Company: SATLW
Filing Date: 2025-03-26
Form Type: 10-K
Source: 0001628280-25-014951
Chunk: 189

Company: Satellogic Inc.
Filing Date: 2025-03-26
Form: 10-K
Item: Item 7
Chunk 189
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, we may be required to record impairment charges. If the recoverable amount of an asset group is less than its carrying amount, the carrying amount of the asset group would be reduced to its recoverable amount. That reduction is an impairment loss that would be recognized in the Consolidated Statements of Operations and Comprehensive Loss.

Fair Value of Financial Instruments

Secured Convertible Notes

As permitted under ASC 825, Financial Instruments, (“ASC 825”), we elected the fair value option to account for our Secured Convertible Notes. We record changes in fair value of the Secured Convertible Notes in Changes in fair value of financial instruments in the statement of operations. The primary reason for electing the fair value option is to better reflect the way that the Company views the financial instrument by accounting for the Secured Convertible Notes at fair value in its entirety versus bifurcation of the embedded derivatives.

The Secured Convertible Notes are categorized as a Level 3 fair value measurement using the "with and without" method. Specifically, the value of the Secured Convertible Notes are estimated with and without the embedded derivative, using discounted cash flow (DCF) and Black Scholes put option models, as well as the as-converted value of the conversion shares estimated based on the traded price of the underlying shares. Each of the aforementioned methods are special cases of the income approach. The significant assumptions used in the model include volatility and credit spread.

A change in assumptions used to estimate the fair value of the convertible notes could materially affect our financial condition and results of operations. Refer to Note 15 (Fair Value Measurements and Financial Instruments) and Note 17 (Secured Convertible Notes), to the Consolidated Financial Statements for information regarding the Secured Convertible Notes.

Warrant Liabilities

We generally classify warrants for the purchase of shares of our common stock as liabilities on our consolidated balance sheets unless the warrants meet certain specific criteria that require the warrants to be classified within stockholders’ deficit. Those warrants accounted for as liabilities are freestanding financial instruments that may require us to transfer assets upon exercise. The warrant liability is initially recorded at fair value upon the date of issuance of each warrant and is subsequently remeasured to fair value at each reporting date. The private warrants are categorized as Level 3 fair value measurement using the Black-Scholes model with inputs that include current price of our common stock, exercise price, volatility, and risk-free rate.

Earnout Liabilities

In connection with the Reverse Recapitalization (see Note 4 (Reverse