DEBT OBLIGATIONS | DEBT OBLIGATIONS The Company’s current and non-current portions of long-term debt were as follows: September 30, 2021 December 31, 2020 (in thousands) Long-term debt Convertible Notes due 2026 $ 690,000 $ — Paycheck Protection Loan — 3,364 Less: Unamortized debt issuance costs (15,950) — Net carrying amount 674,050 3,364 Less: Current installments of long-term debt — (2,403) Long-term debt, net of current portion $ 674,050 $ 961 Long-term debt to related party Offtake Advances $ 32,575 $ 71,843 Less: Unamortized debt discount (1,638) (5,393) Net carrying amount 30,937 66,450 Less: Current installments of long-term debt to related party (30,937) (22,070) Long-term debt to related party, net of current portion $ — $ 44,380 Convertible Notes On March 26, 2021, the Company issued $690.0 million aggregate principal amount of 0.25% unsecured green convertible senior notes that mature, unless earlier converted, redeemed or repurchased, on April 1, 2026 (the “Convertible Notes”), at a price of par. Interest on the Convertible Notes is payable on April 1 st and October 1 st of each year, beginning on October 1, 2021. The Company received net proceeds of $672.3 million from the issuance of the Convertible Notes. The Convertible Notes are convertible into shares of the Company’s Common Stock at an initial conversion price of $44.28 per share, or 22.5861 shares, per $1,000 principal amount of notes, subject to adjustment upon the occurrence of certain corporate events. However, in no event will the conversion exceed 28.5714 shares of Common Stock per $1,000 principal amount of notes. As of September 30, 2021, based on the initial conversion price, the maximum number of shares that could be issued to satisfy the conversion feature of the Convertible Notes was 19,714,266. The Convertible Notes’ if-converted value did not exceed its principal amount as of September 30, 2021. Prior to January 1, 2026, at their election, holders of the Convertible Notes may convert their outstanding notes under the following circumstances: (i) during any calendar quarter commencing with the third quarter of 2021 if the last reported sale price of the Company’s Common Stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (ii) during the five five The Convertible Notes may, at the Company’s election, be settled in cash, shares of Common Stock of the Company, or a combination thereof. The Company has the option to redeem the Convertible Notes, in whole or in part, beginning on April 5, 2024. If we undergo a fundamental change (as defined in the indenture governing the Convertible Notes), holders may require us to repurchase for cash all or any portion of their outstanding notes at a price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. In addition, following certain corporate events that occur prior to the maturity date of the Convertible Notes or if we deliver a notice of redemption, we will, in certain circumstances, increase the conversion rate for holders who elect to convert their outstanding notes in connection with such corporate event or notice of redemption, as the case may be. Paycheck Protection Loan In April 2020, the Company obtained a loan of $3.4 million pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted in March 2020 (the “Paycheck Protection Loan” or the “Loan”). The Paycheck Protection Loan, which was in the form of a note dated April 15, 2020, issued by CIBC Bank USA, was to mature on April 14, 2022, and bore interest at a rate of 1% per annum. Under the terms of the PPP, loans may be forgiven if the funds are used for qualifying expenses as described in the CARES Act, which include payroll costs, costs used to continue group health care benefits, rent and utilities. In June 2021, the Company received notification from the Small Business Administration that the Paycheck Protection Loan and related accrued interest was forgiven. Consequently, during the nine months ended September 30, 2021, the Company recorded a gain on forgiveness of the Loan in the amount of $3.4 million, which is included in “Other income, net” within our unaudited Condensed Consolidated Statements of Operations. Offtake Advances In connection with the June 2020 Modification, which is discussed in Note 3, “Relationship and Agreements with Shenghe,” Shenghe agreed to fund an additional $35.5 million advance to the Company (previously defined as the “Second Additional Advance”) and the Company issued the Shenghe Warrant. For accounting purposes, the June 2020 Modification effectively replaced the deferred revenue arrangement relating to the Original Offtake Agreement with a debt obligation relating to the A&R Offtake Agreement and the issuance of the Shenghe Warrant. Under the A&R Offtake Agreement, a portion of the sales prices of products sold to Shenghe is paid in the form of debt reduction, rather than cash. In addition, the Company must pay the following amounts to Shenghe in cash to reduce the debt obligation until repaid in full: (i) an agreed-upon percentage of sales of products to parties other than Shenghe under the A&R Offtake Agreement; (ii) 100% of net profits from asset sales; and (iii) 100% of net income determined under GAAP, less the tax-effected amount of total non-cash recoupment from sales of products to Shenghe. For the three and nine months ended September 30, 2021, $15.9 million and $36.8 million, respectively, of the sales prices of products sold to Shenghe was paid in the form of debt reduction (see Note 18, “Supplemental Cash Flow Information” ), as compared to $4.8 million and $5.5 million for the three and nine months ended September 30, 2020, respectively. During the three and nine months ended September 30, 2021, the Company made a payment to Shenghe of $0.1 million and $0.2 million, respectively, based on sales to other parties. No amounts were required to be paid based on asset sales. After consideration of the Second Additional Advance, the outstanding balance on the Offtake Advances, as of the date of the June 2020 Modification, was $94.0 million. Since the debt obligation was recorded at fair value, the result was a debt discount of $8.3 million. The A&R Offtake Agreement does not have a stated rate (and is non-interest-bearing), and repayment is contingent on a number of factors, including market prices realized by Shenghe, the Company’s sales to other parties, asset sales, and the Company’s annual net income. The imputed interest rate is a function of this discount taken together with our expectations about the timing of the anticipated reductions of the principal balance. Based on current forecasts, the Company expects to repay the obligation within the next year. As of September 30, 2021, and December 31, 2020, $32.6 million and $25.7 million of the principal amount, respectively, was classified as current based on the Company’s expectations of the timing of repayment. The actual amounts repaid may differ in timing and amount from the Company’s estimates and is updated each reporting period to determine the imputed interest rate, which will likely differ from the current estimated rate. The Company has determined that it will recognize adjustments from these estimates following a prospective method. Under the prospective method, the Company will update its estimate of the effective interest rate in future periods based on revised estimates of the timing of remaining principal reductions at that time. The updated rate will be the discount rate that equates the present value of those revised estimates of remaining reductions with the carrying amount of the debt, and it will be used to recognize interest expense for the remaining periods. Under the prospective method, the effective interest rate is not constant, and changes are recognized prospectively as an adjustment to the effective yield. The effective rate applicable from the June 5, 2020, inception to September 30, 2021, was between 4.41% and 11.50%. Based on the revised estimates of the timing of the remaining principal reductions as of September 30, 2021, the Company updated its estimate of the effective interest rate to 16.28% to be applied prospectively to future periods. As discussed in Note 4, “Revenue Recognition,” in January 2021, the Company was informed of a $2.2 million tariff rebate Shenghe received, which increased the gross profit earned by Shenghe on certain prior period sales. As a result, for the nine months ended September 30, 2021, the Company recorded a reduction in the principal amount of the debt obligation of $2.2 million and the corresponding debt discount of $0.2 million. In August 2020, the Company was informed of a $9.7 million tariff rebate Shenghe received, which increased the gross profit earned by Shenghe on certain prior period sales. In addition, after the June 2020 Modification, but relating to sales made prior the June 2020 Modification, Shenghe also realized higher gross profit than estimated by the Company in the amount of $0.4 million due to higher market prices. As a result of these events, for the three and nine months ended September 30, 2020, the Company recorded reductions in the principal amount of the debt obligation of $10.1 million and the corresponding debt discount of $0.8 million. Equipment Notes The Company has entered into several financing agreements for the purchase of equipment, including trucks, tractors, loaders, graders, and various other machinery, including agreements entered into in February 2021 (as further discussed below). The Company’s equipment notes, which are secured by the purchased equipment, have terms of between 4 to 5 years and interest rates of between 0.0% and 6.5% per annum. In February 2021, we entered into financing agreements for the purchase of equipment, including trucks and loaders, in the aggregate amount of $9.7 million, including $0.3 million for the associated extended warranties. These equipment notes have terms of 5 years and interest rates of 4.5% per annum with monthly payments commencing in April 2021. The current and non-current portions of the equipment notes, which are included within the unaudited Condensed Consolidated Balance Sheets in “Other current liabilities” and “Other non-current liabilities,” respectively, were as follows: September 30, 2021 December 31, 2020 (in thousands) Equipment notes Current $ 2,586 $ 835 Non-current 7,732 1,267 $ 10,318 $ 2,102 Interest expense, net Interest expense, net, was as follows: For the three months ended September 30, For the nine months ended September 30, (in thousands) 2021 2020 2021 2020 Interest expense $ 2,660 $ 1,713 $ 6,620 $ 3,582 Capitalized interest (36) — (203) — Interest expense, net $ 2,624 $ 1,713 $ 6,417 $ 3,582 Interest expense related to the Convertible Notes was as follows: For the three months ended September 30, For the nine months ended September 30, (in thousands) 2021 2020 2021 2020 Coupon interest $ 431 $ — $ 886 $ — Amortization of debt issuance costs 876 — 1,799 — Convertible Notes interest expense $ 1,307 $ — $ 2,685 $ — The debt issuance costs are being amortized to interest expense over the term of the Convertible Notes at an effective interest rate of 0.51%. The remaining term of the Convertible Notes was 4.5 years as of September 30, 2021. As of September 30, 2021, none of the agreements or indentures governing our indebtedness contain financial covenants. |