Terra Innovatum Global N.V. Fair Value Disclosure

Note 8. Fair Value Measurements

 

Financial Instruments Not Recorded at Fair Value 

 

Due to their short-term nature, the carrying value of the Company’s cash and cash equivalents, and other current assets, accounts receivable, accounts payable, Related party loan, non-current, and other non-current liabilities approximate fair value.

Financial Instruments Recorded at Fair Value on a Recurring Basis

 

Share-settled Contingent Liability

 

As discussed in Note 2 – Business Combination and Note 10 – Shareholders’ Deficit, at Closing the Company entered into share-settled arrangements involving (i) contingently Convertible Preferred Shares issued to former Terra Innovatum Global Srl. quotaholders and (ii) contingently vesting Sponsor ordinary shares subject to market-based and regulatory milestones. These arrangements may result in the issuance or vesting of a variable number of ordinary shares and are not solely indexed to the Company’s stock. As a result, they were initially classified and measured as liabilities at fair value, with the related amounts recorded within share-settled contingent liability in the consolidated balance sheet.

 

On October 16, 2025, certain milestones were achieved, resulting in the settlement of a portion of these arrangements. Immediately prior to settlement, the corresponding share-settled contingent liability was remeasured to fair value, and the resulting change in fair value was recognized in change in fair value – share-settled contingent liability. Upon settlement, the related liability was reclassified to equity.

 

As of December 31, 2025, unearned milestone tranches remain classified as share-settled contingent liabilities and are remeasured at fair value at each reporting date, with changes recognized in earnings until the applicable milestones are achieved or expire.

 

The following tables provide a summary of changes in the estimated fair value of the Share-Settled Contingent Liability using significant Level 3 inputs:

 

Balance - January 1, 2025		$	-
Issuance of Share-settled Contingent Liability			1,250,223
Settlements/derecognition to equity upon milestone achievement			(514,510	)
Gain recognized in earnings due to change of fair value, net of foreign currency remeasurement impact			(559,967	)
Foreign currency translation			10,577
Balance - December 31, 2025		$	186,323

  

The Company estimated the fair value of the Share-Settled Contingent Liability using the Monte Carlo option pricing model with the following inputs:

 

Weighted average expected term (years)			6.8
Weighted average expected volatility			125.0	%
Risk-free interest rate			3.41 - 4.67	%
Dividend yield			0	%

 

The fair value measurement of the Share-settled Contingent Liability is classified within Level 3 of the fair value hierarchy due to the use of significant unobservable inputs. The valuation is sensitive to changes in expected volatility and the probability-weighted outcomes associated with achieving the applicable market-based and regulatory milestones, such that increases in these assumptions would generally result in a higher fair value measurement and decreases would result in a lower fair value measurement. Certain unobservable inputs are interrelated, and changes in one assumption may magnify or mitigate the effects of changes in other assumptions. Changes in these unobservable inputs are subject to estimation uncertainty, and reasonably different assumptions could have resulted in a materially different fair value measurement at the reporting date.

 

Liability Classified Warrants

 

The warrants issued to the PIPE Investor and Bridge Loan lenders in connection with the Merger are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities in the consolidated balance sheets. Warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the consolidated statements of operations and comprehensive income (loss). 

 

The fair value of the liability-classified warrants is estimated using a Monte Carlo simulation model, which considers the probability-weighted outcomes of future share price paths. Significant inputs used in the valuation include the Company’s share price at the valuation date, expected share price volatility, risk-free interest rate, expected term of the warrants, and expected dividend yield.

 

Because the valuation relies on significant unobservable inputs, the liability-classified warrants are classified within Level 3 of the fair value hierarchy.

The valuation of the liability-classified warrants is sensitive to changes in key unobservable inputs, particularly expected share price volatility and the probability-weighted outcomes of future share price paths. Increases in expected volatility would generally result in a higher fair value measurement, while decreases would result in a lower fair value. Additionally, changes in assumptions regarding the Company’s expected share price performance could materially affect the estimated fair value. Although management believes the assumptions used are reasonable and consistent with available market information, different assumptions could have resulted in a materially different fair value measurement at the reporting date.

 

The following table summarizes the significant assumptions used in the valuation of the liability-classified warrants as of December 31, 2025:

 

		PIPE Warrant				Bridge Loan Warrant
Weighted average expected term (years)			4.78				2.78
Weighted average expected volatility			125.0	%			125.0	%
Risk-free interest rate			3.6	%			3.5	%
Dividend yield			0	%			0	%

 

During the periods presented, there were no transfers between levels of the fair value hierarchy.