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Fair Value Measurements

9 Months Ended

Sep. 30, 2022

Fair Value MeasurementsThe Company’s debt instruments are recorded at their carrying values in its condensed consolidated balance sheets, which may differ from their respective fair values. The fair values of the Company’s term loans generally approximated their carrying values given their relative shorter-term in nature. The fair value of the promissory note in relation with the Symeo acquisition was determined using valuation inputs categorized as Level 3.

As of September 30, 2022, the Company held currency forward contracts of $3,550 to sell United States dollars and to buy Canadian dollars at a forward rate. Any changes in the fair value of these contracts are reflected in the condensed consolidated statement of operations. The fair value of the currency forward contracts was determined using valuation inputs categorized as Level 2. The change in fair value the three and nine months ended September 30, 2022 was a gain of $211.

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


	Fair Value Measurements as of September 30, 2022
	Level 1		Level 2		Level 3		Total
Liabilities:
Private Placement Warrants	$	—	$	—	$	20,994	$	20,994
Public Warrants	$	30,878	$	—	$	—	$	30,878

City Semi Contingent Consideration - Second Tranche	$	—	$	—	$	1,340	$	1,340
Symeo Contingent Consideration - First Tranche	$	—	$	—	$	4,330	$	4,330
Symeo Contingent Consideration - Second Tranche	$	—	$	—	$	4,007	$	4,007
Symeo Promissory Note	$	—	$	—	$	9,674	$	9,674


	Fair Value Measurements as of December 31, 2021
	Level 1		Level 2		Level 3		Total
Liabilities:
Private Placement Warrants	$	—	$	—	$	40,092	$	40,092
Public Warrants	$	60,375	$	—	$	—	$	60,375
ON Design Israel Contingent Consideration - Tapeout	$	—	$	—	$	1,817	$	1,817
ON Design Israel Contingent Consideration - Design Win	$	—	$	—	$	2,222	$	2,222
City Semi Contingent Consideration - Second Tranche	$	—	$	—	$	980	$	980

As of September 30, 2022 and December 31, 2021, the Company’s cash and cash equivalents were all held in cash or Level 1 instruments where the fair values approximate the carrying values.

Level 3 Disclosures

Warrants

Warrants were valued using the Black-Scholes-Merton formula and a Monte Carlo Simulations analysis. Calculating the fair value of 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 paid may be materially different from the liability’s estimated value.

Earn-out Liabilities

Earn-out liabilities that are specifically indexed to the Company’s stock price were valued using a Monte Carlo analysis in order to simulate the future path of the Company’s stock price over the earn-out period. The carrying amount of the liability may fluctuate significantly and actual amounts paid may be materially different from the liability’s estimated value.

Contingent Considerations

Contingent considerations were valued based on the consideration expected to be transferred. The Company estimated the fair value based on the probability of achievement of various milestones identified within each contingent consideration arrangement, using certain assumptions that require significant judgement and discount rates. The discount rates were based on the estimated cost of debt plus a premium, which included consideration of expected term of the earn-out payment, yield on treasury instruments and an estimated credit rating for the Company.

The following table presents the significant unobservable inputs assumed for each of the fair value measurements:


	September 30, 2022		December 31, 2021
	Input		Input
Liabilities:
Warrants
Expected volatility	50.50	%	36.00	%


City Semi Contingent Consideration - Second Tranche
Discount rate	10.80	%	10.80	%




ON Design Israel Contingent Consideration - Tapeout
Discount rate	N/A		4.37	%
ON Design Israel Contingent Consideration - Design Win
Discount rate	N/A		4.37	%
Symeo Contingent Consideration - First Tranche
Discount Rate	8.03	%	N/A
Symeo Contingent Consideration - Second Tranche
Discount Rate	8.03	%	N/A
Symeo Promissory Note
Discount rate	3.13	%	N/A

- 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.

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