Convertible Debenture |
6 Months Ended | ||||||||||||||||||||||||||||||||||||
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Jun. 30, 2025 | |||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||
| Debt Disclosure | Convertible Debenture On June 17, 2025, we entered into the Private Placement with YA II PN, LTD., a Cayman Islands exempt limited company (the “Investor”). The Private Placement closed on June 18, 2025. Pursuant to the terms of the Private Placement, the Investor purchased a $25 million convertible debenture (the “Convertible Debenture”) from the Company for a price of $23.75 million (the “Purchase Amount”). The Company intends to use the net proceeds from the Private Placement for working capital and general corporate purposes. The Convertible Debenture accrues interest on the outstanding principal balance at an annual rate equal to 0%, which will increase to an annual rate of 18% upon the occurrence of an Event of Default (as defined in the Convertible Debenture) for so long as the Event of Default remains uncured. The Convertible Debenture will mature on the first anniversary of the closing date, unless earlier redeemed or converted in accordance with the terms, and may be extended at the option of the Investor (the “Maturity Date”). On the Maturity Date, the Company shall pay to the Investor an amount in cash representing all outstanding Principal, accrued and unpaid Interest, and any other amounts outstanding pursuant to the terms of the Convertible Debenture. For so long as there is a balance outstanding under the Convertible Debenture, the Investor, in its sole discretion, may deliver to the Company a conversion notice (the “Conversion Notice”) to cause any portion of the outstanding and unpaid balance under the Convertible Debenture to be converted (the “Conversion Amount”) into the Company’s Class A common stock (the “Class A Common Stock”, and together with the Company’s Class V common stock, the “Common Stock”). The Conversion Amount will not exceed the balance owed under the Convertible Debenture on the date of delivery of the Conversion Notice. The debenture includes a monthly conversion limitation (the “Conversion Cap”) that restricts the Investor and its affiliates from converting more than $6.25 million in principal during any calendar month. The limitation does not apply (i) during the occurrence and continuation of an Event of Default or (ii) to conversions at or above the Fixed Price (defined below), and it may be waived with the Company’s written consent. Unused conversion capacity may not be carried forward to future months. The Company will not issue more than 2,827,906 shares of Class A Common Stock pursuant to this transaction or any related transaction documents, which represents 19.99% of the aggregate number of the Company’s outstanding Class A and Class V Common Stock, in accordance with NYSE rules and regulations (the “Exchange Cap”). This limitation will not apply if the Company obtains (i) stockholder approval as required under NYSE rules or (ii) a written opinion of outside counsel that such approval is not necessary. The shares of Class A Common Stock will be issued and sold to the Investor at a per share price (the “Conversion Price”) equal to the lower of (i) $14.51 per share or (ii) 97% of the lowest daily volume weighted average price ("VWAP") during the five consecutive trading days immediately preceding the conversion date (the “Variable Price”), but which Variable Price shall not be lower than $2.418. The shares of Class A Common Stock will be issued and sold to the Investor at the Conversion Price that would be applicable to the Conversion Amount selected by the Investor if such amount were to be converted as of the date of delivery of the Conversion Notice. The amount outstanding under the Convertible Debenture will then be offset by the Conversion Amount. As of June 30, 2025, no Conversion Notices have been delivered to the Company. The Debenture also provides the Company with the right, but not the obligation, to redeem all or a portion of the outstanding principal prior to maturity (“Optional Redemption”). To do so, the Company must deliver written notice to the Investor after market close on a trading day and only if the VWAP of the Company's Class A Common Stock on that day is below the fixed conversion price, unless otherwise agreed by the Investor. Upon receipt of such notice, the Investor has two trading days to elect to convert any or all of the redemption amount. The Company must pay the applicable redemption amount (consisting of principal, a payment premium, and any accrued and unpaid interest) on the third trading day following delivery of the redemption notice, net of any amounts converted by the Investor. To the extent any balance remains outstanding under the Convertible Debenture on the Maturity Date, the Company will pay to the Investor such outstanding balance in cash. The Company agrees to certain covenants related to the Convertible Debenture, including filing Form D and complying with applicable securities laws (“Blue Sky” laws), maintaining SEC reporting status during the life of the debentures, and reserving sufficient shares for conversion. Use of proceeds is restricted, prohibiting repayment of related-party loans (except permitted indebtedness) and investments in sanctioned countries or activities. The Company will secure and maintain listing of underlying shares on the principal market and comply with all reporting and disclosure obligations. The Investor may pledge the securities under margin or financing agreements. The Company will not incur additional indebtedness or liens beyond permitted exceptions without Investor consent and will maintain its corporate governance consistent with the terms of the Convertible Debenture. Stockholder approval will be sought if available shares fall below amounts necessary for conversion. The Investor agrees not to engage in short sales of Common Shares during the restricted period, except as expressly permitted. The Company must also provide trading information to the Investor upon request and refrain from entering agreements that limit its obligations under the Convertible Debenture until it is fully repaid or converted. The Convertible Debenture also includes the following events of default, which may trigger acceleration of all outstanding amounts. These include: •Failure to pay principal, interest, or other amounts within three trading days of the due date; •Bankruptcy, insolvency, or similar proceedings involving the Company or its subsidiaries; •Defaults on other debt over $1 million that result in acceleration; •Judgments exceeding $1 million not resolved within 60 days (unless covered by insurance); •Delisting of common shares for more than 10 consecutive trading days; •Change of control without repayment of the Debenture; •Failure to deliver conversion shares or refusal to honor conversion requests; •Material misstatements or breaches of covenants not timely cured; •Use of proceeds in violation of margin rules; •Cross-default under related agreements. Upon an event of default, the Investor may accelerate payment of all outstanding amounts or convert the Debenture into common shares. As of June 30, 2025, the Company was not in default and was in compliance with all terms and conditions of the Convertible Debenture. For purposes of calculating diluted earnings per share, the Company applies the if-converted method to the convertible portion of the outstanding Convertible Debentures. Under this method, the convertible portion is assumed to be converted into common shares at the beginning of the reporting period (or at the date of issuance, if later), and the resulting shares are included in the diluted weighted-average share count, if the effect is dilutive. The following table sets forth the balance of the Convertible debenture as of June 30, 2025 (in thousands):
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