The fair value of equity securities is determined by multiplying their quoted share price and the number of shares held.
In January 2023, the Company issued the Anzu Note to the institutional investor Anzu Ventures II LLC ('Anzu’) in a principal amount of USD 3.2 million (€ 3.0 million). The Anzu Note matures on January 3, 2028, and includes interest payable monthly at a rate of 3% per annum. In addition, the Anzu Note includes a voluntary prepayment right for voxeljet, and, in the case of fundamental changes including a change of control in voxeljet, a right by voxeljet to repay the Anzu Note and a right by Anzu to require that voxeljet repurchases the Anzu Note. The aforementioned rights are considered to be embedded derivatives that have to be bifurcated. A one-time interest payment equal to the above principal amount of USD 3.2 million (as of September 30, 2023: € 3.0 million) is required to be paid upon maturity or at time of prepayment. The terms of the Anzu Note include certain covenants and events of default.
The Anzu Note contains an early prepayment right for the Company (call option) and a conditional early prepayment right for the lender (put option dependent on the occurrence of a fundamental change event). The initial analysis of the derivative financial instruments in connection with the early prepayment rights embedded in the Anzu Note was based on the analysis of the market rate of interest implied in the contract and the contractual strike interest rate underlying the call and put option. This qualitative analysis yielded a fair value of zero for the call option and a fair value equal to the intrinsic value of the put option. The result was confirmed by a Hull-White model using the U.S. Treasury yield curve, the volatility thereof, the expected recovery rate and the default intensity (credit spread) as well as the mean reversion as input parameters. The fair value of the conditional put option at inception was derived in an iterative process based on the contractual terms of the Anzu Note, the strike price of the put option, likelihood of occurrence of a fundamental change event and the fair value of the combined instrument including the derivatives. The equilibrium (i.e. matching of the total fair value of the instrument with the funds received under the Anzu Note) yields the fair value of the put and the implied interest rate of the note without the put. The subsequent valuation of the call option is based on a qualitative assessment of changes in the credit conditions of the Company; the subsequent valuation of the conditional put option is based on the likelihood of occurrence of a fundamental change event and the updated implied interest rate using market yield curves. As of September 30, 2023, management assessed the likelihood of occurrence of a fundamental change event to be at 25%.
The fair value of embedded derivative financial instruments from the Anzu Note is measured using inputs that are mostly not observable in the market and it has therefore been classified in level 3. The fair value of the conditional put option might increase (decrease) based on an increase (decrease) in the estimated likelihood of occurrence of a fundamental change event. An increase (decrease) in the likelihood of one percentage point would lead to an increase (decrease) in the fair value of the put of kEUR 35.
For the revaluation of the put option voxeljet uses an external expert. The voxeljet team receives and reviews the calculation and makes appropriate postings on each balance sheet date. The external expert provides the calculation to the voxeljet team on a quarterly basis.
The following table presents the changes in level 3 instruments for the nine months ended September 30, 2023, which were related to the Anzu Note as described above:
|
|
|
|
|
Non-current liabilities |
(€ in thousands) |
|
Derivative financial instruments |
Balance at December 31, 2022 |
|
— |
Addition |
|
535 |
(Gains)/losses from revaluation recognized in income statement |
|
325 |
(Gains)/losses from foreign currency translation recognized in income statement |
|
9 |
Balance at September 30, 2023 |
|
869 |
Derivative financial instruments are initially measured at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are generally recognized in profit or loss as finance income or finance expense. Finance expense amounting to kEUR 325 was recognized for the nine months ended September 30, 2023. Further, a loss from foreign currency valuation of kEUR 9 was recognized in other operating expenses for the nine months ended September 30, 2023. These effects are attributable to changes in unrealized gains/losses relating to financial liabilities held at the end of the reporting period September 30, 2023.
The fair value of the other long-term debt was determined using discounted cash flow models based on the relevant forward interest rate yield curves, considering the credit risk of voxeljet.
Due to their short maturity and the current level of interest rates, the carrying amounts of cash and cash equivalents, restricted cash, trade receivables, trade payables, term deposits and current portions of long-term debt approximate their fair values.
The Group’s policy is to recognize transfers into and transfers out of fair value hierarchy levels as of the end of each quarter. As of September 30, 2023, and December 31, 2022, there were no transfers of financial instruments measured at fair value between level 1, level 2 and level 3.
As of September 30, 2023, the Company was in compliance with all covenants.
8. Financial result
|
|
|
|
|
||
|
|
Three months ended September 30, |
||||
|
|
2023 |
|
2022 |
||
|
|
|
(€ in thousands) |
||||
| Finance expense |
|
(425 |
) |
|
(6,175 |
) |
| Interest expense on lease liabilities |
|
(286 |
) |
|
(33 |
) |
| Interest expense from the application of the effective interest rate method |
|
(139 |
) |
|
(1,475 |
) |
| Expense from revaluation of derivative financial instruments |
|
-- |
|
|
(4,664 |
) |
| Other |
|
-- |
|
|
(3 |
) |
| Finance income |
|
44 |
|
|
8 |
|
| Interest income from term deposits |
|
34 |
|
|
-- |
|
| Income from revaluation of derivative financial instruments |
|
7 |
|
|
-- |
|
| Other |
|
3 |
|
|
8 |
|
| Financial result |
|
(381 |
) |
|
(6,167 |
) |
|
|
|
|
|
|
||
|
|
|
Nine months ended September 30, |
||||
|
|
|
2023 |
|
2022 |
||
|
|
|
(€ in thousands) |
||||
| Finance expense |
|
(1,586 |
) |
|
(6,333 |
) |
| Interest expense on lease liabilities |
|
(866 |
) |
|
(103 |
) |
| Interest expense from the application of the effective interest rate method |
|
(395 |
) |
|
(2,625 |
) |
| Expense from revaluation of derivative financial instruments |
|
(325 |
) |
|
(2,827 |
) |
| Fair value valuation of financial assets |
|
-- |
|
|
(773 |
) |
| Other |
|
-- |
|
|
(5 |
) |
| Finance income |
|
107 |
|
|
610 |
|
| Payout of bond funds |
|
-- |
|
|
77 |
|
| Interest income from term deposits |
|
100 |
|
|
-- |
|
| Income from revaluation of derivative financial instruments |
|
-- |
|
|
516 |
|
| Other |
|
7 |
|
|
17 |
|
| Financial result |
|
(1,479 |
) |
|
(5,723 |
) |
