Post-effective amendment to a registration statement that is not immediately effective upon filing

FAIR VALUE MEASUREMENTS

v3.23.1
FAIR VALUE MEASUREMENTS
 3 Months Ended 12 Months Ended
Mar. 31, 2023
Dec. 31, 2022
Fair Value Disclosures [Abstract]    
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 months ended March 31, 2023 and March 31, 2022.

 

Financial Disclosures about Fair Value of Financial Instruments

 

The tables below set forth information related to the Company’s condensed consolidated financial instruments (in thousands):

 

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.

 

                                   
    Level in   March 31,
2023		     December 31,
2022		  
    Fair Value   Carrying     Fair     Carrying     Fair  
    Hierarchy   Amount     Value     Amount     Value  
Assets:                                    
Cash and cash equivalents   1   $ 3,282     $ 3,282     $ 7,253     $ 7,253  
Restricted cash   1     34       34       34       34  
Cash and investment in severance benefit accounts   1     3,102       3,102       3,161       3,161  
                                     
Liabilities:                                    
Subordinated term loan – related party(a)   2   $ 42,449     $ 23,474     $ 41,528       25,503  
Subordinated debt(a)   2     11,256       7,001       11,119       7,386  
Senior term loan(a)   2     40,993       35,188       40,529       36,680  
Convertible debt   2     45,492       45,880       43,928       48,249  
Public Warrants(b)   1     575       575       345       345  
Warrants(b)   3     29       29       36       36  

 

 
(a) As of March 31, 2023 and December 31, 2022, 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 – related party, subordinated debt and senior term loan were 33.98%, 37.59% and 28.00%, respectively, as of March 31, 2023 and 23.00%, 27.18% and 28.78%, respectively, as of December 31, 2022.

 

(b) As of March 31, 2023 and December 31, 2022, 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 March 31, 2023 were as follows:

 

               
  Post-
Combination
Warrants		   Private
Placement
Warrants		  
Assumptions:                
Stock price   $ 0.69     $ 0.69  
Exercise price   $ 12.50-17.50     $ 11.50  
Risk free rate     4.78 %     3.66 %
Expected volatility     101.1 %     84.20 %
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 the issuance date and as of the March 31, 2023 and December 31, 2022 reporting dates. The key inputs to the valuation models that were utilized to estimate the fair value of the convertible debt derivative liabilities include:

 

               
    March 31,
2023		     December 31,
2022		  
Assumptions:                
Stock price   $ 0.69     $ 1.31  
Conversion strike price   $ 8.00     $ 8.00  
Volatility     92.00 %     94.00 %
Dividend yield     0.00 %     0.00 %
Risk free rate     4.12 %     4.32 %
Debt discount rate     28.00 %     15.10 %
Coupon interest rate     7.00 %     7.00 %
Face amount (in thousands)   $ 50,000     $ 50,000  
Contingent put inputs and assumptions:                
Probability of fundamental change     50.00 %     33.00 %

 

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, 2022   $ 36     $ 3,052     $ 2,301  
Change in fair value     (7 )     (2,912 )     2,048  
Ending balance, March 31, 2023   $ 29     $ 140     $ 4,349  

 

The warrant liability is included in other long-term liabilities and the derivatives are included in accrued expenses and other current liabilities.

 

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