Fair Value Measurements

11 Months Ended

Dec. 31, 2021

Note 8 — Fair Value Measurements

At December 31, 2021, the Company’s FPA was valued at $1,007,934. Under the guidance in ASC

815-40

the FPA does not meet the criteria for equity classification. As such, the FPA must be recorded on the balance sheet at fair value. This valuation is subject to

re-measurement

at each balance sheet date. With each

re-measurement,

the valuations will be adjusted to fair value, with the change in fair value recognized in the Company’s statement of operations.

As of December 31, 2021, investments in the Company’s Trust Account of $116,733,409 primarily consisted of U.S. Treasury Securities that mature in May 2022. The Company classifies its United States Treasury securities as

held-to-maturity

in accordance with FASB ASC 320 “Investments — Debt and Equity Securities”.

Held-to-maturity

treasury securities are recorded at amortized cost and adjusted for the amortization or accretion of premiums or discounts. The carrying value approximates the fair value due to its short-term maturity. The carrying value, excluding gross unrealized holding losses and fair value of held to maturity securities on December 31, 2021 are as follows:


	Amortized Cost and Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value as of December 31, 2021
U.S. Treasury Securities	$	116,733,409		—	$	(16,360	)	$	116,716,698

Recurring Fair Value Measurements

The following table presents fair value information as of December 31, 2021 of the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.

The following table sets forth by level within the fair value hierarchy the Company’s assets and liabilities that were accounted for at fair value on a recurring basis at December 31, 2021:


	Level 1		Level 2		Level 3
Assets
Investments held in Trust Account—U.S. Treasury	$	116,716,698	$	—	$	—
Liabilities
FPA	$	—	$	—	$	1,007,934

Measurement

On December 31, 2021 and August 23, 2021, the Company used a Probability Weighted Expected Return (PWER) model to value the FPA liability.

The key inputs into the modified PWER model for the FPA liability were as follows:


Input	December 31, 2021			August 23, 2021
Probability of successful business combination		85	%		85	%
Likelihood by 3/31/2022		—	%		25	%
Likelihood by 4/30/2022		5	%		—	%
Likelihood by 3/31/2023		—	%		50	%
Likelihood by 4/30/2023		80	%		—	%
Likelihood by 9/30/2023		—	%		25	%
Likelihood by 10/31/2023		15	%		—	%
Risk-free rate		0.51	%		0.09	%
Stock price	$	10.00		$	10.00
Estimated term remaining (years)		1.35			1.10
Volatility		14.0	%		14.0	%

The following table provides a reconciliation of changes in fair value of the beginning and ending balances for the FPA liability classified as Level 3:


Fair Value at August 23, 2021	$	1,013,935
Change in fair value		(6,001	)
Fair Value at December 31, 2021	$	1,007,934

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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