Note 8. Convertible Notes

The following table summarizes convertible debt as of June 30, 2019 (in thousands):  

The following table summarizes convertible debt as of June 30, 2018 (in thousands):  

May 2018 Notes

On May 14, 2018, the Company completed the offering of $15.0 million principal amount of the Company's 6.5% Convertible Senior Secured Notes due 2023. The net proceeds of the offering after payment of offering costs were approximately $13.1 million. The notes will mature on May 31, 2023, unless earlier converted, redeemed or repurchased. Interest on the notes accrues at the rate of 6.5% per year and is payable quarterly at the Company's option in cash and/or freely tradable shares of the Company's common stock, subject to certain limitations. The notes may be converted into common stock at the option of the holder at any time prior to maturity at an initial conversion price of $6.55 per share, subject to adjustment under certain circumstances. If the holder elects to convert the notes at any time on or after the date that is one year after the last date of original issuance of the notes and prior to May 31, 2021, the holder will also receive a make-whole payment equal to the remaining scheduled interest payments that would have been made on the notes converted had such notes remained outstanding through May 31, 2021 (the "put date"). At the Company's option, make-whole payments may be paid in cash and/or freely tradable shares of the Company's common stock.

As a result of the Company issuing new shares of common stock for a price to the public of $4.25 per share in October 2018, the Company adjusted the conversion price of the convertible notes from $6.55 per share to $5.00 per share pursuant to the terms of the Indenture.

In addition, the Company identified a beneficial conversion feature in relation to the conversion option of the notes. The fair value of the conversion option of $1,809 thousand was recorded as a debt discount with a corresponding credit to additional paid in capital. As a result of the decrease of the conversion price of the convertible notes due to the October 2018 common stock offering, the associated beneficial conversion feature was increased by $3,951 thousand and recorded as a debt discount with a corresponding credit to additional paid in capital.

The Company recorded total debt discount and debt issuance costs of $4,845 thousand, to be amortized over three years using an effective interest method. Debt discount and debt issuance costs include the fair value of the embedded features at the issuance date of $1,159 thousand, the intrinsic value of the beneficial conversion feature of $1,809 thousand, and debt issuance costs paid totaling $1,877 thousand.

October 2018 Notes

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, including its 6.5% Convertible Senior Secured Notes due 2023 issued in May 2018. 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 may redeem the notes, at its option and in whole or in part, at a redemption price equal to 100% of the principal amount of Notes plus accrued and unpaid interest on such principal up to the redemption date, as follows: (1) on or after November 30, 2019 until November 29, 2020, if the closing sale price per share of the Common Stock exceeds 175% of the then-effective conversion price of the notes for each of 20 of any 30 consecutive trading days immediately preceding the optional redemption notice delivered by the Company; (2) on or after November 30, 2020 until November 29, 2021, if the closing sale price per share of the Common Stock exceeds 150% of the then-effective conversion price of the notes for each of 20 of any 30 consecutive trading days immediately preceding the optional redemption notice delivered by the Company and (3) on or after November 30, 2021, if the closing sale price per share of the Common Stock exceeds 125% of the then-effective conversion price of the notes for each of 20 of any 30 consecutive trading days immediately preceding the optional redemption notice delivered by the Company. Upon redemption, each noteholder will receive an interest make-whole payment equal to the remaining scheduled interest payments that would have been made on the redeemed notes had the notes remained outstanding through the Maturity Date, which will be paid in cash; provided, however, that so long as the Make-Whole VWAP Price (as defined below) is not less than $5.01 per share (as appropriately adjusted for any stock split, reverse stock split, stock dividend or other reclassification or combination of our common stock occurring after the date of issuance of the notes offered hereby), the Company will have the option to pay interest make-whole payments in freely tradable shares of Common Stock valued at the product of (x) 95% and (y) the volume weighted average price of Common Stock for the ten trading days ending on and including the trading day immediately preceding the redemption date (such product, the "Make-Whole VWAP Price"). 

Each holder of notes will have a one-time right to require the Company to repurchase on November 30, 2021 for cash all (but not less than all) of the notes of such holder at a purchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest on such principal, if any, up to such repurchase date. In addition, if a "fundamental change" (as defined in the indenture) occurs prior to the maturity date, subject to certain conditions, holders of the notes will have the right to require the Company to repurchase for cash all of the notes, or any portion thereof that is equal to $1,000 or an integral multiple of $1,000, at a purchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest on such principal, if any, up to such repurchase date.

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.