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Fair Value Measurements

9 Months Ended

Sep. 30, 2021

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

NOTE 10. FAIR VALUE MEASUREMENTS

The following table presents information about the Company’s financial assets that are measured at fair value on a recurring basis at September 30, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

Description		Amount at Fair Value				Level 1				Level 2				Level 3
September 30, 2021
Assets
Investments held in Trust Account:
Money Market investments		$	224,018,282			$	224,018,282			$	—			$	—
Liabilities
Warrant liability – Public Warrants		$	4,181,334			$	4,181,334			$	—			$	—
Warrant liability – Private Placement Warrants		$	2,512,533			$	—			$	—			$	2,512,533

The Company utilized a Monte Carlo simulation model for the initial valuation the Public Warrants. The subsequent measurement of the Public Warrants as of September 30, 2021 is classified as Level 1 due to the use of an observable market quote in an active market under the ticker AFAQW. The quoted price of the Public Warrants was $0.56 per warrant as of September 30, 2021.

The Company utilizes a Modified Black-Scholes model to value the Private Placement Warrants at each reporting period, with changes in fair value recognized in the statement of operations. The estimated fair value of the Private Placement warrant liability is 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 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 aforementioned warrant liabilities are not subject to qualified hedge accounting.

Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period. The estimated fair value of the Public Warrants transferred from a Level 3 measurement to a Level 1 fair value measurement in June 2021 after the Public Warrants were separately listed and traded.

The following table provides the significant inputs to the Monte Carlo Simulation for the initial fair value of the Public Warrants:

		As of March 23, 2021				As of September 30, 2021
Stock Price on Valuation Date		$	9.77			$	9.74
Strike price (Exercise Price Share)		$	11.50			$	11.50
Probability of completing a Business Combination			85.0	%			*
Term (in years)			6.59				6.06
Volatility			4% pre-merger / 26% post-merger				9.7% implied by Public Warrant Market Price
Risk-free rate			1.19	%			1.16	%
Fair value of warrants		$	1.55			$	0.56

*The probability of completing a Business Combination is considered within the volatility implied by the traded price of the Public Warrants which is used to value the Private Placement Warrants.

The following table provides the significant inputs to the Modified Black-Scholes model for the fair value of the Private Placement Warrants:

		As of March 23, 2021				As of September 30, 2021
Stock price		$	9.77			$	9.74
Strike price		$	11.50			$	11.50
Probability of completing a Business Combination			85.0	%			100.0	%
Dividend yield			—	%			—	%
Term (in years)			6.59				6.06
Volatility			21.6	%			9.7	%
Risk-free rate			1.2	%			1.2	%
Fair value of warrants		$	1.55			$	0.56

The following table presents the changes in the fair value of the Company’s Level 3 financial instruments that are measured at fair value:

Fair value as of January 12, 2021 (inception)		$	—
Initial measurement at March 23, 2021			18,527,667
Change in fair value			1,553,934
Fair value as of March 31, 2021			20,081,601
Transfer of Public Warrants to Level 1 measurement			(12,544,001	)
Change in fair value			(3,544,467	)
Fair value as of June 30, 2021			3,993,133
Change in fair value			(1,480,600	)
Fair value as of September 30, 2021		$	2,512,533

The Company recognized a gain in connection with changes in the fair value of warrant liabilities of $3,869,933 within change in fair value of warrant liabilities in the condensed statements of operations during the three months ended September 30, 2021. The Company recognized a gain in connection with changes in the fair value of warrant liabilities of $11,833,800 within change in fair value of warrant liabilities in the condensed statements of operations during the period from January 12, 2021 (Inception) through September 30, 2021.

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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