Quarterly report pursuant to Section 13 or 15(d)

Convertible Notes

Convertible Notes
6 Months Ended
Dec. 31, 2018
Debt Disclosure [Abstract]  
Convertible Notes

Note 7. Convertible Notes


Convertible Notes Issued October 2018 


On October 23, 2018 the Company completed the offering of $10.0 million principal amount of the Company’s 6.5% Convertible Senior Notes due 2023. The notes are unsecured and rank pari passu with the Company’s outstanding unsubordinated liabilities. The net proceeds of the offering after payment of offering costs were approximately $8.9 million. The notes will mature on November 30, 2023, unless earlier converted, redeemed or repurchased. Interest on the notes accrues at the rate of 6.5% per year and is payable in cash on each February 28, May 31, August 31 and November 30, beginning February 28, 2019. The notes are convertible into common stock at the option of the holder at any time prior to maturity at an initial conversion price of $5.10 per share, subject to adjustment under certain circumstances.


The Company analyzed the components of the convertible notes for embedded derivatives and the application of the corresponding accounting treatment. This analysis determined that certain features of the notes represented derivatives that require bifurcation from the host contract. The fair value of these components of $0 was recorded as a debt discount and will be adjusted to fair value at the end of each future reporting period.


As a result of the Company issuing new shares of Common Stock for a price to the public of $4.25 per share, the Company adjusted the conversion price of the convertible notes issued on May 14, 2018 from $6.55 per share to $5.00 per share pursuant to the terms of the Indenture. As a result of this adjustment, the associated beneficial conversion feature was increased by $3,950,839 and recorded as a debt discount with a corresponding credit to additional paid in capital. 


The following table summarizes convertible debt as of December 31, 2018: 


    Maturity Date   State Interest Rate     Conversion
    Face Value     Remaining
    Fair Value of
Conversion Option
    Carrying Value  
Long Term convertible notes payable                                                    
6.5% convertible senior secured notes   5/31/2023     6.50 %   $ 5.00     $ 15,000,000     $ (7,876,770 )   $ 909,000     $ 8,032,230  
6.5% convertible senior notes   11/30/2023     6.50 %   $ 5.10     $ 10,000,000     $ (1,076,030 )   $     $ 8,923,970  
Ending Balance as of December 31, 2018                       $ 25,000,000     $ (8,952,800 )   $ 909,000     $ 16,956,200