For accounting purposes, the Company was considered to have issued the 15,000,000 common share warrants issued by SOAC as part of the units offered in its initial public offering (“Public Warrants”) and the 9,500,000 private placement common share warrants issued by SOAC in a private placement simultaneously with the closing of the initial public offering (“Private Warrants”) as part of the Business Combination.

As at September 30, 2022, 15,000,000 (December 31, 2021 - 15,000,000) Public Warrants were outstanding. Public Warrants may only be exercised for a whole number of shares.

As at September 30, 2022, the value of outstanding Public Warrants of $19.5 million was recorded in additional paid in capital.

As at September 30, 2022, 9,500,000 Private Warrants were outstanding (December 31, 2021 - 9,500,000).

The Company re-measures the fair value of the Private Warrants at the end of each reporting period. The Private Warrants were valued using a Black-Scholes model, which resulted in a Level 3 fair value measurement. The primary unobservable input utilized in determining the fair value of the Private Warrants was the expected volatility of the Company’s common shares. The expected volatility was estimated using a binomial model based on consideration of the implied volatility from the Company’s Public Warrants adjusted to account for the call feature of the Public Warrants at prices above $18.00 during 20 trading days within any 30-trading day period.

As at September 30, 2022, the fair value of outstanding Private Warrants of $2.2 million is recorded as warrants liability. The following table presents the changes in the fair value of warrants liability:


	Private
	Warrants
Warrants liability as at December 31, 2021	$	3,126
Decrease in fair value of warrants liability		(892)
Warrants liability as at September 30, 2022	$	2,234

As at September 30, 2022 and December 31, 2021, the fair value of the Private Warrants was estimated using the following assumptions:


	September 30,			December 31,
	2022			2021
Exercise price	$	11.50		$	11.50
Share price	$	1.05		$	2.08
Volatility		91.72	%		64.6	%
Term		3.9 years			4.7 years
Risk-free rate		4.07	%		1.2	%
Dividend yield		0.0	%		0.0	%

There were no exercises or redemptions of the Public Warrants or Private Warrants during the three and nine months ended September 30, 2022.

Allseas holds warrants to purchase common shares (the Allseas Warrants), which will vest and become exercisable upon successful completion of the PMTS and will expire on September 30, 2026. A maximum of 11.6 million warrants to purchase common shares will vest if the PMTS is completed by September 30, 2023, gradually decreasing to 5.8 million warrants to purchase common shares if the PMTS is completed after September 30, 2025. The Company will record the expense for the Allseas Warrants upon successful completion of the pilot trial of the PMTS in the NORI Area D. No expense or liability has been recorded as at and for the three and nine months ended September 30, 2022.

With the successful completion of the pilot trial of the PMTS, as approved by the Company’s Board of Directors on November 11, 2022, the 11.6 million Allseas Warrants have vested and are exercisable (Note 12).