Warrant liabilities

9 Months Ended

Sep. 30, 2023

Warrants and Rights Note Disclosure [Abstract]

Warrant liabilities

Note 6—Warrant liabilities

At September 30, 2023 and December 31, 2022, the Company had a total of 20,500,000 warrants outstanding, including 10,000,000 Public Warrants and 10,500,000 Private Placement Warrants.

The Company accounts for its warrants outstanding consistent with the “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies” (the “Staff Statement”) issued on April 12, 2021 by the staff (the “Staff”) of the Division of Corporation Finance of the SEC. The Company’s management has evaluated its warrants under ASC Subtopic 815-40, Contracts in Entity’s Own Equity including the assistance of accounting and valuation consultants and concluded that the Company’s warrants are not indexed to the Company’s shares in the manner contemplated by ASC Section 815-40-15 because the holder of the instrument is not an input into the pricing of a fixed-for-fixed option on equity shares. Therefore, the Company accounts for its warrants as warrant liabilities.

The following table presents information about the Company’s warrant liabilities that are measured at fair value on a recurring basis at September 30, 2023 and December 31, 2022 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.

Description	September 30, 2023		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Warrant Liabilities:
Public Warrants	$	400,000	$	—	$	400,000	$	—
Private Placement Warrants	$	420,000	$	—	$	420,000	$	—
Warrant liabilities at September 30, 2023	$	820,000	$	—	$	820,000	$	—

Description	December 31, 2022		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Warrant Liabilities:
Public Warrants	$	300,000	$	300,000	$	—	$	—
Private Placement Warrants	$	315,000	$	—	$	315,000	$	—
Warrant liabilities at December 31, 2022	$	615,000	$	300,000	$	315,000	$	—

At December 31, 2022, the Company valued its Public Warrants based on publicly observable inputs (Level 1 inputs) from the trading in the Public Warrants in an active market ($0.03 per warrant on December 31, 2022). During the three months ended June 30, 2023, the trading in the Company’s warrants became less active. So at June 30, 2023, the Company transferred the Public Warrants from Level 1 to Level 2 (significant other observable inputs) using the public trading price ($0.03 per warrant at September 30, 2023) as a guide. During the three months ended September 30, 2023, the trading in the Company’s warrants remained less active. Since the Private Placement Warrants are substantially similar to the Public Warrants but do not trade, the Company valued them based on the value of the Public Warrants (significant other observable inputs – Level 2). The Company is required to record the warrants at fair value at each reporting period, with changes in fair value recognized in the statements of operations. Transfers between Levels 1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology occurs.

At inception of the warrants on October 25, 2021, which became separable from the Units on December 13, 2022, the Company utilized an independent valuation consultant that used a binomial lattice model incorporating the Cox-Ross-Rubenstein methodology to value the warrants. The estimated fair value of the warrant liability at October 25, 2021 was determined using Level 3 inputs. Inherent in a binomial options pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimated the volatility of its shares based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants was assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero.

The warrant liabilities are not subject to qualified hedge accounting.