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INVESTMENTS | 12 Months Ended
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Jun. 30, 2021
Disclosure Text Block Supplement [Abstract] |
Investments and Other Noncurrent Assets [Text Block] | NOTE 4. INVESTMENTS As of June 30, 2021, the Company held investments carried at fair value of $35.3 million and a cost basis of $23.1 million. The fair value of these investments is approximately 56.7 percent of the Company’s total assets at June 30, 2021. In addition, the Company held other investments of approximately $3.5 million, held-to-maturity debt investments of $1.0 million and investments of $532,000 accounted for under the equity method of accounting. The cost basis of investments are adjusted for amortization of premium or accretion of discount on debt securities held or the recharacterization of distributions from investments in partnerships, if applicable. Fair Value Hierarchy Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for measuring financial instruments at fair value are summarized in the three broad levels listed below: Level 1 – Inputs represent unadjusted quoted prices for identical assets exchanged in active markets. Level 2 – Inputs include directly or indirectly observable inputs (other than Level 1 inputs) such as quoted prices for similar assets exchanged in active or inactive markets; quoted prices for identical assets exchanged in inactive markets; other inputs that may be considered in fair value determinations of the assets, such as interest rates and yield curves; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 – Inputs include unobservable inputs used in the measurement of assets. The Company is required to use its own assumptions regarding unobservable inputs because there is little, if any, market activity in the assets and it may be unable to corroborate the related observable inputs. Unobservable inputs require management to make certain projections and assumptions about the information that would be used by market participants in valuing assets. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with the investing in those securities. Because of the inherent uncertainties of valuation, the values reflected may materially differ from the values received upon actual sale of those investments. The Company has established a Proprietary Valuation Committee (the “Committee”) to administer and oversee the Company’s valuation policies and procedures, which are approved by the Board of Directors, and to perform a periodic review of valuations provided by independent pricing services. For actively traded securities, the Company values investments using the closing price of the securities on the exchange or market on which the securities principally trade. If the security is not traded on the last business day of the quarter, it is generally valued at the mean between the last bid and ask quotation. The fair value of a security that has a restriction is based on the quoted price for an otherwise identical unrestricted instrument that trades in a public market, adjusted for the estimated effect of the restriction. Mutual funds, which include open- and closed-end funds and exchange-traded funds, are valued at net asset value or closing price, as applicable. For common share purchase warrants not traded on an exchange, the estimated fair value is determined using the Black-Scholes option-pricing model. This sophisticated model utilizes a number of assumptions in arriving at its results, including the estimated life, the risk-free interest rate, and historical volatility of the underlying common stock. The Company may change the assumption of the risk-free interest rate and utilize the yield curve for instruments with similar characteristics, such as credit ratings and jurisdiction, or change the expected volatility. The effects of changing any of the assumptions or factors employed by the Black-Scholes model may result in a significantly different valuation. Certain convertible debt securities not traded on an exchange are valued by an independent pricing service using a binomial lattice model based on factors such as yield, quality, maturity, coupon rate, type of issuance, individual trading characteristics of the underlying common shares and other market data. The model utilizes a number of assumptions in arriving at its results. The effects of changing any of the assumptions or factors utilized in the binomial lattice model, including expected volatility, credit adjusted discount rates, and discounts for lack of marketability, may result in a significantly different valuation for the securities. For other securities included in the fair value hierarchy with unobservable inputs, the Committee considers a number of factors in determining a security’s fair value, including the security’s trading volume, market values of similar class issuances, investment personnel’s judgment regarding the market experience of the issuer, financial status of the issuer, the issuer’s management, and back testing, as appropriate. The fair values may differ from what may have been used had a broader market for these securities existed. The Committee reviews inputs and assumptions and reports material items to the Board of Directors. Securities which do not have readily determinable fair values are also periodically reviewed by the Committee. The following summarizes the major categories of investments with fair values adjusted on a recurring basis as of June 30, 2021, and June 30, 2020, with fair values shown according to the fair value hierarchy.
|  | June 30, 2021 |
|  |  |  |  |  | Significant |  |  | Significant |  |  |  |  |
|  | Quoted Prices |  |  | Other Inputs |  |  | Unobservable Inputs |  |  |  |  |
(dollars in thousands) |  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |  |  | Total |
Investments carried at fair value on a recurring basis: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Investments in equity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equities - International |  | $ | 2,837 |  |  | $ | 135 |  |  | $ | 8,026 |  |  | $ | 10,998 |
Equities - Domestic |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Mutual funds - Fixed income |  |  | 6,322 |  |  |  | - |  |  |  | - |  |  |  | 6,322 |
Mutual funds - Global equity |  |  | 938 |  |  |  | - |  |  |  | - |  |  |  | 938 |
Mutual funds - Domestic equity |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total investments in equity securities: |  | $ | 10,097 |  |  | $ | 135 |  |  | $ | 8,026 |  |  | $ | 18,258 |
Investments in debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available-for-sale - Convertible debentures |  |  | - |  |  |  | - |  |  |  | 17,049 |  |  |  | 17,049 |
Total investments carried at fair value on a recurring basis: |  | $ | 10,097 |  |  | $ | 135 |  |  | $ | 25,075 |  |  | $ | 35,307 |
|  | June 30, 2020 |
|  |  |  |  |  | Significant |  |  | Significant |  |  |  |  |
|  | Quoted Prices |  |  | Other Inputs |  |  | Unobservable Inputs |  |  |  |  |
(dollars in thousands) |  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |  |  | Total |
Investments carried at fair value on a recurring basis: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Investments in equity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equities - International |  | $ | 4,447 |  |  | $ | 32 |  |  | $ | - |  |  | $ | 4,479 |
Equities - Domestic |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Mutual funds - Fixed income |  |  | 6,322 |  |  |  | - |  |  |  | - |  |  |  | 6,322 |
Mutual funds - Global equity |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Mutual funds - Domestic equity |  |  | 663 |  |  |  | - |  |  |  | - |  |  |  | 663 |
Total investments in equity securities: |  | $ | 11,432 |  |  | $ | 32 |  |  | $ | - |  |  | $ | 11,464 |
Investments in debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available-for-sale - Convertible debentures |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total investments carried at fair value on a recurring basis: |  | $ | 11,432 |  |  | $ | 32 |  |  | $ | - |  |  | $ | 11,464 |
A significant portion of the securities recorded at fair value in the above table is investments in HIVE Blockchain Technologies Ltd. (“HIVE”), which were warrants and convertible debentures valued at $25.1 million and classified as Level 3 at June 30, 2021, and common shares valued at $2.4 million and classified as Level 1 at June 30, 2020. The following table is a reconciliation of investments recorded at fair value for which unobservable inputs (Level 3) were used in determining fair value during the year ended June 30, 2021:
Changes in Level 3 Assets Measured at Fair Value on a Recurring Basis |
|  | June 30, 2021 |
(dollars in thousands) |  | Investments in equity securities |  |  | Investments in debt securities |
Beginning Balance |  | $ | - |  |  | $ | - |
Purchases |  |  | 5,853 |  |  |  | 9,147 |
Sales |  |  | - |  |  |  | - |
Principal repayments |  |  | - |  |  |  | (1,408 | )
Amortization of Premium (investment income) |  |  | - |  |  |  | (178 | )
Total gains or losses (realized/unrealized) |  |  |  |  |  |  |  |
Included in earnings (investment income) |  |  | 2,173 |  |  |  | 1,180 |
Included in Accumulated Other Comprehensive Income (other) |  |  | - |  |  |  | 8,308 |
Transfers into Level 3 |  |  | - |  |  |  | - |
Transfers out of Level 3 |  |  | - |  |  |  | - |
Ending Balance |  | $ | 8,026 |  |  | $ | 17,049 |
During the fiscal year ended June 30, 2021, the Company purchased convertible securities of HIVE, a company that is headquartered and traded in Canada with cryptocurrency mining facilities in Iceland, Sweden, and Canada, for $15.0 million. The convertible securities are comprised of 8.0% interest-bearing unsecured convertible debentures, payable in quarterly installments with a final maturity in January 2026, and 5 million common share purchase warrants in the capital of HIVE. The principal amount of each debenture is convertible into common shares in the capital of HIVE at a conversion rate of $2.34, and the remaining principal amount is $14.3 million as of June 30, 2021. Each whole warrant, expiring in January 2024, entitles the Company to acquire one common share at a price of $3.00 (Canadian). Cryptocurrency markets and related securities have been, and are expected to continue to be, volatile. There has been significant volatility in the market price of HIVE, which has materially impacted the value of the investments included on the balance sheet, unrealized gain recognized in investment income (loss), and unrealized gain recognized in other comprehensive income (loss). The investments did not represent ownership in HIVE as of June 30, 2021. The securities are subject to Canadian securities regulations. Frank Holmes serves on the board as non-executive chairman of HIVE and held shares and options at June 30, 2021. Effective August 31, 2018, Mr. Holmes was named Interim Executive Chairman of HIVE while a search for a new CEO is undertaken. The Company recorded the warrants at the estimated fair value of $5.9 million on purchase date. The debentures were recorded at the estimated fair value of $16.0 million on purchase date, and an unrealized gain of $6.9 million was recognized in other comprehensive income (loss), which will be realized in investment income (loss) ratably using the effective interest method until maturity, conversion, or other disposition. During the fiscal year ended June 30, 2021, $1.2 million was realized in investment income (loss). The fair value of the warrants and debentures was $8.0 million and $17.0 million, respectively, at June 30, 2021. The Company currently considers the related fair value measurements to contain Level 3 inputs. The following is quantitative information as of June 30, 2021, with respect to the securities measured and carried at fair value on a recurring basis with the use of significant unobservable inputs (Level 3):
|  | June 30, 2021 |
(dollars in thousands) |  | Fair Value |  | Principal Valuation Techniques |  | Unobservable Inputs |
Investments in equity securities: |  |  |  |  |  |  |  |  |  |  |
Common share purchase warrants |  | $ | 8,026 |  | Option pricing model |  |  |  |  |  |
|  |  |  |  |  |  | Volatility |  |  | 88.1 | %
Investments in debt securities: |  |  |  |  |  |  |  |  |  |  |
Available-for-sale - Convertible debentures |  | $ | 17,049 |  | Binomial lattice model |  |  |  |  |  |
|  |  |  |  |  |  | Volatility |  |  | 60.1 | %
|  |  |  |  |  |  | Credit Adjusted Discount Rate |  |  | 1.9 | %
During the fiscal year ended June 30, 2021, the Company sold its investment of 10 million common shares in HIVE. The cost of the 10 million shares was $2.4 million. In fiscal year 2019, the Company adopted ASU 2016-01 Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”) and its amendments. On July 1, 2018, the Company reclassified $3.2 million of unrealized gains related to its investment in HIVE from Accumulated Other Comprehensive Income (Loss) into Retained Earnings. Therefore, when the HIVE investment in common shares was sold, the amount included in realized gains on sales of fair valued securities was the proceeds of $20.6 million, less the cost of $2.4 million and the ASU 2016-01 reclassified unrealized gains of $3.2 million, or $15.0 million. The Company has an investment in Thunderbird Entertainment Group Inc. (“Thunderbird”), a company headquartered and traded in Canada, which was valued at approximately $2.7 million at June 30, 2021, and classified as Level 1 in the fair value hierarchy. This investment was valued at approximately $1.2 million at June 30, 2020 and classified as Level 1 in the fair value hierarchy. Realized gains on sales totaled $936,000 during the fiscal year ended June 30, 2021. The Company’s ownership of Thunderbird was approximately 1.6 percent as of June 30, 2021. Frank Holmes served on the board of this company as a director from June 2014 to March 2021. During the year ended June 30, 2021, the Company sold its investment in GoldSpot Discoveries Corp. (“GoldSpot”), a technology company headquartered and traded in Canada which leverages machine learning in natural resource exploration, and recorded realized gains on sales of fair valued securities of $600,000. The investment was valued at approximately $806,000 at June 30, 2020, of which $774,000 was classified as Level 1 and $32,000 was classified as Level 2 in the fair value hierarchy. The portion of the investment classified in Level 2 was restricted for resale due to escrow and regulatory provisions; its valuation was based on the quoted market price adjusted for the restriction on resale. The remaining shares in escrow were released in August 2020. Frank Holmes served on the board of this company as director from February 2019 to June 2020 and as independent chairman from February 2019 to May 2020 and held common stock and options at June 30, 2020. Equity Investments at Fair Value Investments in equity securities with readily determinable fair values are carried at fair value, and changes in unrealized gains or losses are reported in current period earnings. The following details the components of the Company’s equity investments carried at fair value as of June 30, 2021, and 2020.
|  | June 30, 2021 |
(dollars in thousands) |  | Cost |  |  | Unrealized Gains (Losses) |  |  | Fair Value |
Equity securities at fair value |  |  |  |  |  |  |  |  |  |  |  |
Equities - International |  | $ | 7,076 |  |  | $ | 3,922 |  |  | $ | 10,998 |
Equities - Domestic |  |  | 45 |  |  |  | (45 | ) |  |  | - |
Mutual funds - Fixed income |  |  | 6,313 |  |  |  | 9 |  |  |  | 6,322 |
Mutual funds - Global equity |  |  | 929 |  |  |  | 9 |  |  |  | 938 |
Mutual funds - Domestic equity |  |  | - |  |  |  | - |  |  |  | - |
Total equity securities at fair value |  | $ | 14,363 |  |  | $ | 3,895 |  |  | $ | 18,258 |
|  | June 30, 2020 |
(dollars in thousands) |  | Cost |  |  | Unrealized Gains (Losses) |  |  | Fair Value |
Equity securities at fair value |  |  |  |  |  |  |  |  |  |  |  |
Equities - International |  | $ | 5,641 |  |  | $ | (1,162 | ) |  | $ | 4,479 |
Equities - Domestic |  |  | 45 |  |  |  | (45 | ) |  |  | - |
Mutual funds - Fixed income |  |  | 6,313 |  |  |  | 9 |  |  |  | 6,322 |
Mutual funds - Global equity |  |  | - |  |  |  | - |  |  |  | - |
Mutual funds - Domestic equity |  |  | 929 |  |  |  | (266 | ) |  |  | 663 |
Total equity securities at fair value |  | $ | 12,928 |  |  | $ | (1,464 | ) |  | $ | 11,464 |
Included in the preceding table was $7.3 million and $7.0 million as of June 30, 2021, and June 30, 2020, respectively, at fair value invested in USGIF. Debt Investments Investments in debt securities are classified on the acquisition dates and at each balance sheet date. Securities classified as held-to-maturity are carried at amortized cost, reflecting the ability and intent to hold the securities to maturity. Debt securities classified as trading are acquired with the intent to sell in the near term and are carried at fair value with changes reported in earnings. All other debt securities are classified as available-for-sale and are carried at fair value. Investment gains and losses on available-for-sale debt securities are recorded when the securities are sold, as determined on a specific identification basis, and recognized in current period earnings. Changes in unrealized gains are reported net of tax in accumulated other comprehensive income (loss). For securities in an unrealized loss position, a loss in earnings is recognized for the excess of amortized cost over fair value if the Company intends to sell before the price recovers. Otherwise, the Company evaluates as of the balance sheet date whether the unrealized losses are attributable to credit losses or other factors. The severity of the decline in value, creditworthiness of the issuer and other relevant factors are considered. The portion of unrealized loss the Company believes is related to a credit loss is recognized earnings, and the portion of unrealized loss the Company believes is not related to a credit loss is recognized in other comprehensive income. The following details the components of the Company’s debt investments as of June 30, 2021. The Company did not have any debt investments at June 30, 2020.
|  | June 30, 2021 |
(dollars in thousands) |  | Amortized Cost |  |  | Unrealized Gains in Other Comprehensive Income |  |  | Unrealized Losses in Other Comprehensive Income |  |  | Fair Value |
Available-for-sale - Convertible debentures |  | $ | 8,741 |  |  | $ | 8,308 |  |  | $ | - |  |  | $ | 17,049 |
|  | June 30, 2021 |
(dollars in thousands) |  | Amortized Cost |  |  | Gross Unrecognized Holding Gains |  |  | Gross Unrecognized Holding Losses |  |  | Fair Value |
Held-to-maturity - Debentures |  | $ | 1,000 |  |  | $ | 3 |  |  | $ | - |  |  | $ | 1,003 |
Investments in debt securities classified as held-to-maturity are carried at amortized cost. The net carrying amount and estimated fair value of debt securities at June 30, 2021, are summarized below by contractual maturity dates. Actual maturities may differ from final contractual maturities due to principal repayment installments or prepayment rights held by issuers.
|  | June 30, 2021 |
|  | Available-for-sale debt securities |  |  | Held-to-maturity debt securities |
(dollars in thousands) |  | Convertible debentures (1) |  |  | Due after five years through ten years |
Net Carrying Amount |  | $ | 8,741 |  |  | $ | 1,000 |
Fair Value |  | $ | 17,049 |  |  | $ | 1,003 |
1. Principal payments are due quarterly with a final maturity in January 2026. Certain derivatives embedded in other financial instruments, such as the conversion option in a convertible bond, are reported at fair value, and changes in fair value are recorded through earnings within investment income (loss). The host contract continues to be accounted for in accordance with the appropriate accounting standard. The embedded derivative and the related host contract represent one legal contract and are combined on the Consolidated Balance Sheets and the tables reflected above. The Company held one financial instrument containing an embedded derivative at June 30, 2021. The following table summarizes the fair values of embedded derivatives on the Consolidated Balance Sheet, categorized by risk exposure, at June 30, 2021.
|  | June 30, 2021 |
|  | Other Assets |
(dollars in thousands) |  | Investments in available-for-sale debt securities |
Embedded Derivatives: |  |  |  |
Equity price risk exposure |  | $ | 2,542 |
The embedded derivatives presented in the table above were bifurcated from the related host contract on June 30, 2021; as such, there was no effect on the Consolidated Statement of Operations for the year ended June 30, 2021. The Company did not have any embedded derivatives at June 30, 2020. Other Investments The carrying value of equity securities without readily determinable fair values was approximately $3.5 million and $1.3 million as of June 30, 2021, and June 30, 2020, respectively. The Company has elected to value these investments using the measurement alternative, under which such securities are measured at cost, less impairment, if any. If the Company identifies observable price changes for identical or similar securities of the same issuer, the equity security is measured at fair value as of the date the observable transaction occurred, with such changes recorded in investment income (loss). The carrying value of equity securities without readily determinable fair values has been adjusted as follows:
|  | Year Ended June 30, |
(dollars in thousands) |  | 2021 |  |  | 2020 |
Carrying amount, beginning of period |  | $ | 1,283 |  |  | $ | 1,404 |
Adjustments: |  |  |  |  |  |  |  |
Purchases |  |  | 863 |  |  |  | 125 |
Reclassification to securities at fair value |  |  | (187 | ) |  |  | - |
Impairments |  |  | (6 | ) |  |  | (285 | )
Other downward adjustments |  |  | (158 | ) |  |  | (124 | )
Upward adjustments |  |  | 1,658 |  |  |  | 163 |
Carrying amount, end of period |  | $ | 3,453 |  |  | $ | 1,283 |
One security purchased during the fiscal year ended June 30, 2021, started trading on a stock exchange, and was reclassified to securities at fair value. A total of four securities were remeasured at various dates during the fiscal year ended June 30, 2021, with carrying amounts totaling $2.1 million and $470,000, classified as Level 2 and Level 3, according to the fair value hierarchy, respectively. There were impairment adjustments to one security totaling $6,000 during the fiscal year ended June 30, 2021. Cumulative impairment adjustments to all equity securities without readily determinable fair values total $543,000 since their respective acquisitions through June 30, 2021. The cumulative amount of other downward adjustments, which include return of capital distributions and observable price changes, is $935,000, which includes $158,000 for the year ended June 30, 2021, and $124,000 for the year ended June 30, 2020. The cumulative amount of upward adjustments, which primarily consist of observable price changes, is $2.3 million, which includes $1.7 million for the year ended June 30, 2021, and $163,000 for the year ended June 30, 2020. Investments Classified as Equity Method The Company has an equity method investment in Galileo New Economy Fund LP (previously known as Galileo Technology and Blockchain LP), a Canadian limited partnership managed by Galileo. The Company owns approximately 22 percent of the LP as of June 30, 2021, and the Company is considered to have the ability to exercise significant influence. Thus, the investment is accounted for under the equity method of accounting. Included in other income (loss) for the years ended June 30, 2021, and 2020, is $347,000 and ($142,000), respectively, of equity method income (loss) for this investment. The Company’s investment in the LP had a carrying value of approximately $532,000 and $158,000 at June 30, 2021, and June 30, 2020, respectively. Frank Holmes also directly held an investment in the LP as of June 30, 2021. This investment has a concentration in technology and blockchain companies, which may result in volatility in its valuation. Investment Income (Loss) The following summarizes investment income (loss) reflected in earnings from continuing operations for the periods presented.
(dollars in thousands) |  | Year Ended June 30, |
Investment Income (Loss) |  | 2021 |  |  | 2020 |
Unrealized gains (losses) on fair valued securities |  | $ | 8,479 |  |  | $ | (2,011 | )
Unrealized gains on equity securities without readily determinable fair values |  |  | 1,430 |  |  |  | - |
Realized gains on sales of fair valued securities |  |  | 16,572 |  |  |  | - |
Realized gains on principal payment proceeds |  |  | 1,180 |  |  |  | - |
Realized gain on sale of subsidiary |  |  | - |  |  |  | 151 |
Realized foreign currency gains (losses) |  |  | 219 |  |  |  | (232 | )
Impairments in equity investments that do not have readily determinable fair values |  |  | (6 | ) |  |  | (285 | )
Dividend and interest income |  |  | 464 |  |  |  | 166 |
Total Investment Income (Loss) |  | $ | 28,338 |  |  | $ | (2,211 | )
For the year ended June 30, 2021, realized gains on principal payment proceeds in the amount of $1.2 million was released from other comprehensive income (loss). Realized gain on sale of subsidiary shown in the table above for the year ended June 30, 2020, is from the sale of Galileo. See Note 3 for further information on this transaction. Realized foreign currency gains (losses) for the year ended June 30, 2020, includes $228,000 in foreign currency losses released from other comprehensive income (loss) upon the sale of Galileo. The year ended June 30, 2021, included approximately $9.9 million of net unrealized gains recognized on equity securities still held at June 30, 2021. Investment income (loss) can be volatile and varies depending on market fluctuations. The Company expects that gains and losses will continue to fluctuate in the future.

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