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FAIR VALUE MEASUREMENTS
 3 Months Ended
Mar. 31, 2025
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS FAIR VALUE MEASUREMENTS
The Company determines fair value based on assumptions that market participants would use in pricing an asset or a liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
•Level 1 inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.
•Level 2 inputs: Other than quoted prices in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.
•Level 3 inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.
Recurring Fair Value Measurements—The assets and liabilities measured at estimated fair value on a recurring basis and their corresponding placement in the fair value hierarchy are presented in the tables below.
Fair Value Hierarchy
As of March 31, 2025Level 1Level 2Level 3Total
Assets:
Life settlement policies$— $— $446,207,963 $446,207,963 
Available-for-sale securities, at fair value— — 2,743,338 2,743,338 
Total assets held at fair value$— $— $448,951,301 $448,951,301 
Liabilities:
Current portion of long-term debt, at fair value$— $— $117,094,610 $117,094,610 
Private placement warrants— — 14,151,000 14,151,000 
Total liabilities held at fair value:$— $— $131,245,610 $131,245,610 
Fair Value Hierarchy
As of December 31, 2024Level 1Level 2Level 3Total
Assets:
Life settlement policies$— $— $370,398,447 $370,398,447 
Available-for-sale securities, at fair value— — 2,205,904 2,205,904 
Total assets held at fair value$— $— $372,604,351 $372,604,351 
Liabilities:
Current portion of long-term debt, at fair value$— $— $37,430,336 $37,430,336 
Long-term debt, at fair value— — 105,120,100 105,120,100 
Private placement warrants— — 9,345,000 9,345,000 
Total liabilities held at fair value$— $— $151,895,436 $151,895,436 
Life Settlement Policies—For all policies purchased after June 30, 2023, the Company accounts for owned life settlement policies using the fair value method. Prior to June 30, 2023, the Company elected to use either the fair value method or the investment method (cost, plus premiums paid). The valuation method is chosen upon contract acquisition and is irrevocable.
For policies carried at fair value, the valuation based on Level 3 inputs that reflect our assumptions about what factors market participants would use in pricing the asset or liability, such as life expectancies and cash flow discount rates. The inputs are developed based on the best available information, including our own data. The valuation model is based on a discounted cash flow analysis and is sensitive to changes in the discount rate used. The Company utilized a blended average discount rate of 18% and 20% for policy valuations at March 31, 2025 and at December 31, 2024, respectively, which is based on economic and company-specific factors. The Company re-evaluates its discount rates at the end of every reporting period in order to reflect the estimated discount rates that could reasonably be used in a market transaction involving the Company’s portfolio of life settlements.
For life settlement policies carried using the investment method, the Company measures these at the cost of the policy plus premiums paid. The policies accounted for using the investment method totaled $1,096,866 and $1,083,977 at March 31, 2025 and at December 31, 2024, respectively.
Discount Rate Sensitivity—18% was determined to be the weighted average discount rate used to estimate the fair value of policies held by the Company and its investment funds. If the discount rate increased or decreased by two percentage points and the other assumptions used to estimate fair value remained the same, the change in estimated fair value as of March 31, 2025, would be as follows:
Rate AdjustmentFair ValueChange in
Fair Value
+2%$417,791,669 $(28,416,294)
No change446,207,963 
-2%478,861,553 32,653,590 
Credit Exposure to Insurance Companies—The following table provides information about the life insurance issuer concentrations that exceed 10% of total face value or 10% of total fair value of the Company’s life insurance policies as of March 31, 2025:
CarrierPercentage of
Face Value		Percentage of
Fair Value		Carrier
Rating
Lincoln National Life Insurance Company13.1 %13.8 %A
Transamerica10.4 %13.0 %A
John Hancock Life Insurance Company (U.S.A.)12.8 %10.9 %A+
The following table provides a roll forward of the fair value of life insurance policies for the three months-ended March 31, 2025:
Fair value at December 31, 2024$370,398,447 
Policies purchased105,633,081 
Realized gain on matured/sold policies(15,130,764)
Realized gain on matured/sold policies15,130,764 
Premiums paid(8,308,073)
Unrealized gain on held policies27,012,517 
Change in estimated fair value33,835,208 
Matured/sold policies(56,836,082)
Premiums paid8,308,073 
Fair value at March 31, 2025$446,207,963 
Long-Term Debt—See Note 14, Long-Term Debt, for background information on the market-indexed debt. The Company has elected the fair value option in accounting for the instruments. Fair value is determined using Level 3 inputs. The valuation methodology is based on the Black-Scholes-Merton option-pricing formula and a discounted cash flow analysis. Inputs to the Black-Scholes-Merton model include (i) the S&P 500 Index price, (ii) S&P 500 Index volatility, (iii) a risk-free rate based on data published by the US Treasury, and (iv) a term assumption based on the contractual term of the LMATT Notes. The discounted cash flow analysis includes a discount rate that is based on the implied discount rate developed by calibrating a valuation model to the purchase price on the initial investment date. The implied discount rate is evaluated for reasonableness by benchmarking it to yields on actively traded comparable securities.
The total change in fair value of the debt resulted in a gain of $(3,362,103). The Company recognized a gain of $(3,362,103) on the change in fair value of the debt resulting from risk-free valuation scenarios, which is included within gain on change in fair value of debt within the consolidated statement of operations and comprehensive income (loss) for the three months ended March 31, 2025.
The following table provides a roll forward of the fair value of the outstanding debt for the three months ended March 31, 2025:
Fair value at December 31, 2024$142,550,436 
Debt issued to third parties16,189,871 
Repayment of debt(38,415,464)
Unrealized loss on change in fair value (risk-free)(3,362,103)
Change in estimated fair value of debt(3,362,103)
LMA Income Series, LP excess return accrual117,616 
Deferred issuance costs and discounts14,254 
Fair value at March 31, 2025$117,094,610 
Private Placement Warrants—The Company had 8,900,000 private placement warrants (the “Private Placement Warrants”) outstanding as of March 31, 2025 and December 31, 2024. Each Private Placement Warrant is exercisable for one share of Class A common stock at a price of $11.50 per share, subject to adjustment. The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that (x) the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable so long as they are held by the initial purchasers or their permitted transferees and (z) the Private Placement Warrants and the shares of Class A common stock issuable upon exercise of the Private Placement Warrants will be entitled to registration rights. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted
transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
Private Placement Warrants were accounted for as liabilities in accordance with ASC 815-40. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented separately in the consolidated statements of operations and comprehensive income (loss).
The Private Placement Warrants were considered a Level 3 fair value measurement using a binomial lattice model in a risk-neutral framework. The binomial lattice model’s primary unobservable input utilized in determining the fair value of the Private Placement Warrants is the expected volatility of the common stock. The implied volatility as of the reporting date was derived from observable public warrant traded price provided by Bloomberg LP.
The following table presents the key assumptions in the analysis as of the Merger Closing Date:
Private Placement Warrants
Expected implied volatilityde minimis
Risk-free interest rate4.09%
Term to expiration5.0 years
Exercise price$11.50
Common Stock Price$10.03
Dividend Yield—%
The subsequent changes in the value of the private warrants is based on the changes in the value of the public warrants as of the relevant reporting date due to mostly identical terms between the Private Placement Warrants and the Public warrants, except as noted above. The noted exceptions were determined not to have a significant impact on the valuation of the Private Placement Warrants when using the change in the value of the Public Warrants.
Available-for-Sale Investment—The convertible promissory notes are classified as available-for-sale securities. Available-for-sale investments are subsequently measured at fair value. Unrealized holding gains and losses are excluded from earnings and reported in other comprehensive income until realized. The Company determines fair value of its available-for-sale investments using unobservable inputs by considering the initial investment value, next round financing, and the likelihood of conversion or settlement based on the contractual terms in the agreement. As of March 31, 2025 and December 31, 2024, the Company evaluated the fair value of its Promissory Note and determined that the fair value approximates the carrying value of $2,743,338 and $2,205,904, respectively.
Financial Instruments Where Carrying Value Approximates Fair Value—The carrying value of cash, cash equivalents, accounts receivables, due to affiliates, and due to affiliates approximates fair value due to the short-term nature of their maturities.