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| Preferred Stock |
Note 9 - Preferred Stock
Series A Convertible Preferred Stock Financing
On May 10, 2013, the Company entered into a Series A Convertible Preferred Stock Purchase Agreement (the "Series A Purchase Agreement") with One Stone Holdings II LP ("One Stone"), an affiliate of One Stone Energy Partners, L.P. Pursuant to the terms of the Series A Purchase Agreement, on May 17, 2013 (the "Closing Date"), the Company issued to One Stone 19,239,734 shares of Series A Convertible Preferred Stock, par value $0.01 per share (the "Series A Preferred Stock"), at a purchase price of approximately $1.22149381 per share (the "Purchase Price"), for aggregate proceeds of approximately $23.5 million. Subject to certain conditions, each share of Series A Preferred Stock and any related unpaid accumulated dividends are convertible into one share of the Company's Common Stock, par value $0.01 per share, at an initial conversion price equal to the Purchase Price. As a result of the one share for eight shares reverse split of the Company's Common Stock effective July 10, 2015, the conversion price was adjusted to reflect the ratio of pre-split common shares outstanding to post-split common shares outstanding multiplied by the Purchase Price, or $9.77586545 per share (the "Adjusted Conversion Price"). Please refer to Note 10 - Preferred Stock of the Notes to the Consolidated Financial Statements in the Company's 2015 Form 10-K for further information regarding key terms and registration rights applicable to the Company's Series A Preferred Stock.
The Company has analyzed the embedded features of the Series A Preferred Stock and has determined that none of the embedded features is required under US GAAP to be bifurcated from the Series A Preferred Stock and accounted for separately as a derivative. The Company recorded the transaction by recognizing the fair value of the Series A Preferred Stock at the time of issuance in the amount of $23.5 million. The Company will accrete the Series A Preferred Stock to the redemption value if events or circumstances indicate that redemption is probable. No accretion was recorded during the three months ended September 30, 2015, nor during the year ended June 30, 2015.
On August 3, 2015, via the First Amendment to the Series A Convertible Preferred Stock Purchase Agreement (the "Series A First Amendment"), Magellan and One Stone agreed to amend and extend the standstill provisions of the Series A Purchase Agreement to December 31, 2015. In addition to extending the terms of the prior standstill, One Stone agreed to be prohibited from i) depositing any securities of the Company in trust or subjecting them to any voting agreement or arrangement and ii) requesting the Company to modify or waive any provision of the standstill covenants. Certain definitions were also updated in the Series A First Amendment.
For the three months ended September 30, 2015 and 2014, the Company recorded preferred stock dividends of $452 thousand and $430 thousand, respectively, related to the Series A Preferred Stock. The preferred stock dividends for the three months ended September 30, 2015, were paid in kind. Accordingly, the value of these dividends of $452 thousand was recorded and added to the preferred stock balance on the Company's balance sheet at September 30, 2015.
The activity related to the Series A Preferred Stock for the three months ended September 30, 2015, and the fiscal year ended June 30, 2015, is as follows:
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