Investments

12 Months Ended

Dec. 31, 2023

7. Investments

The following table sets forth the Company’s investments:

	December 31, 2023				December 31, 2022
	Carrying Value		Cost		Carrying Value		Cost
Securrency, Inc.:
Series A Shares	$	—	$	—	$	8,488	$	8,112
Series B Shares		—		—		5,500		5,500
Convertible note		—		—		14,500		15,000
Subtotal—Securrency, Inc.		—		—		28,488		28,612
Fnality International Limited:
Convertible note		—		—		6,921		6,863
Series B-1 Preference Shares		9,684		8,091		—		—
Subtotal—Fnality International Limited		9,684		8,091		6,921		6,863
Other investments		—		250		312		250
Total	$	9,684	$	8,341	$	35,721	$	35,725

Securrency, Inc.

Exit from Investment – Year Ended December 31, 2023

On December 7, 2023, the Company received proceeds of $28,818 relating to the exit from its investment in Securrency, Inc. (“Securrency”), a developer of institutional-grade blockchain-based financial and regulatory technology, in connection with the sale of Securrency to an unaffiliated third party. This resulted in a net impairment charge of $7,630 and additional losses of $1,777, recorded in other losses, net, recognized during the year ended December 31, 2023.

Disclosures Pertaining to December 31, 2022

Preferred Stock

The Company owned approximately 22% (or 18% on a fully-diluted basis) of the capital stock of Securrency, issued as a result of strategic investments totaling $13,612. In consideration of such investments, the Company had received 5,178,488 shares of Series A convertible preferred stock (“Series A Shares”) in December 2019 and 2,004,665 shares of Series B convertible preferred stock (“Series B Shares”) in March 2021. The Series B Shares contained a liquidation preference that was pari passu with shares of Series B-1 convertible preferred stock (which were substantially the same as the Series B Shares except that they had limited voting rights) and senior to that of the holders of the Series A Shares, which were senior to the holders of common stock. Otherwise, the Series A Shares and Series B Shares had substantially the same terms, were convertible into common stock at the option of the Company and contained 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 Series A Shares and Series B Shares (together with the Series B-1 convertible preferred stock) were 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 Series A Shares (at any time on or after December 31, 2029) and 90% of the Series B Shares (at any time on or after March 31, 2031).

These investments were accounted for under the measurement alternative prescribed in ASC 321, as they did not have a readily determinable fair value and were not considered to be in-substance common stock. The investments were assessed for impairment and similar observable transactions on a quarterly basis. There was no impairment recognized during the years ended December 31, 2022 and 2021 based upon a qualitative assessment.

During the year ended December 31, 2021, the Company recognized a gain of $376 on its Series A Shares, which were re-measured to fair value upon the issuance of Securrency’s Series B Shares. Fair value was determined using the backsolve method, a valuation approach that determines the value of shares for companies with complex capital structures based upon the price paid for shares recently issued. Fair value was allocated across the capital structure using the Black-Scholes option pricing model.

The table below presents the inputs used in the backsolve valuation approach (classified as Level 3 in the fair value hierarchy):

	Inputs
	June 9, 2021	March 8, 2021
Expected volatility	50%	55%
Time to exit (in years)	4.75	5.00

Convertible Note

In April and November 2022, the Company participated in a convertible note financing, making an aggregate investment of $15,000 in Securrency. In consideration for its investment, the Company was issued a 7% Convertible Promissory Note maturing on April 21, 2023.

The note was convertible into either Securrency’s common stock or the class of securities convertible into, exchangeable for, or conferring the right to purchase Securrency’s common stock that was issued in the event of a future equity financing 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 note was redeemable upon the occurrence of a corporate transaction for an amount which was 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 common stock immediately prior to the occurrence of the corporate transaction. At maturity, redemption or conversion could occur upon the election by the holders of a majority-in-interest of the aggregate principal amount of outstanding notes. If no such election was made, Securrency could elect to pay or convert the notes in its sole discretion.

The note was accounted for at fair value. Fair value was determined by the Company using the probability-weighted expected return method (“PWERM”), a valuation approach that estimated the value of the note assuming various outcomes. During the year ended December 31, 2022, the Company recognized an unrealized loss of $500 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:

		December 31, 2022
Conversion of note upon a future equity financing		60%
Redemption of note upon a corporate transaction		25%
Default		15%
Time to potential outcome (in years)		0.33

Fnality International Limited

Series B-1 Preference Shares (December 31, 2023)

The Company owns approximately 5.4% (or 4.8% on a fully-diluted basis) of capital stock 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. The Company’s ownership interest is represented by 2,340,378 Series B-1 Preference Shares, resulting from the conversion of its investment of £6,000 ($8,091) in convertible notes upon Fnality’s qualified equity financing which occurred in October 2023. The Series B-1 Preference Shares carry a 1.0x liquidation preference, are convertible into ordinary shares at the option of the Company and contain various rights and protections.

This investment is accounted for under the measurement alternative prescribed in ASC 321, as it does not have a readily determinable fair value and is otherwise not subject to the equity method of accounting. The investment is assessed for impairment and similar observable transactions on a quarterly basis. During the year ended December 31, 2023, the Company recognized a gain of $1,534 on its investment in Fnality which was re-measured to fair value upon the issuance by Fnality of Series B-2 Preference Shares to new investors in the qualified equity financing. The Series B-2 Preference Shares carry a 1.5x liquidation preference, rank pari passu to the Series B-1 Preference Shares and automatically convert into Series B-1 Preference Shares if certain conditions are met no later than June 30, 2024.

Fair value of the Company’s investments in Fnality were determined using the backsolve method, a valuation approach that determines the value of shares for companies with complex capital structures based upon the price paid for shares recently issued. Fair value is allocated across the capital structure using the Black-Scholes option pricing model.

The table below presents the inputs used in the backsolve valuation approach (classified as Level 3 in the fair value hierarchy):

		December 31, 2023
Expected volatility		60%
Time to exit (in years)		5.00
Probability that Series B-2 Preference Shares convert into Series B-1 Preference Shares		75%

There was no impairment recognized during the year ended December 31, 2023 based upon a qualitative assessment.

Convertible Note (December 31, 2022)

In February 2022, the Company participated in a convertible note financing, making a £5,000 ($6,863) investment in 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 was convertible into equity shares in the event of a future financing round at a conversion price equal to the lower of (i) a discount of 20% to 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 could occur on or after the maturity date or, if earlier, in the event a future financing round had 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 was also convertible, at the option of the Company, following the earlier of the maturity date or such Long Stop Date.

The note was redeemable upon the occurrence of a change of control for an amount which was the greater of (i) the principal amount and all accrued interest and (ii) the amount that would have been received had the note been converted to equity shares immediately prior to the occurrence of the change of control. Redemption could 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 was accounted for at fair value. Fair value was determined by the Company using the PWERM and was also remeasured for changes in the British pound and U.S. dollar exchange rate. During the year ended December 31, 2022, the Company recognized a gain of $58 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:

		December 31, 2022
Conversion of note upon a future financing round		85%
Redemption of note upon a change of control		10%
Default		5%
Time to potential outcome (in years)		0.25

Other Investments

During the year ended December 31, 2023, the Company recognized an impairment of $312 on its other investments.