| Summary of convertible notes payable |
Convertible notes payable are as follows as of June 30, 2019 and 2018 (in thousands):
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Original
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Interest Rate
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Funding Date
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Stated
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Default
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2019
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2018
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Fiscal 2018 Notes:
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Former member of board of directors
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January 2018
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12.0
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%
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15.0
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%(1)
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$
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—
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$
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500
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(2)(3)
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Former member of board of directors
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February 2018
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15.0
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%
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15.0
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%
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—
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500
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(2)(3)(4)
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Other investors
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February 2018
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12.0
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%
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15.0
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%(1)
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—
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200
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(2)(3)
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Other investors
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April 2018
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12.0
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%
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15.0
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%(1)
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—
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4,140
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(2)
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Less unaccreted discount and issuance costs
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—
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(1,915)
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(5)
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Net carrying value
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—
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3,425
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Note payable, due on demand (6)
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May 2010
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8.0
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%
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8.0
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%
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10
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10
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Total
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$
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10
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$
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3,435
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(1)
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Beginning on July 1, 2018, the interest rate increased from the stated rate of 12.0% to the default rate of 15.0% due to the Company’s failure to make quarterly interest payments.
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(2)
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As amended in April 2018, all of the Fiscal 2018 Notes provided that the unpaid principal and accrued interest automatically convert to the class of securities issued in an equity financing for at least $15 million at a 20% discount to the terms set forth in such financing. This feature that enabled conversion at a 20% discount was a contingent BCF that was not calculated and recorded until the financing that triggered conversion was completed. Since the closing of the Series AA Financing resulted in the conversion of the Fiscal 2018 Notes, the contingent BCF was measured and recognized on January 30, 2019 as discussed below under the caption “Beneficial Conversion Feature”.
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(3)
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In April 2018, these notes and related warrants were amended to mirror the terms of the Fiscal 2018 Notes issued in April 2018. Accordingly, the Company completed an analysis to determine if changes to the terms of these notes should be accounted for as a troubled debt restructuring, a debt modification or as an extinguishment. Since the future cash flows of the instruments changed by an amount greater than 10%, debt extinguishment accounting was applied. Accordingly, the Company recognized a loss on the extinguishment of debt of approximately $0.6 million.
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(4)
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This convertible promissory note contained an embedded derivative for the acceleration of the maturity date if the note was paid prior to maturity, whereby a $25,000 penalty plus all unpaid interest to be accrued through the maturity date was due. The initial measurement of fair value for this embedded derivative liability was $100,000, which was reflected as DDIC. The fair value of this embedded derivative was $74,000 as of June 30, 2018, which resulted in a gain of $26,000 for the fiscal year ended June 30, 2019. This embedded derivative was eliminated upon conversion of the convertible promissory note on January 30, 2019, which resulted in the recognition of a gain of $74,000 for the fiscal year ended June 30, 2019.
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(5)
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As discussed below under the caption “Debt Discount and Issuance Costs”, the Company incurred DDIC of $3.2 million related to the issuance of the Fiscal 2018 Notes, of which the unaccreted balance was $1.9 million as of June 30, 2018.
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(6)
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This convertible note payable was executed in May 2010 whereby the principal and accrued interest are convertible to Common Stock at a price of $1.02 per share. To date, the holder has not exercised its conversion rights or requested payment.
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| Summary of components of debt discount and issuance costs |
The components of DDIC for the fiscal years ended June 30, 2019 and 2018, are as follows (in thousands, except per share amounts):
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Warrant Terms
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Number
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Exercise
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Fair
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Components of DDIC
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of Shares
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Price
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Value
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Fair value of warrants issued in fiscal 2018:
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Fiscal 2018 Note holders
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12,185
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$
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0.52
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$
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1,899
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Placement Agent
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289
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$
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0.52
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217
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Modification of warrant in January 2019
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707
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0.18
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138
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Initial fair value of embedded derivative in February 2018
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100
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Incremental and direct costs of placement in fiscal 2018
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204
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Total DDIC related to Fiscal 2018 Notes
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$
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2,558
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