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Long-Term Debt
 9 Months Ended
Sep. 30, 2024
Debt Disclosure [Abstract]  
Long-Term Debt Long-Term Debt
Long-term debt consists of the following (in thousands):
September 30, 2024December 31, 2023
Convertible notes$— $75,099 
Revolving line of credit— — 
     Total debt— 75,099 
Less: unamortized debt discount— (10,440)
Less: unamortized debt issuance costs— (211)
Long-term debt, net$— $64,448 
The Company recognized interest expense as follows (in thousands):
Three months ended September 30,Nine months ended September 30,
2024202320242023
Contractual interest expense$32 $1,168 $2,529 $3,465 
Amortization of debt discount and issuance costs7 834 1,036 2,475 
Total interest expense $39 $2,002 $3,565 $5,940 
Convertible Notes
On March 24, 2022 (Initial Closing), the Company issued convertible unsecured subordinated promissory notes (notes or convertible notes) to certain investors, including certain related parties and a then officer of the Company (see Note 12 – Related Parties), in an aggregate principal amount of $75.0 million with a maturity date of March 24, 2027. Up to but not including the date that is 18 months after the Initial Closing, the convertible notes bear interest at a rate of 6.00% per annum, payable quarterly in cash or as payment-in-kind at the Company’s election. Thereafter, subject to certain exceptions, the convertible notes bear interest at a rate of (A) the greater of (x) the three-month Secured Overnight Financing Rate and (y) 1.00% plus (B) 5.00%, payable quarterly in cash.
The Company determined that certain conversion provisions embedded in the convertible notes represented contingent exchange features that qualified as embedded derivatives under ASC 815, Derivatives and Hedging. The qualifying features were collectively bifurcated from the debt host and recorded as a derivative liability in the condensed balance sheets. The derivative liability was accounted for on a fair market value basis. The initial value of the derivative liability at issuance was $16.1 million with the offset recorded as a discount to the notes. Changes in fair value were recognized in other expense, net, in the condensed statements of operations. The debt discount was amortized to interest expense over the contractual term of the debt using the straight-line method which approximates the effective interest method. Refer to Note 6 – Fair Value Measurements for further discussion of the valuation of the derivative liability.
Concurrently upon the closing of the IPO, the $75.1 million of convertible notes automatically converted into 1,177,087 shares of the Company’s Class A common stock. The conversion was accounted for as a debt extinguishment, resulting in the recognition of a $9.6 million loss on extinguishment calculated as the difference between the fair value of the shares issued and the carrying value of the notes and the embedded derivative liability. Immediately prior to the extinguishment, a $1.4 million loss was recognized from the change in fair value of the embedded derivative liability.
2021 Credit Facility
On November 3, 2021, the Company executed the Third Amended and Restated Loan and Security Agreement with Silicon Valley Bank, which consists of a $50.0 million revolving line of credit (2021 Credit Facility). In March 2023, the Company executed a letter agreement to amend the 2021 Credit Facility to reduce the percentage of funds required to be maintained with Silicon Valley Bank. In December 2023, the Company executed the Second Loan Modification Agreement with Silicon Valley Bank, which, among other things, extended the initial maturity date of the 2021 Credit Facility to November 3, 2025 and amended the financial covenant liquidity ratio calculation. The 2021 Credit Facility, as amended by the subsequent amendment and modification agreements, is referred to herein as the Amended 2021 Credit Facility. As a result of our IPO, the maturity date of the Amended 2021 Credit Facility can be extended to November 3, 2026.
Borrowings under the Amended 2021 Credit Facility bear interest at a floating annual rate equal to the greater of (i) an applicable floor rate that ranges from 2.25% to 3.0% based on the Company’s average liquidity position as defined in the Amended 2021 Credit Facility and (ii) the prime rate less a margin that
ranges from 0.25% to 1.0% based on the Company’s average liquidity position as defined in the Amended 2021 Credit Facility. In addition, the Company pays an unused revolving line facility fee of 0.25% per year on the average monthly unused amount of commitments under the Amended 2021 Credit Facility. The Company is subject to a springing financial covenant to maintain a minimum liquidity ratio of 1.50x, depending on the Company’s average liquidity position as defined in the Amended 2021 Credit Facility.
As of September 30, 2024, there was no outstanding balance under the Amended 2021 Credit Facility and $50.0 million available. The Company is in compliance with all financial covenants under the Amended 2021 Credit Facility during all periods presented. All obligations under the Amended 2021 Credit Facility are secured by substantially all of the assets of the Company, including intellectual property.