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Fair Value Measurements

9 Months Ended

Sep. 30, 2022

The Company follows the guidance in ASC 820, "Fair Value Measurement," for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period. The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities).

The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

Level 1: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2: Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.

Level 3: Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.

The Company’s financial instruments include cash equivalents, restricted cash, accounts receivable from customers, accounts payable and accrued liabilities, all of which are typically short-term in nature. The Company believes that the carrying amounts of these financial instruments reasonably approximate their fair values due to their short-term nature.

The following table presents information about the Company’s derivative liabilities that are measured at fair value on a recurring basis beginning February 4, 2022 (the date of closing of the Business Combination) when the derivative liabilities were assumed, and discloses the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:


Description	Level	Fair Value at September 30, 2022		Fair Value at June 30, 2022		Fair Value at February 4, 2022		Gain (Loss) Three Months Ended September 30, 20221		Gain (Loss) Nine Months Ended September 30, 20221
Private Warrants derivative liability	3	$	662	$	3,693	$	3,916	$	3,031	$	3,254
Forward share purchase agreements derivative liability 2	3	—		17,763		14,170		3,939		346
Escrow Shares derivative liability	3	47		3,481		6,868		3,434		6,821
Stockholder earn-out rights derivative liability	3	288		12,147		26,131		11,859		25,843
Total		$	997	$	37,084	$	51,085	22,264		$	36,264

1 Totals may not foot due to rounding.

2 The forward share purchase agreements were settled effective August 1, 2022, at which time the fair value was $13,824 based on cash settlement.

Assumptions used to determine the fair values are presented in the following sections:

Private Warrants Derivative Liability

The Private Warrants were valued using a Black-Scholes model and the following Level 3 inputs:


	September 30, 2022		June 30, 2022		February 4, 2022
Exercise price	$	11.50	$	11.50	$	11.50
Stock price	$	0.68	$	4.50	$	6.53
Volatility	98.0%		51.6%		34.3%
Term (in years)	4.34		4.59		5.00
Risk-free rate	4.1%		3.0%		1.8%
Dividend yield	0.0%		0.0%		0.0%

The volatility input was calculated using a weighted average of historical volatilities from select benchmark companies and the volatility of the Public Warrants. The term input represents the maximum contractual term, though the Private Warrants may be exercised earlier. The interest rate input is the U.S. Treasury constant maturity rate for the instrument that most closely matches the term input.

Forward Share Purchase Agreements Derivative Liability

The FPAs were valued using a Black-Scholes model and the following Level 3 inputs:


	September 30, 2022	June 30, 2022		February 4, 2022
Exercise price - one agreement	N/A	$	10.31	$	10.16
Exercise price - three agreements	N/A	$	10.16	$	10.01
Stock price	N/A	$	4.50	$	6.53
Volatility	N/A	70.4%		63.9%
Term (in years)	N/A	0.09		0.24
Risk-free rate	N/A	1.3%		0.2%
Dividend yield	N/A	0.0%		0.0%

The volatility input was calculated using a weighted average of historical volatilities from select benchmark companies. The term input represents the maximum contractual term, though the shares underlying the FPAs may be sold by the holders into the open market earlier, which in some cases they have been (see Note 13). The interest rate input is the U.S. Treasury constant maturity rate for the instrument that most closely matches the term input.

Escrow Shares Derivative Liability

The Escrow Shares derivative liability was calculated using a binomial lattice model and the following Level 3 inputs:


	September 30, 2022		June 30, 2022		February 4, 2022
First stock price trigger	$	13.50	$	13.50	$	13.50
Second stock price trigger	$	15.50	$	15.50	$	15.50
Stock price	$	0.68	$	4.50	$	6.53
Volatility	79.0%		68.0%		64.0%
Term (in years)	2.34		2.59		3.00
Risk-free rate	4.2%		3.0%		1.6%
Dividend yield	0.0%		0.0%		0.0%

The volatility input was calculated using a weighted average of historical volatilities from select benchmark companies. The term input represents the maximum contractual term, though the shares may be released from escrow earlier. The interest rate input is the U.S. Treasury constant maturity rate for the instrument that most closely matches the term input.

Stockholder Earn-Out Rights Derivative Liability

The stockholder earn-out rights were valued using a binomial lattice model and the following Level 3 inputs:


	September 30, 2022		June 30, 2022		February 4, 2022
First stock price trigger	$	13.50	$	13.50	$	13.50
Second stock price trigger	$	15.50	$	15.50	$	15.50
First revenue trigger	$	65,000	$	65,000	$	65,000
Second revenue trigger	$	101,000	$	101,000	$	101,000
Stock price	$	0.68	$	4.50	$	6.53
2022 Revenue assumption	$	47,500	$	49,500	$	55,500
Volatility	79.0%		68.0%		64.0%
Term (in years)	2.34		2.59		3.00
Risk-free rate	4.2%		3.0%		1.6%
Dividend yield	0.0%		0.0%		0.0%

The revenue assumption input represents the midpoint of revenue guidance the Company had provided in the respective period. The volatility input was calculated using a weighted average of historical volatilities from select benchmark companies. The term input represents the maximum contractual term, though the stockholder earn-out rights may vest earlier. The interest rate input is the U.S. Treasury constant maturity rate for the instrument that most closely matches the term input.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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