Notes Payable

3 Months Ended

Mar. 31, 2024

Debt Disclosure [Abstract]

Notes Payable

The Company has entered into notes payable agreements with third parties, which consist of the following as of March 31, 2024 and December 31, 2023:

	March 31, 2024
(in thousands)	Contractual Maturity Date	Contractual Interest Rates	Unpaid Principal Balance		Fair Value Measurement Adjustments		Original Issue Discount and Proceeds Allocated to Warrants		Net Carrying Value
Secured SPA Notes	Various	10%-15%	$	83,387	$	(33,603)	$	(7,896)	$	41,888
Unsecured SPA Notes*	Various dates in 2029	10%-15%	13,219		(1,626)		(2,543)		9,050
Unsecured Convertible Notes	Various dates in 2024	4.27%	9,080		414		—		9,494
Notes payable – China other	Due on Demand	—%	4,897		—		—		4,897
Auto loans	October 2026	7%	72		—		—		72
			$	110,655	$	(34,815)	$	(10,439)	65,401
Less: Related party notes payable									$	(1,632)
Less: Notes payable, current portion									(63,769)
Total: Notes payable, less current portion									$	—

	December 31, 2023
(in thousands)	Contractual Maturity Date	Contractual Interest Rates	Unpaid Principal Balance		Fair Value Measurement Adjustments		Original Issue Discount and Proceeds Allocated to Warrants		Net Carrying Value
Secured SPA Notes	Various	10%-15%	$	100,052	$	(15,501)	$	(10,319)	$	74,232
Unsecured SPA Notes*	Various dates in 2029	10%-15%	13,885		1,208		(2,613)		12,480
Notes payable – China other	Due on Demand	—%	4,898						4,898
Auto loans	October 2026	7%	82						82
			$	118,917	$	(14,293)	$	(12,932)	91,692
Less: Related party notes payable									$	(542)
Less: Notes payable, current portion									$	(91,150)
Total: Notes payable, less current portion									$	—

* includes amounts attributed to the Unsecured Streeterville SPA

Secured and Unsecured SPA Notes

On August 14, 2022, the Company entered into a securities purchase agreement (as amended from time to time, the “Secured SPA”) with FF Simplicity Ventures LLC (“FFSV”) as administrative agent, collateral agent and purchaser, and certain additional purchasers (collectively the “Secured SPA Purchasers”) to issue and sell the Company’s senior secured convertible notes (the “Secured SPA Notes”). The Secured SPA Notes were subsequently amended multiple times throughout 2022 and 2023, as further described below.

On May 8, 2023, as further described below, the Company entered into a securities purchase agreement (as amended from time to time, the “Unsecured SPA”) with Metaverse Horizon Limited (“MHL”) and V W Investment Holding Limited (“VW Investment”) (MHL and V W Investment, together with the other purchasers, the “Unsecured SPA Purchasers”) to issue and sell $100.0 million aggregate principal of the Company’s senior unsecured convertible notes (the “Unsecured SPA Notes” and, together with the Secured SPA Notes, the “SPA Notes”). In August 2023, as further described below, the Company entered into the Unsecured Streeterville SPA (collectively included with the Unsecured SPA, Unsecured SPA Notes and SPA Warrants in future references), as part of its issuance of the Unsecured SPA Notes. The terms of the Secured SPA Notes and Unsecured SPA Notes are generally the same, however, the Secured SPA 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.

The SPA Notes are generally subject to an original issue discount of 10%, and are convertible, along with any interest accrued, into shares of Class A Common Stock at the Conversion Price (as defined in each SPA Note), subject to full ratchet anti-dilution price protection. The principal balance of the SPA Notes is convertible at $0.73 per share as of each of March 31, 2024 and December 31, 2023, which represents an amended and reduced conversion price due to the full ratchet price protections, as described below.

The SPA Notes bear interest at 10% per annum (or 15% if interest or settlement is paid in shares). Generally the SPA Notes require interest to be paid on each conversion date and quarterly in cash or in shares of Class A Common Stock. Certain Unsecured and Secured SPA Notes require the payment of interest in cash or shares of Class A Common Stock at maturity. Unless earlier paid, the SPA 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. The conversion price for the Make-Whole Amount is the generally the greater of (a) the floor price, which is $10.90 as of March 31, 2024 and December 31, 2023 or (b) 90% of the lowest volume-weighted average price (“VWAP”) for the five consecutive trading days. Certain Secured SPA Notes require the Interest Conversion Price to be the lesser of (1) the Conversion Price or (2) the greater of (a) the floor price, which is $10.90 as of December 31, 2023 or (b) 90% of the lowest volume-weighted average price (“VWAP”) for the five consecutive trading days. 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.

Generally, the Secured and Unsecured SPA Purchasers have the option to purchase additional SPA Notes under similar terms as the existing SPA Notes, subject to various closing conditions (see Note 2, Liquidity and Capital Resources and Going Concern, for detailed discussion on commitments to fund additional Secured SPA Notes).

In connection with the issuance of the SPA Notes, the Company also granted to each Secured SPA Purchaser and Unsecured SPA Purchaser a warrant (the “SPA Warrants”) to purchase shares of Class A Common Stock equal to 33% of the shares issuable upon conversion of the aggregate principal amount under the SPA Notes funded.

The Company elected the fair value option afforded by ASC 825, Financial Instruments, with respect to the SPA Notes because the notes include features, such as a contingently exercisable put option, that meet the definition of an embedded derivative. The Company expenses transaction costs to Changes in fair value of notes payable and warrant liabilities or Changes in fair value of related party notes payable and warrant liabilities, as applicable, in the Unaudited Condensed Consolidated Statement of Operations and Comprehensive Loss.

Sixth Secured SPA Amendment

On February 3, 2023, the Company entered into a sixth amendment to the Secured SPA (the “Sixth Secured SPA Amendment”) with certain Secured SPA Purchasers, in which the Company agreed to sell up to $135.0 million in aggregate principal (the “Tranche C Notes”) with terms largely congruent to prior issuances and a $252.00 base conversion price subject to full ratchet anti-dilution price protection. Each applicable Secured SPA Purchaser has the option to purchase additional Secured SPA Notes 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 each applicable Secured SPA Purchaser (the “Tranche D Notes”).

Pursuant to the Sixth Secured SPA Amendment, certain outstanding Secured SPA Notes issued by the Company to Secured SPA Purchasers with an aggregate outstanding principal amount of $31.0 million were replaced by the same principal amount of new notes with a $214.20 base conversion price. In accordance with ASC 470-50, Debt— Modifications and Extinguishments, the change in conversion price qualifies as an extinguishment because the change in the fair value of the conversion feature was substantial. Accordingly, the Company recognized a Loss on settlement of notes payable in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss in the amount of $3.0 million for the three months ended March 31, 2023, calculated as the difference between the reacquisition price of the debt and the net carrying amount of the Secured SPA Notes.

Pursuant to the Sixth Secured SPA Amendment, the Company entered into an agreement with certain Secured SPA Purchasers (the “Exchange Agreement”) holding a total of 825,542 warrants to exchange them for an aggregate 377,039 warrants and convertible notes (the “Exchange Notes”) with a principal balance totaling $41.0 million. The issued warrants have terms that limit down-round ratchet clauses to price adjustments only. The Exchange Notes mature on February 3, 2025, bear interest at 11% per annum, have no original issuance discount, do not have a fixed price conversion, and convert using a VWAP calculation as described in the Exchange Agreement. The remainder of the terms of the Exchange Notes are largely congruent to the existing Secured SPA Notes, including most-favored nation rights. In connection with the Exchange Agreement, equity-classified warrants were exchanged for warrants that qualify for liability classification per ASC 480, Distinguishing Liabilities from Equity, and were reclassified from equity to Warrant liabilities during the period ended March 31, 2023 in an amount totaling $6.8 million (the “Warrant Exchange”). As a result of the transaction, the Company did not recognize a gain or loss in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss, as the fair value of the instruments exchanged and received were approximately the same.

Seventh Secured SPA Amendment

On March 23, 2023, the Company entered into a seventh amendment to the Secured SPA (the “Seventh Secured SPA Amendment”) with FFSV, as administrative agent, collateral agent and purchaser, Senyun International Ltd. (“Senyun”), and FF Prosperity Ventures LLC (“FF Prosperity”), pursuant to which the parties agreed to accelerate the funding timeline of Tranche C Notes in the amount of $40.0 million, and FFSV 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 the original issuance discount associated with such funding. As part of the Seventh Secured SPA Amendment, the Company agreed that the original issuance discount related to $25.0 million in principal amount of Tranche C Notes and Tranche B Notes would be 14% and 16%, respectively.

Unsecured SPA

On May 8, 2023, the Company entered into the Unsecured SPA. The Unsecured SPA 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 an original conversion price equal to $214.20, subject to anti-dilution protection. Interest on Unsecured SPA Notes is payable at conversion or at maturity. When calculating the shares issuable upon conversion, the converted amount shall be decreased by 50% of the original issue discount pertaining to such amount.

Unless earlier paid, the Unsecured SPA Notes entitle the Unsecured SPA Purchasers, at each conversion date, to a 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 greater of (a) the floor price, $24.00 at inception (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions occurring after the date hereof) and (b) 90% of the lowest VWAP for the five consecutive trading days ending immediately prior to the conversion date.

The Company elected the fair value option afforded by ASC 825, Financial Instruments, with respect to the Unsecured SPA Notes because the notes include features, such as a contingently exercisable put option, that meet the definition of an embedded derivative. The Company expenses the transaction costs to Changes in fair value of notes payable and warrant liabilities in the Unaudited Condensed Consolidated Statement of Operations and Comprehensive Loss.

As part of the Unsecured SPA the Unsecured SPA Purchasers also received warrants consistent with the rights, terms and privileges of the warrants afforded to the holders of the Secured SPA Notes.

Unsecured Securities Purchase Agreement – Streeterville

On August 4, 2023, the Company entered into a securities purchase agreement with Streeterville (the “Unsecured Streeterville SPA”), for $16.5 million aggregate principal amount of the Company’s senior unsecured promissory notes (the “Streeterville Note”) and a common stock purchase warrant (the “Streeterville Warrant”) to purchase up to 25,421 shares of Common Stock with an exercise price equal to $214.20 per share, subject to full ratchet anti-dilution protection and other adjustments, and are exercisable for seven years on a cash or cashless basis.

The Streeterville Note is subject to an original issue discount of $1.5 million. In addition, the Company paid Streeterville $0.2 million to cover Streeterville’s legal fees and other transaction costs incurred in connection with the purchase and sale of the Streeterville Note. The Streeterville Note is convertible into shares of Class A Common Stock, at an original conversion price equal to $214.20, plus an interest make-whole amount as described above for the Unsecured SPA, subject to certain adjustments including full ratchet anti-dilution price protection.

The Streeterville Note matures on August 4, 2029 and is subject to the same repayment conversion, and most-favored nation terms and conditions as described above for the Unsecured SPA.

Streeterville has the option, from time to time for 12 months after the date of the Unsecured Streeterville SPA, to purchase up to $7.5 million in aggregate (or $15.0 million in aggregate with the Company’s consent) in additional convertible senior unsecured notes and warrants on the same terms as the Streeterville Note and Streeterville Warrant. Additionally, from the date of the Unsecured Streeterville SPA until the five-year anniversary of the date of the Unsecured Streeterville SPA, upon any issuance by the Company or any of its subsidiaries of Class A Common Stock or Class A Common Stock equivalents for cash consideration, indebtedness or a combination of units thereof (subject to certain exceptions set forth in the Unsecured Streeterville SPA) (each, a “Subsequent Financing”), if Streeterville owns at least $7.5 million principal amount of Streeterville Notes (when aggregated with any affiliates of Streeterville) shall have the right to participate in the Subsequent Financing, up to an amount such that Streeterville’s ownership of the Company remains the same immediately following such Subsequent Financing as its ownership immediately prior to such Subsequent Financing, pursuant to the procedures outlined in the Unsecured Streeterville SPA.

Pursuant to the Streeterville Note, the Company obtained stockholder approval, as required by the Nasdaq listing rules, with respect to the issuance of any shares of Class A Common Stock in excess of 19.99% of the issued and outstanding shares of Class A Common Stock (the “Issuance Cap”), the Conversion Shares (as defined in the Streeterville Note), the Warrant Shares (as defined in the Unsecured Streeterville SPA), and subject to any applicable Nasdaq rules, any shares Common Stock issuable pursuant to the note and warrant issuable in connection with the reinvestment right set forth in the Unsecured Streeterville SPA in excess of the Issuance Cap. Such stockholder approval was obtained at a special meeting of the Company’s stockholders held on February 5, 2024.

Anti-dilution adjustments

During the twelve-month period ended December 31, 2023 the Company entered into multiple dilutive stock sale and purchase transactions, as discussed in Note 2, Liquidity and Capital Resources and Going Concern above that triggered the full ratchet anti-dilution price protections embedded in the SPA Notes and SPA Warrants. As a result, the fixed-price conversion price of the SPA Notes and exercise price of the SPA Warrants outstanding prior to such financings was reduced to a price equal to the price per share paid in the dilutive financings. As of March 31, 2024 and December 31, 2023 the SPA Note conversion and SPA Warrant exercise price equals $0.73 for SPA Notes that were issued prior to December 31, 2023. Generally, the Make-Whole Amount is calculated using the floor price, which is $10.90 as of March 31, 2024 and December 31, 2023.

End of Period Secured and Unsecured SPA Information

During the three months ended March 31, 2024 the Company received cash proceeds, net of original issue discounts, of $1.5 million pursuant to the commitments included in the SPA Notes. The Company received cash proceeds, net of original issue discounts, of $231.1 million in exchange for the issuance of the SPA Notes during the twelve months ended December 31, 2023. The Company incurred approximately $0.0 million and $1.1 million in transaction costs during the three months ended March 31, 2024 and 2023 respectively.

During the three months ended March 31, 2024 and the twelve months ended December 31, 2023, the Company issued to the Secured SPA Purchasers and Unsecured SPA Purchasers SPA Warrants pursuant to both the Secured SPA and Unsecured SPA arrangements and in connection with the Warrant Exchange. As of March 31, 2024, there were 558,689 SPA Warrants outstanding and as of December 31, 2023, there were 556,205 SPA Warrants outstanding. The SPA Warrants are subject to anti-dilution ratchet price protection and are exercisable for seven years from the date of issuance (see Note 10, Stockholders' Equity ). The Company may repurchase certain warrants for $0.01 per share if and to the extent the VWAP of the Class A Common Stock during 20 out of 30 trading days prior to the repurchase is greater than $3,600.00 per share, subject to certain additional conditions. There were no SPA Warrant exercises during the three months ended March 31, 2024. During the twelve months ended December 31, 2023, the Secured SPA Purchasers exercised warrants to purchase 251,649 shares of Class A Common Stock issued pursuant to the SPA Notes, via both cash and cashless exercise.

On March 31, 2024 and 2023 the Company determined that the fair value of the SPA Notes was $50.9 million and $92.7 million and the fair value of the SPA Warrants was $0.1 million and $28.5 million, respectively. The Company recorded a gain in Change in fair value of notes payable and warrant liabilities in the Unaudited Condensed Consolidated Statement of Operations and Comprehensive Loss for the three months ended March 31, 2024 and 2023 in the amounts of $28.3 million and $97.7 million for the SPA Notes and SPA Warrants.

During the three months ended March 31, 2024, total SPA Notes principal of $19.0 million with a fair value of $9.1 million was converted to Class A Common Stock. During the three months ended March 31, 2023, total SPA Notes principal of $61.6 million with a fair value of $42.7 million was converted to Class A Common Stock. In connection with the conversions of the SPA Notes the Company recognized a Loss on settlement of notes payable for the three months ended March 31, 2024 and 2023 in the amount of $11.6 million and $95.1 million, respectively.

Unsecured Convertible Notes

During January through March 2024, the Company issued unsecured convertible notes to Senyun and MHL, in an aggregate principal amount of $9.1 million. The notes are due three months from the date of issuance, accrue interest at a rate of 4.27% per annum, and are convertible into either Class A Common Stock or into an SPA Note at the option of the holder. If conversion into Class A Common Stock is elected, the conversion price is the latest closing price of the Company’s Class A Common Stock on the conversion date. The debt is due on demand upon the occurrence of an event of default as defined in the notes.

The Company elected the fair value option afforded by ASC 825, Financial Instruments, with respect to these notes because the Company believes the notes will be exchanged into an SPA Note pursuant to the conversion right included within the notes. The SPA Notes include features, such as a contingently exercisable put option, which meet the definition of an embedded derivative. The Company recorded a loss in Change in fair value of notes payable and warrant liabilities in the Unaudited Condensed Consolidated Statement of Operations and Comprehensive Loss for the three months ended March 31, 2024 in the amount of $0.4 million for the convertible notes.

Subsequent to the balance sheet date and prior to the issuance of these financial statements, this debt went into default due to non-payment by the maturity date.

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, approximated their carrying value as of March 31, 2024 and December 31, 2023, respectively.

Schedule of Principal Maturities of Notes Payable

The future scheduled principal maturities of notes payable as of March 31, 2024 are as follows:

(in thousands)
Due on demand	$	4,897
2024	7,580
2025	34,128
2026	72
2027	—
2028	—
2029	60,858
Thereafter	1,620
	$	109,155