Quarterly report pursuant to Section 13 or 15(d)

Financial Instruments Fair Value Measurements

v3.22.2.2
Financial Instruments Fair Value Measurements
6 Months Ended
Jun. 30, 2022
Fair Value Disclosures [Abstract]  
Financial Instruments Fair Value Measurements

Note 10 — Financial Instruments Fair Value Measurements

 

Recurring Fair Value Measurements

 

The fair value hierarchy table for the reporting date noted is as follows:

 

    Fair Value Measurement on a Recurring Basis at Reporting Date Using(1)
    Level-1 Inputs   Level-2 Inputs   Level-3 Inputs   Total
June 30, 2022                
Senior Secured Convertible Note - April 2022   $   $   $ 29,500   $ 29,500
Totals   $   $   $ 29,500   $ 29,500

 

(1) As noted above, as presented in the fair value hierarchy table, Level-1 represents quoted prices in active markets for identical items, Level-2 represents significant other observable inputs, and Level-3 represents significant unobservable inputs. There were no transfers between the respective Levels during the period ended June 30, 2022.

 

As discussed in Note 11, Debt, the Company issued a Senior Secured Convertible Note dated April 4, 2022, with an initial $27.5 million face value principal (“April 2022 Senior Convertible Note”). The April 2022 Senior Convertible Note is accounted for under the ASC 825-10-15-4 fair value option (“FVO”) election, wherein, the financial instrument is initially measured at its issue-date estimated fair value and subsequently remeasured at estimated fair value on a recurring basis at each reporting period date.

 

The estimated fair value of the financial instruments classified within the Level 3 category was determined using both observable inputs and unobservable inputs. Unrealized gains and losses associated with liabilities within the Level 3 category include changes in fair value attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long- dated volatilities) inputs.

 

The estimated fair value of the April 2022 Senior Convertible Note as of each of April 4, 2022 and June 30, 2022, were computed using a Monte Carlo simulation of the present value of its cash flows using a synthetic credit rating analysis and a required rate-of-return, using the following assumptions:

  

   

April 2022

Senior
Convertible Note:
April 4, 2022
   

April 2022

Senior

Convertible Note:
June 30, 2022

 
Fair Value   $ 30,100     $ 29,500  
Face value principal payable   $ 27,500     $ 27,500  
Required rate of return     7.875 %     11.20 %
Conversion Price   $ 5.00     $ 5.00  
Value of common stock   $ 1.26     $ 0.94  
Expected term (years)     2.00       1.76  
Volatility     115.00 %     130.00 %
Risk free rate     2.40 %     2.85 %
Dividend yield     %     %

 

The estimated fair values reported utilized the Company’s common stock price along with certain Level 3 inputs (as discussed above), in the development of Monte Carlo simulation models, discounted cash flow analyses, and /or Black-Scholes valuation models. The estimated fair values are subjective and are affected by changes in inputs to the valuation models /analyses, including the Company’s common stock price, the Company’s dividend yield, the risk-free rates based on U.S. Treasury security yields, and certain other Level-3 inputs including, assumptions regarding the estimated volatility in the value of the Company’s common stock price. Changes in these assumptions can materially affect the estimated fair values.