Series Z Preferred Stock, and (iii) enter into a fundamental transaction such as a sale of the Company. Certain provisions of the Series Z Preferred Stock are as follows:
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Conversion: Upon obtaining stockholder approval at the Special Meeting, each share of Series Z automatically converted into 58.82 shares of common stock, subject to beneficial ownership limitations.
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Dividends: Series Z Preferred Stock was eligible to participate in any dividends with common stockholders on an as-converted basis
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Liquidation: In the event of the liquidation, dissolution, or winding up of the affairs of the Company (a “Liquidity Event”), prior to stockholder approval at the Special Meeting, the holders of Series Z Preferred Stock would have been entitled to receive a liquidation preference prior to any payment to the holders of common stock.
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Redemption: In the event the Company would have been unable to obtain an affirmative stockholder vote at the Special Meeting to permit conversion, each holder of Series Z Preferred Stock would have been entitled to elect, at the holder’s option, to have the shares of Series Z Preferred Stock be redeemed by the Company and equal to the estimated fair value of the Series Z Preferred Stock share at the time of redemption. Due to this redemption feature, as of December 31, 2022, the Series Z Preferred Stock was classified within temporary equity on the consolidated balance sheet.
The carrying value of the shares of Series Z is accreted to redemption value using the estimated fair value of the redemption value at each reporting period until the redeemable convertible preferred stock cease to be outstanding or the redemption right has expired. There was no accretion for the year ended December 31, 2022.
As more fully described in Note 19, “Subsequent Events”, in January 2023, following shareholder approval of the Merger Agreement Proposals at the Special Meeting, all outstanding Series Z Preferred Stock converted into shares of common stock.
Note 10. Stockholders’ Equity (Deficit)
Preferred Stock
The Restated Certificate of Incorporation, as amended, of the Company permits its Board of Directors to issue up to 5,000,000 shares of preferred stock, par value $0.01 per share, in one or more series, to designate the number of shares constituting such series, and fix by resolution, the powers, privileges, preferences and relative, optional or special rights thereof, including liquidation preferences and dividends, and conversion and redemption rights of each such series.
As of December 31, 2022, the Company has designated the following class of preferred stock:
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Series A: 1,500,000 authorized shares of Series A Convertible Preferred Stock
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Series B: 200,000 authorized shares of Series B Preferred Stock
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Series B1: 277,921 authorized shares of Series B1 Redeemable Convertible Preferred Stock
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Series B2: 98,685 authorized shares of Series B2 Redeemable Convertible Preferred Stock
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Series B3: 82,814 authorized shares of Series B3 Redeemable Convertible Preferred Stock
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Series B4: 82,814 authorized shares of Series B4 Redeemable Convertible Preferred Stock
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Series Z: 80,656 authorized shares of Series Z Redeemable Convertible Preferred Stock
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Series X: 5 authorized shares of Series X Preferred Stock
Series A Convertible Preferred Stock. The dividends on the Series A convertible preferred stock (“Series A Preferred Stock”) are payable semi-annually in arrears at the rate of 1% per annum, at the election of the Company, either in cash or additional duly designated, fully paid and nonassessable shares of Series A Preferred Stock. In the event of liquidation, dissolution, or winding up of the Company, after payment of debts and other liabilities of the Company, the holders of the Series A Preferred Stock then outstanding will be entitled to a distribution of $1 per share out of any assets available to shareholders.