13. Temporary Equity

Overview

As of June 30, 2026, the Company’s temporary equity consists of the Redeemable Series A Convertible Preferred Stock issued on March 31, 2026, in connection with the March 2026 PIPE (as defined in Note 15). The Operating Subsidiary’s Series A Redeemable Preferred Units, which had been classified as temporary equity in prior periods, were fully redeemed on March 31, 2026, as described below.

Part I — Redeemable Preferred Units (Extinguished March 31, 2026)

In connection with the Company's emergence from Chapter 11 bankruptcy on December 7, 2023, the Operating Subsidiary issued 10,449,863 Series A Redeemable Preferred Units (the "Preferred Units") to CDSS, an entity controlled by Goldman Sachs, representing a 37.5% equity interest in the Operating Subsidiary. The Preferred Units were classified as a redeemable noncontrolling interest within temporary equity, initially measured at fair value of $13.9 million and subsequently remeasured under the hypothetical liquidation at book value ("HLBV") method. On March 31, 2026, the Operating Subsidiary redeemed all outstanding Preferred Units for $83.5 million, funded with a portion of the net proceeds from the March 2026 PIPE, following which the Operating Subsidiary became a wholly owned subsidiary of the Company. The terms and redemption of the Preferred Units are described further in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2026 (see also Note 12).

During the three months ended June 30, 2025, the Preferred Units were outstanding, and a portion of the Operating Subsidiary’s net income (loss) was allocated to them under the HLBV method, as reflected in net income (loss) attributable to redeemable noncontrolling interests. The Preferred Units were not outstanding as of June 30, 2026 nor March 31, 2026.

Part II — Redeemable Series A Convertible Preferred Stock

Issuance

On March 31, 2026, in connection with the March 2026 PIPE, the Company issued 80,000 shares of Redeemable Series A Convertible Preferred Stock (the "Series A Preferred Stock") to funds managed by Monarch Alternative Capital LP ("Monarch") at an initial stated value of $1,000 per share, for an aggregate purchase price of $80.0 million. As redemption of the Series A Preferred Stock is not solely within the Company's control, it is classified as temporary equity in accordance with ASC 480. Holders of the Series A Preferred Stock vote together with common stockholders on an as-converted basis, hold separate class voting rights over certain significant corporate actions, and have the right to designate directors to the Company's board, subject to certain ownership thresholds. The Series A Preferred Stock is convertible at the holder's option into common stock and had an initial conversion price of $5.00 per share, subject to customary anti-dilution adjustments.

Dividends

The Series A Preferred Stock accrues a cumulative paid-in-kind ("PIK") dividend at an initial rate of 5.00% per annum on the original issue price, as increased by prior PIK dividends, compounding annually. The dividend rate was subject to increase by 200 basis points if the Company's common stock was not listed on a U.S. national securities exchange within 18 months of the closing date, and by additional amounts thereafter. In addition, beginning on the fourth anniversary of the March 31, 2026 closing date, the dividend rate for each quarterly measurement period increases by 200 basis points if certain minimum financial metrics are not satisfied as of the applicable measurement date, or by 100 basis points if such metrics are satisfied, in each case subject to a maximum dividend rate of 13.0% per annum. The Series A Preferred Stock also participates in any dividends or distributions paid on the common stock on an as-converted basis. See Note 20 – Subsequent Events regarding our July 8, 2026 Nasdaq listing, which renders the 18-month listing step-up inapplicable.

The following table presents the activity in the Redeemable Series A Convertible Preferred Stock since issuance (in thousands):

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Conversion

The Series A Preferred Stock is initially recorded at its allocated purchase price, net of $6.0 million of issuance costs, with cumulative PIK dividends recorded as an increase to the carrying amount. As of June 30, 2026, the Series A Preferred Stock is not currently redeemable or probable of redemption and, therefore, is not subject to remeasurement to its redemption value. Following the listing of the Company's common stock on Nasdaq, the Company has the right to require conversion of all (but not less than all) outstanding Series A Preferred Stock into common stock at the then-applicable conversion price if the volume-weighted average trading price of the common stock equals or exceeds $15.00 for at least 20 out of 30 consecutive trading days, subject to certain conditions including an effective resale registration statement, minimum average daily trading volume, and a float held by non-affiliates of no less than $425 million.

Redemption

The Series A Preferred Stock is redeemable at the option of the holder upon certain breaches by the Company, subject to available funds and the restrictions of the Exit Note Purchase Agreement. Because redemption is contingent upon events not solely within the Company's control, the Series A Preferred Stock is classified as temporary equity rather than permanent equity.

Governance Rights

So long as Monarch holds at least 20% of the Company's common stock on an as-converted basis, it has the right to designate two independent directors to the Company’s Board of Directors (the “Board”). Monarch retains the right to designate one director while holding at least 10% on an as-converted basis, and board observer rights at 5% ownership. Monarch also holds broad consent rights over major corporate actions while a substantial portion of the Series A Preferred Stock remains outstanding, as well as certain participation rights in any of the Company’s future issuances.

Registration Rights

In connection with the issuance of the Series A Preferred Stock, the Company entered into a registration rights agreement pursuant to which the Company agreed to file a resale registration statement with the SEC registering the resale of the shares of common stock underlying the Series A Preferred Stock. The resale registration statement was filed with the SEC on April 28, 2026.