Redeemable Preferred Stock

9 Months Ended

Sep. 30, 2022

Equity [Abstract]

Redeemable Preferred Stock

Redeemable Preferred Stock

In November 2021, the Company issued 41,250 shares of Series A Preferred Stock. The Series A Preferred Stock is convertible outside of the Company's control and in accordance with GAAP is classified as mezzanine equity, outside the stockholders’ equity (deficit) section, on our condensed consolidated balance sheets. The Series A Preferred Stock was initially recorded at fair value upon issuance in 2021, net of issuance costs. The holders of Series A Preferred Stock are entitled to vote with the holders of common stock on all matters submitted to a vote of stockholders of the Company. It is deemed probable that the Series A Preferred Stock could be redeemed for cash, and as such, the Series A Preferred Stock is required to be remeasured and adjusted to its maximum redemption value at the end of each reporting period. However, to the extent that the maximum redemption value of the Series A Preferred Stock does not exceed the fair value of the shares at the date of issuance, the shares are not adjusted below the fair value at the date of issuance. As of September 30, 2022 and December 31, 2021, the Series A Preferred Stock is carried at the maximum redemption value. The Series A Preferred Stock does not have a maturity date and therefore is considered as perpetual.

The Series A Preferred Stock has an 11% annual dividend calculated on the original investment of approximately $41.3 million accrued quarterly in arrears and compounded. Dividends are cumulative, and any declaration of dividends is at the discretion of the Company’s Board of Directors. If the Board does not declare a dividend in respect of any dividend payment date, the

amount of such accrued and unpaid dividend is added to the liquidation preference and compounds quarterly thereafter. During the three months ended September 30, 2022, the Board did not declare a dividend, and accordingly, $1.1 million was added to the liquidation preference of the Series A Preferred Stock, effectively increasing the carrying value of the Series A Preferred Stock. On June 8, 2022, the Company declared a $1.1 million cash dividend on the Series A Preferred Stock, which was paid in June 2022. On March 31, 2022, the Company declared a $1.1 million cash dividend on the Series A Preferred Stock which was included in accounts payable and accrued expense as of March 31, 2022, and paid in April 2022. There were no corresponding amounts for the three or nine months ended September 30, 2021, as there were no shares of Series A Preferred Stock outstanding during such periods.