Item 3. Quantitative and Qualitative Disclosures About Market Risk
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. We are subject to interest rate risk in connection with the Notes, and we hold derivative financial instruments and have outstanding warrants that are subject to market risk. We also have foreign currency exchange rate risk from our global operations, although we do not believe this risk to be significant. Except as set forth below, there have been no material changes in our exposure to market risk during the three months ended June 30, 2020 as compared to our market risk disclosures set forth in Item 7A , "Quantitative and Qualitative Disclosures About Market Risk" within the 2019 10-K.
Interest rate risk
As a result of having $204.0 million aggregate principal amount of Notes outstanding, which are convertible into shares of Common Stock at a conversion price of $31.29 per share (the "Conversion Price"), we are subject to interest rate risk. As of June 30, 2020, the interest rate on the Notes was 12.0% per year. The interest rate reset on January 30, 2020 and will remain at 12.0% (subject to certain conditions) until February 1, 2021 (the "Interest Reset Date"). On the Interest Reset Date, the interest rate will reset based on the then-applicable Conversion Premium which is calculated by dividing the Conversion Price by the arithmetic average of the volume-weighted average trading prices of our Common Stock on each of the ten consecutive trading days immediately preceding the applicable Interest Reset Date (the "VWAP"). The interest rate is then determined in accordance with the table below, which includes theoretical VWAP calculations:
If the Conversion Premium
(as of the applicable
Interest Reset Date) is: Implied VWAP Then the Interest Rate from
the applicable Interest Reset
Date until the next
subsequent Interest Reset
Date shall be:
1.0 or less $31.29 or higher 4.0%
1.05 $29.80 4.3%
1.10 $28.45 4.7%
1.15 $27.21 5.0%
1.20 $26.08 5.3%
1.25 $25.03 5.7%
1.30 $24.07 6.0%
1.35 $23.18 8.0%
1.40 $22.35 10.0%
1.45 or higher $21.58 or less 12.0%
If the Conversion Premium is between two Conversion Premium amounts in the table above, the interest rate is determined by straight-line interpolation between the interest rates for the higher and lower Conversion Premium amounts.
As discussed in Footnote 4 , Long-term Debt , we have the ability, subject to certain conditions, to pay interest on the Notes through the issuance of PIK Interest Shares. We elected to pay the interest due on January 2, 2020, April 1, 2020 and July 1, 2020 in cash.
Interest rate reset derivative financial instrument, warrants liability financial instrument, and foreign currency risk
For discussion of market risk associated with our interest rate reset derivative financial instrument, warrants liability financial instrument, and foreign currency risk, refer to Item 7A , "Quantitative and Qualitative Disclosures About Market Risk" in the 2019 10-K.
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