Fair Value Measurements

9 Months Ended

Sep. 30, 2022

Note 8 — 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, 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). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

Level 1 —

Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.

Level 2 —

Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means.

Level 3 —

Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The following table presents information about the Company’s assets and 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, 2022		Quoted Prices In Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Liabilities:
Public Warrant Liability	$	431,250	$	431,250	$	—	$	—
Private Placement Warrant Liability		310,000		—		310,000		—
Total	$	741,250	$	431,250	$	310,000	$	—

	December 31, 2021		Quoted Prices In Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Liabilities:
Public Warrant Liability	$	8,409,374	$	8,409,374	$	—	$	—
Private Placement Warrant Liability		6,045,000		—		6,045,000		—
Total	$	14,454,374	$	8,409,374	$	6,045,000	$	—

The Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the Condensed Balance Sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liability in the Condensed Statements of Operations.

The Company established the initial fair value of the Public Warrants and Private Warrants on February 23, 2021, the date of the Company’s Initial Public Offering, using a Monte Carlo simulation model. The Warrants were classified as Level 3 at the initial measurement date due to the use of unobservable inputs.

On February 23, 2021, the fair value of the Private Placement Warrants and Public Warrants was determined to be $1.53 per warrant. The following table presents the change in the fair value of Level 3 warrant liabilities for the three and six months ended June 30, 2021. The Level 3 warrant liabilities were transferred to Level 2 as of June 30, 2021 and there were no Level 3 warrant liabilities during the three months ended September 30, 2021:

	Level 3 Warrant Liabilities
Fair Value as of December 31, 2020	$	—
Initial measurement on February 23, 2021		18,901,875
Change in valuation as of March 31, 2021		(2,717,916	)
Fair Value as of March 31, 2021		16,183,959
Change in valuation as of June 30, 2021		864,791
Transfer of Public Warrants to Level 1		(9,918,750	)
Transfer of Private Warrants to Level 2		(7,130,000	)
Fair Value as of June 30, 2021	$	—

Beginning with the quarter ended June 30, 2021, the Public Warrants were reclassified from Level 3 to Level 1 and the Private Placement Warrants were reclassified from Level 3 to Level 2, due to certain “make whole” provisions in the warrant agreement. As of September 30, 2022 and December 31, 2021 the Company used the quoted market price of the Public Warrants as the fair value of the Public Warrants and the Private Placement Warrants.

There were no transfers to/from Levels 1, 2 and 3 for the three and nine months ended September 30, 2022.

As of September 30, 2022 and December 31, 3021 there was cash held in the Trust Account of $1,027 and $813, respectively. The carrying value, excluding gross unrealized holding gains (losses) and fair value of held to maturity securities, on September 30, 2022 and December 31, 2021, are as follows:

	Carrying Value as of September 30, 2022		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value as of September 30, 2022
U.S. Treasury Securities	$	289,010,813	$	—	$	(8,889	)	$	289,001,924
	$	289,010,813	$	—	$	(8,889	)	$	289,001,924

	Carrying Value as of December 31, 2021		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value as of December 31, 2021
U.S. Treasury Securities	$	287,548,366	$	2,435	$	—	$	287,550,801
	$	287,548,366	$	2,435	$	—	$	287,550,801

- 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.

+ References + Details

Figure Acquisition Corp. I 10-Q