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Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2022

Items Measured at Fair Value on a Recurring Basis

As of March 31, 2022 and December 31, 2021, the Company held certain assets and liabilities that were required to be measured at fair value on a recurring basis.

The following tables are summaries of fair value measurements and hierarchy level as of:


	March 31, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	—	$	—	$	—	$	—
Equity securities	552		—		—		552
Fixed maturity debt securities, including cash equivalents	—		118,347		—		118,347
Total Assets	$	552	$	118,347	$	—	$	118,899
Liabilities:


Merger warrants liability	2,939		1,752		—		4,691
Earnout shares liability	—		—		3,650		3,650
Total Liabilities	$	2,939	$	1,752	$	3,650	$	8,341


	December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	—	$	—	$	—	$	—
Equity securities	558		—		—		558
Fixed maturity debt securities	—		135,346		—		135,346
Total Assets	$	558	$	135,346	$	—	$	135,904
Liabilities:
Merger warrants liability	$	3,941	$	2,350	$	—	$	6,291
Earnout shares liability	—		—		7,679		7,679
Total Liabilities	$	3,941	$	2,350	$	7,679	$	13,970

Money market funds consist of highly liquid investments with original maturities of three months or less and classified in restricted cash in the accompanying condensed consolidated balance sheets.

The Company recognizes transfers between the levels as of the actual date of the event or change in circumstances that caused the transfer. There were no transfers between the levels during the three months ended March 31, 2022 and 2021.

The following tables set forth a summary of changes in the estimated fair value of the Company’s Level 3 redeemable convertible preferred stock tranche obligation, historic warrants liability and earnout shares for the three months ended March 31, 2022 and 2021:


	January 1, 2022		Issuances		Settlements		Change in fair value		March 31, 2022


Earnout shares	7,679		—		—		(4,029)		3,650
Total	$	7,679	$	—	$	—	$	(4,029)	$	3,650


	January 1, 2021		Issuances		Settlements		Change in fair value		March 31, 2021
Redeemable convertible preferred stock tranche obligation	$	2,832	$	—	$	(2,832)	$	—	$	—
Historic warrants liability	144				(144)		—		—
Earnout shares	—		74,284		—		(31,846)		42,438
Total	$	2,976	$	74,284	$	(2,976)	$	(31,846)	$	42,438

The fair value of the earnout shares was estimated by utilizing a Monte-Carlo simulation model. The inputs into the Monte-Carlo pricing model included significant unobservable inputs. The table below summarizes the significant observable inputs used when valuing the earnout shares as of:


	March 31, 2022		March 31, 2021
Expected volatility	85.00	%	80.00	%
Starting stock price	$1.37		$7.13
Expected term (in years)	3.7 years		4.70 years
Risk-free interest rate	2.44	%	0.87	%
Earnout hurdle	$12.50-$15.00		$12.50-$15.00

Fair Value of Financial Instruments Not Measured at Fair Value on a Recurring Basis

The carrying amounts of restricted cash, accounts receivable and accounts payable approximate fair value because their respective maturities are less than three months.

Beginning March 10, 2021, the Company entered into a $30,000 floor plan credit facility with Ally Financial. Concurrently, proceeds from the agreement were used to settle outstanding debt obligations on the Company’s preexisting floor plan facility with Automotive Finance Corporation (“AFC”). In June 2021, the Company expanded the floor plan credit facility by $10,000 to a total of $40,000. The carrying value of the Ally Financial floor plan notes payable outstanding as of March 31, 2022 approximates fair value due to its variable interest rate determined to approximate current market rates.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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