Fair Value Measurements

3 Months Ended

Mar. 31, 2025

Fair Value Measurements

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, 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:		Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2:		Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.

Level 3:		Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.

The following table presents information about the Company’s assets and liabilities that are measured at fair value at March 31, 2025 and December 31, 2024, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:


Description:	Level		March 31, 2025		December 31, 2024
Assets:
Investments Held for Trading		1	$	102,283	$	101,511
Investments held in Trust Account		1	$	8,634,335	$	8,544,857
Liabilities:
Warrant liability - Private Placement Warrants		3	$	176,800	$	33,600
Warrant liability - Public Warrants		1	$	254,150	$	48,300

The Public Warrants and the Private Placement Warrants were accounted for as liabilities in accordance with ASC

815-40

and are presented within liabilities on the condensed balance sheets. The warrant liabilities were measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the condensed statements of operations.

Upon consummation of the Initial Public Offering, the Company used a Monte Carlo simulation model to value the Public Warrants and a modified Black-Scholes model to value the Private Placement Warrants. The Company allocated the proceeds received from (i) the sale of Units (which is inclusive of one share of Class A common stock and

one-half

of one Public Warrant) and (ii) the sale of Private Placement Warrants, first to the warrants based on their fair values as determined at initial measurement, with the remaining proceeds allocated to shares of Class A common stock subject to possible redemption (temporary equity) based on their relative fair values at the initial measurement date. The Public Warrants and the Private Placement Warrants were classified within Level 3 of the fair value hierarchy at the issuance due to the use of unobservable inputs. As of March 31, 2025 and December 31, 2024, the Public Warrants were valued using the publicly available price for the Warrant and are classified as Level 1 on the Fair Value Hierarchy. The Company relied upon the implied volatility of the Public Warrants and the implied volatilities of comparable companies and the closing price as of March 31, 2025 and December 31, 2024 per Public Warrant to estimate the volatility for the Private Placement Warrants. As of March 31, 2025 and December 31, 2024, the Private Placement Warrants were classified within Level 3 of the Fair Value Hierarchy at the measurement dates due to the use of unobservable inputs

The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2025:


	Fair Value Measurement Using Level 3 Inputs Total
Balance, fair value at December 31, 2024	$	33,600
Change in fair value of derivative warrant liabilities		143,200

Balance, fair value at March 31, 2025	$	176,800

As of March 31, 2025 and December 31, 2024, the fair value of the derivative feature of the Warrants was calculated using the following range of weighted average assumptions


	March 31, 2025			December 31, 2024
Risk-free interest rate		3.96	%		4.38	%
Expected volatility of underlying shares		2.00	%		2.00	%
Dividend yield		0.00	%		0.00	%
Probability of business combination		1.00	%		0.30	%

The following table provides a summary of the changes in the fair value of the Company’s financial instruments that are measured at fair value on a recurring basis:


	Private Placement Warrants		Public Warrants		Total
Fair value at December 31, 2024	$	33,600	$	48,300	$	81,900
Change in fair value		143,200		205,850		349,050

Fair value at March 31, 2025	$	176,800	$	254,150	$	430,950

As of March 31, 2025 and December 31, 2024, the derivative liability was $430,950 and $81,900, respectively. In addition, for the three months ended March 31, 2025 and March 31, 2024, the Company recorded $349,050 and $235,000 as a loss on the change in fair value of the derivative warrants on the condensed statements of operations, respectively.

- 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

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-Topic 820
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Reference 2: http://www.xbrl.org/2003/role/exampleRef
-Topic 820
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 820
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 820
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 820
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Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 820
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 820
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-Name Accounting Standards Codification
-Section 50
-Paragraph 6A
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 820
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-Name Accounting Standards Codification
-Section 50
-Paragraph 2
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-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482106/820-10-50-2

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 820
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-Name Accounting Standards Codification
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Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 940
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-URI https://asc.fasb.org/1943274/2147478119/940-820-50-1

+ Details

AltEnergy Acquisition Corp 10-Q