RECURRING FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2023

RECURRING FAIR VALUE MEASUREMENTS

RECURRING FAIR VALUE MEASUREMENTS

NOTE 8. RECURRING FAIR VALUE MEASUREMENTS

At June 30, 2023 and December 31, 2022, the Company’s warrant liability was valued at $1,336,725 and $669,759, respectively. Under the guidance in ASC 815-40 the Warrants do not meet the criteria for equity treatment. As such, the Warrants must be recorded on the condensed balance sheet at fair value. This valuation is subject to re-measurement at each balance sheet date. With each re-measurement, the warrant valuation will be adjusted to fair value, with the change in fair value recognized in the Company’s condensed consolidated statement of operations.

The Company’s warrant liability for the Private Placement Warrants is based on a valuation model utilizing inputs from observable and unobservable markets with less volume and transaction frequency than active markets. The fair value of the Private Warrant liability classified within Level 3 of the fair value hierarchy.

The Company’s warrant liability for the Public Warrants is based on unadjusted quoted prices in active markets 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 2 of the fair value hierarchy due to limited trading activity. The Company classifies its U.S. Treasury and equivalent securities as held-to-maturity in accordance with ASC Topic 320 “Investments - Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost on the accompanying condensed consolidated balance sheets and adjusted for the amortization or accretion of premiums or discounts.

At June 30, 2023, assets held in the Trust Account were comprised of $21,193,395 in cash held by Continental Stock Transfer & Trust. During the three and six months ended June 30, 2023, the Company withdrew $260,493,363 in interest income from the Trust Account for tax obligation purposes and in connection with redemption.

At December 31, 2022, assets held in the Trust Account were comprised of $4,858 in cash and $279,379,571 in U.S. Treasury Bills. The sum of the cash held in trust and the U.S. Treasury bills total the condensed consolidated balance sheet balance of $279,384,429. During the year ended December 31, 2022, the Company withdrew $401,925 in interest income from the Trust Account for tax obligation purposes.

The following table presents information about the Company’s gross holding gains and fair value of held-to-maturity securities at June 30, 2023 and December 31, 2022:

					Gross
			Amortized		Holding
	Held-To-Maturity	Level	Cost		Gain		Fair Value
December 31, 2022	U.S. Treasury Bill (Matures on 01/05/2023)	1	$	279,339,034	$	40,537	$	279,379,571

The following table presents information about the Company’s liabilities that were measured at fair value on a recurring basis as of June 30, 2023 and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.

	Level 1		Level 2		Level 3
Liabilities:
Private Placement Warrants	$	—	$	—	$	508,725
Public Warrants	$	828,000	$	—	$	—

The following table presents information about the Company’s liabilities that were measured at fair value on a recurring basis as of December 31, 2022 and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.

	Level 1		Level 2		Level 3
Liabilities:
Private Placement Warrants	$	—	$	—	$	250,239
Public Warrants	$	—	$	419,520	$	—

Measurement

The Company established the initial fair value for the Warrants on February 11, 2021, the date of the consummation of the Company’s IPO using a Monte Carlo simulation model to value the Public Warrants and a modified Black-Scholes model to value the Private Placement Warrants. The Warrants were initially classified within Level 3 of the fair value hierarchy due to the use of unobservable inputs. In April 2021, the Public Warrants began trading in the open market and were reclassified to Level 1. On June 30, 2023 and December 31, 2022, the fair value was remeasured. At June 30, 2023 and December 31, 2022, the Company used a Monte Carlo simulation and modified Black-Scholes model, respectively, to value the Private Placement Warrants. The Public Warrants were previously classified as Level 3 due to the lack of an observable market price for the warrants and initially valued using the Black-Scholes Option Pricing Model. Public Warrants were transferred to a level 2 due to lack of an active market during the quarter ended September 30, 2022 through March 31, 2023. At June 30, 2023, the Public Warrants transferred from a Level 2 measurement to a Level 1 due to the active market.

The Private Placement Warrants were classified within Level 3 of the fair value hierarchy at the measurement date due to the use of unobservable inputs. The Company’s Private Placement Warrant liability is based on a valuation model utilizing management judgment and pricing inputs from observable and unobservable markets with less volume and transaction frequency than active markets. Significant deviations from these estimates and inputs could result in a material change in fair value.

Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology occurs. The estimated fair value of the Public Warrants transferred from a Level 2 measurement to a Level 1 fair value measurement during the three months ended June 30, 2023 was $828,000.

The key inputs into the valuation models was as follows:

	December 31,			June 30,
Input	2022			2023
Risk-free interest rate		4.75	%		5.45	%
Expected term (years)		5.71			5.06
Expected volatility		9.8	%		40	%
Dividend rate		0.0	%		0.0	%
Exercise price	$	11.50		$	11.50
Market implied likelihood of IBC		8.9	%		11.0	%

The following table provides a reconciliation of changes in fair value of the beginning and ending balances for the Company’s assets and liabilities classified as level 3 for the three and six months ended June 30, 2023 and 2022.

Fair Value at December 31, 2022	$	250,239
Change in fair value		56,372
Fair Value at March 31, 2023		306,611
Change in fair value		202,114
Fair Value at June 30, 2023	$	508,725

Fair Value at December 31, 2021	$	2,692,800
Change in fair value		(1,100,880)
Fair Value at March 31, 2022		1,591,920
Change in fair value		(793,893)
Fair Value at June 30, 2022	$	798,027