Greenland Mines Ltd Fair Value Disclosure

Note 9 — Fair Value Measurements

 

The fair value of the Company’s consolidated 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. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

 

Level 1:	Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2:	Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.

 

Level 3:

Unobservable inputs based on the assessment of the assumptions that market participants would use in pricing the asset or liability.

 

The following table presents information about the Company’s liabilities that are measured at fair value on December 31, 2023 and December 31, 2022, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

 

		December 31, 2023				Quoted Prices in Active Markets (Level 1)				Significant  Other Observable Inputs (Level 2)				Significant Other Unobservable Inputs (Level 3)
Liabilities:
Warrant liability		$	58,300				—				—			$	58,300

 

		December 31, 2022				Quoted  Prices in Active Markets (Level 1)				Significant  Other Observable  Inputs (Level 2)				Significant  Other Unobservable Inputs (Level 3)
Liabilities:
Warrant liability		$	31,800				—				—			$	31,800

 

The private warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the balance sheet. Changes in the fair value of the warrants are recorded in the statement of operations each period.

 

The table below shows the change in fair value of warrant liabilities as of December 31, 2023:

 

		Private Warrants				Total
Fair value at January 1, 2023		$	31,800			$	31,800
Change in fair value			26,500				26,500
Fair value as of December 31, 2023		$	58,300			$	58,300

 

The Company established the initial fair value for the private warrants at $587,717 (including over-allotment) on April 4, 2022, the date of the Company’s IPO, using the Black-Scholes model. The Company allocated the proceeds received from the sale of Private Units, first to the private warrants based on their fair values as determined at initial measurement, with the remaining proceeds recorded as common shares subject to possible redemption, and common shares based on their relative fair values recorded at the initial measurement date. The warrants were classified as Level 3 at the initial measurement date due to the use of unobservable inputs.

 

The key inputs into the Black-Scholes model were as follows at their measurement date:

 

		December 31, 2023				December 31, 2022
Exercise Price		$	11.50			$	11.50
Underlying share price		$	10.70			$	10.06
Expected Volatility			3.51	%			2.97	%
Warrant life (years)			5.0				5.0
Risk-free rate			3.84	%			3.99	%

 

The fair value of the Convertible Note 1 was estimated at the as converted value at March 31, 2023 and initial measurement date of March 22, 2023 to be $13,930 and $13,910, respectively. The fair value of the Convertible Note 2 was estimated at the as converted value at March 31, 2023 and initial measurement date of March 30, 2023 to be $33,400 and $33,400, respectively. The binomial tree model was used for the underlying warrants based on the following key assumptions which were unchanged as of March 31, 2023.

 

		March 31, 2023 Convertible Note 2				March 22, 2023 Convertible Note 1
Strike Price		$	10.00			$	10.00
Spot Price		$	10.28			$	10.26
Time to maturity			0.68				0.70
Business combination success rate			9	%			9	%
Expected Volatility			5.0	%			5.0	%
Expected dividend rate			0	%			0	%
Risk-free rate			4.8	%			4.7	%

 

The following table presents the changes in the fair value of the Level 3 Convertible Notes:

 

Fair value as of January 1, 2023		$	—
Proceeds received through Convertible Note 1 on March 22, 2023			150,000
Proceeds received through Convertible Note 2 on March 30, 2023			360,000
Change in valuation inputs or other assumptions			(462,670	)
Fair value as of March 31, 2023		$	47,330

 

As a result of amendments to the conversion feature of Convertible Note 1 and Convertible Note 2, a remeasurement under ASC 825 has occurred and the previously selected fair value option is no longer applied. The convertible promissory notes were recorded as debt (liability) at cash proceeds on the balance sheet effective May 15, 2023. As of December 31, 2023, the Convertible Note 1 and Convertible Note 2 were recorded at $150,000 and $360,000, respectively, based on the cash proceeds on March 22, 2023 and March 30, 2023.