Mezzanine Equity and Stockholders' Equity (Deficit) |
3 Months Ended |
|---|---|
Mar. 31, 2025 | |
| Equity [Abstract] | |
| Mezzanine Equity and Stockholders' Equity (Deficit) |
Mezzanine Equity and Stockholders' Equity (Deficit) Securities Purchase Agreement
On March 31, 2025, simultaneous with the Eleventh Amendment (see Note 6, Debt for further information), the Company entered into a securities purchase agreement (the "Purchase Agreement") with certain investors (the "Investors") for a $25 million investment (the "PIPE Investment"). In connection with the PIPE Investment, the Company issued 1,771,586 shares of common stock (the "PIPE Common Stock"), $0.0001 par value per share, and 10,728,414 shares Series A Preferred Stock (the "Series A Preferred Stock"), $0.0001 par value per share (and together with the PIPE Common Stock, (the "Securities")) at a purchase price of $2.00 per share (the "Purchase Price") to comply with NYSE stockholder approval rules. As required by the NYSE shareholder approval rules, the Series A Certificate of Designations limit the number of shares of common stock issuable upon conversion of the Series A Preferred Stock such that, when aggregated with the shares of PIPE Common Stock issued at closing, such issuances shall not exceed 19.99% of the Company’s issued and outstanding common stock until the date stockholder approval is obtained. All shares of Series A Preferred Stock will automatically convert into one share of common stock without any action by the holders on the first trading day after the Company obtains stockholder approval, which the Company will seek at its upcoming June 11, 2025, Annual Meeting of Stockholders. The Series A Preferred Stock has no liquidation preference and is non-voting, convertible, and redeemable at the option of the holder at the original purchase price if not automatically converted into common stock within one year from the date of issuance. The holders of Series A Preferred Stock are entitled to dividends on an if-converted basis in the same form as any dividends paid on shares of the Company’s common stock or other securities. The Investors will be subject to a 180-day lock-up period with respect to the Securities purchased in the PIPE Investment.
The Purchase Agreement includes customary representations, warranties and covenants of the parties. The securities issued pursuant to the Purchase Agreement were sold in private placements in reliance upon the exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended ("Securities Act") and/or Rule 506(b) of Regulation D promulgated under the Securities Act, without general solicitation, made only to and with accredited investors as defined in Regulation D. The transaction closed on March 31, 2025, following the satisfaction of customary closing conditions. Upon closing, the Company received aggregate net proceeds of approximately $24.5 million, net of offering expenses, which was allocated between the Common Stock and Series A Preferred Stock on a relative fair value basis resulting in $3.4 million of net proceeds from the sales of Common Stock and $21.1 million from the sale of Series A Preferred Stock. The Company intends to use the proceeds from the Securities sale for general corporate purposes.
The Series A Preferred Stock is classified in temporary equity on the Unaudited Condensed Consolidated Balance Sheets as it is contingently redeemable in cash at the original purchase price at the holder’s option upon the occurrence of events which are deemed outside of the Company’s control. In accordance with the accounting guidance for contingently redeemable equity instruments, the Company elected to record changes in redemption value immediately as the changes occur, and to adjust the carrying amount of the Series A Preferred Stock to its redemption value at the end of each reporting period. At issuance, the Series A Preferred Stock had a relative fair value of $21.1 million. At the end of the reporting period on March 31, 2025, the redemption value of the Series A Preferred Stock was equal to the original purchase price of $2.00 per share, or $21.5 million. Consequently, the Company recognized a $0.4 million increase to the initial carrying value of the Series A Preferred Stock and a decrease to additional paid in capital to reflect the Series A Preferred Stock at its maximum redemption value. This increase to the carrying value is treated as a deemed dividend to the preferred stockholders and increases the net loss attributable to common stockholders and basic net loss per share. See Note 10, Net Loss Per Share for further information.
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