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Contingent and Earn-Out Liabilities | 12 Months Ended
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Dec. 31, 2022
Reverse Capitalization [Abstract] |
Contingent and Earn-Out Liabilities | Contingent and Earn-Out Liabilities Earn-Out Milestones Certain of indie’s stockholders are entitled to receive up to 10,000,000 earn-out shares of the Company’s Class A common stock if the earn-out milestones are met. The earn-out milestones represent two independent criteria, each of which entitles the eligible stockholders to 5,000,000 earn-out shares per milestone met. Each earn-out milestone is considered met if at any time following the Transaction and prior to December 31, 2027, the volume weighted average price of indie’s Class A common stock is greater than or equal to $12.50 or $15.00 for any twenty trading days within any thirty-trading day period, respectively. Further, the earn-out milestones are also considered to be met if indie undergoes a Sale. A Sale is defined as the occurrence of any of the following for indie: (i) engage in a “going private” transaction pursuant to Rule 13e-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise cease to be subject to reporting obligations under Sections 13 or 15(d) of the Exchange Act; (ii) Class A common stock ceases to be listed on a national securities exchange, other than for the failure to satisfy minimum listing requirements under applicable stock exchange rules; or (iii) change of ownership (including a merger or consolidation) or approval of a plan for complete liquidation or dissolution. These earn-out shares have been categorized into two components: (i) those associated with stockholders with vested equity at the closing of the Transaction that will be earned upon achievement of the earn-out milestones (the “Vested Shares”) and (ii) those associated with stockholders with unvested equity at the closing of the Transaction that will be earned over the remaining service period with the Company on their unvested equity shares and upon achievement of the Earn-Out Milestones (the “Unvested Shares”). The Vested Shares are classified as liabilities in the consolidated balance sheet and the Unvested Shares are equity-classified share-based compensation to be recognized over time (see Note 17 — Share-Based Compensation). The earn-out liability was initially measured at fair value at the closing of the Transaction and subsequently remeasured at the end of each reporting period. The change in fair value of the earn-out liability is recorded as part of Other income (expense), net in the consolidated statement of operations. The estimated fair value of the earn-out liability was determined using a Monte Carlo Simulations analysis that simulated the future path of the Company’s stock price over the earn-out period. The assumptions utilized in the calculation are based on the achievement of certain stock price milestones including projected stock price, volatility, and risk-free rate. Escrow Shares 3,450,000 Class A common shares of indie were placed in escrow for the potential future release to the Sponsor in the event the earn-out milestones are met. The earn-out milestones for the Escrow Shares are identical to those of the earn-out shares. Achievement of each milestone entitles the shareholders to 50% of the total Escrow Shares. The Escrow Shares have been accounted for as a liability and remeasured to fair value each reporting period. At the closing of the Transaction on June 10, 2021, the earn-out liability had an initial fair value of $119,759, which was recorded as a long-term liability and a reduction to additional paid in capital in the consolidated balance sheet. As of November 9, 2021, the first earn-out milestone was achieved while the second Earn-Out Milestone remains unachieved. The achievement of the first earn-out milestone eliminated the variability in the arrangement that previously prevented this instrument to be equity-classified. As a result, the earn-out liabilities associated with the first Earn-Out Milestone were recorded to Additional paid-in capital in the consolidated balance sheet at its fair value. At the same time, the unearned liabilities associated with the second Earn-Out Milestones were also remeasured to its fair value and reclassified per ASC 815-40 to Additional paid-in capital in the consolidated balance sheet. The total fair value associated with the first and second Earn-Out Milestone is $158,517 and the change in fair value of $38,758 from its initial measurement date is recorded as part of Other income (expense), net in the consolidated statement of operations as of December 31, 2021. As of December 31, 2021, there was no liability remaining on the balance sheet. Contingent Considerations On May 13, 2020, in connection with the acquisition of City Semiconductor, Inc. (“City Semi”), the Company recorded contingent consideration as a long-term liability at a fair value of $1,180. The contingent consideration is comprised of two tranches. The first tranche is payable, up to a maximum of $500, upon the achievement of cash collection targets within twelve months of the acquisition, and $456 was achieved in May 2021. The second tranche is payable, up to a maximum of $1,500, upon the shipment of a product incorporating the acquired developed technology. In September 2021, the Company paid off the first tranche of the contingent consideration. The fair value of the second tranche contingent consideration liabilities was $1,383 as of December 31, 2022. On October 1, 2021, in connection with the acquisition of ON Design Israel, the Company recorded contingent consideration as a long-term liability at a fair value of $4,000. The contingent consideration is comprised of two tranches. The first tranche is payable, up to a maximum of $2,500, upon the achievement of Tapeout of certain product designs acquired from the seller within 30 months of the acquisition. The second tranche is payable, up to a maximum of $5,000, upon indie’s achievement of a Design Win related to certain acquired product designs within 36 months of the acquisition. The fair value of the first and second tranche contingent consideration liabilities was $1,817 and $2,222, respectively, and are recorded in Other long-term liabilities in the consolidated balance sheet as of December 31, 2021. The change in fair value since the acquisition date is recorded in Other income (expense), net in the consolidated statement of operations as of December 31, 2021. During the six months ended June 30, 2022, management determined that the product design specified in the contingent consideration provision would be replaced with a new product design that is better aligned with customer requirements and which will not be eligible for either of the contingent considerations. Accordingly, the fair value for both the Tapeout and Design Win were reduced to zero as of December 31, 2022. The change in fair value since the acquisition date is recorded in Other income (expense), net in the consolidated statement of operations. On January 4, 2022, in connection with the acquisition of Symeo, the Company recorded contingent considerations as a current and a long-term liability at a fair value of $4,390 and $3,446, respectively. The contingent consideration is comprised of two tranches. The first tranche is payable upon the achievement of a revenue threshold of $5,000 by December 31, 2022. The second tranche is payable upon Symeo’s achievement of a revenue threshold of $6,000 by December 31, 2023. The fair value of the first and second tranche contingent consideration liabilities as of December 31, 2022 was $2,000 and $4, respectively. The change in fair value since the acquisition date is recorded in Other income (expense), net in the consolidated statement of operations. See Note 3 — Business Combinations for additional information. Share-Based Compensation At the closing of the Transaction on June 10, 2021, ADK LLC’s share-based compensation awards (as such terms are defined below) were converted into equity in indie at the Exchange Ratio of 27.80. Share and per share information below have been converted from historical disclosure based on the Exchange Ratio. 2021 Omnibus Equity Incentive Plan The Company’s Board of Directors adopted the indie Semiconductor, Inc. 2021 Omnibus Equity Incentive Plan (the “2021 Plan”) effective June 10, 2021, which provides for the granting of nonqualified stock options, incentive stock options, restricted stock awards, stock appreciation rights, performance stock awards, unrestricted stock awards, distribution equivalent rights or any combination of the foregoing to employees and directors for a total of 10,368,750 shares. On June 22, 2022, the Company’s Board of Directors and shareholders approved an increase of shares by 10,500,000 to a total of 20,868,750 shares. The primary purpose of the 2021 Plan is to enhance the Company’s ability to attract, motivate and retain the services of qualified employees, officers and directors. The Company accounts for share-based compensation arrangements with employees and non-employees in accordance with ASC 718-10, Compensation — Stock Compensation, which requires the Company to account for the compensation expense related to all equity awards on a fair value based method. Further, the Company treats equity awards with multiple vesting tranches as a single award for expense attribution purposes and recognize compensation expense on a straight-line basis over the required service vesting period of the entire award. Since inception of the 2021 Plan, equity awards granted are substantially all in the form of restrictive stock units (“RSU”). These RSUs primarily have a four-year vesting schedule and vests annually in equal installments. The grant date fair value of RSUs issued per the 2021 Plan was valued based on the value of indie’s common stock on the date of grant. The RSUs are equity classified. Occasionally, the Company also grants equity awards in the forms of options or equity awards with either market condition (“MSU”) or performance conditions (“PSU”). Options typically have a four year vesting schedule in equal annual installments and a ten-year term from the original grant date. The grant date fair value of Options issued per the 2021 Plan was valued based on a Black-Scholes model at the time of the grant. Vesting for both the MSUs and PSUs require the award recipients’ continuous service with the Company and achievement of predetermined milestones. The grant date fair value of PSUs was based on the value of indie’s common stock on the date of grant. The grant date fair value of MSUs was determined using the Monte Carlo Simulations analysis. As of December 31, 2022, there were 10,259,207 award units in the 2021 Plan that were available for grant. Historical Profit Interests Historically, per the ADK LLC Operating Agreement, ADK LLC issued Class B units (“Profits Interests” or “Class B units”) to employees, directors and consultants. Class B units entitle the holders of such units to a share of ADK LLC’s profits and distributions of ADK’s assets to the extent their capital accounts are positive. Holders of Class B units do not have voting rights except to the extent required by law. The board of directors authorized 14,284,919 shares (or 513,846 units prior to the exchange) for grant under the ADK LLC Operating Agreement. The Class B units generally have a four-year vesting schedule, in which 25% of units vest after 12 months and the remaining 75% vest monthly over the following three-year period. Upon the consummation of the Transaction, the Class B units were converted into Class A common stock at the Exchange Ratio of 27.80. Any unvested shares will continue to vest over time following their original contractual terms. No additional profit interests were granted post the consummation of the Transaction. The Profit Interests are equity-classified awards that operate substantially the same as an RSU. The consummation of the Transaction is considered to be a qualifying liquidation event, such that all historically vested units are now considered to have value. As a result, the unrecognized compensation costs through the consummation date of the Transaction were recognized in full as a change of control satisfying the in-substance performance condition became probable. No compensation cost was recognized historically until the closing of the Transaction. Phantom Units On January 29, 2021, indie issued Phantom Units that give employees rights to receive, upon vesting, either 1,751,360 shares of Class A common stock (or 62,998 Phantom Units prior to giving effect to the Exchange Ratio) or the equivalent in cash at the election of indie (the “Phantom Units”). These Phantom Units had a grant date fair value of $6.83 per share of Class A common stock. The Phantom Units generally have a four-year vesting schedule, in which 25% of units vest after 12 months and the remaining 75% vest monthly over the following three-year period. Certain awards vest based on specific performance conditions. Notwithstanding the foregoing, no Phantom Units vested until December 10, 2021. These Phantom Units are equity-classified awards that operate substantially the same as an RSU. The grant date fair value of the Phantom Units was determined by dividing the expected equity value of the Company upon the Transaction by the Company’s expected capitalization structure at the time of the grant. No compensation cost was recognized historically until the closing of the Transaction. Unvested Earn-out Shares A portion of the earn-out shares were issued to individuals with unvested equity awards. While the payout of these shares requires achievement of the earn-out milestones, the individuals are required to complete the remaining service period associated with these unvested equity awards to be eligible to receive the earn-out shares. As a result, these unvested earn-out shares are equity-classified awards that operate substantially the same as an RSU. The aggregated grant date fair value of these shares totaled $3,919 (or $9.20 per share). The grant date fair value of the earn-out shares was valued based on the fair value of the earn-out liability at inception divided by total shares subject to the earn-out liability. Stock compensation expense is recorded in cost of goods sold, research and development and general and administrative expenses based on the classification of the work performed by the grantees. The following table sets forth the share-based compensation for the periods presented:
| December 31,
| 2022 |  | 2021
Cost of goods sold | $ | 149 |  |  | $ | — |
Research and development | 28,325 |  |  | 9,721 |
Selling, general, and administrative | 13,411 |  |  | 13,184 |
Total | $ | 41,885 |  |  | $ | 22,905 |
Total stock compensation expense for the year ended December 31, 2022 above included an accrual of $6,600 that represents awards issuable upon distribution of the Company’s 2022 annual incentive plan. The following table sets forth the changes in the Company’s outstanding aforementioned non-option awards for the years ended December 31, 2022 and 2021:
| Number of Shares |  | Weighted average grant date fair value |  | Shares Retained to Cover Statutory Minimum Withholding Taxes
Nonvested shares as of December 31, 2020 | 3,841,822 |  |  | $ | 2.61 |  |  |
Granted | 6,237,471 |  |  | $ | 9.00 |  |  |
Vested | (3,070,760) |  |  | $ | 4.17 |  |  | 153,636 |
Forfeited | (337,026) |  |  | $ | 4.04 |  |  |
Nonvested shares as of December 31, 2021 | 6,671,507 |  |  | $ | 7.79 |  |  |
Granted | 6,610,213 |  |  | $ | 7.81 |  |  |
Vested | (3,594,696) |  |  | $ | 7.51 |  |  | — |
Forfeited | (436,667) |  |  | $ | 10.46 |  |  |
Nonvested shares as of December 31, 2022 | 9,250,357 |  |  | $ | 8.52 |  |  |
As of December 31, 2022 there was $60,574 of total unrecognized compensation costs related to all nonvested shares, which is expected to be recognized over a weighted-average remaining vesting period of 3.3 years. The following table sets forth the changes in the Company’s outstanding options in the 2021 plan for the year ended December 31, 2022:
| Options |  | Weighted-average exercise price |  | Weighted-average remaining contractual term (years) |  | Aggregate intrinsic value
Outstanding at December 31, 2021 | — |  |  | $ | — |  |  |  |  | $ | — |
Granted | 384,108 |  |  | $ | 10.77 |  |  |  |  |
Exercised | — |  |  | $ | — |  |  |  |  |
Forfeited or expired | (15,233) |  |  | $ | 11.69 |  |  |  |  |
Outstanding at December 31, 2022 | 368,875 |  |  | $ | 10.74 |  |  | 9.07 |  | $ | — |
Exercisable at December 31, 2022 | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Vested or expected to vest | — |  |  | $ | — |  |  | — |  |  | $ | — |
There were no options granted or outstanding for the year ended December 31, 2021. The Company uses the Black-Scholes option pricing model to estimate the fair value of stock options. Fair value is estimated at the date of grant for employee options. The following assumptions were used in the Black-Scholes model to calculate the fair value of stock options granted for the year ended December 31, 2022 for the 2021 Plan.
|  |  | December 31, 2022
Expected life of options (in years) (1) |  |  | 6
Dividend yield (2) |  |  | — | %
Risk-free interest rate (3) |  |  | 1.35% - 3.39%
Volatility (4) |  |  | 53.95% - 77.74%
(1)The Company opted for simplified method permitted by ASC 718 for companies that offers plain vanilla options and do not have sufficient historical data to provide a reasonable basis to estimate the expected term. Under the simplified term, expected term = ((vesting term + original contractual term) / 2). (2)The Company has assumed a dividend yield of zero as it has no plans to declare dividends in the foreseeable future. (3)Risk free rate was obtained from US treasury notes for the expected terms noted as of the valuation date. (4)Volatility, or the standard deviation of annualized returns, was calculated based on the Company’s internal volatility. The weighted-average grant date fair value per share of options granted during the year ended December 31, 2022 was $10.77. There were no stock options exercised under the 2021 Plan during the year ended December 31, 2022 As of December 31, 2022, the Company had $1,599 of unrecognized stock-based compensation expense related to stock options. This cost is expected to be recognized over a weighted-average period of 3.1 years. TeraXion Option Plan On October 12, 2021, the Company assumed fully vested TeraXion options, which became exercisable to purchase 1,542,332 shares of indie Class A common stock with a fair value of $17,249 in connection with the acquisition. The options have a 10-year term from the original grant date. The consummation of the TeraXion acquisition is considered to be a qualifying liquidation event per the original option plan, all of the options became fully vested upon the acquisition date. As such, there is no further stock-based compensation expense to be recognized. The following table sets forth the changes in the Company’s outstanding options for the year ended December 31, 2022:
| Options |  | Weighted-average exercise price |  | Weighted-average remaining contractual term (years) |  | Aggregate intrinsic value
Outstanding at December 31, 2021 | 1,450,081 |  |  | $ | 0.20 |  |  | 5.93 |  | $ | 17,095 |
Granted | — |  |  | $ | — |  |  |  |  |
Exercised | (235,144) |  |  | $ | 0.44 |  |  |  |  |
Forfeited or expired | (893) |  |  | $ | 0.05 |  |  |  |  |
Outstanding at December 31, 2022 | 1,214,044 |  |  | $ | 0.16 |  |  | 4.88 |  | $ | 6,889 |
Exercisable at December 31, 2022 | 1,214,044 |  |  | $ | 0.16 |  |  | 4.88 |  | $ | 6,889 |
Vested or expected to vest | 1,214,044 |  |  | $ | 0.16 |  |  |  |  | $ | 6,889 |
2023 Employment Inducement Incentive Plan On March 22, 2023, the Company’s board of directors approved the indie Semiconductor, Inc. 2023 Employment Inducement Incentive Plan (the “2023 Inducement Plan”), which became effective on such date without stockholder approval pursuant to Rule 5635(c)(4) of The Nasdaq Stock Market LLC listing rules (“Rule 5635(c)(4)”). The 2023 Inducement Plan provides for the grant of nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock units and other stock- or performance-based awards. In accordance with Rule 5635(c)(4), awards under the 2023 Inducement Plan may only be made to a newly hired employee who has not previously been a member of indie’s board of directors, or an employee who is being rehired following a bona fide period of non-employment by indie as a material inducement to the employee’s entering into employment with the Company. A total of 2,000,000 shares of Class A common stock were reserved for issuance under the 2023 Inducement Plan. To the extent that an award lapses, expires, is cancelled, is terminated, unexercised or ceases to be exercisable for any reason, or the rights of its recipient terminate, any shares subject to such award shall again be available for the grant of a new award under the 2023 Inducement Plan. As of March 28, 2023, there were no awards outstanding and 2,000,000 Class A common stock shares available for future grant under the 2023 Inducement Plan.

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