Borrowings | Borrowings The Company’s debt obligations at carrying value consist of the following related and third-party borrowings: September 30, 2022 December 31, 2021 Borrowing Outstanding Carrying Value Borrowing Outstanding Carrying Value Yorkville Convertible Promissory Note - Related party - due September 2022 (1) $ — $ — $ — $ — 2021 Convertible Notes Payable – Related party - due June 2026 105,987 78,743 102,900 84,148 Total Convertible Notes Payable - Related Party $ 105,987 $ 78,743 $ 102,900 $ 84,148 Senior Secured Term Loan - due March 2026 $ 94,681 $ 75,492 $ — $ — Equipment financing facility - due April 2025 9,299 9,283 6,389 6,371 Total long-term debt outstanding 103,980 84,775 6,389 6,371 Long-term debt, current 2,822 2,822 1,644 1,644 Long-term debt, excluding current $ 101,158 $ 81,953 $ 4,745 $ 4,727 (1) The outstanding balance of the Yorkville Convertible Promissory Note was converted into common shares during the third quarter of 2022. Yorkville Convertible Promissory Note - Related Party On June 13, 2022, the Company issued and sold the Promissory Note with a stated principal amount of $7,500 in a private placement to Yorkville under a Supplemental Agreement. The Promissory Note had a maturity date of September 15, 2022. The Promissory Note was issued with a 2% original issue discount and bears interest only upon the occurrence of an Event of Default. The Promissory Note gives Yorkville the right, but not the obligation, to convert principal and accrued interest into shares of the Company’s common stock at a conversion price of $2.21 (the “Conversion Price”) any time prior to the maturity date, subject to the terms and conditions of the Promissory Note. The Company incurred $125 of legal fees in connection with the issuance of the Promissory Note. These costs were accounted for as debt issuance costs and recorded as a reduction to the initial carrying value of the Promissory Note. Interest expense for the Promissory Note was $201 and $309 for the three and nine months ended September 30, 2022, respectively. In July and August 2022, pursuant to the terms of the Supplemental Agreement, Yorkville delivered six Investor Notices under the SEPA requiring the Company to issue and sell an aggregate of 3,393,663 shares of common stock at a price of $2.21 per share. The total purchase price of the shares of common stock was $7,500. The proceeds from the issuance of the shares were used to repay all outstanding amounts owed to Yorkville pursuant to the Promissory Note. As of September 30, 2022, the outstanding balance of the Promissory Note was zero. 2021 Convertible Notes Payable – Related Party On July 6, 2021, the Company entered into an investment agreement with Spring Creek Capital, LLC, a wholly-owned, indirect subsidiary of Koch Industries. The investment agreement provides for the issuance and sale to Koch Industries of convertible notes in the aggregate principal amount of $100,000 (the “2021 Convertible Notes”). The maturity date of the 2021 Convertible Notes is June 30, 2026, subject to earlier conversion, redemption, or repurchase. The Company estimated the fair value of the embedded conversion feature using a binomial lattice model at the inception and on subsequent valuation dates. This model incorporates inputs such as the stock price of the Company, dividend yield, risk-free interest rate, the effective debt yield and expected volatility. The effective debt yield and volatility involve unobservable inputs classified as Level 3 of the fair value hierarchy (refer to Note 15, Fair Value Measurement ). The assumptions used to determine the fair value of the embedded conversion feature are as follows: September 30, 2022 December 31, 2021 Term 3.8 years 4.5 years Dividend yield — % — % Risk-free interest rate 4.1 % 1.2 % Volatility 75.0 % 60.0 % Effective debt yield 25.0 % 19.0 % As of September 30, 2022 and December 31, 2021, the fair value of the embedded conversion feature was $1,076 and $12,359, respectively. The (loss) gain from the change in fair value of the embedded derivative conversion feature for the three months ended September 30, 2022 and 2021 amounted to $(369) and $9,927 and for the nine months ended September 30, 2022 and 2021 amounted to $11,304 and $9,927, respectively. Interest expense recognized on the 2021 Convertible Notes is as follows: Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Contractual interest expense $ 1,590 $ 1,500 $ 4,677 $ 1,500 Amortization of debt discount 1,065 781 2,532 781 Amortization of debt issuance costs 104 1,330 281 1,330 Total $ 2,759 $ 3,611 $ 7,490 $ 3,611 The balances for the 2021 Convertible Notes are as follows: September 30, 2022 December 31, 2021 Principal $ 105,987 $ 102,900 Unamortized debt discount (25,811) (28,321) Unamortized debt issuance costs (2,509) (2,790) Embedded conversion feature 1,076 12,359 Aggregate carrying value $ 78,743 $ 84,148 During the second quarter of 2022, the contractual interest in-kind of $3,087 was recorded as an increase to the 2021 Convertible Note’s principal balance on the condensed consolidated balance sheets. As of September 30, 2022 and December 31, 2021, interest payable attributable to the 2021 Convertible Notes was $1,590 and $—, respectively. As of September 30, 2022, the Company was obligated to repay all contractual interest attributable to the 2021 Convertible Notes in-kind in accordance with the terms under the Senior Secured Term Loan (see below). Therefore, such interest was recorded as a long-term liability on the condensed consolidated balance sheets. Senior Secured Term Loan On July 29, 2022, the Company entered into a Senior Secured Term Loan Agreement (the “Term Loan”) with Atlas Credit Partners (ACP) Post Oak Credit I LLC, as administrative agent for the lenders and collateral agent for the secured parties. The Term Loan agreement provided for an aggregate commitment of $94,681 during the third quarter of 2022. Any additional funding under the Term Loan facility is at the discretion of the agent and lenders. The Term Loan is scheduled to mature on the earlier of (i) July 29, 2026, and (ii) 91 days prior to the current maturity date of the 2021 Convertible Notes of June 30, 2026. The Company has the right at any time to prepay any Borrowing in whole or in part in an amount of not less than $500. The Company agreed to use the proceeds from the Term Loan to (i) fund growth investments and for general corporate purposes including corporate-level research and development investments, (ii) expand the manufacturing facility of the Company’s wholly owned subsidiary, Hi-Power, in the Turtle Creek, Pittsburgh area in Pennsylvania, (iii) redeem in full the Company’s existing indebtedness to Holtec Power, Inc. and (iv) pay certain insurance premiums, interest reserves, fees and expenses incurred in connection with the Term Loan agreement. The outstanding principal balance of the Term Loan bears interest, at the applicable margin plus, at the Company’s election, either (i) the benchmark secured overnight financing rate (“SOFR”), which is a per annum rate equal to (y) the Adjusted Term SOFR (as defined in the Term Loan Agreement) plus 0.2616%, or (ii) the alternate base rate (“ABR”), which is a per annum rate equal to the greatest of (x) the Prime Rate (as defined in the Term Loan), (y) the NYFRB Rate (as defined in the Term Loan Agreement) plus 0.5% and (z) the SOFR. The applicable margin under the Credit Agreement is 8.5% per annum with respect to SOFR loans, and 7.5% per annum with respect to ABR loans. Interest on the Term Loan accrues at a variable interest rate, and interest payments are due quarterly. The Company may elect to convert SOFR Loans to ABR (and ABR Loans to SOFR). As of September 30, 2022, the interest rate in effect for the Term Loan for the third quarter of 2022 interest payment was 11.3% (at the SOFR). Any repayment of principal prior to the second anniversary of the issuance date is subject to a call premium. The call premium is equal to the present value of all interest payments due through June 30, 2024, calculated using a discount rate equal to the applicable treasury rate as of the repayment date plus 50 basis points. Also, there are no embedded derivatives from the Term Loan that required bifurcation. Debt issuance costs of $12,607 and fees of $1,898 were paid to the Lenders in connection with the Credit Agreement. These fees shall be amortized, utilizing the effective interest method through loan maturity. The amortization shall be included in interest expense in the condensed consolidated statements of operations and comprehensive loss. The debt issuance costs include credit wrap insurance policy premiums in the amount of $11,724. The credit wrap insurance provides the Lender with a guarantee on the Company’s credit risk. In the event the Term Loan remains outstanding on the first, second and third anniversaries of the closing date, the Company will be required to pay additional insurance premiums equal to 3%, 3%, and 2%, respectively of the Term Loan balance then outstanding. At closing, the Company accrued $5,231 for the present value of the future credit wrap insurance policy premiums. On the closing date, the Company also entered into a Guarantee and Collateral Agreement. The Term Loans issued are secured by substantially all the assets of the Company and its subsidiaries other than the Company’s equity interests in Hi-Power and assets of Hi-Power, and are guaranteed by the Company's subsidiaries other than Hi-Power. Additionally, interest is required to be escrowed in an amount equal to the aggregate amount of the four immediately following interest payments owed on the Loans which was $10,731 at September 30, 2022. This escrowed and restricted cash is presented on a separate line item on the condensed consolidated balance sheets as long-term restricted cash. The agreements also contain customary affirmative and negative covenants. They limit the Company’s and its subsidiaries’ ability to incur indebtedness, make restricted payments, including cash dividends on its common stock, make certain investments, loans and advances, enter into mergers and acquisitions, sell, assign, transfer or otherwise dispose of its assets, enter into transactions with its affiliates and engage in sale and leaseback transactions, among other restrictions. Furthermore, the limitation on the Company’s ability to incur indebtedness also (i) limits the amount of Pre-Advance Loans that the Company may have outstanding at any time to $15,000 under the SEPA and (ii) requires the payment of principal and interest in kind on each of the Pre-Advance Loans (if any) and the 2021 Convertible Notes. The Company was in compliance with all Term Loan covenants as of September 30, 2022. The effective annual interest rate of the Term Loan is 19.2%. The following table summarizes interest expense recognized: Three and Nine Months Ended September 30, 2022 Contractual interest expense $ 1,861 Amortization of debt discount 53 Amortization of debt issuance costs 495 Total $ 2,409 The Term Loan balance is as follows: September 30, 2022 Principal $ 94,681 Unamortized debt discount (1,846) Unamortized debt issuance costs (17,343) Aggregate carrying value $ 75,492 Equipment Financing facility Long-term debt consists of the outstanding balances from the $25,000 equipment financing facility with Trinity Capital Inc. ("Trinity"). As of September 30, 2022, the Company had drawn a total of $11,216 from the equipment financing facility. On September 30, 2022, the Company borrowed $4,216 with an effective interest rate of 16.2%, and debt issuance costs of $96. On September 30, 2021, the Company borrowed $7,000 with an effective interest rate of 14.3% and debt issuance costs of $175. Additionally, a commitment fee of $188 was paid at the 2021 closing of the equipment financing facility. On September 30, 2022, an amendment to the Master Equipment Financing Agreement removed the non-utilization fee. Also, on this date, the equipment facility’s unused commitment of $13,784 expired. As of September 30, 2022 and December 31, 2021, equipment financing debt outstanding was $84,775 and $6,371, with $2,822 and $1,644 of the principal recorded as a current liability on the condensed consolidated balance sheets, respectively. For the three and nine months ended September 30, 2022, the Company recognized $190 and $615 as interest expense attributable to the equipment financing agreement, respectively. For the three and nine months ended September 30, 2021, the Company did not recognize any interest expense for the equipment financing agreement. Other Borrowings Note Payable – Hi-Power In connection with the Hi-Power acquisition (refer to Note 2, Acquisition ), the Company agreed to pay an aggregate purchase price of $25,000. Principal payments of $5,000 were paid in May 2021 and 2022. The fair value of the note payable was estimated using active market quotes, based on the Company’s incremental borrowing rates for similar types of borrowing arrangements, which were Level 2 inputs (refer to Note 15, Fair Value Measurement ). As of December 31, 2021, notes payable included a current portion of $4,926 and a long-term portion of $13,769, respectively. The Note was extinguished during the third quarter of 2022 with proceeds from the Term Loan. The Company recognized a loss of $942 from debt extinguishment for the three and nine months ended September 30, 2022. |