Fair Value Measurement |
Fair Value Measurement
The fair value of the Company’s financial assets and liabilities are determined in accordance with the fair value hierarchy established in ASC 820, Fair Value Measurements, issued by the Financial Accounting Standards Board. The fair value hierarchy of ASC 820 requires an entity to maximize the use of observable inputs when measuring fair value and classifies those inputs into three levels:
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Level 1: |
Observable inputs, such as quoted prices (unadjusted) in active markets for identical assets or liabilities at the measurement date. |
Level 2: |
Observable inputs, other than Level 1 prices, such as quoted prices in active markets for similar assets and liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
Level 3: |
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
The Company's financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable and the warrant liabilities. Cash and cash equivalents are reported at their respective fair values on the Company's Consolidated Balance Sheets. Cash and cash equivalents are reported at their respective fair values on the Consolidated Balance Sheets. Where quoted prices are available in an active market, securities are classified as Level 1. The Company classifies money market funds as Level 1. When quoted market prices are not available for the specific security, then the Company estimates fair value by using quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs obtained from various third-party data providers, including but not limited to benchmark yields, reported trades and broker/dealer quotes. Where applicable the market approach utilizes prices and information from market transactions for similar or identical assets. The Company will classify commercial paper, corporate debt securities and asset-backed securities as Level 2. As of January 1, 2023 and January 2, 2022, the Company did not have short-term and long-term investments that are classified available-for-sale. As of January 1, 2023 and January 2, 2022, the Company had cash and cash equivalents of $322.9 million and $385.3 million, respectively.
The following table details the fair value measurements of assets and liabilities that were measured at fair value on a recurring basis based on the following three-tiered fair value hierarchy per ASC 820, Fair Value Measurement, as of January 1, 2023 and January 2, 2022 (in thousands).
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Fair Value Measurement using |
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Level 1 |
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Level 2 |
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Level 3 |
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Total Fair Value |
As of January 1, 2023 |
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Assets: |
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Money Market Funds |
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$ |
319,946 |
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$ |
— |
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$ |
— |
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$ |
319,946 |
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Liabilities: |
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Private Placement Warrants |
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$ |
— |
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$ |
— |
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$ |
49,080 |
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$ |
49,080 |
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As of January 2, 2022 |
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Liabilities: |
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Private Placement Warrants |
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$ |
— |
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$ |
— |
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$ |
124,260 |
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$ |
124,260 |
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The Company’s liabilities are measured at fair value on a non-recurring basis, including 6,000,000 shares of the Private Placement Warrants that were assumed from the Business Combination and were held by Rodgers Capital, LLC (the “Sponsor”) and certain of its members. The fair value of the Private Placement Warrants is considered a Level 3 valuation and is determined using the Black-Scholes valuation model. The key assumptions impacting the fair value of the Private Placement Warrants are the fair value of the Company’s common stock as of each re-measurement date, the remaining contractual terms of the Private Placement Warrants, risk-free rate of return and expected volatility which is based on the historical and implied volatility of the Company and the volatility of the Company’s peer group.
As of January 1, 2023, the fair value of the Private Placement Warrants was $8.18 per share with an exercise price of $11.50 per share. The following table summarizes the changes for Level 3 items measured at fair value on a recurring basis using significant unobservable inputs (in thousands).
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Private Placement Warrants |
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Convertible Preferred Stock Warrants |
Fair value as of December 31, 2020 |
$ |
— |
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$ |
15,995 |
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Acquired from the Business Combination |
72,900 |
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— |
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Settlements |
— |
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(20,776) |
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Change in fair value |
51,360 |
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4,781 |
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Fair value as of January 2, 2022 |
124,260 |
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— |
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Change in fair value |
(75,180) |
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— |
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Fair value as of January 1, 2023 |
$ |
49,080 |
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$ |
— |
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The following table summarizes the key assumptions used for determining the fair value of convertible preferred stock warrants and common stock warrants.
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Private Placement Warrants Outstanding as of January 1, 2023 |
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Private Placement Warrants Outstanding as of January 2, 2022 |
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Private Placement Warrants Acquired on July 14, 2021 |
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Convertible Preferred Stock Warrants Exercised on February 22, 2021 |
Expected term (in years) |
3.5 |
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4.5 |
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5.0 |
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2.5 - 4.1 |
Expected volatility |
92.5% |
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77.5% |
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50.0% |
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75.0% |
Risk-free interest rate |
4.2% |
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1.2% |
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0.8% |
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0.2% - 0.4% |
Expected dividend rate |
0.0% |
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0.0% |
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—% |
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0.0% |
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