FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2023

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

NOTE 9.    FAIR VALUE MEASUREMENTS

The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.

The following table presents information about the Company’s assets and liabilities that are measured at fair value at June 30, 2023 and December 31, 2022, and indicates the Fair Value Hierarchy of the valuation inputs the Company utilized to determine such fair value:

		June 30,		December 31,
Description:	Level	2023		2022
Liabilities:
Warrant liability - Private Placement Warrants	2		712,140		264,000
Warrant liability - Public Warrants	2	$	1,240,850	$	460,000
Forward Purchase Liability	3	$	7,002,759	$	1,459,534

Transfers to/from Levels 1, 2, and 3 are recognized at the end of the reporting period. As of June 30, 2023 and December 31, 2022, the Public Warrants were valued using the publicly available price for the Warrant. Due to low trading activity during the year ended December 31, 2022, the Public Warrants were transferred to Level 2 on the Fair Value Hierarchy from Level 1 where they were classified at December 31, 2021. As of June 30, 2023 the Private Placements Warrants were valued based on the fair value of the Public Warrants. As such, the Private Placement Warrants were transferred to Level 2 on the Fair Value Hierarchy from Level 3 where they were classified at December 31, 2021.

The Public Warrants, Private Placement Warrants and the forward purchase units were accounted for as liabilities in accordance with ASC 815-40 and are presented within liabilities on the balance sheets. The warrant liabilities and the forward purchase units are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of derivative instruments in the statement of operations.

Upon consummation of the Initial Public Offering, the Company used a Monte Carlo simulation model to value the Public Warrants and a modified Black-Scholes model to value the Private Placement Warrants. In order to value the forward purchase asset, the Company used a valuation method which considers the reconstructed unit price (the total fair value of common stock and half the Private Warrant value) and multiple assumptions such as risk-free rate and time to Initial Business Combination. The Company allocated the proceeds received from (i) the sale of Units (which is inclusive of one share of Class A Common Stock and one-half of one Public Warrant), (ii) the sale of Private Warrants, and (iii) the issuance of Class B Common Stock, first to the warrants based on their fair values as determined at initial measurement, with the remaining proceeds allocated to Class A Common Stock subject to possible redemption (temporary equity) and Class B Common Stock (permanent equity) based on their relative fair values at the initial measurement date. The Public Warrants, Private Placement Warrants and forward purchase agreements were classified within Level 3 of the Fair Value Hierarchy at the initial measurement date due to the use of unobservable inputs.

As of June 30, 2023 and December 31, 2022, the Public Warrants were valued using the publicly available price for the Warrant and are classified as Level 2 on the Fair Value Hierarchy. As of June 30, 2023 and December 31, 2022, the Private Placements Warrants were valued based on the fair value of the Public Warrants. As of June 30, 2023 and December 31, 2022 the

Private Placement Warrants were classified within Level 2 of the Fair Value Hierarchy due to low trading volume at the measurement date due to the use of the fair value of the Public Warrants. As of June 30, 2023 and December 31, 2022, the forward purchase units were valued using a valuation method which considers the reconstructed unit price (the total fair value of common stock and half the Private Warrant value) and multiple assumptions such as risk-free rate and time to Initial Business Combination. As of June 30, 2023 and December 31, 2022, the forward purchase agreement was classified within Level 3 of the Fair Value Hierarchy at the measurement dates due to the use of unobservable inputs.

The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the six months ended June 30, 2023.

	Fair Value
	Measurement
	Using Level 3
Forward purchase liability	Inputs Total
Balance, December 31, 2022	$	1,459,534
Change in fair value of forward purchase asset/liability		5,543,225
Balance, June 30, 2023	$	7,002,759

At June 30, 2023 and December 31, 2022, the fair value of the derivative feature of the warrants was calculated using the following assumptions:

		June 30, 2023			December 31, 2022
Risk-free interest rate		4.06	%		3.98	%
Stock price	$	10.88		$	9.95
Expected life of grants		5.0	years		5.69	years
Expected volatility of underlying stock		4.0	%		3.0	%
Dividends		0	%		0	%

As of June 30, 2023, the forward purchase liability was $7,002,759. As of December 31, 2022, the forward purchase liability was $1,459,534. As of June 30, 2023 and December 31, 2022, the derivative warrant liability was $1,952,990 and $724,000, respectively. In addition, for the three and six months ended June 30, 2023, the Company recorded a losses of $5,360,359 and a gain $6,772,215 on the change in fair value of the derivative instruments on the statements of operations, respectively. In addition, for the three and six months ended June 30, 2022, the Company recorded $546,440 and $6,679,490 as a gain on the change in fair value of the derivative instruments on the unaudited condensed statements of operations, respectively.