XML 28 R18.htm IDEA: XBRL DOCUMENT

Fair Value Measurements

6 Months Ended

Jun. 30, 2022

12.

FAIR VALUE MEASUREMENTS

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Company’s own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The Company uses prices and inputs that are current as of the measurement date, including during periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This condition could cause an instrument to be reclassified from Level 1 to Level 2 or Level 2 to Level 3.

The Company’s financial instruments consist of accounts receivable, accounts payable, accrued expenses, and short- and long-term debt. The carrying value of accounts receivable, accounts payable, accrued expenses and short-term debt are considered a reasonable estimate of their fair value, due to the short-term maturity of these instruments.

The Company’s debt instruments are carried at amortized cost in its condensed consolidated balance sheets, which may differ from their respective fair values. The fair values of the Company’s term loan and revolving line of credit generally approximate their carrying values.

The Company’s Warrant liability and Earnout liability are recorded at fair value on a recurring basis.

The following table presents the Company’s fair value hierarchy for financial assets and liabilities:


	Fair Value Measurements as of June 30, 2022
	Level 1		Level 2		Level 3		Total
Liabilities:
Public Warrants	$	3,413	$	—	$	—	$	3,413
Private Placement Warrants		—		—		2,419		2,419
Earnout liability		—		—		32,200		32,200


	Fair Value Measurements as of May 26, 2022
	Level 1		Level 2		Level 3		Total
Liabilities:
Public Warrants	$	5,397	$	—	$	—	$	5,397
Private Placement Warrants		—		—		3,834		3,834
Earnout liability		—		—		93,880		93,880

There were no movements between levels during the three and six months ended June 30, 2022. These instruments were not outstanding on the Company’s books for the three and six months ended June 30, 2021.

Level 3 Disclosures

Private Placement Warrants

As described in Note 10, the Company’s Private Placement Warrants were initially issued by Haymaker and were thus acquired by the Company through the consummation of the Business Combination. Accordingly, the initial measurement date of the Private Placement Warrants for the Company was the Closing Date. The Private Placement Warrants were valued using a Monte Carlo simulation. Calculating the fair value of the Private Placement Warrants requires the input of subjective assumptions. Other reasonable assumptions could provide differing results. The carrying amount of the liability may fluctuate significantly, and actual amounts at settlement may be materially different from the liability’s estimated value.

The following table provides the significant inputs to the Monte Carlo simulation for the fair value of the Private Placement Warrants as of June 30, 2022 and the Closing Date:


	As of
	June 30, 2022			May 26, 2022
Stock price	$	3.77		$	9.02
Exercise price	$	11.50		$	11.50
Risk-free rate		3.0	%		2.7	%
Volatility		44.2	%		13.4	%
Term (in years)		4.9			5.0

Earnout Liability

The Earnout liability was valued using a Monte Carlo simulation in order to project the future path of the Company’s stock price over the earnout period. The carrying amount of the liability may fluctuate significantly, and actual amounts paid may be materially different from the liability’s estimated value.

The following table provides the significant inputs to the Monte Carlo simulation for the fair value of the Earnout liability as of June 30, 2022 and the Closing Date, the date of initial measurement:


	As of
	June 30, 2022			May 26, 2022
Stock price	$	3.77		$	9.02
Risk-free rate		3.0	%		2.7	%
Volatility		65.0	%		60.0	%
Term (in years)		4.9			5.0

The following table presents the changes in fair value of the Company’s Level 3 financial instruments that are measured at fair value as of June 30, 2022 and the Closing Date, the date of initial measurement:


	Private Placement Warrants			Earnout Liability			Total
Fair value as of May 26, 2022 (initial measurement)	$	3,834		$	93,880		$	97,714
Gain from change in fair value		(1,415	)		(61,680	)		(63,095	)
Fair value as of June 30, 2022	$	2,419		$	32,200		$	34,619

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details