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, 2023 and 2022 is primarily associated with the Perceptive Term Loan Facility 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 the Perceptive Warrant (as defined below) issued in conjunction with the transaction. The carrying value of outstanding borrowings approximates the fair value as of December 31, 2023. 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 the Perceptive Warrant netted against the Perceptive Term Loan Facility. 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, 2023				December 31, 2022
	Carrying Value		Fair Value		Carrying Value		Fair Value
Borrowings	$	35,276	$	35,506	$	25,053	$	26,785

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):



Description	December 31, 2023		December 31, 2022
Current portion of contingent consideration	$	21,857	$	10,341
Contingent consideration		—		18,645
Total contingent consideration	$	21,857	$	28,986

Warrant liabilities	$	—	$	61

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


Level 3 Rollforward	Contingent Consideration			Warrant Liabilities
Balance - December 31, 2021	$	33,792		$	—
Additions		—			145
Changes in fair value, net		—			(84	)
Interest expense		3,082			—
Loss on extinguishment of liabilities		2,934			—
Payments		(10,822	)		—
Balance - December 31, 2022		28,986			61
Changes in fair value, net		—			1,274
Interest expense		3,946			—
Payments		(11,075	)		—
Reclassification of Tranche B Warrants to additional paid-in capital		—			(1,335	)
Balance - December 31, 2023	$	21,857		$	—

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, which was achieved during the three months ended June 30, 2021. 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.

In August 2021, the Company entered into an amendment to the original agreement in which all parties agreed to forgo the issuance of common stock and agreed that the Company would, 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. The Company made five quarterly installments of $2.0 million each beginning in April 2022, three quarterly installments of $3.0 million which began in July 2023, will make one installment of $5.0 million in April 2024, and will make 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 Facility. We obtained consent from Perceptive and subsequently paid the contractual Milestone Payment due January 1, 2024.

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 years ended December 31, 2023 and 2022, the Company recorded $3.9 million and $3.1 million, respectively, in interest expense due to the passage of time and fixed payment schedule.

In accordance with ASC 230, Statement of Cash Flows, cash paid to settle the contingent consideration liability recognized at fair value as of the acquisition date (including measurement-period adjustments) should be reflected as a cash outflow for financing activities while the remaining portion of the amount paid should be reflected as a cash outflow from operating activities in the statement of cash flows. A portion of the October 2023 and all 2024 Milestone Payments are classified as cash outflows from operating activities in the Company's statements of cash flows.

On November 21, 2022, as consideration for the Perceptive Term Loan Facility (see Note 8 – Debt), the Company issued Perceptive a warrant to purchase up to 5,000,000 shares of the Company's common stock (the Perceptive Warrant), including Initial Warrants and

Additional Warrants (as defined in Note 10 – Equity below). The Initial Warrants and First Amendment Warrants are equity classified (see Note 10 – Equity) while the Tranche B and C Warrants were initially classified as liabilities within 'Other short-term liabilities' and recognized at fair value. The fair value of the Tranche B and C 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, 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. During the year ended December 31, 2023, the Company recorded a $1.3 million loss as a change in fair value through the statement of operations due to changes in unobservable inputs. This is a result of changes in the probability of our ability to draw on Tranche B and C loans. 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.

On December 15, 2023 (the Tranche B Borrowing Date), the Company exercised its ability to draw the Tranche B loan (see Note 8 – Debt). In connection with the Tranche B draw, the Company remeasured the Tranche B Warrants through the Tranche B Borrowing Date and recorded the change in fair value through the statement of operations and, subsequently, reclassified the fair value to additional paid-in capital (see Note 10 – Equity).