Our borrowing instruments are recorded at their carrying values in the balance sheets, which may differ from their respective fair values. The fair value of borrowings as of December 31, 2022 is primarily associated with the Perceptive Term Loan entered into with Perceptive Credit Holdings IV, LP, in November 2022 and was determined using a discounted cash flow analysis, excluding the fair value of Perceptive Warrant issued in conjunction with the transaction. The difference between the carrying value and fair value of outstanding borrowings as of December 31, 2022 is due to the debt issuance costs and the fair value of Perceptive Warrant netted against the Perceptive Term Loan. The carrying value of outstanding borrowings as of December 31, 2021, approximates fair value based on interest rates available at that time for similar borrowings. The table below presents the carrying and fair values of outstanding borrowings, which are classified as Level 2, as of the dates indicated (in thousands):


	As of December 31,
	2022				2021
	Carrying Value		Fair Value		Carrying Value		Fair Value
Borrowings	$	25,053	$	26,785	$	10,012	$	10,012

The financial liabilities that are measured and recorded at estimated fair value on a recurring basis consist of our contingent consideration associated with our previous acquisition of Indi and the warrant liabilities granted as consideration for the Perceptive Term Loan Facility (see Note 8 - Debt), which were accounted for as liabilities and remeasured through our statements of operations.

The table below presents the reported fair values of contingent consideration and warrant liabilities, which are classified as Level 3 in the fair value hierarchy, as of the dates indicated (in thousands):


	As of December 31,
Description	2022		2021
Current portion of contingent consideration	$	10,341	$	17,764
Contingent consideration		18,645		16,028
Total contingent consideration	$	28,986	$	33,792

Warrant liabilities	$	61	$	—

The following table presents the changes in contingent consideration and warrant liabilities for the dates indicated (in thousands):


	For the year ended December 31, 2022
Level 3 Rollforward	Contingent Consideration			Warrant Liabilities
Beginning balances - January 1, 2022	$	33,792		$	—
Additions		—			145
Changes in fair value		—			(84	)
Interest expense		3,082			—
Loss on extinguishment of liabilities		2,934			—
Payments		(10,822	)		—
Ending balances - December 31, 2022	$	28,986		$	61

The following table presents the changes in contingent consideration as of the date indicated (in thousands):


Level 3 Rollforward	For the year ended December 31, 2021
Beginning balances - January 1, 2021	$	29,932
Changes in fair value		1,622
Interest expense		2,238
Loss on extinguishment of liabilities		—
Payments of contingent consideration		—
Ending balances - December 31, 2021	$	33,792

In connection with the acquisition of Indi in 2018, the Company recorded contingent consideration for amounts contingently payable to Indi's selling shareholders pursuant to the terms of the asset purchase agreement (the Indi APA). The contingent consideration arrangement requires additional consideration to be paid by the Company to such shareholders upon attainment of a three-consecutive month gross margin target of $2.0 million within the seven-year period after the acquisition date. Under the terms of the original agreement, when the gross margin target was achieved the Company was required to issue 2,520,108 shares of common stock. For the six months following the achievement of the gross margin target, Indi had the option to require the Company to redeem these common shares for $37.0 million in cash over eight equal quarterly installments. If Indi elected to not exercise its option, the Company had 12 months to repurchase the common stock in two equal and consecutive quarterly cash installments totaling $37.0 million.

The Company achieved the gross margin target of $2.0 million for three consecutive months during the three months ended June 30, 2021. The Company entered into an amendment to the original agreement in August 2021 in which all parties agreed to forgo the issuance of common stock and agreed that the Company will in lieu thereof make six quarterly installments of approximately $4.6 million each beginning in January 2022 and a final payment of approximately $9.3 million in July 2023 for a total of $37.0 million. (the Milestone Payments and each individually a Milestone Payment). The aggregate amount of payments owed by the Company under this amendment is the same as if Indi had exercised the put right or the Company had exercised the call right provided for in the original agreement.

On April 7, 2022, the Company entered into Amendment No. 3 to the Indi APA in which the parties agreed to restructure the Milestone Payments whereby the Company will make five quarterly installments of $2.0 million each beginning in April 2022, three quarterly installments of $3.0 million beginning in July 2023, one installment of $5.0 million in April 2024, and one installment of approximately $8.4 million in July 2024. In addition, the Company agreed to an exit fee of approximately $6.1 million in October 2024. Interest shall accrue on the difference between the payment schedule as agreed in the August 2021 amendment and the April 2022 amended payment schedule, at an aggregate per annum rate equal to 10%, with such interest to be payable quarterly on the following installment payment date. Our ability to make these payments is subject to ongoing compliance under the Perceptive Term Loan and commencing January 1, 2024, consent from Perceptive (see Note 8 - Debt).

The contingent consideration liability is accounted for at fair value and subject to certain unobservable inputs. The significant unobservable inputs used in the measurement of the fair value include the probability of successful achievement of the specified product gross margin targets, the period in which the targets were expected to be achieved, and discount rates which ranged from 11% to 16%. As a result of the achievement of the gross margin target, the only remaining significant unobservable input used in the measurement of fair value includes the discount rate since all other inputs became fixed and determinable. Significant increases or decreases in the discount rate could result in a significantly higher or lower fair value measurement. During the three months ended June 30, 2022, the Company recorded $1.1 million in interest expense due to the passage of time and fixed payment schedule, partially offset by a reduction to the contingent consideration balance of $1.0 million due to an increase in the discount rate to reflect current market and Company specific conditions, resulting in $0.1 million, net recorded as ‘Interest expense’ in the statements of operations.

The Company evaluated Amendment No. 3 to the Indi APA in accordance with applicable accounting standards under U.S. GAAP which resulted in the extinguishment of the original instrument due to the substantially different terms. As a result, during the three months ended June 30, 2022, we recorded a loss on extinguishment of $2.9 million in the statements of operations.

During the years ended December 31, 2022 and 2021, the Company recorded $3.1 million and $2.2 million, respectively, in interest expense due to the passage of time and fixed payment schedule.

Contingent consideration expected to be paid in the next twelve months is recorded in the balance sheets as ‘Current portion of contingent consideration’ while the remaining amount to be paid is recorded as ‘Contingent consideration’ within non-current liabilities. The net change to contingent consideration through the date the gross margin target was achieved is recorded as operating expenses in the statements of operations. Subsequent changes to the contingent consideration following the achievement of the gross margin target are recorded as ‘Interest expense’ in the statements of operations resulting from the passage of time and fixed payment schedule.

On November 21, 2022, as consideration for the Perceptive Term Loan Facility (see Note 8 - Debt), the Company issued the Perceptive Warrant to purchase up to 5,000,000 shares of the Company's common stock, including Initial Warrants and Additional Warrants. The Initial Warrants are equity classified (see Note 10 - Equity) while the Additional Warrants are classified as liabilities within 'Other long-term liabilities' and recognized at fair value. The fair value of the Additional Warrants is determined using a Black-Scholes model and subject to certain unobservable inputs. The significant unobservable inputs used in the measurement of the fair value include the fair value of the Company's common stock, risk-free rate, the volatility of common stock which ranged from 78% to 82%, and the probability of the expected borrowing. Significant increases or decreases in the unobservable inputs could result in a significantly higher or lower fair value measurement. The Company determined the initial fair value of the Additional Warrants to be $0.1 million and during the year ended December 31, 2022, the Company recorded $0.1 million as a change in fair value through the statement of operations due to changes in unobservable inputs.