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FREQUENCY ELECTRONICS, INC.
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...
1) Frequency Electronics, Inc. is a U.S. person that has an equity investment in an entity (Morion) that of which 50% of the equity is owned by Gazprombank, which is a non-blocked entity subject to SSI Directive 1. Frequency Electronics’ disclosures to the SEC are notable for two reasons. First, compare Haverly Systems, Inc. The settlement in Haverly and the cautionary letter disclosed here both pertain to violations of SSI Directive 1 resulting from the acceptance of late payments from entities subject to Directive 1. In Haverly, the apparent violations did not constitute a non-egregious case, and Haverly did not voluntarily self-disclose the apparent violations to OFAC. (Note that a "Cautionary Letter" is only issued when an entity is deemed to have engaged in apparent violations of the law (U.S. v. Nejad (SDNY) - Court Testimony of Senior OFAC Enforcement Official)).
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