| FAIR VALUE MEASUREMENTS |
| 17. |
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, 2023 and 2022. 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):
| Schedule of Fair Value of Financial Instruments |
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Level in |
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December 31,
2023 |
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December 31,
2022 |
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Fair Value
Hierarchy |
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|
Carrying
Amount |
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Fair
Value |
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|
Carrying
Amount |
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Fair
Value |
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| Assets: |
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| Cash and cash equivalents |
|
1 |
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|
$ |
7,517 |
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|
$ |
7,517 |
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|
$ |
7,253 |
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|
$ |
7,253 |
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| Restricted cash |
|
1 |
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|
- |
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|
- |
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|
34 |
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|
|
34 |
|
| Cash and investment in severance benefit accounts |
|
1 |
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|
2,818 |
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|
2,818 |
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3,161 |
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|
3,161 |
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| Liabilities: |
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| Subordinated term loan(a)
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2 |
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45,393 |
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28,491 |
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41,528 |
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25,503 |
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| Subordinated debt(a)
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2 |
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11,685 |
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8,110 |
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|
11,119 |
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|
7,386 |
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| Senior term loan(a)
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|
2 |
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|
|
59,470 |
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|
56,062 |
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|
40,529 |
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36,680 |
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| Convertible debt |
|
2 |
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33,345 |
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34,186 |
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|
43,928 |
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48,249 |
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| Derivative liability |
|
3 |
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3,645 |
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|
3,645 |
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|
5,353 |
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|
5,353 |
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| Public Warrants |
|
1 |
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|
1 |
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|
1 |
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|
345 |
|
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|
345 |
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| Warrants(b)
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|
3 |
|
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|
1 |
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|
1 |
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|
36 |
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|
36 |
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| Warrants(c)
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|
3 |
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1,163 |
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1,163 |
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- |
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- |
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(a) |
As of December 31, 2023 and 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 senior term loan, subordinated term loan and subordinated debt were 43.55%, 37.97% and 51.42%, respectively, as of December 31, 2023. 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. |
|
(b) |
As of December 31, 2023 and 2022, 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 Private Placement Warrants were as follows as of December 31, 2023: |
| |
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Private
Placement
Warrants |
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| Assumptions: |
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|
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| Stock price |
|
$ |
0.09 |
|
| Exercise price |
|
$ |
11.50 |
|
| Risk free rate |
|
|
4.09 |
% |
| Expected volatility |
|
|
84.2 |
% |
| Dividend yield |
|
|
0.00 |
% |
|
(c) |
As of December 31, 2023 and 2022, the fair value of warrants outstanding that are classified as equity are included in additional paid in capital in the Company’s consolidated balance sheets. |
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, 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 |
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December 31,
2023 |
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Issuance
Date |
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| Assumptions: |
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| Stock price |
|
$ |
0.09 |
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$ |
9.75 |
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| Conversion strike price |
|
$ |
8.00 |
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$ |
12.50 |
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| Volatility |
|
|
94.00 |
% |
|
|
25.00 |
% |
| Dividend yield |
|
|
0.00 |
% |
|
|
0.00 |
% |
| Risk free rate |
|
|
4.79 |
% |
|
|
0.51 |
% |
| Debt discount rate |
|
|
28.00 |
% |
|
|
12.80 |
% |
| Coupon interest rate |
|
|
10.00 |
% |
|
|
7.00 |
% |
| Face amount (in thousands) |
|
|
35,717 |
|
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|
50,000 |
|
| Contingent put inputs and assumptions: |
|
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| Probability of fundamental change |
|
|
75.00 |
% |
|
|
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 |
|
| Beginning balance, December 31, 2022 |
|
$ |
36 |
|
|
$ |
5,353 |
|
| Change in fair value |
|
|
(35 |
) |
|
|
(1,708 |
) |
| Ending balance, December 31, 2023 |
|
$ |
1 |
|
|
$ |
3,645 |
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