9. Mandatorily Redeemable Preferred Stock

Series D Preferred Stock

On May 11, 2026, pursuant to the Exchange Agreement, dated May 11, 2026, by and between the Company and Clarkston Companies, Inc., the Company issued 1,600 shares of the Company’s newly designated Series D Preferred Stock, no par value, to Clarkston Companies, Inc., an entity affiliated with Jeffrey Hakala, a member of the Board of Directors of the Company, in exchange for 1,600 shares of the Company’s Series C Preferred Stock. In connection with the exchange, on May 11, 2026, the Company filed a Certificate of Designation designating 1,600 shares of Series D Preferred Stock. The Series D Preferred Stock has the same terms as the Series C Preferred Stock but with a maturity date of April 2, 2028 instead of April 2, 2027. The exchange involved no cash consideration and was effected in reliance on Section 3(a)(9) of the Securities Act of 1933, as amended. Following the exchange, 1,600 shares of Series D Preferred Stock were outstanding and no shares of Series C Preferred Stock were outstanding. The Company recorded $300,000 and $600,000 of interest expense for the three and six months ended June 30, 2026, respectively, related to the dividends from the Series C and Series D Preferred Stock.

Series C Preferred Stock

On December 23, 2025, the Company issued a total of $8.0 million of its newly designated non-convertible mandatorily redeemable Series C Preferred Stock, no par value, through a private placement of 1,600 preferred shares priced at $5,000 per share that matures on April 2, 2027, to Clarkston Companies, Inc., an entity affiliated with Jeffrey Hakala, a member of the Board of Directors of the Company.

The Series C Preferred Stock required quarterly dividend payments at a dividend rate of 15.0% per annum.

Series B Preferred Stock

On February 27, 2026, the Company redeemed the $7.5 million Series B Preferred Stock.

On February 27, 2025 and March 3, 2025, the Company issued a total of $7.5 million of its newly designated non-convertible mandatorily redeemable Series B Preferred Stock, no par value, through a private placement of 1,500 preferred shares priced at $5,000 per share that matures on December 31, 2026, and issued the Purchaser (as defined below) common stock purchase warrants (the "warrants") to purchase 571,428 shares at an exercise price of $10.50 per share. The warrants will expire on January 31, 2027.

The Series B Preferred Stock was sold to Clarkston 91 West LLC (the "Purchaser"), an entity affiliated with Gerald and Jeffrey Hakala, who were both members of the Board of Directors of the Company at such time. The Company used the proceeds for working capital and general corporate purposes. Each share of the Series B Preferred Stock entitled the Holder to 428 votes on each matter properly submitted to the Company's shareholders for their vote, however the aggregate voting power of all outstanding shares of the Series B Preferred Stock shall not exceed 19.99% of the aggregate voting power of all voting securities.

The $7.5 million of Series B Preferred Stock, and the warrants issued contemporaneously, were both fair valued as of the issuance date. The warrants were valued at $2.0 million and the Preferred Stock was valued at $5.5 million. The fair value of the warrants was recorded as additional paid-in capital. The fair value measurement of the mandatorily redeemable preferred stock was determined using a trinomial lattice model. The model was selected in consideration of the Company's optional redemption rights. Key assumptions in the analysis included the following as of the date of issuance:

The total liability recorded for the Preferred Stock was $5.5 million. The Preferred Stock liability was accreted to its maximum redemption value on the date of redemption. The increase in the redemption amount was recorded as interest expense. The Series B Preferred Stock accreted by $1.1 million for the three and six months ended June 30, 2026. The Series B Preferred Stock accreted by $233,000 and $308,000 for the three and six months ended June 30, 2025, respectively.