Tesla 2014 Annual Report Download - page 64

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(2) In May 2013, we issued $660.0 million aggregate principal amount of 1.50% convertible senior notes due June 2018 (Notes) in a public
offering. We incurred $12.0 million of debt issuance costs in connection with the issuance of the Notes which we recorded in other assets
and are amortizing to interest expense using the effective interest method over the contractual term of the Notes. The interest under the
Notes is fixed at 1.50% per annum and is payable semi
-annually in arrears on June 1 and December 1 of each year, commencing on
December 1, 2013. During the year ended December 31, 2013, we recognized $1.2 million of interest expense related to the amortization
of debt issuance costs and $5.9 million of coupon interest expense. In accordance with accounting guidance on embedded conversion
features, we valued and bifurcated the conversion option associated with the Notes from the host debt instrument and recorded the
conversion option of $82.8 million in equity. The resulting debt discount on the Notes is being amortized to interest expense at an effective
interest rate of 4.29% over the contractual term of the Notes. During the year ended December 31, 2013, we recognized $9.1 million of
interest expense related to the amortization of the debt discount. In May 2013, we used a portion of the Notes offering proceeds to repay all
outstanding loan amounts under the Department of Energy (DOE) Loan Facility. During the year ended December 31, 2013, we recorded
total interest expense of $17.8 million related to the early repayment fee, coupon interest expense and the amortization of the remaining
loan origination costs on the DOE Loan Facility. As a result of the extinguishment of our loans, unamortized loan origination costs
associated with the DOE Loan Facility of $5.6 million were charged to interest expense.
(3) In January 2010, we issued a warrant to the DOE in connection with the closing of the DOE Loan Facility to purchase shares of our
Series E convertible preferred stock. This convertible preferred stock warrant became a warrant to purchase shares of our common stock
upon the closing of our initial public offering (IPO). The warrant provided that beginning on December 15, 2018 and until December 14,
2022, the shares subject to purchase under the warrant would become exercisable in quarterly amounts depending on the average
outstanding balance of the DOE Loan Facility, if any, during the prior quarter. Since the number of shares of common stock ultimately
issuable under the warrant would vary, this warrant had been carried at its estimated fair value with changes in the fair value of this
common stock warrant liability reflected in other income (expense), net, until its expiration or vesting. We entered into an amendment with
the DOE effective March 1, 2013. We agreed among other things to: (i) modify certain future financial covenants; (ii) accelerate the
maturity date of the DOE Loan Facility to December 15, 2017; (iii) create an obligation to repay approximately 1.0% of the outstanding
principal under the DOE Loan Facility on or before June 15, 2013; and (iv) create additional contingent obligations based on excess cash
flow that could have resulted in accelerated repayment of the DOE Loan Facility starting in 2015. Accordingly, the DOE warrants were no
longer expected to vest and we therefore recognized a one-time non-
cash gain of $10.7 million from the elimination of this warrant liability
in the quarter ended March 31, 2013. As a result of our repayment of all outstanding principal and interest under the DOE Loan Facility
and the termination of the DOE Loan Facility in May 2013, the DOE warrant expired.
(4)
Diluted net loss per share of common stock is computed excluding common stock subject to repurchase, and, if dilutive, potential shares of
common stock outstanding during the period. Potential shares of common stock consist of stock options to purchase shares of our common
stock, the conversion of our convertible senior notes (using the treasury stock method), warrants to purchase shares of our common stock
issued in connection with our 1.50% convertible senior notes due 2018 (using the treasury stock method), warrants to purchase shares of
our convertible preferred stock (using the treasury stock method) and the conversion of our convertible preferred stock and convertible
notes payable (using the if-converted method). For purposes of these calculations, potential shares of common stock have been excluded
from the calculation of diluted net loss per share of common stock as their effect is antidilutive since we generated a net loss in each
period.