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CONVERTIBLE NOTES
9 Months Ended
Sep. 30, 2021
Debt Disclosure [Abstract]  
CONVERTIBLE NOTES CONVERTIBLE NOTES
In May 2021, the Company issued and sold convertible promissory notes (“Convertible Notes”) with a principal amount of $235.5 million and incurred $6.0 million of debt issuance costs that have been recorded in interest expense in the statements of operations. The Convertible Notes accrue interest at a simple rate of 3.0% per annum during the first 12-month period and will accrue at a simple rate of 9.0% per annum thereafter.
The Convertible Notes are only convertible upon a qualified conversion event or corporate transaction.
The Convertible Notes were converted into shares of the Company’s common stock at the then effective conversion price in the case of a qualified going public transaction: (a) an IPO resulting in at least $50.0 million in proceeds, (b) a SPAC combination, or (c) a direct listing. If the Company closes an equity financing with gross proceeds of not less than $50.0 million, then the Convertible Notes, unless previously converted into shares of our common stock, will automatically convert into shares of the same class and series of capital stock of the Company issued to investors in such equity financing. The conversion price with respect to a qualified conversion event, which would be a qualified going public transaction or an equity financing, will incorporate the applicable discount: (i) a 20.0% discount if the qualified conversion event is consummated on or prior to September 30, 2021, and (ii) a 25.0% discount if the qualified conversion event is consummated after September 30, 2021.
In the event of certain corporate transactions prior to the conversion of the Convertible Notes or the repayment of the Convertible Notes, each purchaser, in its discretion, shall have the right either (a) to convert, effective immediately prior to the closing of the corporate transaction, all, but not less than all, of the outstanding principal amount of a Convertible Note and all accrued and unpaid interest on such May 2021 Note immediately prior to the closing of a corporate transaction into shares of common stock at the then effective conversion price, or (b) be paid an amount equal to the sum of 1.75 times the outstanding principal amount of a Convertible Notes and all accrued and unpaid interest of such Convertible Notes immediately prior to the closing of a corporate transaction
The Convertible Notes include customary events of default. In the event of any default under the Convertible Notes, the interest rate then in effect shall be increased by 3.0%, and then by an additional 3.0% each year thereafter, so long as such event of default continues. Unless earlier converted immediately prior to the qualified conversion event, the Convertible Notes and any unpaid accrued interest will become due in May 2023.
The Company elected to account for the Convertible Notes at estimated fair value pursuant to the fair value option and records the change in estimated fair value in the statement of operations. The Company recorded a loss of $36.3 million and $59.6 million related to the change in estimated fair value of the Convertible Notes in its statement of operations for the three and nine months ended September 30, 2021, respectively.
All of the Convertible Notes were converted upon the IPO, which was a qualified conversion event. The Convertible Notes’ principal of $235.5 million and accrued interest of $2.8 million was converted into 18,611,914 shares of common stock at a fair value of $297.8 million using a 20% discount to the initial public offing price of $16.00 per share. The Company no longer had outstanding Convertible Notes as of September 30, 2021.
DEBTOn February 5, 2021, the Company entered into a Loan and Security Agreement (“Revolving Credit Agreement”) with group of lenders with East West Bank, acting as administrative agent and Collateral Agent for the lenders. In connection
with entering into the Revolving Credit Agreement, the Company repaid outstanding amounts of $5.4 million and terminated the prior Loan and Security Agreement with Comerica Bank (“2015 Credit Agreement”) that was initially entered into in May 2015. The 2015 Credit Agreement, as amended, provided for a revolving line with a credit extension of up to $4.0 million and a Growth Capital A Line with a credit extension of up to $6.0 million. The Revolving Credit Agreement provided a revolving credit facility with an aggregate maximum principal amount of $130.0 million and a letter of credit subfacility of $20.0 million. In May 2021, the Company repaid $63.2 million of debt outstanding under the Revolving Credit Agreement with a portion of the net proceeds from the issuance and sale of Convertible Notes.

In June 2021, the Company terminated the Revolving Credit Agreement and was required to pay a fee of $1.3 million, equal to 1.00% of the amount of the outstanding revolving commitment. The Company also wrote-off issuance costs of $0.7 million for a total loss on extinguishment of debt of $2.0 million. These amounts were recorded in loss on extinguishment of debt in the statement of operations during the nine months ended September 30, 2021. Upon agreement with East West Bank and the other lenders to the Revolving Credit Agreement, the Company kept in place its outstanding letter of credit in the amount of $6.0 million, which has been cash collateralized. The letter of credit was increased to $12.0 million in July 2021. All other obligations under the Revolving Credit Agreement have otherwise been terminated.