Quarterly report pursuant to Section 13 or 15(d)

Mezzanine Equity

v3.20.2
Mezzanine Equity
9 Months Ended
Sep. 30, 2020
Temporary Equity Disclosure [Abstract]  
MEZZANINE EQUITY

NOTE 10 – MEZZANINE EQUITY

 

Series A Redeemable Convertible Preferred Stock

 

The following table summarizes the Company’s Series A Redeemable Convertible Preferred Stock, par value $0.0001 per share (“Series A preferred stock”) activities for the nine months ended September 30, 2020 (in thousands, except share amounts):

 

 

 

Shares

 

 

Amount

 

Series A preferred stock as of December 31, 2019

 

 

55,000

 

 

$

38,928

 

Deemed and imputed dividends on Series A preferred stock

 

 

-

 

 

 

11,220

 

Accrued Series A preferred stock dividends

 

 

-

 

 

 

5,450

 

Conversion of Series A preferred stock to Class A common stock

 

 

(3,000

)

 

 

(4,691

)

Series A preferred stock as of September 30, 2020

 

 

52,000

 

 

$

50,907

 

 

In accordance with the Series A preferred stock purchase agreement, subject to there being Series A preferred stock outstanding, the Company will issue an additional 4,399,992 warrants to the purchasers of Series A preferred stock in quarterly installments of 488,888 warrants beginning nine months after May 24, 2019. During the nine months ended September 30, 2020, the Company issued 1,466,664 additional warrants to the purchasers of Series A preferred stock.

 

In the third quarter of 2020, a holder of the Series A preferred stock converted 3,000 shares of Series A preferred stock and accrued dividends into 523,973 shares of Class A common stock pursuant to the certificate of designations authorizing and establishing the rights, preferences and privileges of the Series A preferred stock. Accordingly, the Company recorded a reduction of $4.7 million in the carrying value of the Series A preferred stock.

 

As of September 30, 2020, 52,000 shares of Series A preferred stock were outstanding and convertible into 9,146,254 shares of Class A common stock, and dividends accrued and outstanding with respect to the Series A preferred stock were $9.5 million and reflected in the carrying value of Series A preferred stock.

 

Series B Redeemable Convertible Preferred Stock

 

The following table summarizes the Company’s Series B Redeemable Convertible Preferred Stock, par value $0.0001 per share (“Series B preferred stock”) activities for the nine months ended September 30, 2020 (in thousands, except share amounts):

 

 

 

Shares

 

 

Amount

 

Series B preferred stock as of December 31, 2019

 

 

-

 

 

$

-

 

Proceeds from issuance of Series B preferred stock

 

 

21,000

 

 

 

21,000

 

Issuance of Series B preferred stock to senior secured term loan lenders

 

 

1,050

 

 

 

1,050

 

Issuance cost associated with Series B preferred stock

 

 

-

 

 

 

(1,413

)

Accrued Series B preferred stock dividends

 

 

-

 

 

 

1,347

 

Series B preferred stock as of September 30, 2020

 

 

22,050

 

 

$

21,984

 

 

On March 31, 2020, the Company entered into a purchase agreement with certain institutional investors (collectively, the “Purchasers”), pursuant to which the Company agreed to issue and sell in a private placement 21,000 shares of Series B preferred stock, for an aggregate purchase price of $21.0 million. On April 1, 2020 (the “Series B Closing Date”), the Purchasers purchased the Series B preferred stock. Two of the purchasers of the Series B preferred stock were affiliates of Crestview Partners, which held, prior to the issuance, an aggregate 36.67% ownership interest in the Company and is entitled to designate for nomination by the Company for election two directors to serve on the Company’s Board of Directors.

 

The Series B preferred stock ranks senior to the Class A common stock and Class B common stock and in parity with the Series A preferred stock, with respect to distributions. The Series B preferred stock has only specified voting rights, including with respect to the issuance or creation of senior securities, amendments to the Company’s Second Amended and Restated Certificate of Incorporation that negatively impact the rights of the Series B preferred stock and the payment of dividends on, or repurchase or redemption of, Class A common stock.

 

The Company has the option, but no obligation, to redeem the Series B preferred stock for cash. If the Company notifies the holders that it has elected to redeem the Series B preferred stock, a holder may instead elect to convert its shares of Series B preferred stock at the specified conversion price, which is initially $0.308 per share. The Series B preferred stock converted in response to a redemption notice will net settle for a combination of cash and Class A common stock.

 

Each holder of Series B preferred stock may convert all or any portion of its Series B preferred stock into Class A common stock based on the then-applicable liquidation preference, subject to anti-dilution adjustments, at any time, but not more than once per quarter, so long as any conversion is for at least $1.0 million based on the liquidation preference on the date of the conversion notice.

 

Following the eighteen-month anniversary of the Series B Closing Date, the Company may cause the conversion of all or any portion of the Series B preferred stock into Class A common stock if (i) the closing price of the Class A common stock is greater than 130% of the conversion price for 20 days over any 30-day trading period; (ii) the average daily trading volume of the Class A common stock exceeded 250,000 for 20 days over any 30-day trading period; and (iii) the Company has an effective registration statement on file with the Securities and Exchange Commission covering resales of the underlying Class A common stock to be received upon such conversion.

 

The Series B preferred stock was recorded as Mezzanine Equity, net of issuance cost, on the condensed consolidated balance sheets because it has redemption features upon certain triggering events that are outside the Company’s control, such as change in control.

 

As of September 30, 2020, 22,050 shares of Series B preferred stock were outstanding and convertible into 75,966,724 shares of Class A common stock, and dividends accrued and outstanding with respect to the Series B preferred stock was $1.3 million and reflected in the carrying value of Series B preferred stock.