are headquartered in Irvine, California.
COVID-19 Pandemic
We have adjusted certain policies
and procedures based on applicable national, state, and local emergency orders and safety guidance that may be issued from time to time,
in order to effectively manage our business during the pandemic and to keep our employees safe. These measures have changed over time
and continue to change as our specific circumstances change.
While we have yet to see any decline
in our customer orders, we have received and accepted some customer requests to delay the shipment of their existing orders. We are focused
on the health and safety of all those we serve – our customers, our communities, our employees, and our suppliers. We are supporting
our customers according to their priorities and working with them to the degree that we can offer relief in the form of delayed shipments.
We are focused on continuity of supply by working with our suppliers, some of whom have delivered our orders late and are quoting longer
lead times.
During fiscal 2022, we began to
see some challenges in our supply chain in the form of delayed shipments, longer lead times, higher prices, and surcharges, much of which
our suppliers indicate have been caused by the COVID-19 pandemic. We have largely been able to mitigate our biggest supply chain concerns
by sourcing replacement chips through alternative suppliers, albeit at much higher prices, for many of our printed circuit board assemblies.
In so doing, our cost of sales increased during the second half of fiscal 2022 and in fiscal 2023. We continue to implement plans and
processes to mitigate these challenges that many manufacturers similarly face. Our long-term prospects remain positive, and we believe
these challenges will negatively impact us only in the short-term.
Critical Accounting Policies
Our financial statements
are prepared in accordance with U.S. GAAP. The preparation of our financial statements requires management to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures. We base our estimates on historical
experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates.
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Revenue Recognition
Under Accounting Standards Update
(“ASU”) 2014-09, (Topic 606) “ Revenue From Contracts with Customers ,” we recognize revenue from the sales
of products and services by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations
in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract;
and (5) recognize revenue when each performance obligation is satisfied. We primarily sell finished products and recognize revenue at
point of sale or delivery. However, we also perform services when we are engaged to design a product for a customer and there is more
judgment involved in determining the amount and timing of revenue recognition under those types of contracts. In fiscal 2023, the revenue
from non-recurring engineering (“NRE”) and prototype services represents approximately 6% of total revenue.
Returns of our product for
credit are not material; accordingly, we do not establish a reserve for product returns at the time of sale.
Estimated Losses on Product Development Services
Cost and revenue estimates
related to the product development service portions of development and supply contracts are reviewed and updated quarterly. An expected
loss on development service contracts is recognized immediately in cost of sales. Losses recorded in fiscal 2023 and 2022 related to these
services totaled $108,000 and $0, respectively.
Owing
to the complexity of many of the contracts we have undertaken, the cost estimation process requires significant judgment. It is based
upon the knowledge and experience of our project managers, engineers, and finance professionals. Factors that are considered in estimating
the cost of work to be completed and ultimate profitability of the fixed price product development portion of development and supply contracts
include the nature and complexity of the work to be performed, availability and productivity of labor, the effect of change orders, the
availability of materials, performance of subcontractors, and expected costs for specific regulatory approvals.
Warranties
Most of our products are
sold with a warranty that provides for repairs or replacement of any defective parts for a period, generally one to two years, after the
sale. At the time of the sale, we accrue an estimate of the cost of providing the warranty based on prior experience with such factors
as return rates and repair costs, which factors are reviewed quarterly.
Warranty expenses, including
changes of estimates, are included in cost of sales in our statements of operations.
Inventories
Inventories are stated
at the lower of cost (first-in, first-out method) or net realizable value. Reductions to estimated net realizable value are recorded,
and charged to cost of sales, when indicated based on a formula that compares on-hand quantities to both historical usage and estimated
demand over the ensuing 12 months from the measurement date.
Accounts Receivable
Trade receivables are stated
at their original invoice amounts, less an allowance for doubtful portions of such accounts. Management determines the allowance for doubtful
accounts based on facts and circumstances related to specific accounts, and on historical experience related to the age of accounts. Trade
receivables are written off when deemed uncollectible. Recoveries of trade receivables previously reserved are offset against the allowance
when received.
Deferred Costs
Deferred costs reflect
costs incurred related to non-recurring engineering services under the terms of the related development and supply contracts. These costs
get recorded to cost of sales in the period that the revenue is recognized.
Investments
Investments consist
of marketable equity securities of publicly held companies and a warrant (the “Monogram Warrant”) to purchase common stock
of a publicly held company. The investments were made to realize a reasonable return, although there is no assurance that positive returns
will be realized. Investments are marked to market at each measurement date, with unrealized gains and losses presented in other income
(expense) in our consolidated income statements. Some of our investments include the common stock of public companies that are thinly
traded. Certain of these investments are classified as long-term in nature, as we may not be able to liquidate the investments in a timely
manner even if we wish to sell them. Thinly traded investments were subject to a valuation analysis as of June 30, 2023 and 2022. The
Monogram Warrant is the subject of the restatement of our previous financial statements described in Note 2 to the consolidated financial
statements contained elsewhere in this report. As previously disclosed, from the time we were issued the Monogram warrant through the
fourth quarter of fiscal 2023, we considered the Monogram warrant to be of little value and did not record it as an investment in our
consolidated balance sheet.
Long-lived Assets
We review the recoverability
of long-lived assets, consisting of building, equipment, and improvements, when events or changes in circumstances occur that indicate
carrying values may not be recoverable.
Building, equipment, and
improvements are recorded at historical cost and depreciation is provided using the straight-line method over the following periods:
Building
Thirty years
Equipment
Three to ten years
Improvements
Shorter of the remaining life of the underlying building, lease term, or the asset’s estimated useful life
Intangibles
Other
intangibles consist of legal fees incurred in connection
with patent applications. The legal fees will be amortized over the estimated life of the product(s) that will be utilizing the technology
or expensed immediately in the event the patent office denies the issuance of the patent. The expense associated with the amortization
of the patent costs is recognized in research and development costs.
Income Taxes
We recognize deferred tax
assets and liabilities for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities,
along with net operating loss and tax credit carryovers. Deferred tax assets and liabilities at June 30, 2023 and 2022 consisted primarily
of basis differences related to unrealized gain/loss related to investments, stock-based compensation, fixed assets, accrued expenses
and inventories. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Significant management judgment
is required in determining our provision for income taxes and the recoverability of our deferred tax assets. Such determination is based
on our historical taxable income, with consideration given to our estimates of future taxable income and the periods over which deferred
tax assets will be recoverable. In evaluating our ability to recover our deferred tax assets, we consider all available positive and negative
evidence, including reversals of deferred tax liabilities, projected future taxable income, and results of recent operations. The assumptions
about future taxable income require significant judgment and are consistent with the plans and estimates we are using to manage the underlying
business. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income
(loss).
17
Results of Operations for the Fiscal Year Ended June 30, 2023
Compared to the Fiscal Year Ended June 30, 2022
The following tables set
forth results from operations for the fiscal years ended June 30, 2023 and 2022:
Years
Ended June 30,
2023
2022
(Restated)
Dollars
in thousands
%
of Net Sales
%
of Net Sales
Net sales
$ 46,087
100 %
$ 42,041
100 %
Cost of sales
33,338
72 %
28,909
69 %
Gross profit
12,749
28 %
13,132
31 %
Selling expenses
155
—
91
—
General and administrative expenses
4,028
9 %
4,903
12 %
Loss from disposal of equipment
—
—
35
—
Research and development costs
2,804
6 %
2,980
7 %
Total operating expenses
6,987
15 %
8,009
19 %
Operating income
5,762
13 %
5,123
12 %
Other income (loss), net
3,666
7 %
571
1 %
Income before income taxes
9,428
20 %
5,694
13 %
Income tax expense
2,354
5 %
1,122
2 %
Net income
$ 7,074
15 %
$ 4,572
11 %
Net Sales
The
majority of our revenue is derived from designing, developing, and manufacturing powered
surgical instruments for medical device original equipment manufacturers. We also manufacture and
sell rotary air motors to a wide range of industries. The proportion of total sales by product/service
type is as follows:
Years
Ended June 30,
Increase
(Decrease)
From 2022 To 2023
2023
2022
Dollars
in thousands
%
of Net Sales
%
of Net Sales
Net sales:
Medical devices
$ 30,740
66 %
$ 34,004
81 %
(10 %)
Industrial and scientific
865
2 %
919
2 %
(6 %)
NRE & Prototype services
2,695
6 %
1,014
2 %
166 %
Dental and component
257
1 %
465
1 %
(45 %)
Repairs
12,617
27 %
6,610
16 %
91 %
Discounts & Other
(1,087 )
(2 %)
(971 )
(2 %)
12 %
$ 46,087
100 %
$ 42,041
100 %
10 %
18
Net
sales in fiscal 2023 increased by $4.0 million, or 10%, as compared to fiscal 2022, due primarily to an increase in repair revenue of
$6.0 million and an increase in NRE and prototype services of $1.7 million offset by a decrease in medical device revenue of $3.3 million.
Details of our medical device sales by type is as follows:
Years
Ended June 30,
Increase
(Decrease)
From 2022 To 2023
2023
2022
Dollars
in thousands
%
of
Total
%
of
Total
Medical device sales:
Orthopedic
$ 19,688
64 %
$ 21,877
64 %
(10 %)
CMF
8,497
28 %
10,277
30 %
(17 %)
Thoracic
2,555
8 %
1,850
6 %
38 %
Total
$ 30,740
100 %
$ 34,004
100 %
(10 %)
Sales
of our medical device products decreased $3.3 million, or 10%, during fiscal 2023 as compared to fiscal 2022. During fiscal 2023, thoracic
sales increased by $705,000 to $2.6 million, up from $1.9 million in fiscal 2022, due to additional orders from our single distributor
of this driver. In late fiscal 2023, we executed a supply agreement with another distributor for a thoracic driver and we expect an increase
in revenue of thoracic products in fiscal 2024. Recurring revenue from distributors of CMF drivers decreased $1.8 million in fiscal 2023
compared to fiscal 2022. We do not have much visibility into our customers’ distribution networks, but we surmise the decline relates
to a buildup of customer inventory. Our orthopedic sales decreased $2.2 million in fiscal 2023 compared to fiscal 2022, in part, due
to our largest customer shifting priorities to an enhanced repair program (described under the discussion of repair revenue below).
Sales
of our industrial and scientific products, which consist primarily of our compact pneumatic air
motors, decreased $54,000, or 6%, for fiscal 2023 compared to fiscal 2022. The revenue decrease is expected as these are legacy products
with no substantive marketing or sales efforts.
Sales
of our NRE & prototype services increased $1.7 million or 166% compared to fiscal 2022 and relates to billable engagement for multiple
engineering projects.
Sales
of our dental products and components in fiscal 2023 decreased $208,000, or 45%, as compared to fiscal 2022. The decrease is as expected
because in fiscal 2022 we sold components of excess inventory directly to our largest customer due to the release of their next generation
device. We expect future declines in this area as we are no longer manufacturing dental products, but rather are simply selling remaining
component inventory.
Our
fiscal 2023 repair revenue increased approximately $6.0 million, or 91%, to $12.6 million, as compared to fiscal 2022, due to increased
repairs of the orthopedic handpiece we sell to our largest customer. We expected repair revenue to increase based upon the customer’s
requested refurbishments to upgrade previously purchased handpieces to the next generation, which we collectively term “enhanced
repairs”. We are rapidly refurbishing these handpieces and we believe that our largest customer will request enhanced repairs for
a similar volume or number of handpieces in fiscal 2024, but there are no assurances that our customer will return the same volume of
handpieces.
At June 30, 2023, we
had a backlog of $41.6 million compared with a backlog of $16.5 million at June 30, 2022. Our backlog represents firm purchase orders
received and acknowledged from our customers and does not include all revenue expected to be generated from existing customer contracts.
Of our backlog at June 30, 2023, $31.4 million, as well as certain purchase orders received subsequent to June 30, 2023, are expected
to be delivered during fiscal 2024 and the balance of $10.2 million is expected to be delivered in fiscal 2025. We have experienced, and
may continue to experience, variability in our new order bookings due to, among other reasons, the launch of new products, the timing
of customer orders based on end-user demand, and customer inventory levels. We do not typically experience seasonal fluctuations in our
shipments and revenues.
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Cost of Sales and Gross Margin
Years
Ended June 30,
Increase
(Decrease) From 2022 To 2023
2023
2022
Dollars
in thousands
Cost of sales:
%
of Net Sales
%
of Net Sales
Product costs
$ 29,600
64 %
$ 26,296
63 %
13 %
NRE and Prototype services costs
1,724
4 %
774
2 %
123 %
Under (over)-absorption of manufacturing overhead
1,724
4 %
877
2 %
97 %
Inventory and warranty charges
290
—
962
2 %
(70 %)
Total cost of sales
$ 33,338
72 %
$ 28,909
69 %
15 %
Cost of sales in fiscal 2023 increased
$4.4 million, or 15%, from fiscal 2022, primarily due to the increase in product costs, consistent with the 10% increase in net sales,
coupled with higher material and labor costs. During fiscal 2023, we experienced $1.7 million of under-absorption of manufacturing costs
compared to $877,000 in fiscal 2022, due primarily to actual production hours being less than planned .
Costs related to inventory and warranty charges decreased $672,000 in fiscal 2023 compared to fiscal 2022, primarily due to sourcing of
components for our printed circuit board assemblies at prices higher than usual in fiscal 2022 coupled with reduced warranty repairs related
to the handpiece we sell to our largest customer in fiscal 2023 .
Operating Expenses
Years
Ended June 30,
Increase
(Decrease)
From 2022 To 2023
2023
2022
(Dollars
in thousands)
% of Net Sales
% of Net Sales
Operating expenses:
Selling expenses
$ 155
—
$ 91
—
70 %
General and administrative expenses
4,028
9 %
4,903
12 %
(18 %)
Research and development costs
2,804
6 %
2,980
7 %
(6 %)
$ 6,987
15 %
$ 7,974
19 %
(12 %)
Selling expenses consist
of salaries and other personnel-related expenses related to our business development department, as well as trade show attendance, advertising
and marketing expenses, and travel and related costs incurred in generating and maintaining customer relationships. Selling expenses increased
$64,000, or 70%, compared to fiscal 2022, primarily due to increased sales commissions.
General and administrative
expenses (“G&A”) consist of salaries and other personnel-related expenses for corporate, accounting, finance, and human
resource personnel, as well as costs for outsourced information technology services, professional fees, directors’ fees, and costs
associated with being a public company. The $875,000 decrease in G&A expenses from fiscal 2022 to 2023 is due primarily to reduced
legal and settlement expenses related to employment matters and reduced non-cash compensation expense related to stock compensation.
Research and development
costs generally consist of salaries, employer-paid benefits, and other personnel- related costs of our engineering and support personnel,
as well as allocated facility and information technology costs, professional and consulting fees, patent-related fees, lab costs, materials,
and travel and related costs incurred in the development and support of our products. Research and development costs decreased $176,000
from fiscal 2022 to 2023 due to increased personnel and related costs of $333,000 as well as increased legal fees related to IP matters
of $89,000 offset by decreased spending on internal product development projects of $604,000. In fiscal 2023, our engineering department
has continued to be engaged in billable customer projects and therefore those costs are shifted to cost of sales instead of research and
development.
20
Although the majority of our research
and development costs relate to sustaining activities related to products we currently manufacture and sell, we have created a product
roadmap to develop future products. Many of our product development efforts are undertaken only upon completion of an analysis of the
size of the market, our ability to differentiate our product from our competitors’, as well as an analysis of our specific sales
prospects with new and/or existing customers. Research and development costs represent between 37% and 40% of total operating expenses
during fiscal 2022 and 2023 and are expected to increase in the future as we continue to invest in product development. The amount spent
on projects under development is summarized below (in thousands):
Years Ended
June 30,
Expected
Market
Launch (1)
Estimated
Annual
Revenue (2)
2023
2022
Dollars
in thousands
Total Research and Development costs:
$ 2,804
$ 2,980
Products in development:
ENT
Shaver
$ 51
$ 282
Q4 2023
$ 1,000
Vital
Ventilator
—
115
(3 )
$ 1,500
Sustaining
& Other
2,753
2,583
Total
$ 2,804
$ 2,980
(1) Represents the calendar quarter of expected market launch.
(2) The products in development include risks that they could be abandoned in the future prior to completion,
they could fail to become commercialized, or the actual annual revenue realized may be less than the amount estimated.
(3) We have suspended the vital ventilator project at this time.
As we introduce new products into
the market, we expect to see an increase in sustaining and other engineering expenses. Typical examples of sustaining engineering activities
include, but are not limited to, end-of- life component replacement, especially in electronic components found in our printed circuit
board assemblies, analysis of customer complaint data to improve process and design, replacement and enhancement of tooling and fixtures
used in the machine shop, assembly operations, and inspection areas to improve efficiency and through-put. Additionally, these costs include
development projects that may be in their infancy and may or may not result in a full-fledged product development effort.
Other Income (Expense)
Interest and Dividend Income
Our interest and dividend income
earned in fiscal 2023 and 2022 includes income earned from our interest-bearing money market accounts and portfolio of equity investments.
Unrealized gain (loss) on investments
The unrealized gain (loss) on
investments relates to our investment portfolio, which is the subject of our restatement described in Note 2 to the consolidated financial
statements contained elsewhere in this report. Additional information related to the nature of our investments is more fully described
in Note 5 to the consolidated financial statements contained elsewhere in this report.
21
Gain on Sale of Investments
During fiscal 2023, we liquidated
some of the investments in our portfolio of equity investments receiving proceeds of $89,000 and recording a gain of $6,000. During fiscal
2022, we liquidated some of the investments in our portfolio of equity investments receiving proceeds of $770,000 and recording a gain
of $28,000.
Interest Expense
Interest expense incurred in fiscal
2023 and 2022 consists primarily of interest expense related to our debt with Minnesota Bank & Trust (“MBT”) described
more fully in Note 8 to the consolidated financial statements contained elsewhere in this report.
Income Taxes
The effective tax rate
for the fiscal years ended June 30, 2023 and 2022 was 26% and 20%, as restated, respectively, slightly less than our combined expected
federal and applicable state corporate income tax rates due primarily to federal and state research credits.
Liquidity and Capital
Resources
The following table is a summary
of our Statements of Cash Flows and Cash and Working Capital as of and for the fiscal years ended June 30, 2023 and 2022:
As of
and for the Years
Ended June 30,
2023
2022
(In thousands)
Cash provided by (used in):
Operating activities
$ 5,462
$ (847 )
Investing activities
$ (885 )
$ (1,235 )
Financing activities
$ (2,490 )
$ (790 )
Cash, cash equivalents and working capital:
Cash and cash equivalents
$ 2,936
$ 849
Working capital
$ 21,303
$ 19,812
Cash Flows from Operating Activities
Cash provided by operating
activities during fiscal 2023 totaled $5.5 million. Our net income was $7.1 million and included $3.9 million of unrealized gains on certain
equity investments, as well as $857,000 of depreciation and amortization and $766,000 of non-cash stock compensation. Additionally, our
accounts receivable decreased by $5.4 million due to the variability in the timing of shipments and our prepaid expenses and deferred
income taxes decreased by $494,000 and $264,000, respectively. Offsetting this net inflow of cash, inventory increased by $3.5 million
and our accounts payable and accrued expenses and deferred revenue decreased by $1.1 million and $1.0 million, respectively.
Cash used in operating
activities totaled $847,000 during fiscal 2022. Our net income was $4.6 million and included $931,000 of unrealized gains on certain equity
investments, as well as non-cash stock compensation expense and depreciation and amortization expense in the amount of $1.3 million and
$726,000, respectively. Additionally, our accounts payable and accrued expenses increased by $2.0 million. Offsetting these inflows of
cash, our accounts receivable and inventory balances grew by $4.4 million and $4.2 million, respectively.
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Cash Flows from Investing Activities
Net cash used in investing
activities in fiscal 2023 was $885,000. During the 2023 fiscal year, we made capital expenditures in the amount of $974,000 primarily
for the Franklin Property and we received proceeds of $89,000 from the sales of marketable equity securities.
Net cash used in investing
activities in fiscal 2022 was $1.2 million and related primarily to $1.6 million in purchases of equipment and improvements as well as
the purchase of $334,000 of marketable equity securities, offset by $770,000 in proceeds from sales of marketable equity securities.
Cash Flows from Financing Activities
Net cash used in financing
activities for fiscal 2023 totaled $2.5 million and included $809,000 in net principal payments of various notes payable to MBT more fully
described in Note 8 to the consolidated financial statements contained elsewhere in this report, and $1.5 million related to the repurchase
of 86,422 shares of our common stock pursuant to our share repurchase program, as well as payment of $223,000 of employee payroll taxes
related to the award of 37,500 shares of common stock to employees under previously granted performance awards.
Net cash used in financing
activities for fiscal 2022 totaled $790,000 and related primarily to the $1.6 million repurchase of 75,250 shares of our common stock
pursuant to our share repurchase program, as well as $1.2 million of principal payments primarily related to our various loans from MBT
offset by the $2.0 million in new borrowings from MBT more fully described in Note 8 to the consolidated financial statements contained
elsewhere in this report.
Liquidity Requirements for the Next 12 Months
As of June 30, 2023, our
working capital was $21.3 million. We currently believe that our existing cash and cash equivalent balances, together with our account
receivable balances, and anticipated cash flows from operations will provide us sufficient funds to satisfy our cash requirements as our
business is currently conducted for at least the next 12 months. In addition to our cash and cash equivalent balances, we expect
to derive a portion of our liquidity from our cash flows from operations. We may also liquidate some or all of our investment portfolio
or borrow further against our $7.0 million Amended Revolving Loan with MBT (see Note 8 to condensed consolidated financial statements
contained elsewhere in this report), under which we had availability of $4.5 million as of June 30, 2023.
We are focused on preserving our
cash balances by monitoring expenses, identifying cost savings, and investing only in those development programs and products that we
believe will most likely contribute to our profitability. As we execute our current strategy, however, we may require debt and/or equity
capital to fund our working capital needs and requirements for capital equipment to support our manufacturing and inspection processes.
In particular, we have experienced negative operating cash flow in the past, especially as we procure long-lead time materials to satisfy
our backlog, which can be subject to extensive variability. We believe that if we need additional capital to fund our operations, we can
borrow against our revolving loan with MBT.
Surplus Capital Investment Policy
During
fiscal 2013, our Board approved a Surplus Capital Investment Policy (the “Policy”) that provides,
among other items, for the following:
(a) Determination by our Board of Directors
of (i) our surplus capital balance and (ii) the portion of such
surplus capital balance to be invested according to the Policy;
(b) Selection of an Investment
Committee responsible for implementing the Policy; and
(c) Objectives and criteria under which investments may be made.
The
Investment Committee is comprised of Messrs. Swenson (Chair) , Cabillot,
and Van Kirk. 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. The Investment Committee approved each of the investments comprising the $8.8 million of investments consisting of a warrant to purchase
common stock of a publicly held company and marketable public equity securities held at June 30, 2023, which amount includes unrealized
holding gains in the amount of $6.1 million at June 30, 2023.
23
In
December 2019, our Board approved a new share repurchase program authorizing us to repurchase up to one million shares of our common stock,
as the prior repurchase plan, authorized by our Board in 2013, authorizing the repurchase of 750,000 shares of common stock was nearing
completion. In accordance with, and as part of, these share repurchase programs, our Board has approved the adoption of several
prearranged share repurchase plans intended to qualify for the safe harbor Rule 10b5-1 under the Securities Exchange Act of 1934, as amended
(“10b5-1 Plan” or “Plan”).
During the fiscal year ended
June 30, 2023, we repurchased 86,422 shares at an aggregate cost, inclusive of fees under the Plan, of $1.5 million. During the fiscal
year ended June 30, 2022, we repurchased 75,250 shares at an aggregate cost, inclusive of fees under the Plan, of $1.6 million. On a cumulative
basis, we have repurchased a total of 1,197,168 shares under the share repurchase programs at an aggregate cost, inclusive of fees under
the Plan, of $17.2 million. All repurchases under the 10b5-1 Plans were administered through an independent broker.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
24