Annual report pursuant to Section 13 and 15(d)

Warrant Liabilities

v3.22.1
Warrant Liabilities
12 Months Ended
Dec. 31, 2021
Warrants and Rights Note Disclosure [Abstract]  
Warrant Liabilities

NOTE 9 – WARRANT LIABILITIES

Public Warrants and Private Placement Warrants

Pursuant to the Company’s IPO, 32,500,000 warrants (the “Public Warrants”) were issued and 15,500,000 warrants (the “Private Placement Warrants”) were sold simultaneously to Matlin & Partners Acquisition Sponsor, LLC (the “Sponsor”) and Cantor Fitzgerald (the “Underwriter”). Each Public Warrant and Private Placement Warrant entitles its holder to purchase one-seventh of a share of Class A common stock at an exercise price of $5.75 per warrant ($40.25 per full share equivalent), to be exercised only for a whole number of shares of our Class A common stock. The warrants became exercisable 30 days after the completion of the transaction and expire on November 9, 2023 or earlier upon redemption or liquidation.

The Company may redeem the outstanding Public Warrants at a price of $0.01 per warrant upon a minimum of 30 days’ prior written notice of redemption, if the last sale price of the Company’s common stock equals or exceeds $84.00 per share for any 20 trading days within a 30-trading day period ending on the third business day before the Company sends the notice of redemption to the warrant holders. The Private Placement Warrants, however, are nonredeemable so long as they are held by the Sponsor, the Underwriter or their permitted transferees.

During the year ended December 31, 2021, no Public or Private Placement Warrants were redeemed, exercised or forfeited. During the year ended December 31, 2020, certain warrant holders elected to forfeit 6,327,218 Private Placement Warrants for no consideration. As of December 31, 2021, 9,994,635 Public Warrants and 9,172,782 Private Placement Warrants were outstanding, and exercisable for an aggregate of 2,738,203 shares of Class A common stock.

Series A Warrants

On May 24, 2019 ("Closing Date"), the Company issued 2,933,333 initial warrants to certain institutional investors in connection with the Company's private placement of Series A preferred stock (the "Series A Warrants"). The Company will issue additional warrants to the purchasers in quarterly installments beginning nine months after the Closing Date through March 31, 2022.

The Series A Warrants entitle their holders to purchase two-sevenths of a share of Class A common stock at an exercise price of $7.66 per warrant ($26.81 per full share equivalent), to be exercised only for a whole number of shares of Class A common stock. The Series A Warrants expire on November 25, 2025.

During the years ended December 31, 2021 and 2020, the Company issued 1,777,776 and 1,911,108 additional Series A Warrants to the purchasers of Series A preferred stock, respectively, in accordance with the Series A preferred stock purchase agreement. During the year ended December 31, 2021, a Series A Warrant holder elected to forfeit 399,999 Series A Warrants for no consideration. See “Note 13 – Mezzanine Equity” for additional discussion of the Series A preferred stock purchase agreement. As of December 31, 2021, 6,222,218 Series A Warrants were outstanding pursuant to the Series A preferred stock purchase agreement, and exercisable for 1,777,777 shares of Class A common stock.

Fair Value Measurement

As of December 31, 2021, the Company’s outstanding warrants are accounted for as liabilities measured at fair value upon issuance, with subsequent changes in fair value reported in the Company’s consolidated statements of operations each reporting period.

The following tables present the Company's fair value hierarchy for liabilities measured at fair value on a recurring basis:

 

 

Quoted prices in active markets
(Level 1)

 

 

Other observable inputs
(Level 2)

 

 

Unobservable inputs
(Level 3)

 

 

Total

 

As of December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

Public Warrants

 

$

752

 

 

$

-

 

 

$

-

 

 

$

752

 

Private Placement Warrants

 

 

-

 

 

 

871

 

 

 

-

 

 

 

871

 

Series A Warrants

 

 

-

 

 

 

1,934

 

 

 

-

 

 

 

1,934

 

 

 

$

752

 

 

$

2,805

 

 

$

-

 

 

$

3,557

 

As of December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Public Warrants

 

$

254

 

 

$

-

 

 

$

-

 

 

$

254

 

Private Placement Warrants

 

 

-

 

 

 

248

 

 

 

-

 

 

 

248

 

Series A Warrants

 

 

-

 

 

 

1,117

 

 

 

-

 

 

 

1,117

 

 

 

$

254

 

 

$

1,365

 

 

$

-

 

 

$

1,619

 

Public Warrants. The fair value of the Public Warrants are classified as Level 1 in the fair value hierarchy and valued using quoted market prices, as they are traded in active markets.

Private Placement Warrants. The fair value of the Private Placement Warrants are classified as a Level 2 in the fair value hierarchy and determined using a Monte Carlo simulation model. Inherent in a Monte Carlo simulation are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock warrants based on implied volatility from the Company’s publicly traded warrants and from historical volatility of select peer company common stock that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.

Series A Warrants. The fair value of the Series A Warrants are classified as a Level 2 in the fair value hierarchy and is determined using the Black-Scholes valuation method.

The following assumptions were used to calculate the fair value for the private placement and Series A Warrants:

 

 

Private Placement Warrants

 

Series A Warrants

As of December 31, 2021

 

 

 

 

Expected remaining life

 

1.9 years

 

3.9 years

Volatility rate

 

227.5%

 

227.5%

Risk-free interest rate

 

0.7%

 

1.1%

Expected dividend rate

 

0%

 

0%

 

 

 

 

 

As of December 31, 2020

 

 

 

 

Expected remaining life

 

2.86 years

 

4.9 years

Volatility rate

 

115.8%

 

115.8%

Risk-free interest rate

 

0.2%

 

0.4%

Expected dividend rate

 

0%

 

0%

The following table summarizes the activities, including changes in fair values of the Company’s warrant liabilities for the periods indicated:

 

 

December 31,

 

 

 

2021

 

 

2020

 

Balance at beginning of period

 

$

1,619

 

 

$

8,147

 

Reclassification of warrant liability upon forfeiture

 

 

(232

)

 

 

(203

)

Change in fair value of warrant liabilities

 

 

2,152

 

 

 

(6,342

)

Amortization of warrant issuance costs

 

 

18

 

 

 

17

 

Balance at end of period

 

$

3,557

 

 

$

1,619