| FAIR VALUE MEASUREMENTS |
|
12. |
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,
2023 and 2022.
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 fair value of financial instruments
|
|
Level
in |
|
|
June 30,
2023 |
|
|
December 31,
2022 |
|
| |
|
Fair
Value |
|
|
Carrying |
|
|
Fair |
|
|
Carrying |
|
|
Fair |
|
| |
|
Hierarchy |
|
|
Amount |
|
|
Value |
|
|
Amount |
|
|
Value |
|
| Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash
and cash equivalents |
|
1 |
|
|
$ |
10,102 |
|
|
$ |
10,102 |
|
|
$ |
7,253 |
|
|
$ |
7,253 |
|
| Restricted
cash |
|
1 |
|
|
|
35 |
|
|
|
35 |
|
|
|
34 |
|
|
|
34 |
|
| Cash
and investment in severance benefit accounts |
|
1 |
|
|
|
2,917 |
|
|
|
2,917 |
|
|
|
3,161 |
|
|
|
3,161 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Subordinated
term loan(a) |
|
2 |
|
|
$ |
43,402 |
|
|
$ |
25,107 |
|
|
$ |
41,528 |
|
|
$ |
25,503 |
|
| Subordinated
debt(a) |
|
2 |
|
|
|
11,396 |
|
|
|
7,346 |
|
|
|
11,119 |
|
|
|
7,386 |
|
| Senior
term loan(a) |
|
2 |
|
|
|
63,224 |
|
|
|
55,105 |
|
|
|
40,529 |
|
|
|
36,680 |
|
| Convertible
debt |
|
2 |
|
|
|
47,749 |
|
|
|
49,325 |
|
|
|
43,928 |
|
|
|
48,249 |
|
| Public
Warrants |
|
1 |
|
|
|
15 |
|
|
|
15 |
|
|
|
345 |
|
|
|
345 |
|
| Warrants(b) |
|
3 |
|
|
|
1 |
|
|
|
1 |
|
|
|
36 |
|
|
|
36 |
|
|
(a) |
As
of June 30, 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, subordinated debt and senior term
loan were 34.45%, 40.74% and 32.19%, respectively, as of June 30, 2023 and 23.00%, 27.18% and 28.78%, respectively, as of December 31,
2022. |
|
(b) |
As
of June 30, 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 June 30,
2023 were as follows: |
| Schedule
of assumptions |
|
Post-
Combination
Warrants |
|
|
Private
Placement
Warrants |
|
| Assumptions: |
|
|
|
|
|
|
|
|
| Stock
price |
|
$ |
0.17 |
|
|
$ |
0.17 |
|
| Exercise
price |
|
$ |
12.50
– 17.50 |
|
|
$ |
11.50 |
|
| Risk
free rate |
|
|
4.47 |
% |
|
|
4.47 |
% |
| Expected
volatility |
|
|
84.2 |
% |
|
|
84.2 |
% |
| 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, 2023 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 of the convertible debt derivative liabilities |
|
June 30,
2023 |
|
|
December 31,
2022 |
|
| Assumptions: |
|
|
|
|
|
|
|
|
| Stock
price |
|
$ |
0.17 |
|
|
$ |
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) |
|
$ |
52,500 |
|
|
$ |
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 |
|
|
(35 |
) |
|
|
(2,912 |
) |
|
|
2,048 |
|
| Ending
balance, June 30, 2023 |
|
$ |
1 |
|
|
$ |
140 |
|
|
$ |
4,349 |
|
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.
|