FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2022

NOTE 10. FAIR VALUE MEASUREMENTS

The following table presents fair value information at March 31, 2022 and 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 Company’s warrant liability is based on a valuation model utilizing management’s judgment and pricing inputs from observable and unobservable markets with less volume and transaction frequency than active markets. Significant deviations from these estimates and inputs could result in a material change in fair value. The fair value of the Private Placement Warrants liability is classified within Level 3 of the fair value hierarchy. There was no transfer of fair value measurements between levels of the fair value hierarchy for the three months ended March 31, 2022.

The following tables set 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:


	March 31, 2022
	(Level 1)		(Level 2)		(Level 3)
Assets
Cash and marketable securities held in Trust Account	$	310,549,167	$	—	$	—
Liabilities
Public Warrants	$	2,277,000	$	—	$	—
Private Placement Warrants	$	—	$	—	$	1,204,133


	December 31, 2021
	(Level 1)		(Level 2)		(Level 3)
Assets
Cash and marketable securities held in trust account	$	310,544,829	$	—	$	—
Liabilities
Public Warrants	$	5,589,000	$	—	$	—
Private Placement Warrants	$	—	$	—	$	2,955,600

Measurement

At March 31, 2022, the Company’s warrant liability was valued at $3,481,133. Under the guidance in Subtopic 815-40, the Public Warrants and the Private Placement Warrants do not meet the criteria for equity treatment. As such, the Public Warrants and the Private Placement Warrants must be recorded as a liability 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.

The Warrants were initially valued using a Monte Carlo simulation model, with the observable assumptions as provided in the table below. Significant increases in the expected stock prices and expected liquidity would result in a significantly higher fair value measurement. Significant increases in either the probability or severity of default of the host instrument would result in a significantly lower fair value measurement. The measurement of the Public Warrants after the detachment of the Public Warrants from the Units is classified as Level 1 due to the use of an observable market quote in an active market. For periods subsequent to the detachment of the Public Warrants from the Units, the closing price of the Public Warrants was used as the fair value for the Public Warrants as of each relevant date. The Private Placement Warrants are valued using a Monte Carlo simulation model at each reporting period.

The key inputs into the Monte Carlo simulation model formula utilized to value the Private Placement Warrants were as follows at March 31, 2022 and December 31, 2021:


	March 31,			December 31,
Input	2022			2021
Common stock price	$	9.81		$	9.75
Exercise price	$	11.50		$	11.50
Risk-free rate of interest		2.38	%		1.34	%
Volatility		3.3	%		9.1	%
Term		5.76			6.00
Warrant to buy one share (unadjusted for the probability of dissolution)	$	0.22		$	0.54
Warrant to buy one share (adjusted for the probability of dissolution)	$	0.22		$	0.54
Dividend yield		0.00	%		0.00	%

- 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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Science Strategic Acquisition Corp. Alpha 10-Q