The PMC Credit Facility contains no financial covenants and is collateralized by the Company’s accounts receivable, inventory, equipment, deposit accounts, and general intangibles. The intent of the lease line of credit was to provide funds necessary to begin production on equipment which was aggregated and converted into a lease two lease labilities during 2022, when those equipment projects were completed (see Note 7- Leases). The Company incurred an aggregate of $2.4 million in “success fees” in connection with the Credit Facility, $2.0 million of which it paid to PMC during 2021, and $0.4 million of which during August 2022. These success fees were recorded as deferred loan costs, a component of non-current assets, on the Company’s balance sheet. The unamortized balance of these fees as of December 31, 2022 was approximately $1.0 million, which will be charged to interest expense ratably over the remainder of the borrowing term. The amortization expense related to these deferred loan costs was $0.2 million and $1.5 million for the years ended December 31, 2022 and 2021, respectively. Regarding the CapEx line, the Company is required to make monthly payments of $38,300 on its fixed portion, the balance of which is approximately $0.9 million at December 31, 2022, which include both principal and interest, through its maturity date of November 2025. PPPLoan On May 9, 2020, the Company received loan proceeds in the amount of $0.3 million under the Paycheck Protection Program (“PPP”) from Carter Federal Credit Union (the “PPP Loan”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act, provides for loans to qualifying businesses for amounts of up to 2.5 times the average monthly payroll expenses of the qualifying business. Under the terms of the PPP Loan, the entire amount of principal and accrued interest may be forgiven to the extent the borrower uses the proceeds for qualifying expenses as determined by the U.S. Small Business Administration (“SBA”) under the PPP, including payroll, benefits, rent and utilities, and maintains its payroll levels. The outstanding balance on the PPP Loan was $0.3 million, prior to its forgiveness, and in August 2021, the Company was notified that forgiveness of the PPP Loan had been approved. Accordingly the $0.3 million of loan forgiveness has been recognized as a gain and recorded as a component of other income in the Company’s statement of operations in accordance with FASB Subtopic 470-50 (ASC 470-50) Debt – Modifications and Extinguishments. Fidelity Secured Financing On May 7, 2021, the Company entered into a note purchase agreement (the “2021 Notes Agreement”) with various Fidelity investment funds (collectively, the “Fidelity Investors”), pursuant to which the Fidelity Investors purchased the convertible promissory notes of the Company with an aggregate principal amount of $35.0 million (the “Notes”), of which $34.1 million was used to partially repay amounts owed pursuant to the PMC Credit Facility. The 2021 Notes accrued interest at a rate of 1.0% per annum compounded annually on the unpaid principal balance, with payment of the principal and accrued and unpaid interest due on May 7, 2022. In connection with the Company’s IPO, the 2021 Notes converted into common shares of the Company, resulting in the outstanding debt balance at the date of the IPO being reduced to zero. Pursuant to the terms of the 2021 Notes Agreement, the Company issued 836,552 shares of its Class A common shares, and 2,809,281 of its Class B common shares, for a combined value of $43.8 million, in exchange for the $35.0 million outstanding principal. Included in the $43.8 million was approximately $0.2 million of interest. Prior to the conversion, the equity conversion feature of the Notes did not meet the equity classification guidance, therefore the Company had elected the fair value option under ASC 825, Financial Instruments, for measurement of the Notes. Under the fair value option, any changes to the fair value of the Notes was required to be recognized in the statement of operations. Accordingly, the Company recognized a charge to its operations of approximately $8.8 million, which was recorded in Change of fair value of convertible debt in the Company’s consolidated statements of operations, which represents the difference between the $43.8 million of equity value issued in connection with the conversion of the Notes, and the $35.0 principal balance of the Notes. The increase 69
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