And there are some on the market now, but they’re antiquated compared to what PRIMA is going to be. Everybody at the show. The dealers came over to the booth. They see the way the door cameras work. The way the WiFi is automatically self-healed because WiFi systems signals get lost on the premise that this self-heals fixes that. Nothing on the market does anything like that. It is a great boon to the dealers because they’re not going to have to roll trucks to repair. We set up the WiFi system to do things with the camera as far as the camera going off circuit. PRIMA does it all. And it’s a beautiful-looking product and we expect great results. So we’re going to have, as far as I can see into the future, lots of business at PRIMA, as well as the retrofitting of the black radios and Fire so all these things are combined together and both are a very strong future.
James Ricchiuti: Got it. Thanks very much.
Operator: Thank you. And our next question comes from Matt Pfau from William Blair. Your line is open.
Matthew Pfau: Hey, great. Thanks for taking my questions. Wanted to first start on the restatement, and I was just hoping you could better explain to us what happened here from an accounting perspective. It seems a little bit counterintuitive that both inventory and would be overstated while COGS were understated. So what happened that drove that? And then on the cash component, how did that sort of tie out when the accounting was wrong on the other side of the financial statements.
Kevin Buchel: So Matt, the inventory for the quarters that succeeded the June 30, 2022 physical inventory audited statements, the quarters that followed it, which was the September quarter the December quarter and the March quarter of fiscal 2023. The inventory was valued using values from the 6/30/22 audited numbers. What that means is take as an example, if a component was valued at $50 at June 30, 2022. That same $50 was used to value the inventory for the first quarter, and let’s say, the second quarter and let’s say, the third quarter. The cost of that component was coming down, no longer $50, $5 using this one example. You value the inventory at $50, you’re overstating your inventory when you put a valuation on your balance sheet.
If you’re overstating your inventory and your balance sheet, that means the other side of the equation is you’re understating your cost of goods sold. It has nothing to do with cash. This is all book entries Cash is unaffected. Cash flow unaffected cash from ops, none of that is affected. This is strictly overstated your inventory – it means you understated your cost of goods sold. If you understated, your cost of goods sold, that means you overstated your net income. And that’s what it is now. we’re going to fix this, and we’ve begun the process of fixing it. You can’t use the prior year’s physical inventory valuation going forward. normal conditions, it could use it, but in fluctuating pricing times and who knows what the times are going to be going forward times seem to be better now, the fluctuations seem to be gone.
But we’re going to have a system where we measure every fluctuation during the quarters and we utilize that new price if there is a new price to value the inventory in each quarter. We’ll do it at the beginning the first day after the quarter end, so on October 1, let’s say, for the upcoming end of the quarter, we’ll measure every fluctuation that exists up or down and we’ll make sure that the inventory valuation for the quarter utilizes the correct price. And that’s the best way I could explain it, Matt. It’s nothing to do with cash for those that took accounting in school, it’s – you’ve got to credit your inventory, lower your inventory, you’ve got to debit your cost of goods sold, and that reduces profits. That’s what it was.
Matthew Pfau: Got it. And then with the stock down significantly from the highs, are you considering repurchasing any stock or is management team considering any personal purchases themselves?
Kevin Buchel: That’s all on the table. And it’s possible we will do that. The first things first, let’s get the Qs, the restated Qs filed. We expect to do that this week. Let’s get the K filed. We expect to do that next week. And then we could look at buybacks and personal buying all this it’s all on the table. Let’s get this – our house in order with our filings and we go from there.
Matthew Pfau: Got it. Last one for me, just on the radio component of the equipment hardware. I think you called out that was 20% of equipment sales, not sure if that was for the quarter or the full year, but how would that compare to the year-ago period from a percentage of sales perspective?
Kevin Buchel: That was for the quarter, and it would have been greater than the prior year’s periods because in the prior year’s period, the radios were stronger in the locking wasn’t as strong as it just was. So I don’t have the exact stat in front of me, but I could give you that maybe at a later point, but I’m sure it was a much – it was a higher percentage. I wouldn’t even say much higher, it was a higher percentage.
Matthew Pfau: Okay, great. Thank you. Appreciate it.
Kevin Buchel: Thanks, Matt.
Operator: And our next comes from Jaeson Schmidt from Lake Street Capital. Your line is open.
Jaeson Schmidt: Hey, guys, thanks for taking my questions. Just looking at the inventory digestion situation. Just curious how long you think that will last? I mean, obviously, it will impact the September quarter, but do you think this bleeds into the December quarter?
Kevin Buchel: Well, I just want to make sure everybody understands – it’s one radio, one type of radio, and it’s with a couple of distributors, not everything, and it’s not with every distributor. We’re going to work hard to move it through these distributors. This – like I’ve said earlier, this has happened in the past. Where distributors load up on a product and they need help moving it through. That’s what we’re here for. We can help them. My guess, and it’s just a guess, it’ll take a couple of quarters to move it through. We’ll work really hard to do this, but that’s how it looks for right now.
Jaeson Schmidt: Okay. That’s helpful. And then just as a follow-up, looking at OpEx, it sounds like there could be some incremental costs associated with better accounting controls, et cetera, how should we think about OpEx trending for fiscal ‘24?
Kevin Buchel: Yes, there’s going to be a few things we’re going to have to spend some money on won’t hesitate spending the money. We have the money, but software upgrades, personnel. Those are the 2 main things that I can point to that would make our OpEx more than it was in fiscal 2023. If I’m putting a number on it, I would say let’s assume $1 million more in SG&A in ‘24 versus ‘23 for this type of thing.
Jaeson Schmidt: Okay. Sounds good. That’s it for me. Thanks guys.
Kevin Buchel: Thanks, Jaeson.
