XML 25 R15.htm IDEA: XBRL DOCUMENT

Notes Held for Investment

6 Months Ended

Jun. 30, 2024

Notes Held for Investment

Notes Held for Investment

9.Notes Held for Investment

Notes receivable consists of the following for the periods presented:


		June 30,				December 31,
		2024				2023
Senior secured promissory notes		$	1,000		$	1,000
Secured convertible promissory notes			5,100			4,372
Total notes held for investment		$	6,100		$	5,372

In June 2022, the Company loaned Mellitus an aggregate of $1,000 through the purchase of two senior secured promissory notes that bear interest at a rate of 5% per annum, which mature in three years unless accelerated due to an event of default as provided in the notes. Repayment of notes is secured by a first priority interest in all of Mellitus’ assets. As of June 30, 2024, this note was reclassified to short-term notes held for investments.

In December 2022, the Company entered into a senior convertible promissory note arrangement with Monarch, providing Monarch with up to $5,000 in available funding, which was fully drawn down as of June 30, 2024. The Monarch debt security accrues interest at 10% per annum, payable monthly, and the principal balance is due December 6, 2024. The note together with $100 of transaction expenses is due and payable on the occurrence of an event of default or change of control unless accelerated due to the conversion into preferred stock prior thereto at the option of the Company. The Company has the option to extend the maturity date for two consecutive one-year terms. The Monarch debt security can be converted into Monarch’s shares at the Company’s option upon (a) an equity financing at Monarch, (b) upon a change of control at Monarch, or (c) at the Company’s option at any time prior to the maturity date. If converted upon a change of control, the Company has the right to receive a cash payment equal to the balance of the Monarch debt security or the amount payable upon conversion into Monarch’s shares. The Monarch debt security is redeemable at any time at Monarch’s option or automatically upon an event of default (as defined in the note). Monarch notified the Company of its intention to repay the debt before its maturity. Hence, this note, including transaction fees receivable of $100, was reclassified to short-term notes held for investment as of June 30, 2024. As of December 31, 2023, the note was classified as long-term note held for investment.

The Company made an irrevocable election to account for the Mellitus and Monarch debt securities using the fair value option under ASC 825 – Financial Instruments (“ASC 825”) and will measure the fair value of such debt securities in accordance with ASC 820. The Company made the fair value option election to present the debt securities in their entirety at fair value, which it

believes to be preferable to recognizing the host instrument at fair value under ASC 320 and potentially separately recognizing certain embedded features as bifurcated derivatives under ASC 815. As of June 30, 2024 and December 31, 2023, the Company estimated the fair value of the Monarch debt security to be $5,100, which includes transaction fees receivable of $100 and $4,372, respectively.

The Company recognizes interest income on the Monarch debt securities, which is included in interest and dividend income in the Unaudited Condensed Statements of Income. For the three months ended June 30, 2024 and 2023, the Company recognized $133 and $118 of interest income from Monarch and Mellitus notes, respectively, which is included in prepaid expenses and other current assets. For the six months ended June 30, 2024 and 2023, the Company recognized $258 and $227, of interest income from Monarch and Mellitus notes, respectively. Accrued interest is included in prepaid and other current assets. The Company recognizes changes in fair value of the notes in the statements of income separately from the interest income. For the six months ended June 30, 2024, the Company recorded change in fair value of $128.