INDEPENDENCE CONTRACT DRILLING, INC. MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-Q)

You should read the following discussion and analysis of our financial condition
and results of operations together with the financial statements and related
notes that are included elsewhere in this Quarterly Report on Form 10-Q and with
our audited financial statements included in our Annual Report on Form 10-K for
the year ended December 31, 2021, filed with the Securities and Exchange
Commission on March 15, 2022 (the "Form 10-K"). This discussion contains
forward-looking statements based upon current expectations that involve risks
and uncertainties. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of various factors,
including those described in the section titled "Cautionary Statement Regarding
Forward-Looking Statements" and those set forth under Part I "Item 1A. Risk
Factors" or in other parts of the Form 10-K.

Management Overview

We were incorporated in Delaware on November 4, 2011. We provide land-based
contract drilling services for oil and natural gas producers targeting
unconventional resource plays in the United States. We own and operate a premium
fleet comprised of modern, technologically advanced drilling rigs. Our first rig
began drilling in May 2012. On October 1, 2018, we completed a merger with
Sidewinder Drilling LLC ("Sidewinder"). As a result of this merger, we more than
doubled our operating fleet and personnel.

As of June 30, 2022, our rig fleet includes 24 marketed AC powered ("AC") rigs,
increasing to 26 in the third quarter of 2022, plus additional idle AC rigs that
require significant upgrades in order to meet our AC pad-optimal specifications
that we do not plan to market absent a material improvement in market
conditions.

We currently focus our operations on unconventional resource plays located in
geographic regions that we can efficiently support from our Houston, Texas and
Midland, Texas facilities in order to maximize economies of scale. Currently,
our rigs are operating in the Permian Basin and the Haynesville Shale; however,
our rigs have previously operated in the Eagle Ford Shale, Mid-Continent and
Eaglebine regions as well.

Our business depends on the level of exploration and production activity by oil
and natural gas companies operating in the United States, and in particular, the
regions where we actively market our contract drilling services. The oil and
natural gas exploration and production industry is historically cyclical and
characterized by significant changes in the levels of exploration and
development activities. Oil and natural gas prices and market expectations of
potential changes in those prices significantly affect the levels of those
activities. Worldwide political, regulatory, economic, and military events, as
well as natural disasters have contributed to oil and natural gas price
volatility historically, and are likely to continue to do so in the future. Any
prolonged reduction in the overall level of exploration and development
activities in the United States and the regions where we market our contract
drilling services, whether resulting from changes in oil and natural gas prices
or otherwise, could materially and adversely affect our business.

Significant developments

Market Conditions and COVID-19 Pandemic Update

Oil and natural gas prices were negatively impacted by the effects of the
COVID-19 pandemic and significantly decreased the demand for drilling services
in 2020 and early 2021. However, business conditions have begun to improve
rapidly which has led to improved dayrates and margins for contract drilling
services. In addition, the supply for pad-optimal, super-spec rigs is very tight
with limited spare capacity that can be reactivated without significant cost and
expense. We expect the market for our contract drilling services to continue to
remain tight and for pricing and margins to continue to improve throughout the
remainder of 2022 and into 2023. As a result of these improving and tight market
conditions, we also are experiencing increases in labor and other operating
costs as well as the costs of capital equipment. In addition, lead times for
delivery of capital equipment and services are lengthening which is causing us
to bring forward investments in order to meet our planned rig reactivation
schedules.

Oil prices (WTI-Cushing) recently reached a high of $123.64 per barrel on March
8, 2022, and natural gas prices (Henry Hub) reached a recent high of $9.46 per
mmcf on July 26, 2022. As of June 30, 2022, we had 17 rigs operating, and our
18th rig reactivated in August 2022. Assuming market conditions continue to
improve, we plan to pursue the reactivation of our 19th and 20th rigs later in
2022. Additionally, we have completed the engineering designs to convert our 200
series Shaledriller rigs to 300 series status with modest capital outlay. We
intend to convert three of our

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200 series platforms at the end of 2022 and have already signed two contracts with customers to make these conversions into operational platforms.

Certificate of Amendment to Updated Certificate of Incorporation

On June 8, 2022, we filed a certificate of amendment to our Restated Certificate
of Incorporation (the "Charter Amendment") with the Delaware Secretary of State.
The Charter Amendment increased the number of authorized shares of our common
stock, par value $0.01 per share from 50 million shares to 250 million shares.
The Charter Amendment does not change the number of authorized shares of the
Company's preferred stock or the par value per share of any stock.

Amendment No. 1 to the 2019 Plan

On June 8, 2022, our stockholders approved an amendment to our 2019 Omnibus
Incentive Plan (the "2019 Plan") to increase the number of shares of Common
Stock authorized for issuance under the 2019 Plan by 4.3 million shares (such
amendment to the 2019 Plan, "Amendment No. 1"). Amendment No. 1 increased the
number of authorized shares of Common Stock issuable under the 2019 Plan by 4.3
million shares (from 275,000 shares to 4,575,000 shares).

Convertible Notes

On March 18, 2022, we issued $157.5 million aggregate principal amount of
convertible secured PIK toggle notes due 2026 (the "Convertible Notes").
Proceeds from the private placement of the Convertible Notes were used to repay
all of our outstanding indebtedness under our term loan credit agreement, to
repay merger consideration payable with associated accrued interest to prior
equity holders of Sidewinder Drilling LLC, and for working capital purposes. The
Convertible Notes mature on March 18, 2026. The Convertible Notes have a cash
interest rate of the Secured Overnight Financing Rate plus a 10 basis point
credit spread, with a floor of 1% (collectively, "SOFR") plus 12.5%. The
Convertible Notes have an initial payment in-kind, or "PIK," interest rate of
SOFR plus 14.0% through September 30, 2022. The PIK interest rate decreases to
SOFR plus 9.5% as of September 30, 2022. We have the right at our option, to PIK
interest under the Convertible Notes for the entire term of the Convertible
Notes. The effective conversion price of the Convertible Notes is $4.51 per
share (221.72949 shares of Common Stock per $1,000 principal amount of
Convertible Notes). We may issue up to $7.5 million of additional Convertible
Notes. We may convert all Convertible Notes (including PIK notes) upon
conversion of Convertible Notes in connection with a Qualified Merger Conversion
(as defined in the Indenture) and may issue additional shares of common stock to
the extent the number of shares issuable upon such conversion would exceed the
number of shares of common stock issuable at the otherwise then-current
conversion price. In connection with the placement of the Convertible Notes, we
issued 2,268,000 shares of our common stock as a structuring fee. The
structuring fee shares were issued on March 18, 2022, concurrent with the
closing of the private placement of the Convertible Notes. See "Liquidity and
Capital Resources - Long-term Debt" in this Management Discussion and Analysis
for additional information.

The following changes to the terms of the Convertible Notes and Indenture, and
to the shares issuable upon conversion of the Convertible Notes, became
effective based on approvals of matters by our stockholders at our 2022 Annual
Meeting of Stockholders held on June 8, 2022 (constituting "Shareholder
Approval" as defined in the Indenture): (a) the Convertible Notes initial PIK
interest rate of SOFR plus 14.0% decreased to SOFR plus 9.5% as of September 30,
2022; (b) the initial option to pay interest in additional PIK notes for a
period of 18 months was increased to 48 months (the entire term of the
Convertible Notes); (c) the effective conversion price of $5.07 per share
(197.23866 shares of common stock per $1,000 principal amount of Convertible
Notes) was decreased to $4.51 per share (221.72949 shares of Common Stock per
$1,000 principal amount of Convertible Notes); (d) the issuance by us of up to
$7.5 million of additional Convertible Notes, if and when issued by us; and (e)
the issuance of shares of common stock upon conversion of Convertible Notes in
connection with a Qualified Merger Conversion (as defined in the Indenture) to
the extent the number of shares issuable upon such conversion would exceed the
number of shares of common stock issuable at the otherwise then-current
conversion rate.

ATM Distribution Agreement

In December 2021, our board of directors authorized the sale of $5.9 million of
common stock to be sold in transactions that are deemed to be "at-the-market
offerings" and increased the authorization by $6.5 million in May 2022. In the
first quarter of 2022, we raised gross proceeds of $3.6 million from the sale of
1,061,853 shares in this

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offering. We did not participate in this program in the second quarter of 2022.
As of June 30, 2022, we have $8.8 million remaining availability under this
ATM
program.

Our Revenues

We earn contract drilling revenues pursuant to drilling contracts entered into
with our customers. We perform drilling services on a "daywork" basis, under
which we charge a specified rate per day, or "dayrate." The dayrate associated
with each of our contracts is a negotiated price determined by the capabilities
of the rig, location, depth and complexity of the wells to be drilled, operating
conditions, duration of the contract and market conditions. The term of land
drilling contracts may be for a defined number of wells or for a fixed time
period. We generally receive lump-sum payments for the mobilization of rigs and
other drilling equipment at the commencement of a new drilling contract. Revenue
and costs associated with the initial mobilization are deferred and recognized
ratably over the term of the related drilling contract once the rig spuds. Costs
incurred to relocate rigs and other equipment to an area in which a contract has
not been secured are expensed as incurred. If a contract is terminated prior to
the specified contract term, early termination payments received from the
customer are only recognized as revenues when all contractual obligations, such
as mitigation requirements, are satisfied. While under contract, our rigs
generally earn a reduced rate while the rig is moving between wells or drilling
locations, or on standby waiting for the customer. Reimbursements for the
purchase of supplies, equipment, trucking and other services that are provided
at the request of our customers are recorded as revenue when incurred. The
related costs are recorded as operating expenses when incurred. Revenue is
presented net of any sales tax charged to the customer that we are required to
remit to local or state governmental taxing authorities.

Our operating costs

Our operating costs include all expenses associated with operating and
maintaining our drilling rigs. Operating costs include all "rig level" expenses
such as labor and related payroll costs, repair and maintenance expenses,
supplies, workers' compensation and other insurance, ad valorem taxes and
equipment rental costs. Also included in our operating costs are certain costs
that are not incurred at the "rig level." These costs include expenses directly
associated with our operations management team as well as our safety and
maintenance personnel who are not directly assigned to our rigs but are
responsible for the oversight and support of our operations and safety and
maintenance programs across our fleet.

How we evaluate our operations

We regularly use a number of financial and operational measures to analyze and
evaluate the performance of our business and compensate our employees, including
the following:

Safety performance. Maintaining a strong safety record is an essential

of our business strategy. We measure security by tracking total recordable

incident rate for our operations. In addition, we closely monitor and measure

? compliance with our safety policies and procedures, including “near misses”

compliance with job safety reports and analysis. We believe that our risk-based HSE approach

management system provides the control required, but the flexibility needed, to

conduct all activities in a safe, efficient and appropriate manner.

Use. Platform usage measures the percentage of time our platforms are

earn income under a contract over a period of time. We measure

usage by dividing the total number of days of operation (defined below) for

a platform by the total number of days that the platform is available to operate in the

? applicable calendar period. A platform is available for an operation commencing on

before the date on which he digs his initial well after construction or when he

has been completed and is actively marketed. The “days of operation” represent the

total number of days a platform generates revenue under a contract, from the time that

   the rig spuds its initial well under the contract and ending with the
   completion of the rig's demobilization.


   Revenue Per Day. Revenue per day measures the amount of revenue that an

mining rig earns daily for a given period. We calculate

? revenue per day by dividing the total contracted drilling revenue earned during the

applicable period by the number of business days in the period. Revenue

attributable to fees reimbursed by customers are excluded from this measure.

Operating cost per day. Operating cost per day measures operating costs

incurred daily for a given period. We calculate the operation

? cost per day by dividing the total operating costs during the applicable period by

the number of Business Days in the period. Operating costs attributable to

   costs reimbursed by customers and rig construction costs are excluded from this
   measure.


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Operational efficiency and availability. Maintain the operational efficiency of our platforms

? is an essential part of our business strategy. We measure our operation

   efficiency by tracking each drilling rig's unscheduled downtime on a
   daily, monthly, quarterly and annual basis.


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Results of Operations

Here is a summary of our financial and operational data for the three and six months ended June 30, 2022 and 2021:

                                      Three Months Ended June 30,            Six Months Ended June 30,
(In thousands, except per share
data)                                   2022               2021                 2022             2021
Revenues                           $       42,313     $        19,817      $       77,304     $    35,359
Costs and expenses
Operating costs                            28,904              17,040              56,069          31,581
Selling, general and
administrative                              4,860               4,075              10,088           7,761
Depreciation and amortization               9,848               9,516              19,599          19,505
Asset impairment, net                           -                 250                   -             293
(Gain) loss on disposition of
assets, net                                 (582)                  31             (1,098)           (404)
Total cost and expenses                    43,030              30,912      
       84,658          58,736
Operating loss                              (717)            (11,095)             (7,354)        (23,377)
Interest expense                          (8,232)             (3,773)            (12,907)         (7,482)
Loss on extinguishment of debt                  -                   -            (46,347)               -
Change in fair value of
embedded derivative liability             (2,408)                   -             (4,265)               -
Realized gain on extinguishment
of derivative                              10,765                   -              10,765               -
Loss before income taxes                    (592)            (14,868)            (60,108)        (30,859)
Income tax expense                          2,199                  33               1,479              67
Net loss                           $      (2,791)     $      (14,901)     

($61,587) ($30,926)

Other financial and operating
data
Number of marketed rigs (end of
period) (1)                                    24                  24                  24              24
Rig operating days (2)                      1,540               1,077               3,004           2,006
Average number of operating
rigs (3)                                     16.9                11.8                16.6            11.1
Rig utilization (4)                            71 %                49 %                69 %            46 %
Average revenue per operating
day (5)                            $       24,875     $        16,514      $       23,388     $    16,028
Average cost per operating day
(6)                                $       15,929     $        13,352      $       15,997     $    13,033
Average rig margin per
operating day                      $        8,946     $         3,162      $        7,391     $     2,995


(1)Marketed rigs exclude idle rigs that will not be reactivated unless market
conditions materially improve. Subsequent to June 30, 2022, we increased our
marketed fleet to 26 rigs.

(2)Rig operating days represent the number of days our rigs are earning revenue
under a contract during the period, including days that standby revenues are
earned.

(3)Average number of operating rigs is calculated by dividing the total number
of rig operating days in the period by the total number of calendar days in the
period.

(4) Rig utilization is calculated as days of rig operation divided by the total number of days our drilling rigs are available during the applicable period.

(5)Average revenue per operating day represents total contract drilling revenues
earned during the period divided by rig operating days in the period. Excluded
in calculating average revenue per operating day are revenues associated with
the reimbursement of out-of-pocket costs paid by customers of $4.0 million and
$2.0 million during the three months ended June 30, 2022 and 2021, respectively,
and $7.1 million and $3.2 million during the six months ended June 30, 2022 and
2021, respectively.

(6)Average cost per operating day represents operating costs incurred during the
period divided by rig operating days in the period. The following costs are
excluded in calculating average cost per operating day: (i) out-of-pocket costs
paid by customers of $4.0 million and $2.0 million during the three months ended
June 30, 2022 and 2021, respectively, and $7.1 million and $3.2 million during
the six months ended June 30, 2022 and 2021, respectively; (ii) overhead costs
expensed due to reduced rig upgrade activity of $0.4 million and $0.4 million
during the three months

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ended June 30, 2022 and 2021, respectively, and $1.0 million and $0.8 million
during the six months ended June 30, 2022 and 2021, respectively; and (iii) rig
reactivation costs, inclusive of new crew training costs, of zero and $0.2
million during the three months ended June 30, 2022 and 2021, respectively, and
zero and $1.3 million during the six months ended June 30, 2022 and 2021,
respectively.

Three months completed June 30, 2022 Compared to the three months ended
June 30, 2021

Revenue

Revenues for the three months ended June 30, 2022 were $42.3 million,
representing a 113.5% increase as compared to revenues of $19.8 million for the
three months ended June 30, 2021. This increase was primarily attributable to an
increase in operating days resulting from the reactivation of rigs in late 2021
and first quarter of 2022 (such increase in days noted below), as well as
increases in contractual dayrates driven by improving demand for our contract
drilling services. Revenue per day increased by 50.6% to $24,875 during the
three months ended June 30, 2022, as compared to revenue per day of $16,514 for
the three months ended June 30, 2021.

Operating costs

Operating costs for the three months ended June 30, 2022 were $28.9 million,
representing a 69.6% increase as compared to operating costs of $17.0 million
for the three months ended June 30, 2021. This increase was primarily
attributable to an increase in operating days to 1,540 days as compared to
1,077 days in the prior year comparable quarter. Operating costs per day
increased to $15,929 during the three months ended June 30, 2022, representing a
19.3% increase compared to cost per operating day of $13,352 for the three
months ended June 30, 2021. This increase in cost per operating day was
primarily attributable to higher personnel costs driven by a much tighter labor
market compared to the prior period in 2021.

Selling, general and administrative expenses

Selling, general and administrative expenses for the three months ended
June 30, 2022 were $4.9 million, representing a 19.3% increase as compared to
selling, general and administrative expense of $4.1 million for the three months
ended June 30, 2021. This increase in selling, general and administrative
expenses as compared to the prior year comparable quarter primarily relates to
the reinstatement of pre-COVID salaries and benefits as well as higher
professional fees and incentive compensation accruals.

Depreciation and amortization

Depreciation and amortization expense for the three months ended June 30, 2022
was $9.8 million, representing a 3.5% increase compared to depreciation and
amortization expense of $9.5 million for the three months ended June 30, 2021.
The increase in depreciation and amortization expense is primarily the result of
asset additions related to reactivated rigs in the fourth quarter of 2021 and
the first quarter of 2022.

Gain on disposal of assets, net

A gain on the disposition of assets totaling $0.6 million was recorded for the
three months ended June 30, 2022 compared to a loss on the disposition of assets
totaling $31.0 thousand in the prior year comparable quarter. In the current and
prior year quarter, the gains, related to the sale of miscellaneous drilling
equipment.

Interest Expense
Interest expense was $8.2 million for the three months ended June 30, 2022 and
$3.8 million for the three months ended June 30, 2021. The increase in the
current quarter interest expense primarily relates to higher interest and
principal debt associated with the Convertible Notes issued on March 18, 2022,
as well as non-cash amortization of debt discount and debt issuance costs
associated with the Convertible Notes.

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Change in fair value of embedded derivative liability

In the second quarter of 2022, we recognized a loss of $2.4 million related to
the change in fair value of the embedded derivative liability between March 31,
2022 and June 8, 2022. See "Embedded Derivative Liability" in Liquidity and
Capital Resources.

Gain realized on the extinction of the derivative

In the second quarter of 2022, we recorded a gain of $10.8 million related to the extinction of the PIK interest rate feature of the derivative liability.

income tax expense

Income tax expense recorded for the three months ended June 30, 2022 amounted to
$2.2 million as compared to income tax expense of $33 thousand for the three
months ended June 30, 2021. Our effective tax rates for the three months ended
June 30, 2022 and 2021 were (371.5)% and (0.2)%, respectively.

Semester completed June 30, 2022 Compared to the half-year ended June 30, 2021

Revenue

Revenues for the six months ended June 30, 2022 were $77.3 million, representing
a 118.6% increase as compared to revenues of $35.4 million for the six months
ended June 30, 2021. This increase was primarily attributable to an increase in
operating days resulting from the reactivation of rigs in late 2021 and first
quarter of 2022 (such increase in days noted below), as well as increases in
contractual dayrates driven by improving demand for our contract drilling
services. Revenue per day increased by 45.9% to $23,388 during the six months
ended June 30, 2022, as compared to revenue per day of $16,028 during the six
months ended June 30, 2021.

Operating Costs
Operating costs for the six months ended June 30, 2022 were $56.1 million,
representing a 77.5% increase as compared to operating costs of $31.6 million
for the six months ended June 30, 2021. This increase was primarily attributable
to an increase in operating days to 3,004 days as compared to 2,006 days in the
prior year comparable period. Operating costs per day increased to $15,997
during the six months ended June 30, 2022, representing a 22.7% increase
compared to cost per operating day of $13,033 for the six months ended
June 30, 2021. This increase in cost per operating day was primarily
attributable to higher personnel costs driven by a much tighter labor market
compared to the prior period in 2021.

Selling, general and administrative expenses

Selling, general and administrative expenses for the six months ended
June 30, 2022 were $10.1 million, representing a 30.0% increase as compared to
selling, general and administrative expense of $7.8 million for the six months
ended June 30, 2021. This increase in selling, general and administrative
expenses as compared to the prior year comparable period primarily relates to
the reinstatement of pre-COVID salaries and benefits as well as higher
professional fees and incentive compensation accruals.

Depreciation and amortization

Depreciation and amortization expense for the six months ended June 30, 2022 was
$19.6 million, representing a 0.5% increase compared to depreciation and
amortization expense of $19.5 million for the six months ended June 30, 2021.
The increase in depreciation and amortization expense is primarily the result of
asset additions related to reactivated rigs in the fourth quarter of 2021 and
the first quarter of 2022.

Gain on disposal of assets, net

A gain on the disposition of assets totaling $1.1 million was recorded for the
six months ended June 30, 2022 compared to a gain on the disposition of assets
totaling $0.4 million in the prior year comparable period. In the current and
prior year periods, gains related to the sale of miscellaneous drilling
equipment.

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Interest Expense

Interest expense was $12.9 million for the six months ended June 30, 2022 and
$7.5 million for the six months ended June 30, 2021. The increase in the current
period primarily relates to higher interest rates and principal debt associated
with the Convertible Notes issued on March 18, 2022, as well as non-cash
amortization of debt discount and deferred financing costs associated with the
Convertible Notes.

Loss on extinguishment of debt

Loss on extinguishment of debt was $46.3 million for the six months ended
June 30, 2022. The debt terms of the Convertible Notes, of which affiliates of
our prior Term Loan Facility are 50.1% noteholders, were determined to be
substantially different terms from the Term Loan Facility and therefore required
to be accounted for as an extinguishment of the Term Loan Facility. Accordingly,
we recognized a loss on the extinguishment of debt of approximately $46.3
million during the six months ended June 30, 2022. This is a non-cash expense
primarily associated with the recognition of unamortized debt issuance costs,
non-cash fees settled in shares to the affiliates of our prior Term Loan
facility and the fair value of the embedded derivatives attributable to the
affiliates of our prior Term loan facility.

Change in fair value of embedded derivative liability

We observed a loss of $4.3 million for the six months ended June 30, 2022
related to the change in the fair value of the embedded derivative liability between the issue date of the convertible notes and June 8, 2022. See “Embedded Derivative Liabilities” in Liquidity and Capital Resources.

Gain realized on the extinction of the derivative

We recognized a gain of $10.8 million for the six months ended June 30, 2022
related to the extinguishment of the PIK interest rate feature of the derivative
liability.

Income Tax Expense
Income tax expense recorded for the six months ended June 30, 2022 amounted to
$1.5 million as compared to income tax expense of $67 thousand for the six
months ended June 30, 2021. Our effective tax rates for the six months ended
June 30, 2022 and 2021 were (2.5)% and (0.2)%, respectively.

Cash and capital resources

Our liquidity at June 30, 2022 was $21.3 million, consisting of cash on hand of
$7.3 million and $14.0 million of availability under our $40.0 million Revolving
ABL Credit Facility, based on a borrowing base of $22.0 million.

During the first six months of 2022, cash flow from operations was positive. On
January 1, 2022, we elected to PIK the $3.2 million interest payment due under
our Term Loan Facility. In March 2022, we issued the Convertible Notes, which
permit us to PIK interest, at our election, for the entire term of the
Convertible Notes. During the first quarter of 2022, we continued our
"at-the-market" offering process, raising an additional $3.6 million of gross
proceeds and issuing an additional 1,061,853 shares. We did not participate in
this program in the second quarter of 2022.

We expect our future capital and cash requirements to be related to operating expenses, maintenance capital expenses, platform reactivation costs, working capital and general business needs. company.

We currently believe that the actions we have taken to date and our existing
sources of liquidity are sufficient to fund our operations for at least the next
twelve months.

Net cash provided by (used in) operating activities

Cash provided by operating activities was $2.5 million for the six months ended
June 30, 2022 compared to cash used in operating activities of $4.9 million
during the same period in 2021. Factors affecting changes in operating cash
flows are similar to those that impact net earnings, with the exception of
non-cash items such as depreciation and amortization, impairments, gains or
losses on disposals of assets, gains or losses on extinguishment of debt,
non-cash interest expense, non-cash compensation, deferred taxes, and
amortization of debt issuance costs and debt discount. Additionally, changes in
working capital items such as accounts receivable, inventory, prepaid expense
and accounts

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payable can significantly affect operating cash flows. Cash flows from operating
activities during the first six months of 2022 were higher as a result of an
increase in net loss of $30.7 million, adjusted for non-cash items, of $66.9
million for the six months ended June 30, 2022, which included $46.3 million of
non-cash extinguishment of debt, compared to $24.1 million for non-cash items
during the same period in 2021. Working capital changes decreased cash flows
from operating activities by $2.8 million for the six months ended June 30, 2022
and increased cash flows from operating activities by $2.0 million during the
same period in 2021.

Net cash used In investment activities

Cash used in investing activities was $10.1 million for the six months ended
June 30, 2022 and $3.6 million during the same period in 2021. During the first
six months of 2022, cash payments of $12.1 million for capital expenditures were
offset by proceeds from the sale of property, plant and equipment of $2.0
million. During the 2021 period, cash payments of $4.3 million for capital
expenditures were offset by proceeds from the sale of property, plant and
equipment of $0.7 million.

Net cash provided by financing activities

Cash provided by financing activities was $11.3 million for the six months ended
June 30, 2022 and $2.2 million during the same period in 2021. During the first
six months of 2022, we received proceeds from borrowings under our new
Convertible Notes of $157.5 million, proceeds from borrowings under our
revolving credit facility of $1.5 million, and proceeds from the issuance of
common stock through our ATM transaction, net of issuance costs of $3.2 million.
These proceeds were offset by repayment of our term loan of $139.1 million,
payment of our merger consideration of $2.9 million, issuance costs paid related
to our Convertible Notes of $7.1 million, repayments under our revolving credit
facility of $2.0 thousand, restricted stock units withheld for taxes paid of
$32.0 thousand and payments for finance lease obligations of $2.3 million.
During the first six months of 2021 we received proceeds from borrowings under
our revolving credit facility of $9.0 thousand, proceeds from the issuance of
common stock through our ATM transaction, net of issuance costs of $2.0 million
and proceeds from the issuance of common stock under our equity line of credit
purchase agreement of $1.9 million. These proceeds were offset by repayments
under our revolving credit facility of $8.0 thousand, restricted stock units
withheld for taxes paid of $11.0 thousand and payments for finance lease
obligations of $1.8 million.

long-term debt

On March 18, 2022, we entered into a subscription agreement with affiliates of
MSD Partners, L.P. and an affiliate of Glendon Capital Management L.P. (the
"Subscription Agreement") for the placement of $157.5 million aggregate
principal amount of convertible secured PIK toggle notes due 2026 (the
"Convertible Notes"). The Convertible Notes were issued pursuant to an
Indenture, dated as of March 18, 2022 (as amended in the Supplemental Indenture,
dated as of July 21, 2022, the "Indenture"). The obligations under the
Convertible Notes are secured by a first priority lien on collateral (the "Note
Priority Collateral") other than accounts receivable, deposit accounts and other
related collateral pledged as first priority collateral ("Priority Collateral")
under the Revolving ABL Credit Facility (defined below). Proceeds from the
private placement of the Convertible Notes were used to repay all of our
outstanding indebtedness under our term loan credit agreement, to repay
obligations to prior equity holders of Sidewinder Drilling LLC, and for working
capital purposes. In connection with the placement of the Convertible Notes, we
issued 2,268,000 shares of our common stock as a structuring fee. The
structuring fee shares were issued on March 18, 2022, concurrent with the
closing of the private placement of the Convertible Notes. The Convertible Notes
mature on March 18, 2026.

The Convertible Notes have a cash interest rate of the Secured Overnight
Financing Rate plus a 10 basis point credit spread, with a floor of 1%
(collectively, "SOFR") plus 12.5%. The Convertible Notes have an initial payment
in-kind, or "PIK," interest rate of SOFR plus 14.0% through September 30, 2022.
The PIK interest rate decreases to SOFR plus 9.5% as of September 30, 2022. We
have the right, at our option, to PIK interest under the Convertible Notes for
the entire term of the Convertible Notes. The effective conversion price of the
Convertible Notes is $4.51 per share (221.72949 shares of Common Stock per
$1,000 principal amount of Convertible Notes). We may issue up to $7.5 million
of additional Convertible Notes. We may convert all Convertible Notes (including
PIK notes) in connection with a Qualified Merger Conversion (as defined in the
Indenture), and we may issue additional shares of common stock upon conversion
of the Convertible Notes to the extent the number of shares issuable upon such
conversion would exceed the number of shares of common stock issuable at the
otherwise then-current conversion price.

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The following changes to the terms of the Convertible Notes and Indenture, and
to the shares issuable upon conversion of the Convertible Notes, became
effective based on approvals of matters by our stockholders at our 2022 Annual
Meeting of Stockholders held on June 8, 2022 (constituting "Shareholder
Approval" as defined in the Indenture): (a) the Convertible Notes initial PIK
interest rate of SOFR plus 14.0% decreased to SOFR plus 9.5% as of September 30,
2022; (b) the initial option to pay interest in additional PIK notes for a
period of 18 months was increased to 48 months (the entire term of the
Convertible Notes); (c) the effective conversion price of $5.07 per share
(197.23866 shares of common stock per $1,000 principal amount of Convertible
Notes) was decreased to $4.51 per share (221.72949 shares of Common Stock per
$1,000 principal amount of Convertible Notes); (d) the issuance by us of up to
$7.5 million of additional Convertible Notes, if and when issued by us; and (e)
the issuance of shares of common stock upon conversion of Convertible Notes in
connection with a Qualified Merger Conversion (as defined in the Indenture) to
the extent the number of shares issuable upon such conversion would exceed the
number of shares of common stock issuable at the otherwise then-current
conversion rate.

Each noteholder has a right to convert our Convertible Notes for shares of ICD
common stock at any time after issuance through maturity. The conversion price
is $4.51 per share. Interest on the Convertible Notes is due on March 31 and
September 30 each year, beginning on September 30, 2022. Under the Indenture, a
holder is not entitled to receive shares of our common stock upon conversion of
any Convertible Notes to the extent to which the aggregate number of shares of
common stock that may be acquired by such beneficial owner upon conversion of
Convertible Notes, when added to the aggregate number of shares of common stock
deemed beneficially owned, directly or indirectly, by such beneficial owner and
each person subject to aggregation of common stock with such beneficial owner
under Section 13 or Section 16 of the Securities Exchange Act of 1934 (the
"Exchange Act") and the rules promulgated thereunder at such time (an
"Aggregated Person") (other than by virtue of the ownership of securities or
rights to acquire securities that have limitations on such beneficial owner's or
such person's right to convert, exercise or purchase similar to this
limitation), as determined pursuant to the rules and regulations promulgated
under Section 13(d) of the Exchange Act, would exceed 9.9% (the "Restricted
Ownership Percentage") of the total issued and outstanding shares of common
stock (the "Section 16 Conversion Blocker"); provided that any holder has the
right to elect for the Restricted Ownership Percentage to be 19.9% with respect
to such note holder, (x) at any time, in which case, such election will become
effective sixty-one days following written notice thereof to us or (y) in the
case of a holder acquiring Convertible Notes on the Issue Date, in such note
holder's Subscription Agreement. In lieu of any shares of common stock not
delivered to a converting holder by operation of the Restricted Ownership
Percentage limitation, we will deliver to such note holder Pre-Funded Warrants
in respect of any equal number of shares of common stock. Such Pre-Funded
Warrants will contain substantially similar Restricted Ownership Percentage
terms.

The Indenture includes a mandatory redemption offer requirement (the "Mandatory
Offer Requirement"). Beginning June 30, 2023, we are obligated to offer to
redeem $5.0 million of Convertible Notes on a quarterly basis through December
31, 2023, and $3.5 million of Convertible Notes on a quarterly basis through
March 31, 2025. The mandatory offer price is an amount in cash equal to the
principal amount of such Convertible Note plus accrued and unpaid interest on
such Convertible Note. The Indenture also includes an optional redemption right
(the "Company Redemption Right") that permits us to redeem on one or more
occasions (i) during the period ending on September 18, 2022, up to $25.0
million aggregate principal of notes at a redemption price of 105% of par, plus
accrued and unpaid interest, and (ii) during the period beginning September 19,
2022 and ending September 19, 2023, up to $25 million aggregate principal amount
of notes at redemption price of 104% of par, plus accrued and unpaid interest.
The Mandatory Offer Requirement is reduced by the amount of any Convertible
Notes repurchased pursuant to our Redemption Right.

The Indenture contains financial covenants, including a liquidity covenant of
$10.0 million beginning September 30, 2022; a springing fixed charge coverage
ratio covenant of 1.00 to 1.00 that is tested when availability under the
Revolving ABL Credit Facility (defined below) is below $5.0 million at any time
that the Convertible Notes are outstanding; and capital expenditure limits of
$25.0 million during 2022 and $15.0 million during 2023 and 2024, subject to
adjustment upward by $500,000 per year for each rig above 17 that operates
during each year, as well as an amount equal to capital expenditures
specifically approved by both the required holder and our board of directors. In
addition, capital expenditures are excluded from this covenant (a) if funded
from equity proceeds, (b) if relating to the reactivation of a rig so long as
(i) we have a signed contract with a customer with respect to each such rig of
at least one (1) year duration providing for early termination payments
consistent with past practice equal to at least the expected margin on the
contract, (ii) the expected margin on such rig contract will be equal to or
exceed such reactivation capital expenditures, and (iii) the reactivation
capital expenditures, rig contract and the expected margin calculation are
approved by our board of directors or (c) relate to other capital expenditures
specifically approved by written or

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electronic consent by both (i) the required holders (which approval may, for the
avoidance of doubt, be provided by the required holders in their sole discretion
for an amount of capital expenditures to be committed or made by the Company or
a subsidiary of the Company within ninety (90) days after the date of such
consent) and (ii) the Board of Directors of the Company. The Indenture also
contains other customary affirmative and negative covenants, including
limitations on indebtedness, liens, fundamental changes, asset dispositions,
restricted payments, investments and transactions with affiliates. The Indenture
also provides for customary events of default, including breaches of material
covenants, defaults under the Revolving ABL Credit Facility or other material
agreements for indebtedness, and a change of control. Beginning 18 months prior
to maturity, we may elect to suspend the Convertible Debt covenant requirements
by depositing cash and short-term treasuries with the Trustee in an amount equal
to all amounts due to the noteholders including principal, premium (if any) and
interest. We are in compliance with our covenants as of June 30, 2022.

Upon a Qualified Merger (defined below), we may elect to convert all, but not
less than all, of the Convertible Notes at a Conversion Rate equal to our
Conversion Rate on the date on which the relevant "Qualified Merger" is
consummated (a "Qualified Merger Conversion"), so long as the "MOIC Condition"
is satisfied with respect to such potential Qualified Merger Conversion. A
"Qualified Merger" means a Common Stock Change Event consolidation, merger,
combination or binding or statutory share exchange of the Company with a
Qualified Acquirer. A "Qualified Merger Conversion Date" means the date on which
the relevant Qualified Merger is consummated. A "Qualified Acquirer" means any
entity that (i) has its common equity listed on the New York Stock Exchange, the
NYSE American, Nasdaq Global Market or Nasdaq Global Select Market, or Toronto
Stock Exchange, (ii) has an aggregate equity market capitalization of at least
$350 million, and (iii) has a "public float" (as defined in Rule 12b-2 under the
Securities Act of 1933) of at least $250 million in each case, as determined by
the calculation agent based on the last reported sale price of such common
equity on date of the signing of the definitive agreement in respect of the
relevant Common Stock Change Event. A "Common Stock Change Event" means the
occurrence of any: (i) recapitalization, reclassification or change of our
common stock (other than (x) changes solely resulting from a subdivision or
combination of the common stock, (y) a change only in par value or from par
value to no par value or no par value to par value and (z) stock splits and
stock combinations that do not involve the issuance of any other series or class
of securities); (ii) consolidation, merger, combination or binding or statutory
share exchange involving us; (iii) sale, lease or other transfer of all or
substantially all of the assets of ours and our Subsidiaries, taken as a whole,
to any person; or (iv) other similar event, and, as a result of which, the
common stock is converted into, or is exchanged for, or represents solely the
right to receive, other securities, cash or other property, or any combination
of the foregoing. A "Company Conversion Rate" means, in respect of any Qualified
Merger, the greater of (a) the relevant Conversion Rate, (b) $1,000 divided by
our Conversion VWAP, and (c) the lowest rate that would cause the MOIC Condition
to be satisfied with respect to the related Qualified Merger Conversion. A
"Company Conversion VWAP" means, in respect of any Qualified Merger, the average
of daily VWAP over the five (5) VWAP Trading Days prior to the earlier of
signing or public announcement (by any party, and whether formal or informal,
including for the avoidance of doubt any media reports thereof) of a definitive
agreement in respect of such Qualified Merger as calculated by the Calculation
Agent. The "MOIC Condition" means, with respect to any potential Qualified
Merger Conversion, MOIC is greater than or equal to the MOIC Required Level. The
"MOIC Required Level" means $1,350.00. "MOIC" means, with respect to any
potential Qualified Merger Conversion, an amount determined by the Calculation
Agent equal to the aggregate return on a hypothetical Note with $1,000 face
amount, issued on the Issue Date, from the Issue Date through the potential
Qualified Merger Conversion Date, including (x) the aggregate amount of any cash
interest paid on such hypothetical Note from the Issue Date through the
potential Qualified Merger Conversion Date, (y) the aggregate fair market value
of any Conversion Consideration that would be received by the Holder of such
hypothetical Note on the relevant Qualified Merger Conversion Date and (z) the
aggregate fair market value of any Conversion Consideration that would be
received on the relevant Qualified Merger Conversion Date by the Holder of any
PIK Notes issued in respect of (or the relevant increase in value of) such
hypothetical Note.

We early adopted ASU 2020-06 as of January 1, 2022 and concluded the Convertible
Notes are accounted for as debt, with embedded features. As a consequence of the
embedded features, the Convertible Notes gave rise to a derivative liability.
See Embedded Derivative Liability. The debt terms of the Convertible Notes, of
which affiliates of our prior Term Loan Facility are 50.1% noteholders, were
determined to be substantially different terms from the Term Loan Facility and
therefore required to be accounted for as an extinguishment of the Term Loan
Facility. Accordingly, we recognized a loss on the extinguishment of debt of
approximately $46.3 million during the quarter ended March 31, 2022. This is a
non-cash expense primarily associated with the recognition of unamortized debt
issuance costs, non-cash fees settled in shares to the affiliates of our prior
Term Loan Facility and the fair value of the embedded derivatives. We recorded a
derivative liability of $75.7 million at the time of the issuance and a debt
discount of $37.6 million. Issuance costs consisting of cash fees of $7.1
million and a non-cash structuring fee settled in shares of $2.3 million along
with

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the debt discount are recorded as a direct deduction from the Convertible Notes
in the consolidated balance sheet. The debt discount is amortized to interest
expense using the effective interest rate method over the term of the
Convertible Notes. The effective interest rate for the Convertible Notes as of
June 30, 2022 is 24.5%. For the three and six months ended June 30, 2022, the
contractual interest expense was $6.0 million and $6.9 million, respectively;
the amortization of the debt discount was $1.5 million and $1.7 million,
respectively; and the amortization of the issuance costs was $0.5 million and
$0.7 million, respectively.

Embedded Derivative Liability

The Convertible Notes contained the following embedded features upon issuance
(i) an increase of the noteholder's optional conversion rate for the Convertible
Notes from 197.23866 shares of common stock per $1,000 principal amount of
Convertible Notes ($5.07 per share) to 221.72949 shares of Common Stock per
$1,000 principal amount of Convertible Notes ($4.51 per share) following the
receipt of the Shareholder Approval, (ii) a decrease in the PIK interest rate
from SOFR plus 14.0% to SOFR plus 9.5% following receipt of the Shareholder
Approval, (iii) a conversion feature associated with the MOIC condition in the
event of a Qualified Merger and (iv) a contingent interest feature as a result
of violations of credit-risk related covenants. We evaluated these embedded
features under the guidance of ASC 815 and determined that they required
bifurcation at fair value. However, management determined the probability of a
Qualified Merger to be remote and as such the fair value of the embedded
conversion feature has been estimated to be zero. Management also evaluated the
contingent interest feature and determined the likelihood of payment to be
remote. Accordingly, the fair value of the contingent interest feature was also
estimated to be zero. Lastly, management evaluated the conversion rate feature
and the decrease in PIK interest feature and determined that these embedded
features met all three criteria in ASC 815-15-25-1 and therefore required
bifurcation. Accordingly, as of March 18, 2022, we recorded a derivative
liability representing the increase in conversion rate feature and the decrease
in PIK interest feature. The derivative liability was presented as a non-current
liability in our consolidated balance sheet and was adjusted to reflect fair
value at each period end with changes in fair value recorded in the "Change in
fair value of embedded derivative liability" financial statement line item of
our consolidated statements of operations.

After the approval of certain matters by our stockholders at our 2022 Annual
Meeting of Stockholders held June 8, 2022, certain features under our
Convertible Notes were modified and no longer met the criteria to bifurcate from
the host debt agreement. Accordingly, as of June 8, 2022, we recognized the
change in fair value of the embedded derivative, $2.4 million, and extinguished
the fair value of the conversion rate feature ($69.2 million) of the derivative
liability on our balance sheet to stockholders' equity, as the conversion rate
feature now met the criteria to be classified in equity, and recognized a gain
on extinguishment of derivative liability of $10.8 million on our consolidated
statement of operations associated with the PIK interest rate feature of the
derivative liability. See Note 5 "Financial Instruments and Fair Value" for
additional information.

Term loan facility

On October 1, 2018, we entered into a Term Loan Credit Agreement (the "Term Loan
Credit Agreement") for an initial term loan in an aggregate principal amount
of $130.0 million, (the "Term Loan Facility") and (b) a delayed draw term loan
facility in an aggregate principal amount of up to $15.0 million (the "DDTL
Facility", and together with the Term Loan Facility, the "Term Facilities"). The
Term Facilities had a maturity date of October 1, 2023, but were repaid in their
entirety on March 18, 2022 with proceeds from the issuance of the Convertible
Notes.

At our option, interest under the Term Loan Facility has been determined by reference to, at our option, either (i) a “base rate” equal to the greater of (a) the effective federal funds rate plus 0.05%, (b) the London Interbank Offered Rate (“LIBOR”) with an interest period of one month, plus 1.0%, and (c) the interest rate as ‘ publicly stated from time to time by the the wall street journal as the “prime rate” in United Statesplus an applicable margin of 6.5%, or (ii) a “LIBOR rate” equal to LIBOR with an interest period of one month, plus an applicable margin of 7.5%.

In June 2020, we revised the Term Loan Credit Agreement to elect to pay accrued
and unpaid interest, solely during one three-consecutive-month period
immediately following such notice, in-kind (the "PIK Amount"). We agreed to pay
an additional amount equal to 0.75% of the aggregate principal amount of the
loans under the Term Loan Credit Agreement plus all PIK Amounts, if any, that
were added to such principal amount being repaid or prepaid on either the
maturity date or upon the occurrence of an acceleration of obligations under the
Term Loan Credit Agreement. As such, the additional amount, approximately $1.0
million, was recorded as a direct deduction from the face amount of the Term
Loan Facility and as a long-term payable on our consolidated balance sheets
while the Term Loan remained outstanding.

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The additional amount was amortized as interest expense over the term of the
Term Loan Facility. On April 1, 2021, we elected to pay in-kind the
$2.8 million, interest payment due under our Term Loan, which increased our Term
Loan balance accordingly. In September 2021, we amended our Term Loan Credit
Agreement and elected to pay in-kind the $3.1 million October 1, 2021 interest
payment which reduced the amount of the Term Loan Accordion by the PIK amount.
On December 30, 2021, we amended our Term Loan Credit Agreement and elected to
pay in-kind the $3.2 million January 3, 2022 interest payment which reduced the
Term Loan Accordion by a corresponding amount.

ABL Revolving Credit Facility

On October 1, 2018, we entered into a $40.0 million revolving Credit Agreement
(the "Revolving ABL Credit Facility"), including availability for letters of
credit in an aggregate amount at any time outstanding not to exceed $7.5
million. Availability under the Revolving ABL Credit Facility is subject to a
borrowing base calculated based on 85% of the net amount of our eligible
accounts receivable, minus reserves. The ABL Credit Facility has a maturity date
of October 1, 2023.

At our election, interest under the Revolving ABL Credit Facility is determined
by reference at our option to either (i) a "base rate" equal to the higher of
(a) the federal funds effective rate plus 0.05%, (b) LIBOR with an interest
period of one month, plus 1.0%, and (c) the prime rate of Wells Fargo, plus in
each case, an applicable base rate margin ranging from 1.0% to 1.5% based on
quarterly availability, or (ii) a revolving loan rate equal to LIBOR for the
applicable interest period plus an applicable LIBOR margin ranging
from 2.0% to 2.5% based on quarterly availability. We also pay, on a quarterly
basis, a commitment fee of 0.375% (or 0.25% at any time when revolver usage is
greater than 50% of the maximum credit) per annum on the unused portion of the
Revolving ABL Credit Facility commitment.

The Revolving ABL Credit Facility contains a springing fixed charge coverage
ratio covenant of 1.00 to 1.00 that is tested when availability is less
than 10% of the maximum credit. The Revolving ABL Credit Facility also contains
other customary affirmative and negative covenants, including limitations on
indebtedness, liens, fundamental changes, asset dispositions, restricted
payments, investments and transactions with affiliates. The Revolving ABL Credit
Facility also provides for customary events of default, including breaches of
material covenants, defaults under the Term Loan Agreement or other material
agreements for indebtedness, and a change of control. We are in compliance with
our financial covenants as of June 30, 2022.

The obligations under the Revolving ABL Credit Facility are secured by a first
priority lien on Priority Collateral, which includes all accounts receivable and
deposit accounts, and a second priority lien on the Term Priority Collateral,
and are unconditionally guaranteed by all of our current and future direct and
indirect subsidiaries. As of June 30, 2022, the weighted-average interest rate
on our borrowings was 14.59%. At June 30, 2022, the borrowing base under our
Revolving ABL Credit Facility was $22.0 million, and we had $14.0 million of
availability remaining of our $40.0 million commitment on that date.

On March 18, 2022, we entered into a third amendment to that certain Credit
Agreement, dated as of October 1, 2018 (the "Third Amendment to the Credit
Agreement"), by and among us, Sidewinder Drilling LLC ("Sidewinder"), the
Lenders named therein and Wells Fargo Bank, National Association ("Wells
Fargo"), as administrative agent. The Third Amendment to the Credit Agreement
amends the original credit agreement, dated as of October 1, 2018 (the "Credit
Agreement") by deleting references to the "Term Loan Agreement" and related
definitions and adding certain references and clauses related to our placement
of $157.5 million aggregate principal amount of convertible secured PIK toggle
notes due 2026 (the "Convertible Notes"), which were issued pursuant to an
Indenture, dated as of March 18, 2022 (the "Indenture"), with U.S. Bank Trust
Company, National Association as trustee and collateral agent.

In addition, our long-term debt includes finance leases. These leases generally have an initial term of 36 months and are paid monthly.

Other topics

Off-balance sheet arrangements

We are party to certain arrangements defined as "off-balance sheet arrangements"
that have or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that
is material to investors. These arrangements

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relate to non-cancellable operating leases and unconditional purchase obligations that are not fully reflected in our balance sheets (see Note 12 “Commitments and contingencies” for additional information).

Significant Accounting Policies and Accounting Estimates

We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of our financial instruments to
determine if such instruments are derivatives or contain features that qualify
as embedded derivatives, pursuant to ASC 480, Distinguishing Liabilities from
Equity, and ASC 815, Derivatives and Hedging ("ASC 815"). The classification of
derivative instruments, including whether such instruments should be recorded as
liabilities or as equity, is re-assessed at the end of each reporting period.
All derivative instruments are measured at fair value.

As described in Note 8, we determined that certain features under our
Convertible Notes required bifurcation from the debt host agreement in
accordance with ASC 815 as of March 18, 2022. Accordingly, we recognized a
derivative liability at fair value for this instrument in our consolidated
balance sheet and adjusted the carrying value of the liability to fair value at
each reporting period until the features underlying the instrument were
exercised, redeemed, cancelled, or expired. The changes in fair value were
assessed quarterly and recorded in our consolidated statement of operations.
After the approval of certain matters by our stockholders at our 2022 Annual
Meeting of Stockholders held June 8, 2022, certain features under our
Convertible Notes were modified and no longer met the criteria to bifurcate from
the host debt agreement. Accordingly, as of June 8, 2022, we recognized the
change in fair value of the embedded derivative, $2.4 million, and extinguished
the fair value of the conversion rate feature ($69.2 million) of the derivative
liability on our balance sheet to stockholders' equity, as the conversion rate
feature now met the criteria to be classified in equity, and recognized a gain
on extinguishment of derivative liability on our consolidated statement of
operations of $10.8 million associated with the PIK interest rate feature of the
derivative liability. See Note 5 "Financial Instruments and Fair Value" for
additional information.

We review our assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
recoverability of assets that are held and used is measured by comparison of the
estimated future undiscounted cash flows associated with the asset to the
carrying amount of the asset. If the carrying value of such assets is less than
the estimated undiscounted cash flow, an impairment charge is recorded in the
amount by which the carrying amount of the assets exceeds their estimated fair
value. There are no such indicators of impairment this period.

For a complete discussion of our significant accounting policies and accounting estimates, please see our Annual Report on Form 10-K for the year ended
December 31, 2021.

Recent accounting pronouncements

See note 2 “Interim financial information – recent accounting pronouncements” for information on recently adopted accounting standards and new accounting standards not yet adopted.

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