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Fair Value Measurement

3 Months Ended

Mar. 31, 2023

The Company’s financial instruments consist of cash and cash equivalents, restricted cash, private placement warrants, accounts receivable, notes receivable, contract assets, accounts payable, note payable, convertible notes payable — related party, contract liabilities and long-term debt.

Accounting standards establish a hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three levels. The fair value hierarchy gives the highest priority to quoted market prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Accounting standards require financial assets and liabilities to be classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and the exercise of this judgment may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.

The carrying value of cash and cash equivalents, restricted cash, accounts receivable, contract assets, contract liabilities and accounts payable are considered to be representative of their fair value due to the short maturity of these instruments.

The table below summarizes the fair values of certain liabilities that are included within the Company’s accompanying unaudited condensed consolidated balance sheets, and their designations among the three fair value measurement categories:


	March 31, 2023						December 31, 2022
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Liabilities
Private placement warrants	$	—	$	234	$	—	$	—	$	78	$	—
Embedded derivative liabilities	$	—	$	—	$	21,255	$	—	$	—	$	1,945

The following table presents a roll-forward of the activity of the embedded derivative liabilities within the convertible notes discussed in Note 12, Borrowings. These liabilities were measured at fair value on a recurring basis using significant unobservable inputs (Level 3).


	Three Months Ended March 31,
	2023		2022
Balance at beginning of the period	$	1,945	$	12,359
Additions	14,799		—
Extinguishment from Yorkville Promissory Notes Conversions	(8,423)		—
Change in fair value included in earnings	12,934		(7,695)
Balance at end of the period	$	21,255	$	4,664

The estimated fair value of financial instruments not carried at fair value in the unaudited condensed consolidated balance sheets was as follows:


	Level in Fair Value Hierarchy	March 31, 2023				December 31, 2022
		Carrying Value		Fair Value		Carrying Value		Fair Value
Notes receivable	3	$	862	$	688	$	863	$	677
AFG Convertible Notes*	3	26,075		27,593		—		—
2021 Convertible Notes*	3	85,039		46,634		82,950		62,421
Senior Secured Term Loan	3	82,531		67,410		81,616		77,576
Equipment financing facility	3	7,900		4,045		8,577		6,282
Yorkville Convertible Notes*	3	8,240		8,375		2,688		2,908
Total		$	210,647	$	154,745	$	176,694	$	149,864

*Includes the embedded derivative liabilities.

- 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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