These two types of inputs have created the following fair-value hierarchy:
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Level 1: |
Quoted prices for identical instruments in active markets; |
Level 2: |
Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and |
Level 3: |
Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
The following table presents the fair value per warrant and the valuation assumptions under the Black-Scholes OPM as of March 31, 2022 and December 31, 2021.
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March 31, 2022 |
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December 31, 2021 |
| Fair value |
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$ |
2.63 |
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$ |
2.47 |
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| Exercise price |
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$ |
11.50 |
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$ |
11.50 |
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| Common stock price |
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$ |
8.48 |
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$ |
6.75 |
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| Expected option term (years) |
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4.42 years |
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4.67 years |
| Expected volatility |
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45.90 |
% |
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60.50 |
% |
| Risk-free rate of return |
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2.41 |
% |
|
1.21 |
% |
| Expected annual dividend yield |
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— |
% |
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— |
% |
The assumptions used in the Black-Scholes OPM were as follows:
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| Roccor Black-Scholes OPM Assumptions |
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Risk-free interest rate |
0.1 |
% |
Revenue discount rate |
7.0 |
% |
Revenue volatility |
30.0 |
% |
Earnout payment discount rate |
4.0 |
% |
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The fair value of the earnout is arrived at using the Black-Scholes option pricing model (“OPM”) using the following assumptions:
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| MIS Black-Scholes OPM Assumptions |
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Risk-free interest rate |
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0.05 |
% |
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Revenue volatility |
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51.7 |
% |
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The assumptions used in the Black-Scholes OPM were as follows:
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| Roccor Black-Scholes OPM Assumptions |
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Risk-free interest rate |
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0.1 |
% |
Revenue discount rate |
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7.0 |
% |
Revenue volatility |
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30.0 |
% |
Earnout payment discount rate |
|
4.0 |
% |
The private warrants were valued at $2.81 and $2.47 per warrant as of September 2, 2021 and December 31, 2021, respectively, under the Black-Scholes OPM using the following assumptions:
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September 2,
2021 |
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December 31, 2021 |
| Exercise price |
$ |
11.50 |
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$ |
11.50 |
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| Common stock price |
$ |
10.50 |
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$ |
6.75 |
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| Expected option term (years) |
5 |
|
4.67 |
| Expected volatility |
32.80 |
% |
|
60.50 |
% |
| Risk-free rate of return |
0.78 |
% |
|
1.21 |
% |
| Expected annual dividend yield |
— |
% |
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— |
% |
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