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Other Assets
12 Months Ended
Dec. 31, 2021
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
Other Assets Other Assets
Purchases of Patents and Patent Licenses

From time to time, we enter into agreements to purchase patents or patent licenses. In April 2020, we purchased 30 patents for $0.9 million and in October 2020, we purchased one patent for $0.2 million. The carrying value, net of amortization, of our purchased patents and patent licenses was $2.2 million and $2.9 million as of December 31, 2021 and 2020, respectively. As of December 31, 2021 and 2020, $0.6 million and $0.7 million of patent costs were included in other current assets and $1.6 million and $2.2 million of patent costs were included in other assets, respectively. We have $7.0 million of historical cost in purchased patents and patent licenses as of December 31, 2021. We are amortizing the patent costs over the estimated useful lives of the patents, which range from three years to eighteen years. Patent cost amortization of $0.4 million was included in cost of SaaS and license revenue in our consolidated statements of operations for each of the years ended December 31, 2021, 2020 and 2019. Patent cost amortization of $0.3 million, $0.2 million and $0.1 million was included in amortization and depreciation in our consolidated statements of operations for the year ended December 31, 2021, 2020 and 2019, respectively.
Loan to a Distribution Partner

In September 2016, we entered into dealer and loan agreements with a distribution partner. The dealer agreement enables the distribution partner to resell our SaaS services and hardware to their subscribers. Under the loan agreements, we agreed to loan the distribution partner up to $4.0 million, collateralized by all assets owned by the distribution partner. The advance period for the loan was amended in August 2017 to begin each year on September 1 and end each year on December 31. Interest on the outstanding principal accrued at a rate per annum equal to the greater of 6.0% or LIBOR, plus 4.0%, as determined on the first date of each annual advance period. The repayment of principal and accrued interest was due in three installments beginning in July and ending in August following the advance period. The maturity date of the loan was August 31, 2019; however, the borrower had the option to extend the term of the loan for two successive terms of one year each.

In May 2018, the loan agreement with our distribution partner was amended to convert the entire $4.0 million note receivable outstanding into a $4.0 million term loan. The term loan had a maturity date of July 31, 2022 and required annual principal repayments of $1.0 million on July 31 of each year, commencing on July 31, 2019. The term loan also required monthly interest payments, with interest accruing on the outstanding principal balance at a rate per annum equal to 6.0% through June 30, 2018 and a rate per annum equal to the LIBOR rate on the first of any interest period plus 7.0% beginning on July 1, 2018.

In April 2017, we entered into a subordinated credit agreement with an affiliated entity of the distribution partner and loaned the affiliated entity $3.0 million, with a maturity date of November 21, 2022. Interest on the outstanding principal balance accrued at a rate of 8.5% per annum and required monthly interest payments.

In June 2020, we amended the term loan with our distribution partner and also amended the subordinated credit agreement with the affiliated entity of the distribution partner. At the time of the amended term loan and subordinated credit agreement in June 2020, the outstanding balance of the term loan was $3.0 million and the outstanding balance of the subordinated credit agreement was $3.0 million. Under the amended terms, the distribution partner paid us $2.0 million in principal for the term loan on June 9, 2020 and the remaining $1.0 million was transferred to the amended subordinated credit agreement with the affiliated entity of the distribution partner. As of December 31, 2021 and 2020, none of the notes receivable balance related to the amended term loan was outstanding.

The amended subordinated credit agreement with the affiliated entity of the distribution partner matures on September 9, 2025 and interest on the outstanding principal balance accrues at a rate of 9.0% per annum and is payable in kind. As of December 31, 2021 and 2020, $4.6 million and $4.2 million of the notes receivable balance related to the subordinated credit agreement was included in other assets in our consolidated balance sheets, respectively.

For the years ended December 31, 2021, 2020 and 2019, we recognized $3.0 million, $2.4 million and $1.9 million of revenue from the distribution partners associated with these loans, respectively.

Loan to a Service Provider Partner

In July 2020, we entered into a loan agreement with a service provider partner, under which we agreed to loan the service provider partner up to $2.5 million, collateralized by the assets of the service provider partner. Interest on the outstanding principal accrues at a rate per annum equal to 9.0% and monthly interest and principal payments began in April 2021. The maturity date of the loan is July 24, 2025. As of December 31, 2021 and 2020, $1.2 million of principal was outstanding from the service provider partner under the loan agreement.

For the years ended December 31, 2021, 2020 and 2019, we recognized $0.2 million, $0.1 million and less than $0.1 million of revenue from the service provider partner associated with this loan, respectively.

Loan to and Investment in a Hardware Supplier

In October 2018, we entered into a subordinate convertible promissory note with one of our hardware suppliers, or the October 2018 Promissory Note, which was subsequently amended. In March 2019, we entered into a separate secured promissory note with the same hardware supplier, which, together with the October 2018 Promissory Note, we refer to as the Promissory Notes. Under the Promissory Notes, we agreed to provide the hardware supplier loans of up to $7.4 million, collateralized by all assets owned by the supplier.

In March 2019, we also purchased and acquired a secured promissory note, or the Acquired Promissory Note, that matured on March 30, 2019 and was originally executed between our hardware supplier and another third-party secured creditor. The Acquired Promissory Note had an outstanding balance of $26.6 million as of December 31, 2018, including interest. We paid $16.4 million to the third-party secured creditor in exchange for all of the rights associated with the Acquired Promissory Note, including a security interest and a right to enforce that interest against all assets owned by the hardware supplier. We also paid an additional $6.0 million the third-party secured creditor in September 2019 based on the outcome of certain contingencies
measured as of May 4, 2019. The fair value of the Acquired Promissory Note at the date of purchase was $22.4 million, which represented the initial cash consideration paid in March 2019 and the contingent consideration paid in September 2019.

On June 24, 2019, we received a payment of $7.4 million from the supplier for the partial satisfaction of amounts due under the Promissory Notes and the Acquired Promissory Note. On July 15, 2019, we received an additional payment of $25.0 million from the supplier and converted the outstanding notes receivable balance of $5.6 million into 9,520,832 shares of Series B preferred stock in the hardware supplier. We concluded that the $5.6 million equity investment, which is included in the Alarm.com segment, does not meet the criteria for consolidation and will be accounted for using the measurement alternative. Under the measurement alternative, we measure investments without readily determinable fair values at cost, less impairment, adjusted for observable price changes from orderly transactions for identical or similar investments. As of December 31, 2021 and 2020, our investment in the hardware supplier was $5.6 million.

As a result of the $25.0 million payment received and conversion of the $5.6 million outstanding notes receivable balance into an equity investment on July 15, 2019, we recorded interest of $1.7 million within interest income and a gain of $6.9 million within other income, net, in our consolidated statements of operations during the year ended December 31, 2019, related to the Promissory Notes and the Acquired Promissory Note.

Investment in a Technology Partner

In December 2016, we paid $0.3 million for a convertible promissory note with a technology partner. In April 2018, the $0.3 million convertible promissory note converted into 135,135 shares of Series A-1 Preferred Stock. At the time of conversion, we determined there was no value related to the Series A-1 Preferred Stock. Based on observable price changes from orderly transactions for similar investments, we increased the amount of our investment by $0.7 million and recorded a gain within other (expense) / income, net, in our consolidated statements of operations during the year ended December 31, 2020.

In February 2021, we paid $5.0 million in cash to purchase 1,000,000 shares of Series B-2 Preferred Stock from the same technology partner as part of a financing round that included other investors. The $5.0 million equity investment, which is included in the Alarm.com segment, does not meet the criteria for consolidation and is accounted for using the measurement alternative. Under the alternative, we measure investments without readily determinable fair values at cost, less impairment, adjusted for observable price changes from orderly transactions for identical or similar investments. Our investment in the technology partner was $5.7 million and $0.7 million as of December 31, 2021 and 2020, respectively.

Investment in a Platform Partner

On July 31, 2020, a platform partner, in which we held 3,548,820 shares of common stock of the platform partner, was acquired by an unrelated third party. As a result of the sale, we received proceeds of $25.7 million in exchange for our shares of the platform partner's common stock and we recorded a gain of $24.7 million within other income, net, in our consolidated statements of operations during the year ended December 31, 2020. As of December 31, 2021 and 2020, our investment in the platform partner was zero.

Allowance for Credit Losses - Notes Receivable

The changes in our allowance for credit losses for notes receivable are as follows (in thousands):
Year Ended December 31, 2021Year Ended December 31, 2020
Loan
Receivables
Hardware
Financing
Receivables
Loan
Receivables
Hardware
Financing
Receivables
Beginning of period balance$(73)$(16)$— $(16)
Impact of adopting Topic 326— — (434)(15)
(Provision for) / recovery of expected credit losses(6)15 360 (1)
Write-offs— — 16 
End of period balance$(79)$(1)$(73)$(16)
We manage our notes receivables using delinquency as a key credit quality indicator. The following tables reflect the current and delinquent notes receivable by class of financing receivables and by year of origination (in thousands):
December 31, 2021
Loan Receivables:20212020201920182017PriorTotal
Current$— $1,151 $$— $4,602 $— $5,760 
30-59 days past due— — — — — — — 
60-89 days past due— — — — — — — 
90-119 days past due— — — — — — — 
120+ days past due— — — — — — — 
Total$— $1,151 $$— $4,602 $— $5,760 
Hardware Financing Receivables:
Current$— $— $$— $— $— $
30-59 days past due— — — — — 
60-89 days past due— — 11 — — — 11 
90-119 days past due— — — — — — — 
120+ days past due— — — — — — — 
Total$— $— $21 $— $— $— $21 

December 31, 2020
Loan Receivables:20202019201820172016PriorTotal
Current$1,200 $17 $— $4,207 $— $— $5,424 
30-59 days past due— — — — — — — 
60-89 days past due— — — — — — — 
90-119 days past due— — — — — — — 
120+ days past due— — — — — — — 
Total$1,200 $17 $— $4,207 $— $— $5,424 
Hardware Financing Receivables:
Current$— $67 $49 $— $— $— $116 
30-59 days past due— — — — — 
60-89 days past due— 57 27 — — — 84 
90-119 days past due— — — — — — — 
120+ days past due— — — — — 
Total$— $124 $76 $11 $— $— $211 
The amortized cost of notes receivables placed on nonaccrual status is as follows (in thousands):
December 31, 2021December 31, 2020
Loan receivables$— $— 
Hardware financing receivables— 
Total$— $

During the years ended December 31, 2021, 2020 and 2019, there was no interest income recognized related to notes receivables that were in nonaccrual status.

As of December 31, 2021 and 2020, there were no notes receivables placed in nonaccrual status for which there was not a related allowance for credit losses. As of December 31, 2021 and 2020, there were no notes receivables that were 90 days or greater past due for which we continued to accrue interest income.

Prepaid Expenses
As of December 31, 2021 and 2020, $17.7 million and $8.4 million of prepaid expenses were included in other current assets, respectively, primarily related to long lead-time parts related to our inventory and software licenses.