Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.23.3
Fair Value Measurements
 9 Months Ended
Sep. 30, 2023
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
The following table summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis as required by ASC 820, by level, within the fair value hierarchy as of September 30, 2023 and December 31, 2022 (in thousands):
September 30, 2023
Fair Value Level 1 Level 2 Level 3
Asset
Derivative asset, current $ 2,205  $ —  $ —  $ 2,205 
Liability
Contingent earnout shares liability $ 170  $ —  $ —  $ 170 
Derivative liability, current $ 538  $ —  $ —  $ 538 
Convertible debt, current $ 27,941  $ —  $ —  $ 27,941 
Convertible debt, non-current $ 44,836  $ —  $ —  $ 44,836 
Warrant liability, non-current $ 75,651  $ —  $ 75,651  $ — 
December 31, 2022
Fair Value Level 1 Level 2 Level 3
Liability
Contingent earnout shares liability $ 3,013  $ —  $ —  $ 3,013 
Warrant liability, current $ 17,171  $ —  $ 17,171  $ — 
    
The Company’s Contingent Earnout liability, Convertible Debentures, derivative liability, and derivative asset are considered “Level 3” fair value measurement. Refer to Note 2 for discussion of the Company’s methods for valuation.
The Company issued Convertible Debentures to Yorkville discussed in Note 9 whereby the Company elected to account transactions under the fair value option of accounting upon issuance. The Company estimated the fair value of the Initial Loans based on assumptions used in the Monte Carlo simulation model using the following inputs as of the end of the reporting period:
July Convertible Debenture August Convertible Debenture
September Convertible Debenture
Expected term (in years) 0.92 1.01 1.16
Stock price $0.49 $0.49 $0.49
Interest rate 3.0  % 3.0  % 3.0  %
Expected volatility 113.2  % 112.2  % 111.7  %
Expected dividend rate $ —  $ —  $ — 
Risk free rate 5.4  % 5.4  % 5.3  %
Following is a summary of the change in fair value of the Convertible debt for the nine months ended September 30, 2023 and September 30, 2022 (in thousands).
Nine months ended September 30,
Convertible Debt 2023 2022
Beginning fair value —  — 
Addition during the period $ 71,438  — 
Change in fair value during the period $ 1,339  — 
Ending fair value $ 72,777  — 
As the fair value of the freestanding instruments identified within the Convertible Debentures exceeded the proceeds, a loss on issuance on convertible debenture was recognized. Refer to Note 9 for further information.
The Company has a contingent obligation to issue shares of Common Stock to certain stockholders and employees upon the achievement of certain market share price milestones within specified periods. Issuances are made in three tranches of 5.0 million shares, for a total of 15.0 million shares, each upon reaching share price targets within specified time frames from December 21, 2020 ("Earnout Date"). The first tranche was not issued given the share price did not reach $18 as of December 21, 2022. The second tranche will be issued if the share price reaches $25 within four years of the closing of the Earnout Date. The third tranche will be issued if the share price reaches $30 within five years of the Earnout Date. The tranches may also be issued upon a change of control transaction that occurs within the respective timeframes and results in per share consideration exceeding the respective share price target. As of September 30, 2023, the Company has a remaining contingent obligation to issue 10.0 million shares of Common Stock.
Following is a summary of the change in fair value of the Earnout Shares liability for the nine months ended September 30, 2023 and September 30, 2022 (in thousands).
Nine Months Ended September 30,
Earnout Shares Liability 2023 2022
Beginning fair value $ 3,013  $ 29,057 
Change in fair value during the period $ (2,843) $ (22,869)
Ending fair value $ 170  $ 6,188 
The Company issued the April Convertible Debenture whose conversion feature meet the definition of a derivative liability which requires bifurcation. The remaining debt of $1.3 million remaining under this debenture was assumed by the August Convertible Debenture. The Company estimated the fair value of the conversion feature derivative embedded in the convertible debt based on assumptions used in the Monte Carlo simulation model using the following inputs on the date the debt was assumed by the August Convertible Debenture: the price of the Company’s common stock of $0.63; a risk-free interest rate of 5.3%; expected volatility of the Company’s common stock of 130.4%; expected dividend yield of 0%; and simulation period of 0.8934 years. The fair value of the conversion feature derivative was $3.7 million at issuance and $0.8 million when the remaining debt under April Convertible Debenture was assumed by the August Convertible Debenture.
The Company entered into a Lease Agreement ("Lease Agreement") with I-40 OKC Partners LLC ("I-40") which contained a "Market Value Shortfall" provision that meets the definition of a derivative. The Company estimated the fair value of the Market Value Shortfall based on assumptions used in the Monte Carlo simulation model using the following inputs as of the end of the reporting period: the price of the Company’s common stock of $0.49; shares subject to Market Value shortfall of 2.3 million shares; a risk-free interest rate of 5.5%; expected volatility of the Company’s common stock of 113.0%; expected dividend yield of 0%; and remaining term of 0.52 years. The fair value of the Market Value Shortfall derivative measured at issuance and as of September 30, 2023 was $0.5 million resulting in a nominal amount reflected as a loss within the condensed consolidated statement of operations.
Nine months ended September 30,
Derivative liability 2023 2022
Beginning fair value —  — 
Addition during the period 4,310  — 
Change in fair value during the period $ (2,998) — 
Derecognition of liability upon extinguishment of convertible debt $ (774) — 
Ending fair value $ 538  — 
The Company entered into the Fifth Pre-Paid Advance whose conversion features meet the definition of a derivative asset which requires bifurcation. The Company estimated the fair value of the conversion feature derivative embedded in the convertible debt based on assumptions used in the Monte Carlo simulation model using the following inputs: the price of the Company’s common stock of $0.49; a risk-free interest rate of 5.3%; expected volatility of the Company’s common stock of 111.2%; expected dividend yield of 0%; and simulation period of 1.20 years. The fair value
of the conversion feature derivative measured at issuance and as of September 30, 2023 was $6.0 million and $2.2 million, respectively, resulting in a loss of $3.8 million included within the condensed consolidated statement of operations.

Nine months ended September 30,
Derivative asset
 2023 2022
Beginning fair value —  — 
Addition during the period 5,966  — 
Change in fair value during the period $ (3,761) — 
Ending fair value $ 2,205  —