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CONVERTIBLE DEBT | 9 Months Ended
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Sep. 30, 2022
Debt Disclosure [Abstract] |
CONVERTIBLE DEBT | CONVERTIBLE DEBT 4.375% Convertible Senior Notes due 2022 (the “2022 Notes”) In June 2020, the Company issued the 2022 Notes with an aggregate principal amount of $37.7 million in a non-cash exchange for its 2020 Notes with an equal principal amount pursuant to an indenture, dated June 2, 2020 (the “2022 Notes Indenture”), by and between the Company and U.S. Bank National Association, as trustee. The 2022 Notes bear interest at a rate of 4.375% per year, payable in cash on June 1 and December 1 of each year. The 2022 Notes will mature on December 1, 2022, unless earlier repurchased or redeemed by the Company, or converted pursuant to their terms. The 2022 Notes were initially convertible into cash, shares of the Company’s common stock, par value $0.001 (“Common Stock”), or a combination thereof, at the Company’s election, at an initial conversion rate of 173.9978 shares of Common Stock per $1,000 principal amount of 2022 Notes (which is equivalent to an initial conversion price of approximately $5.75 per share). Pursuant to the supplemental indenture entered into by the Company and the trustee during the fourth quarter of fiscal 2021, the Company made an irrevocable election to settle the principal amounts of the 2022 Notes solely with cash and may pay or deliver, as the case may be, any conversion value greater than the principal amount in cash, shares of common stock or a combination thereof, at the Company’s election. The conversion rate, and thus the effective conversion price, may be adjusted under certain circumstances, including in connection with conversions made following certain fundamental changes and under other circumstances as set forth in the 2022 Notes Indenture. Prior to the close of business on the business day immediately preceding September 1, 2022, the 2022 Notes were convertible only under the following circumstances: (1) during any fiscal quarter commencing after the fiscal quarter ended on June 26, 2020 (and only during such fiscal quarter), if the last reported sale price of Common Stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of 2022 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of Common Stock and the conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events. Commencing on September 1, 2022 until the close of business on the second scheduled trading day immediately preceding the maturity date, the 2022 Notes are convertible in multiples of $1,000 principal amount regardless of the foregoing circumstances. As of September 30, 2022, the 2022 Notes were convertible and the net carrying amount of $37.6 million was classified as a current liability. As the 2022 Notes were issued in exchange for the 2020 Notes, which was accounted for as an extinguishment, the 2022 Notes were initially accounted for at fair value, which was estimated to be $44.4 million. In accordance with the accounting guidance on embedded conversion features, the conversion feature associated with the 2022 Notes was initially valued at $8.3 million and bifurcated from the host debt instrument and recorded in “Additional paid-in capital.” The remaining amount of $36.0 million, which represents the fair value of the liability component of the 2022 Notes, was recorded as the initial carrying value of the 2022 Notes. The initial debt discount on the 2022 Notes was $1.7 million, calculated as the difference between the stated principal amount of $37.7 million and the initial carrying value of the liability component of $36.0 million. The debt discount was being amortized, prior to adoption of ASU 2020-06, to interest expense at the effective interest rate over the contractual term of the 2022 Notes. As discussed in the Note 2. “Recent Accounting Pronouncements”, effective January 1, 2022, the Company adopted ASU 2020-06 using the modified retrospective method and, as a result, accounted for the Convertible debt as a single liability measured at amortized cost. The following table presents the components of the 2022 Notes:
| As of
(in thousands, except for years and percentages) | September 30, 2022 |  | December 31, 2021
Liability component: |  |  |
Principal amount | $ | 37,707 |  |  | $ | 37,707 |
Less: Debt discount, net of amortization | — |  |  | (672) |
Less: Debt issuance costs, net of amortization | (50) |  |  | (211) |
Carrying amount | $ | 37,657 |  |  | $ | 36,824 |
Remaining debt discount amortization period (years) | n/a |  | 0.9
Effective interest rate on liability component | n/a |  | 6.95 | %
The following table presents interest expense recognized for the 2022 Notes:
| Three Months Ended |  | Nine Months Ended
(in thousands) | September 30, 2022 |  | October 1, 2021 |  | September 30, 2022 |  | October 1, 2021
Contractual interest expense | $ | 412 |  |  | $ | 412 |  |  | $ | 1,236 |  |  | $ | 1,236 |
Amortization of debt discount | — |  |  | 171 |  |  | — |  |  | 508 |
Amortization of debt issuance costs | 69 |  |  | 54 |  |  | 207 |  |  | 159 |
Total interest expense recognized | $ | 481 |  |  | $ | 637 |  |  | $ | 1,443 |  |  | $ | 1,903 |
2.00% Convertible Senior Notes due 2024 (the “2024 Notes”) In September 2019, the Company issued the 2024 Notes with an aggregate principal amount of $115.5 million pursuant to an indenture (the “2024 Notes Indenture”), dated September 13, 2019, by and between the Company and U.S. Bank National Association, as trustee. The 2024 Notes bear interest at a rate of 2.00% per year, payable semiannually on March 1 and September 1 of each year. The 2024 Notes will mature on September 1, 2024, unless earlier repurchased or redeemed by the Company, or converted pursuant to their terms. The 2024 Notes were initially convertible into cash, shares of the Company’s common stock, par value $0.001 (“Common Stock”), or a combination thereof, at the Company’s election, at an initial conversion rate of 115.5001 shares of Common Stock per $1,000 principal amount of 2024 Notes (which is equivalent to an initial conversion price of approximately $8.66 per share). Pursuant to the supplemental indenture entered into by the Company and the trustee during the fourth quarter of fiscal 2021, the Company made an irrevocable election to settle the principal amounts of the 2024 Notes solely with cash and may pay or deliver, as the case may be, any conversion value greater than the principal amount in cash, shares of common stock or a combination thereof, at the Company’s election. The conversion rate, and thus the effective conversion price, may be adjusted under certain circumstances, including in connection with conversions made following certain fundamental changes or a notice of redemption and under other circumstances, in each case, as set forth in the 2024 Notes Indenture. The 2024 Notes will be convertible at certain times and upon the occurrence of certain events in the future, in each case, specified in the 2024 Notes Indenture. Further, on or after June 1, 2024, until the close of business on the scheduled trading day immediately preceding the maturity date, holders of the 2024 Notes may convert all or a portion of their 2024 Notes regardless of these conditions. In accordance with the accounting guidance on embedded conversion features, the conversion feature associated with the 2024 Notes was valued at $24.9 million and bifurcated from the host debt instrument and recorded in “Additional paid-in capital”. The resulting debt discount on the 2024 Notes was being amortized, prior to adoption of ASU 2020-06, to interest expense at the effective interest rate over the contractual term of the 2024 Notes. As discussed in the Note 2. “Recent Accounting Pronouncements”, effective January 1, 2022, the Company adopted ASU 2020-06 using the modified retrospective method and, as a result, accounted for the Convertible debt as a single liability measured at amortized cost. The following table presents the components of the 2024 Notes:
| As of
(in thousands, except for years and percentages) | September 30, 2022 |  | December 31, 2021
Liability component: |  |  |
Principal amount | $ | 115,500 |  |  | $ | 115,500 |
Less: Debt discount, net of amortization | — |  |  | (14,576) |
Less: Debt issuance costs, net of amortization | (1,739) |  |  | (1,983) |
Carrying amount | $ | 113,761 |  |  | $ | 98,941 |
Remaining debt discount amortization period (years) | n/a |  | 2.7
Effective interest rate on liability component | n/a |  | 7.95 | %
The following table presents interest expense recognized for the 2024 Notes:
| Three Months Ended |  | Nine Months Ended
(in thousands) | September 30, 2022 |  | October 1, 2021 |  | September 30, 2022 |  | October 1, 2021
Contractual interest expense | $ | 578 |  |  | $ | 578 |  |  | $ | 1,734 |  |  | $ | 1,734 |
Amortization of debt discount | — |  |  | 1,193 |  |  | — |  |  | 3,505 |
Amortization of debt issuance costs | 220 |  |  | 162 |  |  | 654 |  |  | 476 |
Total interest expense recognized | $ | 798 |  |  | $ | 1,933 |  |  | $ | 2,388 |  |  | $ | 5,715 |

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