Fair Value Measurements
|3 Months Ended|
Mar. 31, 2022
|Fair Value Disclosures [Abstract]|
|Fair Value Measurements||Fair Value Measurements
The following table presents the Company's fair value hierarchy for financial liabilities:
The fair value of the public warrants is estimated based on the quoted market of such warrants.
Level 3 Disclosures
The fair value of the private warrants is estimated using the Binomial Lattice option-pricing model that requires the input of subjective assumptions. Other reasonable assumptions could provide different results. The carrying amount of the liability may fluctuate significantly and actual amounts paid may be materially different from the liability's estimated fair value.
The earn-out liability was initially measured at fair value at the closing of the Business Combination using a Monte Carlo simulation in an option pricing framework that simulated the future path of the Company's stock price over the earn-out period. The assumptions utilized in the calculation impact the likelihood of achieving certain stock price milestones, and include the Company's stock price, volatility, and risk-free rate. The carrying amount of the liability may fluctuate significantly and actual amounts paid may be materially different from the liability's estimated fair value.
The fair value of the derivative liability was initially measured at fair value considering the future issuance of Company common shares as well as the likelihood of achieving a certain Company market capitalization threshold using an option pricing approach. The assumptions utilized in the calculation include consideration of the likelihood of achieving certain market capitalization thresholds and the stock price of the Company. The carrying amount of the liability may fluctuate significantly and actual amounts paid may be materially different from the liability’s estimated fair value.
Volatility is a significant unobservable input assumed for each fair value measurement as disclosed in the table below:
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.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef