DevvStream Corp.DEVS
DevvStream Corp. Fair Value Disclosure
Note 7 - Recurring Fair Value Measurements
At December 31, 2023, investments held in the Trust Account are held in an interest bearing demand deposit account and at December 31, 2022, substantially all of
the Company’s trust assets on the consolidated balance sheet consist of U. S. Money Market funds which are classified as cash equivalents. Fair values of these investments are determined by Level 1 inputs utilizing quoted prices (unadjusted) in
active markets for identical assets.
Under the guidance in ASC 815-40 the warrants do not meet the criteria for equity classification. As such, these financial instruments must be recorded on the consolidated balance sheet at fair value. This valuation is subject to re-measurement at each balance sheet date. With each re-measurement, these financial instruments valuations will be adjusted to fair value, with the change in fair value recognized in the Company’s consolidated statement of operations.
The Company’s warrant liability for the Private Placement Warrants is based on valuation models utilizing inputs from observable and unobservable markets. The inputs used to determine the fair value of the Private Warrant liability, is classified within Level 3 of the fair value hierarchy.
Under the guidance in ASC 815-40 the warrants do not meet the criteria for equity classification. As such, these financial instruments must be recorded on the consolidated balance sheet at fair value. This valuation is subject to re-measurement at each balance sheet date. With each re-measurement, these financial instruments valuations will be adjusted to fair value, with the change in fair value recognized in the Company’s consolidated statement of operations.
The Company’s warrant liability for the Private Placement Warrants is based on valuation models utilizing inputs from observable and unobservable markets. The inputs used to determine the fair value of the Private Warrant liability, is classified within Level 3 of the fair value hierarchy.
The Company’s Public Warrants are trading on the Nasdaq Stock Market LLC (“NASDAQ”) and the Company’s warrant liability was based on unadjusted quoted prices in an
active market (NASDAQ) for identical assets or liabilities that the Company has the ability to access. The fair value of the Public Warrant liability is classified within Level 1 of the fair value hierarchy.
The Company’s Promissory Note contains an embedded option whereby up to $1,500,000 of the Promissory Note may be converted into the Company’s warrants. The embedded Working Capital Loan conversion option is accounted for as a liability in accordance with ACS
815-40 on the balance sheet and is measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value in the consolidated statement of operations. Valuation of the Working Capital Loan
conversion option was derived from the valuation of the underlying Private Placement Warrants and is classified as a level 3 valuation.
The following table presents information about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of December 31, 2023
and 2022, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
| December 31, 2023 |
||||||||||||
|
Level 1
|
Level 2
|
Level 3
|
||||||||||
|
Assets
|
||||||||||||
|
Investments held in Trust Account
|
$
|
62,418,210
|
$
|
—
|
$
|
—
|
||||||
|
Liabilities
|
||||||||||||
|
Public Warrants
|
$
|
230,000
|
$
|
—
|
$
|
—
|
||||||
|
Private Warrants
|
$
|
—
|
$
|
—
|
$
|
224,000
|
||||||
| Working Capital Loan Conversion Option |
$ |
— | $ |
— | $ |
— | ||||||
| December 31, 2022 |
||||||||||||
|
Level 1
|
Level 2
|
Level 3
|
||||||||||
|
Assets
|
||||||||||||
|
Investments held in Trust Account
|
$
|
237,038,010
|
$
|
—
|
$
|
—
|
||||||
|
Liabilities
|
||||||||||||
|
Public Warrants
|
$
|
575,000
|
$
|
—
|
$
|
—
|
||||||
|
Private Warrants
|
$
|
—
|
$
|
—
|
$
|
560,000
|
||||||
Measurement
The Private Warrants were valued using a binomial lattice model, which is considered to be a Level 3 fair value measurement.
The key inputs into the binomial lattice model were as follows at December 31, 2023 and 2022:
|
Input
|
December 31, 2023
|
December 31, 2022 | ||||||
|
Risk-free interest rate
|
3.81
|
%
|
3.95 | % | ||||
|
Expected term to initial Business Combination (years)
|
0.25
|
0.25 | ||||||
|
Expected volatility
|
de minimis
|
% | de minimis | |||||
|
Common stock price
|
$
|
10.89
|
$ |
10.18 | ||||
|
Dividend yield
|
0.0
|
%
|
0.0 | % | ||||
The following table
provides a reconciliation of changes in fair value of the beginning and ending balances for the Company’s warrants classified as Level 3 for the period ended December 31, 2023 and December 31, 2022:
| Fair value of the Private Placement Warrants measured with level 3 |
||||
|
December 31, 2021
|
$
|
5,824,000
|
||
|
|
(5,264,000
|
)
|
||
|
December 31, 2022
|
$
|
560,000
|
||
|
December 31, 2022
|
$
|
560,000
|
||
|
|
(336,000
|
)
|
||
|
December 31, 2023
|
$
|
224,000
|
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2023 | Apr 8, 2024 | Showing above |
| 2022 | Apr 6, 2023 | |
| 2021 | Apr 1, 2022 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.