Long-term Debt

6 Months Ended

Jun. 30, 2022

Convertible Notes Payable - Related Party

Yorkville Convertible Note

On June 13, 2022, the Company issued and sold the Promissory Note with a stated principal amount of $7,500 in a private placement to Yorkville (“Yorkville” or the “Holder”) under the Supplemental Agreement. The Promissory Note has a maturity date of September 15, 2022 (the “Maturity Date”). The Promissory Note was issued with a 2% original issue discount and bears interest only upon the occurrence of an Event of Default, as discussed below. The Company shall reimburse the Holder promptly for all fees, costs and expenses, including, without limitation, attorneys’ fees and expenses incurred by the Holder in connection with the Promissory Note if the Company fails to strictly comply with the terms of the Promissory Note. Total cash proceeds of $7,350 were received upon the issuance.

Mandatory Repayments - Six installments of $1,250 shall be made starting from August 11, 2022, ending on the Maturity Date. The Company may repay each installment amount in either cash or by delivering an Advance notice under the SEPA or in a combination of these two. Refer to Note 12 for details regarding the SEPA. An additional 3% payment premium applies to any installment amount paid in cash. If an installment is repaid in shares via delivery of an Advance notice, the payment premium does not apply. The Company accounts for the payment premium as principal.

Conversion Rights - Yorkville has the right, but not the obligation, to convert principal and accrued interest into shares of the Company’s common stock at a conversion price of $2.21 (the “Conversion Price”) any time prior to the Maturity Date, subject to the terms and conditions of the Promissory Note. At any time that there is an outstanding balance owed under the Promissory Note, the Holder may, pursuant to the terms of the Supplemental Agreement, deliver Investor Notices to require the Company to issue and sell shares of common stock under the SEPA at the Conversion Price in order to repay the amounts owed by the Company to the Holder under the Promissory Note. In addition, while there is an outstanding balance owed under the Promissory Note, the Company may use any Advance requested by the Company pursuant to the SEPA to repay the amounts owed by the Company to the Holder under the Promissory Note. Prior to June 28, 2022, the shares issuable upon conversion were subject to the Exchange Cap. Refer to Note 12 for details regarding the Exchange Cap.

Optional Redemption - The Company has the right, but not the obligation, to redeem (“Optional Redemption”) early a portion or all amounts outstanding under the Promissory Note provided that (i) the Company provides the Holder with at least five trading days’ prior written notice (each, a “Redemption Notice”) of its desire to exercise an Optional Redemption, and (ii) the VWAP of the Company’s common stock on each of the ten trading days immediately prior to the Redemption Notice is less than the conversion price.

Redemption upon Event of Default - Upon the occurrence of an Event of Default (as defined in the SEPA), interest will begin to accrue at a rate of 15% per year and Yorkville may elect to accelerate the repayment of each installment.

Embedded Derivatives - The number of shares issuable for conversion of the Promissory Notes is subject to the Exchange Cap limitation under the SEPA, unless shareholder approval is obtained. Therefore, at issuance, shareholder approval is an explicit input that can adjust the number of shares issuable upon settlement. Because shareholder approval is not an input that is indexed to the Company’s shares, the conversion feature is not indexed to the Company's own stock. Therefore, the conversion feature does not qualify for the scope exception to derivative accounting and bifurcation is required at issuance. On June 28, 2022, shareholder approval was obtained to issue shares under the SEPA in excess of the Exchange Cap. As such, upon the receipt of shareholder approval, the conversion feature no longer requires bifurcation and would be classified in equity.

In addition, upon the occurrence of an Event of Default, as defined in the Promissory Note, interest will begin to accrue at a rate of 15% per year and reimbursement of fees, cost and expenses incurred by the Holder in any action in connection with the Promissory Note are required if the Company fails to comply with the Promissory Note. An event of default and the nature of noncompliance includes events that are unrelated to Company’s credit worthiness and/or interest rates. Therefore, these features are not clearly and closely related to the debt host and bifurcation is required for this feature under the requirement of Accounting Standards Codification 815, Derivatives and Hedging (“ASC 815”).

Management concluded the fair value of the bifurcated embedded derivative described above as of the issuance date, June 28, 2022 and June 30, 2022 is de minimis.

Debt Issuance Costs - The Company incurred $125 of legal fees in connection with the issuance of the Promissory Note. No debt issuance costs were allocated to the embedded derivative due to the de minimis fair value and the full amount of the issuance cost were allocated to the Promissory Note. These costs were accounted for as debt issuance costs and recorded as a reduction to the initial carrying value of the Promissory Note.

The following table summarizes interest expense recognized for the three and six months ended June 30, 2022:


	For the Three and Six Months Ended June 30, 2022
Contractual interest expense	$	—
Amortization of debt discount	81
Amortization of debt issuance costs	27
Total	$	108

The Yorkville Convertible Note as of June 30, 2022 are comprised of the following:


	June 30, 2022
Principal-Installment	$	7,500
Principal- Payment Premium	225
Unamortized debt discount	(294)
Unamortized debt issuance costs	(98)
Aggregate carrying value	$	7,333

2021 Convertible Notes

As previously reported, on July 6, 2021, the Company entered into an investment agreement (the “Investment Agreement”) with Spring Creek Capital, LLC, a wholly-owned, indirect subsidiary of Koch Industries providing for the issuance and sale to Koch Industries of convertible notes in the aggregate principal amount of $100,000 (the “2021 Convertible Notes”). The transactions contemplated by the Investment Agreement closed on July 7, 2021 (the “Issue Date”). The maturity date of the 2021 Convertible Notes is June 30, 2026, subject to earlier conversion, redemption, or repurchase.

The Company estimated the fair value of the embedded conversion feature using a binomial lattice model at the inception and on subsequent valuation dates. This model incorporates inputs such as the stock price of the Company, dividend yield, risk-free interest rate, the effective debt yield and expected volatility. The effective debt yield and volatility involve unobservable inputs classified as Level 3 of the fair value hierarchy. Refer to Note 20 for definition of the fair value hierarchy. The assumptions used to determine the fair value of the embedded conversion feature as of June 30, 2022 and December 31, 2021 are as follows:


	June 30, 2022		December 31, 2021
Term	4.0 years		4.5 years
Dividend yield	—	%	—	%
Risk-free interest rate	3.0	%	1.2	%
Volatility	80.0	%	60.0	%
Effective debt yield	25.5	%	19.0	%

As of June 30, 2022 and December 31, 2021, the fair value of the embedded conversion feature was $707 and $12,359, respectively. The Company recognized a gain of $3,978 and $11,673 attributable to the change in fair value of the embedded conversion feature for the three and six months ended June 30, 2022, respectively.

The following table summarizes interest expense recognized:


	For the Three Months Ended June 30, 2022		For the Six Months Ended June 30, 2022
Contractual interest expense	$	1,544	$	3,087
Amortization of debt discount	924		1,467
Amortization of debt issuance costs	90		177
Total	$	2,558	$	4,731

The 2021 Convertible Notes as of June 30, 2022 and December 31, 2021 was comprised of the following:


	June 30, 2022		December 31, 2021
Principal	$	105,987	$	102,900
Unamortized debt discount	(26,876)		(28,321)
Unamortized debt issuance costs	(2,613)		(2,790)
Embedded conversion feature	707		12,359
Aggregate carrying value	$	77,205	$	84,148

The Company elected to repay the contractual interest due on June 30, 2022 in-kind as an increase to the principal amount. $3,087 of contractual interest attributable to the 2021 Convertible Notes was recorded as addition to the convertible notes payable - related party balance on the condensed consolidated balance sheets.

Long-term DebtLong-term debt consists of the outstanding balances from the previously-reported $25,000 equipment financing facility with Trinity Capital Inc. ("Trinity"). As of June 30, 2022, the Company had drawn $7,000 from the equipment financing facility with an effective interest rate of 14.3%. As of June 30, 2022 and December 31, 2021, total long-term debt was $5,581 and $6,371, with $1,765 and $1,644 of the principal recorded as a current liability on the condensed consolidated balance sheets, respectively. For the three and six months ended June 30, 2022, the Company recognized $205 and $424 as interest expense attributable to the equipment financing agreement, respectively. As of June 30, 2022, the unused commitment from the equipment financing facility was $18,000.