6.Short-Term and Long-Term Investments

We account for our investments in accordance with ASC 320, “Investments – Debt and Equity Securities”. Investments with a term to maturity between three months to one year are considered short-term investments and are classified as available-for-sale investments. Investments with a term to maturity beyond one year may be classified as available for sale if we reasonably expect the investment to be realized in cash or sold or consumed during the normal operating cycle of the business. Investments are classified as held-to-maturity if the term to maturity is greater than one year and we have the intent and ability to hold such investments to maturity. All investments are initially recognized at fair value. Subsequent measurement for available-for-sale investments is recorded at fair value. Unrealized gains and losses on available-for-sale investments are recorded in other comprehensive income. Held-to-maturity investments are subsequently measured at amortized cost. At each balance sheet date, we evaluate all investments for possible other-than-temporary impairment, which involves significant judgment. In making this judgment, we review factors such as the length of time and extent to which fair value has been below the cost basis, the anticipated recovery period, the financial condition of the issuer, the credit rating of the instrument and our ability and intent to hold the investment for a period of time which may be sufficient for recovery of the cost basis. Any losses determined to be other-than-temporary are charged as an impairment loss and recorded in earnings. If market, industry, and/or investee conditions deteriorate, future impairments may be incurred.

As of December 31, 2016, we had restricted cash held in short-term bank guarantees. These guarantees provide financial assurance that we will fulfill certain customer obligations in China. The cash is restricted as to withdrawal or use while the related bank guarantee is outstanding. Interest is earned on the restricted cash and recorded as interest income. At December 31, 2016 and June 30, 2016, restricted cash in short-term investments was $322,000 and $77,000, respectively. Furthermore, at June 30, 2016, we had restricted cash held in long-term bank guarantees of $45,000.

At December 31, 2016, we held a long-term investment in preferred stock that is not registered under the Securities Act of 1933, as amended and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The preferred stock investment is currently recorded at $725,000 after consideration of impairment charges recorded in fiscal years 2008 and 2009. We estimated that the fair market value of this investment at December 31, 2016 exceeded $725,000 based on an internal valuation model, which included the use of a discounted cash flow model. The fair market analysis considered the following key inputs:

	(i)	the underlying structure of the security;
	(ii)	the present value of the future principal, discounted at rates considered to reflect current market conditions; and
	(iii)	the time horizon that the market value of the security could return to its cost and be sold.

Under ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”) such valuation assumptions are defined as Level 3 inputs.

The following table presents our Short-Term and Long-Term Investments by category at December 31, 2016 and June 30, 2016 (in thousands):



	December 31, 2016
	Cost		Fair Value or Carrying Value
Short-Term Investments
Bank Guarantee	$	322	$	322
Mutual Funds		10		10
Time/Fixed Deposits		219		219
Total Short-Term Investments	$	551	$	551

Long-Term Investments
Preferred Stock	$	3,700	$	725
Total Long-Term Investments	$	3,700	$	725

Total Investments	$	4,251	$	1,276


	June 30, 2016
	Cost		Fair Value or Carrying Value
Short-Term Investments
Bank Guarantee	$	77	$	77
Mutual Funds		29		29
Time/Fixed Deposits		1,368		1,368
Total Short-Term Investments	$	1,474	$	1,474

Long-Term Investments
Time Deposits	$	45	$	45
Preferred Stock		3,700		725
Total Long-Term Investments	$	3,745	$	770

Total Investments	$	5,219	$	2,244