Derivative Financial Instruments |
9 Months Ended |
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Sep. 30, 2022 | |
Derivative Financial Instruments [Abstract] | |
DERIVATIVE FINANCIAL INSTRUMENTS | NOTE 8. DERIVATIVE FINANCIAL INSTRUMENTS
Common Stock Warrants
The Common Stock Warrants are traded on the Nasdaq Capital Market and may only be exercised for a whole number of shares. The Common Stock Warrants became exercisable on October 24, 2021 and will expire on September 24, 2026, unless early redeemed or if the Company extends the exercise period. The fair value of $7.9 million of Common Stock Warrants was recognized as a liability on September 24, 2021, the Closing Date, based on the closing market price. 130 Common Stock Warrants have been exercised from the Closing Date through September 30, 2022.
The Company recognized a gain of $0.2 million and $0.5 million for the three months ended September 30, 2022 and 2021, respectively, and recognized a gain of $7.1 million and $0.5 million for the nine months ended September 30, 2022 and 2021, respectively, classified within change in fair value of common stock warrant liability in the condensed consolidated statements of operations and comprehensive loss. The Common Stock Warrants’ fair value was 0.3 million and $7.4 million as of September 30, 2022 and December 31, 2021, respectively.
Contingent Earnout Liability
Upon the closing of the Business Combination and pursuant to the Sponsor Support Agreement, the Sponsor agreed to place the Earnout Shares into escrow, which will be released as follows: (a) 250,000 Earnout Shares will be released if, during the period from and after September 24, 2021 until September 24, 2024 (the “Earnout Period”), over any twenty trading days within any thirty day consecutive trading day period, the volume-weighted average price of the Company’s common stock (the “Applicable VWAP”) is greater than or equal to $11.50, (b) 500,000 Earnout Shares will be released if, during the Earnout Period, the Applicable VWAP is greater than or equal to $15.00, and (c) 300,000 Earnout Shares will be released if, during the Earnout Period, the Applicable VWAP is greater than or equal to $18.00 (the “triggering events”).
The Earnout Shares placed in escrow are legally issued and outstanding shares that participate in voting and dividends. The Earnout Shares (along with related escrowed dividends, if any) will be forfeited and not released from escrow at the end of the Earnout Period unless the triggering events described above are achieved during the Earnout Period. Upon the closing of the Business Combination, the contingent obligation to release the Earnout Shares was accounted for as a liability classified financial instrument upon their initial recognition because the triggering events that determine the number of shares required to be released from escrow include events that were not solely indexed to the common stock of the Company. The earnout liability is remeasured each reporting period with changes in fair value recognized in earnings.
The estimated fair value of the earnout liability was 0.1 million and $5.7 million as of September 30, 2022 and December 31, 2021, respectively, based on a Monte Carlo simulation model. Assumptions used in the valuations are described in Note 4. No triggering event occurred as of September 30, 2022. The Company recognized a gain of $0.4 million and $6.2 million for the three months ended September 30, 2022 and 2021, respectively, and recognized a gain of $5.6 million and $6.2 million for the nine months ended September 30, 2022 and 2021, respectively, classified within change in fair value of earnout liability in the condensed consolidated statements of operations and comprehensive loss. |