Annual report pursuant to Section 13 and 15(d)

FAIR VALUE MEASUREMENTS

v3.22.4
FAIR VALUE MEASUREMENTS
12 Months Ended
Dec. 31, 2022
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS

 

15. 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 years ended December 31, 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 tables below set forth information related to the Company’s consolidated financial instruments (in thousands):

 

                                       
    Level in     December 31,
2022
    December 31,
2021
 
 
 
 
 
Fair Value
Hierarchy
 
 
 
 
Carrying
Amount
 
 
 
 
Fair
Value
 
 
 
 
Carrying
Amount
 
 
 
 
Fair
Value
 
 
Assets:                                        
Cash and cash equivalents     1     $ 7,253     $ 7,253     $ 62,937     $ 62,937  
Restricted cash     1       34       34       185       185  
Cash and investment in severance benefit accounts     1       3,161       3,161       3,687       3,687  
                                         
Liabilities:                                        
Subordinated term loan(a)     2       41,528       25,503       37,991       28,376  
Subordinated debt(a)     2       11,119       7,386       10,577       7,674  
Senior term loan(a)     2       40,529       36,680       41,063       43,276  
Convertible debt     2       43,928       48,249       41,343       44,494  
Long-term debt     2       -       -       -       -  
Public Warrants     1       345       345       8,510       8,510  
Warrants(b)     3       36       36       1,317       1,317  

 

 
(a) As of December 31, 2022 and 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 senior term loan, subordinated term loan and subordinated debt were 23.00%, 27.18% and 28.78%, respectively, as of December 31, 2022. The implied yields of the senior term loan, subordinated term loan and subordinated debt were 13.8%, 17.16% and 16.83%, respectively, as of December 31, 2021.
(b) As of December 31, 2022 and 2021, the fair value of warrants outstanding that are classified as liabilities are included in other long-term liabilities in the Company’s 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 were as follows as of December 31, 2022:

 

           
    Post-
Combination
Warrants
    Private
Placement
Warrants
 
Assumptions:              
Stock price   $ 1.31     $ 1.31  
Exercise price   $ 12.50 - $17.50     $ 11.50  
Risk free rate     4.64 %     4.02 %
Expected volatility     101.10 %     58.50 %
Dividend yield     0.00 %     0.00 %

 

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 issuance date and as of the December 31, 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:

 

               
    December 31,
2022
    Issuance
Date
 
Assumptions:                
Stock price   $ 1.31     $ 9.75  
Conversion strike price   $ 8.00     $ 12.50  
Volatility     94.00 %     25.00 %
Dividend yield     0.00 %     0.00 %
Risk free rate     4.32 %     0.51 %
Debt discount rate     15.10 %     12.80 %
Coupon interest rate     7.00 %     7.00 %
Face amount (in thousands)     50,000       50,000  
Contingent put inputs and assumptions:                
Probability of fundamental change     33.00 %     25.00 %

 

The following table presents a roll-forward of the Level 3 instruments:

 

                       
(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     (1,281 )     1,709       650  
Ending balance, December 31, 2022   $ 36     $ 3,052     $ 2,301