Convertible Redeemable Preferred Shares

12 Months Ended

Dec. 31, 2024

Convertible Redeemable Preferred Shares [Abstract]

CONVERTIBLE REDEEMABLE PREFERRED SHARES

NOTE 15 — CONVERTIBLE REDEEMABLE PREFERRED SHARES

 We have various series of convertible redeemable preferred shares (collectively, “Preferred Shares”) issued and outstanding. The table below presents the number of authorized and outstanding shares of our various series convertible redeemable preferred shares as of December 31, 2024 and 2023.

	2024				2023
Series	Authorized		Issued and Outstanding		Authorized		Issued and Outstanding
A-1		16,518,502		15,181,000		16,518,502		15,181,000
A-2		14,244,000		14,244,000		14,244,000		14,244,000
A-3		3,536,099		2,828,899		3,536,099		2,828,899
B-1		13,111,999		13,111,999		13,111,999		13,111,999
B-2		9,090,900		9,090,900		9,090,900		9,090,900
B-3		2,100,000		2,100,000		2,100,000		2,100,000
C		13,684,800		13,684,800		13,684,800		13,684,800
D		15,000,000		12,963,577		15,000,000		11,747,760
		87,286,300		83,205,175		87,286,300		81,989,358

During the year ended December 31, 2022, we issued 2,100,000 shares of Series B-3 preferred shares in connection with an exercise of a Series B-3 preferred stock warrant that was issued during 2020. Total proceeds from the exercise were $10,000,000. Upon exercise of the warrant, the intrinsic value of the preferred stock was $40,379,000. We also recognized preferred stock redemption value accretion in the same amount upon issuance of the preferred stock.

As of January 1, 2022, we had an outstanding preferred share subscription receivable in the amount of $73,723,814 that originated from our July 16, 2020 original issuance of preferred shares Series A-1 through B-2. During the year ended December 31, 2022, we received the entire receivable balance.

On April 19, 2023, we issued 603,424 shares of Series D preferred shares to an accredited investor for total proceeds of $20,000,000.

On April 26, 2023, by way of a fourth amendment to our memorandum of association, our share capital with respect to our Series D preferred shares was increased to 15,000,000 shares from 11,144,336 to accommodate future Series D issuances.

On January 10, 2024, we issued 1,215,817 shares of Series D preferred shares to an accredited investor for total proceeds of $40,297,282.

The following table provides a breakdown of our various series of convertible redeemable preferred shares that are aggregated on our consolidated statements of financial position as well as presents the activity for the year ended December 31, 2022, 2023 and 2024.

	Series A-1 Preferred Shares					Series A-2 Preferred Shares					Series A-3 Preferred Shares					Series B-1 Preferred Shares					Series B-2 Preferred Shares
	Shares		Amount			Shares		Amount			Shares		Amount			Shares		Amount			Shares		Amount
Beginning balances as of January 1, 2022		15,181,000	$	323,106,619			14,244,000	$	304,421,139			2,828,899	$	60,508,715			13,111,999	$	284,731,410			9,090,900	$	201,638,532
Issuance of Preferred Shares		–		–			–		–			–		–			–		–			–		–
Receipt of subscription receivable		–		–			–		–			–		–			–		–			–		–
Preferred Shares redemption value accretion		–		(21,004,739	)		–		(16,265,019	)		–		(3,082,066	)		–		(3,347,911	)		–		6,724,896
Balances as of December 31, 2022		15,181,000	$	302,101,880			14,244,000	$	288,156,120			2,828,899	$	57,426,649			13,111,999	$	281,383,499			9,090,900	$	208,363,428
Issuance of Preferred Shares		–		–			–		–			–		–			–		–			–		–
Preferred Shares redemption value accretion		–		50,400,940			–		46,008,120			–		9,052,478			–		37,500,317			–		21,909,069
Balances as of December 31, 2023		15,181,000	$	352,502,820			14,244,000	$	334,164,240			2,828,899	$	66,479,127			13,111,999	$	318,883,816			9,090,900	$	230,272,497
Issuance of Preferred Shares		–		–			–		–			–		–			–		–			–		–
Preferred Shares redemption value accretion		–		132,985,560			–		122,213,520			–		24,187,086			–		104,371,512			–		65,636,298
Balances as of December 31, 2024		15,181,000	$	485,488,380			14,244,000	$	456,377,760			2,828,899	$	90,666,213			13,111,999	$	423,255,328			9,090,900	$	295,908,795

	Series B-3 Preferred Shares				Series C Preferred Shares				Series D Preferred Shares					Series A-1 thru B-2 Subscription			Total Preferred Shares
	Shares		Amount		Shares		Amount		Shares		Amount			Receivable			Shares		Amount
Beginning balances as of January 1, 2022		–	$	–		13,684,800	$	325,277,607		11,144,336	$	405,189,642		$	(73,723,814	)		79,285,934		1,831,149,850
Issuance of Preferred Shares		2,100,000		10,000,000		–		–		–		–			–			2,100,000		10,000,000
Receipt of subscription receivable		–		–		–		–		–		–			73,723,814			–		73,723,814
Preferred Shares redemption value accretion		–		40,379,000		–		46,538,409		–		1,467,179			–			–		51,409,749
Balances as of December 31, 2022		2,100,000	$	50,379,000		13,684,800	$	371,816,016		11,144,336	$	406,656,821		$	–			81,385,934	$	1,966,283,413
Issuance of Preferred Shares		–		–		–				603,424		20,000,000			–			603,424		20,000,000
Preferred Shares redemption value accretion		–		5,586,000		–		23,811,552		–		145,811,524			–			–		340,080,000
Balances as of December 31, 2023		2,100,000	$	55,965,000		13,684,800	$	395,627,568		11,747,760	$	572,468,345		$	–			81,989,358	$	2,326,363,413
Issuance of Preferred Shares		–		–		–		–		1,215,817		40,297,282			–			1,215,817		40,297,282
Preferred Shares redemption value accretion		–		12,810,000		–		62,950,080		–		(30,066,018	)		–			–		495,088,038
Balances as of December 31, 2024		2,100,000	$	68,775,000		13,684,800	$	458,577,648		12,963,577	$	582,699,609		$	–			83,205,175	$	2,861,748,733

The major rights of our Preferred Shares are discussed below:

Voting Rights

Each holder of our Preferred Shares is entitled to the number of votes as the number of Class A ordinary shares into which each holder’s preferred shares are convertible. Preferred shareholders and ordinary shareholders vote on all matters as a single class.

Dividend Rights

In the event our board declares a dividend, our Preferred Shares are entitled to receive a non-cumulative dividend of 8% per annum based on their respective original issue price prior to any ordinary share receiving a dividend. If the declared dividend is sufficient to cover the 8% minimum dividend, then the Preferred Shares will participate in the remaining dividend amount on an as-converted basis with the ordinary shares. As of December 31, 2024, no dividends have been declared or paid on Preferred Shares.

Conversion Rights

Our Preferred Shares have an optional conversion feature and an automatic conversion feature. Upon a conversion, the Preferred Shares are convertible into Class A ordinary shares. The current conversion ratio for our Preferred Shares is 1 for 3.3593 and may change in the future due to standard antidilutive adjustments. Preferred shareholders may convert their preferred share holdings at any time in whole or in part. Our Preferred Shares will automatically convert in the event of a qualified public offering or an alternative listing, including through merger with an existing listed company or a special-purpose acquisition company. Our Series C preferred shares will automatically convert in the event holders of more than 50% of such shares elect to convert their shares. Our Series D preferred shares will automatically convert in the event holders of more than 66% of such shares elect to convert their shares. As of December 31, 2024, no holders have elected to convert their preferred shares.

Redemption Rights

In the event an automatic conversion or liquidation event has not occurred, our Preferred Shares become redeemable at the option of the holder on the earlier of June 10, 2026, or the date in which the principal business cannot be continued due to certain adverse circumstances (e.g., material integrity problems or fraud of our cofounders, loss of our business qualification, licenses, permits, etc.). The redemption amount payable to the holders is determined as the higher of a 10% per annum return from the preferred shares original issuance date through the date of redemption or the fair market value on the redemption date. As of December 31, 2024, no event has occurred which would allow holders of our Preferred Shares to exercise their redemption option.

The following presents the aggregate and per share redemption value of each preferred share series as of December 31, 2024 and 2023:

	2024				2023
Series	Total		Per Share		Total		Per Share
A-1	$	485,488,380	$	31.98	$	352,502,820	$	23.22
A-2		456,377,760	$	32.04		334,164,240	$	23.46
A-3		90,666,213	$	32.05		66,479,127	$	23.50
B-1		423,255,328	$	32.28		318,883,816	$	24.32
B-2		295,908,795	$	32.55		230,272,497	$	25.33
B-3		68,775,000	$	32.75		55,965,000	$	26.65
C		458,577,648	$	33.51		395,627,568	$	28.91
D		582,699,609	$	44.95		572,468,345	$	48.73
	$	2,861,748,733			$	2,326,363,413

Liquidation Rights

Our Preferred Shares are entitled to a liquidation preference in the event of a liquidation event. A liquidation event may include the following items:

● Any consolidation, reorganization, merger or any other arrangement whereby our shareholders prior to such transaction do not own at least 50% of the surviving entity.

● A sale, lease, transfer or other disposition of all or substantially all of our assets.

● Exclusive licensing of all or substantially all of our intellectual property rights to a third party.

● Any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary.

As of December 31, 2024, no event has occurred which would allow holders of our Preferred Shares to exercise their liquidation rights.

The following presents the liquidation preferences of our preferred shares by series as of December 31, 2024 and 2023:

As of December 31, 2024
Series	Outstanding Shares		Original Issue Price		Liquidation Multiplier		Liquidation Preference
A-1		15,181,000	$	0.45		1.2	$	8,197,740
A-2		14,244,000	$	0.91		1.0		12,962,040
A-3		2,828,899	$	0.97		1.0		2,744,032
B-1		13,111,999	$	2.29		1.0		30,026,478
B-2		9,090,900	$	3.85		1.0		34,999,965
B-3		2,100,000	$	5.00		1.0		10,500,000
C		13,684,800	$	8.41		1.0		115,089,168
D		12,963,577	$	33.14		1.0		429,612,942
Aggregate liquidation preference							$	644,132,365

As of December 31, 2023
Series	Outstanding Shares		Original Issue Price		Liquidation Multiplier		Liquidation Preference
A-1		15,181,000	$	0.46		1.2	$	8,379,912
A-2		14,244,000	$	0.94		1.0		13,389,360
A-3		2,828,899	$	0.99		1.0		2,800,610
B-1		13,111,999	$	2.29		1.0		30,026,477
B-2		9,090,900	$	3.85		1.0		34,999,965
B-3		2,100,000	$	5.00		1.0		10,500,000
C		13,684,800	$	8.41		1.0		115,089,168
D		11,747,760	$	33.14		1.0		389,320,766
Aggregate liquidation preference							$	604,506,258

In an event of liquidation, the order of liquidation distribution is first Series D followed by Series C, B-3, B-2, B-1, A-3, A-2 and then A-1. If in the event of a liquidation our assets are insufficient to distribute and satisfy a particular Series’ liquidation preference in its entirety, then the assets available for distribution will be distributed ratably in proportion to the holders of that respective preferred series’ liquidation preference.

Right of Participation

Our holders of Preferred Shares (“Participation Right Holders”) have rights of participation (“Right of Participation”) with respect to the issuance of new equity securities. The Right of Participation does not apply to the following issuances of securities:

● Ordinary shares issued or reserved under our Global Share Incentive Plan.

● Ordinary shares issued in connection with a share split, consolidation or share dividend.

● Ordinary shares issuable upon conversion of our Preferred Shares.

● Equity securities issued in connection with a public offering.

● Any equity securities issued in connection with the acquisition of another corporation or entity by consolidation, merger, purchase of assets, or other reorganization in which we acquire, in a single transaction or a series of related transactions, all or substantially all assets of other corporation or entity or 50% percent or more of the equity ownership or voting power of such other corporation or entity.

The Right of Participation shall immediately and automatically expire, terminate, and cease to have any force or effect upon the consummation of a qualified public listing or upon receipt by Participation Right Holders of all liquidation proceeds payable in accordance with our articles following a liquidation event.