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Fair Value Measurements | 3 Months Ended
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Mar. 31, 2023
Fair Value Disclosures [Abstract] |
Fair Value Measurements | NOTE 16. FAIR VALUE MEASUREMENTS The Company’s financial assets and liabilities subject to fair value measurement on a recurring basis and the level of inputs used for such measurements were as follows as of the dates indicated (in thousands):
|  | Fair Value Measured as of March 31, 2023 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets included in: |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  |  |  |  |  |  |  |  |  |  |  |
Money market securities |  | $ | 2,288 |  |  | $ | - |  |  | $ | - |  |  | $ | 2,288 |
Accounts receivable |  |  | 281 |  |  |  | - |  |  |  | - |  |  |  | 281 |
Derivative asset |  |  | - |  |  |  | - |  |  |  | 72,030 |  |  |  | 72,030 |
|  | $ | 2,569 |  |  | $ | - |  |  | $ | 72,030 |  |  | $ | 74,599 |
Liabilities included in: |  |  |  |  |  |  |  |  |  |  |  |
Warrant liability |  | $ | - |  |  | $ | - |  |  | $ | 44 |  |  | $ | 44 |
|  | $ | - |  |  | $ | - |  |  | $ | 44 |  |  | $ | 44 |
|  | Fair Value Measured as of December 31, 2022 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets included in: |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  |  |  |  |  |  |  |  |  |  |  |
Money market securities |  | $ | 10,943 |  |  | $ | - |  |  | $ | - |  |  | $ | 10,943 |
Accounts receivable |  |  | 98 |  |  |  | - |  |  |  | - |  |  |  | 98 |
Derivative asset |  |  | - |  |  |  | - |  |  |  | 66,702 |  |  |  | 66,702 |
|  | $ | 11,041 |  |  | $ | - |  |  | $ | 66,702 |  |  | $ | 77,743 |
Liabilities included in: |  |  |  |  |  |  |  |  |  |  |  |
Warrant liability |  | $ | - |  |  | $ | - |  |  | $ | 7 |  |  | $ | 7 |
|  | $ | - |  |  | $ | - |  |  | $ | 7 |  |  | $ | 7 |
The carrying values reported in the Company’s consolidated balance sheets for cash (excluding cash equivalents which are recorded at fair value on a recurring basis), accounts payable and accrued expenses and other current liabilities are reasonable estimates of their fair values due to the short-term nature of these items. There were no transfers of financial instruments between Level 1, Level 2 and Level 3 during the periods presented. Level 3 asset The Company’s derivative asset, related to the Luminant Power Agreement, is divided between current and noncurrent assets, and was initially recorded on its unaudited condensed consolidated balance sheets on the derivative asset’s effective date of July 1, 2022, with an offsetting amount recorded to change in fair value of derivative asset in costs and operating expenses on the unaudited condensed consolidated statements of operations. Subsequent changes in fair value are also recorded to change in fair value of derivative asset. The Luminant Power Agreement was not designated as a hedging instrument. The estimated fair value of the Company’s derivative asset was derived from Level 2 and Level 3 inputs (i.e., unobservable inputs) due to a lack of quoted prices for similar type assets and as such, is classified in Level 3 of the fair value hierarchy. Specifically, the discounted cash flow estimation models contain quoted spot and forward prices for electricity, as well as estimated usage rates consistent with the terms of the Luminant Power Agreement, which has a remaining term of approximately 4.3 years. The valuations performed by the third-party valuation firm engaged by the Company utilized pre-tax discount rates of 6.55% and 6.83% as of March 31, 2023 and December 31, 2022, respectively, and include observable market inputs, but also include unobservable inputs based on qualitative judgment related to company-specific risk factors. Unrealized gains associated with the derivative asset within the Level 3 category include changes in fair value that were attributable to changes to the quoted forward electricity rates, as well as unobservable inputs (e.g., changes in estimated usage rates and discount rate assumptions). The following table presents the changes in the estimated fair value of the derivative asset measured using significant unobservable inputs (Level 3) for the three months ended March 31, 2023 (in thousands):
Balance as of January 1, 2023 |  | $ | 66,702 |
Change in fair value |  |  | 5,328 |
Balance as of March 31, 2023 |  | $ | 72,030 |
Level 3 liability The Company’s Private Placement Warrants (as defined in Note 14, Warrants) are its only liability classified within Level 3 of the fair value hierarchy because the fair value is based on significant inputs that are unobservable in the market. The valuation of the Private Placement Warrants uses assumptions and estimates the Company believes would be made by a market participant in making the same valuation. The Company assesses these assumptions and estimates on an on-going basis as additional data impacting the assumptions and estimates are obtained. The Company engaged a valuation firm to determine the fair value of the Private Placement Warrants using a Black-Scholes option-pricing model and the quoted price of its Common Stock. The following table presents significant assumptions utilized in the valuations of the Private Placement Warrants as of the dates indicated:
|  | March 31, 2023 |  |  | December 31, 2022 |
Risk-free rate |  |  | 3.70 | % |  |  | 4.06 | %
Dividend yield rate |  |  | 0.00 | % |  |  | 0.00 | %
Volatility |  |  | 72.5 | % |  |  | 90.0 | %
Contractual term (in years) |  |  | 3.4 |  |  |  | 3.7 |
Exercise price |  | $ | 11.50 |  |  | $ | 11.50 |
The following table presents changes in the estimated fair value of the Private Placement Warrants for the three months ended March 31, 2023 (in thousands):
Balance as of January 1, 2023 |  | $ | 7 |
Change in fair value |  |  | 37 |
Balance as of March 31, 2023 |  | $ | 44 |

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- 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 Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI https://asc.fasb.org/extlink&oid=126976982&loc=d3e19207-110258 + Details
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