Fair value measurements

3 Months Ended

Mar. 31, 2022

NOTE 9. 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 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:


Description	Amount at Fair Value		Level 1		Level 2		Level 3
March 31, 2022
Assets
Investments held in Trust Account:
Money Market investments	$	317,582,318	$	317,582,318	$	—	$	—
Liabilities
Warrant liability – Public Warrants	$	4,365,625	$	4,365,625	$	—	$	—
Warrant liability – Private Placement Warrants	$	3,061,666	$	—	$	—	$	3,061,666
Convertible promissory note - related party	$	72,800	$	—	$	—	$	72,800
December 31, 2021
Assets
Investments held in Trust Account:
Money Market investments	$	317,581,791	$	317,581,791	$	—	$	—
Liabilities
Warrant liability – Public Warrants	$	5,715,000	$	5,715,000	$	—	$	—
Warrant liability – Private Placement Warrants	$	4,063,666	$	—	$	—	$	4,063,666

The Company utilized a Monte Carlo simulation model for the initial valuation of the Public Warrants. The subsequent measurement of the Public Warrants as of March 31, 2022 and December 31, 2021 is classified as Level 1 due to the use of an observable market quote in an active market under the ticker HYACW. The quoted price of the Public Warrants, on NASDAQ, beginning on April 29, 2021, was

$0.55 and $0.72 per warrant as of March 31, 2022 and December 31, 2021, respectively.

The Company utilizes a Black-Scholes Option Pricing Model to value the Private Placement Warrants at each reporting period, with changes in fair value recognized in the condensed statements of operations. The estimated fair value of the Private Placement warrant liability is determined using Level 3 inputs. Inherent in a binomial lattice 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 periods. The estimated fair value of the Public Warrants transferred from a Level 3 measurement to a Level 1 fair value measurement in April 2021 after the Public Warrants were separately listed and traded.

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


	At March 4, 2021 (Initial Measurement)
Stock Price on Valuation Date	$	10.00
Strike price (Exercise Price per Share)	$	11.50
Probability of completing a Business Combination		85.0	%
Term (in years)		6.6
Volatility		4% pre-merger/34% post-merger
Risk-free rate		1.1	%
Fair value per warrant	$	2.11

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 31, 2022			As of December 31, 2021
Stock price	$	9.88		$	9.80
Strike price	$	11.50		$	11.50
Probability of completing a Business Combination		N/A	*		N/A	*
Dividend yield		—	%		—	%
Term (in years)		5.3			5.8
Volatility		7.3	%		11.3	%
Risk-free rate		2.4	%		1.3	%
Fair value per warrant	$	0.55		$	0.73

*	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 convertible promissory note - related party was valued using a Black-Scholes method, which is considered to be a Level 3 fair value measurement. The estimated fair value of each draw of the convertible promissory note - related party was based on the following significant inputs:


	As of March 31, 2022			As of February 14, 2022 (Initial Measurement)			As of February 9, 2022 (Initial Measurement)			As of February 4, 2022 (Initial Measurement)
Warrant price	$	0.55		$	0.36		$	0.44		$	0.47
Conversion price	$	1.50		$	1.50		$	1.50		$	1.50
Expected term		0.3			0.4			0.4			0.4
Warrant volatility		123.0	%		91.0	%		89.0	%		89.0	%
Risk free rate		0.5	%		0.6	%		0.4	%		0.4	%
Discount rate		9.9	%		9.8	%		9.9	%		9.9	%
Probability of completing initial Business Combination		35	%		35	%		35	%		35	%
Fair value convertible promissory note - related party	$	72,800		$	14,800		$	27,600		$	29,600

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 December 31, 2020	$	—
Initial measurement of Public Warrants and Private Placement Warrants as of March 4, 2021		27,185,000
Additional warrants issued in over-allotment		1,420,125
Transfer of Public Warrants to Level 1 measurement		(16,748,125	)
Change in valuation inputs or other assumptions		(7,793,334	)

Fair value as of December 31, 2021		4,063,666
Initial measurement of draw on convertible promissory note - related party on February 4, 2022		29,600
Initial measurement of draw on convertible promissory note - related party on February 9, 2022		27,600
Initial measurement of draw on convertible promissory note - related party on February 14, 2022		14,800
Change in valuation inputs or other assumptions		(1,001,200	)

Fair value as of March 31, 2022	$	3,134,466

The Company recognized gains in connection with changes in the fair value of warrant liabilities of $2,351,375 and $619,543

within change in fair value of warrant liabilities in the Condensed Statements of Operations for the three months ended March 31, 2022 and March 31, 2021, respectively. The Company recognized a loss on the change in fair value of convertible promissory note - related party of $800 in the condensed statement of operations for the three months ended March 31, 2022. The aggregate amount by which the cash proceeds from the draws on the convertible promissory note – related party was in excess of fair value on the initial measurement dates of $136,827 is reflected as a contribution to additional paid-in capital during the three months ended March 31, 2022.

- 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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