Debt

12 Months Ended

Dec. 31, 2021

Debt Disclosure [Abstract]

Debt

Debt

Convertible Senior Notes and Capped Call Transactions

In December 2021, the Company issued $625.0 million aggregate principal amount of 1.25% Convertible Senior Notes due 2026 in a private placement, which included $75.0 million aggregate principal amount of such notes pursuant to the exercise in full of the option granted to the initial purchasers to purchase additional notes (collectively, the “Convertible Senior Notes”). The interest on the Convertible Senior Notes is payable semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2022. The Convertible Notes will mature on December 15, 2026, unless earlier repurchased or redeemed by the Company or converted pursuant to their terms.

The total net proceeds from the debt offering, after deducting fees paid to the initial purchasers paid by the Company was approximately $609.4 million.

Each $1,000 principal amount of the Convertible Senior Notes are initially convertible into 50.0475 shares of the Company’s Class A common stock, par value $0.0001, which is equivalent to an initial conversion price of approximately $19.98 per share. The conversion rate is subject to adjustment upon the occurrence of certain specified events prior to the maturity date but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date or if the Company delivers a notice of redemption in respect of some or all of the Convertible Senior Notes, the Company will, under certain circumstances, increase the conversion rate of the Convertible Senior Notes for a holder who elects to convert its Convertible Senior Notes in connection with such a corporate event or convert its Convertible Senior Notes called for redemption during the related redemption period, as the case may be. The Convertible Senior Notes are redeemable, in whole or in part (subject to certain limitations), at the Company’s option at any time, and from time to time, on or after December 20, 2024, and on or before the 40th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Convertible Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if certain liquidity conditions are satisfied and the last reported sale price per share of the Class A common stock exceeds 130% of the conversion price on (1) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice, and (2) the trading day immediately before the date the Company sends such notice. If the Company undergoes a fundamental change (as defined in the indenture governing the Convertible Senior Notes) prior to the maturity date, holders may require the Company to repurchase for cash all or any portion of their Convertible Senior Notes in principal amounts of $1,000 or a multiple thereof at a fundamental change repurchase price equal to 100% of the principal amount of the Convertible Senior Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

Holders of the Convertible Senior Notes may convert their Convertible Senior Notes at their option at any time prior to the close of business on the business day immediately preceding December 15, 2026, in multiples of $1,000 principal amount, only under the following circumstances: (1) during any calendar quarter (and only during such calendar quarter) commencing

after the calendar quarter ending on March 31, 2022, if the last reported sale price per share of the Class A common stock exceeds 130% of the conversion price for each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (2) during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “measurement period”) in which the trading price per $1,000 principal amount of Convertible Senior Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Class A common stock on such trading day and the conversion rate on such trading day; (3) upon the occurrence of specified corporate events or distributions on the Class A common stock; and (4) if the Notes are called for redemption. On or after June 15, 2026, holders may convert all or any portion of their Convertible Senior Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date, regardless of the foregoing circumstances. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of its Class A common stock or a combination of cash and shares of its Class A common stock, at the Company’s election. As of December 31, 2021, the conditions allowing holders of the Convertible Senior Notes to convert were not met.

It is the Company’s current intent to settle the principal amount of its outstanding Convertible Senior Notes in cash and any excess in shares of the Company’s Class A common stock.

The Convertible Senior Notes are senior unsecured obligations and will rank equal in right of payment with the Company’s future senior unsecured indebtedness; senior in right of payment to the Company’s future indebtedness that is expressly subordinated to the Convertible Senior Notes; effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity, if any, of the Company’s subsidiaries.

The Company has classified the Convertible Senior Notes as a non-current liability under the guidance in ASC 470-20, as amended by ASU 2020-06. Debt discount and issuance costs, comprising of fees paid to the initial purchasers, advisors, and lawyers in connection with issuance of the Convertible Senior Notes aggregating approximately $16.2 million were initially recorded as a reduction to the principal amount of the debt and will be amortized to interest expense on a straight line over the contractual terms of the Convertible Senior Notes. The Company estimates that the difference between amortizing the debt discounts and the issuance costs using the straight line method as compared to using effective interest rate method is immaterial.

The net carrying amount of the Convertible Senior Notes was as follows (in thousands):

	As of December 31, 2021
Principal	$	625,000
Unamortized debt discount and issuance costs	(16,043)
Net carrying amount	$	608,957

The following table sets forth the interest expense recognized related to the Convertible Senior Notes (in thousands):

	As of December 31, 2021
Contractual interest expense	$	316
Amortization of debt discount and issuance costs	135
Total interest expense	$	451

The remaining term over which the debt discount and issuance costs will be amortized is five years. Interest expense of $0.5 million is reflected as a component of interest (expense) income, net in the accompanying consolidated statement of operations for the year ended December 31, 2021.

In connection with the offering of the Convertible Senior Notes, the Company entered into privately negotiated capped call option transactions with certain counterparties (the “Capped Calls”). The Capped Calls each have an initial strike price of approximately $19.98 per share, subject to certain adjustments, which corresponds to the initial conversion price of the Convertible Senior Notes. The Capped Calls have initial cap prices of $30.16 per share, subject to certain adjustment events. The Capped Calls are generally intended to reduce the potential dilution to the Class A common stock upon any conversion of the Convertible Senior Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted Convertible Senior Notes, as the case may be, with such reduction and/or offset subject to a cap based on the cap price. The Capped Calls expire on April 6, 2027, subject to earlier exercise. The Capped Calls are subject to either

adjustment or termination upon the occurrence of specified extraordinary events affecting the Company, including a merger event, a tender offer, and a nationalization, insolvency or delisting involving the Company. In addition, the Capped Calls are subject to certain specified additional disruption events that may give rise to a termination of the Capped Calls, including changes in law, failure to deliver, and hedging disruptions. The Capped Calls are recorded in stockholders’ equity and are not accounted for as derivatives. The net cost of $73.4 million incurred to purchase the Capped Calls was recorded as a reduction to additional paid-in capital in the accompanying consolidated balance sheet.

Senior Secured Loan

Legacy Luminar had in August 2017 issued certain Senior Secured Promissory Notes (“Senior Secured Notes”). These Senior Secured Notes were subsequently amended, refinanced and partially repaid at various times through 2020. In connection with the issuance of Senior Secured Notes, Legacy Luminar had issued 2017, 2018 and 2020 Warrants (see Note 9 for details). The Senior Secured Notes were repaid in full in December 2020 as required per the terms of the Merger Agreement. The Company had recorded loss on extinguishment of debt in connection with the Senior Secured Notes in the amount of approximately $4.0 million and $0.0 million and interest expense in the amount of $2.5 million and $1.5 million in 2020 and 2019, respectively.

Equipment Loan

Legacy Luminar had in July 2017 entered into an Equipment and Loan Agreement (“Equipment Loan”) which had been paid off in full in 2020 upon maturity.

Paycheck Protection Program Loan

On April 22, 2020 (the “Origination Date”), Legacy Luminar received $7.8 million in aggregate loan proceeds (the “PPP Loan”) from Silicon Valley Bank (the “Lender”) pursuant to the Paycheck Protection Program established under the CARES (the Coronavirus Aid, Relief, and Economic Security) Act of 2020. Legacy Luminar repaid the PPP loan in full in August 2020.

Bridge Note

Legacy Luminar had in August 2015 entered into a Convertible Promissory Note (the “Bridge Note”) with an investor. The terms of the Bridge Note were amended in February 2019, and the said Bridge Note was settled in full in June 2019 by conversion of the Bridge Notes in preferred stock of Legacy Luminar. Legacy Luminar had recorded loss on extinguishment of debt in connection with the Bridge Notes in the amount of approximately $6.0 million in the year ended December 31, 2019.