| FAIR VALUE MEASUREMENTS |
|
11. |
FAIR VALUE MEASUREMENTS |
The
Company’s assets and liabilities recorded at fair value are categorized based upon a fair value hierarchy that ranks the quality
and reliability of the information used to determine fair value.
The
Company has certain non-financial assets that are measured at fair value on a non-recurring basis when there is an indicator of impairment,
and they are recorded at fair value only when impairment is recognized. These assets include property, plant and equipment, goodwill
and intangible assets, net. The Company did not record impairment to any non-financial assets in the three and six months ended June
30, 2022 and 2021. The Company does not have any non-financial liabilities measured and recorded at fair value on a non-recurring basis.
Financial
Disclosures about Fair Value of Financial Instruments
The
table below sets forth information related to the Company’s condensed consolidated financial instruments (in thousands):
| Schedule of assumptions |
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Level in |
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June 30, 2022 |
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December 31, 2021 |
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Fair Value |
|
Carrying |
|
|
Fair |
|
|
Carrying |
|
|
Fair |
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|
Hierarchy |
|
Amount |
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|
Value |
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|
Amount |
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|
Value |
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| Assets: |
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|
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| Cash and cash equivalents |
|
1 |
|
$ |
36,305 |
|
|
$ |
36,305 |
|
|
$ |
62,937 |
|
|
$ |
62,937 |
|
| Restricted cash |
|
1 |
|
|
51 |
|
|
|
51 |
|
|
|
185 |
|
|
|
185 |
|
| Cash and investment in severance benefit accounts |
|
1 |
|
|
3,514 |
|
|
|
3,514 |
|
|
|
3,687 |
|
|
|
3,687 |
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| Liabilities: |
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| Subordinated term loan(a) |
|
2 |
|
$ |
39,706 |
|
|
$ |
26,436 |
|
|
$ |
37,991 |
|
|
$ |
28,376 |
|
| Subordinated debt(a) |
|
2 |
|
|
10,844 |
|
|
|
7,470 |
|
|
|
10,577 |
|
|
|
7,674 |
|
| Senior term loan(a) |
|
2 |
|
|
41,036 |
|
|
|
39,829 |
|
|
|
41,063 |
|
|
|
43,276 |
|
| Convertible debt |
|
2 |
|
|
42,605 |
|
|
|
45,952 |
|
|
|
41,343 |
|
|
|
44,494 |
|
| Public Warrants |
|
1 |
|
|
1,380 |
|
|
|
1,380 |
|
|
|
8,510 |
|
|
|
8,510 |
|
| Warrants(b) |
|
3 |
|
|
499 |
|
|
|
499 |
|
|
|
1,317 |
|
|
|
1,317 |
|
| |
(a) |
As of June 30, 2022 and
December 31, 2021, the fair value of the subordinated term loan, subordinated debt and senior term loan considered the senior status
of the senior term loan under the Fortress Credit Agreement, followed by the junior status of the subordinated term loan and subordinated
debt. The implied yields of the subordinated term loan, subordinated debt and senior term loan were 21.53%, 21.83% and 17.8%, respectively,
as of June 30, 2022 and 17.16%, 16.83% and 13.8%, respectively, as of December 31, 2021. |
| |
(b) |
As of June 30, 2022 and
December 31, 2021, the fair value of warrants outstanding that are classified as liabilities are included in other long-term liabilities
in the Company’s condensed consolidated balance sheets. The key inputs to the valuation models that were utilized to estimate
the fair value of the Post-Combination Warrants and Private Placement Warrants as of June 30, 2022 were as follows: |
| Schedule of assumptions |
|
|
|
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| |
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Post- Combination Warrants |
|
|
Private Placement Warrants |
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| Assumptions: |
|
|
|
|
|
|
|
|
| Stock price |
|
$ |
2.99 |
|
|
$ |
2.99 |
|
| Exercise price |
|
$ |
12.50 – 17.50 |
|
|
$ |
11.50 |
|
| Risk free rate |
|
|
2.78 |
% |
|
|
2.96 |
% |
| Expected volatility |
|
|
81.2 |
% |
|
|
45.2 |
% |
| Dividend yield |
|
|
0.0 |
% |
|
|
0.0 |
% |
The
conversion option derivative and call and contingent put derivative are considered a Level 3 measurement due to the utilization of significant
unobservable inputs in the valuation. The Company utilized a binomial model to estimate the fair value of the embedded derivative features
requiring bifurcation associated with the Convertible Notes payable at the issuance date and as of the June 30, 2022 reporting date.
The key inputs to the valuation models that were utilized to estimate the fair value of the convertible debt derivative liabilities include:
| Schedule of assumptions |
|
|
|
|
|
|
|
|
| |
|
June 30,
2022 |
|
|
Issuance Date |
|
| Assumptions: |
|
|
|
|
|
|
|
|
| Stock price |
|
$ |
2.99 |
|
|
$ |
9.75 |
|
| Conversion strike price |
|
$ |
8.00 |
|
|
$ |
12.50 |
|
| Volatility |
|
|
59.00 |
% |
|
|
25.00 |
% |
| Dividend yield |
|
|
0.00 |
% |
|
|
0.00 |
% |
| Risk free rate |
|
|
2.91 |
% |
|
|
0.51 |
% |
| Debt discount rate |
|
|
17.80 |
% |
|
|
12.80 |
% |
| Coupon interest rate |
|
|
7.00 |
% |
|
|
7.00 |
% |
| Face amount (in thousands) |
|
$ |
50,000 |
|
|
$ |
50,000 |
|
| Contingent put inputs and assumptions: |
|
|
|
|
|
|
|
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| Probability of fundamental change |
|
|
25.00 |
% |
|
|
25.00 |
% |
The
following table presents a roll-forward of the Level 3 instruments:
| Schedule of warrants |
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| (in thousands) |
|
Warrants |
|
|
Conversion option derivative |
|
|
Call and contingent put derivative |
|
| |
|
|
|
|
|
|
|
|
|
| Beginning balance, December 31, 2021 |
|
$ |
1,317 |
|
|
$ |
1,343 |
|
|
$ |
1,651 |
|
| Change in fair value |
|
|
(818 |
) |
|
|
4,570 |
|
|
|
(559 |
) |
| Ending balance, June 30, 2022 |
|
$ |
499 |
|
|
$ |
5,913 |
|
|
$ |
1,092 |
|
The
fair value of the Company’s cash and cash equivalents and restricted cash approximate the carrying value because of the short-term
nature of these accounts.
|