Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurement

v3.22.2.2
Fair Value Measurement
3 Months Ended
Mar. 31, 2022
Fair Value Disclosures [Abstract]  
Fair Value Measurement
8.
Fair Value Measurement

 

The Company follows the guidance in ASC 820, “Fair Value Measurement” for its liabilities that are re-measured and reported at fair value at each reporting period.

The fair value of the Company’s common and preferred stock warrant 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. 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.

Level 2:

Significant other observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3:

Unobservable inputs reflecting management’s assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

 

The Company classifies financial instruments in Level 3 of the fair value hierarchy when there is reliance on at least one significant unobservable input to the valuation model. In addition to these unobservable inputs, the valuation models for Level 3 financial instruments typically also rely on a number of inputs that are readily observable, either directly or indirectly. The Company’s assessment of a particular input to the fair value measurement requires management to make judgments and consider factors specific to the asset or liability. The fair value hierarchy requires the use of observable market data when available in determining fair value. The Company recognizes transfers between levels within the fair value hierarchy, if any, at the end of each period.

The following tables present the Company’s fair value hierarchy for its financial instruments that are measured at fair value on a recurring basis:

 

 

 

March 31, 2022

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Long-term liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Public warrants

 

$

2,990

 

 

$

 

 

$

 

 

$

2,990

 

Private Placement warrants

 

 

 

 

 

2,657

 

 

 

 

 

 

2,657

 

Contingent Earnout liability

 

 

 

 

 

 

 

 

3,143

 

 

 

3,143

 

 

 

$

2,990

 

 

$

2,657

 

 

$

3,143

 

 

$

8,790

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2021

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Long-term liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Public warrants

 

$

5,060

 

 

$

 

 

$

 

 

$

5,060

 

Private Placement warrants

 

 

 

 

 

6,422

 

 

 

 

 

 

6,422

 

Contingent Earnout liability

 

 

 

 

 

 

 

 

10,026

 

 

 

10,026

 

 

 

$

5,060

 

 

$

6,422

 

 

$

10,026

 

 

$

21,508

 

 

Public Warrants

The Company assumed 11,499,992 publicly-traded warrants (“Public Warrants”) upon the Merger, all of which were issued in connection with NavSight’s initial public offering and entitled the holder to purchase one share of the Company’s Class A common stock, par value $0.0001, at an exercise price of $11.50 per share. The Public Warrants are publicly traded and are exercisable for cash unless certain conditions occur, such as the failure to have an effective registration statement related to the shares issuable upon exercise or redemption by the Company under certain conditions, at which time the warrants may be cashless exercised.

The fair value of the Public Warrants is based on quoted market process and is classified as a Level 1 financial instrument.

Private Placement Warrants

The Company assumed 6,600,000 private placement warrants issued by NavSight (“Private Warrants”) upon the Merger, all of which were issued in connection with NavSight’s initial public offering and entitled the holder to purchase one share of the Company’s Class A common stock, par value $0.0001, at an exercise price of $11.50 per share. The Private Warrants are non-redeemable for cash so long as they are held by the initial purchasers or their permitted transferees. If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Warrants are redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

The fair value of the Private Warrants is estimated using the Black-Scholes model with inputs that include the Company’s stock price in an actively traded market, making this fair value classified as a Level 2 financial instrument. The other significant assumptions used in the model are the exercise price, expected term, volatility, interest rate, and dividend yield.

The table below quantifies the significant inputs used for the Private Warrants:

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Fair value of the Company’s common stock

 

$

2.10

 

 

$

3.38

 

Exercise price

 

$

11.50

 

 

$

11.50

 

Risk-free interest rate

 

 

2.42

%

 

 

1.26

%

Expected volatility factor

 

 

70.0

%

 

 

70.0

%

Expected dividend yield

 

 

%

 

 

%

Remaining contractual term (in years)

 

 

4.4

 

 

 

4.6

 

 

Contingent Earnout Liability

In connection with the Merger, eligible Spire equity holders are entitled to receive additional shares of the Company's Common Stock upon the achievement of certain Earnout Triggering Events. The estimated fair value of the contingent earnout liability was determined using a Monte Carlo simulation using a distribution of potential outcomes on a monthly basis over the Earnout Period, which is a period up to five years post-closing of the transaction, prioritizing the most reliable information available. The assumptions utilized in the calculation are based on the achievement of certain stock price milestones, including the current price of the Company’s common stock, expected volatility, risk-free rate, expected term and dividend rate.

The table below quantifies the significant inputs used for the Contingent Earnout Liability:

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Fair value of the Company’s common stock

 

$

2.10

 

 

$

3.38

 

Risk-free interest rate

 

 

2.42

%

 

 

1.26

%

Expected volatility factor

 

 

70.0

%

 

 

70.0

%

Expected dividend yield

 

 

%

 

 

%

Remaining contractual term (in years)

 

 

0.004

 

 

 

0.004

 

 

The following table presents a summary of the changes in the fair value of the Company’s Level 3 financial instruments that are measured at fair value on a recurring basis:

 

 

 

Contingent Earnout Liability

 

 

Warrant
Liability

 

Fair value as of December 31, 2020

 

$

 

 

$

4,007

 

Issuance of warrants to Silicon Valley Bank

 

 

 

 

 

308

 

Change in fair value of warrant liabilities

 

 

 

 

 

5,991

 

Fair value as of March 31, 2021

 

$

 

 

$

10,306

 

Fair value as of December 31, 2021

 

$

10,026

 

 

$

 

Change in fair value of contingent earnout liability

 

 

(6,883

)

 

 

 

Fair value as of March 31, 2022

 

$

3,143

 

 

$

 

 

During the three months ended March 31, 2021, the Company issued 32,412 warrants at a fair value of $308 to Silicon Valley Bank with an exercise price of $1.60. The warrants allow the holder to acquire the Company’s common stock. Silicon Valley Bank exercised the Series C warrants, which were converted into common stock upon the Closing.