Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.23.2
Fair Value Measurements
6 Months Ended
Jun. 30, 2023
Fair Value Disclosures [Abstract]  
Fair Value Measurements
NOTE 8. FAIR VALUE MEASUREMENTS
The following table presents information about the Company’s liabilities that are measured at fair value on a recurring basis at June 30, 2023, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
 
    
June 30,
2023
    
Quoted
Prices In
Active
Markets
(Level 1)
    
Significant
Other
Observable
Inputs
(Level 2)
    
Significant
Other
Unobservable
Inputs
(Level 3)
 
Liabilities:
           
Warrant Liability—Public Warrants
   $ 825,000      $ 825,000      $ —      $ —  
Warrant Liability—Private Placement Warrants
  
486,338        —          —          486,338  
  
 
 
    
 
 
    
 
 
    
 
 
 
  
$
1,311,338
 
  
$
825,000
 
  
$
—  
    
$
486,338
 
  
 
 
    
 
 
    
 
 
    
 
 
 
 
The following table presents information about the Company’s liabilities that are measured at fair value on a recurring basis at December 31, 2022, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
 
    
December 31,
2022
    
Quoted
Prices In
Active
Markets
(Level 1)
    
Significant
Other
Observable
Inputs
(Level 2)
    
Significant
Other
Unobservable
Inputs
(Level 3)
 
Liabilities:
           
Warrant Liability—Public Warrants
   $ 877,500      $ 877,500      $ —      $ —  
Warrant Liability—Private Placement Warrants
   $ 505,949        —          —          505,949  
  
 
 
    
 
 
    
 
 
    
 
 
 
  
$
1,383,449
 
  
$
877,500
 
  
$
—  
    
$
505,949
 
  
 
 
    
 
 
    
 
 
    
 
 
 
The measurement of the Public Warrants at June 30, 2023 and December 31, 2022 is classified as Level 1 due to the use of an observable market quote in an active market. As of June 30, 2023 and December 31, 2022, the aggregate value of Public Warrants was $825,000 and $877,500, respectively. During the period ended June 30, 2023 and year ended December 31, 2022 there were no transfers between Level 1, 2 and 3 on the derivative warrant liabilities.
The estimated fair value of the Private Placement Warrants on June 30, 2023 and December 31, 2022 is determined using Level 3 inputs. Inherent in a Monte Carlo simulation model are assumptions related to expected stock-price volatility
(pre-merger
and post-merger), expected term, dividend yield and risk-free interest rate. The Company estimates the volatility of its common stock based on management’s understanding of the volatility associated with instruments of other similar entities. The risk-free interest rate is based on the U.S. Treasury Constant Maturity similar to the expected remaining life of the warrants. The expected life of the warrants is simulated based on management assumptions regarding the timing and likelihood of completing a business combination. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero. The assumptions used in calculating the estimated fair values represent the Company’s best estimate. However, inherent uncertainties are involved. If factors or assumptions change, the estimated fair values could be materially different.
The key inputs into the Monte Carlo simulation model for the Private Placement Warrants were as follows at June 30, 2023:
 
Input
  
June 30, 2023
 
Expected term (years)
     0.96  
Expected volatility
     7.7
Risk-free interest rate
     5.40
Exercise price
   $  11.50  
Fair value of the common stock price
   $ 10.05  
The key inputs into the Monte Carlo simulation model for the Private Placement Warrants were as follows at December 31, 2022:
 
Input
  
December 31,
2022
 
Expected term (years)
     1.15  
Expected volatility
     7.9
Risk-free interest rate
     4.68
Exercise price
   $  11.50  
Fair value of the common stock price
   $ 9.92  
The primary significant unobservable input used in the fair value measurement of the Company’s Private Placement Warrants is the expected volatility of the common stock. Significant increases (decreases) in the expected volatility in isolation would result in a significantly higher (lower) fair value measurement.
The following table sets forth a summary of the changes in the fair value of the Level 3 warrant liability for the three and six months ended June 30, 2023:
 
    
Warrant Liability
 
Fair value as of December 31, 2022
   $ 505,949  
Change in fair value
     (60,935
  
 
 
 
Fair value as of March 31, 2023
  
$
445,014
 
Change in fair value
     41,324  
  
 
 
 
Fair value as of June 30, 2023
  
$
486,338
 
  
 
 
 
 
The following table sets forth a summary of the changes in the fair value of the Level 3 warrant liability for the three and six months ended June 30, 2022:
 
    
Warrant Liability
 
Fair value as of December 31, 2021
   $ 4,822,783  
Change in fair value
     (3,428,308
    
 
 
 
Fair value as of March 31, 2022
  
 
1,394,475
 
Change in fair value
     (344,281
    
 
 
 
Fair value as of June 30, 2022
  
$
1,050,194