Company: LEGT
Filing Date: 2025-07-02
Form Type: 10-Q
Source: 0001829126-25-004857
Chunk: 17

Company: Legato Merger Corp. III
Filing Date: 2025-07-02
Form: 10-Q
Item: Part I, Item 1
Chunk 17
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 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 an assessment of the assumptions that market participants would use in pricing the asset or liability. 

Warrant Instruments

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable authoritative guidance in ASC 480 and ASC 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the instruments are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company’s own ordinary shares and whether the instrument holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the instruments are outstanding. Upon further review of the warrant agreement, management concluded that the warrants issued pursuant to the warrant agreement qualify for equity accounting treatment.

    12

Recent Accounting Pronouncements

In August 2020, the FASB issued ASU No.
2020-06, “Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts
in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own
Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation
models required under current U.S. GAAP. The ASU also removes certain settlement conditions that are required for equity-linked
contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain
areas. The Company adopted ASU 2020-06 on November 6, 2023 (inception) using a modified retrospective method for transition.
Adoption of the ASU did not impact the Company’s financial position, results of operations or cash flows.

In December 2023, the Company adopted the FAS