Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUE MEASUREMENTS

v3.22.1
FAIR VALUE MEASUREMENTS
3 Months Ended
Mar. 31, 2022
FAIR VALUE MEASUREMENTS  
FAIR VALUE MEASUREMENTS

NOTE 9. FAIR VALUE MEASUREMENTS

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: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active or financial instruments for which significant inputs to models are observable (including but not limited to quoted prices for similar securities, interest rates, foreign exchange rates, volatility and credit risk), either directly or indirectly;

Level 3: Prices or valuations that require significant unobservable inputs (including the Management’s assumptions in determining fair value measurement).

At March 31, 2022, assets held in the Trust Account were comprised of $116,170,636 in money market funds which are invested primarily in U.S. Treasury Securities.

At December 31, 2021, marketable securities held in the Trust Account were comprised of $116,160,281 in money market funds which are invested primarily in U.S. Treasury Securities.

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at March 31, 2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.

March 31, 

     

December 31,

Description

    

Level

    

2022

2021

Assets:

Investments held in Trust Account – U.S. Treasury Securities Money Market Fund

1

116,170,636

116,160,281

Liabilities:

  

Warrant Liability – Public Warrants

1

1,840,000

2,817,500

Warrant Liability – Private Placement Warrants

2

1,302,400

1,994,300

Warrant Liability – Representative Warrants

3

32,000

49,000

The Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on our accompanying March 31, 2022 and December 31, 2021 condensed balance sheets. The 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 condensed statements of operations.

The Company utilizes a lattice model, specifically a binomial lattice model, to value the representative warrants at each reporting period, with changes in fair value recognized in the statements of operations. The estimated fair value of the representative warrant liabilities are determined using Level 3 inputs. Inherent in a binomial options pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its shares of common stock based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero.

The Public Warrants were initially valued using a lattice model, specifically a binomial lattice model. As of March 31, 2022 and December 31, 2021, the Public Warrants were valued using the instrument’s publicly listed trading price as of the balance sheet date, which is considered to be a Level 1 measurement due to the use of an observable market quote in an active market. As of March 31, 2022 and December 31, 2021, the fair value of the Private Warrants was the equivalent to that of the Public Warrants as they had substantially the same terms; however, they are not actively traded, as such are listed as a Level 2 in the fair value hierarchy table above.

The key inputs into the binomial lattice model for the Warrants were as follows:

February 11, 2021

 

(Initial Measurement)

December 31, 2021

March 31, 2022

 

    

Public

    

Private

    

Representative

    

Public

    

Private

    

Representative

    

Representative

    

Private

 

Input

Warrants

Warrants

Warrants

Warrants

Warrants

Warrants

Warrants

Warrants

 

Market price of public stock

$

9.54

$

9.54

$

9.54

$

9.79

$

9.79

$

9.79

$

9.88

$

Risk-free rate

 

0.52

%

 

0.52

%

0.36

%

 

1.18

%

 

1.18

%

1.18

 

2.44

%

 

%

Dividend Yield

 

0.00

%

 

0.00

%

0.00

%

 

0.00

%

 

0.00

%

0.00

 

0.00

%

 

%

Exercise price

$

11.50

$

11.50

$

11.50

$

11.50

$

11.50

$

11.50

$

11.50

$

Effective expiration date

 

6/26/26

 

6/26/26

5/11/25

 

6/23/26

 

6/23/26

6/23/26

 

6/23/26

 

One-touch hurdle

$

18.15

$

$

$

18.53

$

$

18.53

$

$

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

    

Private Placement

    

Public

    

Representative

    

Warrant Liabilities

Fair value as of January 1, 2021

 

$

 

$

$

$

Initial measurement on February 11, 2021

3,785,100

5,290,000

36,500

9,111,600

Change in valuation inputs or other assumptions

(1,730,400)

(2,357,500)

(19,000)

(4,106,900)

Transfer to Level 1

(2,054,700)

(2,932,500)

(4,987,200)

Fair value as of March 31, 2021

$

$

$

17,500

$

17,500

    

    

   

Representative

   

Warrant Liabilities

Fair value as of January 1, 2022

$

49,000

$

49,000

Change in valuation inputs or other assumptions

(17,000)

(17,000)

Fair value as of March 31, 2022

$

32,000

$

32,000

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. The estimated fair value of the Public Warrants transferred from a Level 3 measurement to a Level 1 during the three months period ended March 31, 2021 was $2,932,500. The estimated fair value of the Public Warrants transferred from a Level 3 measurement to a Level 2 measurement during the three months ended March 31, 2021 was $2,054,700. There were no transfers from Level 3 to Level 1 or Level 2 during the three months period ended March 31, 2022.