FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2021

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

NOTE 10. FAIR VALUE MEASUREMENTS

The Company classifies its U.S. Treasury and equivalent securities as held-to-maturity in accordance with ASC Topic 320, “Investments - Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost on the accompanying balance sheets and adjusted for the amortization or accretion of premiums or discounts.

At December 31, 2021, assets held in the Trust Account were comprised of $4,727 in cash and $690,144,171 in U.S. Treasury securities. During the year ended December 31, 2021, the Company did not withdraw any interest income from the Trust Account.

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. The gross holding gains and fair value of held-to-maturity securities at December 31, 2021, are as follows:

					Gross
			Amortized		Holding		Fair
	Held-To-Maturity	Level	Cost		Gain		Value
December 31, 2021	U.S. Treasury Securities (Mature on 01/11/22)	1	$	690,144,171	$	6,829	$	690,151,000

The following table presents information about the Company’s liabilities 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:

		December 31,
Description	Level	2021
Liabilities:
Derivative Liability – Public Warrants	1	$	11,730,000
Derivative Liability – Private Placement Warrants	2	$	8,330,000
Convertible Note – related party	3	$	1,934,656

The Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within derivative liabilities on the Company’s accompanying December 31, 2021, balance sheets. The derivative 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 derivative liabilities in the statements of operations.

As of March 23, 2021 (closing date of the Initial Public Offering), the Warrants were initially valued using a Monte Carlo simulation model for the Public Warrants and a Modified Black Scholes model for the Private Placement Warrants, which are considered to be a Level 3 fair value measurements. The 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 March 23, 2021 was derived from observable public warrant pricing on comparable 'blank-check' companies without an identified target. Significant increases (decreases) in the expected volatility in isolation would result in a significantly higher (lower) fair value measurement.

For periods subsequent to the detachment of the Public Warrants from the Units, the close price of the Public Warrant price was used as the fair value as of each relevant date. The measurement of the Public Warrants after the detachment of the Public Warrants from the Units was classified as Level 1 due to the use of an observable market quote in an active market. The subsequent measurements of the Private Placement Warrants after the detachment of the Public Warrants from the Units are classified as Level 2 due to the use of an observable market quote for a similar asset in an active market.

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

	Private
	Placement		Public		Total
Fair value as of January 1, 2021	$	—	$	—	$	—
Initial measurement on March 23, 2021 (Initial Public Offering)		14,014,000		19,182,000		33,196,000
Transfers to Level 1		—		(18,906,000)		(18,906,000)
Transfers to Level 2		(13,426,000)		—		(13,426,000)
Change in fair value		(588,000)		(276,000)		(864,000)
Fair value as of December 31, 2021	$	—	$	—	$	—

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 fair value measurement during the year ended December 31, 2021, was $18,906,000. The estimated fair value of the Private Placement Warrants transferred from a Level 3 measurement to a Level 2 fair value measurement during the year ended December 31, 2021, was $13,426,000.

At December 31, 2021, the Convertible Promissory Note was valued using a Monte Carlo simulation model, which is considered to be a Level 3 fair value measurement. The Monte Carlo simulation model’s primary unobservable input utilized in determining the fair value of the Convertible Promissory note is the expected volatility of the common stock, which underlines the price of warrants into which the Convertible Promissory Note may be converted into. This liability is subject to re-measurement at each balance sheet date and loan withdrawal date until exercised, and any change in fair value is recognized in our statements of operations. The fair value of the loan as of December 31, 2021, was $1,934,656, which resulted in a change in fair value of the convertible promissory note of $65,344 recorded in the statement of operations for the year ended December 31, 2021.

The following table presents the quantitative information regarding Level 3 fair value measurements for the Convertible Promissory Notes:

	December 31,
Input:	2021
Risk-free interest rate		1.27	%
Expected term (years)		5.17
Expected volatility		13.50	%
Exercise price	$	11.50
Fair value of Units	$	9.84

The following table presents the changes in the fair value of the Level 3 Convertible Promissory Notes as of December 31, 2021:

	Total
Fair value as of January 1, 2021	$	—
Proceeds received through convertible note – related party		2,000,000
Change in fair value		(65,344)
Fair value as of December 31, 2021	$	1,934,656

There were no transfers in or out of Level 3 from other levels in the fair value hierarchy during the year ended December 31, 2021 for the convertible promissory notes.