Annual report pursuant to Section 13 and 15(d)

Warrants

v3.22.1
Warrants
12 Months Ended
Dec. 31, 2021
Equity [Abstract]  
Warrants Warrants
Historically, Alclear issued warrants for their holders to purchase shares of Class B redeemable capital units. These warrants were generally subject to performance-based vesting criteria, such as criteria related to new customer enrollments and technological innovations. The Company recognizes the expense for those warrants expected to vest on a straight-line basis over the requisite service period of the warrants, which generally ranges from three months to six years. For warrants that vest upon issuance, the entire cost is expensed immediately.
During 2019, 650,000 equity classified warrants were granted with a weighted average grant date fair value per warrant of $43.30. In 2020, 8,382 equity classified warrants were granted with a weighted average grant date fair value per warrant of $289.01. As of December 31, 2020, Alclear had 658,382 equity warrants outstanding at a weighted-average exercise price of $222.15 per warrant and 70,000 liability warrants outstanding at a weighted-average exercise price of $36.74 per warrant.
Prior to the reorganization, in 2021, Alclear issued the following warrants for Class B redeemable capital units:
Number of Units Weighted-average exercise price
Liability awards 1,000 $ 1.00
Equity awards 114,797 $ 194.85
The fair values of warrants granted in 2021 were estimated based on the Black-Scholes option pricing model using the weighted-average significant unobservable inputs (Level 3 inputs) as follows:
2021
Risk-free interest rate
0.36% - 0.92%
Exercise price
$1.00-$290.00
Expected term
3-5 years
Expected volatility
45.0% - 50.8%
The 114,797 equity classified warrants issued during 2021 had a weighted average grant date fair value per warrant of $287.55.

Prior to the Reorganization, certain warrant holders exercised their warrants for Class B redeemable capital units as follows:
Number of Warrants Weighted-average exercise price
Liability awards 70,000 $ 36.74
Equity awards 3,400 $ 1.00
On the date of exercise, the Company recognized a fair value adjustment to the outstanding liability classified warrants which was estimated based on a Black-Scholes option pricing model using the weighted-average significant unobservable inputs (Level 3 inputs) as follows:

Risk-free interest rate
0.16% -0.19%
Exercise price
$1.00- $36.74
Expected term
2-3 years
Expected volatility
35.1% - 45.0%

For the year ended December 31, 2021, prior to the Reorganization, the Company issued member units upon settlement and subsequent derecognition of warrant liabilities for $30,825.
As part of the Reorganization, the remaining Alclear warrants were either exchanged for Clear Secure, Inc. warrants representing the right to receive Class A Common Stock or the right to receive Alclear Units. The exchange was completed at an approximate 19.98 per unit ratio, using a cashless exercise conversion method. The Clear Secure, Inc. warrants are subject to the same vesting terms as applied to Alclear warrants and maintained the same fair value immediately before and after the exchange of the warrants. As such, there was no additional expense that was recorded due to the exchange as the Company determined there was no modification.
In December 2021, 2,000,000 vested warrants with an intrinsic value of $54,120, that were exercisable for Class A Common Stock, were exercised in a cashless transaction.
The following warrants remained outstanding as of December 31, 2021:
Classification Number of Warrants Weighted-Average Exercise Price Weighted average Remaining Contractual Term (years) Aggregate Intrinsic Value
Exercisable for Class A Common Stock Equity awards 5,674,502 $ 0.01 0.88 177,952
Exercisable for Alclear Units Equity awards 968,043 $ 0.01 2.7 30,358

During the year ended December 31, 2021, 1,207,932 warrants exercisable for Class A Common Stock at a weighted-average exercise price of $0.01 were vested with an intrinsic value of $37,881 and weighted average exercise term of 0.52 years. Additionally, 103,668 warrants exercisable for Alclear Units at a weighted-average exercise price of $0.01 were vested with an intrinsic value of $3,251. The balance of all outstanding warrants are subject to certain performance based vesting criteria which the Company evaluates at each reporting period to determine the likelihood of achievement. Based on the likelihood of achievement of the vesting criteria, as of December 31, 2021 the Company estimated unrecognized warrant expense is $1,071.
The Company recorded the following within general and administrative expense in the consolidated statements of operations:
For the year ended
December 31, 2021 December 31, 2020 December 31, 2019
Liability awards $ 12,796  $ 887  $ 3,363 
Equity awards 4,813  1,969  13,223 
Total $ 17,609  $ 2,856  $ 16,586