5.        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):

Land and Building

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

On November 6, 2020, we acquired the Franklin Property in order to increase our operational capacity 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 (the “Property Loan”) through Minnesota Bank & Trust (“MBT”) (See Note 8). Depreciation expense for both fiscal years ended June 30, 2025 and 2024 totaled $94,000. 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):

Depreciation expense for the years ended June 30, 2025 and 2024 amounted to $1.1 million and $1.0 million, respectively. During fiscal 2025 and 2024, fully depreciated assets in the amount of $32,000 and $85,000, respectively, were retired.

Intangibles

Intangibles consist of the following (in thousands):

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. All remaining costs are expected to be fully amortized in fiscal 2026. Amortization expense for both years ended June 30, 2025 and 2024 totaled $28,000.

Accrued Liabilities

Accrued liabilities consist of the following (in thousands):