3. Note receivable, net

On  December 1, 2025, the Company entered into an agreement with Lion Energy, LLC (“Lion Energy”) pursuant to which the Company provided $2,069,000 of short-term financing to Lion Energy. Under the arrangement, repayment was due no later than  December 30, 2025. As of  December 31, 2025, the entire amount remained outstanding and was recorded as a note receivable in the condensed consolidated balance sheet.

On  February 6, 2026, the Company entered into a non-binding term sheet contemplating a potential acquisition of Lion Energy and acquired a subordinated, last-out participation interest in Lion Energy’s senior secured asset-based lending facility with GRC SPV Investments (“GRC SPV”), the fund entity managed by Great Rock Capital Partners Management, LLC, which financed Lion Energy’s working capital needs. In connection with this arrangement, the Company contributed $2,100,000 which includes the original note receivable balance and approximately $31,000 of accrued interest and related costs and advanced an additional $2,000,000 to acquire the participation interest. The resulting participation principal was $4,100,000. The participation interest is subordinated to the senior secured lender and is subject to the terms and conditions of the underlying credit facility. The note accrues interest at a rate equal to the adjusted term SOFR rate plus an applicable margin and is subject to increased rates upon the occurrence of an event of default. Since March 31, 2026, Lion Energy was in default under the underlying credit facility. On May 11, 2026, the Company terminated the Lion Energy term sheet.

During the quarter ended June 30, 2026, the Company’s management decided to cease pursuit of a business combination with Lion Energy. As a result, the probability-weighted recovery analysis no longer considers a scenario whereby the note receivable was to be fully settled as a portion of the purchase consideration. Effective June 17, 2026, GRC SPV assigned its senior loan position and participation-related rights and obligations to CG Ventures LLC (“CG Ventures”), an entity that the Company believes may be affiliated with an owner of Lion Energy. As of June 30, 2026, the Company had not received any repayment of amounts associated with its participation interest. The Company is evaluating, with the assistance of legal counsel, the effect of the assignment on its contractual and legal rights and its ability to pursue recovery of the amounts owed. The underlying credit facility remained in default under its terms based on the most recent borrowing base certificate available to the Company. The participation interest continues to be classified as a current asset based on the default status of the underlying credit facility.

The Company evaluates the Lion Energy exposure individually due to its borrower-specific credit characteristics.The Company's sole credit quality indicator for the Lion Energy exposure is the borrower's compliance status under the underlying senior secured credit facility. At June 30, 2026, the entire $4,160,000 amortized-cost basis was non-compliant, based on the most recent borrowing base certificate available to the Company, dated June 11, 2026. Following the assignment to CG Ventures, the Company’s access to certain current financial, operating, and collateral information concerning Lion Energy was significantly reduced. Accordingly, the estimate reflects the latest reliable information available to the Company as of June 30, 2026.

The Company includes accrued interest in the amortized-cost basis of the related financial asset and applies the same CECL methodology and allowance rate to principal and accrued interest. During the second quarter of 2026, the Company placed the participation interest on nonaccrual status and ceased recognizing interest income. Accordingly, no interest income related to the participation interest was recognized during the three months ended June 30, 2026. During the six months ended June 30, 2026, the Company recognized approximately $60,000 of interest income, all of which was recognized during the first quarter of 2026 and remained included in the amortized-cost basis at June 30, 2026. The amortized-cost basis of the participation interest on nonaccrual status was nil as of  March 31, 2026 and $4,160,000 as of  June 30, 2026. At June 30, 2026, the entire amortized-cost basis was past due. Contractual interest may continue to accrue under the applicable agreement but is not recognized in the Company’s financial statements while the participation interest remains on nonaccrual status.

At June 30, 2026, the gross amortized-cost basis was $4,160,000, consisting of $4,100,000 of principal and $60,000 of previously accrued interest. The allowance for credit losses was $2,496,000, consisting of $2,460,000 related to principal and $36,000 related to accrued interest. The net carrying amount was $1,664,000, consisting of $1,640,000 presented as note receivable—Lion Energy, net, and $24,000 presented as interest receivable—Lion Energy, net, in the condensed consolidated balance sheet. The Company recognized provisions for credit losses of $2,059,000 and $2,496,000 during the three and six months ended June 30, 2026, respectively.

The Company estimated expected credit losses using an individual, probability-weighted recovery analysis that considered a range of potential outcomes, including full recovery, partial recovery through a negotiated commercial resolution, and no recovery. Based on the latest reliable information available, management estimated a probability-weighted recovery of approximately 40% of the gross amortized-cost basis and recorded an allowance for credit losses equal to approximately 60% of the gross amortized-cost basis. The estimate required significant management judgment regarding the probability and timing of potential recovery outcomes and the amount expected to be recovered under each scenario. The allowance is an accounting estimate of expected collections and does not represent a determination of the amount legally owed to the Company or a waiver of the Company's rights. The estimate is subject to significant uncertainty and may change based on future operating performance, developments relating to the senior secured debt, collateral realization, available financial information, commercial-resolution activity and other factors affecting the Company's recovery prospects. The CECL measurement excludes potential litigation proceeds or damages.

The table below summarizes the allowance for credit loss balance for the three and six months ended June 30, 2026 (in thousands):