FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 30, 2022

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-end, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.

The fair value of the Company’s 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).

Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period. The estimated fair value of the Public Warrants transferred from a Level 3 measurement at December 31, 2021 to a Level 1 fair value measurement at March 31, 2022, the quarter in which the Public Warrants were separately listed and traded, and subsequently transferred to a Level 2 measurement during the quarter ended September 30, 2022 due to low trading volume.

The following tables present information about the Company’s assets and liabilities that are measured at fair value at September 30, 2022 and December 31, 2021, and indicate the level in the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

At September 30, 2022	Quoted Prices in		Significant Other		Significant Other
	Active Markets		Observable Inputs		Unobservable Inputs
Description	(Level 1)		(Level 2)		(Level 3)
Assets:
Investments held in Trust Account	$	295,009,088	$	—	$	—

Liabilities:
Public Warrants	$	—	$	1,437,500	$	—
Private Placement Warrants		—		—		900,000
Total warrant liabilities	$	—	$	1,437,500	$	900,000

At December 31, 2021	Quoted Prices in		Significant Other		Significant Other
	Active Markets		Observable Inputs		Unobservable Inputs
Description	(Level 1)		(Level 2)		(Level 3)
Assets:
Investments held in Trust Account	$	293,251,371	$	—	$	—

Liabilities:
Public Warrants	$	—	$	—	$	8,481,250
Private Placement Warrants		—		—		5,400,000
Total warrant liabilities	$	—	$	—	$	13,881,250

Investments Held in Trust Account

At September 30, 2022 and December 31, 2021, the entire balance in the Trust Account of $295.0 million and $293.3 million, respectively, was held in marketable securities. At September 30, 2022, the Company had $193,439 in income taxes payable that will be eligible for payment out of proceeds from the Trust Account.

Warrant Liabilities

The accounting treatment of derivative financial instruments requires that the Company record a derivative liability upon the closing of the Initial Public Offering. Accordingly, the Company has classified both the Public Warrants and Private Placement Warrants as liabilities at their fair value, as determined by the valuation techniques noted below. These liabilities are subject to re-measurement at each balance sheet date. With each such re-measurement, the warrant liabilities will be adjusted to fair value, with the change in fair value recognized in the Company’s statement of operations. The Company will reassess the classification at each balance sheet date. If the classification changes as a result of events during the period, the warrants will be reclassified as of the date of the event that causes the reclassification.

The estimated fair value of the Public Warrants at September 30, 2022 was based upon Level 1 inputs as such warrants were actively traded on an exchange. The estimated fair value of the Public Warrants at December 31, 2021 and Private Placement Warrants at September 30, 2022 and December 31, 2021 was determined using Level 3 inputs. Inherent in a Monte Carlo simulation model are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock based on historical volatility of select peer companies’ common stock 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 is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates will remain at zero.

The following table provides quantitative information regarding Level 3 fair value measurements as of September 30, 2022:

	Private Placement Warrants
Exercise price	$	11.50
Share price	$	10.00
Volatility		0.4	%
Expected term (years)		3.6
Risk-free rate		4.19	%
Dividend yield		—	%

The following table provides quantitative information regarding Level 3 fair value measurements as of December 31, 2021:

	Public Warrants			Private Placement Warrants
Exercise price	$	11.50		$	11.50
Share price	$	9.71		$	9.71
Volatility		11.0	%		11.0	%
Expected term (years)		6.0			6.0
Risk-free rate		1.35	%		1.35	%
Dividend yield		—	%		—	%

The change in fair value of the warrant liabilities classified as Level 3 during the nine months ended September 30, 2022 is summarized as follows:

	Public Warrants			Private Placement Warrants

Warrant liabilities at December 31, 2021	$	8,481,250		$	5,400,000
Transfer out to Level 1⁽¹⁾		(8,481,250	)		—
Change in fair value of warrant liabilities		—			(4,500,000	)
Warrant liabilities at September 30, 2022	$	—		$	900,000

(1)	Subsequently transferred from Level 1 to Level 2 during the quarter ended September 30, 2022.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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