Note 13 - Mezzanine Equity and Stockholders’ Equity (Deficit)

Authorized Shares (Predecessor)

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Legacy Adagio’s Amended and Restated Articles of Incorporation authorized the issuance of two classes of stock designated as common and preferred stock, each having a par value of $0.001 per share. The number of shares authorized as of June 30, 2024 was 11,534,892 consisting of 6,594,946 shares of common stock and 4,939,946 shares of preferred stock, designated as Series A, Series B, Series C, Series D, and Series E preferred stock in the amounts included in the table below.

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Convertible Preferred Stock (Predecessor)

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Legacy Adagio classified convertible preferred stock as temporary equity on the accompanying condensed consolidated balance sheets, as all such preferred stock was redeemable either at the option of the holder or upon an event outside the control of Legacy Adagio. The requirements of a deemed liquidation event, as defined within its amended and restated certificate of incorporation filed in November 2020, were not entirely within Legacy Adagio’s control. In the event of such a deemed liquidation event, the proceeds from the event would have been distributed in accordance with the liquidation preferences, provided that the holders of preferred stock had not converted their shares into common stock. Legacy Adagio recorded the issuance of preferred stock at the issuance price less related issuance costs. Legacy Adagio had not adjusted the carrying value of outstanding preferred stock to its liquidation preference because a deemed liquidation event was not probable as of the end of the reporting period.

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During the periods from January 1, 2024, to July 30, 2024 (Predecessor), the following transactions were executed:

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There were no preferred stock transactions during the year ended December 31, 2024 (Successor).

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The following table summarizes information related to the issuance of Legacy Adagio’s preferred stock as of June 30, 2024 (Predecessor) (in thousands, except share data):

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(1)The carrying value reflects the gross proceeds received from the sale of the preferred stock less issuance costs.

The relative rights, terms, privileges, and restrictions granted to or imposed upon preferred stockholders are described below:

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Preferred Stock - Dividends

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Prior and in preference to any declaration or payment of any dividends to the holders of common stock, the holders of preferred stock were entitled to receive dividends out of any assets legally available therefor, at the rate of eight percent (8%) of the original issue price per share per annum. The original issue price of Series A, Series B, Series C, Series D, and Series E was $9.23, $13.04, $16.30, $20.16, and $22.61, respectively. The dividends were not cumulative.

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In the event that the dividend amount declared by the Board of Directors of Legacy Adagio were insufficient to permit payment of the full aforesaid dividends, such dividends would have been paid ratably to each holder of preferred stock in proportion to the dividend amounts to which each holder of preferred stock was entitled. After payment of the full amount of the aforesaid dividends, any additional dividends declared would have been distributed to the holder of common stock and preferred stock in proportion to the number of shares of common stock that were held by such holder on an as-converted to common stock basis.

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No dividends on preferred stock or common stock had been declared by the Board of Directors as of June 30, 2024 (Predecessor) or as of the Closing date.

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Liquidation Preference

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In the event of liquidation of Legacy Adagio, including a merger, acquisition, or sale of all or substantially all the assets of Legacy Adagio, holders of preferred stock were entitled to receive an amount equal to the original issue price of each share of preferred stock held plus any dividends declared but not yet paid, prior to any distribution of assets or surplus funds of Legacy Adagio to common stock shareholders. After payment had been made to the holders of the preferred stock of the full amounts to which they were entitled as noted above, the remaining assets would have been distributed among the holders of the common stock pro rata based on the number of shares of common stock held by each holder.

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If, at the time of liquidation, the assets were insufficient to permit full payment of the liquidation preferences of the series listed in the order above, the assets would have been distributed ratably among the holders of the series in proportion to the full preferential amount each such holder was otherwise entitled to receive in respect to such shares.

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Voting Rights

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So long as the shares of preferred stock that were convertible into at least 1,000,000 shares of common stock (subject to appropriate adjustment in the event of any stock dividends, stock split, combination or other similar recapitalization with respect to the common stock) were issued and outstanding, the holders of preferred stock, voting as a separate class on an as-converted to common stock basis, had the right to elect four members of the Board of Directors of Legacy Adagio. The holders of common stock, voting as a separate class, had the right to elect one member of the Board of Directors. The remaining directors would be elected by the holders of the common stock and the preferred stock, voting together as a single class on an as-converted to common stock basis.

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On all other matters, the holders of the preferred stock had full voting rights and powers equal to the voting rights and powers of the holders of common stock.

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Fractional votes by the holders of preferred stock were not permitted and any fractional voting rights would be rounded to the nearest whole number.

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Conversion Rights

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Each share of preferred stock was convertible, at the option of the holder, into shares of common stock without the payment of any additional consideration. The preferred stock was convertible into the number of fully paid and nonassessable shares of common stock, which results from dividing the conversion price per share in effect for the preferred stock at the time of conversion into the per share conversion value. The initial per share conversion price of Series A, Series B, Series C, Series D, and Series E was $9.23, $13.04, $16.30, $20.16, and $22.61, respectively. The initial conversion price was subject to adjustment for antidilution provisions, as defined. The per share conversion value of Series A, Series B, Series C, Series D, and Series E was $9.23, $13.04, $16.30, $20.16, and $22.61, respectively.

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Each share of preferred stock would be automatically be converted into shares of common stock at the then effective conversion rate immediately upon the earlier of (i) the election of the holders of a majority of the outstanding shares of preferred stock, voting as a separate class on an as-converted to common stock basis, or (ii) the closing of the sale of the Legacy Adagio common stock in a firm commitment, underwritten public offering registered under the Securities Act of 1933, as amended, with aggregate offering proceeds to Legacy Adagio (before deduction for underwriters’ discounts and expenses relating to the issuance) of at least $75 million and a public offering price per share equal to at least $67.83 (subject to adjustments for stock dividends, splits, combinations and similar events).

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Protective Provisions

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So long as there were at least 1,000,000 shares of preferred stock outstanding, Legacy Adagio shall not (by merger, reclassification, amendment or otherwise), without first obtaining the approval of the holders of at least seventy percent (70%) of the then outstanding shares of preferred stock, voting separately as a class, to, among other things: (i) amend the certificate of incorporation or bylaws; (ii) adversely alter or change the rights, preferences or privileges of the preferred stock; (iii) increase or decrease the aggregate number of authorized shares of any class of the capital stock of Legacy Adagio.

So long as shares of Series E preferred stock that were convertible into at least 500,000 shares of common stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the common stock) were issued and outstanding, Legacy Adagio did not, directly or indirectly (by merger, reclassification, amendment or otherwise), without first obtaining the approval of the holders of at least a majority of the voting power of the then outstanding shares of Series E preferred stock, voting separately as a class, do, among other things: (i) amend, alter, repeal or waive any provision of the certificate of incorporation or bylaws of Legacy Adagio in a manner that adversely affected the holders of the Series E preferred stock in a manner different from any other series of preferred stock; (ii) create or authorize the creation of or issue any other security convertible into or exercisable for any equity security having rights, preferences or privileges senior to the Series E preferred stock; or (iii) increase or decrease the authorized number of shares of Series E preferred stock.

Common Stock (Predecessor)

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Prior to the Business Combination, each share of Legacy Adagio common stock was entitled to one vote. As of December 31, 2024 (Predecessor), Legacy Adagio was authorized to issue up to 6,594,946 of common stock at a par value of $0.001 per share out of which 786,510 shares were issued and 779,908 shares were outstanding.

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On the Closing Date, as explained in Note 3 - Forward Merger, each share of Legacy Adagio issued and outstanding prior to the Closing Date was converted into the Company’s common stock based on the exchange ratio set forth in the Business Combination Agreement.

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Common Stock (Successor)

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As of June 30, 2025 (Successor), the Company’s certificate of incorporation, as amended and restated, authorized the Company to issue up to 210,000,000 of common stock at a par value of $0.0001 per share, and 20,000,000 shares of preferred stock, par value $0.0001 per share. As of June 30, 2025 (Successor), 15,381,565 shares were issued and outstanding, including 1,147,500 Sponsor Earnout (as defined below).

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In September 2024, the Company issued 1,147,500 shares of the Company’s Common Stock (such issuance, the “Sponsor Earnout”) to the AYRA Sponsor under the Sponsor Letter Agreement dated February 13, 2024 (“the Sponsor Letter Agreement”). Pursuant to the agreement, the Sponsor Earnout shall be unvested and vests upon the earlier of: (i) During the period from the effective time to the 10th anniversary of the Closing Date (the “Earn-Out Period”), the stock price of the Company’s Common Stock equals to or exceeds $24.00 per share for any 20 trading days within any 30 trading day period from and after the Closing Date and (ii) immediately prior to the consummation of a company sale during the Earn-Out Period.

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As of the reporting date, the vesting of the Sponsor Earnout was not considered probable.

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According to ASC 815, it is determined that the Sponsor Earnout is indexed to the Company’s common stock and classified as equity and is initially measured at fair value and not subsequently remeasured. The Sponsor Earnout vests when the Company’s stock price meets a stated price or there is a company sale during the earnout period. Upon meeting either vesting condition, the same number of the Company’s common stock would be issued and no longer subject to forfeiture or cancellation. The Sponsor Earnout meets the ASC 815-40 indexation guidance. Specifically, the stated stock price and company sale, as the exercise contingencies, do not preclude equity indexation and there is no variability in the number of shares issuable under the Sponsor Earnout. Additionally, the Sponsor Earnout at the issuance meets the ASC 815-40 equity classification criterion as the Company has sufficient authorized shares available to settle the Sponsor Earnout and all the antidilution adjustments are in the control of the Company.

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The holders of the Company’s common stock are entitled to receive dividends whenever funds are legally available, when and if declared by the Company’s Board of Directors. As of June 30, 2025 (Successor), no cash dividend has been declared to date. Each share of the Company’s common stock is entitled to one vote.

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The table below summarizes the number of shares of common stock outstanding immediately following the Closing:

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The table below summarizes the Company’s reserved common stock for further issuance as of June 30, 2025 (Successor) and December 31, 2024 (Successor):

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