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Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates.
−Removed: As of December 31, 2020, we were subject to interest rate risk in connection with the Notes, and we hold derivative financial instruments and have outstanding warrants that are subject to market risk.
−Removed: We also have foreign currency exchange rate risk from our global operations.
+Added: As of December 31, 2021, we have outstanding warrants that are subject to market risk.
+Added: We also have interest rate risk for amounts outstanding under our Revolving Credit Agreement, and foreign currency exchange rate risk from our global operations.
Interest rate risk
−Removed: As a result of having $204.0 million aggregate principal amount of the Notes outstanding, which are convertible into shares of Common Stock at a conversion price of $31.29 per share, we were subject to interest rate risk as of December 31, 2020.
−Removed: As of such date, the interest rate on the Notes was 12.0% per year.
−Removed: On February 1, 2021, the interest rate was determined to remain at 12.0% (subject to certain conditions) until the maturity of the Notes.
−Removed: As discussed in Footnote 4 , Debt , we have the ability, subject to certain conditions, to pay interest on the Notes through the issuance of PIK Interest Shares.
−Removed: We elected to pay the interest due on January 2, 2020, April 1, 2020 and July 1, 2020 in cash.
−Removed: We elected to pay the interest due on October 1, 2020 through a combination of cash and the issuance of PIK Interest Shares.
−Removed: For the amount due for the fourth quarter of 2020 we elected to pay through the issuance of PIK Interest Shares which were delivered on January 25, 2021.
−Removed: As described in Footnote 1 , Organization, and Footnote 16 , Subsequent Events, on March 9, 2021, our stockholders approved Transactions to issue preferred securities.
−Removed: The proceeds of the Transactions will be used to repay the Notes prior to maturity.
−Removed: For the remaining interest payment from January 1, 2021 through the closing of the Transactions, we intend to pay interest due through the issuance of PIK Interest Shares.
−Removed: Derivative financial instrument risk
−Removed: The interest rate reset feature of the Notes represents a complex derivative financial instrument, which is classified as a liability in the Consolidated Balance Sheets.
−Removed: This derivative is not considered a hedging instrument.
−Removed: We determine the fair value of our derivative financial instrument, relying in part on the work of an independent valuation firm engaged by us to provide inputs as to the fair value of the liability, including the valuation models and assumptions used to determine its fair value.
−Removed: As of December 31, 2020, the fair value of our interest rate reset derivative financial instrument of $11.3 million was recorded in financing derivatives within the Consolidated Balance Sheets.
−Removed: The fair value of our interest rate reset derivative liability relates to the interest rate reset feature of the Notes.
−Removed: Changes in the fair value of the interest rate reset derivative liability are primarily driven by changes in the price and volatility of a share of our Common Stock.
−Removed: As described above, the interest rate on the Notes will remain at 12.0% (subject to certain conditions) until the maturity of the Notes.
−Removed: As a result, changes in our stock price no longer affect the fair value of the interest rate reset derivative liability.
−Removed: The value of the interest rate reset derivative liability will decrease as the time to maturity shortens and interest on the Notes is paid.
−Removed: For additional information on the determination of fair value, including the assumptions used in those determinations, refer to Footnote 4 , Debt and Footnote 6 , Fair Value Measurements .
+Added: As of December 31, 2021, our borrowings, including letters of credit, under the Revolving Credit Agreement bore interest at a variable rate per annum equal to the Eurodollar Rate (as previously defined in the Revolving Credit Agreement) plus an applicable rate equal to 2.25%.
+Added: As a result, we were subject to interest rate risk based on a Eurodollar Rate, and our interest obligation on outstanding borrowings fluctuated with movements in the Eurodollar Rate.
+Added: On February 25, 2022, we amended our Revolving Credit Agreement, which resulted in the replacement of the Eurodollar Rate with a variable rate per annum equal to the Daily SOFR (as defined in the Revolving Credit Agreement) plus an applicable rate of 2.50%.
+Added: As a result, we are subject to interest rate risk going forward based on the Daily SOFR, and our interest obligation on outstanding borrowings will fluctuate with movements in the Daily SOFR.
+Added: We are able to repay any amounts borrowed under the Revolving Credit Agreement prior to the maturity date without any premium or penalty other than customary breakage costs.
+Added: As of December 31, 2021, our exposure to interest rate risk calculated using either the Eurodollar Rate or the Daily SOFR was not material.
Warrants liability financial instrument risk
As a result of having $10.5 million in liability related to outstanding warrants as of December 31, 2021, which warrants are exercisable for shares of Common Stock under certain conditions, we are subject to market risk.
−Removed: The value of the warrants, and the number of shares likely to be issued under the warrants, is impacted by changes in the market price of our Common Stock.
−Removed: As described in Footnote 1 , Organization, and Footnote 16 , Subsequent Events, on March 9, 2021 our stockholders approved Transactions to issue preferred securities.
−Removed: The exercise price of our Series A Warrants is subject to anti-dilution adjustment in certain circumstances, including upon certain issuances of capital stock.
−Removed: As a result of the Transactions, we expect to adjust the exercise price of the Series A Warrants to the closing price of the Transactions.
−Removed: If the Series A Warrants had been measured as of December 31, 2020 based on the closing price of the Transactions of $2.4719, then the estimated fair value of the warrants would have increased from $2.8 million to $7.5 million.
−Removed: Thereafter, a 10% increase in the market price of our Common Stock would result in a $1.0 million increase in the fair value of the Series A Warrants, while a 10% decrease in the market price of our Common Stock would result in a $1.1 million decrease in fair value of the Series A Warrants.
−Removed: For further information regarding our outstanding warrants, see Footnote 5 , Stockholders' Equity .
+Added: The value of the warrants is impacted by changes in the market price of our Common Stock.
+Added: As of December 31, 2021, a 10% increase in the market price of our Common Stock would result in a $1.5 million increase in the fair value of the Series A Warrants, while a 10% decrease in the market price of our Common Stock would result in a $1.5 million decrease in fair value of the Series A Warrants.
+Added: For further information on our outstanding warrants, refer to Footnote 5 , Convertible Redeemable Preferred Stock and Stockholders' Equity .
Foreign currency risk
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We have not engaged in any transactions that hedge foreign currency exchange rate risk.
−Removed: Table of Conte nt s
There can be no guarantee that exchange rates will remain constant in future periods.
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Dollar and various South American, Asia Pacific and other European currencies.
−Removed: We have evaluated and assessed the potential effect of this risk and believe that near-term changes in currency rates should not materially affect our financial position, results of operations or cash flows.
−Removed: We performed a sensitivity analysis, assuming a 10% decrease or increase in the value of foreign currencies in which we operate.
−Removed: Our analysis has determined that a 10% decrease in value would have resulted in a decrease to our net loss of approximately $6.8 million for 2020, and a 10% increase in value would have resulted in an increase to our net loss of approximately $6.0 million for the year ended December 31, 2020.
−Removed: As of December 31, 2020, of the total $50.7 million in cash and cash equivalents, including restricted cash, $25.5 million was held by foreign subsidiaries.
+Added: We performed a sensitivity analysis, assuming a 10% decrease or increase in the value of foreign
+Added: Table of Conte nt s
+Added: currencies in which we operate.
+Added: Our analysis has determined that a 10% decrease in value would have resulted in a decrease to our net loss of approximately $7.6 million and a 10% increase in value would have resulted in an increase to our net loss of approximately $5.7 million for the year ended December 31, 2021.
+Added: As of December 31, 2021, of our total $22.3 million in cash and cash equivalents, including restricted cash, $11.1 million was held by foreign subsidiaries.
Of this amount, we believe $4.0 million could be subject to income tax withholding of 5% to 15% if the funds were repatriated to the U.S.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.