Spire Global, Inc. General form of registration statement for all companies including face-amount certificate companies

General form of registration statement for all companies including face-amount certificate companies

Fair Value Measurement

Fair Value Measurement

6 Months Ended

12 Months Ended

Jun. 30, 2021

Dec. 31, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurement

8.	Fair Value Measurement

The following tables present the Company’s fair value hierarchy for its derivative instruments and common and preferred stock warrant liabilities that are measured at fair value on a recurring basis:


	June 30, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Contingent interest embedded derivative (classified within long-term debt, non-current)	$	—	$	—	$	8,922	$	8,922

Liabilities:
Warrant liability	$	—	$	—	$	13,600	$	13,600


	December 31, 2020
	Level 1		Level 2		Level 3		Total
Liabilities:
Warrant liability	$	—	$	—	$	4,007	$	4,007

Contingent Interest Embedded Derivative

The contingent interest embedded derivative asset in the table above relates to a contingent interest feature of the FP Term Loan (Note 6), which is required to be bifurcated and is recorded at fair value. This embedded derivative asset is classified within Long-term debt,

non-current,

on the Condensed Consolidated Balance Sheet at June 30, 2021 on a combined basis with the host debt as it is reflective of the overall cash flow for this instrument. Subsequent changes in fair value are recognized in Interest expense, which did not have a material impact on the Condensed Consolidated Statement of Operations for the six months ended June 30, 2021.

The significant quantitative elements associated with the Company’s Level 3 inputs impacting the fair value measurement of the contingent interest embedded derivative asset include the original principal amount and the contractual term of the FP Term Loan, risk-adjusted discount rate, expected future cash flows based on the 8.5% initial rate and 4% post-merger rate and a weighted probability factor for the completion of the merger.

Warrant Liabilities

The warrant liability in the tables above consisted of the fair value of warrants to purchase the Company’s common stock and preferred stock and was based on the significant inputs not observable in the market, which represent a Level 3 measurement within the fair value hierarchy. The Company’s valuation of the stock warrants utilized the Black-Scholes option-pricing model, which incorporates assumptions and estimates to value the stock warrants. Changes in the fair value of the stock warrants are recognized in Other income, net in the Condensed Consolidated Statements of Operations.

instrument for

which the term is consistent with the expected life of the warrants. As there was no public market for the Company’s common and preferred stock, the Company determined the expected volatility for warrants granted based on an analysis of reported data for a peer group of companies.

The following tables present the Company’s fair value hierarchy for its warrants classified as equity that are measured at fair value on a nonrecurring basis:


	June 30, 2021
	Level 1		Level 2		Level 3		Total
Equity:
Warrants	$	—	$	—	$	970	$	970


	December 31, 2020
	Level 1		Level 2		Level 3		Total
Equity:
Warrants	$	—	$	—	$	970	$	970

The table below quantifies the most significant inputs used for the warrants:



	June 30, 2021			December 31, 2020

Fair value of the Company’s common stock	$	14.61		$	4.19
Risk-free interest rate		0.13	%		0.13	%
Expected volatility factor		68.3	%		68.4	%
Remaining contractual term (in years)		4.2			4.7

The following table provides a roll-forward of the aggregate fair values of the warrant liability for the six months ended June 30, 2021 as determined by Level 3 inputs:



Fair value at December 31, 2020	$	4,007
Issuance of warrants		308
Exercise of warrants		(891	)
Change in fair value		10,176

Fair value at June 30, 2021	$	13,600

During the six months

ended June 30, 2021, the Company issued 32,412 warrants to SVB with an exercise price of $1.60. The warrants allow the holder to acquire the Company’s common stock.

Certain holders of Series C preferred stock exercised their warrants to purchase 86,129 shares of common stock at a nominal amount during the six months ended June 30, 2021.

Based on the recent rounds of debt financing during the six months ended June 30, 2021 and the year ended December 31, 2020 and the terms of those debt agreements, current market conditions and the Company’s financial condition, the carrying amounts for Long-term debt and Convertible notes payable approximate fair value. The carrying amounts reported on the Condensed Consolidated Balance Sheets of other assets and liabilities which are considered to be financial instruments approximate fair value based on their short-term nature and current market indicators.

9.	Fair Value Measurement

The following tables present the Company’s fair value hierarchy for its common and preferred stock warrant liabilities (Note 12) that are measured at fair value on a recurring basis:


	December 31, 2020
	Level 1		Level 2		Level 3		Total
Liabilities:
Warrant liability	$	—	$	—	$	4,007	$	4,007


	December 31, 2019
	Level 1		Level 2		Level 3		Total
Liabilities:
Warrant liability	$	—	$	—	$	197	$	197

The Company’s valuation of the stock warrants utilized the Black-Scholes option-pricing model, which incorporates assumptions and estimates to value the stock warrants. Changes in the fair value of the stock warrants are recognized in Other income, net in the Consolidated Statements of Operations.

The quantitative elements associated with the Company’s Level 3 inputs impacting the fair value measurement of the stock warrant liability include the fair value per share of the Company’s common stock, the remaining contractual term of the warrants, risk-free interest rate, expected dividend yield and expected volatility of the price of the Company’s common stock. The Company determines the fair value per share of the Company’s common and preferred stock with assistance from third-party valuations and considers additional factors that the Company deems relevant. The risk-free interest rate is based on a treasury instrument for which the term is consistent with the expected life of the warrants. As there was no public market for the Company’s common and preferred stock, the Company determined the expected volatility for warrants granted based on an analysis of reported data for a peer group of companies.

The following tables present the Company’s fair value hierarchy for its warrants classified as equity (Note 12) that are measured at fair value on a nonrecurring basis:


	December 31, 2020
	Level 1		Level 2		Level 3		Total
Equity:
Warrants	$	—	$	—	$	970	$	970


	December 31, 2019
	Level 1		Level 2		Level 3		Total
Equity:
Warrants	$	—	$	—	$	428	$	428

The table below quantifies the most significant inputs used for the warrants:


	December 31,
	2020			2019
Fair value of the Company’s common stock	$	4.19		$	3.57
Risk-free interest rate		0.13	%		1.81	%
Expected volatility factor		68.4	%		45.0	%
Remaining contractual term (in years)		4.7			3.0

The following table provides a roll-forward of the aggregate fair values of the warrant liability as determined by Level 3 inputs:


Fair value at December 31, 2018	$	197
Change in fair value		—

Fair value at December 31, 2019		197
Issuance of warrants		3,612
Change in fair value		198

Fair value at December 31, 2020	$	4,007

Based on the recent rounds of debt financing during the years ended December 31, 2020 and 2019 and the terms of those debt agreements, current market conditions and the Company’s financial condition, the carrying amounts for Long-term debt and Convertible notes payable approximate fair value. The carrying amounts reported on the Consolidated Balance Sheets of other assets and liabilities which are considered to be financial instruments approximate fair value based on their short-term nature and current market indicators.

- 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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