Investment in a Corporate Venture

12 Months Ended

Jun. 30, 2018

Equity Method Investments and Joint Ventures [Abstract]

Investment in a Corporate Venture

Investment in a Corporate Venture

In October 2016, the Company entered into agreements pursuant to which the Company contributed certain technology rights in connection with an investment in the Corporate Venture to expand the Company's presence in China. The Corporate Venture is 30% owned by the Company and 70% owned by another company in China. The transaction was closed in the third fiscal quarter of 2017 and the investment has been accounted for using the equity method. As such, the Corporate Venture is also a related party.

The Company recorded a deferred gain related to the contribution of certain technology rights of $7.0 million in the third fiscal quarter of 2017. The amortization of the deferred gain is being recognized as a credit to research and development expenses in the Company's consolidated statement of operations over a period of five years which represents the estimated period over which the remaining obligations will be fulfilled. As a result of the adoption of new accounting guidance as of the beginning of fiscal year 2019, the Company recorded an increase of $3.0 million to the investment in equity investee for the contribution of those technology rights, and corresponding increases in deferred gain and retained earnings of $2.1 million and $0.9 million, respectively. As of June 30, 2020 and 2019, the Company had unamortized deferred gain balance of $2.0 million and $2.0 million, respectively, in accrued liabilities and $1.0 million and $3.0 million, respectively, in other long-term liabilities in the Company’s consolidated balance sheets.

The Company monitors the investment for events or circumstances indicative of potential impairment and makes appropriate reductions in carrying values if it determines that an impairment charge is required. In June 2020, the third-party parent company that controls the Corporate Venture was placed on a U.S. government export control list, along with several related entities. The Company is working with the Corporate Venture management to ensure that any future related parties transactions with the Corporate Venture are in accordance with the new restrictions and does not believe that the equity investment carrying value is impacted as of June 30, 2020. The Company did not recognize any impairment in the years ended June 30, 2020, 2019 and 2018.

As of June 30, 2020 and June 30, 2019, the Company's equity investment in the Corporate Venture was $2.7 million and $1.7 million, respectively, and was recorded under investment in equity investee on the Company's consolidated balance sheet.

The Company's share of income (losses), net of taxes, of the Corporate Venture net of taxes were $2.4 million, $(2.7) million, and $(3.6) million for the fiscal years ended June 30, 2020, June 30, 2019, and June 30, 2018, respectively.

Additionally, the Company sold products worth $61.9 million, $52.2 million, $21.7 million to the Corporate Venture in the fiscal years 2020, 2019, 2018, respectively, and the Company's share of intra-entity profits on the products that remained unsold by the Corporate Venture in the amounts of $3.0 million and $1.7 million as of June 30, 2020 and June 30, 2019 have been eliminated and have reduced the carrying value of the Company's investment in the Corporate Venture. To the extent that the elimination of intra-entity profits reduces the investment balance below zero, such amounts are recorded within accrued liabilities. The Company had $7.8 million and $13.1 million due from the Corporate Venture in accounts receivable, net as of June 30, 2020 and 2019, respectively, in its consolidated balance sheets.