v3.25.2
Fair Value Measurements
 3 Months Ended
Mar. 31, 2025
Fair Value Measurements [Abstract]  
Fair Value Measurements

Note 10 — Fair Value Measurements

 

The following table presents assets and liabilities measured at fair value by classification within the fair value hierarchy at March 31, 2025 and December 31, 2024:

 

March 31, 2025

 

   Level I   Level II   Level III   Total 
Assets                
Money Market Funds  $3,607,557   $—   $—   $3,607,557 
Total assets  $3,607,557   $—   $—   $3,607,557 
Liabilities                    
July Investment Agreement Derivative  $—   $—   $65,803,887   $65,803,887 
CPU Share Allocation Obligation   —    —   $17,426,650    17,426,650 
Total liabilities  $—   $—   $83,230,537   $83,230,537 

 

December 31, 2024

 

   Level I   Level II   Level III   Total 
Assets                
Money Market Funds  $2,588,289   $—   $—   $2,588,289 
Total assets  $2,588,289   $—   $—   $2,588,289 
Liabilities                    
July Investment Agreement Derivative  $—   $—   $53,231,638   $53,231,638 
CPU Share Allocation Obligation   —    —   $10,231,516    10,231,516 
Total liabilities  $—   $—   $63,463,154   $63,463,154 

The following table provides a reconciliation of the beginning and ending balance associated with the liabilities measured at fair value using significant unobservable inputs (Level III) for the three months ended March 31, 2025 and for the period from February 8, 2024 (inception) to December 31, 2024:

 

   July Investment Agreement Derivative (Level III)   CPU Share Allocation Obligation (Level III) 
         
Balance, February 8, 2024 (inception)  $
—
   $
—
 
Additions   37,660,336    8,370,647 
Change in fair value   15,571,302    1,860,869 
Balance, December 31, 2024  $53,231,638   $10,231,516 
Additions   
—
    4,703,536 
Change in fair value   12,572,249    2,491,598 
Balance, March 31, 2025  $65,803,887   $17,426,650 

 

Money Market Funds

 

Money market funds are investments with maturities within three months of their purchase dates held at banks, that approximate fair value based on Level 1 measurements. 

 

Derivative Liabilities

 

The Company utilized scenario-based valuation models to value the July Investment Agreement Derivative and the CPU Share Allocation Obligations at issuance and March 31, 2025. A key estimate used in the valuations of the July Investment Agreement Derivative and the CPU Share Allocation Obligations is an enterprise valuation of New EM, including the acquisition of the Five Entities, at the date of issuance and period end, which uses a sum-of-the-parts valuation model that combined the arm’s length purchase prices of the Five Entities pursuant to acquisition agreements signed with the Company on February 10, 2025, and the invested capital of the Company for each measurement date.

 

July Investment Agreement Derivative

 

The Company utilized the following assumptions to value the July Investment Agreement Derivative:

 

   March 31,
2025		   December 31,
2024		 
         
Expected Business Combination date   June 30, 2025    June 30, 2025 
Term   0.25    0.50 
Risk free rate   4.2%   4.2%
CCC credit rating   10.8%   8.7%
Present value factor   0.99    0.98 
Probability of Business Combination close   60.0%   60.0%
Expected Company fully diluted ownership of New EM   71.3%   71.3%
Additional share allocation percentage   10.0%   10.0%

 

The change in fair value of July Investment Agreement Derivative of $12,572,249 and $0 were reported as a component of other income/(expense), on the accompanying statement of operations for the three months ended March 31, 2025 and for the period from February 8, 2024 (inception) to March 31, 2024, respectively.

 

CPU Share Allocation Obligation:

 

The CPU Share Allocation Obligations are contingent on the closing of the Business Combination and certain convertible preferred unit holders entering into additional convertible preferred unit agreements in increments of $2,000,000. At March 31, 2025 and December 31, 2024, the CPU Share Allocation Obligation totaled 7.9% and 4.75%, respectively, representing an estimated 5.63 % and 2.85%, respectively, of outstanding shares of New EM Common Stock at the Closing.

The Company utilized the following assumptions to value the CPU Share Allocation Obligations:

 

   March 31,
2025		   March 2025
(issuances)		   February 2025
(issuances)		   December 31,
2024		 
Expected Business Combination date   June 30, 2025    June 30, 2025    June 30, 2025    June 30, 2025 
Term   0.25    0.25    0.35-0.37    0.50 
Risk free rate   4.23%   4.33%   4.31-4.34%   4.2%
Present value factor   0.99    0.99    0.99    0.98 
Probability of Business Combination close   60.0%   60.0%   60.0%   60.0%
Expected Company fully diluted ownership of New EM   71.3%   71.3%   71.3%   71.3%
Additional share allocation percentages   7.90%   1.80%   1.35%   4.75%

 

The change in fair value of CPU Share Allocation Obligation of $2,491,598 and $0 were reported as a component of other income, on the accompanying statement of operations for the three months ended March 31, 2025 and for the period from February 8, 2024 (inception) to March 31, 2024, respectively.