XML 24 R18.htm IDEA: XBRL DOCUMENT v3.24.2.u1
Mezzanine Equity
 6 Months Ended
Jun. 30, 2024
Equity [Abstract]  
Mezzanine Equity

Note 11 – Mezzanine Equity

 

In May 2023, the Company issued to OC III LFE 85,412 shares of non-convertible Series C Preferred Stock, $0.01 par value per share, with an initial stated and fair value of $85,412 or $1,000 per share (the “Preferred Stock”). As of June 30, 2024, 85,412 shares of the Preferred Stock remain issued and outstanding. The Company classifies the Preferred Stock as mezzanine equity (temporary equity outside of permanent equity) because a deemed liquidation event following a change of control may require redemption of the Preferred Stock that is not solely within the control of the Company.

 

The Preferred Stock ranks senior to the Common Stock with respect to payment of dividends and distribution of assets upon liquidation, dissolution and winding up. Dividends accrue at a rate of 17.5% per annum on the initial stated value of the Preferred Stock. Accrued dividends, whether or not declared, are cumulative. OC III LFE will not participate in any dividends paid to holders of Common Stock.

The Company may redeem outstanding shares of Preferred Stock at any time by payment of the initial stated value plus accrued dividends. If the Company has not redeemed all of the outstanding shares of Preferred Stock on or prior to the fourth anniversary of issuance, the dividend rate will increase by 0.5% for every quarter thereafter until redeemed in full (the “Dividend Rate Increase”). OC III LFE has the right to request the Company redeem all of the outstanding shares of Preferred Stock at any time after the sixth

anniversary of issuance. If the Company does not redeem all of the outstanding shares of Preferred Stock within six months after receipt of a redemption request, OC III LFE will be entitled to certain limited voting rights.

The Preferred Stock has similar characteristics of an “Increasing Rate Security” as described by SEC Staff Accounting Bulletin Topic 5Q, Increasing Rate Preferred Stock. As a result, and as the Company has the ability to redeem all of the outstanding shares of the Preferred Stock before the occurrence of a Dividend Rate Increase, the discount on outstanding shares of Preferred Stock is considered an unstated dividend cost that is amortized over the period preceding commencement of the Dividend Rate Increase using the effective interest method, by charging imputed dividend cost against retained earnings, or additional paid in capital in the absence of retained earnings, and increasing the carrying amount of the outstanding shares of Preferred Stock by a corresponding amount. Accordingly, the discount is amortized over four years using the effective yield method. Issuance costs of $2,301 were allocated against the outstanding shares of the Preferred Stock upon issuance. The Company recognized discount amortization of $143 and $287 during the three and six months ended June 30, 2024, respectively, and $57 during the three and six months ended June 30, 2023.