15. Fair Value Measurements

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The Company records the fair value of assets and liabilities in accordance with ASC 820, Fair Value Measurement (“ASC 820”). ASC 820 defines fair value as the price received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity.

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In addition to defining fair value, ASC 820 expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels, which is determined by the lowest level input that is significant to the fair value measurement in its entirety.

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These levels are:

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There were no transfers between Level 1, Level 2, or Level 3 during the six months ended June 30, 2024. Financial instruments not recorded at fair value on a recurring basis include equity method investments that have not been remeasured or impaired in the current period, such as our investments in HyVia, AccionaPlug, SK Plug Hyverse and Clean H2 Infra Fund.

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Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):

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The liabilities measured at fair value on a recurring basis that have unobservable inputs and are therefore categorized as level 3 are related to contingent consideration. The fair value as of June 30, 2024 of $90.6 million is comprised of contingent consideration related to the Joule Processing LLC (“Joule”) acquisition in 2022 and the Frames Holding B.V. (“Frames”) acquisition in 2021.

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In connection with the Joule acquisition, the Company initially recorded on its unaudited interim condensed consolidated balance sheet a liability of $41.7 million representing the fair value of contingent consideration payable. The fair value of this contingent consideration was $61.4 million and $75.5 million as of June 30, 2024 and December 31, 2023, respectively. The decrease compared to the year ended December 31, 2023 was primarily due to payments that reduced the fair value of the liability by $10.0 million during the first quarter of 2024. A decrease of $4.1 million was recorded in change in fair value of contingent consideration in the unaudited interim condensed consolidated statement of operations for the six months ended June 30, 2024, partially offset by an increase of $3.4 million for the three months ended June 30, 2024.

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In connection with the Frames acquisition, the Company initially recorded on its unaudited interim condensed consolidated balance sheet a liability of $29.1 million representing the fair value of contingent consideration payable. The fair value of this contingent consideration was $29.2 million and $31.8 million as of June 30, 2024 and December 31, 2023, respectively. The decrease compared to the year ended December 31, 2023 was primarily due to a decrease of $1.6 million recorded in change in fair value of contingent consideration in the unaudited interim condensed consolidated statement of operations for the six months ended June 30, 2024, partially offset by an increase of $0.9 million for the three months ended June 30, 2024. A further decrease of $0.3 million and $1.0 million for the three and six months ended June 30, 2024 was due to foreign currency translation gains.

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In connection with the United Hydrogen Group Inc. (“UHG”) acquisition, the Company initially recorded on its unaudited interim condensed consolidated balance sheet a liability of $1.1 million representing the fair value of contingent consideration payable. The fair value of this contingent consideration was $0 and $0.9 million as of June 30, 2024 and December 31, 2023, respectively. The decrease of $0.9 million was due to payments that reduced the fair value of the liability by $1.0 million during the three months ended June 30, 2024. Partially offsetting this decrease was an increase of $0 and $0.1 million recorded in change in fair value of contingent consideration in the unaudited interim condensed consolidated statement of operations during the three and six months ended June 30, 2024, respectively. The $1.0 million payment made during the second quarter of 2024 settled the remaining earn-out obligation.

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In connection with the Giner acquisition, the Company initially recorded on its unaudited interim condensed consolidated balance sheet a liability of $16.0 million representing the fair value of contingent consideration payable. The fair value of this contingent consideration was $0 million and $18.0 million as of June 30, 2024 and December 31, 2023, respectively. The decrease of $18.0 million was due to payments that reduced the fair value of the liability by $18.2 million during the three months ended June 30, 2024. Furthermore, an increase of $0.2 million was recorded in change in fair value of contingent consideration in the unaudited interim condensed consolidated statement of operations for the six months ended June 30, 2024, partially offset by a decrease of $0.5 million for the three months ended June 30, 2024. The $18.2 million payment during the second quarter of 2024 was paid in common stock and warrants and settled the remaining obligation of the earn-out. As part of the $18.2 million settlement of Giner’s earn-out obligation on May 24, 2024, the Company issued warrants to purchase the Company’s shares of common stock and the Company filed a prospectus supplement registering for resale up to 3,461,371 shares of the Company’s common stock issuable upon exercise of the warrants that were issued in connection with such earn-out obligation. The warrants have not been exercised as of June 30, 2024.

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In the unaudited interim condensed consolidated balance sheets, contingent consideration is recorded in the contingent consideration, loss accrual for service contracts, and other current liabilities financial statement line item, and was comprised of the following unobservable inputs as of June 30, 2024:

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In the unaudited interim condensed consolidated balance sheets, contingent consideration is recorded in the contingent consideration, loss accrual for service contracts, and other current liabilities financial statement line item, and was comprised of the following unobservable inputs as of December 31, 2023:

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The change in the carrying amount of Level 3 liabilities during the six months ended June 30, 2024 was as follows (in thousands):

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