Fair Value Measurements

12 Months Ended

Dec. 31, 2022

Note 18. Fair Value Measurements

The Public Warrants are classified as Level 1 financial instruments. The fair value of Public Warrants has been measured based on the listed market price of such warrants.

The Private Placement Warrants are classified as Level 3 financial instruments. The Company estimated the fair value of the Private Placement Warrants using a Black Scholes Pricing Model. Inherent in a Black Scholes Pricing Model are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock warrants based on implied volatility from the Company’s traded warrants and from historical volatility of select peer company’s common stock that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury

zero-coupon

yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants 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 change in the fair value of the derivative warrant liabilities is summarized as follows (in thousands):


	Public Warrants			Private Placement Warrants			Total

Initial measurement at April 20, 2021	$	52,638		$	32,026		$	84,664
Change in fair value		(22,733	)		34,145			11,412
Exercise of warrants		(12,928	)		(65,876	)		(78,804	)
Foreign currency translation adjustments		(183	)		(295	)		(478	)

Derivative warrant liabilities at December 31, 2021	$	16,794		$	—		$	16,794
Change in fair value		(10,132	)		—			(10,132	)
Foreign currency translation adjustments		260			—			260

Derivative warrant liabilities at December 31, 2022	$	6,922		$	—		$	6,922

Contingent consideration is classified as Level 2 and Level 3 financial instruments. The fair value of the Level 2 contingent consideration has been measured based on the underlying stock price of the Company. The fair value of the Level 3 contingent consideration is determined based on significant unobservable inputs including discount rate, estimated revenue of the acquired business, and estimated probabilities of achieving specified technology development and operational milestones. Significant judgment is employed in determining the appropriateness of the inputs described above. Changes to the inputs could have a material impact on the company’s financial position and results of operations in any given period.

With the respect to the contingent consideration obligation arising from the Spirable acquisition, the Company estimates the fair value at each subsequent reporting period using a probability weighted discounted cash flow model for contingent milestone payments and Monte Carlo simulation for contingent revenue payments.

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2022 (in thousands):


Description	Level 1		Level 2		Level 3		Total

Liabilities:
Public Warrants	$	6,922	$	—	$	—	$	6,922
Contingent Consideration		—		5,990		4,739		10,729

Total liabilities	$	6,922	$	5,990	$	4,739	$	17,651

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2021 (in thousands):


Description	Level 1		Level 2		Level 3		Total

Liabilities:
Public Warrants	$	16,794	$	—	$	—	$	16,794
Contingent Consideration		—		20,532		7,840		28,372

Total liabilities	$	16,794	$	20,532	$	7,840	$	45,166

The change in the fair value of the contingent consideration is summarized as follows (in thousands):


	2022			2021

Beginning balance – January 1	$	28,372		$	2,302
Additions (1)		—			6,615
Issuance of shares (2)		(17,452	)		—
(Gain) loss on fair value remeasurement of contingent consideration (3)		(218	)		19,405
Foreign currency translation adjustments		27			50

Ending balance – December 31	$	10,729		$	28,372

(1)	Additions during the year ended December 31, 2021 represent contingent consideration liabilities arising from the Spirable acquisition (refer to Note 3 – Business Combinations) in the third quarter of 2021.

(2)	On February 2, 2022, the Company issued 2,701,576 additional ordinary shares to the sellers of Second Spectrum that received equity consideration, pursuant to the terms and conditions of the business combination agreement.

(3)

(Gain) loss on fair value remeasurement of contingent consideration mainly consist of an increase in the obligation to the former management shareholders of Second Spectrum as the

lock-up

period expired on December 31, 2021 and December 31, 2022. Pursuant to the terms and conditions of the business combination agreement with Second Spectrum, the Company issued an additional 2,701,576 shares of the Company’s common stock to the former Second Spectrum shareholders in the first quarter of fiscal year 2022 and will issue an additional

1,677,920

shares of the Company’s common stock to the former Second Spectrum shareholders in early 2023.

As of December 31, 2022, the Company had no transfers between levels of the fair value hierarchy of its assets or liabilities measured at fair value.

- 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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