General form of registration statement for all companies including face-amount certificate companies

Fair Value Measurements

v3.23.2
Fair Value Measurements
6 Months Ended 12 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Dec. 31, 2022
Dec. 31, 2021
Fair Value Measurements [Line Items]        
FAIR VALUE MEASUREMENTS

17. Fair Value Measurements

 

The Company measures and reports certain financial and non-financial assets and liabilities on a fair value basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three levels related to fair value measurements are as follows:

 

Level 1 – Observable inputs such as quoted prices in active markets for identical assets or liabilities.

 

Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data.

 

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs.

 

The estimated fair values of accounts receivable, contract assets, accounts payable, accrued expenses, and indebtedness with unrelated parties approximate their carrying amounts due to the relatively short maturity or time to maturity of these instruments. Notes payable with related parties may not be arms-length transactions and therefore may not reflect fair value. The estimated fair value of the Debentures approximates their carrying amount due to their recent issuance.

 

The Company’s non-financial assets measured at fair value on a recurring basis include SPA Warrants and Private Warrants. These are considered Level 3 measurements as they involve significant unobservable inputs.

 

In accordance with the fair value hierarchy described above, the following tables show the fair value of the Company’s financial liabilities that are required to be measured at fair value on a recurring basis and the related activity for the periods presented:

 

    Fair Value as of June 30, 2023  
    Carrying
Value
    Level 1     Level 2     Level 3  
Financial liabilities:                        
Warrant liability - Public Warrants   $ 1,921,650     $ 1,921,650     $
-
    $
-
 
Warrant liability - Private Warrants     1,677,025      
-
     
-
      1,677,025  
Warrant liability - SPA Warrants     2,248,382      
-
     
-
      2,248,382  
Total   $ 5,847,057     $ 1,921,650     $
    -
    $ 3,925,407  

 

The following table sets forth a summary of the changes in fair value of the Company’s financial liabilities:

 

    Warrant  
    Liability  
Balance, December 31, 2022   $ 32,688,341  
Loss on repricing of warrants     590,266  
Change in fair value of warrant liabilities     (27,431,550 )
Balance, June 30, 2023   $ 5,847,057  
 

15. Fair Value Measurements

 

The Company measures and reports certain financial and non-financial assets and liabilities on a fair value basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three levels related to fair value measurements are as follows:

 

  Level 1 Observable inputs such as quoted prices in active markets for identical assets or liabilities.
       
  Level 2 Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data.
       
  Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

 

The estimated fair values of accounts receivable, contract assets, accounts payable and accrued expenses approximate their carrying amounts due to the relatively short maturity or time to maturity of these instruments. Notes payable with related parties may not be arms-length transactions and therefore may not reflect fair value. The estimated fair value of the Debentures approximates their carrying amount due to their recent issuance.

 

In accordance with the fair value hierarchy described above, the following tables show the fair value of the Company’s financial liabilities that are required to be measured at fair value on a recurring basis and the related activity for periods presented:

 

    Fair Value as of December 31, 2022  
    Carrying Value     Level 1     Level 2     Level 3  
Financial liabilities:                        
Warrant liability – Public Warrants   $ 2,276,136     $ 2,276,136     $
    $
 
Warrant liability – Private Warrants     1,934,588      
     
      1,934,588  
Warrant liability – SPA Warrants     28,477,618      
     
      28,477,618  
Total   $ 32,688,342     $ 2,276,136     $
    $ 30,412,206  

 

The following table sets forth a summary of the changes in fair value of the Company’s financial liabilities:

 

    Warrant
Liability
 
Balance, December 31, 2021   $
 
Assumption of Public and Private Warrants in Business Combination     5,278,145  
SPA Warrants from Convertible Note     20,949,110  
Change in fair value of warrant liabilities     6,461,087  
Balance, December 31, 2022   $ 32,688,342  
 
CleanTech Acquisition Corp [Member]        
Fair Value Measurements [Line Items]        
FAIR VALUE MEASUREMENTS  

NOTE 10. FAIR VALUE MEASUREMENTS

 

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

 

Description   Amount at
Fair Value
    Level 1     Level 2     Level 3  
June 30, 2022                        
Assets                        
Investments held in Trust Account:                        
Money Market investments   $ 174,483,243     $ 174,483,243     $
    $
 
Liabilities                                
Warrant liabilities – Public Warrants   $ 2,760,000     $ 2,760,000     $
    $
 
Warrant liabilities – Private Placement
Warrants
  $ 2,296,000     $
    $
    $ 2,296,000  
December 31, 2021                                
Assets                                
Investments held in Trust Account:                                
Money Market investments   $ 174,230,428     $ 174,230,428     $
    $
 
Liabilities                                
Warrant liabilities – Public Warrants   $ 5,175,000     $ 5,175,000     $
    $
 
Warrant liabilities – Private Placement
Warrants
  $ 2,798,250     $
    $
    $ 2,798,250  

 

The Company utilized a Monte Carlo simulation model for the initial valuation of the Public Warrants, and the publicly-traded value for the subsequent valuation of the Public Warrants. The measurement of the Public Warrants as of June 30, 2022 and December 31, 2021 is classified as Level 1 due to the use of an observable market quote in an active market under the ticker CLAQW. The quoted price of the Public Warrants was $0.32 and $0.60 per warrant as of June 30, 2022 and December 31, 2021, respectively.

 

The Company utilizes a Black-Scholes Option Pricing Model to value the Private Placement Warrants at each reporting period, with changes in fair value recognized in the condensed consolidated statements of operations. The estimated fair value of the warrant liability is determined using Level 3 inputs. Inherent in a Black-Scholes Option Pricing Model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. For the initial valuation, the Company estimated volatility based on research on comparable companies with the same type of warrants along with the implied volatilities shortly after they start trading. Significant increases (decreases) in the expected volatility in isolation would result in a significantly higher (lower) fair value measurement. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero.

Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period. The estimated fair value of the Public Warrants transferred from a Level 3 measurement to a Level 1 fair value measurement in September 2021 after the Public Warrants were separately listed and traded.

 

The following table provides the significant inputs to the Black-Scholes Option Pricing Model fair value of the Private Placement Warrants:

 

    As of
June 30,
2022
    As of
December 31,
2021
 
Stock price   $ 10.07     $ 9.96  
Strike price   $ 11.50     $ 11.50  
Probability of completing a Business Combination     38.0 %     *  
Dividend yield    
%    
%
Term (in years)     4.1       4.6  
Volatility     11.2 %     8.7 %
Risk-free rate     3.0 %     1.2 %
Discount for lack of marketability    
%    
%
Fair value of warrants   $ 0.32     $ 0.39  

 

* The probability of completing a Business Combination is considered within the volatility implied by the traded price of the Public Warrants which is used to value the Private Placement Warrants.

 

The following table provides a summary of the changes in the fair value of the Company’s Level 3 financial instruments that are measured at fair value on a recurring basis:

 

Fair value as of December 31, 2020   $
 
Initial measurement of Public Warrants and Private Placement Warrants at July 19, 2021     7,980,000  
Initial measurement of over-allotment warrants     1,071,000  
Transfer of Public Warrants to Level 1 measurement     (5,175,000 )
Change in fair value     (1,077,750 )
Fair value as of December 31, 2021     2,798,250  
Change in fair value     (861,000 )
Fair value as of March 31, 2022     1,937,250  
Change in fair value     358,750  
Fair value as of June 30, 2022   $ 2,296,000  

 

The Company recognized gains in connection with the change in the fair value of warrant liabilities of $503,750 and $0 in the unaudited condensed consolidated statements of operations for the three months ended June 30, 2022 and 2021, respectively. The Company recognized gains in connection with the change in the fair value of warrant liabilities of $2,917,250 and $0 in the unaudited condensed consolidated statements of operations for the six months ended June 30, 2022 and 2021, respectively.

 

NOTE 10. FAIR VALUE MEASUREMENTS

 

The following table presents information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2021 and December 31, 2020, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

Description   Amount at
Fair Value
    Level 1     Level 2     Level 3  
December 31, 2021                        
Assets                        
Investments held in Trust Account:                        
Money Market investments   $ 174,230,428     $ 174,230,428     $
    $
 
Liabilities                                
Warrant liabilities – Public Warrants   $ 5,175,000     $ 5,175,000     $
    $
 
Warrant liabilities – Private Placement Warrants   $ 2,798,250     $
    $
    $ 2,798,250  

 

The Company did not have any assets or liabilities measured at fair value as of December 31, 2020.

 

The Company utilized a Monte Carlo simulation model for the initial valuation of the Public Warrants, and the publicly-traded value for the subsequent valuation of the Public Warrants. The measurement of the Public Warrants as of December 31, 2021 is classified as Level 1 due to the use of an observable market quote in an active market under the ticker CLAQW. The quoted price of the Public Warrants was $0.60 per warrant as of December 31, 2021.

 

The Company utilizes a Black-Scholes Option Pricing Model to value the Private Placement Warrants at each reporting period, with changes in fair value recognized in the statement of operations. The estimated fair value of the warrant liability is determined using Level 3 inputs. Inherent in a Black-Scholes Option Pricing Model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. For the initial valuation, the Company estimated volatility based on research on comparable companies with the same type of warrants along with the implied volatilities shortly after they start trading. Significant increases (decreases) in the expected volatility in isolation would result in a significantly higher (lower) fair value measurement. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero.

 

Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period. The estimated fair value of the Public Warrants transferred from a Level 3 measurement to a Level 1 fair value measurement in September 2021 after the Public Warrants were separately listed and traded.

 

The following table provides the significant inputs to the Black-Scholes Option Pricing Model fair value of the Private Placement Warrants:

 

    As of
December 31,
2021
 
Stock price   $ 9.96  
Strike price   $ 11.50  
Probability of completing a Business Combination     100.0 %
Dividend yield    
%
Term (in years)     4.6  
Volatility     8.7 %
Risk-free rate     1.2 %
Fair value of warrants   $ 0.39  

 

The following table provides a summary of the changes in the fair value of the Company’s Level 3 financial instruments that are measured at fair value on a recurring basis:

 

Fair value as of December 31, 2020   $
 
Initial measurement of Public Warrants and Private Placement Warrants at July 19, 2021     7,980,000  
Initial measurement of over-allotment warrants     1,071,000  
Transfer of Public Warrants to Level 1 measurement     (5,175,000 )
Change in fair value     (1,077,750 )
Fair value as of December 31, 2021   $ 2,798,250  

 

The Company recognized gains in connection with the change in the fair value of warrant liabilities of $1,077,750 in the consolidated financial consolidated statements of operations during the year ended December 31, 2021.