Preferred Stock and PIPE Warrant |
6 Months Ended |
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Jun. 30, 2025 | |
| Equity [Abstract] | |
| Preferred Stock and PIPE Warrant | Preferred Stock and PIPE Warrant Series A Preferred Stock - Mezzanine Equity On the PIPE Closing Date, the Company and the PIPE Purchaser entered into the PIPE Purchase Agreement pursuant to which the Company agreed to issue and sell 20,000,000 shares of Series A Preferred Stock to the PIPE Purchaser for $2.00 per share for an aggregate purchase price of $40.0 million (the “Series A Preferred Stock Issuance”), subject to certain closing conditions described therein. The Series A Preferred Stock Issuance was consummated on the PIPE Closing Date. Preferential cumulative dividends accrue on each share of Series A Preferred Stock on a daily basis in arrears at 8.0% per annum and once accrued shall not be declared or paid but shall be added to the liquidation value of such share of Series A Preferred Stock. Subject to applicable law, upon the occurrence of a change of control, certain bankruptcy related events, a sale of all or substantially all assets of the Company or a material subsidiary thereof or a material breach by the Company of the terms of the Series A Preferred Stock, the Company is required to make an irrevocable and unconditional offer to holders of the Series A Preferred Stock to redeem all of the then-outstanding shares of Series A Preferred Stock (a “Mandatory Redemption”). The redemption price for each share of Series A Preferred Stock redeemed in a Mandatory Redemption is equal to an amount per share of 1.5x its liquidation value plus any accumulated and unpaid dividends that have not been added to the liquidation value as of the relevant date of determination. Upon the occurrence of certain bankruptcy related events, all outstanding Series A Preferred Stock will be deemed automatically surrendered to the Company, redeemed and extinguished in exchange for a promissory note. If the Company is prohibited by law from redeeming all shares of Series A Preferred Stock upon a Mandatory Redemption, then the Company shall redeem the maximum aggregate number of shares of Series A Preferred Stock permitted by law, on a pari passu basis. Any shares of Series A Preferred Stock that are not redeemed pursuant to the immediately preceding sentence shall remain outstanding. The Company classifies the Series A Preferred Stock as mezzanine equity (temporary equity) outside of permanent equity on the consolidated balance sheets. This classification reflects provisions in the PIPE Purchase Agreement that could require redemption of the shares upon the occurrence of a liquidation or deemed liquidation event, such as a change of control, which is not solely within the Company’s control. PIPE Warrant - Current Liability Pursuant to the PIPE Purchase Agreement, the Company also agreed to provide the PIPE Purchaser the contingent opportunity to participate in the potential future equity appreciation of the Company in the form of the PIPE Warrant that, similar to a structuring fee, would be issued and exercisable if and only if certain conditions were satisfied prior to May 7, 2026, including obtaining a required stockholder vote and additional Financing meeting specified criteria. If issued, the PIPE Warrant would provide for the issuance of an aggregate of 780,000,000 shares of common stock at an exercise price equal to $0.0000001 per share (subject to adjustments in certain events, including the Reverse Stock Split, and to be no less than the par value of the Company’s common stock) and the other terms to be set forth in the PIPE Warrant. Pursuant to the PIPE Purchase Agreement, the parties agreed that the PIPE Warrant would only be exercised upon consummation of a Subsequent Financing or, with the PIPE Purchaser’s consent, an Other Financing. If the Conditions to Exercise are satisfied, each PIPE Warrant will be deemed automatically exercised on a cashless, net-exercise basis at such time (the time immediately following such automatic exercise, the “Expiration Time”). The PIPE Warrant will terminate at the earlier of (i) the Expiration Time and (ii) May 7, 2026. Irrespective of the PIPE Warrant being a contingent instrument for which the conditions to issuance have not been satisfied, under applicable accounting guidance, the PIPE Warrant was required to be classified as a current liability at May 7, 2025 and to be remeasured at fair value at each balance sheet date, with changes in fair value recorded in other income (expense), net within the consolidated statements of operations and comprehensive loss. As a result, the Company recorded a current liability of $24.9 million as of May 7, 2025 based on the closing stock price of the Company’s common stock of $0.24 and taking into account the probability that a Subsequent Financing would be consummated. As of June 30, 2025, the closing stock price of the Company’s common stock increased to $0.27, resulting in an increase in the fair value of the PIPE Warrant of approximately $3.4 million using the same probability assumption. Changes in the fair value of the PIPE Warrant were recognized in other income (expense), net within the Company’s consolidated statements of operations and comprehensive loss. If the Company is unable to consummate a Financing, then the PIPE Warrant will not be issued and will have no accounting value. See Item 1A.-“Risk Factors—There can be no assurance that a Financing will be successfully consummated or achieve the anticipated results”. The PIPE Purchase Agreement also provides that, no later than 75 days (or 90 days if the staff of the SEC conducts a review of the applicable preliminary proxy statement) following the PIPE Closing Date, the Company would be required to convene a meeting of its stockholders to obtain stockholder approvals (collectively, the “Requisite Stockholder Approvals”) with respect to: (i) the issuance of shares of common stock issuable upon conversion of the Series A Preferred Stock, the exercise of the PIPE Warrants, and in connection with the Subsequent Financing (collectively, the “Issuable Common Shares”) and to effect any “change of control” in connection with the foregoing, in accordance with the rules of Nasdaq; (ii) an amendment to the Company’s certificate of incorporation to (a) effect a reverse stock split of the common stock (the “Reverse Stock Split”) at a ratio mutually acceptable to the Company and the holders of a majority of the outstanding Preferred Stock (the “Majority Holders”), (b) authorize that number of shares of common stock that, taking into account the Reverse Stock Split, is sufficient to authorize and issue Issuable Common Shares (the “Authorized Capitalization Amendment”), (c) set the par value of the common stock to an amount equal to the exercise price of the PIPE Warrants, and (d) provide that the Company’s stockholders may take action by written consent; and (iii) the issuance of common stock in the Subsequent Financing at a price per share of $0.05 (subject to adjustment in certain events, including the Reverse Stock Split). The PIPE Purchaser also agreed in the PIPE Purchase Agreement to vote all shares of common stock held by it prior to the PIPE Closing Date in favor of the Requisite Stockholder Approvals or, if there were insufficient votes in favor of granting the Requisite Stockholder Approvals, in favor of the adjournment of such meeting of the stockholders of the Company to a later date. The Company also agreed to use its reasonable best efforts to consummate a Subsequent Financing. The PIPE Purchase Agreement provides that the Subsequent Financing must be consummated, if at all, no later than 45 days following receipt of the Requisite Stockholder Approvals.
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