XML 20 R11.htm IDEA: XBRL DOCUMENT
v3.21.1

INVESTMENTS | 9 Months Ended
--- | ---
Mar. 31, 2021
Disclosure Text Block Supplement [Abstract] |
Investments and Other Noncurrent Assets [Text Block] | NOTE 3. INVESTMENTS As of March 31, 2021, the Company held investments in securities at fair value totaling approximately $42.4 million with a cost basis of approximately $24.8 million. The fair value of these investments is 69.5 percent of the Company’s total assets at March 31, 2021. In addition, the Company held other investments of approximately $2.9 million and investments of approximately $596,000 accounted for under the equity method of accounting. 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. 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, which approximates fair value, reflecting the ability and intent to hold the securities to maturity. 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. An allowance for credit losses is recorded, limited to the excess of amortized cost over fair value, along with a corresponding charge to earnings if the present value of estimated cash flows is less than the present value of contractual cash flows. The allowance may be subsequently increased or decreased based on the prevailing facts and circumstances. The portion of the unrealized loss that the Company believes is not related to a credit loss is recognized in other comprehensive income. Other investments consist of equity investments in entities over which the Company is unable to exercise significant influence and which do not have readily determinable fair values. For these securities, the Company generally elects to value using the measurement alternative, under which such securities are measured at cost, less impairment, plus or minus observable price changes for identical or similar securities of the same issuer with such changes recorded in investment income (loss). See further information about these investments in a separate section of this note. The cost basis of investments may also be adjusted for amortization of premium or accretion of discount on debt securities held or the recharacterization of distributions from investments in partnerships. The following details the components of the Company’s equity investments recorded at fair value as of March 31, 2021, and June 30, 2020.
|  | March 31, 2021 |
(dollars in thousands) |  | Cost |  |  | Unrealized Gains (Losses) |  |  | Fair Value |
Equity securities at fair value |  |  |  |  |  |  |  |  |  |  |  |
Equities - International |  | $ | 2,147 |  |  | $ | 15,634 |  |  | $ | 17,781 |
Equities - Domestic |  |  | 45 |  |  |  | (45 | ) |  |  | - |
Mutual funds - Fixed income |  |  | 6,313 |  |  |  | 9 |  |  |  | 6,322 |
Mutual funds - Global equity |  |  | 929 |  |  |  | (75 | ) |  |  | 854 |
Mutual funds - Domestic equity |  |  | - |  |  |  | - |  |  |  | - |
Total equity securities at fair value |  | $ | 9,434 |  |  | $ | 15,523 |  |  | $ | 24,957 |
|  | 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 above table was $7.2 million and $7.0 million as of March 31, 2021, and June 30, 2020, respectively, at fair value invested in USGIF. Debt Investments The following details the components of the Company’s debt investments as of March 31, 2021. The Company did not have any debt investments at June 30, 2020.
|  | March 31, 2021 |
(dollars in thousands) |  | Amortized Cost |  |  | Unrealized Gains |  |  | Unrealized Losses |  |  | Fair Value |
Debt securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available-for-sale - Corporate bonds |  | $ | 14,342 |  |  | $ | 2,128 |  |  | $ | - |  |  | $ | 16,470 |
Held-to-maturity - Corporate bonds |  |  | 1,000 |  |  |  | - |  |  |  | - |  |  |  | 1,000 |
Total debt securities |  | $ | 15,342 |  |  | $ | 2,128 |  |  | $ | - |  |  | $ | 17,470 |
The amortized cost and estimated fair value of debt securities at March 31, 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.
|  | March 31, 2021 |
(dollars in thousands) |  | Due in one year or less |  |  | Due after one year through five years |  |  | Due after five years through ten years |  |  | Due after ten years |  |  | Total |
Amortized cost |  | $ | - |  |  | $ | 14,342 |  |  | $ | 1,000 |  |  | $ | - |  |  | $ | 15,342 |
Fair Value |  | $ | - |  |  | $ | 16,470 |  |  | $ | 1,000 |  |  | $ | - |  |  | $ | 17,470 |
Fair Value Hierarchy ASC 820, Fair Value Measurement and Disclosures, defines fair value 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. ASC 820 establishes a hierarchy that prioritizes inputs to valuation techniques used to measure fair value and requires companies to disclose the fair value of their financial instruments according to a fair value hierarchy (i.e., Levels 1, 2, and 3 inputs, as defined below). The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. Financial instruments measured and reported at fair value are classified and disclosed in one of the following categories: 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. 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 of the warrant, the risk-free interest rate, and the 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. The effects of changing any of the assumptions or factors employed by the Black-Scholes model may result in a significantly different valuation for the warrants. The fair value of common share purchase warrants that have restrictions are adjusted for the estimated effect of the restriction. For certain debt securities not traded on an exchange, the estimated fair value generally reflects discounted expected future cash flows, which incorporate yield curves for instruments with similar characteristics, such as credit ratings and estimated durations. The portfolio management team, which includes representatives from the investment and accounting departments, also takes into consideration numerous other factors that could affect valuation such as overall market conditions, liquidity of the security and bond structure. For other securities included in the fair value hierarchy with unobservable inputs, the portfolio management team 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 portfolio management team 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 portfolio management team. The following summarizes the major categories of equity investments at fair value and debt investments as of March 31, 2021, and June 30, 2020, with fair values shown according to the fair value hierarchy. The carrying values of held-to-maturity debt investments are considered to be reasonable estimates of fair values.
|  | March 31, 2021 |
|  |  |  |  |  | Significant |  |  | Significant |  |  |  |  |
|  | Quoted Prices |  |  | Other Inputs |  |  | Unobservable Inputs |  |  |  |  |
(dollars in thousands) |  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |  |  | Total |
Investments in equity securities at fair value: |  |  |  |  |  |  |  |  |  |  |  |  |
Equities - International |  | $ | 5,133 |  |  | $ | 12,648 |  |  | $ | - |  |  | $ | 17,781 |
Equities - Domestic |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Mutual funds - Fixed income |  |  | 6,322 |  |  |  | - |  |  |  | - |  |  |  | 6,322 |
Mutual funds - Global equity |  |  | 854 |  |  |  | - |  |  |  | - |  |  |  | 854 |
Mutual funds - Domestic equity |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Investments in debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available-for-sale - Corporate bonds |  |  | - |  |  |  | 16,470 |  |  |  | - |  |  |  | 16,470 |
Held-to-maturity - Corporate bonds |  |  | - |  |  |  | 1,000 |  |  |  | - |  |  |  | 1,000 |
Total securities at fair value |  | $ | 12,309 |  |  | $ | 30,118 |  |  | $ | - |  |  | $ | 42,427 |
|  | June 30, 2020 |
|  |  |  |  |  | Significant |  |  | Significant |  |  |  |  |
|  | Quoted Prices |  |  | Other Inputs |  |  | Unobservable Inputs |  |  |  |  |
(dollars in thousands) |  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |  |  | Total |
Investments in equity securities at fair value: |  |  |  |  |  |  |  |  |  |  |  |  |
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 |
Investments in debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available-for-sale - Corporate bonds |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Held-to-maturity - Corporate bonds |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total securities at fair value |  | $ | 11,432 |  |  | $ | 32 |  |  | $ | - |  |  | $ | 11,464 |
As of March 31, 2021, approximately 29 percent and 71 percent of the Company’s financial assets were classified in the fair value hierarchy as Level 1 and Level 2, respectively. As of June 30, 2020, approximately 100 percent of the Company’s financial assets were classified in the fair value hierarchy as Level 1. During the three months ended March 31, 2021, the Company purchased convertible securities of HIVE Blockchain Technologies Ltd. (“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 March 31, 2021. Each whole warrant, expiring in January 2024, entitles the Company to acquire one common share at a price of $3.00 (Canadian). The securities are subject to Canadian securities regulations. The debentures and warrants were valued at approximately $16.5 million and $12.6 million, respectively, at March 31, 2021, and were classified as Level 2 in the fair value hierarchy. 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 March 31, 2021. Frank Holmes serves on the board as non-executive chairman of HIVE and held shares and options at March 31, 2021. Effective August 31, 2018, Mr. Holmes was named Interim Executive Chairman of HIVE while a search for a new CEO is undertaken. During the nine months ended March 31, 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 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, at a cost of $1.5 million. The investment was valued at approximately $4.4 million and $1.2 million at March 31, 2021, and June 30, 2020, respectively, and was classified as Level 1 in the fair value hierarchy. The Company’s ownership of Thunderbird was approximately 2.4 percent as of March 31, 2021. Frank Holmes served on the board of this company as a director from June 2014 to March 2021. The Company has an investment in GoldSpot Discoveries Corp. (“GoldSpot”), a technology company headquartered and traded in Canada which leverages machine learning in natural resource exploration, at a cost of $514,000. During the three and nine months ended March 31, 2021, the Company recorded realized gains on sales of fair valued securities of $538,000 and $570,000 respectively, from sales of GoldSpot. The investment was valued at approximately $542,000 at March 31, 2021, and was classified as Level 1 in the fair value hierarchy. 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. The Company’s ownership of GoldSpot was approximately 1.8 percent and 7.3 percent as of March 31, 2021, and June 30, 2020, respectively. 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 March 31, 2021. Other Investments The carrying value of equity securities without readily determinable fair values was approximately $2.9 million and $1.3 million as of March 31, 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, plus or minus observable price changes for identical or similar securities of the same issuer with such changes recorded in investment income (loss). The carrying value of equity securities without readily determinable fair values has been adjusted as follows:
|  | Nine Months Ended |  |  | Three Months Ended |
|  | March 31, |  |  | March 31, |
(dollars in thousands) |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Carrying amount, beginning of period |  | $ | 1,283 |  |  | $ | 1,404 |  |  | $ | 1,385 |  |  | $ | 1,488 |
Adjustments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Purchases |  |  | 665 |  |  |  | 75 |  |  |  | 440 |  |  |  | 75 |
Impairments |  |  | (6 | ) |  |  | - |  |  |  | (6 | ) |  |  | - |
Other downward adjustments |  |  | (158 | ) |  |  | (124 | ) |  |  | (35 | ) |  |  | (108 | )
Upward adjustments |  |  | 1,156 |  |  |  | 163 |  |  |  | 1,156 |  |  |  | 63 |
Carrying amount, end of period |  | $ | 2,940 |  |  | $ | 1,518 |  |  | $ | 2,940 |  |  | $ | 1,518 |
There were impairment adjustments to one security totaling $6,000 during the three and nine months ended March 31, 2021. Cumulative impairment adjustments to all equity securities without readily determinable fair values total $542,000 since their respective acquisitions through March 31, 2021. The cumulative amount of other downward adjustments, which include return of capital distributions and observable price changes, is $935,000, which includes $35,000 and $158,000 for the three and nine months ended March 31, 2021, respectively. The cumulative amount of upward adjustments, which primarily consist of observable price changes, is $1.9 million, which includes $1.2 million for the three and nine months ended March 31, 2021. Investments Classified as Equity Method Investments classified as equity method consist of investments in companies in which the Company is able to exercise significant influence but not control. Under the equity method of accounting, the investment is initially recorded at cost, then the Company’s proportional share of investee’s underlying net income or loss is recorded as a component of “other income (loss)” with a corresponding increase or decrease to the carrying value of the investment. Distributions received from the investee reduce the Company’s carrying value of the investment. These investments are evaluated for impairment if events or circumstances arise that indicate that the carrying amount of such assets may not be recoverable. During fiscal years 2020 and 2021, the Company had 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 22.2 percent of the LP as of March 31, 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 three and nine months ended March 31, 2021, is ($64,000) and $420,000 of equity method income (loss) for this investment. Included in other income (loss) for the three and nine months ended March 31, 2020, is ($91,000) and ($146,000) of equity method loss for this investment. The Company’s investment in the LP was valued at approximately $596,000 and $158,000 at March 31, 2021, and June 30, 2020, respectively. Frank Holmes also directly held an investment in the LP as of March 31, 2021. This investment has a concentration in technology and blockchain companies, which may result in volatility in its valuation. Investment Income (Loss) Investment income (loss) from the Company’s investments includes: • realized gains and losses on sales of securities; • unrealized gains and losses on securities at fair value; • realized foreign currency gains and losses; • other-than-temporary impairments on available-for-sale debt securities; • impairments and observable price changes on equity investments without readily determinable fair values; and • dividend and interest income. The following summarizes investment income (loss) reflected in earnings from continuing operations:
|  | Nine Months Ended |  |  | Three Months Ended |
(dollars in thousands) |  | March 31, |  |  | March 31, |
Investment Income (Loss) |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Unrealized gains (losses) on fair valued equity securities |  | $ | 20,106 |  |  | $ | (3,995 | ) |  | $ | 13,533 |  |  | $ | (342 | )
Unrealized gains (losses) on equity securities without readily determinable fair values |  |  | 1,025 |  |  |  | - |  |  |  | 1,138 |  |  |  | (100 | )
Realized gains on sales of fair valued securities |  |  | 15,606 |  |  |  | - |  |  |  | 563 |  |  |  | - |
Realized gain on sale of subsidiary |  |  | - |  |  |  | 151 |  |  |  | - |  |  |  | 151 |
Realized foreign currency gains (losses) |  |  | 164 |  |  |  | (234 | ) |  |  | (12 | ) |  |  | (234 | )
Impairments in equity securities without readily determinable fair values |  |  | (6 | ) |  |  | - |  |  |  | (6 | ) |  |  | - |
Dividend and interest income |  |  | 310 |  |  |  | 156 |  |  |  | 289 |  |  |  | 84 |
Total Investment Income (Loss) |  | $ | 37,205 |  |  | $ | (3,922 | ) |  | $ | 15,505 |  |  | $ | (441 | )
The three and nine months ended March 31, 2021, included approximately $14.7 million and $21.1 million of net unrealized gains recognized on equity securities still held at March 31, 2021. Investment income (loss) can be volatile and varies depending on market fluctuations, the Company’s ability to participate in investment opportunities, and timing of transactions. The Company expects that gains and losses will continue to fluctuate in the future.

X
- References No definition available. + Details
Name: | us-gaap_DisclosureTextBlockSupplementAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for investments and other noncurrent assets. + References No definition available. + Details
Name: | us-gaap_InvestmentsAndOtherNoncurrentAssetsTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration