Convertible Preferred Stock and Stockholders’ Equity |
6 Months Ended |
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Jun. 30, 2025 | |
| Equity [Abstract] | |
| Convertible Preferred Stock and Stockholders’ Equity | Convertible Preferred Stock and Stockholders’ Equity Preferred Stock The outstanding shares of Series A convertible preferred stock are not mandatorily or otherwise redeemable. The sale of all, or substantially all, of the Company’s assets, a consolidation or merger with another company, or a transfer of voting control in excess of fifty percent (50%) of the Company’s voting power are all events which are deemed to be a liquidation and would trigger the payment of liquidation preferences under the Company’s Certificate of Incorporation. The significant terms of outstanding Series A preferred shares are as follows: Conversion – Each share of Series A is convertible, at the option of the holder, initially, into one share of Class A Common Stock (subject to adjustments for events of dilution). Each share of convertible preferred stock will automatically be converted upon: (i) the election of a majority of the outstanding shares of such series of preferred stock; or (ii) the consummation of an underwritten registered public offering with aggregate proceeds in excess of $35 million (a “Qualified Public Offering”). The Company’s Certificate of Incorporation contains certain anti-dilution provisions, whereby if the Company issues additional shares of capital stock for an effective price lower than the conversion price for a series of preferred stock immediately prior to such issue, then the existing conversion price of such series of preferred stock will be reduced. The Company determined that while its convertible preferred stock contains certain anti-dilution features, the conversion feature embedded within its convertible preferred stock does not require bifurcation under the guidance of FASB ASC 815, Derivatives and Hedging Activities. Liquidation preference – Upon any liquidation, winding up or dissolution of the Company, whether voluntary or involuntary (a “Liquidation Event”), before any distribution or payment will be made to the holders of any Common Stock, the holders of convertible preferred stock will be entitled to receive, by reason of their ownership of such stock, an amount per share of Series A equal to $2.1872 (as adjusted for stock splits, recapitalizations and other similar events) plus all declared and unpaid dividends (the “Series A Preferred Liquidation Preference”). However, if, upon any such Liquidation Event, our assets are insufficient to make payment in full to all holders of convertible preferred stock of their respective liquidation preferences, then the entire balance of the Company’s assets legally available for distribution will be distributed with equal priority between the preferred holders based upon the amount of each such holders’ Series A Preferred Liquidation Preference. Any excess assets, after payment in full of the liquidation preferences to the convertible preferred stockholders, are then allocated to the holders of the Common Stock, pro-rata. Dividends – If and when declared by the Board, the holders of Series A and Common Stock, on a pari passu basis, will be entitled to receive dividends. As of June 30, 2025 and December 31, 2024 we have not declared any dividends on preferred stock or Common Stock. Voting rights – Generally, preferred stockholders have one vote for each share of Common Stock that would be issuable upon conversion of preferred stock. Voting as a separate class, the Series A stockholders are entitled to elect one member of the Board. The holders of Common Stock, voting as a separate class, are entitled to elect two members of the Board. The remaining two members are elected by the preferred stockholders and common stockholders voting together as a single class on an as-if-converted to Common Stock basis. The Company has adopted a dual-class Common Stock structure, pursuant to which each share of Class A Common Stock will have one vote per share and each share of Class F Common Stock will have ten votes per share. The Company has classified the Series A convertible preferred stock as mezzanine equity in accordance with FASB ASC 480, Distinguishing Liabilities from Equity, as the shares have certain redemption features within the liquidation preference upon a change of control that are not solely in control of the Company. The Series A convertible preferred stock is not currently redeemable because the deemed liquidation provision related to a change in control is considered a substantive condition that is contingent on an event and it is not currently probable that it will become redeemable. The carrying value of the Series A convertible preferred stock, which includes the proceeds received upon issuance, has not been adjusted to liquidation value since the securities are not currently redeemable or probable to become redeemable. Subsequent adjustments to increase the carrying value to the liquidation value will be made only if and when it becomes probable that a change in control or other deemed liquidation event will occur. Common Stock Class A Common Stock As of June 30, 2025 and December 31, 2024, there were 2,891,359 shares and 2,888,859 shares issued and 2,458,394 shares and 2,455,894 shares outstanding. Holders of our Class A Common Stock are entitled to one (1) vote for each share held of record on all matters submitted to a vote of stockholders. Class F Common Stock In April of 2014, the Company issued 10,000,000 shares of Class F Common Stock to Daniel Miller and to Benjamin Miller, with a par value of $0.0001 per share. Each share of the Class F Common Stock is entitled to ten (10) votes per share. As of June 30, 2025 and December 31, 2024, there were 10,000,000 shares of Class F Common Stock issued and outstanding. Class B Common Stock On January 19, 2017, the Board of the Company created a new class of Common Stock, to be designated as Class B Common Stock, with a par value of $0.0001 per share. As of June 30, 2025 and December 31, 2024, 38,000,000 shares have been authorized as Class B Common Stock. As of June 30, 2025 and December 31, 2024 respectively, there were 21,827,447 and 21,540,781 shares of Class B Common Stock issued and 19,949,041 and 20,075,183 shares outstanding. Except as required by applicable law, the holders of our Class B Common Stock are not entitled to vote on any matters submitted to a vote of stockholders. Investors’ Rights Agreement In 2014 we entered into an Investors’ Rights Agreement (the “IRA”) with certain holders of our Class F Common Stock and Series A Preferred Stock, including persons who held more than 10% of any class of our outstanding capital stock, certain of our executive officers and directors and entities with which certain of our directors are affiliated. Pursuant to the IRA, the holders of certain shares of our Common Stock and preferred stock are entitled to certain registration rights, information rights, and preemptive rights. Right of First Refusal and Co-Sale Agreement In 2014, we entered into a Right of First Refusal and Co-Sale Agreement (the “Co-Sale Agreement”) with certain holders of our Common Stock and preferred stock, including persons who hold more than 10% of our outstanding capital stock, certain of our executive officers and directors, and entities with which certain of our directors are affiliated. Pursuant to the Co-Sale Agreement, the holders of our preferred stock have rights of first refusal and co-sale with respect to certain transfers made by certain holders of our Common Stock. Voting Agreement In 2014 we entered into a Voting Agreement (the “Voting Agreement”) with certain holders of our Class F Common Stock and Series A Preferred Stock, including persons who held more than 10% of any class of our outstanding capital stock, our executive officers and directors, and entities with which certain of our directors are affiliated. Pursuant to the Voting Agreement, the holders of certain shares of our Common Stock and preferred stock have agreed to vote their shares on certain matters, including with respect to the election of directors.
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