Annual report [Section 13 and 15(d), not S-K Item 405]

FAIR VALUE MEASUREMENTS

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FAIR VALUE MEASUREMENTS
 12 Months Ended
Dec. 31, 2025
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable or unobservable:

•Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity.
•Unobservable inputs are inputs that reflect the reporting entity’s own assumptions.

A fair value hierarchy for inputs is implemented in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The availability of valuation techniques and the ability to attain observable inputs can vary among different financial instruments and are affected by a wide variety of factors, including the type of instrument, whether the instrument is newly issued and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the transaction.

The fair value hierarchy is categorized into three broad levels based on the inputs as follows:

Level 1 - Valuations based on unadjusted, quoted prices in active markets for identical assets and liabilities.
Level 2 - Valuations based on quoted prices in an inactive market, or whose values are based on models - but the inputs to those models are observable either directly or indirectly for substantially the full term of the assets and liabilities. Level 2 inputs include the following:
a) Quoted prices for similar assets and liabilities in active markets;
b) Quoted prices for identical or similar assets and liabilities in non‑active markets;
c) Pricing models whose inputs are observable for substantially the full term of the assets and liabilities; and
d) Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability.
Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. Valuation of these assets is typically based on the Company’s own assumptions or expectations based on the best information available. The degree of judgment exercised by the Company in determining fair value is greatest for financial instruments for which fair value is disclosed in Level 3.

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the actual level is determined based on the level of inputs that is most significant to the fair value measurement in its entirety.
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. Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the investments existed.

Financial Instruments Measured at Fair Value

The Company is required to measure its warrant liabilities at fair value for the Penny Warrants and Private Placement Warrants, which are both included in “warrant liabilities to affiliates” on the consolidated balance sheets.

Penny Warrants

The Penny Warrants, issued in 2023, are marked to fair value by reference to the fair value of the Company’s stock price on the last day of the reporting period, less the five cent exercise price, and are therefore considered as Level 2 in the fair value hierarchy. The fair value of the Company’s stock as of December 31, 2025 and 2024, less the exercise price, resulted in a Penny Warrant valuation of approximately $10.0 million and $7.6 million as of December 31, 2025 and 2024, respectively.

Private Placement Warrants

The Private Placement Warrants are marked to fair value by reference to the fair value of the Company’s public warrants, which are therefore considered as Level 2 in the fair value hierarchy. The public warrants are traded on the OTC Pink Limited Market under the ticker symbol KORGW. As of December 31, 2025 and 2024, the aggregate value of the Private Placement Warrants was immaterial, as the reference price of the public warrants was less than one cent per warrant.

Financial Instruments Held at Amortized Cost for Which Fair Value is Disclosed

Financial Instruments for which Cost Approximates Fair Value

Cash, including restricted cash, is stated at cost, which approximates fair value. The carrying amounts reported in the consolidated balance sheets for accounts receivable (including contract assets), accounts payable, and accrued liabilities (including contract liabilities) approximate fair value, due to their short-term maturities.

Senior Secured Term Loan, Backstop Note, and Mandatorily Redeemable Preferred Stock Due to Affiliate

The table below sets forth the amortized cost and fair value of the Company’s Senior Secured Term Loan as of December 31, 2025 and 2024. The fair value of this debt is not indicative of the amounts at which the Company could settle this debt.

(in thousands) December 31,
Financial Instruments Disclosed at Fair Value Level 2 Measurement 2025 2024
Senior Secured Term Loan Amortized cost $ 178,359  $ 179,201 
Fair value $ 170,734  $ 168,144 

The table below sets forth the amortized cost and fair value of the Backstop Notes and Mandatorily Redeemable Preferred Stock Due to Affiliate as of December 31, 2025 and 2024. The fair value of this debt is not indicative of the amounts at which the Company could settle this debt.

(in thousands) December 31,
Financial Instrument Disclosed at Fair Value Level 3 Measurement 2025 2024
Backstop Notes Amortized cost $ 118,728  $ 118,310 
Fair value $ 96,943  $ 87,507 
Mandatorily Redeemable Series A-1 Preferred Stock Due to Affiliate
Amortized cost (1)
$ 143,912  $ 142,776 
Fair value
 $ 160,682  $ 128,356 

(1) The amortized cost of the Mandatorily Redeemable Series A-1 Preferred Stock Due to Affiliate excludes $47.9 million and $23.8 million of accrued interest due to affiliate as of December 31, 2025 and 2024, respectively.

Additional disclosures regarding Level 3 unobservable inputs - Backstop Notes and Mandatorily Redeemable Preferred Stock Due to Affiliate

The Company uses a third‑party valuation firm who utilizes proprietary methodologies to value the Company’s Backstop Notes and Mandatorily Redeemable Preferred Stock Due to Affiliate. This firm uses a lattice modeling technique to determine the fair value of these liabilities which is
disclosed (but not measured) as Level 3 in the fair value hierarchy. Use of this technique requires determination of relevant inputs and assumptions, some of which represent significant unobservable inputs such as credit spreads and equity volatility based on guideline companies, as well as other valuation assumptions. Accordingly, a significant increase or decrease in any of these inputs in isolation may result in a significantly lower or higher fair value measurement.

The table sets forth information regarding the Company’s significant Level 3 inputs for modeling this fair value disclosure as of December 31, 2025, and 2024:

($ in thousands, except as otherwise noted) December 31,
Significant Inputs for Level 3 Fair Value Disclosure Input 2025 2024
Backstop Notes Principal amount $120,000 $120,000
Term to maturity date 2.75 years 3.75 years
Stock price $4.22 $3.22
Credit spreads (basis points) 1,105 1,127
Selected equity volatility 105.8% 100.8%
Mandatorily Redeemable Series A-1 Preferred Stock Due to Affiliate
Notional amount (1)
$200,764 $176,655
Term of lattice model 7.88 years 8.88 years
Stock price $4.22 $3.22
Credit spreads (basis points) 1,224 1,254
Selected equity volatility 101.6% 109.4%

(1) The notional amount of the preferred stock for valuation purposes includes the unpaid accrued interest as well as the liquidation value of the instrument.