Daedalus Special Acquisition Corp. Fair Value Disclosure
Note 9 – Fair Value Measurements
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date.
Recurring Fair Value Measurements
The following table presents information about the Company’s recurring fair value measurements as of December 31, 2025, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| Level | December 31, 2025 | |||||||
| US$ | ||||||||
| Assets: | ||||||||
| Cash held in Trust Account | 1 | $ | 250,535,814 | |||||
| Liabilities: | ||||||||
| Over-allotment option liability | 3 | $ | 77,000 | |||||
The following table presents the change in fair value of Level 3 recurring fair value measurements:
| Level 3 | ||||
| US$ | ||||
| Balance as of August 7, 2025 (inception) | ||||
| Over-allotment option liability – December 10, 2025 | 105,000 | |||
| Change in fair value | (28,000 | ) | ||
| Balance as of December 31, 2025 | 77,000 | |||
The over-allotment option was accounted for as a liability in accordance with ASC 815-40 and was presented within liabilities on the balance sheet. The over-allotment liability is measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of over-allotment liability in the statement of operations.
A Black-Scholes model was used to value the over-allotment option. The Company estimates the volatility of its ordinary share based on historical volatility that matches the expected remaining life of the option. The risk-free interest rate is based on the U.S. Constant Maturity Treasury rates on the grant date for a maturity similar to the expected remaining life of the option. The expected life of the option is assumed to be equivalent to their remaining contractual term. The following is a summary of key inputs utilized:
| Over-allotment Option | ||||||||
| December 31, 2025 | December 10, 2025 | |||||||
| Unit price | $ | 10.04 | $ | 10.00 | ||||
| Exercise price | $ | 10.00 | $ | 10.00 | ||||
| Risk-free rate | 3.71 | % | 3.76 | % | ||||
| Estimated volatility | 5.07 | % | 6.81 | % | ||||
| Time to expiration | 0.061 | 0.122 | ||||||
Non- Recurring Fair Value Measurements
Upon consummating the Initial Public Offering on December 10, 2025, the Public Warrants were valued using a Black-Scholes Simulation Model, resulting in a fair value of $3,482,587. The Public Warrants have been classified within shareholders’ deficit and will not require remeasurement after issuance. The following table presents the quantitative information regarding market assumptions used in the Level 3 valuation of the Public Warrants:
| December 10, 2025 | ||||
| Implied ordinary share price | $ | 9.91 | ||
| Exercise price | $ | 11.50 | ||
| Simulation term (years) | 7.00 | |||
| Risk-free rate | 3.92 | % | ||
| Estimated implied volatility | 2.10 | % | ||
| Market adjustment | 47.66 | % | ||
| Calculated value per warrant | $ | 0.56 | ||
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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.