Investment in Convertible Notes Receivable

9 Months Ended

Sep. 30, 2024

Investments, Debt and Equity Securities [Abstract]

Investment in Convertible Notes Receivable

Investment in Convertible Notes Receivable

In May 2023, the Company entered into two subscription agreements to purchase non-guaranteed private placement convertible notes receivable (the “Notes Receivable”) for a subscription amount of $1 million each. The Notes Receivable mature in May 2026 and the yield to maturity is 4.5% per annum. The Company has the option to request that the issuer redeem part or the entire principal amount of the Notes Receivable on the first anniversary after the issue date and every three months thereafter before the maturity date. The redemption price will be one hundred percent (100%) of the Notes Receivable’s face value, plus accrued interest. The Company also has the ability to convert the debt into shares based on the number of shares computed by dividing the face value of each security by a calculated conversion price, which is subject to adjustment provisions, determined at the time of issuance. The securities may be converted from May 3, 2024, the first anniversary of the issue date of the first agreement, to April 15, 2026, one month prior to the maturity date to the second agreement. In March 2024, the Company notified the issuer of the Notes Receivable that it was exercising its redemption right with respect to the entire principal amount of the Notes Receivable after the first anniversary of their issue dates (May 3 and May 16, 2024, respectively) for an aggregate redemption price of $2.090 million (representing the principal amount plus 4.5% per annum yield to the redemption date). The issuer has taken the position that the Notes Receivable are not redeemable until August 3, 2024 and August 16, 2024, and as a result that redemption notice submitted in March were premature. We have attempted to redeem the $2 million aggregate principal amount of the convertible Notes Receivable in June 2024, but have not received a response to our most recent request.

The Company’s debt securities are classified as available-for-sale (“AFS”) pursuant to Accounting Standards Codification (“ASC”) 320 - Investments - Debt Securities. AFS securities are recorded at fair value. As of September 30, 2024 and December 31, 2023, management does not believe these AFS investments are recoverable and recorded them at a fair value of $0.