| 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.
| Schedule of Fair Value of Financial Instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
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: |
| Schedule of assumptions |
|
|
|
|
|
|
|
|
| |
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:
| Schedule of assumptions |
|
|
|
|
|
|
|
|
| |
|
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:
| Schedule of warrants |
|
|
|
|
|
|
|
|
|
|
|
|
| (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.
|