Long-term Investments

9 Months Ended

Sep. 30, 2020

Long-term Investments

Long-term Investments

Note 10.    Long-term Investments

The following table summarizes the Company's long-term investments (in thousands):

	September 30,		December 31,
	2020		2019
Non-marketable equity investments	$	6,005	$	5,967
Equity method investments		16,646		16,654
Total	$	22,651	$	22,621

Non-marketable equity investments

Non-marketable equity investments are investments in privately held companies without readily determinable fair values are carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

The Company reviews its equity securities without readily determinable fair values on a regular basis to determine if the investment is impaired. For purposes of this assessment, the Company considers the investee’s cash position, earnings and revenue outlook, liquidity and management ownership, among other factors, in its review. If management’s assessment indicates that an impairment exists, the Company estimates the fair value of the equity investment and recognizes in current

earnings an impairment loss that is equal to the difference between the fair value of the equity investment and its carrying amount. Based on management's analysis of certain investment's performance, no impairment losses were recorded in the three and nine months ended September 30, 2020 and 2019.

In the nine months ended September 30, 2019, the Company sold one non-marketable equity investment with a carrying amount of $3.2 million for GTB and recognized no gain or loss on the sale. Refer to Note 14(b) for additional information.

Equity method investments

The following table summarizes the Company’s investment in companies accounted for using the equity method of accounting (in thousands):

		September 30, 2020
						Income (loss)		Impairment				Foreign currency
		January 1, 2020		Addition		on investment		losses		Disposal		translation adjustments		September 30, 2020
BDCG	(a)	$	9,800	$	—	$	—	$	—	$	—	$	—	$	9,800
Glory	(b)		6,854		—		(8)		—		—		—		6,846
Total		$	16,654	$	—	$	(8)	$	—	$	—	$	—	$	16,646

All the investments above are privately held companies; therefore, quoted market prices are not available. The Company has received no dividends from equity method investees in the three and nine months ended September 30, 2020 and 2019.

(a) BBD Digital Capital Group Ltd. (“BDCG”)

In 2018, the Company signed an investment agreement, with two unrelated parties, to establish BDCG, subsequently renamed Intelligenta, located in the United States for providing block chain services for financial or energy industries by utilizing artificial intelligence and big data technology in the United States. On April 24, 2018, the Company acquired 20.0% equity ownership in BDCG from one noncontrolling party for total consideration of $9.8 million which consisted of $2.0 million in cash and $7.8 million paid in the form of the Company’s capital stock (valued at $2.60 per share and equal to 3.0 million shares of the Company’s common stock), increasing the Company’s ownership to 60.0%. The remaining 40.0% of BDCG are held by Seasail Ventures Limited (“Seasail.”) The accounting treatment of the investment is based on the equity method due to variable substantive participating rights (in accordance with ASC 810) granted to Seasail. Intelligenta is currently in the process of developing its operations, although it has been impacted by international trade tentions. Intelligenta has yet to record revenue or earnings or losses, and therefore its statement of operations and balance sheet data are not material.

As of September 30, 2020, the excess of the Company's investment over its proportionate share of Intelligenta's net assets was $9.8 million. The difference represents goodwill and is not being amortized.

(b) Glory Connection Sdn. Bhd (“Glory”)

On July 18, 2019, the Company entered into an acquisition agreement to purchase a 34.0% interest in Glory, a Malaysian company, from its shareholder Beijing Financial Holding Limited, a Hong Kong registered company, for the consideration of 12.2 million restricted common shares of the Company, initially representing $24.4 million at $2.00 per share, the contract price, and subsequently revised to $20.0 million at $1.64 per share, the closing price on the date of acquisition. As part of this transaction, the Company was also granted an option to purchase a 40.0% interest in Bigfair Holdings Limited (“Bigfair”) from its shareholder Beijing Financial Holding Limited for an exercise price of $13.2 million in the form of common shares of the Company. Bigfair currently holds a 51.0% ownership stake in Glory. The option is exercisable from July 18, 2020 to July 19, 2021. If the option is exercised, the Company would have 20.4% indirect ownership in Glory in addition to the 34.0% direct ownership it already has.

Upon the initial investment, the Company performed a valuation analysis and allocated $23.0 million and $1.4 million of the consideration transferred to the equity method investment and the call option, respectively, which was subsequently revised to $20.0 million and $0, respectively. Glory is currently in the process of developing its products and its business, and is dependent upon the business of Tree Manufacturing.

As initially contemplated, Glory, through its subsidiary Tree Manufacturing, would hold a domestic EV manufacturing license in Malaysia, a marketing and distribution agreement for EVs in the ASEAN region, as well as the land use rights for 250 acres of vacant land zoned for industrial development in the Begeng Industrial Area adjacent to Kuantan Port. Kuantan is the capital city of the state of Pahang on the east coast of Peninsular Malaysia, which was to be the site of the manufacturing operations.

In December 2019, the Company acquired a 51.0% ownership interest in Tree Technologies. Tree Technologies had previously been granted the land use rights to the 250 acres of vacant land mentioned above, which was previously anticipated to be owned by Glory. As Glory would no longer receive the land use rights to the 250 acres of vacant land, the Company evaluated its investment in Glory for impairment, and recorded an impairment loss of $13.1 million in “Impairment of and equity in loss of equity method investees” in the consolidated statements of operations in the year ended December 31, 2019.

Tree Technologies has also entered into a product supply arrangement and a product distribution arrangement with a subsidiary of Glory. The Company performed an assessment of these arrangements, and determined that Glory is a VIE, but that the Company is not the primary beneficiary. As of September 30, 2020, the Company accounts for Glory as an equity method investment.

The Company has advanced $0.4 million to Glory in order to fund its operations, although it had no obligation to do so. The Company’s maximum exposure to Glory is $7.3 million, the sum of its investment and advances.

As of September 30, 2020, the excess of the Company’s investment over its proportionate share of Glory’s net assets was $7.1 million. The difference primarily represents an amortizing intangible asset.

The following table summarizes the income statement information of Glory for the three and nine months ended September 30, 2020 (in thousands):

	Three Months Ended		Nine Months Ended
	September 30, 2020		September 30, 2020
Revenue	$	—	$	5
Gross profit		—		(6)
Net loss from operations		(8)		(56)
Net income (loss)		21		(23)
Net income (loss) attributable to Glory		11		(14)