Annual report pursuant to Section 13 and 15(d)

DERIVATIVES

v3.24.1.u1
DERIVATIVES
 12 Months Ended
Dec. 31, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVES DERIVATIVES
Derivatives are complex financial instruments. The Company does not use derivatives to manage financial risks or as an economic hedge. The Company’s sole derivative instrument arose as part of the issuance of Series A-1 preferred stock to Searchlight, in which transaction Searchlight was also granted Penny Warrants (see Note 10 — Warrants on Common Stock). The Penny Warrants are considered a freestanding derivative instrument, as they are separable and legally detachable from the Series A-1 preferred stock, were issued for nominal or no apparent consideration, and have the essential characteristics inherent in a derivative instrument of a notional amount, an underlying security, and a mechanism for net settlement.

The following table sets forth the details of the derivative instrument presented on the consolidated balance sheets and notional amount as of December 31, 2023 (1):

Derivatives Not Designated as Hedging Instruments Number of Warrants (Notional Amount) Warrant Liability Exercise Price Per Share
($ in thousands, except for per share amounts)
Penny warrants issued to Searchlight 12,024,711  $ 11,664  $ 0.01 

(1) No such instruments existed as of December 31, 2022.

The gains and losses arising from this derivative instrument in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2023 (1) is set forth as follows:

Derivatives Not Designated as Hedging Instruments Net Realized Gains (Losses) on Derivative Instruments
Net Change in Unrealized Gain (Loss) on Derivative Instruments (2)
(in thousands)
Penny warrants issued to Searchlight $ —  $ (6,469)

(1) No such instruments existed during the year ended December 31, 2022; therefore, there were no gains or losses from such instruments during that year.
(2) The consolidated statements of operations and comprehensive loss include the above unrealized loss on the Penny Warrants as well as the immaterial unrealized loss on the Private Placement Warrants in the “change in fair value of warrant liabilities to affiliates”.