Debts

9 Months Ended

Sep. 30, 2020

Development Loans

On April 4, 2018, the Company entered into a Loan and Security Agreement (“LSA”) and Development and License Agreement (“DLA”) with Nexperia. The LSA provided for term loans in an aggregate principal amount of up to $15.0 million, which term loans were available in tranches (Tranche A, Tranche B and Tranche B-1) and subject to the satisfaction of specified conditions. The Tranche A Loan of $5.0 million initially was scheduled to mature on the earlier of the date a specified report is required to be delivered under the DLA or March 31, 2020. On April 8, 2020, the maturity of the Tranche A loan was extended to April 30, 2020 and, on April 28, 2020, the maturity of the Tranche A Loan was further extended to June 30, 2020. On June 29, 2020, the Tranche A Loan of $5.0 million was satisfied in full when the Company transferred its Gen-4 technology development to Nexperia. The Tranche B Loan of $8.0 million and Tranche B-1 Loan of $2.0 million mature on the earlier of the date a specified

report is required to be delivered under the DLA or March 31, 2021, subject to extension as provided in the LSA. See Note 2 - Nexperia Arrangement.

As of September 30, 2020 and December 31, 2019, $10.0 million aggregate principal amount of term loans were outstanding under the LSA.

Revolving Credit Facility

The LSA also provided a $10.0 million revolving loan (Tranche C Loan) maturing at the earlier of (i) April 3, 2021, and (ii) the date a Change of Control (as defined in the LSA) of the Company occurs. Interest payable by the Company accrues on the outstanding principal amount of the loans during such period at a rate of 6% per annum. The credit facility is secured against certain of our U.S. patents not relating to MOCVD or epiwafer technology. See Note 2 - Nexperia Arrangement.

The Tranche C Loan is recorded based on principal in the amount of $10.0 million and accrued interest (6% interest per annum). The Company recorded interest expense of $153 thousand for each of the three months ended September 30, 2020 and 2019, and interest expense of $457 thousand and $455 thousand for the nine months ended September 30, 2020 and 2019, respectively. The Company paid interest expense of $762 thousand during the three months ended September 30, 2020. As of September 30, 2020 and December 31, 2019, the total balance of the revolving credit facility was $10.2 million and $10.5 million, respectively.

Promissory Note

The Company’s promissory note obligation at September 30, 2020 and December 31, 2019 consists of the following (in thousands):


			Stated Value at
	Interest Rate	Due Date	September 30, 2020		December 31, 2019
Yaskawa Note	1.00%	September 2022	$	15,448	$	15,336

Pursuant to ASC 825-10-15-4, the Company elected to apply the fair value option for the promissory note. As of September 30, 2020 and December 31, 2019, the Company determined the fair value for the note, as compared to the face value, including accrued interest, as follows (in thousands):


	Fair Value at
	September 30, 2020		December 31, 2019
Yaskawa Note	$	16,327	$	16,169

Fair value of promissory note increased $46 thousand for the nine months ended September 30, 2020 and increased $167 thousand for the year ended December 31, 2019.

In October 2017, the Company issued an unsecured subordinated convertible promissory note to Yaskawa Electric Corporation (the “Yaskawa Note”) for $15.0 million. The stated interest rate of the Yaskawa Note is 1.0%, and principal plus interest is due on the earlier of September 30, 2022, or the date of the occurrence of an Event of Default, Change of Control or an Initial Public Offering (all terms as defined in the Yaskawa Note). In connection with the Merger, the Yaskawa Note was amended to be convertible at the option of the holder into a maximum of 3,076,171 shares of our common stock at a conversion price of $5.12 per share.

In connection with its promissory note obligation, the Company recorded interest expense of $38 thousand for each of the three months ended September 30, 2020 and 2019, and interest expense of $112 thousand for each of

the nine months ended September 30, 2020 and 2019. In accordance with the terms of the promissory note, interest is added to the principal balance and is reflected in the carrying value on the condensed consolidated balance sheet. As of September 30, 2020 and December 31, 2019, accrued interest on the promissory note was $448 thousand and $336 thousand, respectively.

In February 2020, the Company entered into a letter of intent (“LOI”) with Yaskawa that will form the basis for a mutually beneficial cooperation agreement between the Company and Yaskawa, which is expected to be finalized by the end of 2020. Under the LOI, Yaskawa intends to enter into a long-term cooperation and development agreement with the Company to use the Company’s GaN power device products for a variety of industrial power conversion applications, which will initially focus on servo motor drive applications. Yaskawa also intends to provide at least $4.0 million to fund the Company’s development activities from which amount Yaskawa intends to provide $1.0 million in 2020 in connection with the ongoing development activities.

As of September 30, 2020, the scheduled maturity on the development loans, revolving credit facility and promissory note was as follows (in thousands):


Year Ending December 31,	Amount
2020	$	10,153
2021	10,000
2022	15,748
Total	$	35,901