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Fair Value Measurements

6 Months Ended

Sep. 30, 2021

4. Fair Value Measurements

The Company's fair value hierarchy for its financial assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2021, is as follows:


	Level 1		Level 2		Level 3		Total
	(in thousands)
Liabilities
Public Warrants	$	31,191	$	—	$	—	$	31,191
Private Placement Warrants		—		—		14,930		14,930
Total liabilities	$	31,191	$	—	$	14,930	$	46,121

The fair value of cash, restricted cash, accounts receivable, accounts payable, and accrued liabilities are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date as of September 30, 2021 and March 31, 2021. The Public Warrants are classified as Level 1 due to the use of an observable market quote in an active market. The Private Placement Warrants contain significant unobservable inputs including the expected term. Therefore, these warrant liabilities were evaluated to be a Level 3 fair value measurement. There were no financial assets or liabilities measured at fair value on a recurring basis as of March 31, 2021 and no other financial instruments in the Level 1, Level 2, or Level 3 categories as of September 30, 2021.

As of September 30, 2021, the Company has Private Placement Warrants and Public Warrants defined and discussed in Note 10, "Common Stock and Warrants." The Warrants are measured at fair value on a recurring basis. The Company performs routine procedures such as comparing prices obtained from independent sources to ensure that appropriate fair values are recorded. The Company valued the Private Placement Warrants using a binomial lattice model. Inherent in a binomial lattice model ("lattice model") are assumptions related to expected term, volatility, risk-free interest rate, and dividend yield. The expected term of the Warrants was determined to be equivalent to their remaining contractual term and includes consideration of the redemption features that were incorporated into the binomial lattice model. The Company derived the volatility of its Private Placement Warrants based on an implied volatility that was estimated using an iterative process to calibrate a binomial lattice model to the trading price of the Public Warrant. The risk-free interest rate is based on the U.S. Treasury's rates of U.S. Treasury zero-coupon bonds with a maturity similar to the expected term of the Private Placement Warrants. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero. The following assumptions were used for the valuation of the Private Placement Warrants:


	September 30,
	2021

Expected term	4.71
Volatility		35.50	%
Risk-free rate		0.94	%
Dividend yield		—

The Public Warrants were valued as of September 30, 2021 using the listed trading price of $1.84 per Public Warrant.

The change in the fair value of warrant liabilities is as follows:


	Warrant Liabilities
	(in thousands)
Balance at March 31, 2021	$	—
Assumption of Private Placement Warrants and Public Warrants		75,415
Change in fair value of warrant liabilities		(29,294	)
Balance at September 30, 2021	$	46,121

As of September 30, 2021, the Company had transfers between levels of the fair value hierarchy of its assets and liabilities measured at fair value. The Company recognizes transfers between levels of the hierarchy based on the fair values of the respective financial measurements at the end of the reporting period in which the transfer occurred. At June 30, 2021, the Company used observable inputs for similar liabilities to determine the fair value of the Private Placement Warrants, which resulted in a Level 2 classification. During the three months ended September 30, 2021, the Company used a lattice model to determine the fair value of the Private Placement Warrants, which utilizes unobservable inputs in determining fair value and therefore has classified the Private Placement Warrants as Level 3 financial instruments as of September 30, 2021. As a result of the change in valuation approach, the Company had transfers out of Level 2 totaling approximately $14.9 million during the three months ended September 30, 2021.

- 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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