INVESTMENT IN MORION, INC.

9 Months Ended

Jan. 31, 2021

Investment Holdings [Abstract]

Investment Holdings [Text Block]

NOTE H – INVESTMENT IN MORION, INC.

The Company has an investment in Morion, Inc. (“Morion”), a privately-held Russian company, which manufactures high precision quartz resonators and crystal oscillators. The Company has also licensed certain technology to Morion.

The Company’s investment consists of 4.6% of Morion’s outstanding shares, accordingly, the Company accounts for its investment in Morion on the cost basis.  This investment of approximately $800,000 is included in other assets in the accompanying condensed consolidated balance sheets. During the three months ended January 31, 2021 and 2020, the Company acquired product from Morion in the aggregate amount of approximately $199,000 and $332,000, respectively, included in cost of revenues in the condensed consolidated statements of operations as part of the FEI-NY segment. During the nine months ended January 31, 2021 and 2020, the Company acquired product from Morion in the aggregate amount of approximately $467,000 and $712,000, respectively, and during the nine months ended January 31, 2020, the Company sold product and training services to Morion in the aggregate amount of approximately $49,000, included in revenues in the condensed consolidated statements of operations as part of the FEI-NY segment. The Company did not receive dividends from Morion during the three months ended January 31, 2021. During the three months ended January 31, 2020, the Company received a dividend from Morion in the amount of approximately 125,000, which is included in other income, net in the condensed consolidated statements of operations as part of the FEI-NY segment. During the nine months ended January 31, 2021 and 2020, the Company received dividends from Morion in the amount of approximately $105,000 and $250,000, respectively, which is included in other income, net in the condensed consolidated statements of operations as part of the FEI-NY segment.

Morion is a less than wholly-owned subsidiary of Gazprombank, a state-owned Russian bank.  The U.S. Ukraine-related sanctions regime has since 2014 included a list of sectoral sanctions identifications (“SSI”) pursuant to Executive Order 13662, which prohibits certain transactions, including certain extensions of credit, with an entity designated as an SSI or certain affiliates of an entity designated as an SSI.  On July 16, 2014, after the Company’s investment in Morion, Gazprombank was designated as an SSI.

As previously disclosed, in light of Morion’s relationship with Gazprombank, in 2020, the Company evaluated, with the assistance of external legal counsel, certain sales to Morion and the timing of payments by Morion to the Company in connection with those sales to determine whether payments by Morion may have inadvertently constituted extensions of credit in violation of Directive 1 under Executive Order 13662.  The Company determined that certain payments by Morion – the majority of which occurred more than five years ago – were not timely.  Following the evaluation, on May 7, 2020, the Company voluntarily disclosed its findings to the Office of Foreign Assets Control (“OFAC”).  The Company’s voluntary disclosure to OFAC related solely to delays in collection of accounts receivable that exceeded then-applicable payment windows set forth in sanctions regulations and did not relate to any other type of payment or transaction.  On February 17, 2021, the Company received a Cautionary Letter from OFAC indicating that OFAC has completed its review of the matter. According to OFAC, the Cautionary Letter was issued instead of pursuing a civil monetary penalty or taking other enforcement action.