Note 3 - Investments and Fair Value Measurements

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Fair Value Disclosures [Text Block]

3.      INVESTMENTS AND FAIR VALUE MEASUREMENTS

The Company’s fair value hierarchy for its cash equivalents, marketable securities and financial instruments as of  December 31, 2022 and December 31, 2021, respectively, was as follows:

(In thousands)
December 31, 2022	Level 1		Level 2		Level 3		Total
Contingent Consideration	$	—	$	—	$	570	$	570
Front Line Power Construction seller financed debt, net of discount		—		68,753		—		68,753
Financial instrument liability - related to Syndicated debt		—		—		536		536
Financial instrument liability - related to Front Line Power Construction seller financed debt		—		—		43,693		43,693
Prepaid advance agreement		—		1,829		—		1,829
Warrant liability		—		—		1,777		1,777
Total liabilities	$	—	$	70,582	$	46,576	$	117,158

December 31, 2021	Level 1		Level 2		Level 3		Total
Contingent Consideration	$	—	$	—	$	720	$	720
Front Line Power Construction seller financed debt, net of discount		—		86,183		—		86,183
Financial instrument liability		—		—		825		825
Total liabilities	$	—	$	86,183	$	1,545	$	87,728

Fair Value Measurements
Using Significant Unobservable Inputs (Level 3 - recurring basis)
(In thousands)	Financial Instrument Liability -related to Front Line Power Construction Seller Financed Debt
Balance at December 31, 2021	$	—
Fair value of financial instrument liability at inception		26,782
Fair value adjustment to financial instrument liability		16,911
Balance at December 31, 2022	$	43,693

As part of the purchase of Front Line, the Company paid the sellers, Tidal Power and Kurt Johnson, a certain number of shares of restricted stock. To the extent that if the value of the shares previously issued to Tidal Power were less than $4.00 per share upon expiration of the restriction period on April 1, 2023, the Company has agreed to pay additional consideration to Tidal Power so that the value of Tidal Power's shares are equal to no less than $28,852,844. For the Johnson lockup letter, the Company agreed to pay additional consideration to Mr. Johnson upon expiration of the restriction period on April 1, 2023, so that the value of his stock consideration is no less than $17,635,228, which is equal to $4.00 per common share. 

Fair Value Measurements
Using Significant Unobservable Inputs (Level 3 - recurring basis)
(In thousands)	Contingent Consideration
Balance at December 31, 2021	$	720
Fair value adjustment		(150	)
Balance at December 31, 2022	$	570

The Company evaluated the contingent consideration for fair value as of December 31, 2022 using a third-party valuation specialist. Significant unobservable inputs include projected future EBITDA, future estimated growth rate, estimated discount rate, and estimated volatility. Based upon this evaluation, the contingent consideration was reduced by $150 thousand resulting in a contingent consideration of $570 thousand at December 31, 2022.

Fair Value Measurements
Using Significant Unobservable Inputs (Level 3 - recurring basis)
(In thousands)	Financial Instrument Liability - related
	to Syndicated debt
Balance at December 31, 2021	$	825
Issuance of shares upon exercise and reset of financial instrument		(7,667	)
Fair value adjustment to financial instrument liability		7,378
Balance at December 31, 2022	$	536

In conjunction with the Company issuing $105 million of debt to a syndicate of lenders, the Company committed to issuing 1,690,677 shares of stock to the lenders in the syndicate in a subscription agreement. Included in the subscription agreement is a provision that provides for additional shares to be issued to the lenders of the syndicate if the Company issues shares of common stock in an offering at a price lower than $2.36 per share amount ("the reference price"), for the shares initially issued to the lenders in the syndicate. This financial instrument was valued as a put option using the Black Scholes option pricing model. Unobservable inputs include volatility, exercise price, and time to expiration. The put expires at the maturity of the Company's seller notes. In 2022, there were five separate issuances via the financial instrument for a total of 25.0 million shares. The updated reference price as of December 31, 2022 was $0.15. 

Fair Value Measurements
Using Significant Unobservable Inputs (Level 3 - recurring basis)
(In thousands)	Warrant Liability
Balance at December 31, 2021	$	—
Proceeds from sale of warrants including pre-funded warrants		19,800
Exercise of pre-funded warrants, net of exercise proceeds		(6,938	)
Fair value adjustment to warrant liability		(11,085	)
Balance at December 31, 2022	$	1,777

On  April 28, 2022, the Company entered into a Securities Purchase Agreement with an institutional investor. The Purchase Agreement provides for the sale and issuance by the Company of an aggregate of: (i) 9,000,000 shares of the Company’s common stock, $0.001 par value, (ii) pre-funded warrants to purchase up to 7,153,847 shares of Common Stock and (iii) accompanying warrants to purchase up to 16,153,847 shares of Common Stock. The offering price per share and associated prefunded warrants was $1.30 for the shares and $1.2999 for the prefunded warrants. The prefunded warrants were immediately exercisable, had an exercise price of .0001 and were exercised during the three months ended  June 30, 2022.

The accompanying warrants have an exercise price of $1.31, and were exercisable 6-months after their date of issuance and will expire on the fifth anniversary of the original issuance date. Common stock warrants are accounted for in accordance with applicable accounting guidance provided in ASC Topic 815, Derivatives and Hedging - Contracts in Entity's Own Equity (ASC Topic 815), as either derivative liabilities or equity instruments depending on the specific terms of the warrant agreement. The Company’s warrants are considered to be derivative warrants, are classified as liabilities, and are recorded at fair value. The warrants are subject to re-measurement at each balance sheet date and any change in fair value is recognized as a component of change in fair value of warrant liability in the consolidated statements of operations. The Company uses the Black-Scholes pricing model to estimate the fair value of the related derivative warrant liability. Unobservable inputs include volatility, exercise price, and time to expiration.

There were no transfers between Level 3 and Level 2 in 2022 as determined at the end of the reporting period.

The fair values of the reporting units subject to the Company’s quantitative impairment analysis were determined utilizing a blend of a market and an income approach to determine the estimated fair values of the reporting units, as discussed in Note 2. The fair value measurements and models were classified as non-recurring Level 3 measurements.

Investment in VPS

The Company has a minority ownership in Virtual Power Systems ("VPS"). The VPS investment basis at  December 31, 2022 and  December 31, 2021 was $1.1 million and $1.1 million, respectively, as reflected on the condensed consolidated balance sheets. The investment is held at  December 31, 2022 under the cost method of accounting for investments.