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Investments | 6 Months Ended
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Jun. 30, 2023
Schedule of Investments [Abstract] |
Investments | 7. Investments The following table sets forth the Company’s investments:
|  | June 30, 2023 |  |  | December 31, 2022 |
|  | Carrying Value |  |  | Cost |  |  | Carrying Value |  |  | Cost |
Securrency, Inc.—Series A convertible preferred stock |  | $ | 3,588 |  |  | $ | 8,112 |  |  | $ | 8,488 |  |  | $ | 8,112 |
Securrency, Inc.—Series B convertible preferred stock |  |  | 5,500 |  |  |  | 5,500 |  |  |  | 5,500 |  |  |  | 5,500 |
Securrency, Inc.—secured convertible note |  |  | 8,887 |  |  |  | 10,000 |  |  |  | — |  |  |  | — |
Securrency, Inc.—convertible note |  |  | 13,836 |  |  |  | 15,000 |  |  |  | 14,500 |  |  |  | 15,000 |
Subtotal—Securrency, Inc. |  | $ | 31,811 |  |  | $ | 38,612 |  |  | $ | 28,488 |  |  | $ | 28,612 |
Fnality International Limited—convertible note |  |  | 7,879 |  |  |  | 6,863 |  |  |  | 6,921 |  |  |  | 6,863 |
Other investments |  |  | 312 |  |  |  | 250 |  |  |  | 312 |  |  |  | 250 |
|  | $ | 40,002 |  |  | $ | 45,725 |  |  | $ | 35,721 |  |  | $ | 35,725 |
Securrency, Inc. – Preferred Stock The Company owns approximately 22% (or 17% on a fully-diluted basis) of the capital stock of Securrency, Inc. (“Securrency”), a developer of institutional-grade blockchain-based financial and regulatory technology, issued as a result of strategic investments totaling $13,612. In consideration of such investments, the Company received 5,178,488 shares of Series A convertible preferred stock (“Securrency Series A Shares”) in December 2019 and 2,004,665 shares of Series B convertible preferred stock (“Securrency Series B Shares”) in March 2021. The Securrency Series B Shares contain a liquidation preference that is pari passu with shares of Series B-1 convertible preferred stock (which are substantially the same as the Securrency Series B Shares except that they have limited voting rights) and senior to that of the holders of the Securrency Series A Shares, which are senior to the holders of common stock. Otherwise, the Securrency Series A Shares and Securrency Series B Shares have substantially the same terms, are convertible into common stock at the option of the Company and contain various rights and protections including a non-cumulative 6.0% dividend, payable if and when declared by the board of directors of Securrency. In addition, the Securrency Series A Shares and Securrency Series B Shares (together with the Securrency Series B-1 convertible preferred stock) are separately redeemable, with respect to all of the shares outstanding of the applicable series of preferred stock (subject to certain regulatory restrictions of certain investors), for the original issue price thereof, plus all declared and unpaid dividends, upon approval by holders of at least 60% of the Securrency Series A Shares (at any time on or after December 31, 2029) and 90% of the Securrency Series B Shares (at any time on or after March 31, 2031). The se investments are accounted for under the measurement alternative prescribed in ASC 321, as they do not have a readily determinable fair value and are not considered to be in-substance common stock. The investments are assessed for impairment and similar observable transactions on a quarterly basis. There was no impairment recognized during the three months ended June 30, 2023 based upon a qualitative assessment. During the six months ended June 30, 2023, the Company recognized an impairment of $4,900 on its Securrency Series A Shares to reduce the carrying value of its investment to fair value. Fair value was determined using the probability-weighted expected return method (“PWERM”), a valuation approach that estimates fair value assuming various outcomes. The table below presents the probability ascribed to potential outcomes used in the PWERM, which resulted in the mark-down of the Securrency Series A Shares (classified as Level 3 in the fair value hierarchy). There was no mark-down applied to the Securrency Series B Shares, as they are a senior instrument.
|  | March 31, 2023 |
Conversion upon a future equity financing |  |  | 33.3 | %
Redemption upon a corporate transaction |  |  | 33.3 | %
Default |  |  | 33.4 | %
Ther e was no impairment recognized during the three and six months ended June 30, 2022 based upon a qualitative assessment. Securrency – Secured Convertible Note In June 2023, the Company provided funding in the amount of $10,000, and in consideration therefor, the Company was issued a 9% Secured Convertible Promissory Note maturing on December 31, 2023. The note is guaranteed by a U.S.-based wholly-owned subsidiary of Securrency and is secured by a valid and perfected first priority security interest in all existing and after acquired assets and personal property of the borrower, including all intellectual property and a pledge of non-regulated subsidiary equity. The note is convertible into Securrency’s preferred stock that is issued in the event of a qualified future equity financing of Securrency, subject to the Company’s right to require repayment, in whole or in part, to the extent such conversion would result in the Company obtaining a control position in Securrency. The note will convert at a conversion price equal to a discount of 25% to the price paid per share of preferred stock issued in such future equity financing round. The note is redeemable upon the occurrence of a corporate transaction for an amount which is the greater of (i) an amount equal to (x) 1.25 times (y) the sum of the principal amount and all accrued interest of the note (the “Liquidity Premium”) and (ii) such amount as would have been payable to the Company if the note had been converted, immediately prior to such corporate transaction, into that number of shares of the then most senior series of preferred stock of Securrency obtained by dividing (A) the Liquidity Premium by (B) the applicable conversion price, as set forth in the note. If not otherwise converted or redeemed, all unpaid interest accrued on the note and all (if any) other amounts payable on or in respect of the note or the indebtedness evidenced thereby owing to the Company will become immediately due and payable. The note is accounted for at fair value. Fair value is determined by the Company using the PWERM. During the three months ended June 30, 2023, the Company recognized an unrealized loss of $1,113 when re-measuring the note to fair value. The table below presents the probability ascribed to potential outcomes used in the PWERM (classified as Level 3 in the fair value hierarchy).
|  | June 30, 2023
Conversion of note upon a future equity financing |  | 50%
Redemption of note upon a corporate transaction |  | 30%
Default |  | 20%
Time to potential outcome (in years) |  | 0.31
Securrency – Convertible Notes In April and November 2022, the Company participated in a convertible note financing, making an aggregate investment of $15,000 in convertible notes of Securrency. In consideration for its investment, the Company was issued 7 % Convertible Promissory Notes maturing on October 20, 2023. The notes are convertible into either common stock or a class of securities convertible into, exchangeable for, or conferring the right to purchase Securrency’s common stock that is issued in the event of a qualified future equity financing of Securrency. The notes will convert at a conversion price equal to a discount of 25% (or, if applicable, a greater discount offered to other holders of convertible securities in such future equity financing round) to the lowest price paid per equity share issued in the future equity financing round. The notes are redeemable upon the occurrence of a corporate transaction for an amount which is the greater of (i) the principal amount and all accrued interest and (ii) the amount that would be received had the note been converted, in accordance with the terms of the notes, to common stock immediately prior to the occurrence of the corporate transaction. At maturity, redemption or conversion may occur upon the election by the holders of a majority-in-interest of the aggregate principal amount of outstanding notes. If no such election is made, the Company may elect to convert the notes into common stock, in accordance with the terms of the notes, or require repayment of the aggregate principal and interest thereon. The notes are accounted for at fair value. Fair value is determined by the Company using the PWERM. When re-measuring the notes to fair value, the Company recognized an unrealized gain of $3,785 during the three months ended June 30, 2023, and an unrealized loss of $664 during the six months ended June 30, 2023. The table below presents the probability ascribed to potential outcomes used in the PWERM (classified as Level 3 in the fair value hierarchy) and the time to exit:
|  | June 30, 2023 |  |  | December 31, 2022 |
Conversion of notes upon a future equity financing |  |  | 50% |  |  |  | 60% |
Redemption of notes upon a corporate transaction |  |  | 30% |  |  |  | 25% |
Default |  |  | 20% |  |  |  | 15% |
Time to potential outcome (in years) |  |  | 0.31 |  |  |  | 0.33 |
Fnality International Limited – Convertible Note In February 2022, the Company participated in a convertible note financing, making an investment of £5,000 ($6,863) in convertible notes of Fnality International Limited (“Fnality”), a company incorporated in England and Wales and focused on creating a peer-to-peer digital wholesale settlement ecosystem comprised of a consortium of financial institutions, offering real time cross-border payments from a single pool of liquidity. In consideration for its investment, the Company was issued a 5% Convertible Unsecured Loan Note maturing on December 31, 2023. The note is convertible into equity shares in the event of a future qualified equity financing of Fnality. The note will convert at a conversion price equal to the lower of (i) a discount of 20 % to the lowest price paid per equity share issued pursuant to such future financing round and (ii) an amount paid per share subject to a pre-money valuation cap. Mandatory conversion may occur on or after the maturity date or, if earlier, in the event a future financing round has not been completed within a specified time from an initial closing of such financing round (“Long Stop Date”), upon the approval of holders of at least 75% of the outstanding notes. The note is also convertible, at the option of the Company, following the earlier of the maturity date or such Long Stop Date. The note is redeemable upon the occurrence of a change of control for an amount which is the greater of (i) the principal amount and all accrued interest and (ii) the amount that would be received had the note been converted to equity shares immediately prior to the occurrence of the change of control. Redemption may also occur on or after maturity or prior to maturity upon approval by holders of at least 50% and 75%, respectively, of the outstanding notes, or in connection with bankruptcy or other liquidation events. The note is accounted for at fair value. Fair value is determined by the Company using the PWERM and is also remeasured for changes in the British pound and U.S. dollar exchange rate. During the three and six months ended June 30, 2023, the Company recognized a gain of $428 and $958, respectively, when re-measuring the notes to fair value. The table below presents the probability ascribed to potential outcomes used in the PWERM (classified as Level 3 in the fair value hierarchy) and the time to exit:
|  | June 30, 2023 |  |  | December 31, 2022 |
Conversion of note upon a future financing round |  |  | 95% |  |  |  | 85% |
Redemption of note upon a change of control |  |  | 0% |  |  |  | 10% |
Default |  |  | 5% |  |  |  | 5% |
Time to potential outcome (in years) |  |  | 0.08 |  |  |  | 0.25 |

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