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Equity Investment in Unconsolidated Subsidiary | 9 Months Ended
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Sep. 30, 2021
Equity Method Investments And Joint Ventures [Abstract] |
Equity Investment in Unconsolidated Subsidiary |
C. | Equity Investment in Unconsolidated Subsidiary
The Company invested $6.1 million in a partnership LGL Systems Acquisition Holdings, LLC that served as the Sponsor of a NYSE listed special purpose acquisition company (“SPAC”). On September 14, 2021, as a result of this investment, the Company received 1,572,529 IRNT common shares and 2,065,000 IRNT private warrants exchangeable into IRNT common stock, representing an aggregate fair value of $65.3 million. While LGL continues to hold a partnership interest in LGL Systems Acquisition Holding Company, LLC, it is expected to be immaterial. See Note D - Marketable Securities for the basis of determining the fair value of the securities received. For the nine months ended September 30, 2021 and 2020, the Company recognized a gain (loss) on equity investment in unconsolidated subsidiary of $59,453,000 and ($200,000), respectively, for its share of the Sponsor’s gains and losses through the September 14, 2021 distribution of IRNT common shares and private warrants. The Company’s cumulative Sponsor gain recognized as of September 30, 2021 amounted to $59,175,000. Subsequent to the September 14, 2021 Sponsor distribution, the Company’s IRNT common stock and warrants have been classified as marketable securities, under ASC 321, Investments – Equity Securities (“ASC 321”), with the change in fair value from the date of distribution reported as an unrealized gain or loss. The IRNT common stock is marked to market at September 30, 2021 based on its publicly quoted market price adjusted for liquidity, when applicable. A Monte Carlo simulation model was used to estimate the market price of the IRNT private warrants. On April 12, 2021, the SEC’s Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (the “Staff Statement”) was released. The SPAC evaluated the applicability and impact of the Staff Statement on its historical financial statements that have been filed with the SEC and determined that restatement was required. In the first quarter of 2021, the SPAC changed its accounting treatment for both its public and private warrants outstanding using liability classification instead of equity classification resulting in a mark to market warrant liability adjustment for each reporting period since issuance in 2019. As previously discussed, prior to the IronNet Business Combination, t he Company report ed its investment in the Sponsor under the equity method of accounting using HLBV. The SPAC’s mark to market accounting adjustments for the warrant liability did not change the Company’s HLBV due to the warrants requiring no cash settlement as of December 31, 2020 under a hypothetical liquidation; therefore, the SPAC’s restatement did not impact the Company’s carrying amount of its equity investment in the Sponsor.

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- Definition The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -URI http://asc.fasb.org/topic&trid=2196965 + Details
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