FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 30, 2022

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

NOTE 9. FAIR VALUE MEASUREMENTS

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 September 30, 2022, assets held in the Trust Account were comprised of $4,645 in cash and $693,252,957 in U.S. Treasury securities. During the nine months ended September 30, 2022, the Company withdrew $752,999 of interest income from the Trust Account to pay franchise and income taxes.

At December 31, 2021, assets held in the Trust Account were comprised of $4,728 in cash and $690,144,171 in U.S. Treasury securities. During the year ended December 31, 2021, the Company did not withdraw any interest income from the Trust Account.

The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at September 30, 2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value. The gross holding gains and fair value of held-to-maturity securities at September 30, 2022 and December 31, 2021, are as follows:

					Gross
					Holding
	Held-To-Maturity Securities	Level	Amortized Cost		Gain (loss)		Fair Value
September 30, 2022	U.S. Treasury Securities (Mature on 10/04/22)	1	$	693,252,957	$	62,442	$	693,315,399
December 31, 2021	U.S. Treasury Securities (Mature on 01/11/22)	1	$	690,144,171	$	6,829	$	690,151,000

The following table presents information about the Company’s liabilities that are measured at fair value on a recurring basis at September 30, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

		September 30,		December 31,
Description	Level	2022		2021
Liabilities:
Derivative Liability – Public Warrants	1	$	966,000	$	11,730,000
Derivative Liability – Private Placement Warrants	2	$	686,000	$	8,330,000
Convertible Note – related party	3	$	1,796,337	$	1,934,656
Promissory Note – related party	3	$	1,526,762	$	—
Forward Purchase Agreement	3	$	4,932,441	$	—

As of March 23, 2021 (closing date of the Initial Public Offering), the Warrants were initially valued using a Monte Carlo simulation model for the Public Warrants and a Modified Black Scholes model for the Private Placement Warrants, which are considered to be a Level 3 fair value measurements. The model’s primary unobservable input utilized in determining the fair value of the Warrants is the expected volatility of the common stock. The expected volatility as of March 23, 2021 was derived from observable public warrant pricing on comparable ‘blank-check’ companies without an identified target. Significant increases (decreases) in the expected volatility in isolation would result in a significantly higher (lower) fair value measurement.

For periods subsequent to the detachment of the Public Warrants from the Units, the close price of the Public Warrant price was used as the fair value as of each relevant date. The measurement of the Public Warrants after the detachment of the Public Warrants from the Units was classified as Level 1 due to the use of an observable market quote in an active market. The subsequent measurements of the Private Placement Warrants after the detachment of the Public Warrants from the Units are classified as Level 2 due to the use of an observable market quote for a similar asset in an active market. There were no transfers between Levels 1, 2 and 3 at September 30, 2022. The estimated fair value of the Public Warrants transferred from a Level 3 measurement to a Level 1 fair value measurement during the three and nine months ended September 30, 2021 was $18,906,000. The estimated fair value of the Private Placement Warrants transferred from a Level 3 measurement to a Level 2 fair value measurement during the three and nine months ended September 30, 2021 was $18,906,000.

The following table presents the changes in the fair value of the Level 3 Forward Purchase Agreement as of September 30, 2021:

	Private
	Placement		Public
Fair value as of January 1, 2021	$	—	$	—
Initial measurement on March 23, 2021 (Initial Public Offering)		14,014,000		19,182,000
Transfers to Level 1		—		(18,906,000)
Transfers to Level 2		(13,426,000)		—
Change in fair value		(588,000)		(276,000)
Fair value as of September 30, 2021	$	—	$	—

At September 30, 2022, the Convertible Promissory Note was valued using a Monte Carlo simulation model, which is considered to be a Level 3 fair value measurement. The Monte Carlo simulation model’s primary unobservable input utilized in determining the fair value of the Convertible Promissory Note is the expected volatility of the common stock, which underlines the price of warrants into which the Convertible Promissory Note may be converted into. This liability is subject to re-measurement at each balance sheet date and loan withdrawal date until exercised, and any change in fair value is recognized in the Company’s condensed consolidated statements of operations. The fair value of the loan as of September 30, 2022, was $1,623,099, which resulted in a change in fair value of the Convertible Promissory Note of $59,193 and $311,557 recorded in the condensed consolidated statements of operations for the three and nine months ended September 30, 2022. The fair value of the loan as of December 31, 2021, was $1,934,656.

The following table presents the quantitative information regarding Level 3 fair value measurements for the Convertible Promissory Note:

	September 30,			December 31,
Input:	2022			2021
Risk-free interest rate		3.71	%		0.06	%
Expected term (years)		0.44			0.16
Expected volatility		44.30	%		69.80	%
Exercise price	$	1.50		$	1.50
Fair value of Units	$	0.07		$	0.17

The following table presents the changes in the fair value of the Level 3 Convertible Promissory Note as of September 30, 2022:

	Total
Fair value as of January 1, 2022	$	1,934,656
Change in fair value		(311,557)
Fair value as of September 30, 2022	$	1,623,099

There were no transfers in or out of Level 3 from other levels in the fair value hierarchy during the three months and nine months ended September 30, 2022 for the Convertible Promissory Note.

At September 30, 2022, the Forward Purchase Agreement was valued using a Black-Scholes simulation model, which is considered to be a Level 3 fair value measurement. The model’s primary unobservable inputs utilized in determining the fair value of the Forward Purchase Shares, used the expected redemption of the common stock. The expected redemption percentage as of September 30, 2022 was 70%, derived from observable market data on pricing for comparable ‘blank-check’ companies of similar size. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the condensed consolidated statements of operations. The fair value of the Forward Purchase Agreement as of September 30, 2022, was $4,932,441, which resulted in a change in fair value of the Forward Purchase Agreement liability of $262,692 recorded in the condensed consolidated statement of operations for the three months ended September 30, 2022.

The following table presents the quantitative information regarding Level 3 fair value measurements for the Forward Purchase Agreement:

	September 30,
Input:	2022
Risk-free interest rate		3.78	%
Expected term (years)		0.44
Expected volatility		4.7	%
Exercise price	$	10.00
Fair value of Units	$	9.82
Redemption proceeds estimate		70	%

The following table presents the changes in the fair value of the Level 3 Forward Purchase Agreement as of September 30, 2022:

	Total
Fair value as of January 1, 2021	$	—
Change in fair value		4,932,441
Fair value as of September 30, 2022	$	4,932,441