Notes Payable

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

Notes Payable

Notes Payable

The Company has entered into notes payable agreements with third parties, which consists of the following as of March 31, 2023 and December 31, 2022 (dollars in thousands):

	March 31, 2023
Note Name	Contractual Maturity Date	Contractual Interest Rates	Unpaid Principal Balance		Fair Value Measurement Adjustments		Original issue discount and proceeds allocated to warrants		Net Carrying Value		Interest Expense for the Three Months Ended March 31, 2023		Accrued Interest
Bridge Notes (1)	Various	11%-15%	$	165,034	$	(37,937)	$	(34,432)	$	92,665	$	4,360	$	2,482
Notes payable – China other	Due on Demand	—%	5,065		—		—		5,065		—		—
Auto loans	October 2026	7%	94		—		—		94		2		—
			$	170,193	$	(37,937)	$	(34,432)	$	97,824	$	4,362	$	2,482

	December 31, 2022
Note Name	Contractual Maturity Date	Contractual Interest Rates	Unpaid Principal Balance		Fair Value Measurement Adjustments		Original issue discount and proceeds allocated to warrants		Net Carrying Value		Interest Expense for the three months Ended March 31, 2022		Accrued Interest
Bridge Notes (1)	October 27, 2028	10%	$	36,622	$	264	$	(10,878)	$	26,008	$	1,272	$	1,676
Notes payable – China other	Due on Demand	—%	4,997		—		—		4,997		—		—
Auto loans	October 2026	7%	100		—		—		100		—		—
			$	41,719	$	264	$	(10,878)	$	31,105	$	1,272	$	1,676

(1) On August 14, 2022, the Company entered into a Securities Purchase Agreement (the “SPA”) with certain entities affiliated with ATW Partners LLC and RAAJJ Trading LLC (and together with Senyun, as defined below, the “Purchasers”) to issue and sell the Company’s senior secured convertible notes (the “Bridge Notes”) in three tranches aggregating to $52.0 million in principal (as increased on September 23, 2022 to $57.0 million, which increase was subsequently terminated upon the Initial Senyun Funding Date, as defined below) and maturing on August 14, 2026 (subsequently extended to October 27, 2028). The Bridge Notes are subject to an original issue discount of 10%, and are convertible, along with any interest accrued, into shares of Class A Common Stock at a conversion price equal to $2.69 (or $2.2865 for the initial tranche) (“Conversion Price”), subject to a full ratchet anti-dilution protection.

The Bridge Notes bear interest of 10% per annum payable quarterly and on each conversion and on the maturity date in cash or in shares of Class A Common Stock. Unless earlier paid, the Bridge Notes entitle the Purchasers, at each conversion date, to an interest make-whole (“Make-Whole Amount”), in a combination of cash or Class A Common Stock at the Company’s discretion, in the amount of the interest that would have been payable if such converted amount was held to maturity based on an interest rate of 15% per annum. The conversion price of interest is the lesser of (a) the Conversion Price or (b) 90% of the lowest VWAP for the five consecutive trading days (“Interest Conversion Price”). When calculating the shares issuable upon conversion, the Make-Whole Amount shall be decreased by 50% of the original issue discount pertaining to such amount.

The Bridge Notes are secured by the grant of a second lien upon substantially all of the personal and real property of the Company and its subsidiaries, as well as guarantee by substantially all of the Company’s domestic subsidiaries.

Total commitments under the SPA shall not exceed $300.0 million, however each Purchaser has the option within 12 months from November 12, 2022 (the “Form S-1 Effective Date”) to purchase additional senior secured convertible notes under similar terms for a total potential commitments of up to $300.0 million (“Tranche B Notes”).

The Company elected the fair value option afforded by ASC 825, Financial Instruments, with respect to the Bridge Notes because the notes include features, such as a contingently exercisable put option, which meets the definition of an embedded derivative. The Company expenses original issue discount and transaction costs to Changes in fair value measurements in the unaudited Condensed Consolidated Statement of Operations and Comprehensive Loss.

On September 23, 2022, the SPA was amended (the “SPA Amendment”), pursuant to which the Purchasers agreed to accelerate their funding obligations, with $7.5 million aggregate principal amount (the “Third Bridge Notes”) being funded and issued on the same day, and the remaining $7.5 million aggregate principal amount (the “Fourth Bridge Notes”) being funded and issued on October 10, 2022. The Third Bridge Notes and Fourth Bridge Notes are convertible into shares of Class A Common Stock at a conversion price of $1.05 per share, mature on October 27, 2028, and are otherwise subject to the same terms and conditions in the SPA as applicable to the Bridge Notes described therein.

Additionally, the SPA Amendment modified the conversion price of $25.0 million of principal of the Bridge Notes, which were funded on August 14, 2022, to $1.05 per share. The Company evaluated the SPA Amendment in accordance with ASC 470-50, Debt, and determined that it constitutes an extinguishment because the change in the conversion price is substantial. Accordingly, the Company recognized a loss in Loss on extinguishment or settlement of related party notes payable, notes payable and vendor payables in trust, net in the Consolidated Statements of Operations and Comprehensive, calculated as the cumulative change in fair value from initial recognition through to the date of amendment.

Third and Fourth Amendments to the SPA

On October 24, 2022, the Company entered into a Limited Consent and Third Amendment to the SPA (the “Third Amendment”), pursuant to which the maturity date for the Bridge Notes was extended from August 14, 2026 to October 27, 2028. In addition, pursuant to the Third Amendment, each Purchaser and the Agent waived certain defaults and events of default under the SPA, any notes issued pursuant to the SPA and other related documents. The amendment was accounted for as a troubled debt restructuring under ASC 470-60, Debt – Troubled Debt Restructurings by Debtors, because the Company was experiencing financial difficulty and the extension of the maturity date following the restructuring results in a reduced effective borrowing rate for the Company. The amendment was accounted for prospectively with no gain or loss recorded in the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2022.

On November 8, 2022, the Company entered into a Limited Consent and Amendment to the SPA (the “Fourth Amendment”), pursuant to which the parties agreed that (i) in no event will the effective conversion price of any interest or

interest make-whole amount payable in shares of Class A Common Stock in respect of Bridge Notes issued or issuable under the SPA be lower than $0.21 per share of Class A Common Stock, and (ii) in order for the Company to make payment of any interest or interest make-whole amount in shares of Class A Common Stock, certain price and volume requirements must be met, namely that (x) the VWAP of the Class A Common Stock is not less than $0.21 per share on any trading day during the preceding seven trading day period, and (y) the total volume of the Class A Common Stock does not drop below $1.5 million on any trading day during the same period (in each case, as adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions). The amendment was accounted for as a troubled debt restructuring under ASC 470-60, Debt – Troubled Debt Restructurings by Debtors, because the Company was experiencing financial difficulty and the addition of a floor price on the conversion of the convertible notes is assessed as a concession to the Company. The amendment was accounted for prospectively with no gain or loss recorded in the Consolidated Statements of Operations and Comprehensive Income (Loss).

Senyun Amendment

On December 28, 2022, the Company entered into a Letter Agreement and Amendment to the SPA (the “Senyun Amendment”) with Senyun International Ltd. (“Senyun”) pursuant to which the conversion rate of notes totaling $19.0 million was lowered from $1.05 to $0.89 and future funding timeframes were renegotiated. As the terms of this modification were determined to not be substantially different, the new debt is accounted for as a continuation of the original debt at fair value using the now lower conversion rate. As a result of the new conversion rate the Company was obligated for the year then ended to issue additional shares to Senyun based on the lower conversion rate. The Company accounted for this obligation by crediting Other current liabilities and debiting Additional paid-in capital for an amount of $0.9 million in the Consolidated Balance Sheet as of December 31, 2022.

Sixth Amendment to the SPA

On February 3, 2023, the Company entered into Amendment No. 6 to SPA (“Amendment No. 6”) in which the Company agreed to sell up to $135.0 million in aggregate principal amount of the Company’s senior secured convertible notes (the “Tranche C Notes”) with terms largely congruent to prior issuances and $1.05 base conversion price subject to full ratchet anti-dilution price protection. Each Purchaser has the option to purchase additional convertible senior secured notes and warrants on the same terms as the Tranche C Notes in an amount not to exceed 50% of the initial principal amount of the Tranche C Notes issued to such Purchaser pursuant to the terms of the SPA (the “Tranche D Notes”).

Pursuant to Amendment No. 6, certain outstanding Tranche A Notes issued by the Company to Purchasers with an aggregate outstanding principal amount of $31.0 million were replaced by the same principal amount of new notes (each, a “Replacement Note”) with a $0.89 base conversion price. In accordance with ASC 470-50, Debt, the change in conversion price qualifies as an extinguishment because the change in the conversion price was substantial. Accordingly, the Company recognized a Loss on settlement of notes payable in the unaudited Condensed Consolidated Statements of Operations and Comprehensive (Income) Loss for the three months ended March 31, 2023 in the amount of $3.0 million, calculated as the difference between the reacquisition price and net carrying amount of the notes.

Pursuant to Amendment No. 6 the Company entered into an agreement with certain Purchasers (“an Exchange Agreement”) holding a total of 198,129,990 NPA Warrants and SPA Warrants to exchange them for an aggregate 90,489,346 NPA Warrants and SPA Warrants and principal convertible notes totaling $41.0 million. The issued warrants have terms that limit down-round ratchet clauses to price adjustments only. The issued senior secured convertible notes (the “Exchange Notes”) have terms congruent to existing SPA notes but carry a $0.89 base conversion price and no original issuance discount. Pursuant to the Exchange Agreement, equity-classified warrants were exchanged for warrants which satisfy liability classification per ASC 480, Distinguishing Liabilities from Equity, and were reclassified from equity to Bridge Warrants in the unaudited Condensed Consolidated Balance Sheet in a total amount of $6.8 million. As a result of the transaction the Company recognized no loss or gain in the Consolidated Statements of Operations and Comprehensive Income (Loss).

Seventh Amendment to the SPA

On March 23, 2023, the Company entered into an Amendment No. 7 to the SPA (the “Seventh Amendment”) with Senyun and entities affiliated with ATW Partners LLC, pursuant to which the parties agreed to accelerate the funding timeline of Tranche C Notes in the amount of $40.0 million, and an entity affiliated with ATW Partners LLC agreed to purchase additional Tranche B Notes in the amount of $5.0 million, in each case, subject to meeting certain conditions, in exchange for an agreement to increase original issuance costs associated with such funding. As part of the agreement,

original issuance discount related to $25.0 million in principal amount of Tranche C Notes and Tranche B notes was agreed to be 14% and 16%, respectively.

During the three months ended March 31, 2023, the Company received gross proceeds of $105.0 million and $34.0 ($92.6 million and $29.3 million net of original issuance costs) in exchange for the issuance of Tranche C Notes and Tranche B Notes, respectively. The Company also received gross proceeds of $10.0 million ($8.8 million net of original issuance costs) in exchange for the issuance of Tranche A Notes.

During the three months ended March 31, 2023, the Company issued to the Purchasers a total of 48,714,277 warrants (“Bridge Warrants" or “SPA Warrants”). Upon their issuance, the Bridge Warrants had an exercise price of $0.89 to $1.05 per share, subject to anti-dilution ratchet price protection, exercisable for seven years from the date of issuance (see Note 12, Stockholders' Equity). The Company may repurchase the Bridge Warrants for $0.01 per share if and to the extent the VWAP of the Company’s Class A Common Stock during 20 out of 30 trading days prior to the repurchase is greater than $15.0 per share, subject to certain additional conditions. During the three months ended March 31, 2023, the Purchasers exercised 35,314,752 Bridge Warrants. As of March 31, 2023, there were 93,571,419 Bridge Warrants outstanding.

On March 31, 2023 the Company determined that the fair value of the Bridge Notes and Bridge Warrants was $92.7 million and $28.5 million, respectively, resulting in a gain in Change in fair value measurements in the unaudited Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) for the three months ended March 31, 2023 in the amount of $79.5 million and $18.2 million respectively.

During the three months ended March 31, 2023, total Bridge Notes principal of $61.6 million with a fair value of $42.7 million and accrued interest of $3.6 million was converted to Additional paid-in capital. Total settlement of notes payable transaction costs for the three months ended March 31, 2023 totaled $1.1 million.

Fair Value of Notes Payable Not Carried at Fair Value

The estimated fair value of the Company’s notes payable not carried at fair value, using inputs from Level 3 under the fair value hierarchy, was $4.9 million as of March 31, 2023 and December 31, 2022.

Schedule of Principal Maturities of Notes Payable

The future scheduled principal maturities of notes payable as of March 31, 2023 are as follows (dollars in thousands):

Due on demand	$	5,065
2023	—
2024	—
2025	41,000
2026	94
2027	—
Thereafter	124,034
	$	170,193