Sponsor Earn-Out Liability

9 Months Ended

Sep. 30, 2022

Contingent Liability [Abstract]

Sponsor Earn-Out Liability

Note 6.  Sponsor Earn-Out Liability

The Sponsor Earn-Out liability has been measured at its estimated fair value using Level 3 inputs in a Monte Carlo simulation valuation model. Inherent in the valuation model are assumptions related to expected stock price volatility, risk-free interest rate, expected life, and dividend yield. The Company estimates the volatility of its common stock by using an average of historical volatilities of select peer companies’ common stock that matches the expected remaining term of the awards. The risk-free interest rate is based on the U.S. Treasury yield curve for zero-coupon U.S. Treasury notes with maturities corresponding to the expected remaining life of the awards, which is

assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.

The key inputs into the Monte Carlo simulation model for the Sponsor Earn-Out liability were as follows at their measurement dates:

		September 30, 2022		February 3, 2022 (Closing Date)
Stock price	$	4.88	$	7.68
Expected volatility		82.0%		81.0%
Risk free rate		4.05%		1.63%
Contractual term (in years)		4.3		5.0
Expected dividends		0%		0%

The following table provides a reconciliation of the beginning and ending balances for the Sponsor Earn-Out liability:

		(in thousands)
Balance as of December 31, 2021	$	—
Additions during the period		36,393
Change in fair value		(16,400)
Balance as of September 30, 2022	$	19,993

There was no transfer in or out of Level 3 measurements during the three and nine months ended September 30, 2022.