Debt

3 Months Ended

Apr. 30, 2023

Debt Disclosure [Abstract]

Debt

9. Debt

5% Convertible Promissory Notes due 2024

On September 14, 2022, the Company entered into the SPA with 3i, under which the Company agreed to sell and issue Convertible Notes to 3i in an aggregate principal amount of up to $25,750, which are convertible into shares of the Company's common stock, subject to certain conditions. On September 15, 2022, the Company issued a Convertible Note under the SPA in the principal amount of $10,300, including a 3% Original Issue Discount ("OID"), with an 18-month term. As of April 30, 2023, the Company prepaid approximately $2,747 of the Convertible Notes to 3i and, as a result, approximately $7,553 principal amount of the Convertible Note was outstanding as of the end of the period. The Company subsequently repaid a total of $3,320 of the Convertible Note in May and June 2023 and, as a result, approximately $4,233 in principal remained outstanding thereafter. As of the date of this report, the conditions to the additional borrowing have not been met. See Note 13, Subsequent Events, for additional information, including with respect to events of default under the Convertible Notes.

The Convertible Notes bear interest at an annual rate of 5.00% per annum, payable monthly on the first of each month (the "Installment Date"), beginning the first month that is 90 days following the issuance date, payable in cash and/or shares of the Company's common stock, at the Company's option. The interest rate will increase to an annual rate of 10.00% per annum upon the occurrence and during the continuance of an event of default as defined in the Convertible Notes. Each Convertible Note issued pursuant to the SPA will have a maturity date of 18 months from the date of issuance, which may be extended at the option of 3i in certain instances.

The Convertible Notes provide a conversion right pursuant to which 3i may convert any portion of the principal, together with any unpaid interest and other unpaid amounts, into shares of common stock at a conversion price of $7.50 per share, subject to adjustments in accordance with the terms of the Convertible Notes. The Convertible Note also contains provisions that provide 3i with the right, subject to certain exceptions, to require the Company to redeem all or a portion of the Convertible Note in cash. This convertible feature has been bifurcated from the host contract and accounted for separately as a derivative. The bifurcation of the embedded derivative created a debt discount of $774 which reduced the book value of the $10,300 Convertible Note and increases prospectively the amount of interest expense to be recognized over the life of the Convertible Note. Due to the provisions that may provide 3i with the right to require the Company to redeem all or a portion of the Convertible Note in cash, the balance of the Convertible Note is included in current liabilities on the consolidated balance sheet. As of April 30, 2023, the fair value of the Convertible Notes was approximately $5,032 based on Level 3 inputs.

On each monthly Installment Date, the Company shall repay the lesser of $687 and the principal amount then outstanding, plus accrued and unpaid interest, in cash and/or shares of common stock, at the Company’s option (the "Installment Amount"). In certain instances, but no more than once per calendar month, 3i will also have the right to

accelerate the repayment of one monthly repayment obligation based on the conversion price on the acceleration date. For any Installment Amount paid in the form of shares of common stock, the applicable conversion price will be equal to the lesser of (a) $7.50, and (b) the greater of (x) 95% of the lowest VWAP in the five trading days immediately prior to such conversion, and (y) a “floor price” of approximately $0.44, subject to adjustment in accordance with the terms of the Convertible Notes. For any Installment Amount paid in cash, the price paid will be equal to 105% of the Installment Amount. The proceeds received from the Convertible Notes were used to fund general corporate and working capital needs.

During the three months ended April 30, 2023, the Company paid two of the Installment Amounts due in cash.

As of April 30, 2023, the effective interest rate on the Convertible Notes was 16.4%. The Company failed to pay Installment Amounts in December 2022 and April 2023, which qualifies as an event of default per the Convertible Notes, and has resulted in the Company incurring interest at a rate of 10.0% per annum since the original event of default. Interest expense for the three months ended April 30, 2023 related to the Convertible Notes was $659, which was a result of effective interest of $348 incurred under the $10,300 Convertible Note, as well as $134 in interest expense related to the amortization of related debt issuance costs and OID and $177 of interest expense related to the accretion of the debt discount created by the embedded conversion feature. Interest expense is included in interest expense in the condensed consolidated statement of operations.

The following table presents the components of the Convertible Notes:

	April 30, 2023
3i Convertible Promissory Notes	$	7,274
Less: unamortized original issue discount and issuance costs		(209	)
	$	7,065

See Note 13, Subsequent Events, for additional information.

Promissory Notes with Directors

In December 2022, the Company issued and sold secured promissory notes in an aggregate principal amount of $6,900 (the “Initial Director Notes”) to a total of eight lenders, including seven lenders who are either directors of the Company or entities affiliates with directors of the Company. At the time of issuance of the Initial Directors Notes, each of the holders of the Director Notes executed a Security Agreement, under which the Company’s obligations under the Initial Director Notes were secured by substantially all of the assets of the Company, excluding the Company’s intellectual property. The Director Notes, together with the C5 Notes described below, rank senior in right of payment to any of the Company’s existing and future indebtedness for borrowed money.

On January 11, 2023, the Company and the holders agreed to amend and restate the Initial Director Notes to be substantially in the form of the secured promissory notes issued to C5 and discussed below (the “Director Notes”). As amended and restated, the Director Notes bear interest at a rate of 13.8% per annum from the respective dates of the Initial Director Notes. On April 20, 2023, the Company issued and sold an additional Director Note in the amount of $300 to one of the initial lenders from the December 2022 issuances who is not affiliated with the board of directors. As of April 30, 2023, there is $7,200 in Director Notes outstanding. All principal and accrued interest was originally due and payable at scheduled maturity on June 30, 2023. On June 30, 2023, the Company and the noteholders executed amendments to these notes to extend the maturity dates thereof from June 30, 2023 to December 31, 2023. Upon issuance of the Director Notes, each of the holders executed an Amended and Restated Security Agreement which secure the Company’s obligations under the Director Notes by substantially all of the assets of the Company, excluding the Company’s intellectual property. The proceeds received from the Director Notes will be used to fund general corporate and working capital needs, including for purposes of remitting amounts due to taxing authorities for tax withholdings received for RSUs settled under the sell-to-cover method. As of April 30, 2023, the fair value of the Director Notes was approximately $4,894 based on Level 3 inputs. Interest expense for the three months ended April 30, 2023 was $237 and is included in interest expense in the condensed consolidated statement of operations.

As of January 29, 2024, there is $8,475 in principal amount of Director Notes outstanding. See Note 13, Subsequent Events, for additional information.

Convertible Promissory Notes with C5

On December 30, 2022, the Company issued a secured convertible promissory note in the principal amount of $2,000 (the “Initial C5 Note”) to an affiliate of C5, which was amended and restated on January 11, 2023 (as amended and restated, the “Restated C5 Note”). The Company issued additional senior secured convertible promissory notes to affiliates of C5 (together with the Restated C5 Note, the “C5 Notes”) in total principal amounts of $3,000 in fiscal 2023, $6,845 during the three months ended April 30, 2023, and $3,430 thereafter. As of April 30, 2023, the Company had issued secured convertible promissory notes to C5 in the amount of $11,845.

Each of the C5 Notes bear interest at an annual rate of 13.8% per annum from the date of issuance (or in the case of the Restated C5 Note, from the date of the Initial C5 Note), and was originally payable at scheduled maturity on June 30, 2023, subject to acceleration in certain circumstances. On June 30, 2023, the Company and the noteholders executed amendments to these notes to extend the maturity dates thereof from June 30, 2023 to December 31, 2023. The C5 Notes, together with the Director Notes, rank senior in right of payment to any of the Company’s existing and future indebtedness for borrowed money. The Company’s obligations under the C5 Notes are secured by substantially all of the assets of the Company, excluding the Company’s intellectual property, as governed by an Amended and Restated Security Agreement executed by C5 on January 4, 2023.

The C5 Notes provide C5 with the right, at any time on or after the date that is five calendar days prior to maturity, to convert all or any portion of the aggregate principal amount of the C5 Notes, together with any accrued and unpaid interest and any other unpaid amounts, into shares of the Company’s common stock, par value $0.0001 per share, at a conversion price of $2.00 per share. In the event that any shares of common stock are issued upon conversion of the C5 Notes, the Company has agreed to grant specified registration rights to C5.

The convertible feature included within the C5 Notes issued through January 31, 2023 was bifurcated from the host contract and accounted for separately as a derivative. The bifurcation of the embedded derivative created a debt discount of $63, which reduced the book value of the $5,000 C5 Notes outstanding at January 31, 2023 and increases prospectively the amount of interest expense to be recognized over the life of the C5 Notes. The convertible features for the C5 Notes issued during the quarter ended April 30, 2023 were determined to have no value and were not bifurcated from the host contract as separate derivatives. Refer to Note 5 for more information. The proceeds received from the C5 Notes have been used to fund general corporate and working capital needs.

As of April 30, 2023, the fair value of the C5 Notes is approximately $8,051 based on Level 3 inputs. Interest expense related to the C5 Notes for the three months ended April 30, 2023 was $352. The Company also recognized interest expense of $32 related to the accretion of the debt discount created by the embedded conversion feature included within the C5 Notes issued through January 31, 2023, which is included in interest expense in the condensed consolidated statement of operations.

As of January 29, 2024, there was $15,275 of C5 Notes outstanding. See Note 13, Subsequent Events, for additional information.

Debt Repayments

The following are scheduled principal repayments on debt, including convertible notes which can be settled in shares as of April 30, 2023, however the balances presented are classified as current in the consolidated balance sheet:

Fiscal year ending,	Principal
2024 (9 months)	$	25,911
2025		687
Total	$	26,598

The Company had accrued interest liabilities of $905 and $181 as of April 30, 2023 and January 31, 2023, respectively.

See Note 13, Subsequent Events, for additional information relating to the Company’s indebtedness subsequent to April 30, 2023, including the events of default currently pending related to all outstanding indebtedness, including as a result of the Chapter 11 Cases.