Annual report pursuant to Section 13 and 15(d)

FAIR VALUE MEASUREMENTS

v3.22.1
FAIR VALUE MEASUREMENTS
11 Months Ended
Dec. 31, 2021
FAIR VALUE MEASUREMENTS  
FAIR VALUE MEASUREMENTS

NOTE 10. FAIR VALUE MEASUREMENTS

The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.

The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

Level 1:

Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2:

Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.

Level 3:

Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.

The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at December 31, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

Description

    

Level

    

December 31, 2021

Assets:

 

  

 

  

Marketable securities held in Trust Account

 

1

$

172,506,512

Liabilities:

 

  

 

Warrant liability – Public Warrants

1

$

3,051,191

Warrant liability – Private Placement Warrants

 

3

3,032,325

The Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities in the accompanying balance sheet. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within the statement of operations.

The Warrants were valued using a binomial lattice model, which is considered to be a Level 3 fair value measurement. The binomial lattice model’s primary unobservable input utilized in determining the fair value of the Warrants is the expected volatility of the common stock. The expected volatility as of the Initial Public Offering date was derived from observable public warrant pricing on comparable

‘blank-check’ companies without an identified target. For periods subsequent to the detachment of the Public Warrants from the Units, the close price of the Public Warrant price will be used as the fair value as of each relevant date.

The following table provides quantitative information regarding Level 3 fair value measurements:

June 11, 2021

(Initial

    

December 31, 2021

    

Measurement)

Stock price

    

$

9.64

$

9.59

Exercise price

$

11.50

$

11.50

Expected term (in years)

5.0

 

5.0

Volatility

11.4

%

16.7

%

Risk-free rate

1.23

%

 

0.81

%

Dividend yield

0.0

%

0.0

%

The following contains additional information regarding the other inputs used in the pricing model:

● Term – the expected life of the warrants was assumed to be equivalent to their remaining contractual term.

● Risk-free rate – the risk-free interest rate is based on the U.S. treasury yield curve in effect on the date of valuation equal to the remaining expected life of the Warrants.

● Dividend yield – the dividend yield percentage is zero because the Company does not currently pay dividends, nor does it intend to do so during the expected term of the Private Placement Warrants.

The following table presents the changes in the fair value of Level 3 warrant liabilities:

Private

Warrant

    

Placement

    

Public

    

Liabilities

Fair value as of February 12, 2021 (inception)

$

$

$

Initial measurement on June 11, 2021

5,092,500

4,750,000

9,842,500

Over allotment on July 1, 2021

436,500

712,500

1,149,000

Change in fair value

(2,496,675)

(2,411,309)

(4,907,984)

Transfer to level 1

(3,051,191)

(3,051,191)

Fair value as of December 31, 2021

 

3,032,325

3,032,325

Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology occurs. There was $3,051,191 transferred out of Level 3 to level 1 for the period from February 12, 2021 (inception) through December 31, 2021.