Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~August 1, 2023,~~May 6, 2024, the registrant had ~~120,377,903~~126,087,528 shares of Class A common stock, $0.0001 par value per share, outstanding, and 8,290,921 shares of Class B common Stock, $0.0001 par value per share, outstanding.

This Quarterly Report on Form 10-Q includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements.” These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “seeks,” “projects,” “intends,” “plans,” “may” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They may appear in a number of places throughout this Quarterly Report on Form 10-Q, including Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 1A, “Risk Factors,” and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our future results of operations, financial condition and liquidity; our prospects, growth, strategies and the markets in which FiscalNote operates. Such forward-looking statements are based on available current market material and management’s expectations, beliefs and forecasts concerning future events impacting FiscalNote. Factors that may impact such forward-looking statements include:

The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties described in the “Risk Factors” section of this Quarterly Report on Form 10-Q and the other documents filed by us from time to time with the U.S. Securities and Exchange Commission ("SEC"). The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on current expectations and beliefs concerning future developments and their potential effects on us and our business. There can be no assurance that future developments affecting us will be those that we have anticipated. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or

See accompanying notes to unaudited condensed consolidated financial statements.

Condensed Consolidated Statements of Operations and Comprehensive ~~Loss~~Income (Loss)

See accompanying notes to unaudited condensed consolidated financial statements.

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

See accompanying notes to unaudited condensed consolidated financial statements.

(in thousands, except shares, par value, per share amounts, or as otherwise noted)

Note 1. Summary of Business and Significant Accounting Policies

Description of Business

FiscalNote Holdings, Inc. (“FiscalNote,” or the “Company”) is a leading technology provider of global policy and market intelligence. It delivers critical, actionable legal and policy insights in a rapidly evolving political, regulatory and macroeconomic environment. By combining artificial intelligence (AI) technology, other technologies with analytics, workflow tools, and expert peer insights, FiscalNote empowers customers to manage policy, address regulatory developments, and mitigate global risk. FiscalNote ingests unstructured legislative and regulatory data, and employs AI and data science to deliver structured, relevant and actionable information in order to facilitate key operational and strategic decisions by global enterprises, midsized and smaller businesses, government institutions, trade groups, and nonprofits. FiscalNote delivers that intelligence through its suite of public policy and issues management products. The Company is headquartered in Washington, D.C.

On July 29, 2022 (the “Closing Date”), the Company consummated the transactions contemplated by the Agreement and Plan of Merger, dated as of November 7, 2021, and as amended on May 9, 2022, (the “Merger Agreement”), by and among FiscalNote Holdings, Inc., a Delaware corporation (“Old FiscalNote”), Duddell Street Acquisition Corp., a Cayman Islands exempted company (“DSAC”), and Grassroots Merger Sub, Inc., a Delaware Corporation and a wholly owned direct subsidiary of DSAC (“Merger Sub” and, together with DSAC, the “DSAC Parties”). Pursuant to these transactions, Merger Sub merged with and into Old FiscalNote, with Old FiscalNote becoming a wholly owned subsidiary of DSAC (the “Business Combination” and, collectively with the other transactions described in the Business Combination Agreement, the “Transactions”). In connection with the closing of the Transactions (the “Closing”), DSAC domesticated and continued as a Delaware corporation under the name of “FiscalNote Holdings, Inc.” (“New FiscalNote”). Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to the “Company,” “FiscalNote,” “we,” “us,” or “our” refer to the business of Old FiscalNote, which became the business of New FiscalNote and its subsidiaries following the Closing.

~~Basis of Presentation and Interim Financial Information~~

We accounted for the Business Combination as a reverse recapitalization whereby Old FiscalNote was determined as the accounting acquirer and DSAC as the accounting acquiree. This determination was primarily based on:

•

~~Old FiscalNote stockholders having the largest voting interest in New FiscalNote;~~

•

~~the board of directors of New FiscalNote having ten members, and Old FiscalNote’s former stockholders having the ability to nominate the majority of the members of the board of directors;~~

•

~~Old FiscalNote management continuing to hold executive management roles for the post-combination company and being responsible for the day-to-day operations;~~

•

~~the post-combination company assuming the Old FiscalNote name;~~

•

~~New FiscalNote maintaining the pre-existing Old FiscalNote headquarters; and~~

•

~~the intended strategy of New FiscalNote being a continuation of Old FiscalNote’s strategy.~~

Accordingly, the Business Combination was treated as the equivalent of Old FiscalNote issuing stock for the net assets of DSAC, accompanied by a recapitalization. The net assets of DSAC are stated at historical cost, with no ~~goodwill or other intangible assets recorded.~~

While DSAC was the legal acquirer in the Business Combination, because Old FiscalNote was determined as the accounting acquirer, the historical financial statements of Old FiscalNote became the historical financial statements of the combined company, upon the consummation of the Business Combination. As a result, the financial statements included in the accompanying unaudited interim condensed consolidated financial statements reflect (i) the historical operating results of Old FiscalNote prior to the Business Combination; (ii) the combined results of the Company and Old FiscalNote following the closing of the Business Combination; (iii) the assets and liabilities of Old FiscalNote at their historical cost; and (iv) the Company’s equity structure for all periods presented.

In connection with the Business Combination, the Company has converted the equity structure for the periods prior to the Business Combination to reflect the number of shares of New FiscalNote’s common stock issued to Old FiscalNote’s stockholders in connection with the recapitalization transaction based on an exchange ratio of ~~1.187~~ (the "Exchange Ratio"), determined pursuant to the terms of the Business Combination. As such, the shares, corresponding capital amounts and earnings per share, as applicable, related to Old FiscalNote’s, convertible preferred stock, and common stock prior to the Business Combination have been retroactively converted as shares by applying the Exchange Ratio.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances have been eliminated in consolidation.

These condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the financial information and footnotes

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required by U.S. GAAP for complete financial statements. In the opinion of the Company’s management, the unaudited condensed consolidated financial statements include all adjustments necessary for the fair presentation of the Company’s balance sheet and its results of operations, including its comprehensive loss, temporary equity, stockholders' equity (deficit), and cash flows. All adjustments are of a normal recurring nature. The results for the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 are not necessarily indicative of the results to be expected for any subsequent quarter or for the fiscal year ending December 31, ~~2023.~~2024. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023.

Liquidity and Going Concern

~~The accompanying condensed consolidated financial statements~~Historically the Company’s cash flows from operations have not been ~~prepared assuming that~~sufficient to fund its current operating model and the Company ~~will continue as a going concern, which contemplates continuity of~~funded operations ~~realization of assets,~~through raising equity and ~~satisfaction of liabilities in the ordinary course of business.~~debt. The ~~propriety of using the going-concern basis is dependent upon, among other things, the achievement of future profitable operations, the~~Company's ability to ~~generate sufficient~~maintain its minimum cash ~~from~~requirement, fund its future cash interest requirements under its senior term loan and fund its operations depend in part on general economic, financial, competitive, legislative, regulatory and ~~potential~~ other ~~funding sources, in addition~~conditions that may be beyond the Company's control. Accordingly, the Company continues to ~~cash on-hand,~~closely monitor expenses to ~~meet~~assess whether any immediate, or long-term changes, are necessary to maintain compliance with its ~~obligations as they become due.~~financial covenants.

~~The Company received approximately $65.6~~ ~~million of net cash proceeds from the Transactions.~~ The Company’s cash, cash equivalents, ~~and~~ restricted cash, and short-term investments were $~~38.1~~44.5 million at ~~June 30, 2023,~~March 31, 2024, compared with $~~61.2~~24.4 million at December 31, ~~2022.~~2023. Further, the Company had a negative working capital balance of $~~46.7~~38.5 million (excluding ~~cash)~~cash and short-term investments) at ~~June 30, 2023~~March 31, 2024 and had an accumulated deficit of $~~751.2~~765.8 million and $~~700.7~~816.4 million as of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022, respectively, and~~2023, respectively. The Company has incurred net losses of $~~50.2~~21.0 million (excluding the effect of the gain on sale of business) and $~~66.7~~19.3 million for the ~~six~~three months ended ~~June 30,~~March 31, 2024 and 2023, ~~and 2022,~~ respectively. Management expects that significant on-going operating and capital expenditures will be necessary to continue to implement the Company’s business plan of entering new markets, future acquisitions, and infrastructure and product development.

In addition, as disclosed in Note 8, “Debt”, the Company is subject to certain financial covenants. The ~~Company's~~Company’s ability to ~~fund its~~maintain compliance with these financial covenants are based on the Company’s current expectations regarding continued growth in revenues, collections, cost structure, current cash ~~interest requirements under its $156.0~~ million new senior term loan facility (the "New Senior Term Loan"), acquisition strategy, operating expenses, and capital expenditure requirements will depend in part on general economic, financial, competitive, legislative, regulatoryburn rate and other ~~conditions that may be beyond the Company's control.~~

The Company's future capital requirements also depend on many factors, including sales volume, the timing and extent of spending to support research and development (“R&D”) efforts, investments in information technology systems, the expansion of sales and marketing activities, and execution on our acquisition strategy. Historically the Company’s cash flows from operations have not been sufficient to fund its current operating ~~model.~~assumptions. The Company believes ~~with the~~our cash on hand at ~~June 30, 2023,~~March 31, 2024, proceeds from our expected product sales, and available borrowings ~~possibly available~~ under ~~the New~~our Senior Term Loan for certain acquisition activity, will be sufficient to meet our ~~short-term~~obligations and ~~long-term operating expenses and capital expenditures~~our required covenants for at least the next twelve ~~months.~~

~~Pursuant to~~months from the ~~terms~~date of the New Senior Term Loan, the Company is subject to customary covenant requirements (see Note 8, “Debt” and Note 18, "Subsequent Events" for additional details). The Company expects to be in compliance with its amended quarterly financial covenants, but cannot guarantee that will be the case. In the event of non-compliance with any quarterly financial covenants, should the lenders of the New Senior Term Loan accelerate the maturity of the New Senior Term Loan, the Company would not have sufficient cash on hand or available liquidity to repay the outstanding debt in the event of default.

~~On April 13, 2020, the Company received funding in the principal amount of $8,000~~ under the Paycheck Protection Program (the “PPP”) provisions of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) (the “PPP Loan”). On February 24, 2022, the U.S. Small Business Administration forgave $~~7,667~~ ~~of the PPP Loan with the remaining balance of $333~~ ~~to be repaid over~~ ~~five years. The Company recognized the forgiveness of the PPP Loan as a gain on debt extinguishment during the first quarter of 2022.~~this filing.

Segments

The Company operates as one operating segment. Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance. Over the past several years, the Company has completed a number of acquisitions. These acquisitions have allowed the Company to expand its offerings, presence, and reach in various market segments. While the Company has offerings in multiple market segments and operates in multiple countries, the Company’s business operates in one operating segment because the Company’s CODM evaluates the Company’s financial information and resources, and assesses the performance of these resources, on a consolidated basis.

Earnings per Share

Basic earnings per share (EPS) is calculated by dividing the net income or loss available to common stockholders by the weighted average number of shares of common stock outstanding for the period without consideration for common stock equivalents. Diluted EPS is computed by dividing the net income or loss available to common stockholders by the weighted average number of shares of common stock outstanding for the period and the weighted average number of dilutive common stock equivalents outstanding for the period determined using the if-converted method (convertible debt instruments) or treasury-stock method (warrants and share-based payment arrangements).

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For purposes of this calculation, common stock issuable upon conversion of debt, options and warrants are considered to be common stock equivalents and are only included in the calculation of diluted earnings per share when their effect is dilutive.

Fair ~~value~~Value of Financial Instruments

The Company has elected the fair value option on the subordinated convertible promissory notes issued as part of the Dragonfly acquisition, refer to Note 4, "Business Combinations" and Note 8, "Debt" for further details, and for the New GPO Note and Era Convertible Notes, refer to Note 8, "Debt" for further details. The Company records changes in fair value through the condensed consolidated statement of operations where the portion of the change that results from a change in the instrument-specific credit risk is recorded separately in accumulated other comprehensive income, if applicable. Additionally, under the fair value option, all issuance costs are expensed in the period that the debt is incurred.

Investments

The Company has invested in highly liquid investments that have investment-grade ratings. These investments are accounted for at fair value through the condensed consolidated statement of operations. The Company is able to easily liquidate these into cash; accordingly, the Company has presented these investments as available for current operations and are presented as short-term investments within current assets in the condensed consolidated balance sheets. Purchases and sales of short-term investments are classified in the investing section of our consolidated statement of cash flows.

Concentrations of Risks

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company generally maintains its cash and cash equivalents with various nationally recognized financial institutions. The Company’s cash and cash equivalents at times exceed amounts guaranteed by the Federal Deposit Insurance Corporation. The Company considers cash on deposit and all highly liquid investments with original maturities of three months or less to be cash and cash equivalents. At ~~June 30, 2023,~~March 31, 2024, approximately 5877% of the Company’s cash and cash equivalents were held at JPMorgan Chase Bank, N.A.

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The Company does not require collateral for accounts receivable. The Company maintains an allowance for its doubtful accounts receivable due to estimated credit losses. This allowance is based upon historical loss patterns, the number of days billings are past due, collection history of each customer, an evaluation of the potential risk of loss associated with delinquent accounts and current market conditions and reasonable and supportable forecasts of future economic conditions to inform adjustments to historical loss patterns. The Company records the allowance against bad debt expense through the condensed consolidated statements of operations, included in sales and marketing expense, up to the amount of revenues recognized to date. Any incremental allowance is recorded as an offset to deferred revenue on the condensed consolidated balance sheets. Receivables are written off and charged against the recorded allowance when the Company has exhausted collection efforts without success. As of ~~June 30,~~March 31, 2024 and December 31, 2023, allowance for credit losses of $~~985~~1,120 and $1,252, respectively, was included in the accounts receivable, net balance.

No single customer accounted for more than 10% of the Company's accounts receivable balance as of ~~June 30, 2023 or~~March 31, 2024 and December 31, ~~2022.~~2023. Revenue derived from the U.S. Federal Government was 15~~% and~~ 1917% of revenue for both of the ~~six~~three months ended ~~June 30,~~March 31, 2024 and 2023, ~~and 2022,~~ respectively. As of ~~June 30, 2023~~both of March 31, 2024 and December 31, ~~2022,~~2023, assets located in the United States were approximately 85% ~~and~~ 92% percent of total ~~assets, respectively.~~assets.

As of ~~June 30, 2023 no vendors~~March 31, 2024 one vendor accounted for more than 10% of the Company's accounts payable balance. ~~Two~~No vendors individually accounted for more than 10% of the Company’s accounts payable as of December 31, ~~2022.~~2023. During the ~~six~~three months ended ~~June 30,~~March 31, 2024 and March 31, 2023, ~~no vendors~~one vendor represented more than 10% of the total purchases made. ~~One vendor represented more than~~ 10~~% of the total purchases made during the six months ended June 30, 2022.~~

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13 Financial Instruments – Credit Losses (ASC 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13") guidance with respect to measuring credit losses on financial instruments, including trade receivables. The guidance eliminates the probable initial recognition threshold that was previously required prior to recognizing a credit loss on financial instruments. The credit loss estimate now reflects an entity's current estimate of all future expected credit losses. Under the previous guidance, an entity only considered past events and current conditions. The Company adopted ASC 2016-13 on January 1, 2023 using the modified retrospective transition method. Upon adoption, the Company recorded a $212 cumulative-effect adjustment to accumulated deficit on the condensed consolidated balance sheets, our allowance for doubtful accounts receivable changed from $468 at December 31, 2022 to $680 at January 1, 2023.

In August 2020, the FASB issued ASU 2020-06 Debt – Debt with Conversion and Other Options (ASC 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (ASC 815-40) ("ASU 2020-06") guidance modifying the requirements for the accounting for convertible instruments and contracts in an entity’s own equity. The modifications eliminate certain accounting models for convertible debt instruments, eliminate certain requirements for equity classification of embedded derivatives and align earnings per share calculations for convertible instruments. The Company adopted ASC 2020-06 on January 1, 2023 using the modified retrospective approach. The adoption of ASC 2020-06 did not have a material impact on the Company's condensed consolidated financial statements.

Recent Accounting Pronouncements Not Yet Effective

In November 2023, the FASB issued ASU 2023-07 Segment Reporting (Topic 280) guidance for segment reporting. The new guidance amends segment reporting to include significant segment expenses. The guidance is effective for the Company beginning with our annual

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report for the year ended December 31, 2024, and the subsequent interim periods and is required to be disclosed retrospectively to all prior periods presented. The Company does not expect that this guidance will have a significant impact on our disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in the ASU enhance income tax disclosures, primarily through standardization, disaggregation of rate reconciliation categories, and income taxes paid by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption allowed. We are currently evaluating the impact of adoption on our financial disclosures.

Note 2. Business Combination with DSAC

On July 29, 2022, ~~Old FiscalNote and DSAC~~the Company consummated the transactions contemplated by the ~~Business Combination Agreement. In connection~~Agreement and Plan of Merger, dated as of November 7, 2021, and as amended on May 9, 2022, (the “Merger Agreement”), by and among FiscalNote Holdings, Inc., a Delaware corporation (“Old FiscalNote”), Duddell Street Acquisition Corp., a Cayman Islands exempted company (“DSAC”), and Grassroots Merger Sub, Inc., a Delaware Corporation and a wholly owned direct subsidiary of DSAC (“Merger Sub” and, together with DSAC, the “DSAC Parties”). Pursuant to these transactions, Merger Sub merged with and into Old FiscalNote, with Old FiscalNote becoming a wholly owned subsidiary of DSAC (the “Business Combination” and, collectively with the Closing, each share of preferred stock of Old FiscalNote was converted into common stock and, immediately thereafter, each share of common stock of Old FiscalNote that was issued and outstanding immediately prior to the effective time of the Business Combination (other than excluded shares as contemplated by the Business Combination Agreement) was canceled and converted into the right to receive approximately ~~1.187~~ shares (the “Exchange Ratio”) of New FiscalNote common stock. The shares of New FiscalNote common stock received as consideration by Tim Hwang, Co-Founder and Chief Executive Officer and Gerald Yao, Co-Founder, Chief Strategy Officer, and Global Head of ESG (together with Mr. Hwang, the “Co-Founders”), are Class B shares, and entitle the Co-Founders or their permitted transferees to 25 ~~votes per share until the earlier of~~ ~~(a) transfer by the holder(s) of New FiscalNote Class B common stock to any~~ other person, except for specified trusts, retirement accounts, corporations or similar entities formed for financial or estate planning purposes and beneficially owned by the holders of New FiscalNote Class B common stock, (b) the death or incapacity of such holder(s) of New FiscalNote Class B common stock, (c) the date specified by an affirmative vote of a majority of the outstanding New FiscalNote Class B common stock, voting as a single class, (d) the date on which the outstanding shares of New FiscalNote Class B common stock represent less than 50% of the shares of New FiscalNote Class B common stock that were outstanding as of the Closing Date, or (e) the seven-year anniversary of the Closing Date.

At the Closing, each option to purchase Old FiscalNote’s common stock, whether vested or unvested, was assumed and converted into an option to purchase a number of shares of New FiscalNote Class A common stocktransactions described in the manner set forth in the Business Combination Agreement. Each restricted stock unit of Old FiscalNote was assumed and converted into restricted stock units of New FiscalNote settling in a number of New FiscalNote Class A common stock in the manner set forth in the Business Combination Agreement.

~~Pursuant to the terms of~~ the Business Combination Agreement, the holders of Old FiscalNote equity instruments outstanding immediately prior to the Closing Date will be entitled to receive their proportionate allocation of additional shares subject to achievement of certain conditions (see Note 10, "Earnout Shares and RSUs"“Transactions”).

In connection with the ~~Closing,~~closing of the Transactions, DSAC domesticated and continued as a Delaware corporation under the name of “FiscalNote Holdings, Inc.” (“New FiscalNote”). Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to the “Company,” “FiscalNote,” “we,” “us,” or “our” refer to the business of Old FiscalNote, ~~also entered into~~which became the ~~Credit Agreement with Runway Growth Finance Corp., ORIX Growth Capital, LLC, Clover Orochi LLC,~~business of New FiscalNote and ~~ACM ASOF VIII SaaS FinCo LLC (together~~its subsidiaries following the ~~“New Senior Lenders”), pursuant~~closing on July 29, 2022. Subsequent to ~~which~~the closing of the Business Combination, the Company's Class A common stock and public warrants began trading on the New ~~Senior Term Loan was consummated simultaneously with~~York Stock Exchange (“NYSE”) under the ~~Closing.~~

symbols “NOTE” and “NOTE WS,” respectively. The Company accounted for the Business Combination as a reverse recapitalization whereby Old FiscalNote was determined as the accounting acquirer and DSAC as the accounting acquiree. Accordingly, the Business Combination was treated as the equivalent of Old

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FiscalNote issuing stock for the net assets of DSAC, accompanied by a recapitalization. The net assets of DSAC are stated at historical cost, with no goodwill or other intangible assets recorded. ~~Refer to Note 1, "Summary of Business and Significant Accounting Policies", for further details.~~

~~Upon~~In connection with the closing of the ~~Transactions~~Business Combination Agreement, FiscalNote also entered into the Credit Agreement with Runway Growth Finance Corp., ORIX Growth Capital, LLC, Clover Orochi LLC, and ACM ASOF VIII SaaS FinCo LLC (together the ~~New~~“New Senior ~~Term Loan, the Company received total gross proceeds of $325.0~~ ~~million,~~Lenders”), pursuant to which ~~consisted of $61.0~~ ~~million from DSAC’s trust, $114.0~~ ~~million from the backstop agreement~~a new senior term loan was consummated simultaneously with the ~~sponsor of DSAC, and $150.0~~ ~~million from the New Senior~~Closing (the "Senior Term ~~Loan. Such gross proceeds were offset by $45.2~~ ~~million transaction costs, which principally consisted of advisory, legal and other professional fees, and were recorded in Additional Paid-in Capital, net of proceeds from the DSAC trust and $3.5~~ ~~million of debt issuance costs paid out of the proceeds of the New Senior Term Loan on the Closing Date, of which $2.8~~ ~~million was capitalized and $0.7~~ ~~million included in the loss on debt extinguishment. Cumulative debt repayments, inclusive of accrued but unpaid interest, of $210.7~~ ~~million were paid in conjunction with the close, which consisted of a $75.3~~ ~~million repayment of the First Out Term Loan, $61.7~~ ~~million repayment of the Last Out Term Loan, a $50.0~~ ~~million payment used to retire the non-converting portion of the Senior Secured Subordinated Promissory Note, a $16.3~~ ~~million repayment of the 8090 FV Subordinated Promissory Note, and $7.4~~ ~~million repayment of the 2021 Seller Notes.~~Loan").

Note 3. Revenues

Disaggregation of Revenue

The following table depicts the Company's disaggregated revenue for the periods presented:


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
	2023		2022		2023		2022		2024		2023
Subscription	$	29,462	$	24,332	$	57,929	$	47,111	$	29,626	$	28,467
Advisory		1,239		1,027		2,352		2,789		1,257		1,113
Advertising		357		760		775		1,378		514		418
Books		539		339		1,123		670		148		584
Other revenue		1,245		716		2,192		1,297		567		947
Total	$	32,842	$	27,174	$	64,371	$	53,245	$	32,112	$	31,529

Revenue by Geographic Locations

The following table depicts the Company’s revenue by geographic operations for the periods presented:


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
	2023		2022		2023		2022		2024		2023
North America	$	26,744	$	24,105	$	52,896	$	47,304	$	25,997	$	26,152
Europe		5,077		2,503		9,177		5,002		5,269		4,100
Australia		288		276		577		534		303		289
Asia		733		290		1,721		405		543		988
Total	$	32,842	$	27,174	$	64,371	$	53,245	$	32,112	$	31,529

Revenues by geography are determined based on the region of the Company's contracting entity, which may be different than the region of the customer. North America revenue consists solely of revenue attributed to the United States. For the three months ended ~~June 30,~~March 31, 2024 and 2023, ~~and 2022,~~ revenue attributed to the United Kingdom represented approximately ~~twelve~~thirteen percent and ~~six~~ ~~percent of total revenues, respectively. For the six months ended June 30, 2023 and 2022, revenue attributed to the United Kingdom represented approximately~~ ~~eleven~~ ~~percent and~~ ~~six~~ten percent of total revenues, respectively. No other foreign country represented more than five percent of total revenue during the three ~~and six~~ months ended ~~June 30, 2023~~March 31, 2024 and ~~2022.~~2023.

Contract Assets

The Company had contract assets of $~~1,664~~1,044 and $~~1,464~~1,183, as of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, respectively. Contract assets are generated when contractual billing schedules differ from the timing of revenue recognition or cash collections. They represent a conditional right to consideration for satisfied performance obligations that becomes a receivable when the conditions are satisfied. They are recorded as part of other current assets on the condensed consolidated balance sheets.

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Deferred Revenue

Details of the Company’s deferred revenue for the periods presented are as follows:

Balance at December 31, 2021

$
30,097

Revenue recognized in the current period from amounts in the prior balance

(21,924
)
New deferrals, net of amounts recognized in the current period

34,988

Effects of foreign currency

(388
)
Balance at June 30, 2022

$
42,773

Balance at December 31, 2022

$
36,487

Acquired deferred revenue

3,941

Revenue recognized in the current period from amounts in the prior balance

(27,128
)
New deferrals, net of amounts recognized in the current period

36,503

Effects of foreign currency

221

Balance at June 30, 2023

$
50,024

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Balance at December 31, 2022	$	36,487
Acquired deferred revenue		4,013
Revenue recognized in the current period from amounts in the prior balance		(16,610	)
New deferrals, net of amounts recognized in the current period		25,928
Effects of foreign currency		32
Balance at March 31, 2023	$	49,850

Balance at December 31, 2023	$	44,405
Sale of Board.org		(9,117	)
Revenue recognized in the current period from amounts in the prior balance		(19,249	)
New deferrals, net of amounts recognized in the current period		29,502
Effects of foreign currency		(118	)
Balance at March 31, 2024	$	45,423

Costs to Obtain

During the ~~six~~three months ended ~~June 30,~~March 31, 2024 and 2023, ~~and 2022,~~ the Company capitalized $~~1,910~~941 and $~~2,071~~1,114 of costs to obtain revenue contracts. The Company amortized costs to obtain revenue contracts in the amount of $~~816~~1,009 and $~~693~~832 to sales and marketing expense during the three months ended ~~June 30,~~March 31, 2024 and 2023, ~~and 2022, respectively, and $1,648~~ ~~and $1,247~~ ~~during the six months ended June 30, 2023 and 2022,~~ respectively. There were no impairments of costs to obtain revenue contracts for the three ~~and six~~ months ended ~~June 30, 2023~~March 31, 2024 and ~~2022.~~2023.

Unsatisfied Performance Obligations

At ~~June 30, 2023,~~March 31, 2024, the Company had $~~103,303~~90,981 of remaining contract consideration for which revenue has not been recognized due to unsatisfied performance obligations. The Company expects to recognize this over the next five ~~year~~syears.

Note 4. ~~Business Combinations~~Acquisitions and Dispositions

2024 Disposition

On March 11, 2024, the Company entered into an agreement (the "Purchase Agreement") to sell the equity of the Company's subsidiary owning and operating its Board.org business ("Board.org") with Exec Connect Intermediate LLC (the “Buyer”). On March 11, 2024, after adjustments based on Board.org’s working capital, indebtedness and transaction expenses, as well as retention payments payable to certain employees of Board.org, the Company received $90,905 in cash (excluding $785 of the purchase price that was deposited into escrow to satisfy certain potential post-closing purchase price adjustments and indemnification claims and including $21 of cash acquired by the Buyer). The Company is entitled to receive an earn-out payment of up to $8,000, less the amount of certain retention payments potentially owing to the former Board.org employees, if the Board.org business achieves specified revenue targets for fiscal year 2024. The Purchase Agreement contains representations, warranties and indemnification obligations of the parties customary for transactions similar to those contemplated by the Purchase Agreement. As a result of the sale of Board.org, the Company recorded a pre-tax gain on disposal of $71,599, inclusive of the $785 of funds placed in escrow that the Company anticipates receiving and $50 of estimated post-closing purchase price adjustment which are included in other current assets.

The proceeds from the sale of Board.org were used in part to prepay $65,700 of term loans under the Company’s Credit Agreement, and pay $7,068 of related prepayment and exit fees associated with the retired amount. The remaining $18,137 of net proceeds were retained by the Company for general corporate purposes. As part of the sale the Company recorded a current tax liability for federal and state income tax of $1,448 and a non-cash deferred tax charge of $280.

The Company determined that Board.org was not a significant subsidiary, and the disposition of Board.org did not constitute a strategic shift that would have a major effect on the Company’s operations or financial results. As a result, the results of operations for Board.org were not reported as discontinued operations under the guidance of ASC 205 “Presentation of Financial Statements."

Pursuant to the Employee Lease Agreement entered into in connection with the closing of the sale of Board.org, the Company is the employer of record for the Board.org employees. Under the terms of the Employee Lease agreement, the Company is responsible for the payment of salaries and benefits to the Board.org employees at the direction of the buyer, until the buyer legally assumes those employees. The Company will be reimbursed by the buyer for the actual costs incurred pursuant to the Employee Lease Agreement. Accordingly, at March 31, 2024 the Company is due $378 from the buyer for payroll and benefit costs paid by the Company during the period from March 11, 2024 to March 31, 2024, which has been presented in other current assets on the condensed consolidated balance sheet.

Additionally, the Company entered into a Transition Services Agreement in connection with the closing of the sale of Board.org whereby the Company will provide certain transitional support services for a period of time following the closing and the buyer will reimburse FiscalNote for certain direct costs of those services. No material costs were incurred under the Transition Services Agreement during the period from March 11, 2024 to March 31, 2024.

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2023 ~~Acquisitions~~Acquisition

Dragonfly Acquisition

On January 27, 2023, the Company entered into a Sale and Purchase Agreement for all of the issued and outstanding share capital of Dragonfly Eye Limited ("Dragonfly"), a UK- based SaaS-based geopolitical and security intelligence provider of actionable data and analysis delivered through Dragonfly's SaaS-based, proprietary Security Intelligence and Analysis Service subscription platform and API.

The aggregate purchase price consisted of (i) $5.6 million in cash (£4.5 million pounds sterling), (ii) 1,885,149 shares of the Company’s Class A Common Stock, and (iii) $11.1 million (£8.9 million pounds sterling) in aggregate principal amount of subordinated convertible promissory notes (“Seller Convertible Notes”). The purchase price is subject to customary adjustments based on working capital and the amount of Dragonfly’s transaction expenses and net indebtedness that remain unpaid as of the closing date, and indemnification obligations for certain claims made following the Closing Date. The Company incurred expenses of $~~1,138~~1,272 in connection with the transaction during the ~~six months~~year ended ~~June 30,~~December 31, 2023 (inclusive of $446 of amounts paid on January 27, 2023 that were recognized as expense during the three months ended March 31, 2023).

The acquisition date fair value of the consideration transferred for Dragonfly consisted of the following:


Cash	$	5,617
Fair value of Class A common stock		9,539
Fair value of Seller Convertible Notes		8,635
Fair value of contingent consideration		1,445
Total	$	25,236

The Class A common stock issued as consideration as part of the acquisition of Dragonfly represents non-cash activity on the condensed consolidated statement of stockholders equity and condensed consolidated statement of cash flows.

~~Additionally, the sellers are eligible to receive an additional payment from the Company of up to approximately $4.3~~ ~~million, £3.5~~ million pounds sterling, (the “Earnout”) based on the achievement of certain U.S. GAAP revenue targets for 2023 by Dragonfly. In the event any part of the Earnout becomes payable, the Company may satisfy its payment obligations to the sellers with cash or common stock, pursuant to the Sale and Purchase Agreement.

Certain employees of Dragonfly are eligible for employee earnout bonus awards ("Employee Earnout Awards") based on 2024 revenue targets. The Employee Earnout Awards are subject to forfeiture in the event that Dragonfly does not achieve its revenue target or these employees terminate their employment. Any Employee Earnout Awards that are forfeited are reallocated to the other eligible employees.

The following table summarizes the fair values of assets acquired and liabilities assumed as of the date of acquisition:


Cash and cash equivalents	$	607		$	607
Current assets, net		3,443			3,690
Property and equipment, net		18			18
Intangible assets		9,600			9,600
Deferred revenues		(3,941	)		(3,933	)
Current liabilities		(1,764	)		(1,764	)
Deferred tax liabilities		(2,009	)		(1,517	)
Total net assets acquired		5,954			6,701
Goodwill		19,282			18,535
Total purchase price	$	25,236		$	25,236

The following table sets forth the components of identified intangible assets acquired and their estimated useful lives as of the date of acquisition:


	Estimated Fair Value		Estimated Useful Life (Years)
Customer relationships	$	7,300	6,10		(a)
Developed technology		1,750		10
Tradename		550		3
Total intangible assets acquired	$	9,600
(a) Includes two separate customer relationships with two different useful lives

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The ~~estimated~~ fair values of the customer relationships, developed technology and tradename were determined using the income approach. The approaches used to estimate the fair values use significant unobservable inputs including revenue and cash flow forecasts, customer attrition rates, and appropriate discount rates.

The purchase price allocation includes UK deferred income tax assets and liabilities for acquired book and tax basis differences.

The fair values assigned to tangible and intangible assets acquired and liabilities assumed combined with the fair value of the purchase consideration are based on management's estimates and assumptions and are preliminary and may change upon completion of the determination of the fair value of assets and liabilities assumed. The Company expects to finalize the valuation as soon as practicable, but not later than one year from the acquisition date.

~~2022 Acquisitions~~

~~Aicel Acquisition~~

On July 29, 2022, the Company acquired all of the outstanding stock of Seoul, South Korea-based Aicel Technologies (“Aicel”), an AI-driven enterprise SaaS company that delivers market intelligence and data insights. The acquisition consideration of $~~8,678~~ ~~consisted of~~ ~~723,684~~ ~~common shares of Old FiscalNote that were then exchanged into~~ ~~859,016~~ Class A common shares of New FiscalNote pursuant to the Exchange Ratio and contingent consideration. Pursuant to the terms of the acquisition agreement, certain of the sellers of Aicel are eligible for additional contingent consideration of ~~12,491~~ ~~shares of the Company’s Class A common stock. The Company incurred expenses of approximately $300~~ ~~in connection with the transaction, of which approximately $~~96 ~~was recognized during the year ended December 31, 2021.~~ ~~The acquisition date fair value of the consideration transferred for Aicel consisted of the following:~~

Fair value of Class A common stock

$
8,590

Fair value of contingent consideration

88

Total

$
8,678

The fair value of the Class A common stock issued was estimated based on the fair value of the Company’s common stock on the date of the acquisition. The fair value of the contingent consideration is estimated based on the expected future cash flows and revenues along with the fair value of the Company’s Class A common stock on the date of acquisition.

The contingent consideration consists of shares of the Company’s Class A common stock and is scheduled to be delivered within eighteen months upon achievement of certain revenue targets pursuant to the terms of the acquisition agreement. The contingent consideration is payable to certain selling shareholders and contains no future service conditions. The fair value of the contingent consideration was Goodwill recorded as equity as the number of shares that ultimately may be issued upon achievement of the revenue targets is fixed. Classification as equity requires fair value measurement initially and there are no subsequent re-measurements. Settlement of equity-classified contingent consideration is accounted for within equity.

~~The acquisition also includes contingent payments in the form of up to $300~~ ~~in cash,~~ ~~28,522~~ ~~shares of the Company’s Class A common stock on a post-exchange basis and~~ ~~24,833~~ ~~of restricted stock upon achievement of certain revenue targets.~~ ~~The common stock, restricted stock and cash portions of the contingent payments will be paid within eighteen months upon achievement of certain revenue targets~~. The contingent payments are payable to certain employees, contingent on them remaining employed through the contingency payout date. The estimated fair value of the contingent payments on the date of acquisition is considered post-combination compensation expense and recognized based on management’s determination of the likelihood of the revenue targets being met. In the event that compensation expense is recognized and the revenue targets are not met, the previously recognized compensation expense is reversed. Post-combination compensation expense of $~~637~~ ~~was recognized during the year ended December 31, 2022, $300~~ ~~of which was accrued as a contingent liability and the remainder recorded as equity-based compensation. In December 2022, the $300~~ ~~contingent liability was paid. The Company recorded equity-based compensation related to the restricted stock contingent payments of $~~31 ~~and $~~62 ~~for the three and six months ended June 30, 2023, respectively.~~

~~The following table summarizes the fair values of assets acquired and liabilities assumed as of the date of acquisition:~~

Cash and cash equivalents

$
1,525

Current assets, net

447

Property and equipment, net

53

Equity method investment

45

Intangible assets

3,000

Deferred revenues

(602
)
Other current liabilities

(453
)
Debt

(1,131
)
Total net assets acquired

2,884

Goodwill

5,794

Total purchase price

$
8,678

The excess of the purchase price over the net tangible and intangible assets was recorded as goodwill, which is primarily attributed to the future economic benefits arising from other assets acquired and could not be individually identified and separately recognized including expected synergies and assembled workforce.

~~The following table sets forth the components of identified intangible assets acquired and their estimated useful lives as of the date of acquisition:~~

~~Table of Contents~~

Estimated Fair Value

Estimated Useful Life (Years)

Developed technology

$
1,200

8

Database

750

8

Customer relationships

650

11

Tradename

400

7

Total intangible assets acquired

$
3,000

The estimated fair values of the developed technology, database, customer relationships, and tradename were determined using the income approach. The approaches used to estimate the fair values use significant unobservable inputs including revenue and cash flow forecasts, customer attrition rates, and appropriate discount rates.

For federal income tax purposes, the Company has made a Section 338(g) election to treat the transaction as an asset acquisition for federal income tax purposes which results in additional tax basis approximately equal to the fair value assigned at the acquisition date. The intangibles and goodwill are to be amortized over 15 ~~years. Additionally, Korean deferred tax liabilities were recorded during 2022 for the difference between book basis and tax basis of assets and liabilities acquired.~~

~~DT-Global Asset Acquisition~~

On September 30, 2022, the Company acquired certain assets of DT-Global Business Consulting, a Vienna, Austria subscription-based market intelligence company which provides in-depth expertise and analysis for Central & Eastern Europe, Commonwealth of Independent States, and Middle East-Africa areas. The aggregate purchase price was $~~600, which included an upfront cash payment of $400~~ ~~and purchase price holdbacks of $100, along with $100~~ ~~of contingent consideration related to operational milestones.~~

~~The Company accounted~~ for this acquisition ~~as an asset purchase. In connection with the acquisition, the Company incurred direct transaction costs of approximately $~~is 43no which have been classified as costs of acquisition. The costs of acquisition are allocated to the acquired assets and assumed liabilities based on their fair values at the date of acquisition, and any excess is allocated to intangible assets. The costs of acquisition exceeded the fair value of net assets acquired by approximately $~~1,012. The Company allocated the $1,012~~ ~~excess to the customer relationship intangible asset. The intangible asset will be amortized over~~ ~~15 years. As of December 31, 2022, the contingent consideration was determined to be probable and reasonably estimable, the consideration of $~~52 ~~was attributed to the customer relationship intangible asset with a corresponding liability of $~~52 ~~recorded as part of Contingent Liabilities from Acquisitions on the consolidated balance sheets and a payment of the liability of $~~39 ~~was made in January 2023, resulting in a remaining liability of $~~13 ~~as of June 30, 2023.~~

~~For federal income~~t tax purposes, the Company obtained a tax basis in the assets acquired equal to the purchase price, as adjusted and allocated, pursuant to IRC guidelines. The resulting intangible asset will be amortized over 15 ~~years. As of June 30, 2023, $~~39 ~~of the contingent consideration was paid. The unpaid portion as of June 30, 2023 will be excluded from federal tax asset allocation until paid.~~deductible.

Note 5. Leases

The Company has operating leases, principally for corporate offices under non-cancelable operating leases that expire at various dates through 2031. The non-cancellable base terms of these leases typically range from one to nine years. Certain lease agreements include

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options to renew or terminate the lease, which if not reasonably certain to be exercised are therefore not factored into the determination of lease payments.

The following table details the composition of lease expense for the periods presented:

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

Operating lease cost (a)

$
1,215

$
2,431

$
3,800

$
4,873

Variable lease cost

242

106

397

194

Short-term lease cost

161

315

339

636

Total lease costs

$
1,618

$
2,852

$
4,536

$
5,703

Sublease income

$
(26
)

$
(1,337
)

$
(1,390
)

$
(2,675
)

~~Excludes operating lease assets impairment charge of $378~~ ~~related to an unoccupied existing office space lease recorded in the first quarter of 2022.~~


	Three Months Ended March 31,
	2024			2023
Operating lease cost	$	1,238		$	2,585
Variable lease cost		94			155
Short-term lease cost		37			178
Total lease costs	$	1,369		$	2,918
Sublease income	$	(26	)	$	(1,364	)

Cash payments related to operating lease liabilities were $~~6,390~~1,499 and $4,797 (inclusive of $1,682 lease termination fee) ~~and $5,793~~for the ~~six~~three months ended ~~June 30, 2023 and 2022, respectively.~~

In March 2022, the Company ceased use of excess office space under one of its existing leases, with the intent to sublease this space. In accordance with ASC 360, the Company evaluated the asset group for impairment and recognized the excess of the carrying value over the fair value of the asset group, which totaled $~~378, as an impairment expense as part of general and administrative expenses on the consolidated statements of operations and comprehensive loss and a reduction to the operating lease asset.~~

In April 2021, the Company entered into a modification of one of its existing subleases. The Company exercised its termination notification right on this lease which resulted in a termination fee payment of $~~1,682~~ ~~made on December 31, 2021 (lease termination notice date) and a second termination fee payment of $1,682~~ ~~made on~~ March 31, 2024 and 2023, ~~(the lease termination effective date).~~ respectively.

12Note

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6. Intangible Assets

The following table summarizes the gross carrying amounts and accumulated amortization of the Company’s intangible assets by major class:


	June 30, 2023							December 31, 2022							Weighted Average		March 31, 2024										December 31, 2023										Weighted Average
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Remaining Useful Life (Years) June 30, 2023		Gross Carrying Amount		Accumulated Amortization			Accumulated Impairment			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Impairment			Net Carrying Amount		Remaining Useful Life (Years) March 31, 2024
Customer relationships	$	88,436	$	(28,485	)	$	59,951	$	81,002	$	(24,654	)	$	56,348		8.6	$	76,071	$	(27,116	)	$	(2,235	)	$	46,720	$	88,544	$	(32,392	)	$	(2,235	)	$	53,917		8.5
Developed technology		37,014		(20,306	)		16,708		35,350		(17,673	)		17,677		4.3		29,968		(20,338	)		(1,909	)		7,721		37,205		(26,743	)		(1,909	)		8,553		6.7
Databases		29,878		(9,972	)		19,906		29,912		(8,892	)		21,020		9.3		29,864		(11,590	)		-			18,274		29,895		(11,057	)		-			18,838		8.6
Tradenames		12,058		(3,784	)		8,274		11,480		(3,216	)		8,264		9.3		11,119		(3,789	)		(579	)		6,751		12,077		(4,367	)		(579	)		7,131		8.2
Expert network		2,672		(1,058	)		1,614		2,559		(800	)		1,759		3.6		2,669		(1,391	)		-			1,278		2,692		(1,291	)		-			1,401		2.9
Patents		726		(210	)		516		700		(200	)		500		17.1		803		(213	)		(8	)		582		784		(217	)		(8	)		559		17.5
Content library		592		(94	)		498		592		(64	)		528		8.4		592		(138	)		-			454		592		(123	)		-			469		7.7
Total	$	171,376	$	(63,909	)	$	107,467	$	161,595	$	(55,499	)	$	106,096			$	151,086	$	(64,575	)	$	(4,731	)	$	81,780	$	171,789	$	(76,190	)	$	(4,731	)	$	90,868

Finite-lived intangible assets are stated at cost, net of amortization, generally using the straight-line method over the expected useful lives of the intangible assets. Amortization of intangible assets, excluding developed technology, was $~~2,901~~2,685 and $~~2,609~~2,814 for the three months ended ~~June 30,~~March 31, 2024 and 2023, ~~and 2022, respectively, and $5,715~~ ~~and $5,217~~ ~~for the six months ended June 30, 2023 and 2022,~~ respectively.

Amortization of developed technology was recorded as part of cost of revenues in the amount of $~~1,327~~765 and $~~1,234~~1,316 for the three months ended ~~June 30,~~March 31, 2024 and 2023, ~~and 2022 and $2,643~~ ~~and $2,486~~ ~~for the six months ended June 30, 2023 and 2022,~~ respectively.

The expected future amortization expense for intangible assets as of ~~June 30, 2023~~March 31, 2024 is as follows:

2023 (remainder)

$
12,095

2024

15,625

2025

12,423

2026

11,987

2027

11,578

Thereafter

43,759

Total

$
107,467

The Company regularly reviews the remaining useful lives of its intangible assets. In the second quarter of 2023 the Company revised the remaining useful life of certain of its developed technology. Accordingly, the Company will recognize accelerated amortization expense totaling $~~3,879~~ ~~during the second half of 2023. This is represented in the weighted average remaining useful life for developed technology assets and future amortization expense presented above.~~


2024 (remainder)	$	8,800
2025		10,441
2026		10,183
2027		9,774
2028		9,427
Thereafter		33,155
Total	$	81,780

Capitalized software development costs

Capitalized software development costs are as follows.

June 30, 2023

December 31, 2022

Gross Carrying Amount

Accumulated Amortization

Net
Carrying Amount

Gross Carrying Amount

Accumulated Amortization

Net
Carrying Amount

Capitalized software development costs

$
24,122

$
(8,882
)

$
15,240

$
19,815

$
(5,869
)

$
13,946


	March 31, 2024										December 31, 2023
	Gross Carrying Amount		Accumulated Amortization			Accumulated Impairment			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Impairment			Net Carrying Amount
Capitalized software development costs	$	27,008	$	(11,754	)	$	(1,492	)	$	13,762	$	27,659	$	(12,795	)	$	(1,492	)	$	13,372

During the ~~six~~three months ended ~~June 30,~~March 31, 2024 and 2023, ~~and 2022,~~ the Company capitalized interest on capitalized software development costs in the amount of $~~247~~132 and $~~341~~117, respectively. Amortization of capitalized software development costs was recorded as part of cost of revenues in the amount of $~~1,734~~1,663 and $~~775~~1,281 for the three months ended ~~June 30,~~March 31, 2024 and 2023, ~~and 2022, and $3,015~~ ~~and $1,346~~ ~~for the six months ended June 30, 2023 and 2022,~~ respectively. The estimated useful life is determined at the time each project is placed in service.

Note 7. Goodwill

Goodwill represents the excess of the purchase price in a business combination over the fair value of net assets acquired. Goodwill amounts are not amortized, but are rather tested for impairment at least annually as of October 1 of each year.

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The changes in the carrying amounts of goodwill, which are generally not deductible for tax purposes, are as follows:

Balance at December 31, 2022

$
194,362

Acquisition

19,282

Impairment

(5,837
)
Impact of foreign currency fluctuations

270

Balance at June 30, 2023

$
208,077


Balance at December 31, 2023	$	187,703
Sale of Board.org		(23,022	)
Impact of foreign currency fluctuations		(347	)
Balance at March 31, 2024	$	164,334

The Company has the following goodwill reporting units: Public Policy & Issues Management ("PPIM"); Geopolitical & Market Intelligence ("GMI"); Advocacy; Community; AI-Driven Intelligence ("FNAI"); and Environmental, Sustainability, and Governance ("ESG"). The Company performed the required annual impairment test as of October 1, 2022 at the reporting unit level, which resulted in no impairment of goodwill. Subsequent to performing our annual impairment test, we continued to monitor our reporting units for events

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~~that might indicate an interim impairment.~~ Due to the decline in the Company’s stock price and market capitalization in the first quarter of 2023, and the underperformance of the Company’s ESG reporting unit compared to internal projections, the Company performed a quantitative goodwill impairment assessment as of March 31, 2023. This quantitative assessment resulted in all the goodwill in our ESG reporting unit being impaired; accordingly, an impairment charge of $5,837 was recognized during the three months ended March 31, 2023. Prior to the quantitative goodwill impairment the Company tested the recoverability of its long-lived assets, and concluded that such assets were not impaired.

The fair value estimate of the Company's reporting units was derived based on an income approach. Under the income approach, the Company estimated the fair value of reporting units based on the present value of estimated future cash flows, which the Company considers to be a Level 3 unobservable input in the fair value hierarchy. The Company prepared cash flow projections based on management's estimates of revenue growth rates and operating margins, taking into consideration the historical performance and the current macroeconomic, industry, and market conditions. The Company based the discount rate on the weighted-average cost of capital considering Company-specific characteristics and the uncertainty related to our reporting unit's ability to execute on the projected cash flows. ~~At June 30, 2023 the Company's~~ ~~PPIM~~ ~~reporting unit had a negative carrying value and $84,029~~ ~~of goodwill.~~

Potential indicators of impairment include significant changes in performance relative to expected operating results, significant negative industry or economic trends, or a significant decline in the Company's stock price and/or market capitalization for a sustained period of time. It is reasonably possible that one or more of these impairment indicators could occur or intensify in the near term, which may result in an impairment of long-lived assets or further impairment of goodwill.

Note 8. Debt

The following presents the carrying value of the Company’s debt as of the respective period ends:


	June 30, 2023			December 31, 2022			March 31, 2024			December 31, 2023
New Senior Term Loan	$	157,421		$	150,647
Senior Term Loan							$	92,891		$	158,228
New GPO Note		36,583			-			33,252			36,954
Convertible Notes		13,094			12,219			14,557			14,052
Dragonfly Seller Convertible Notes		9,598			-			7,857			9,002
Era Convertible Note								8,461			5,977
Aicel Convertible Note		1,126			1,174			1,114			1,156
PPP loan		198			251			117			144
Total gross debt								158,249			225,513
Debt issuance costs		(3,252	)		(2,243	)		(5,220	)		(3,098	)
Total		214,768			162,048			153,029			222,415
Less: Current portion		(68	)		(68	)		(67	)		(105	)
Total	$	214,700		$	161,980		$	152,962		$	222,310

~~New~~ Senior Term Loan

~~Concurrently~~On July 29, 2022, concurrent with the ~~Closing,~~closing of the Company's Business Combination, FiscalNote, Inc., a wholly owned indirect subsidiary of FiscalNote Holdings, Inc., entered into a senior credit agreement (the "Credit Agreement") providing for a ~~New~~ Senior Term Loan consisting of a fully funded principal amount of $150,000 and an uncommitted incremental loan facility totaling $100,000 available upon notice if the Company meets certain financial growth criteria and other customary requirements (the ~~“New Incremental~~“Incremental Term Facility”) (collectively the ~~“New Senior~~“Senior Credit Facility”). The annual interest of the ~~New~~ Senior Term Loan consists of two components: a cash interest component of (a) the greater of (i) Prime Rate plus 5.0% per annum or (ii) 9.0% payable monthly, ~~in cash,~~ and (b) interest payable in kind component of 1.00% per annum, payable in kind monthly. ~~Beginning on August 15, 2025,~~ 50~~% of the outstanding principal amount of the New Senior Term Loan must be repaid in even amounts on a monthly basis over the remaining~~ ~~24 months, with the final balance due on~~ ~~July 15, 2027~~. The ~~New~~ Senior Credit Facility will mature on July 29, 2027~~, the five-year anniversary of the Closing Date.~~.

On March 17, 2023, the Company entered into Amendment No. 1 (“Amendment No. 1”) to the Credit Agreement dated July 29, 2022. Among other things, Amendment No. 1 provided for the extension of an incremental term loan by one of the lenders under the facility in the principal amount of $6,000 which was received by the Company on March 31, 2023, on the same terms as the existing term loans (the “Incremental Facility”). In connection with the funding of the Incremental Facility, the Company issued the lender warrants expiring July 15, 2027, to purchase up to 80,000 Class A Common Stock at an exercise price of $0.01 per share, in a transaction exempt from registration under the Securities Act of 1933, as amended, in reliance on Regulation D promulgated thereunder. The lender warrants ~~represent~~represented a non-cash financing activity.

On May 16, 2023, the Company entered into Amendment No. 2 ("Amendment No. 2") to the Credit Agreement dated July 29, 2022. Among other things, Amendment No. 2 joined Dragonfly Eye Limited and Oxford Analytica Limited (“Oxford Analytica”), each a wholly owned subsidiary of the Company, as Guarantors under the Credit Agreement.

On August 3, 2023, the Company entered into Amendment No. 3 ("Amendment No. 3") to the Credit Agreement dated July 29, 2022. Among other things, Amendment No. 3 provided for: (a) the extension of the July 2023 Deferred Fee from July 29, 2023 to July 29, 2024, (b) the increase of the July 2023 Deferred Fee from $1,734 to $2,034, (c) an increase of the Restatement Date Final Agreement from $7,410

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to $8,970 and (d) the revision to the minimum annual recurring revenue ("ARR") and adjusted EBITDA covenants (as both are defined in the Credit Agreement).

In connection with the completion of the sale of Board.org on March 11, 2024, the Company also entered into Amendment No. 4 to the Credit Agreement (the “Amendment No. 4”), pursuant to which, among other things, the lenders consented to the release of the liens on Board.org’s assets and permitted the consummation of the sale in exchange for the permanent prepayment of $65,700 of term loans under the Credit Agreement. The Company also made a payment of $1,314 and $5,754 of related prepayment and exit fees, respectively. Amendment No. 4 also requires that upon receipt of any earn-out payment pursuant to the equity purchase agreement underlying the sale of Board.org, the Company will prepay outstanding obligations under the Credit Agreement in an amount equal to 70% of the net proceeds received from such earn-out payment, together with a prepayment fee and an exit fee, equal to 5.75% of the amount of such prepayment.

In addition, Amendment No. 4 extended the commencement of amortization payments under the Credit Agreement from August 15, 2025 to August 15, 2026, with such payments to fully amortize the term loans by the maturity date of July 15, 2027. Amendment No. 4 also increased the Company’s minimum liquidity covenant to $22,500 and modified the Company’s minimum ARR and adjusted EBITDA (as defined in the Credit Agreement, as amended) in order to appropriately reflect the sale of Board.org and the absence of its future contributions to the Company’s overall financial performance and position.

The Prime Rate in effect for the ~~New~~ Senior Term Loan was ~~8.25~~8.50% at ~~June 30, 2023.~~March 31, 2024. For the ~~six~~three months ended ~~June 30, 2023,~~March 31, 2024, the Company incurred $~~9,956~~ ~~and $774~~4,911 of cash interest and $364 of paid-in-kind interest, respectively, on the ~~New~~ Senior Term Loan. Paid-in-kind interest is reflected as a component of the carrying value of the ~~New~~ Senior Term Loan as the payment of such interest will occur upon the settlement of the ~~New~~ Senior Term Loan.

The Company may prepay the ~~New~~ Senior Term Loan in whole, subject to a 2.0% prepayment fee if prepaid prior to July 30, 2024, 1.0% prepayment fee if prepaid after July 30, 2024 but prior to July 30, 2025, and no prepayment fee if prepaid on or after July 30, 2025. Prior to Amendment No. 3 (entered into on August 3, 2023 and further defined in Note 18, "Subsequent Events") the Company was obligated to pay certain of the new lenders deferred debt issuance costs of $~~1,734~~ ~~at the earlier of prepayment or July 29, 2023 (the "July 2023 Deferred Fee"). Pursuant to Amendment No. 3, the~~The July 2023 Deferred Fee, ~~was deferred through the earlier~~as previously amended, of ~~prepayment or July 29, 2024 and was~~

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~~increased to~~ $2,034. was paid as part of Amendment No. 4. Accordingly, the Company ~~is recognizing~~recognized the accretion of the July 2023 Deferred Fee as interest expense ~~which at June 30, 2023 is $1,590~~ ~~and is recognized in accounts payable and accrued expenses in the condensed consolidated balance sheets. The Company must also pay to the lenders a final payment of $7,410~~ ~~(of which $1,035~~ ~~was incurred pursuant~~through March 11, 2024. Prior to Amendment No. 1)4, the Company had $8,970 of deferred fees due at the earlier of prepayment or maturity of the ~~New Senior Term Loan. The Company is recognizing the accretion of the final payment as interest expense, which at June 30, 2023 is $1,339~~ ~~and is recognized in other non-current liabilities in the condensed consolidated balance sheets. The Company incurred $2,435~~ ~~of lender fees that were paid out of the net proceeds of the New~~ Senior Term Loan ~~on the Closing Date. The Company also incurred $342~~ ~~of fees paid to third parties. Capitalized debt issuance costs on the Closing Date totaled $2,777. The Company amortizes debt discounts~~which were amortized over the term of the ~~New~~ Senior Term ~~Loans~~Loan using the effective interest method. On March 11, 2024, and as a result of Amendment No. 4, the Company had $5,250 of deferred fees outstanding which the Company recognized the accretion of these deferred fees as interest expense. The $1,134 of prepayment fee paid on March 11, 2024 was treated as a debt discount. The amortization recorded for the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and March 31, 2023 is $~~161~~646 and $~~310~~149, respectively, and is included within interest expense in the condensed consolidated statements of operations and comprehensive ~~loss.~~income (loss). The remaining unamortized debt discount at ~~June 30, 2023~~March 31, 2024 is $~~2,395~~4,629, excluding any deferred fees, and is reflected net against debt on the condensed consolidated balance sheets.

The ~~New~~ Senior Term Loan is senior to all other debt and has a first priority lien on substantially all of the Company’s assets. The ~~New~~ Senior Term Loan contains customary negative covenants related to borrowing, events of default and covenants, including certain non-financial covenants and covenants limiting the Company’s ability to dispose of assets, undergo a change in control, merge with or acquire stock, and make investments, in each case subject to certain exceptions. In addition to the negative covenants, there were ~~three~~four financial covenants in place at ~~June 30, 2023:~~March 31, 2024: a minimum cash balance requirement, minimum ~~annual recurring revenue~~ARR requirement, an adjusted EBITDA requirement and a capital expenditure limitation. ~~Beginning with~~As of, and for the ~~third quarter of 2023,~~three months ended March 31, 2024, the Company ~~is also subject to an adjusted EBITDA requirement (as defined~~was in ~~the Credit Agreement, as amended).~~compliance with all required financial covenants. Upon the occurrence of an event of default, in addition to the lenders being able to declare amounts outstanding under the ~~New~~ Senior Term Loan due and payable the lenders can elect to increase the interest rate by 5.0% per annum.

At June 30, 2023, the Company was in compliance with the minimum cash balance requirement and capital expenditure limitation. The Company's annual recurring revenue was marginally below the minimum annual recurring revenue for the period. On August 3, 2023 the New Senior Term Loan lenders waived their rights upon default retroactive to June 30, 2023 and entered into Amendment No. 3 ("Amendment No. 3") to the Credit Agreement dated July 29, 2022, further discussed in Note 18, "Subsequent Events".

New GPO Note

On June 30, 2023 (the “Subscription Date”), the Company entered into an Exchange and Settlement Agreement (the “Exchange and Settlement Agreement”) with GPO FN Noteholder LLC (the “Investor”) pursuant to which (i) the Investor returned 5,881,723 shares of Class A Common Stock held by the Investor to the Company for cancellation, (ii) the Company issued to the Investor a subordinated convertible promissory note in an initial principal amount of $46,794 (the “New GPO Note”), and (iii) the parties agreed to a mutual settlement and release of all claims ~~(including,~~including, but not limited to, any claims by the Investor for additional shares or money damages resulting from the entry into the Merger Agreement, relating to or arising from the conversion of the Amended and Restated Senior Secured Subordinated Promissory Note, dated December 29, 2020, previously issued by a subsidiary of the pre-business combination FiscalNote Holdings, Inc. to the Investor. The exchange and settlement are non-cash exchanges in the condensed consolidated statement of cash flows. The before mentioned transactions closed on July 3, 2023.

The New GPO Note will mature on July 3, 2028, unless earlier redeemed or repurchased by the Company or converted in accordance with the terms thereof. The New GPO Note bears interest at a rate of 7.50% per annum payable quarterly in arrears, as follows: (i) for the first year following the date of issuance, interest will be payable in kind by adding interest to the principal amount of the New GPO Note; and (ii) for any period thereafter, interest will be payable in cash or freely tradeable shares of Class A Common Stock, at the Company’s option, with the value per share determined with reference to the trailing 30-day volume weighted average trading price prior to the interest payment date, subject to certain exceptions under which the Company will be permitted to pay PIK Interest.

The New GPO Note is subordinate to the Company’s obligations under its ~~New~~ Senior Term Loan which limits certain actions that the Company and the Investor may take under the New GPO Note. At any time prior to the July 3, 2028, the Investor is entitled to convert all or any portion of the principal amount of the New GPO Note and accrued interest thereon into shares of Class A Common Stock at $8.28 per ~~share.~~share (adjusted to $6.89 on April 11, 2024 pursuant to the terms of the New GPO Note as a result of the issuance of the Additional Fee Shares to Era as described in Note 18, "Subsequent Events"). The New GPO Note is subject to customary anti-dilution adjustments for stock splits and similar transactions and, subject to standard exceptions, weighted average anti-dilution protection. The principal amount, together with accrued interest thereon, of the New GPO Note is redeemable by the Company in whole or in part based on certain conditions as defined in the New GPO Note.

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The Company elected to account for the New GPO Note using the fair value option. The New GPO Note was recorded at its June 30, 2023 acquisition date fair value of $36,583. The Company initially recorded a loss contingency of $11,700 in its fiscal year 2022 financial statements representing the difference between the fair value of the shares returned by the Investor and the fair value of the New GPO Note on the date of exchange. With the execution of the Exchange and Settlement Agreement and New GPO Note, the Company recorded an additional non-cash loss on settlement with GPO of $3,474 in the condensed consolidated statement of operations for the ~~three~~year ended December 31, 2023. The fair market value at March 31, 2024 and ~~six~~December 31, 2023 was $33,252 and $36,954, respectively. The unrealized change in the fair value of the New GPO Note of $4,443 is recorded in accumulated other comprehensive income for the period ended March 31, 2024 and the non-cash gain of $180 was recorded in the change in fair value of financial instruments in the condensed consolidated statements of operations and comprehensive income (loss) during the three months ended ~~June 30, 2023.~~March 31, 2024. The Company incurred total interest expense related to the new GPO note of $921 for the three months ended March 31, 2024.

Convertible Notes

At ~~June 30, 2023,~~March 31, 2024, the holders of four convertible notes that were previously issued by Old FiscalNote (the “Convertible Notes”) with a principal and accrued PIK balance of $~~13,094~~14,557~~, remained~~ remain outstanding. The Company incurred total interest expense related to the Convertible Notes, including the amortization of the various discounts, of $~~522~~598 and $~~451~~515 during the three months ended ~~June 30,~~March 31, 2024 and 2023, ~~and 2022, respectively, and $1,037~~ ~~and $892~~ ~~for the six months ended June 30, 2023 and 2022,~~ respectively.

~~Concurrently with the Closing, the Company repaid or converted to shares of Class A Common Stock of New FiscalNote all other previously outstanding debt instruments. The Company recorded $23,900~~ ~~and $41,976~~ ~~of interest expense during the three and six months ended June 30, 2022, respectively, related to debt that was extinguished during 2022.~~

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Dragonfly Seller Convertible Notes

In connection with the Company's acquisition of Dragonfly, the Company financed part of the purchase with the issuance of convertible notes. The Dragonfly Convertible Notes were issued in a principal amount of £8.9 million pounds sterling (approximately $11,050 on the closing date of the acquisition), with interest at an annual rate of 8%, which can be paid in cash or paid-in-kind. The paid-in-kind interest will be annually credited to the principal amount. All principal and accrued interest are due upon maturity on January 27, 2028.

At any time after August 2, 2023, the Company can convert any portion of the principal and accrued interest at the volume weighted-average price for the five consecutive trading day period ending on the last trading day of the calendar month preceding the date the Company provides notice of conversion to the Sellers.

At any time after the 18 month anniversary of the Dragonfly acquisition closing date, the lender has the right to convert the outstanding principal and accrued interest for FiscalNote common stock at $10.00 per share, subject to adjustment in the event of any stock dividend, stock split, reverse stock split, combination or other similar recapitalization with respect to common stock.

The Company elected to account for the Dragonfly Seller Convertible Notes using the fair value option. The Dragonfly Seller Convertible Notes were recorded at their acquisition date fair value of $8,635. The fair market value at ~~June 30,~~March 31, 2024 and at December 31, 2023 was $~~9,598~~7,857 and $9,002. The unrealized change in the fair value of the Dragonfly Seller Convertible Note of $1,264 is recorded in accumulated other comprehensive income for the period ended March 31, 2024 and the non-cash gain of $47 was recorded in the change in fair value of financial instruments in the condensed consolidated statements of operations and comprehensive ~~loss in~~income (loss) during the ~~amount of~~three months ended March 31, 2024 and a ~~loss of $981~~ ~~and a~~non-cash gain of $~~407~~574 ~~for~~is recorded in the change in fair value of financial instruments in the condensed consolidated statements of operations and comprehensive income (loss) during the three ~~and six~~ months ended ~~June 30,~~March 31, 2023, respectively. The Company incurred total interest expense related to the Dragonfly Seller Convertible Notes of $~~226~~241 and $~~379~~153 during the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and March 31, 2023, respectively.

Era Convertible Notes

In connection with the Company’s strategic commercial partnership, the Company issued a convertible note to Era, a third-party lender, dated December 8, 2023 for $5,500 on December 8, 2023 (the "Issuance Date"). Pursuant to the terms of the December 8, 2023 convertible note, the Company issued that same third-party lender a second convertible note for $801 on January 5, 2024 (collectively, the "Era Convertible Notes"). The Era Convertible Notes were issued in a principal amount of $6,301, with cash interest at a rate equal to the applicable federal rate published by the Internal Revenue Service beginning on the six-month anniversary of the Issuance Date. All principal and unpaid interest are due on maturity at December 8, 2027.

The Era Convertible Notes are contractually subordinated to the Company’s obligations under its senior secured indebtedness, and accordingly, the Company’s right to make certain cash payments in connection therewith is limited by the terms of such subordination agreement (the “Subordination Agreement”). Era may convert the Notes into shares of Common Stock (the “Underlying Shares”), beginning on the six-month anniversary of the Issuance Date based on the volume weighted average price of the trailing 30 trading day period prior to the conversion. In addition, the Company may elect to convert the Era Convertible Notes into the Underlying Shares if the Underlying Shares are registered for resale under the Securities Act of 1933, as amended (the “Securities Act”).

Pursuant to the copilot agreement (the "Co-Pilot Agreement") entered into by and among the Company, FiscalNote Inc., a subsidiary of the Company, and Era on December 8, 2023, the Company agreed to issue Era up to an additional $3,105,105 in the form of shares of the Company's Class A Common Stock no later than June 2024 (the "Partnership Shares"). The Co-Pilot Agreement requires the Company to issue additional shares of Common Stock (“Additional Shares”) to Era if Era’s sales of the Partnership Shares and the Underlying Shares do not generate aggregate cash proceeds to Era that equal or exceed approximately $9.5 million during the sell-off period set forth in the Co-Pilot Agreement. Any such Additional Shares would be valued based on the volume weighted average price of the trailing 30 trading day period, calculated prior to the date of any such issuance.

The Company elected to account for the Era Convertible Notes using the fair value option. The Era Convertible Note dated December 8, 2023 was recorded at its acquisition date fair value of $5,500. The Era Convertible Note Dated January 5, 2024 was recorded at its acquisition date fair value of $801. The fair market value of the Era Convertible Note dated December 8, 2023 was $5,977 at December 31, 2023. The fair market value of the two Era Convertible Notes was $8,461 at March 31, 2024. The non-cash loss was recorded in the change

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in fair value of financial instruments in the condensed consolidated statements of operations and comprehensive income (loss) in the amount of a loss of $1,683 for the three months ended March 31, 2024.

Aicel Convertible Note

In connection with the Company’s acquisition of Aicel, the Company assumed a convertible note (“Aicel Convertible Note”) issued by Aicel in a private placement to a third-party lender dated July 27, 2022. The Aicel Convertible Note was issued in a principal amount of $1,131, with paid-in-kind interest at an annual rate of 1%. All principal and accrued and unpaid interest are due on maturity at July 27, 2027. The Aicel Convertible Note provides for no prepayments until maturity without written consent of the lender.

The Aicel Convertible Note can be converted upon the occurrence of certain events, including (i) Aicel initial public offering (“IPO”), (ii) change in control of Aicel (the acquisition of Aicel by FiscalNote did not constitute a change in control as defined in the purchase agreement), or (iii) sale of substantially all of Aicel’s assets (collectively, a “Conversion Event”). The Company has the right to convert the Aicel Convertible Note into shares of common stock issued in an IPO, if (a) the Conversion Event is an IPO and (b) the price per share paid in an IPO is greater than the stipulated initial conversion price. The lender has the right to elect to convert the Aicel Convertible Note into shares of common stock upon the occurrence of a Conversion Event.

At any time after the second anniversary of the Aicel acquisition closing date until the earlier of (a) the Aicel Convertible Note maturity date, or (b) the occurrence of any liquidity event, the lender has the right to require FiscalNote to repurchase the outstanding principal in exchange for FiscalNote common stock. The lender will receive a number of shares of FiscalNote equal to the outstanding principal plus accrued interest divided by the FiscalNote common stock price and rounded to the nearest whole share.

Upon the occurrence of an event of default, in addition to the lenders being able to declare amounts outstanding under the Aicel Convertible Note due and payable the lenders can elect to increase the paid-in-kind interest rate to 12.0% per annum.

The Company concluded that the contingent default interest provision was required to be bifurcated and treated as an embedded derivative liability. The associated value was immaterial and required no initial amount to be ~~recorded.~~recorded and continues to be immaterial as of the reporting date . The Company determined that the remaining embedded features were clearly and closely related to the debt host and did not require bifurcation from the debt host.

The Aicel Convertible Note was recorded at its acquisition fair value of $1,131. The Company incurred total interest expense related to the Aicel Convertible Note of $319 and $63 during the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and March 31, 2023, respectively.

PPP Loan

On April 13, 2020, the Company received funding in the principal amount of $8,000 under the CARES Act. Interest accrues annually at 1%. On February 14, 2022, the SBA forgave $7,667 of the PPP Loan with the remaining balance of $333 to be repaid over five ~~years.~~years. The Company recognized the forgiveness of PPP Loan as a gain on debt extinguishment in the condensed consolidated statements of operations and comprehensive ~~loss.~~income (loss) in 2022. As of ~~June 30, 2023,~~March 31, 2024, the Company recorded $6867 of the remaining PPP Loan as short-term debt and $~~130~~50 as long-term debt in the condensed consolidated balance sheets.

Total Debt

The following table summarizes the total estimated fair value of the Company's debt as of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, respectively. These fair values are deemed Level 3 liabilities within the fair value measurement framework.


	June 30, 2023		December 31, 2022		March 31, 2024		December 31, 2023
New Senior Term Loan	$	161,151	$	165,540
Senior Term Loan					$	92,497	$	168,702
New GPO Note		36,583		-		33,252		36,954
Convertible Notes		13,419		16,942		13,709		13,992
Dragonfly Seller Convertible Notes		9,598		-		7,857		10,407
Era Convertible Notes						8,461		5,977
Total	$	220,751	$	182,482	$	155,776	$	236,032

Warrants

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Old FiscalNote Warrants

At ~~June 30, 2023,~~March 31, 2024, 118,700 warrants (previously issued by Old FiscalNote to lenders prior to the ~~New~~ Senior Term Loan) with an exercise price of $8.56, remain outstanding. These warrants are accounted for as a liability with a fair value of $680 at ~~June 30, 2023,~~March 31, 2024, and are included as part of the other non-current liabilities within the condensed consolidated balance sheets.

Warrants associated with Amendment No. 1

On March 17, 2023, in connection with Amendment No. 1 discussed above, the Company issued 80,000 warrants with an exercise price of $0.01. These warrants are accounted for as a liability with a fair value of $~~291~~106 at ~~June 30, 2023,~~March 31, 2024, and are included as part of the other non-current liabilities within the condensed consolidated balance sheets.

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Note 9. Stockholders’ Equity

Authorized Capital Stock

The Company’s charter authorizes the issuance of 1,809,000,000 shares, which includes Class A common stock, Class B common stock, and preferred stock.

Class A Common Stock

Subsequent to the Closing of the Business Combination, the Company's Class A common stock and public warrants began trading on the New York Stock Exchange (“NYSE”) under the symbols “NOTE” and “NOTE WS,” respectively. Pursuant to the Company’s charter, the Company is authorized to issue 1,700,000,000 shares of Class A common stock, par value $0.0001 per share. As of ~~June 30, 2023,~~March 31, 2024, the Company had ~~120,284,209~~122,749,497 shares of Class A common stock issued and outstanding.

Additionally, the Company has outstanding warrants to purchase shares of New FiscalNote Class A common stock that became exercisable upon the Closing of the Business Combination. Refer to Note 11, "Warrant Liabilities."

Class B Common Stock

Pursuant to the Company’s charter, the Company is authorized to issue 9,000,000 shares of Class B common stock, par value $0.0001 per share.

In connection with the Closing of the Business Combination, the Co-Founders, or entities controlled by the Co-Founders, received Class B shares of New FiscalNote common stock as consideration (see further details in Note 2, "Business Combination with DSAC").

As of ~~June 30, 2023,~~March 31, 2024, the Company had 8,290,921 shares of Class B common stock issued and outstanding.

Preferred Stock

Pursuant to the Company’s charter, the Company is authorized to issue 100,000,000 shares of preferred stock, par value $0.0001 per share. Our board of directors has the authority without action by the stockholders, to designate and issue shares of preferred stock in one or more classes or series, and the number of shares constituting any such class or series, and to fix the voting powers, designations, preferences, limitations, restrictions and relative rights of each class or series of preferred stock, including, without limitation, dividend rights, conversion rights, redemption privileges and liquidation preferences, which rights may be greater than the rights of the holders of the common stock. As of ~~June 30, 2023,~~March 31, 2024, there were no shares of preferred stock issued and outstanding.

Dividends

The Company's Class A and Class B common stock are entitled to dividends if and when any dividend is declared by the Company's board of directors, subject to the rights of all classes of stock outstanding having priority rights to dividends. The Company has not paid any cash dividends on common stock to date. The Company may retain future earnings, if any, for the further development and expansion of the Company's business and have no current plans to pay cash dividends for the foreseeable future. Any future determination to pay dividends will be made at the discretion of the Company's board of directors and will depend on, among other things, the Company's financial condition, results of operations, capital requirements, restrictions contained in future agreements and financing instruments, business prospects and such other factors as the Company's board of directors may deem relevant.

Note 10. Earnout Shares and RSUs

The shareholders and other equity holders of Old FiscalNote as described below are entitled to receive up to 19,195,100 additional shares of Class A common stock of New FiscalNote (the “Earnout Awards”) in the form of Earnout Shares or as shares reserved for issuances upon settlement of Earnout RSUs, as described below. The Earnout Awards are split into five tranches each consisting of 3,839,020 shares of Class A common stock in New FiscalNote. Certain Old FiscalNote equity holders will receive Earnout Restricted Stock Units (the “Earnout RSUs”), which are settled in Class A common stock. The right to receive Earnout Awards will expire five years after the Closing Date (the “Earnout Period”). Each tranche of the Earnout Awards will be issued only when the dollar volume-weighted average price of one share of New FiscalNote Class A common stock is greater than or equal to $10.50, $12.50, $15.00, $20.00, or $25.00, respectively, for any 10 trading days within any period of 20 consecutive trading days during the Earnout Period (collectively, the “Triggering Events”).

Pursuant to the terms of the Business Combination Agreement, the holders of Old FiscalNote common stock, Old FiscalNote warrants, vested Old FiscalNote options and vested Old FiscalNote RSUs outstanding immediately prior to the Closing Date will be entitled to receive their proportionate allocation of Earnout Shares subject to achievement of the Triggering Event. Holders of unvested Old FiscalNote options

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and unvested Old FiscalNote RSUs outstanding immediately prior to the Closing Date will be entitled to receive their proportionate allocation of Earnout Shares in the form of Earnout RSUs subject to achievement of the Triggering Event. To the extent the equity award issued upon New FiscalNote's assumption of such any Old FiscalNote Option or Old FiscalNote RSU (each a “Converted Award”) is outstanding and has vested as of the occurrence of a Triggering Event, the holder thereof will receive a proportionate allocation of Earnout Shares in lieu of Earnout RSUs.

If a Converted Award is forfeited after the Closing Date but prior to the Triggering Event, no Earnout RSUs will be issued for such Converted Award. The right to receive Earnout RSUs that have been forfeited shall be reallocated pro-rata to the remaining holders of vested Converted Awards in the form of Earnout Shares and unvested Converted Awards in the form of Earnout RSUs in the manner described above. Reallocated Earnout RSUs are subject to the remaining vesting schedule and conditions of the Converted Award held by such equity holder. The forfeiture and subsequent reallocation of the Earnout RSUs are accounted for as the forfeiture of the original award and the grant of a new award.

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A portion of the Earnout Shares that may be issued to Old FiscalNote common stockholders, Old FiscalNote vested option holders and Old FiscalNote warrant holders and all of the Earnout RSUs were determined to represent additional compensation for accounting purposes pursuant to ASC 718, “Compensation-Stock Compensation”. The Company recognizes stock-compensation expense based on the fair value of the Earnout Awards over the requisite service period for each tranche. Upon Closing, the Company recognized $17,712 of share-based compensation expense for vested Earnout Awards. The Company recognized $~~257~~131 and $~~1,381~~1,124 of share-based compensation expense during the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and March 31, 2023, respectively. The remaining Earnout Shares were determined to represent an equity transaction in conjunction with the reverse recapitalization and were evaluated pursuant to ASC 480, “Distinguishing Liabilities from Equity” and ASC 815, “Derivatives and Hedging”. These remaining Earnout Shares will be accounted for as a liability as the arrangement is indexed to something other than the Company’s stock. The liability is revalued at each reporting period with changes being recorded as a non-operating gain or loss in the condensed consolidated statements of operations and comprehensive ~~loss.~~income (loss). The liability of $68 was recorded in other non-current liabilities on the condensed consolidated balance sheets as of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022.~~2023.

As of ~~June 30, 2023,~~March 31, 2024, there was $~~1,234~~546 of unrecognized compensation expense related to the Earnout Awards to be recognized over a weighted-average period of approximately one and a half years. As of ~~June 30, 2023,~~March 31, 2024, no Earnout Shares and no Earnout RSUs have been issued as no Triggering Events have occurred.

Note 11. Warrant Liabilities

Upon the Closing of the Business Combination, the Company assumed 8,750,000 public warrants and 7,000,000 private placement warrants that were previously issued by Old DSAC. Each public warrant and private placement warrant is exercisable for 1.571428 shares of New FiscalNote Class A common stock (or an aggregate of up to 24,750,000 shares of New FiscalNote Class A common stock).

During the ~~six~~three months ended ~~June 30, 2023,~~March 31, 2024, no public warrants were exercised into shares of Class A common stock. No private placement warrants have been exercised to date. Accordingly, as of ~~June 30, 2023,~~March 31, 2024, the Company had 8,358,964 public warrants and 7,000,000 private placement warrants outstanding with a per share fair value of $0.44. These warrants are accounted for as a liability and have a fair value of $~~6,758~~3,840 at ~~June 30, 2023.~~March 31, 2024.

Public Warrants

Each public warrant entitles the registered holder to acquire 1.571428 shares of the Company’s Class A common stock at a price of $7.32 per share, subject to adjustment as discussed below. The warrants became exercisable on August 29, 2022. Warrants may only be exercised for a whole number of shares of Class A common stock. The public warrants will expire on July 29, 2027, or earlier upon redemption or liquidation.

Redemption of warrants for cash

The Company may call the public warrants for redemption for cash:

•

in whole and not in part;

•

at a price of $0.01 per warrant;

•

upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and

•

if, and only if, the last reported sale price of the Company’s Class A common stock equals or exceeds $11.45 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like and for certain issuances of the Company’s Class A common stock and equity-linked securities) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date the Company sends the notice of redemption to the warrant holders.

If and when the warrants become redeemable by the Company for cash, the Company may exercise its redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.

Redemption of warrants for shares of Class A common stock

The Company may redeem the outstanding warrants for shares of Class A common stock:

•

in whole and not in part;

~~Table of Contents~~

•

at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants prior to redemption and receive that number of shares determined by reference to an agreed table, based on the redemption date and the “fair market value” of Class A common stock (as defined below) except as otherwise described below;

•

if, and only if, the last reported sale price of the Company’s Class A common stock equals or exceeds $6.36 per share (as adjusted per stock splits, stock dividends, reorganizations, recapitalizations and the like and for certain issuances of the Company’s Class A common stock and equity-linked securities) on the trading day prior to the date on which the Company sends the notice of redemption to the warrant holders; and

•

if and only if, the private placement warrants are also concurrently exchanged at the same price (equal to a number of shares of our Class A common stock) as the outstanding public warrants, as described above.

•

The “fair market value” of the Class A common stock shall mean the average of the last reported sales price for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. In no event will the warrants be exercisable in connection with this redemption feature for more than 0.567 shares of Class A common stock per warrant (subject to adjustment).

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Private Placement Warrants

The private placement warrants are not redeemable by the Company so long as they are held by the sponsor of DSAC or its permitted transferees, except in certain limited circumstances. The DSAC Sponsor, or its permitted transferees, has the option to exercise the private placement warrants on a cashless basis and the DSAC Sponsor and its permitted transferees has certain registration rights related to the private placement warrants (including the shares of Class A common stock issuable upon exercise of the private placement warrants). Except as described in this section, the private placement warrants have terms and provisions that are identical to those of the public warrants. If the private placement warrants are held by holders other than the DSAC Sponsor or its permitted transferees, the private placement warrants will be redeemable by the Company and exercisable by the holders on the same basis as the public warrants.

Note 12. Stock-Based Compensation

2022 Long-Term Incentive Plan

In connection with the Business Combination, the Company's board of directors adopted, and its stockholders approved, the 2022 Long-Term Incentive Plan (the “2022 Plan”) under which 20,285,600 shares of Class A common stock were initially reserved for issuance. The 2022 Plan allows for the issuance of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, other stock-based awards and cash-based awards. The number of shares of the Company’s Class A common stock available for issuance under the 2022 Plan increases on the first day of each calendar year, starting on January 1, 2023 and continuing through and including January 1, 2027, by the lesser of (a) 13,523,734, (b) three percent (3%) of the total number of shares of Class A Common Stock outstanding on December 31st of the immediately preceding fiscal year or (c) a lesser number determined by the Company’s board of directors prior to January 1 of a given year. In accordance with this provision, on each of January 1, 2023 and January 1, 2024, the number of shares authorized for issuance under the 2022 Plan increased by 3,693,767 and 3,650,394, respectively.

During the ~~six~~three months ended ~~June 30, 2023,~~March 31, 2024, the Company issued ~~401,902~~1,271,410 stock options and 239,663 restricted stock units. At March 31, 2024, 7,868,951 stock options, ~~25,000~~ ~~performance based stock options,~~ ~~5,433,779~~ ~~restricted stock units, and~~ ~~75,000~~ ~~performance based restricted stock units. At June 30, 2023,~~ ~~7,028,189~~ ~~stock options,~~ ~~2,556,550~~2,601,649 performance stock options, ~~7,061,940~~5,499,350 restricted stock units, and 75,000 performance based restricted stock units remain outstanding. As of ~~June 30, 2023,~~March 31, 2024, the Company had ~~6,181,386~~4,219,656 shares of Class A common stock available for issuance under the 2022 Plan.

The Company recognized $~~5,091~~5,776 and $~~565~~6,404 of stock-based compensation expense for all long term incentive plans in effect during the three months ended ~~June 30,~~March 31, 2024 and 2023, ~~and 2022, respectively, and $10,360~~ ~~and $825~~ ~~during the six months ended June 30, 2023 and 2022,~~ respectively. The Company recognized $~~138~~ ~~and $276~~169 of stock-based compensation expense related to acquisition earnouts during the three ~~and six months~~ ended ~~June 30,~~March 31, 2024 and 2023, respectively.

2022 Employee Stock Purchase Plan

In connection with the Business Combination, the Company’s board of directors adopted, and its stockholders approved, the 2022 Employee Stock Purchase Plan (the “ESPP”) whereby eligible employees may authorize payroll deductions of up to 15% of their regular base salary to purchase shares at the lower of 85% of the fair market value of the common stock on the date of commencement of the offering period or on the last day of the six-month offering period. The plan is defined as compensatory, and accordingly, a stock-based compensation charge of $~~103~~99 and $~~205~~102 was recorded as the difference between the fair market value and the discounted purchase price of the Company's common stock for the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and 2023, respectively. AsThe number of ~~June 30,~~shares of Common Stock reserved for issuance under the ESPP will automatically increase on January 1st each year, starting on January 1, 2023 and continuing through and including January 1, 2027, by the lesser of (a) ~~102,807~~3,267,760, (b) one percent (1%) of the total number of shares of all classes of Common Stock outstanding on December 31st of the preceding fiscal year, or (c) a lesser number determined by the Board prior to January 1 of a given year. Pursuant to this provision, on each of January 1, 2023 and January 1, 2024, the number of shares authorized for issuance under the ESPP increased by 1,231,255 and 1,299,707, respectively. During the three months ended March 31, 2024, 202,327 shares have been issued under the ESPP and the Company had ~~4,396,208~~5,493,588 shares of Class A common stock available for issuance under the ESPP.

Withholding Taxes on Equity Awards

In connection with the settlement of equity awards, the Company records a non-cash liability and corresponding APIC adjustment for the withholding taxes on net share settlement of stock-based compensation and option exercises until such time as those taxes have been remitted to the respective taxing authorities.

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Note13. Transaction (Gains) Costs, net

The Company incurred the following transaction costs related to businesses acquired and the consummation of the Business Combination during the periods presented:


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
	2023			2022			2023			2022			2024			2023
Transaction costs related to acquired businesses	$	157		$	500		$	1,379		$	572		$	-		$	1,222
Non-capitalizable Business Combination costs		150			256			334			459			-			184
Change in contingent consideration liabilities		(177	)		(171	)		(333	)		(1,537	)		(4	)		(156	)
Contingent compensation expense		179			442			337			488			-			158
Total transaction costs (gains), net	$	309		$	1,027		$	1,717		$	(18	)
Total transaction (gains) costs, net													$	(4	)	$	1,408

Note 14. Earnings (Loss) Per Share

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The Company has two classes of common stock authorized: Class A common stock and Class B common stock. The rights of the holders of Class A and Class B common stock are identical, except with respect to voting. Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to twenty-five votes per share. The Company allocates undistributed earnings attributable to common stock between the common stock classes on a one‑to‑one basis when computing net loss per share. As a result, basic and diluted net income (loss) per share of Class A common stock and Class B common stock are equivalent.

~~Earnings (loss) per share~~The following is ~~computed by dividing net loss attributable to common shareholders by~~a calculation of the ~~weighted average number of common shares outstanding during the period on a basic and diluted basis. The Company’s net loss used in computing~~ basic and diluted earnings per share ~~is adjusted~~ for the deemed dividends resulting from the accretion of Old FiscalNote's preferred shares to redemption value and beneficial conversion features, as applicable. The Old FiscalNote preferred shares were outstanding as of June 30, 2023. At the closing of the Business Combination, all of Old FiscalNote’s preferred shares were exchanged for Class ACompany's common stock, ~~of New FiscalNote.~~including a reconciliation between net income attributable to common stockholders used for Basic EPS and Diluted ~~earnings (loss) per share considers~~EPS for the ~~impact of potentially dilutive securities.~~three months ended March 31, 2024 and 2023:

~~The components of basic and diluted earnings (loss) per shares are as follows~~:

(in thousands, except per share data)

Three Months Ended June 30,

Six Months Ended June 30,

Numerator:

2023

2022

2023

2022

Net loss

$
(30,973
)

$
(38,360
)

$
(50,246
)

$
(66,711
)
Deemed dividend - change in redemption value of preferred stock of Old FiscalNote

-

(10,614
)

-

(2,219
)
Net loss used to compute basic and diluted loss per share

$
(30,973
)

$
(48,974
)

$
(50,246
)

$
(68,930
)
Denominator:

Weighted average common stock outstanding, basic and diluted

134,117,122

19,020,367

133,601,798

18,876,752

Net loss per share, basic and diluted

$
(0.23
)

$
(2.57
)

$
(0.38
)

$
(3.65
)

Anti-dilutive securities excluded from diluted loss per share:

Anti-dilutive Earnout Awards

19,195,100

-

19,195,100

-

Anti-dilutive stock options

923,973

8,592,685

1,461,303

8,474,016

Anti-dilutive Convertible Notes

2,148,810

24,325,180

2,148,810

24,201,372

Anti-dilutive contingently issuable shares

1,339,924

1,481,922

1,339,924

1,481,922

Anti-dilutive restricted stock units

7,136,940

773,385

7,136,940

731,769

Anti-dilutive other liability - classified warrants

-

252,242

-

252,242

Anti-dilutive equity classified warrants

-

320,490

-

320,490

Anti-dilutive New GPO Note

5,651,436

-

5,651,436

-

Anti-dilutive Aicel Convertible Notes

112,051

-

112,051

-

Anti-dilutive convertible preferred stock

-

50,032,289

-

50,032,289

Anti-dilutive convertible senior debt

-

16,729,349

-

17,304,072

Total anti-dilutive securities excluded from diluted loss per share

36,508,234

102,507,542

37,045,564

102,798,172


(in thousands, except per share data)	Three Months Ended March 31,
	2024		2023
Basic Earnings Per Share
Numerator:
Net income (loss) attributable to common stockholders	$	50,599	$	(19,273	)
Denominator:
Weighted average common stock outstanding used in basic EPS computations		130,712,032		133,082,639
Basic Earnings Per Share	$	0.39	$	(0.14	)

Diluted Earnings Per Share
Numerator:
Net income (loss) attributable to common stockholders	$	50,599	$	(19,273	)
If-converted impact on net income (loss) attributable to common stockholders		3,673		-
Net income (loss) attributable to common stockholders for diluted EPS	$	54,272	$	(19,273	)
Denominator:
Weighted average common stock outstanding used in basic EPS computations		130,712,032		133,082,639
Weighted average effect of dilutive securities		15,315,053		-
Weighted average common stock outstanding used in diluted EPS computations		146,027,085		133,082,639
Diluted Earnings Per Share	$	0.37	$	(0.14	)

~~The weighted-average common shares and thus~~Since the Company was in a net loss position during the three months ended March 31, 2023, basic net loss per share ~~calculations and potentially dilutive security amounts for~~attributable to common stockholders is the same as diluted net loss per share as the inclusion of all ~~periods prior to the Business Combination~~potential common shares outstanding would have been ~~retrospectively adjusted to~~anti-dilutive.

Potentially dilutive securities that were not included in the equivalent number of shares outstanding immediately after the Business Combination to effect the reverse recapitalization. Historically reported weighted average shares outstanding have been multiplied by the Exchange Ratio (see diluted per share calculations because they would be anti-dilutive were as follows:


	Three Months Ended March 31,
Anti-dilutive securities excluded from diluted loss per share:	2024		2023
Anti-dilutive Earnout Awards		19,195,100		19,195,100
Anti-dilutive stock options		-		2,033,574
Anti-dilutive Convertible Notes		-		2,075,225
Anti-dilutive contingently issuable shares		-		1,339,924
Anti-dilutive restricted stock units		5,569,966		7,022,744
Anti-dilutive Aicel Convertible Notes		-		112,899
Total anti-dilutive securities excluded from diluted loss per share		24,765,066		31,779,466

Note ~~2, "Business Combination with DSAC").~~

15. Provision (Benefit) from Income Taxes

Effective Tax Rate

The Company computes its quarterly and year-to-date provisions for income taxes by applying the estimated effective tax rates to the quarterly and year-to-date pre-tax income or losses and adjusting the provisions for discrete tax items recorded in the periods. For the three months ended ~~June 30, 2023~~March 31, 2024 the Company reported a tax ~~provision~~expense of $~~213~~1,426 on a pre-tax ~~loss~~income of $~~30,760~~52,025, which resulted in an effective tax rate of (~~0.69~~2.74~~) percent. For the six months ended June 30, 2023, the Company reported a tax provision of $243~~ ~~on a pre-tax loss of $50,003, which resulted in an effective tax rate of (0.49~~) percent. The Company’s effective tax rate differed from the U.S. statutory rate of 21 percent primarily due to ~~state taxes,~~ the impact of a valuation allowance on the Company’s deferred tax ~~assets, and other nondeductible expenses such as stock option deductions and non-deductible officer's compensation.~~assets. During the ~~six~~three months ended ~~June~~ March 31, 2024, the Company recorded a discrete tax charge for the impact of the sale of Board.org of $1,729.

For the three months ended March 31, 2023, the Company reported tax expense of $30 on a pre-tax loss of $19,243, which resulted in an effective tax rate of (0.16) percent. The Company's effective tax rate differed from the U.S. statutory rate of 21 percent primarily due to the impact of a valuation allowance on the Company’s deferred tax assets. During the three months ended March 31, 2023, the Company had discrete items relating to goodwill impairment, unrecognized tax benefits and the tax impact of interest expense on unrecognized tax benefits.

~~Table of Contents~~

~~For the three months ended June 30, 2022, the Company reported a tax benefit of $176~~ ~~on a pretax loss of $38,536, which resulted in an effective tax rate of~~ ~~0.46~~ ~~percent. For the six months ended June 30, 2022, the Company reported a tax benefit of $550~~ ~~on a pretax loss of $67,261, which resulted in an effective tax rate of~~ ~~0.82~~ ~~percent. The Company's effective tax rate differed from the U.S. statutory rate of~~ 21 percent primarily due to state taxes, the impact of a valuation allowance on the Company’s deferred tax assets, an inclusion of global intangible low-taxed income ("GILTI"), disallowed interest expense, non-includible income relating to the forgiveness of the PPP loan, non-includible income relating to a fair value adjustment on contingent consideration, non-includible income for debt premium amortization relating to an equity transaction and other nondeductible expenses. During the six months ended June 30, 2022, the Company had a discrete item relating to the impact of changes in state tax rates on the Company’s deferred tax assets and exercises of stock options.

Unrecognized Tax Benefits and Other Considerations

The Company records liabilities related to its uncertain tax positions. Tax positions for the Company and its subsidiaries are subject to income tax audits by multiple tax jurisdictions throughout the world. The Company believes that it has provided adequate reserves for its income tax uncertainties in all open tax years. As the outcome of the tax audits cannot be predicted with certainty, if any issues arising in the Company's tax audits progress in a manner inconsistent with management's expectations, the Company could adjust its provision for

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income taxes in the future. For the ~~six~~three months ended ~~June 30, 2023,~~March 31, 2024, the Company reported an uncertain tax position totaling $639 relating to a state tax filing position. ~~In addition, the Company derecognized $~~89 ~~deferred tax liabilities relating to historically reported R&D credits as the statute of limitations had expired during the three months ended March 31, 2022.~~ The Company has the following activities relating to unrecognized tax benefits for the periods presented:

Beginning balances at December 31, 2022 and 2021

$
639

$
728

Lapses in statutes of limitations

-

(89
)
Ending balances at June 30, 2023 and 2022

$
639

$
639




Beginning balances at December 31, 2023 and 2022	$	639	$	639
Lapses in statutes of limitations		-		-
Ending balances at March 31, 2024 and 2023	$	639	$	639

Note 16. Fair Value Measurements and Disclosures

The carrying value of cash and cash equivalents (including investments with an original maturity of three months or less at the date of purchase), restricted cash, accounts receivable, accounts payable, and other accruals readily convertible into cash approximate fair value because of the short-term nature of the instruments.

The following table presents the Company’s financial assets and liabilities accounted for at fair value on a recurring basis as of ~~June 30, 2023~~March 31, 2024 by level within the fair value hierarchy:


	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents									$	3,157	$	-	$	-	$	3,157
Short-term investments										-		7,134		-		7,134
Liabilities:
Public warrants	$	3,678	$	-	$	-	$	3,678	$	2,090	$	-	$	-	$	2,090
Private placement warrants		-		3,080		-		3,080		-		1,750		-		1,750
Contingent liabilities from acquisitions		-		-		2,792		2,792		-		-		113		113
Liability classified warrants (a)		-		-		103		103
New GPO Note						36,583		36,583		-		-		33,252		33,252
Dragonfly Seller Convertible Notes		-		-		9,598		9,598		-		-		7,857		7,857
(a) - Included in other non-current liabilities on the condensed consolidated balance sheets
Era Convertible Note										-		-		8,461		8,461

The following table presents the Company’s financial assets and liabilities accounted for at fair value on a recurring basis as of December 31, ~~2022~~2023 by level within the fair value hierarchy:

Level 1

Level 2

Level 3

Total

Liabilities:

Public warrants

$
10,282

$
-

$
-

$
10,282

Private placement warrants

-

8,610

-

8,610

Contingent liabilities from acquisitions

-

-

1,579

1,579

Liability classified warrants (a)

-

-

182

182

(a) - Included in other non-current liabilities on the condensed consolidated balance sheets

~~Table of Contents~~


	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	3,044	$	-	$	-	$	3,044
Short-term investments		-		7,134		-		7,134
Liabilities:
Public warrants	$	2,591	$	-	$	-	$	2,591
Private placement warrants		-		2,170		-		2,170
Contingent liabilities from acquisitions		-		-		130		130
Liability classified warrants (a)		-		-		23		23
New GPO Note		-		-		36,954		36,954
Dragonfly Seller Convertible Notes		-		-		9,002		9,002
Era Convertible Note		-		-		5,977		5,977
(a) - Included in other non-current liabilities on the condensed consolidated balance sheets

The following table summarizes changes in fair value of the Company’s level 3 liabilities during the periods presented:

Contingent
Liabilities from Acquisitions

Liability Classified Warrants

New GPO Note

Dragonfly Seller Convertible Notes

Balance at December 31, 2022

$
1,579

$
182

$
-

$
-

Fair value at issuance date

-

-

36,583

8,635

Contingent consideration at acquisition date

1,445

-

-

-

Contingent compensation recognized

337

-

-

-

Change in fair value included in the determination of net loss(a)

(334
)

(79
)

-

407

Earned contingent consideration settled

(196
)

-

-

-

Cash contingent consideration earned and subsequently settled

(39
)

-

-

-

Paid in kind interest

-

-

-

387

Foreign exchange

-

-

-

169

Balance at June 30, 2023

$
2,792

$
103

$
36,583

$
9,598


	Contingent Liabilities from Acquisitions			Liability Classified Warrants			New GPO Note			Dragonfly Seller Convertible Notes			Era Convertible Note
Balance at December 31, 2023	$	130		$	23		$	36,954		$	9,002		$	5,977
Fair value at issuance date		-			-			-			-			801
Change in fair value included in the determination of net (income) loss(a)		(3	)		(23	)		(180	)		(47	)		1,683
Change in fair value included in accumulated other comprehensive income		-			-			(4,443	)		(1,264	)		-
Cash contingent consideration earned and subsequently settled		(14	)		-			-			-			-
Paid in kind interest		-			-			921			241			-
Foreign exchange		-			-			-			(75	)		-
Balance at March 31, 2024	$	113		$	-		$	33,252		$	7,857		$	8,461

(a)

The change in contingent liabilities from acquisitions is recorded as transaction costs on the condensed consolidated statements of operations and comprehensive ~~loss.~~income (loss).

Short-Term Investments

The fair value of the short-term investments is based on the quoted market price of the securities on the valuation date. As of March 31, 2024, the estimated fair value of the short-term investments was $7,134. The Company recognized a non-cash loss of $49 for the three

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months ended March 31, 2024 resulting from the change in fair value of the short-term investments. The change in fair value is recorded in the condensed consolidated statements of operations and comprehensive income (loss).

Public Warrants

The fair value of the public warrants is based on the quoted market price of such warrants on the valuation date. As of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, the estimated fair value of the public warrants was $~~3,678~~2,090 and $~~10,282~~2,591, respectively. The Company recognized a non-cash ~~loss~~gain of $~~1,003~~501 and $7,607 during the three months ended ~~June 30,~~March 31, 2024 and 2023, ~~and a non-cash gain of $6,604~~ ~~during the six months ended June 30, 2023~~respectively, resulting from the change in fair value of the public warrants. The change in fair value is recorded in change in fair value of financial instruments in the condensed consolidated statements of operations and comprehensive ~~loss.~~income (loss).

Private Placement Warrants

As of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, the estimated fair value of the private warrants was $~~3,080~~1,750 and $~~8,610~~2,170, respectively. The Company recognized a non-cash ~~loss~~gain of $~~840~~420 and $6,370 during the three months ended ~~June 30,~~March 31, 2024 and March 31, 2023, ~~and a non-cash gain of $5,530~~ ~~during the six months ended June 30, 2023~~respectively, resulting from the change in fair value of the private warrants. The change in fair value is recorded in change in fair value of financial instruments in the condensed consolidated statements of operations and comprehensive ~~loss.~~income (loss).

New GPO Note

The New GPO Note was recognized as a liability in connection with the settlement of litigation on ~~the Subscription Date~~June 30, 2023 at its estimated fair value of $36,583. As of March 31, 2024 and December 31, 2023, the estimated fair value of the New GPO Note was $33,252 and $36,954, respectively. The unrealized change in the fair value of the New GPO Note of $4,443 is recorded in accumulated other comprehensive income for the period ended March 31, 2024 and the non-cash gain of $180 was recorded in the change in fair value of financial instruments in the condensed consolidated statements of operations and comprehensive income (loss) during the three months ended March 31, 2024. The estimated fair value of the New GPO Note was determined based on a trinomial lattice model. The following table presents the assumptions used to determine the fair value of the New GPO Note at ~~June 30,~~March 31, 2024 and at December 31, 2023:


	June 30, 2023			March 31, 2024			December 31, 2023
Common stock share price	$	3.64		$	1.33		$	1.14
Risk free rate		4.1	%		4.3	%		3.9	%
Yield		15.5	%		18.5	%		14.5	%
Expected volatility		39.0	%		50.0	%		50.0	%
Expected term (years)		5.0			4.3			4.5

Dragonfly Seller Convertible Notes

The Dragonfly Seller Convertible Notes were recognized as a liability in connection with the acquisition on January 27, 2023 at a fair value of $8,635. As of ~~June 30,~~March 31, 2024 and December 31, 2023, the estimated fair value of the Dragonfly Seller Convertible Notes were $~~9,598. The non-cash loss of $968~~7,857 and $~~395~~9,002, respectively. The unrealized change in the fair value of the Dragonfly Seller Convertible Note of $1,264 is recorded in accumulated other comprehensive income for the period ended March 31, 2024, a non-cash gain of $47 is recorded in the change in fair value of financial instruments in the condensed consolidated statements of operations and comprehensive ~~loss~~income (loss) during the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and a non-cash gain of $573 is recorded in the change in fair value of financial instruments in the condensed consolidated statements of operations and comprehensive income (loss) during the three months ended March 31, 2023, respectively. The following table presents the assumptions used to determine the fair value of the Dragonfly Seller Convertible Notes at ~~June 30, 2023~~March 31, 2024 and ~~January 27,~~December 31, 2023:


	June 30, 2023			January 27, 2023			March 31, 2024			December 31, 2023
Common stock share price	$	3.64		$	5.06		$	1.33		$	1.14
Risk free rate		4.2	%		3.6	%		4.3	%		3.9	%
Yield		17.0	%		17.5	%		20.0	%		15.5	%
Expected volatility		42.0	%		40.0	%		50.0	%		50.0	%
Expected term (years)		4.6			5.0			3.8			4.1

As of ~~June 30, 2023,~~March 31, 2024, the difference between the aggregate fair value and the unpaid principal balance of the Dragonfly Seller Convertible Notes is $~~2,071~~4,490.

Era Convertible Note

The Era Convertible Note was recognized as a liability associated with the Company’s strategic commercial partnership on December 8, 2023 at a fair value of $5,500. During the first quarter of 2024, the Company issued $801 of new debt related to the new Era Convertible Note. At March 31, 2024 and December 31, 2023 the fair value of the Era Convertible Note was $8,461 and $5,977, respectively. The non-cash loss of $1,684 is recorded in the change in fair value of financial instruments in the condensed consolidated statements of operations

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and comprehensive income (loss) during the three months ended March 31, 2024. The following table presents the assumptions used to determine the fair value of the Era Convertible Note at March 31, 2024 and December 31, 2023:


	March 31, 2024			December 31, 2023
Common stock share price	$	1.33		$	1.14
Risk free rate		4.8	%		4.17	%
Yield		156.1	%		153.24	%
Expected volatility		51.0	%		63.00	%
Expected term (years)		3.7			3.9

Contingent Liabilities from acquisitions

The contingent liabilities from acquisitions are classified as Level 3 in the fair value hierarchy. At ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, the contingent consideration and compensation relates to the following acquisitions:

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	June 30, 2023		December 31, 2022		March 31, 2024		December 31, 2023
Dragonfly	$	1,310	$	-
Curate		489		883	$	-	$	4
FrontierView		866		600
Equilibrium		113		43		113		112
DT Global		14		53		-		14
Total contingent liabilities from acquisitions	$	2,792	$	1,579	$	113	$	130

The Company settled part of the Curate contingent consideration and compensation through an issuance of 83,393 additional shares in a non-cash transaction during the first quarter of ~~2023 on the consolidated statement of cash flows.~~2023.

The Company estimated the fair value of the Dragonfly and Curate contingent consideration and compensation using a Monte Carlo simulation. These fair value measurements are based on significant inputs not observable in the market and thus represents Level 3 measurements as defined in ASC 820. Significant changes in the key assumptions and inputs could result in a significant change in the fair value measurement of the contingent consideration.

~~The following inputs and assumptions were used to value contingent liabilities from acquisitions as of June 30, 2023:~~

Dragonfly

Curate

Risk premium

19.5
%

13.0
%
Risk free rate

5.4
%

5.4
%
Revenue volatility

21.0
%

25.0
%
Expected life (years)

0.5

0.8

Liability classified warrants

The Last Out Lender Warrants are classified as Level 3 in the fair value hierarchy. The fair value of the Last Out Lender Warrants is calculated using the Black-Scholes calculation with the following inputs:


	June 30, 2023			March 31, 2024
Common stock fair value	$	3.64		$	1.33
Time to maturity (years)		2.0			1.3
Risk free rate		4.83	%		4.88	%
Volatility		80	%		52	%
Exercise price	$	8.56		$	8.56

Non-Financial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

The Company’s long-lived assets, including property and equipment, intangible assets and goodwill are measured at fair value on a non-recurring basis when an impairment has occurred. The Company has recognized an impairment of goodwill as disclosed in Note 7, "Goodwill" during the three months ended March 31, 2023. The ~~company recognized an impairment of an operating lease asset related to certain unoccupied office space as disclosed in Note 5, "Leases" during the three months ended March 31, 2022. The~~ Company has not identified any additional impairments to be recorded during ~~the three and six months ended June 30, 2023 and 2022.~~

~~Excluding a total of $2,500~~ ~~earned cash contingent compensation related to Predata and FrontierView being transferred from Level 3 to Level 1 during~~both the three months ended March 31, ~~2022, there~~2024 and 2023.

There were no other transfers of assets or liabilities between levels during both the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 and ~~2022.~~2023.

Changes to fair value are recognized as income or expense in the condensed consolidated statements of operations and comprehensive ~~loss.~~income (loss).

Note 17. Commitments and Contingencies

Legal Proceedings

From time to time the Company is a party to various disputes, claims, lawsuits and other regulatory and legal matters, including both asserted and unasserted legal claims, in the ordinary course of business. The status of each such matter, referred to herein as a loss contingency, is reviewed and assessed in accordance with applicable accounting rules regarding the nature of the matter, the likelihood that a loss will be incurred, and the amounts involved.

On May 13, 2022, Old FiscalNote received a letter from GPO FN Noteholder LLC (the “Disputing Lender”) disputing such lender’s pro forma beneficial ownership set forth Amendment No. 4 to the Company’s Registration Statement on Form S-4 dated May 9, 2022. The terms governing Old FiscalNote’s indebtedness with the Disputing Lender provided that, in connection with the Business Combination, and following a $~~50,000~~ repayment, the remainder of such indebtedness could be converted at Old FiscalNote’s option into shares of Old FiscalNote common stock based upon a conversion price determined in accordance with the terms of such indebtedness. The shares of Old FiscalNote common stock issued upon such conversion were issued prior to the Business Combination and thereafter were exchanged for ~~7,781,723~~ ~~shares of the Company's Class A common stock. In connection with the Business Combination, the Disputing Lender claimed it was owed approximately~~ ~~4.4~~ ~~million additional shares of the Company’s Class A common stock.~~

On January 27, 2023, the Company entered into a term sheet (the “Term Sheet”) with the Disputing Lender pursuant to which the parties agreed to negotiate in good faith to enter into definitive documentation providing for the following: (i) the Disputing Lender shall return ~~5,881,723~~ ~~shares of Class A Common Stock held by the Disputing Lender to the Company for cancellation, (ii) the Company shall~~

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~~issue to the Disputing Lender a subordinated convertible promissory note in an initial principal amount of $46,794~~ (the “New Note”), and (iii) the parties shall enter into a mutual settlement and release of all claims (including, but not limited to, any claims by the Disputing Lender for additional shares or money damages resulting from the entry into the Merger Agreement), relating to or arising from the conversion of the Original Note.

~~As discussed in Note 8, "Debt", on June 30, 2023, the Company entered into the Exchange and Settlement Agreement and New GPO Note. Pursuant thereto, on July 3, 2023, (i) the Disputing Lender returned~~ ~~5,881,723~~ shares of Class A Common Stock, which the Company subsequently cancelled, (ii) the Company issued the New GPO Note, and (iii) the parties agreed to a mutual settlement and release of all claims (including, but not limited to, any claims by the Investor for additional shares or money damages resulting from the entry into the Merger Agreement), relating to or arising from the conversion of the Amended and Restated Senior Secured Subordinated Promissory Note, dated December 29, 2020, previously issued by a subsidiary of the pre-business combination FiscalNote Holdings, Inc. to the Investor.

Legal fees are recognized as incurred when the legal services are provided, and therefore are not recognized as part of the loss contingency.

24Note 18. Subsequent Events

The Company has evaluated subsequent events through May 10, 2024, the date that the financial statements were available to be issued.

Era Convertible Note

On April 11, 2024, the “Company entered into a letter agreement (the “Letter Agreement”) with Era modifying certain provisions of the Era Convertible Notes and the Co-Pilot Agreement. The Letter Agreement permitted and required the Company to convert approximately

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~~18. Subsequent Events~~$1.6 million in aggregate principal amount of the Era Convertible Notes (the “Early Converted Notes”) into a portion of the Underlying Shares. Pursuant to the Letter Agreement, the Company was also required to issue to Era the Partnership Shares. Pursuant to the Letter Agreement, Era has the right to convert the aggregate principal amount of the remaining Era Convertible Notes (the “Remaining Notes”), but only on or after June 30, 2024, if such conversion right is not cancelled by the terms of the Letter Agreement. In addition, the Letter Agreement terminates the Company’s obligation to issue the Additional Shares under the circumstances specified therein. On April 11, 2024 and pursuant to the Letter Agreement, the Company issued the Investor an aggregate of 3,003,268 shares of Common Stock to satisfy its obligations with respect to the Partnership Shares and a portion of the Underlying Shares.

~~Amendment No. 3 to the Credit Agreement~~

On August 3, 2023, the Company entered into Amendment No. 3 ("Amendment No. 3") to the Credit Agreement dated July 29, 2022. Among other things, Amendment No. 3 provides for: (a) the extension of the July 2023 Deferred Fee from July 29, 2023 to July 29, 2024, (b) the increase of the July 2023 Deferred Fee from $~~1,734~~ ~~to $2,034, and (c) the revision to the minimum annual recurring revenue and adjusted EBITDA covenants (as both are defined in the Credit Agreement).~~

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion provides information that FiscalNote’s management believes is relevant to an assessment and understanding of FiscalNote’s condensed consolidated results of operations and financial condition. The discussion should be read together with the unaudited interim condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Certain monetary amounts, percentages and other figures included below have been subject to rounding adjustments as amounts are presented in thousands or millions, as the context describes. Percentage amounts included below have not in all cases been calculated on the basis of such rounded figures, but on the basis of such amounts prior to rounding. For this reason, percentage amounts may vary from those obtained by performing the same calculations using the figures in our condensed consolidated financial statements included elsewhere herein. Certain other amounts that appear below may not sum due to rounding.

This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in Part II, Item 1A, “Risk Factors” and other factors set forth in other parts of this Quarterly Report on Form 10-Q. Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to the “Company,” “FiscalNote,” “we,” “us,” or “our” refer to the business of Old FiscalNote, which became the business of New FiscalNote and its subsidiaries following the Closing.

Overview

FiscalNote is a leading technology provider of global policy and market intelligence. It delivers critical, actionable legal and policy insights in a rapidly evolving political, regulatory and macroeconomic environment. By combining artificial intelligence (AI) technology, other technologies with analytics, workflow tools, and expert peer insights, FiscalNote empowers customers to manage policy, address regulatory developments, and mitigate global risk. FiscalNote ingests unstructured legislative and regulatory data, and employs AI and data science to deliver structured, relevant and actionable information in order to facilitate key operational and strategic decisions by global enterprises, midsized and smaller businesses, government institutions, trade groups and nonprofits. FiscalNote delivers that intelligence through its suite of public policy and issues management products, coupled with expert research and analysis of markets and geopolitical events, as well as powerful tools to manage workflows, advocacy campaigns and constituent relationships.

Business Combination

On July 29, 2022, the ~~Closing Date, we~~Company consummated the transactions contemplated by the Agreement and Plan of Merger, ~~Agreement,~~dated as of November 7, 2021, and as amended on May 9, 2022, (the “Merger Agreement”), by and among FiscalNote Holdings, Inc., a Delaware corporation (“Old ~~FiscalNote,~~FiscalNote”), Duddell Street Acquisition Corp., a Cayman Islands exempted company (“DSAC”), and Grassroots Merger Sub, Inc., a Delaware Corporation and a wholly owned direct subsidiary of DSAC (“Merger Sub” and, ~~Merger Sub.~~together with DSAC, the “DSAC Parties”). Pursuant to these transactions, Merger Sub merged with and into Old FiscalNote, with Old FiscalNote becoming a wholly owned subsidiary of ~~DSAC. On~~DSAC (the “Business Combination” and, collectively with the ~~Closing Date, and~~other transactions described in the Business Combination Agreement, the “Transactions”). In connection with the ~~Closing,~~closing of the Transactions, DSAC domesticated and continued as a Delaware corporation under the name of “FiscalNote Holdings, Inc."

We” (“New FiscalNote”). Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to the “Company,” “FiscalNote,” “we,” “us,” or “our” refer to the business of Old FiscalNote, which became the business of New FiscalNote and its subsidiaries following the closing on July 29, 2022. Subsequent to the closing of the Business Combination, the Company's Class A common stock and public warrants began trading on the New York Stock Exchange (“NYSE”) under the symbols “NOTE” and “NOTE WS,” respectively. The Company accounted for the Business Combination as a reverse recapitalization whereby Old FiscalNote was determined as the accounting acquirer and DSAC as the accounting acquiree. ~~While DSAC was the legal acquirer in~~Accordingly, the Business Combination ~~because Old FiscalNote~~ was ~~determined~~treated as the ~~accounting acquirer, the historical financial statements~~equivalent of Old FiscalNote ~~became~~issuing stock for the ~~historical financial statements~~net assets of the combined company, upon the consummation of the Business Combination. Accordingly, New FiscalNote, as the parent company of the combined business, is the successor SEC registrant, meaning that our financial statements for previous periods will be disclosed in the registrant’s future periodic reports filed with the SEC.

~~The Business Combination had~~DSAC, accompanied by a ~~significant impact on our reported financial position and results as a result of the reverse~~ recapitalization. The ~~most significant change in our reported financial position and results was an increase in~~ net ~~cash of $65.6 million from gross cash proceeds of $325.0 million, including $114.0 million from the backstop agreement with the sponsor~~assets of DSAC $61.0 million from DSAC’s trust account from its initial public offering, and $150.0 million from the New Senior Term Loan (as defined below). Such gross proceeds were offset by $45.2 million transaction costs, which principally consisted of advisory, legal andare stated at historical cost, with no goodwill or other professional fees, and were recorded in Additional Paid-in Capital, net of proceeds from the DSAC trust and $3.5 million of debt issuance costs paid out of the proceeds of the New Senior Term Loan on the Closing Date, of which $2.8 was capitalized and $0.7 million included in the loss on debt extinguishment. Cumulative debt repayments, inclusive of accrued but unpaid interest, of $210.7 million were paid in conjunction with the close, which consisted of a $75.3 million repayment of the First Out Term Loan, $61.7 million repayment of the Last Out Term Loan, a $50.0 million payment used to retire the non-converting portion of the Senior Secured Subordinated Promissory Note, a $16.3 million repayment of the 8090 FV Subordinated Promissory Note, and $7.4 million repayment of the 2021 Seller Notes. Please refer to Note 8, "Debt - Senior Capital Term Loan Refinancing" to our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 for information regarding our indebtedness outstanding prior to the Business Combination and the refinancing thereof.

In connection with the Business Combination, we recognized a $34.9 million warrant liability on our consolidated balance sheets for the fair value of the public warrants and private placement warrants that were previously issued by DSAC and assumed by New FiscalNote in the Business Combination, along with the additional private placement warrants that were issued upon the closing of the Business Combination. We adjust the liability-classified warrants to fair value at each reporting period. The warrant liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our condensed consolidated statement of operations. As a result of the recurring fair value measurement, our future financial statements and results of operations may fluctuate quarterly, based on factors that are outside of our control. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on the warrants each reporting period and that the amount of such gains or losses could be material.

In connection with the Business Combination, we recognized (a) $28.9 million of incremental stock-based compensation charges that consisted of $5.0 million related to certain awards that vested as a result of the Business Combination, $6.2 million related to awards issued to our CEO, COO, and CFO pursuant to their respective employment agreements, and $17.7 million related to the Earnout Awards that may

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be issued to shareholders and equity award holders that for accounting purposes are treated as compensation awards (See Note 14, Earnings (Loss) Per Share, of our condensed consolidated financial statements), (b) $45.3 million of loss on debt extinguishment as a result of repayment of certain of our outstanding debt, as well as the conversion of our convertible debt as part of the Business Combination, and (c) $32.1 million interest charge related to the derecognition of the beneficial conversion feature associated with our converted debt.

As a consequence of the Business Combination, we became an SEC-registered and NYSE-listed company, which may require us to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. Upon Closing, we began to incur additional public company expenses for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting, legal and administrative resources.intangible assets recorded.

Factors Impacting the Comparability of Our Operating Results

Acquisitions ~~affect~~/ Disposals

On March 11, 2024, we completed the ~~comparability~~sale of ~~our financial statements from period~~Board.org for a total value of up to ~~period. Acquisitions completed~~$103.0 million, consisting of $95.0 million in cash at closing and a potential earnout opportunity of up to $8.0 million. The Company recorded a gain on sale of business of $71.6 million during ~~one period impact comparability to a prior period in which we did not own~~ the ~~acquired entity.~~three months ended March 31, 2024.

On January 27, 2023, we completed the acquisition of Dragonfly for up to $25.2 million (the "2023 Acquisition"), which included a combination of cash, stock, convertible notes and contingent payments.

~~During the year ended December 31, 2022, we completed the following acquisitions that are referred to as the "2022 Acquisitions" (and collectively with the 2023 Acquisition, the "Acquisitions"):~~

•

~~Aicel Technologies on July 29, 2022 for $8.7 million; and~~

•

~~DT-Global on September 30, 2022 for $0.6 million.~~

As a result of our acquisitions, respectively, we have, and will continue to incur, significant non-cash amortization expense related to the amortization of purchased intangibles, which have reduced our operating income by approximately ~~$2.4~~$1.0 million and ~~$0.9~~$1.2 million during the three months ended ~~June 30,~~March 31, 2024 and 2023, ~~and 2022, respectively, and $4.6 million and $1.9 million during the six months ended June 30, 2023 and 2022,~~ respectively.

Product rationalization

From time to time, management reviews the Company’s existing products and services based on their financial profile ~~(e.g., revenue, margin)~~ and other strategic factors. In connection with such ~~a review in 2020 and 2021~~reviews, management decided to cease actively selling and therefore sunset certain non-core ~~subscription~~ products, representing, in aggregate:

•

subscription revenue of approximately ~~$0.1~~$0.2 million and $0.3 million during the three months ended ~~June 30, 2023~~March 31, 2024 and ~~2022~~2023; and ~~$0.3~~

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•

Non-subscription advisory revenue of approximately $0.1 million and ~~$0.6~~$0.8 million during the ~~six~~three months ended ~~June 30,~~March 31, 2024 and 2023.

On March 11, 2024, we sold Board.org. Board.org’s contributions to FiscalNote through March 11, 2024 were as follows:

•

Subscription revenue of approximately $2.8 million and $3.0 million during the three months ended March 31, 2024 and 2023;

•

Run-rate revenue of approximately $15.2 million at December 31, 2023 and ~~2022, respectively.~~$12.7 million at March 31, 2023; and

•

Annual Recurring Revenue ("ARR") of approximately $14.7 million at December 31, 2023 and $12.7 million at March 31, 2023.

At the end of the first quarter of 2023 the Company had approximately 825 employees. In conjunction with the Company's product rationalization, business simplification, and cost takeout actions, the Company's full-time equivalent headcount reduced by approximately 150 from the end of the first quarter of 2023 through December 31, 2023. As a result, the Company has seen a reduction in overall costs across all operating expenses. We continue to invest for future growth. We are focused on several key growth levers, including cross-selling and upselling opportunities at existing clients, expanding our client base with a focus on enterprise and government customers, expansion into adjacent markets and deepening our offerings for regulated industries or sectors, and continuing to execute on our acquisition strategy. Several of these growth drivers require investment in and refinement of our go-to-market approach and, as a result, we may continue to incur additional costs upfront to obtain new customers and expand our relationships with existing customers, including additional sales and marketing expenses specific to subscription revenue.

We plan to invest a portion of the available capital resources in building innovative products, acquiring complementary businesses, attracting new customers and expanding our leadership role in the legal and regulatory information market. We drive growth both organically and through acquisitions. We regularly evaluate acquisitions and investment opportunities in complementary businesses to supplement our existing platform, enable us to enter new markets and ensure that we are well positioned to provide critical insights to the regulated sectors of the future. Past acquisitions have enabled us to deliver innovative solutions in new categories, such as global risk analysis and AI-enabled new products, and new data sets to enhance the functionality of our existing products. Strategic acquisitions will remain a core component of our strategy in the future.

Key Performance Indicators

In addition to our GAAP results further described and discussed below in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we monitor the following key performance indicators to evaluate growth trends, prepare financial projections, make strategic decisions, and measure the effectiveness of our sales and marketing efforts. Our management team assesses our performance based on these key performance indicators because it believes they reflect the underlying trends and indicators of our business and serve as meaningful indicators of our continuous operational performance.

Annual Recurring Revenue (“ARR”)

Approximately 90% of our revenues are subscription based, which leads to high revenue predictability. Our ability to retain existing subscription customers is a key performance indicator that helps explain the evolution of our historical results and is a leading indicator of our revenues and cash flows for subsequent periods. We use ARR as a measure of our revenue trend and an indicator of our future revenue opportunity from existing recurring subscription customer contracts. We calculate ARR on a parent account level by annualizing the contracted subscription revenue, and our total ARR as of the end of a period is the aggregate thereof. ARR is not adjusted for the impact of any known or projected future customer cancellations, upgrades or downgrades, or price increases or decreases. The amount of actual revenue that we recognize over any 12-month period is likely to differ from ARR at the beginning of that period, sometimes significantly. This may occur due to timing of the revenue bookings during the period, cancellations, upgrades, or downgrades and pending renewals. ARR should be viewed independently of revenue as it is an operating metric and is not intended to be a replacement or forecast of revenue. Our calculation of ARR may differ from similarly titled metrics presented by other companies.

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Our ARR at ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, was ~~$120.2~~$109.6 million and ~~$113.3~~$126.1 million, respectively. ~~Our~~Excluding Board.org, our ARR at ~~June 30,~~December 31, 2023 and ~~2022 excluding the 2022~~March 31, 2023 was $111.4 and ~~2023 Acquisitions, was $110.3 million and $103.5 million,~~$106.2, respectively. ARR of the 2022 and 2023 Acquisitions, was approximately $9.9 million and $8.4 million as of June 30, 2023 and 2022, respectively, including pre-acquisition ARR performance of the 2022 and 2023 Acquisitions on the basis reported to FiscalNote in connection with such company’s acquisition.

Run-Rate Revenue

Management also monitors Run-Rate Revenue, which we define as ARR plus non-subscription revenue earned during the last twelve months. We believe Run-Rate Revenue is an indicator of our total revenue growth, incorporating the non-subscription revenue that we believe is a meaningful contribution to our business as a whole. Although our non-subscription business is non-recurring, we regularly sell different advisory services to repeat customers. The amount of actual subscription and non-subscription revenue that we recognize over any 12-month period is likely to differ from Run-Rate Revenue at the beginning of that period, sometimes significantly. Our Run-Rate Revenue at ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022, including Acquisitions,~~2023, was ~~approximately $135.0~~$122.0 million and ~~$126.7~~$139.7 million, respectively. ~~Our~~Excluding Board.org, our Run-Rate Revenue at ~~June 30,~~December 31, 2023 and ~~2022, excluding the 2022~~March 31, 2023 was $124.5 and ~~2023 Acquisitions, was approximately $123.0~~$120.9 million, ~~and $115.4 million,~~ respectively. Run-Rate Revenue of the 2022 and 2023 Acquisitions was approximately $12.0 million and $9.8 million as of June 30, 2023 and 2022, respectively, including pre-acquisition Run-Rate Revenue performance of the Acquisitions on the basis reported to FiscalNote in connection with such company’s acquisition.

Net Revenue Retention (“NRR”)

Our NRR, which we use to measure our success in retaining and growing recurring revenue from our existing customers, compares our recognized recurring revenue from a set of customers across comparable periods. We calculate our NRR for a given period as ARR at the end of the period minus ARR contracted from new clients for which there is no historical revenue booked during the period, divided by the beginning ARR for the period. We calculate NRR at our parent account level. Customers from acquisitions are not included in NRR until they have been part of our condensed consolidated results for 12 months. Accordingly, the ~~2023~~2022 and ~~2022~~2023 Acquisitions are not included in our NRR for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023. Our calculation of NRR for any fiscal period includes the positive recurring revenue impacts of selling additional licenses and services to existing customers and the negative recognized recurring revenue impacts of contraction

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and attrition among this set of customers. Our NRR may fluctuate as a result of a number of factors, including the growing level of our revenue base, the level of penetration within our customer base, expansion of products and features, the timing of renewals, and our ability to retain our customers. Our calculation of NRR may differ from similarly titled metrics presented by other companies. NRR was ~~98% and 99%~~96% for the three months ended ~~June 30,~~March 31, 2024 and 2023, ~~and 2022,~~ respectively.

Non-GAAP Financial Measures

In addition to financial measures prepared in accordance with GAAP, we use certain non-GAAP financial measures to clarify and enhance our understanding, and aid in the period-to-period comparison, of our performance. Where applicable, we provide reconciliations of these non-GAAP measures to the corresponding most closely related GAAP measure. Investors are encouraged to review the reconciliation of each of these non-GAAP financial measures to its most comparable GAAP financial measure. While we believe that these non-GAAP financial measures provide useful supplemental information, non-GAAP financial measures have limitations and should not be considered in isolation from, or as a substitute for, their most comparable GAAP measures. These non-GAAP financial measures are not prepared in accordance with GAAP, do not reflect a comprehensive system of accounting and may not be comparable to similarly titled measures of other companies due to potential differences in their financing and accounting methods, the book value of their assets, their capital structures, the method by which their assets were acquired and the manner in which they define non-GAAP measures.

Adjusted ~~Revenue~~

Adjusted revenue represents revenue adjusted to include amounts that would have been recognized if deferred revenue was not adjusted to fair value in connection with acquisition accounting. Adjusted revenue is presented because we use this measure to evaluate performance of our business against prior periods and believe it is useful for investors as an indicator of the underlying performance of our business. Adjusted revenue is not a recognized term under U.S. GAAP. Adjusted revenue does not represent revenues, as that term is defined under GAAP, and should not be considered as an alternative to revenues as an indicator of our operating performance. Adjusted revenue as presented herein is not necessarily comparable to similarly titled measures presented by other companies.

~~Adjusted~~ Gross Profit and Adjusted Gross Profit Margin

We define Adjusted Gross Profit as ~~Adjusted~~Total Revenue minus cost of revenues, before amortization of intangible assets that are included in costs of revenues. We define Adjusted Gross Profit Margin as Adjusted Gross Profit divided by ~~Adjusted~~Total Revenues.

We use Adjusted Gross Profit and Adjusted Gross Profit Margin to understand and evaluate our core operating performance and trends. We believe these metrics are useful measures to us and to our investors to assist in evaluating our core operating performance because they provide consistency and direct comparability with our past financial performance and between fiscal periods, as the metrics eliminate the non-cash effects of amortization of intangible assets ~~and deferred revenue, which are non-cash impacts~~ that may fluctuate for reasons unrelated to overall operating performance.

Adjusted Gross Profit and Adjusted Gross Profit Margin have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our results as reported under GAAP. They should not be considered as replacements for gross profit and gross profit margin, as determined by GAAP, or as measures of our profitability. We compensate for these limitations by relying primarily on our GAAP results and using non-GAAP measures only for supplemental purposes. Adjusted Gross Profit and Adjusted Gross Profit Margin as presented herein are not necessarily comparable to similarly titled measures presented by other companies.

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EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin

EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures. EBITDA represents earnings before interest expense, income taxes, depreciation and amortization. Adjusted EBITDA reflects further adjustments to EBITDA to exclude certain non-cash items and other items that management believes are not indicative of ongoing operations. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by ~~Adjusted~~Total Revenue.

We disclose EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin in this Quarterly Report on Form 10-Q because these non-GAAP measures are key measures used by management to evaluate our business, measure our operating performance and make strategic decisions. We believe that EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are useful for investors and others in understanding and evaluating our operating results in the same manner as management. EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are not financial measures calculated in accordance with GAAP and should not be considered as substitutes for net ~~loss,~~income (loss), net ~~loss~~income (loss) before income taxes, or any other operating performance measure calculated in accordance with GAAP. Using these non-GAAP financial measures to analyze our business would ~~have~~ material limitations because the calculations are based on the subjective determination of management regarding the nature and classification of events and circumstances that investors may otherwise find significant. In addition, although other companies in our industry may report measures titled EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin or similar measures, such non-GAAP financial measures may be calculated differently from how we calculate non-GAAP financial measures, which reduces their comparability. Because of these limitations, you should consider EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin alongside other financial performance measures, including net income and our other financial results presented in accordance with GAAP.

Key Components of Results of Operations

Revenues

We derive our revenues from subscription revenue arrangements and advisory, advertising and other revenues. Subscription revenues ~~account~~accounted for approximately 92% and 90% of our total revenues for the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 and ~~2022.~~2023.

Subscription revenue

Subscription revenues consist of revenue earned from subscription-based arrangements that provide customers the right to use the Company’s software and products in a cloud-based infrastructure. Subscription revenues are driven primarily by the number of active licenses, the types of products and the price of the subscriptions. The Company also earns subscription revenues by licensing to customers its digital content, including transcripts, news and analysis, images, video and podcast data.

Our subscription arrangements generally have contractual terms of 12 months or more and are non-refundable regardless of the actual use of the service. Subscription revenues are recognized ratably over the non-cancellable contract terms beginning on the commencement date of each contract, which is the date our service is first made available to customers.

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Advisory, advertising, and other revenue

Advisory revenue is typically earned under contracts for specific deliverables and are non-recurring in nature, although we regularly sell different advisory services to repeat customers. One-time advisory revenues are invoiced according to the terms of the contract, usually delivered to the customer over a short period of time, during which revenues are recognized.

Advertising revenue is primarily generated by delivering advertising in our own publications (Roll Call and CQ) in both print and digital formats. Revenue for print advertising is recognized upon publication of the advertisement. Revenue for digital advertising is recognized over the period of the advertisement or, if the contract contains impression guarantees, based on delivered impressions.

~~Book~~Books revenue is recognized when the product is shipped to the customer, which is when control of the product transfers to the customer. Shipping and handling costs are treated as a fulfillment activity and are expensed as incurred.

Events revenue is deferred and only recognized when the event has taken place and is included in other revenues.

Cost of revenues

Cost of revenues primarily consists of expenses related to hosting our service, the costs of data center capacity, amortization of developed technology and capitalized software development costs, certain fees paid to various third parties for the use of their technology, services, or data, costs of compensation, including bonuses, stock compensation, benefits and other expenses for employees associated with providing professional services and other direct costs of production. Also included in cost of revenues are our costs related to the preparation of contracted advisory deliverables, as well as costs to develop, publish, print and deliver our publications underlying our books revenue.

Research and development

Research and development expenses include the costs of compensation, including bonuses, stock compensation, benefits and other expenses for employees associated with the creation and testing of the products we offer, related software subscriptions, consulting and contractor fees and allocated overhead.

Sales and marketing

Sales and marketing expenses consist primarily of salaries and related expenses, including bonuses, stock compensation, benefits and other expenses for our sales and marketing staff, including commissions, related software subscriptions, consulting fees, marketing programs

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and allocated overhead. Marketing programs consist of advertising, events, corporate communications, brand building and product marketing activities.

Editorial

Editorial expenses consist of salaries and related expenses, including bonuses, stock compensation, benefits and other expenses for the editorial team involved in acquiring, creating, and distributing content and allocated overhead.

General and administrative

General and administrative expenses are primarily related to our executive offices, finance and accounting, human resources, legal, internal operations and other corporate functions. These expenses consist of salaries and related expenses, including bonuses, stock compensation, benefits and other expenses, along with professional fees, depreciation and other allocated overhead.

Amortization of intangible assets

Amortization expense relates to our finite-lived intangible assets, including developed technology, customer relationship, databases and tradenames. These assets are amortized over periods of between three and twenty years. Finite-lived intangible assets are tested for impairment when indicators are present, and, if impaired, are written down to fair value. No impairment of intangible assets has been identified during any financial period included in our accompanying condensed consolidated financial statements.

Impairment of goodwill

Goodwill is tested for impairment when indicators are present, and if impaired are written down to fair value. An impairment of goodwill has been identified for the three months ended March 31, 2023 and is included in our accompanying condensed consolidated financial statements.

Transaction costs, net

Transaction costs consist of acquisition related costs (including due diligence, accounting, legal, and other professional fees, incurred from acquisition activity), fair value adjustments to contingent consideration due to sellers, and non-capitalizable costs.

Interest expense, net

Interest expense, net, consists of expense related to interest on our borrowings, the amortization and write off of debt issuance costs and original discount, and interest related to certain derivative instruments.

Fair value of financial instruments

The fair value of warrants, debt accounted for under the fair value option, and derivative liabilities are accounted for in accordance with ASC 815, ASC 825, and ASC 480. These financial instruments are marked to market each reporting period in accordance with ASC 820

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with all gains and losses being recorded within the condensed consolidated statement of operations and comprehensive loss, with the exception of any gains or losses recorded due to changes in the fair value of instrument-specific credit risk being recorded as a component of accumulated other comprehensive income in the condensed consolidated balance sheets.

Income taxes

We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the condensed consolidated financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

The effect on deferred tax assets and liabilities of a change in tax laws is recognized in the condensed consolidated statements of operations and comprehensive ~~loss~~income (loss) in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts that are expected to be realized based on the weighting of positive and negative evidence.

Results of Operations

The period-to-period comparisons of our results of operations have been prepared using the historical periods included in our condensed consolidated financial statements. The following discussion should be read in conjunction with those condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q.

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Comparison of the Consolidated Results for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2024 and March 31, 2023 ~~and June 30, 2022~~

The following table presents our results of operations for the periods indicated:


	Three Months Ended June 30,						Change						Six Months Ended June 30,						Change						Three Months Ended March 31,						Change
(In thousands)	2023			2022			$			%			2023			2022			$			%			2024			2023			$			%
Revenues:
Subscription	$	29,462		$	24,332		$	5,130			21.1	%	$	57,929		$	47,111		$	10,818			23.0	%	$	29,626		$	28,467		$	1,159			4.1	%
Advisory, advertising, and other		3,380			2,842			538			18.9	%		6,442			6,134			308			5.0	%		2,486			3,062			(576	)		(18.8	)%
Total revenues		32,842			27,174			5,668			20.9	%		64,371			53,245			11,126			20.9	%		32,112			31,529			583			1.8	%

Operating expenses:
Cost of revenues		9,485			7,712			1,773			23.0	%		18,422			14,882			3,540			23.8	%		7,244			8,937			(1,693	)		(18.9	)%
Research and development		4,510			3,791			719			19.0	%		9,630			9,809			(179	)		(1.8	)%		3,480			5,120			(1,640	)		(32.0	)%
Sales and marketing		11,689			10,395			1,294			12.4	%		23,987			19,892			4,095			20.6	%		9,415			12,298			(2,883	)		(23.4	)%
Editorial		4,752			3,346			1,406			42.0	%		9,017			7,022			1,995			28.4	%		4,660			4,265			395			9.3	%
General and administrative		16,174			10,033			6,141			61.2	%		34,395			20,590			13,805			67.0	%		16,076			18,221			(2,145	)		(11.8	)%
Amortization of intangible assets		2,901			2,609			292			11.2	%		5,715			5,217			498			9.5	%		2,685			2,814			(129	)		(4.6	)%
Impairment of goodwill		-			-			-			0	%		5,837			-			5,837			100.0	%		-			5,837			(5,837	)		0	%
Transaction costs (gains), net		309			1,027			(718	)		(69.9	)%		1,717			(18	)		1,735		NM%
Transaction (gains) costs, net																										(4	)		1,408			(1,412	)		(100.3	)%
Total operating expenses		49,820			38,913			10,907			28.0	%		108,720			77,394			31,326			40.5	%		43,556			58,900			(15,344	)		(26.1	)%
Operating loss		(16,978	)		(11,739	)		(5,239	)		44.6	%		(44,349	)		(24,149	)		(20,200	)		83.6	%		(11,444	)		(27,371	)		15,927			(58.2	)%

Gain on sale of business																										(71,599	)		-			(71,599	)		100.0	%
Interest expense, net		7,154			24,255			(17,101	)		(70.5	)%		13,835			46,778			(32,943	)		(70.4	)%		7,362			6,681			681			10.2	%
Change in fair value of financial instruments		2,987			2,048			939			45.8	%		(11,693	)		3,386			(15,079	)	NM%				527			(14,680	)		15,207			(103.6	)%
Gain on PPP loan upon extinguishment		-			-			-			0	%		-			(7,667	)		7,667		NM%
Loss on settlement		3,474			-			3,474			100.0	%		3,474			-			3,474		NM%
Other expense, net		167			494			(327	)	NM%				38			615			(577	)	NM%
Net loss before income taxes		(30,760	)		(38,536	)		7,776			(20.2	)%		(50,003	)		(67,261	)		17,258			(25.7	)%
Provision (benefit) from income taxes		213			(176	)		389			(221.0	)%		243			(550	)		793			(144.2	)%
Net loss	$	(30,973	)	$	(38,360	)	$	7,387			(19.3	)%	$	(50,246	)	$	(66,711	)	$	16,465			(24.7	)%
Other expense (income), net																										241			(129	)		370		NM
Net income (loss) before income taxes																										52,025			(19,243	)		71,268		NM
Provision from income taxes																										1,426			30			1,396		NM
Net income (loss)																									$	50,599		$	(19,273	)	$	69,872		NM

Revenue:

Subscription revenue

Subscription revenue of ~~$29.5~~$29.6 million for the three months ended ~~June 30, 2023~~March 31, 2024 increased ~~$5.1~~$1.2 million, or ~~21%~~4%, from ~~$24.3~~$28.5 million for the three months ended ~~June 30, 2022. Subscription revenue of $57.9 million for the six months ended June 30, 2023 increased $10.8 million for the six months ended June 30, 2022.~~March 31, 2023.

The comparability of our revenues between periods was impacted by the Acquisitions described under “Factors Impacting the Comparability of Our Results of Operations” above. The table below presents the primary items that impacted the comparability of our subscription revenues between periods.


	Change for the Three Months Ended						Change for the Six Months Ended						Change for the Three Months Ended
	June 30, 2023 vs June 30, 2022						June 30, 2023 vs June 30, 2022						March 31, 2024 vs March 31, 2023
(In thousands)	$			%			$			%			$			%
Revenue change driver:
Impact of 2021 Acquisitions deferred revenue adjustment	$	737			100	%		1,730			100	%
Increase from 2022 Acquisitions		501			100	%		978			100	%
Decrease from sale of business														(155	)		(5	)%
Increase from 2023 Acquisitions		1,771			100	%		2,921			100	%		790			69	%
Decrease from discontinued products		(126	)		(46	)%		(270	)		(45	)%		(127	)		(43	)%
Increase from organic business		2,247			9	%		5,459			11	%		652			3	%
Revenues, net (total change)	$	5,130			21	%	$	10,818			23	%	$	1,160			4	%

~~Our organic growth (determined based on FiscalNote ownership over~~

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The increase in subscription revenue is largely due to having a full ~~calendar year) has grown through the successful integration~~quarter of our 2021 Acquisitions (defined as the acquisition of FactSquared LLC and the acquisitions in calendar year 2021) as evidenced by the growth in our organic ARR from $103.0 million at June 30, 2022 compared to $110.2 million at June 30, 2023. Also contributing towards our growth in revenue is a realignment of our business development team, strategic price increases, and rollout of new products. Revenue for the six months ended June 30, 2023 reflects a full six months ofsubscription revenue from the ~~2022 Acquisitions as well as a partial period~~Dragonfly acquisition while the first quarter of 2023 only includes Dragonfly subscription revenue ~~contribution~~from January 27, 2023 (the acquisition date) to March 31, 2023. This is partially offset by the reduction in revenue in the first quarter 2024 from the ~~2023 Acquisition, whereas revenue for the six months ended June 30, 2022 does not reflect any revenue contribution from the 2022 and 2023 Acquisitions.~~sale of Board.org on March 11, 2024.

Advisory, advertising, and other revenue

Advisory, advertising, and other revenue was ~~$3.4~~$2.5 million for the three months ended ~~June 30, 2023,~~March 31, 2024, as compared to ~~$2.8~~$3.1 million for the three months ended ~~June 30, 2022.~~March 31, 2023. The ~~increase~~decrease of ~~$0.5~~$0.6 million, or 19%, was primarily due to timing of revenue recognition for certain ~~contracts.~~contracts combined with movement away from certain product lines.

Advisory, advertising, and other revenue was $6.4 million for the six months ended June 30, 2023, as compared to $6.1 million for the three months ended June 30, 2022. The increase of $0.3 million, or 5%, was primarily due to timing of revenue recognition for certain contracts.

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Revenue by Geography

The below tables present our revenues split by geographic region for the periods presented:


	Three Months Ended June 30,				Change					Three Months Ended March 31,				Change
(In thousands)	2023		2022		$		%			2024		2023		$			%
North America	$	26,744	$	24,105	$	2,639		10.9	%	$	25,997	$	26,152	$	(155	)		(0.6	)%
Europe		5,077		2,503		2,574		102.8	%		5,269		4,100		1,169			28.5	%
Australia		288		276		12		4.3	%		303		289		14			4.8	%
Asia		733		290		443	NM%				543		988		(445	)		(45.0	)%
Total revenues	$	32,842	$	27,174	$	5,668		20.9	%	$	32,112	$	31,529	$	583			1.8	%

	Six Months Ended June 30,				Change
(In thousands)	2023		2022		$		%
North America	$	52,896	$	47,304	$	5,592		11.8	%
Europe		9,177		5,002		4,175		83.5	%
Australia		577		534		43		8.1	%
Asia		1,721		405		1,316	NM%
Total revenues	$	64,371	$	53,245	$	11,126		20.9	%

Revenues by geography are determined based on the region of the FiscalNote contracting entity, which may be different than the region of the customer. North America revenues ~~increased~~decreased primarily for the reasons stated above. Revenues outside of North America increased primarily due to our acquisitions of Dragonfly (included in Europe) ~~and Aicel (included in Asia)~~.

Cost of revenues

Cost of revenues was ~~$9.5~~$7.2 million for the three months ended ~~June 30, 2023,~~March 31, 2024, as compared to ~~$7.7~~$8.9 million for the three months ended ~~June 30, 2022.~~March 31, 2023. The ~~increase~~decrease of ~~$1.8~~$1.7 million, or ~~23%~~19%, was primarily attributable to ~~an increase~~a decrease of ~~$0.9~~$0.8 million ~~related to~~from sunset products, and $0.7 million decrease from workforce planning actions made primarily throughout the ~~2022 and 2023 Acquisitions combined with an increase in amortization expense~~second half of ~~approximately $1.0 million related to capitalized software development costs and developed technology.~~2023.

Cost of revenues was $18.4 million for the six months ended June 30, 2023, as compred to $14.9 million for the six months ended June 30, 2022. The increase of $3.5 million, or 24%, was primarily attributable to an increase of $1.9 million related to the 2022 and 2023 Acquisitions combined with an increase in amortization expense of approximately $1.7 million related to capitalized software development costs and developed technology.

Research and development

Research and development expense was ~~$4.5~~$3.5 million for the three months ended ~~June 30, 2023~~March 31, 2024 as compared to ~~$3.8~~$5.1 million for the three months ended ~~June 30, 2022.~~March 31, 2023. The ~~increase~~decrease of ~~$0.7~~$1.6 million, or ~~19%~~32%, was primarily attributable to ~~$0.3 million~~workforce planning actions made throughout the second half of ~~incremental share-based compensation and $0.3 million of research and development costs incurred by our 2022 and 2023 Acquisitions.~~

Research and development expense was $9.6 million for the six months ended June 30, 2023 as compared to $9.8 million for the six months ended June 30, 2022. The decrease of $0.2 million, or 2%, was primarily attributable to a decrease of $1.4 million of compensation and benefits, offset by $0.6 million incremental share-based compensation and $0.5 million of research and development costs incurred by our 2022 and 2023 Acquisitions.2023.

Sales and marketing

Sales and marketing expense was ~~$11.7~~$9.4 million for the three months ended ~~June 30, 2023~~March 31, 2024 as compared to ~~$10.4~~$12.3 million for the three months ended ~~June 30, 2022.~~March 31, 2023. The ~~increase~~decrease of ~~$1.3~~$2.9 million, or ~~12%~~23%, was primarily attributable to ~~an increase of $0.8~~a decrease in $0.5 million from ~~our 2022~~sunset products, and ~~2023 Acquisitions, $0.5 million of commission amortization, and an increase of $0.2 million of share-based compensation.~~

~~Sales and marketing expense was $24.0 million for~~ the ~~six months ended June 30, 2023 as compared to $19.9 million for the six months ended June 30, 2022. The increase of $4.1 million, or 21%, was~~remainder primarily attributable to ~~an increase~~workforce planning actions made throughout the second half of $0.7 million in compensation and benefits stemming from an increase in our sales team headcount, build out of our sales leadership, an increase of $1.4 million from our 2022 and 2023 Acquisitions, $0.8 million of commission amortization, an increase of $0.5 million of share-based compensation, an increase of $0.4 million related to software, and an increase of $0.2 million of bad debt expense relating to implementation of new accounting guidance.2023.

Editorial expense

Editorial expense was ~~$4.8~~relatively flat at $4.7 million for the three months ended ~~June 30, 2023~~March 31, 2024 as compared to ~~$3.3~~$4.3 million for the three months ended ~~June 30, 2022. The increase was primarily the result of an increase of our 2022 and 2023 Acquisitions and headcount realignment within the Company.~~

Editoral expense was $9.0 million for the six months ended June 30, 2023 as compared to $7.0 million for the six months ended June 30, 2022. The increase was primarily the result of an increase of our 2022 and 2023 Acquisitions and headcount realignment within the Company.

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March 31, 2023.

General and administrative

General and administrative expense was ~~$16.2~~$16.1 million for the three months ended ~~June 30, 2023~~March 31, 2024 as compared to ~~$10.0~~$18.2 million for the three months ended ~~June 30, 2022.~~March 31, 2023. The ~~increase~~decrease of ~~$6.1~~$2.1 million, or ~~61%~~12%, was primarily attributable to ~~$4.2~~a decrease of $0.5 million ~~of incremental non-cash stock based compensation expense, $1.2~~from sunset products, $0.5 million ~~associated~~reduction in public company insurance costs, with ~~incremental public costs such as insurance, build out of investor relations and people teams, and $0.8 million of incremental costs from~~ the ~~2022 and 2023 Acquisitions.~~

General and administrative expense was $34.4 million for the six months ended June 30, 2023 as compared to $20.6 million for the six months ended June 30, 2022. The increase of $13.8 million, or 67%, wasremainder primarily attributable to ~~$9.7 million~~workforce planning actions made throughout the second half of incremental non-cash stock based compensation expense, $2.4 million associated with incremental public costs such as insurance, build out of investor relations and people teams, and $1.7 million of incremental costs from the 2022 and 2023 Acquisitions.2023.

Impairment of goodwill

Impairment of goodwill was $5.8 million recognized during the first quarter of 2023 related to the impairment of goodwill in the ESG reporting unit.

Amortization of intangibles

Amortization of intangibles was ~~$2.9~~$2.7 million for the three months ended ~~June 30, 2023~~March 31, 2024 as compared to ~~$2.6~~$2.8 million for the three months ended ~~June 30, 2022. The increase of $0.3 million, or 11%, is primarily due to the increase in amortizable intangible assets from the 2022 and 2023 Acquisitions.~~March 31, 2023.

Amortization of intangibles was $5.7 million for the six months ended June 30, 2023 as compared to $5.2 million for the six months ended June 30, 2022. The increase of $0.5 million, or 10%, is primarily due to the the increase in amortizable intangible assets from the 2022 and 2023 Acquisitions.

Transaction (gains) costs, ~~(gains),~~ net

Transaction ~~costs~~gains were ~~$0.3~~$0.0 million for the three months ended ~~June 30, 2023,~~March 31, 2024, as compared to transaction costs of ~~$1.0~~$1.4 million for the three months ended ~~June 30, 2022.~~March 31, 2023. The change of ~~$0.7~~$1.4 million relates to a ~~$0.3~~decrease of $1.2 million ~~decrease~~ in ~~transactions~~non-capitalized costs related to business acquisitions primarily related to the acquisition of Dragonfly ~~in 2023 offset by transaction costs related to the 2022 acquisitions~~ combined ~~with a contingent compensation~~ and ~~earnout liabilities recognized in 2022 related to our 2021 Acquisitions.~~$0.2 million from non-capitalizable business combination costs.

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Transaction costs were $1.7 million for the six months ended June 30, 2023, as compared to transaction gains of $0.0 million for the six months ended June 30, 2022. The change of $1.7 million relates to a $0.8 million increase in transactions costs related to business acquisitions primarily related to the acquisition of Dragonfly offset by 2022 Acquisition costs combined with a $1.0 million gain from contingent compensation and earnout liabilities recognized for the six months ended June 30, 2022 related to our 2021 Acquisitions and the reversing of previously recognized earnout liabilities.

Interest expense, net

Interest expense was ~~$7.2~~$7.4 million for the three months ended ~~June 30, 2023~~March 31, 2024 as compared to ~~$24.3~~$6.7 million for the three months ended ~~June 30, 2022.~~March 31, 2023. The ~~decrease~~increase in interest expense of ~~$17.1~~$0.7 million was primarily ~~due interest expense we recorded related~~attributable to the ~~convertible notes that converted into equity as part of the Business Combination as well as~~new GPO note partially offset by interest ~~expense incurred related~~income attributable to ~~the $18.0 million related party convertible note issued in the fourth quarter of 2021.~~

Interest expense was $13.8 million for the six months ended June 30, 2023 as compared to $46.8 million for the six months ended June 30, 2022. The decrease in interest expense of $33.0 million was primarily due interest expense we recorded related to the convertible notes that converted into equity as part of the Business Combination as well as interest expense incurred related to the $18.0 million related party convertible note issued in the fourth quarter of 2021.our investments.

Change in fair value of financial instruments

Change in fair value of financial instruments was a ~~$3.0~~$0.5 million loss for the three months ended ~~June 30, 2023~~March 31, 2024 as compared to a ~~$2.0~~$14.7 million ~~loss~~gain for the three months ended ~~June 30, 2022.~~March 31, 2023. The ~~increase~~change in ~~loss~~financial instruments of ~~$1.0~~$15.2 million is primarily ~~represents a loss that was recorded as a result~~related to $13.2 million of less gain resulting of the fair value adjustment of the warrant liabilities that were assumed in connection with the Business Combination ~~and a loss on~~combined with the changes of $2.0 million in the Dragonfly Seller Convertible Notes, ~~offset by~~New GPO Note, and the ~~loss resulting from the final fair value adjustment of the embedded derivative liabilities that were settled as part of the Business Combination.~~Era Convertible Notes.

~~Change in fair value of financial instruments~~Income tax provision (benefit)

Income tax provision was ~~a $11.7~~$1.4 million ~~gain~~ for the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 as compared to ~~a $3.4~~an income tax provision of less than $0.1 million ~~loss~~ for the ~~six~~three months ended ~~June 30, 2022.~~March 31, 2023. The ~~increase~~change of ~~$15.1~~$1.4 million in income tax was primarily ~~represents a gain that was recorded as a result~~driven by the discrete tax charge of $1.7 million for the impact of the ~~fair value adjustment~~sale of the warrant liabilities that were assumed in connection with the Business Combination offset by a loss on the Dragonfly Seller Convertible Notes and the loss resulting from the final fair value adjustment of the embedded derivative liabilities that were settled as part of the Business Combination.

~~Gain on PPP loan upon extinguishment~~

~~The Company recognized the forgiveness of the PPP Loan as a gain on debt extinguishment during the first quarter of 2022 for $7.7 million.~~

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Board.org.

Certain Non-GAAP Measures

We present certain non-GAAP financial measures including ~~Adjusted Revenues,~~ Adjusted Gross Profit, Adjusted Gross Profit Margin and Adjusted EBITDA. Our management team assesses our performance based on these non-GAAP measures because it believes they reflect the underlying trends and indicators of our business and serve as meaningful indicators of our continuous operational performance. We believe these measures are useful for investors for the same reasons. Investors should be aware that these measures are not a substitute for GAAP financial measures or disclosures. Where applicable, we provide reconciliations of these non-GAAP measures to the corresponding most closely related GAAP measure.

Adjusted ~~Revenues~~

~~The following table presents our calculation of Adjusted Revenues for the periods presented, and a reconciliation of this measure to our GAAP revenues for the same periods:~~

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

2023

2022

2023

2022

Subscription revenue

$
29,462

$
24,332

$
57,929

$
47,111

Deferred revenue adjustment

-

737

-

1,730

Adjusted subscription revenue

29,462

25,069

57,929

48,841

Advisory, advertising, and other revenue

3,380

2,842

6,442

6,134

Adjusted Revenues

$
32,842

$
27,911

$
64,371

$
54,975

~~Adjusted~~ Gross Profit and Adjusted Gross Profit Margin

The following table presents our calculation of Adjusted Gross Profit and Adjusted Gross Profit Margin for the periods presented:


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
(In thousands)	2023			2022			2023			2022			2024			2023
Adjusted Revenues	$	32,842		$	27,911		$	64,371		$	54,975
Total revenues													$	32,112		$	31,529
Costs of revenue		(9,485	)		(7,712	)		(18,422	)		(14,882	)		(7,244	)		(8,937	)
Amortization of intangible assets		3,061			2,009			5,658			3,832			2,428			2,597
Adjusted Gross Profit	$	26,418		$	22,208		$	51,607		$	43,925		$	27,296		$	25,189
Adjusted Gross Profit Margin		80	%		80	%		80	%		80	%		85	%		80	%

EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin

The following table presents our calculation of EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin for the periods presented:


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
(In thousands)	2023			2022			2023			2022			2024			2023
Net loss	$	(30,973	)	$	(38,360	)	$	(50,246	)	$	(66,711	)	$	50,599		$	(19,273	)
Provision (benefit) from income taxes		213			(176	)		243			(550	)
Provision from income taxes														1,426			30
Depreciation and amortization		6,297			4,914			12,044			9,631			5,417			5,747
Interest expense, net		7,154			24,255			13,835			46,778			7,362			6,681
EBITDA		(17,309	)		(9,367	)		(24,124	)		(10,852	)		64,804			(6,815	)
Deferred revenue adjustment (a)		-			737			-			1,730
Gain on sale of business (a)														(71,599	)		-
Stock-based compensation		5,482			565			11,988			825			6,175			6,506
Change in fair value of financial instruments (b)		2,987			2,048			(11,693	)		3,386			527			(14,680	)
Other non-cash (gains) charges (c)		58			271			5,931			(8,338	)
Acquisition related costs (d)		157			500			1,379			572
Other non-cash charges (c)														45			5,873
Acquisition and disposal related costs (d)														704			1,222
Employee severance costs (e)		381			-			750			-			107			369
Non-capitalizable debt raising costs		110			-			316			403			254			206
Other infrequent costs (f)		-			-			-			20
Costs incurred related to the transaction (g)		150			256			334			459
Loss contingency (h)		3,722			-			3,890			-
Business Combination with DSAC (f)														-			184
Loss contingency (g)														-			168
Costs incurred related to the Special Committee (h)														200			-
Adjusted EBITDA	$	(4,262	)	$	(4,990	)	$	(11,229	)	$	(11,795	)	$	1,217		$	(6,967	)
Adjusted EBITDA Margin		(13.0	)%		(17.9	)%		(17.4	)%		(21.5	)%		3.8	%		(22.1	)%

(a)

Reflects ~~deferred revenue fair value adjustments arising~~the gain on disposal from the ~~purchase price allocation in connection with the 2021 Acquisitions.~~sale of Board.org on March 11, 2024.

(b)

Reflects the non-cash impact from the mark to market adjustments on our financial instruments.

(c)

Reflects the non-cash impact of the following: (i) charge of $49 in the first quarter of 2024 related to the unrealized loss on investments; (ii) gain of $4 in the first quarter of 2024 from the change in fair value related to the contingent consideration and contingent compensation related to the 2021, 2022, and 2023 Acquisitions (iii) impairment of goodwill of $5,837 in the first quarter of 2023, ~~(ii)~~(iv) loss from equity method investment of $34 in the first quarter of ~~2023~~2023; and ~~$56 in the second quarter of 2023, (iii)~~(v) charge of $2 in the first ~~quarter of 2023 and $2 in the second~~ quarter of 2023 from the change in fair value related to the contingent consideration and contingent compensation related to the 2021, 2022, and 2023 ~~Acquisitions; (iv) gain of $1,320 in~~Acquisitions.

(d)

In 2024 reflects the ~~first quarter of 2022 and a charge of $271 in the second quarter of 2022 from the change in fair value~~costs incurred related to the ~~contingent consideration~~sale of Board.org, principally consisting of accounting, tax, and contingent compensation related to the 2021 Acquisitions, (v) gain of $7,667 related to the partial forgiveness of our PPP Loan during the first quarter of 2022, and (vi) $378 impairment charge recognized in the first quarter of 2022 related to the abandonment of one of our leases upon adoption of ASC 842 on January 1, 2022.

~~(d)~~

~~Reflects~~legal fees. In 2023 reflects the costs incurred to identify, consider, and complete business combination transactions consisting of advisory, legal, and other professional and consulting costs.

(e)

Severance costs associated with workforce changes related to business realignment actions.

~~(f)~~31

~~Costs incurred related to litigation we believe to be outside~~

Table of ~~our normal course of business totaling $20 in the first quarter of 2022.~~

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~~(g)~~(f)

Includes non-capitalizable transaction costs ~~associated with~~incurred within one year of the Business ~~Combination.~~Combination with DSAC.

~~(h)~~(g)

Reflects ~~(i) $3,474 non-cash loss contingency charge related to the settlement with GPO FN Noteholder LLC recorded in the second quarter of 2023 and (ii)~~ accounting and legal costs incurred associated with the settlement with GPO FN Noteholder LLC totaling $168 in the first quarter of ~~2023 and $248 in~~2023.

(h)

Reflects costs incurred related to the ~~second quarter of 2023. See further discussion in Note 17, "Commitments and Contingencies” and Note 8, “Debt”.~~Special Committee.

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Liquidity and Capital Resources

~~We have incurred losses and negative~~Historically the Company’s cash flows from operations ~~since inception. Through June 30, 2023, we~~ have ~~funded our operations with proceeds from the Business Combination as well as the closing of the New Senior Term Loan whereby~~not been sufficient to fund its current operating model and the Company ~~received $65.6 million of net cash proceeds, additional borrowings under debt facilities,~~funded operations through raising equity and ~~receipts from the sale of our products to customers in the ordinary course of business.~~debt. At ~~June 30, 2023,~~March 31, 2024, the Company’s cash, cash equivalents, ~~and~~ restricted cash, and short-term investments was ~~$38.1~~$44.5 million compared to ~~$61.2~~$24.4 million at December 31, ~~2022.~~2023.

The Company had a negative working capital balance of ~~$46.7~~$38.5 million (excluding ~~cash)~~cash and short-term investments) at ~~June 30, 2023~~March 31, 2024 and had an accumulated deficit of ~~$751.2~~$765.8 million and ~~$700.7~~$816.4 million as of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, respectively, and has incurred net losses of ~~$50.2~~$21.0 million (excluding the gain on sale from business) and ~~$66.7~~$19.3 million for the ~~six~~three months ended ~~June 30,~~March 31, 2024 and 2023, ~~and 2022,~~ respectively. Management expects that significant on-going operating and capital expenditures will be necessary to continue to implement the Company’s business plan of entering new markets, future acquisitions, and infrastructure and product development. ~~Historically the Company’s cash flows from operations have not been sufficient to fund its current operating model.~~

Our capital requirements depend on many factors, including sales volume, the timing and extent of spending to support R&D efforts, investments in information technology systems, the expansion of sales and marketing activities, and execution on our acquisition strategy. We believe our cash on hand, proceeds from our expected product sales, and available borrowings under our New Senior Term Loan for certain acquisition activity, will be sufficient to meet our short-term and long-term operating expenses and capital expenditures for at least the next twelve months.

~~However,~~While the Company’s future projections indicate that the Company will have sufficient liquidity to meet its obligations in the normal course of business within one year from the date of this filing, our ability to maintain our minimum cash requirement, fund our future cash interest requirements under our senior term loan and fund our operating expenses and capital expenditure requirements will depend in part on general economic, financial, competitive, legislative, regulatory and other conditions that may be beyond our control. ~~Depending on these~~The Company has implemented various cost saving measures throughout 2023 and ~~other market conditions, we may seek~~into 2024 and is actively seeking additional ~~financing.~~sources of capital. Volatility in the credit markets may have an adverse effect on our ability to obtain debt financing. If we raise additional funds through the issuance of equity, equity-linked or debt securities, those securities may have rights, preferences or privileges senior to the rights of our common stock, or may require us to agree to unfavorable terms, and our existing stockholders may experience significant dilution.

Our historical financing activities included borrowings under senior secured credit facilities, senior secured promissory notes, convertible debt, and preferred share issuances. Our principal debt plus paid-in kind interest outstanding as of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023 consisted of the following (excluding any fair value adjustments and debt discounts, as applicable):


(In thousands)	June 30, 2023		December 31, 2022		March 31, 2024		December 31, 2023
New Senior Term Loan	$	157,421	$	150,647
Senior Term Loan					$	92,891	$	158,228
New GPO Note		46,794		-		49,496		48,575
Convertible Notes		13,094		12,219		14,557		14,052
Dragonfly Seller Convertible Notes		11,668		-		12,360		12,223
Era Convertible Note						6,301		5,500
Aicel Convertible Note		1,126		1,174		1,114		1,156
PPP Loan		198		251		117		144
Total Principal plus PIK Outstanding	$	230,301	$	164,291	$	176,836	$	239,878

~~New~~ Senior Term Loan

In connection with the ~~Closing,~~closing of the business combination with DSAC, FiscalNote entered into a $150.0 million senior credit agreement (the “Credit Agreement”) with Runway Growth Finance Corp., ORIX Growth Capital, LLC, Clover Orochi LLC, and ACM ASOF VIII SaaS FinCo LLC (together the ~~“New Senior~~“Senior Lenders”). The Credit Agreement also provides for an uncommitted incremental loan facility totaling $100.0 million available upon notice if the Company meets certain financial growth criteria and other customary requirements (the ~~“New Incremental~~“Incremental Term Facility”) (collectively the ~~“New Senior~~“Senior Credit Facility”). The annual interest of the ~~New~~ Senior Term Loan consists of two components: a cash interest component of (a) the greater of (i) Prime Rate plus 5.0% per annum and (ii) 9.0% payable monthly, ~~in cash,~~ and (b) interest payable in kind component of 1.00% per annum, payable in kind monthly. The ~~New~~ Senior Credit Facility will mature on July 29, 2027. ~~Beginning~~Pursuant to Amendment No. 4, beginning on August 15, ~~2025, 50% of the outstanding principal amount of~~2026, the Senior Term Loan must be repaid in even amounts on a monthly basis over the remaining 2412 months, with the final balance due on July 15, 2027. Borrowings under our ~~New~~ Senior Credit Facility are collateralized by substantially all assets of the borrowers and guarantors party thereto.

On March 17, 2023, the Company, entered into Amendment No. 1 (“Amendment No. 1”) to the Credit Agreement dated July 29, 2022. Among other things, Amendment No. 1 provided for the extension of an incremental term loan by one of the lenders to the borrowers under the facility in the principal amount of $6.0 million which was received by the Company on March 31, 2023, on the same terms as the existing term loans (the “Incremental Facility”).

On May 16, 2023, the Company, entered into Amendment No. 2 ("Amendment No. 2") to the Credit Agreement dated July 29, 2022. Among other things, Amendment No. 2 joined Dragonfly Eye Limited (“Dragonfly”) and Oxford Analytica Limited (“Oxford Analytica”), each a wholly owned subsidiary of the Company, as Guarantors under the Credit Agreement.

On August 3, 2023, the Company entered into Amendment No. 3 ("Amendment No. 3") to the Credit Agreement dated July 29, 2022. Among other things, Amendment No. 3 provides for: (a) the extension of the July 2023 Deferred Fee from July 29, 2023 to July 29, 2024, (b) the increase of the July 2023 Deferred Fee from $1,734 to $2,034, and (c) the revision to the minimum ARR and adjusted EBITDA covenants (as both are defined in the Credit Agreement).

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respectively. Amendment No. 4 also requires that upon receipt of any earn-out payment pursuant to the equity purchase agreement underlying the sale of Board.org, the Company will prepay outstanding obligations under the Credit Agreement in an amount equal to 70% of the net proceeds received from such earn-out payment, together with a prepayment fee and an exit fee, equal to 5.75% of the amount of such prepayment.

In addition, Amendment No. 4 extended the commencement of amortization payments under the Credit Agreement from August 15, 2025 to August 15, 2026, with such payments to fully amortize the term loans by the maturity date of July 15, 2027. Amendment No. 4 also increased the Company’s minimum liquidity covenant to $22.5 million and modified the Company’s minimum ARR and adjusted EBITDA in order to appropriately reflect the sale of Board.org and the absence of its future contributions to the Company’s overall financial performance and position.

During the ~~six~~three months ended ~~June 30,~~March 31, 2024 and 2023, we made cash interest payments totaling ~~$9.9~~$5.3 million and $4.7 million related to the ~~New~~ Senior Term Loan.

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covenants in place at ~~June 30, 2023:~~March 31, 2024: a minimum cash balance requirement, minimum ~~annual recurring revenue~~ARR requirement, and a capital expenditure limitation. At June 30, 2023, the Company was in compliance with the minimum cash balance requirement and capital expenditure limitation. The Company's annual recurring revenue was marginally below the minimum annual recurring revenue for the period. On August 3, 2023 the New Senor Term Loan lenders waived their rights upon default retroactive to June 30, 2023. Beginning with the third quarter of 2023, the Company is subject to an adjusted EBITDA requirement (as defined in the ~~New Senior Term Loan,~~Credit Agreement, as amended). and a capital expenditure limitation. At March 31, 2024, the Company was in compliance with all of the covenants. Upon the occurrence of an event of default, in addition to the lenders being able to declare amounts outstanding under the ~~New~~ Senior Term Loan due and payable the lenders can elect to increase the interest rate by 5.0% per annum.

See Note 8 “Debt” ~~and Note 18 "Subsequent Events"~~ to the condensed consolidated financial statements included elsewhere herein.

New GPO Note

On June 30, 2023 (the “Subscription Date”), the Company entered into an Exchange and Settlement Agreement (the “Exchange and Settlement Agreement”) with GPO FN Noteholder LLC (the “Investor”) pursuant to which (i) the Investor returned 5,881,723 shares of Class A Common Stock held by the Investor to the Company for cancellation, (ii) the Company issued to the Investor a subordinated convertible promissory note in an initial principal amount of ~~$46,794~~$46.8 million (the “New GPO Note”), and (iii) the parties agreed to a mutual settlement and release of all claims (including, but not limited to, any claims by the Investor for additional shares or money damages resulting from the entry into the Merger Agreement, relating to or arising from the conversion of the Amended and Restated Senior Secured Subordinated Promissory Note, dated December 29, 2020, previously issued by a subsidiary of the pre-business combination FiscalNote Holdings, Inc. to the Investor. The exchange and settlement are non-cash exchanges in the condensed consolidated statement of cash flows. The before mentioned transactions closed on July 3, 2023.

The New GPO Note is subordinate to the Company’s obligations under its New Senior Term Loan which limits certain actions that the Company and the Investor may take under the New GPO Note. At any time prior to the July 3, 2028, the Investor is entitled to convert all or any portion of the principal amount of the New GPO Note and accrued interest thereon into shares of Class A Common Stock at $8.28 per ~~share.~~share (adjusted to $6.89 on April 11, 2024 pursuant to the terms of the New GPO Note as a result of the issuance of the Additional Fee Shares to Era as described in Note 18, "Subsequent Events"). The New GPO Note is subject to customary anti-dilution adjustments for stock splits and similar transactions and, subject to standard exceptions, weighted average anti-dilution protection. The principal amount, together with accrued interest thereon, of the New GPO Note is redeemable by the Company in whole or in part based on certain conditions as defined in the New GPO Note.

The Company elected to account for the New GPO Note using the fair value option. The New GPO Note was recorded at its June 30, 2023 acquisition date fair value of ~~$36,583.~~$36.6 million. The Company initially recorded a loss contingency of ~~$11,700~~$11.7 million in its fiscal year 2022 financial statements representing the difference between the fair value of the shares returned by the Investor and the fair value of the New GPO Note on the date of exchange. With the execution of the Exchange and Settlement Agreement and New GPO Note, the Company recorded an additional loss on settlement with GPO of ~~$3,474~~$3.5 million in the condensed consolidated statement of operations for the ~~three and six months~~year ended ~~June 30,~~December 31, 2023.

Convertible Notes

Four convertible noteholders with an aggregate principal amount (including accrued paid in kind interest) of $10.5 million as of the Closing Date elected not to convert their notes into shares of capital stock of the Company in conjunction with Closing. The convertible notes are unsecured, earn payable in kind interest of 15% per annum, payable in kind monthly, and mature in 2025.

Dragonfly Seller Convertible Note

On January 27, 2023, we acquired Dragonfly and financed part of the purchase with the issuance of convertible notes. The Dragonfly Convertible Note is subordinate to our New Senior Credit Facility, accrues interest of 8% per annum, payable in kind or in cash, and matures in January 2028.

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Era Convertible Note

On December 8, 2023 and January 5, 2024, we issued convertible notes in connection with the Company's strategic commercial partnership with Era. The Era Convertible Notes are contractually subordinated to the Company's obligations under its senior secured indebtedness, has cash interest at a rate equal to the applicable federal rate published by the Internal Revenue Service beginning on the six-month anniversary of the issuance date, and matures in December 2027. The Company elected to account for the Era Convertible Note using the fair value option.

Aicel Convertible Note

On July 29, 2022, we acquired Aicel Technologies and assumed its $1.0 million convertible note. The Aicel Convertible Note is subordinate to our New Senior Credit Facility, accrues interest of 1% per annum, payable in kind monthly, and matures in July 2027.

PPP Loan

The PPP Loan requires monthly principal and interest payments of approximately $9 thousand until maturity in 2027.

Capital expenditures

Capital expenditures primarily consist of purchases of capitalized software costs and property and equipment. Our capital expenditures program includes discretionary spending, which we can adjust in response to economic and other changes in our business environment to grow our business. We typically fund our capital expenditures through cash flow from operations and external financing. In the event that we are unable to obtain the necessary funding for capital expenditures, our long-term growth strategy could be significantly affected. Our total capital expenditures were ~~$4.1~~$1.6 million and ~~$6.0~~$1.9 million for the ~~six~~three months ended ~~June 30,~~March 31, 2024 and 2023, ~~and 2022,~~ respectively.

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Cash Flow Summary

The following tables summarizes our cash flows for the periods presented:


	Six Months Ended June 30,						Three Months Ended March 31,
	2023			2022			2024			2023
Net cash (used in) provided by:
Net cash provided by (used in):
Operating activities	$	(20,206	)	$	(18,348	)	$	2,741		$	(12,826	)
Investing activities	$	(9,096	)	$	(6,041	)	$	89,192		$	(6,879	)
Financing activities	$	6,564		$	19,727		$	(71,798	)	$	6,237
Effect of exchange rates on cash	$	(383	)	$	(352	)	$	(119	)	$	(251	)
Net change in cash and cash equivalents	$	(23,121	)	$	(5,014	)	$	20,016		$	(13,719	)

Operating activities

Cash used in operating activities consists of net loss adjusted for certain non-cash items including depreciation and amortization, stock based compensation, changes in fair value of warrant liabilities, non-cash interest expense, and ~~loss~~gain on ~~debt extinguishment,~~disposal, as well as the effect of changes in working capital and other activities.

Cash provided by operating activities in the three months ended March 31, 2024 was $2.7 million, a change of $15.6 million from cash used in operating activities ~~in the six months ended June 30, 2023 was $20.2 million, an increase~~ of ~~$1.9~~$12.8 million compared to the ~~six~~three months ended ~~June 30, 2022.~~March 31, 2023. The primary factors affecting our net operating cash flows during this period was our net income of $50.6 million, which includes non-cash income and expense items totaling $55.4 million, including a gain on disposal of $71.6 million, non-cash and paid-in kind interest expense of $2.8 million, stock-based compensation expense of $6.2 million, a loss due to the change in fair value of financial instruments of $0.5 million, non-cash lease expense of $0.3 million, amortization and depreciation of $6.4 million, and the effect of changes in operating assets and liabilities that resulted in cash inflows of $7.5 million.

Net cash used in operating activities was $12.8 million during the three months ended March 31, 2023. The primary factors affecting our net operating cash flows during this period was our net loss of ~~$50.3~~$19.3 million, which includes non-cash expenses items totaling ~~$30.4~~$8.4 million, including impairment of goodwill of $5.8 million, non-cash ~~and paid-in kind~~ interest expense of ~~$4.2~~$2.0 million, stock-based compensation expense of ~~$12.0~~$6.5 million, a gain due to the change in fair value of financial instruments of ~~$11.7~~$14.1 million, non-cash lease expense of ~~$2.4 million, loss on settlement with GPO of $3.5~~$1.8 million, and amortization and depreciation of ~~$13.8 million, other non-cash items of $0.4~~$6.4 million, and the effect of changes in operating assets and liabilities that resulted in cash outflows of ~~$0.3~~$1.6 million.

Net cash used in operating activities was $18.3 million during the six months ended June 30, 2022. The primary factors affecting our operating cash flows during this period was our net loss of $66.7 million adjusted for non-cash items of $52.3 million, primarily consisting of $9.6 million of depreciation and amortization, $0.8 million of stock-based compensation, $42.9 million of non-cash interest expense, $3.2 million of non-cash operating lease expense, $1.2 million of amortization of deferred costs to obtain contracts, non-cash charge of $3.4 million resulting from the change in fair value of financial instruments, offset by $7.7 million gain on PPP Loan forgiveness, non-cash gain of $1.5 million resulting from the change of fair value of contingent consideration, $0.5 million of deferred income tax benefit and the effect of changes in operating assets and liabilities that resulted in cash outflows of $3.9 million.

Investing activities

Net cash provided by investing activities was $89.2 million for the three months ended March 31, 2024 compared to net cash used in investing activities of $6.9 million in the three months ended March 31, 2023. Net cash provided by investing activities in the three months ended March 31, 2024 primarily consisted of cash proceeds from the sale of a business of $90.9 million partially offset by cash paid of $1.7 million of capital expenditures primarily related to software development costs. Net cash used in investing activities in the ~~six~~three months ended ~~June 30, 2023 was $9.1 million compared to $6.0 million in the six months ended June 30, 2022. Net cash used in investing activities in the six months ended June 30,~~March 31, 2023 primarily consisted of cash paid for acquisitions, net of cash acquired of $5.0 million and cash paid of ~~$4.1~~$1.9 million of capital expenditures primarily related to software development costs. ~~Net cash used in investing activities in the six months ended June 30, 2022 was $6.0 million of capital expenditures.~~

Financing activities

Net cash used in financing activities in the three months ended March 31, 2024 was $71.8 million, compared to net cash provided by financing activities ~~in the six months ended June 30, 2023 was $6.6 million, compared to $19.7~~of $6.2 million for the ~~six~~three months ended ~~June 30, 2022.~~March 31, 2023. Net cash used in financing activities during the three months ended March 31, 2024 primarily consisted of payments of long-term debt and deferred financing costs primarily related to Amendment 4 to

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the Credit Agreement and the sale of Board.org of $72.8 million partially offset by the proceeds from the issuance of Era Convertible Notes of $0.8 million and proceeds from the issuance of stock options and ESPP purchases of $0.2 million. Net cash provided by financing activities during the ~~six~~three months ended ~~June 30,~~March 31, 2023 primarily consisted of $6.0 million from Amendment 1 to the Credit Agreement and $0.6 million from the proceeds from the exercise of stock options. Net cash provided by financing activities during the six months ended June 30, 2022 was $19.7 million, primarily consisted of $19.5 million of the increase in our senior debt attributable to the New Senior Term Loan and ~~$0.4~~$0.3 million from the proceeds from the exercise of stock options.

Commitments and Contingencies

Our principal commitments consist of obligations under leases for office space. For more information regarding our lease obligations, see Note 5 “Leases” to the condensed consolidated financial statements included elsewhere herein. For more information regarding our debt service obligations, see Note 8 “Debt” to the condensed consolidated financial statements included elsewhere herein.

Off-Balance Sheet Arrangements

During the periods presented, we did not engage in any off-balance sheet financing activities or other arrangements that have or are reasonably likely to have a current or future material effect on our financial condition or results of operations.

Recently Issued Accounting Pronouncements

For information regarding new accounting pronouncements, and the impact of these pronouncements on our condensed consolidated financial statements, if any, refer to Note 1 of the notes to our financial statements included in this Quarterly Report on Form 10-Q.

Critical Accounting Estimates and Policies

Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.

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We believe that of our significant accounting policies, which are described in Note 1 “Summary of Business and Significant Accounting Policies” to our condensed consolidated financial statements, the following accounting policies and specific estimates involve a greater degree of judgment and complexity.

There were no significant and material changes in our critical accounting policies and use of estimates during the ~~six~~three months ended ~~June 30, 2023,~~March 31, 2024, as compared to those disclosed in "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Estimates and Accounting Policies" in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2022,~~2023, filed with the SEC on March ~~28, 2023 except for the change in one intangible asset discussed in Note 6, "Intangible Assets".~~15, 2024.

Revenue Recognition

Subscription revenues are recurring in nature and include subscription fees from customers accessing our company’s cloud-based infrastructure, digital content, transcripts, news and analysis, images, video and podcast data. Advisory, advertising and other revenue includes revenues derived from non-recurring activities where we deliver specific deliverables for clients as well as where we provide advertising in our own publications (Roll Call and CQ) in both print and digital formats, the sale of various publications, and sponsorship revenue for events organized by the Company. Our company’s subscription arrangements are generally non-cancelable and do not contain refund-type provisions. Our company recognizes revenues upon the satisfaction of its performance obligation(s) (upon transfer of control of promised goods or services to its customers) in an amount that reflects the consideration to which it expects to be entitled to in exchange for those goods or services.

Our company’s contracts with customers may include promises to transfer multiple services. For these contracts, our company accounts for individual promises separately if they are distinct performance obligations. Determining whether services are considered distinct performance obligations may require significant judgment. Judgment is also required to determine the standalone selling price (“SSP”) for each distinct performance obligation. In instances where SSP is not directly observable, such as when our company does not sell the services separately, our company determines the SSP using available information, including market conditions and other observable inputs.

Costs Capitalized to Obtain Revenue Contracts

Costs capitalized related to new revenue contracts are amortized on a straight-line basis over four years, which, although longer than the typical initial contract period, reflects the average period of benefit, including expected contract renewals. Significant judgment is required in arriving at this average period of benefit. Therefore, we evaluate both qualitative and quantitative factors, including the estimated life cycles of our offerings and our customer attrition.

Business Combinations

Accounting for business combinations requires us to make significant estimates and assumptions, especially at the acquisition date with respect to tangible and intangible assets acquired and liabilities assumed and pre-acquisition contingencies. We use our best estimates and assumptions to accurately assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date as well as the useful lives of those acquired intangible assets.

Critical estimates in valuing certain of the intangible assets and goodwill we have acquired are:

•

future expected cash flows from subscription and content contracts, other customer contracts and acquired developed technologies, and trade names;

•

historical and expected customer attrition rates and anticipated growth in revenue from acquired customers;

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•

assumptions about the period of time the acquired trade name will continue to be used in our offerings;

•

discount rates;

•

uncertain tax positions and tax-related valuation allowances assumed; and

•

fair value of earnout consideration.

Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results.

Goodwill and Intangible Assets

Significant judgment is required to estimate the fair value of our reporting units. Accordingly, we typically obtain the assistance of third-party valuation specialists for significant reporting units for purposes of determining whether there is goodwill impairment. The fair value estimates are based on available historical information and on future expectations. We typically estimate the fair value of these assets using the income method, which is based on the present value of estimated future cash flows attributable to the respective assets. The valuations used to establish and to test goodwill for impairment are dependent on a number of significant estimates and assumptions, including macroeconomic conditions, overall growth rates, competitive activities, cost containment and margin progression, Company business plans and the discount rate applied to cash flows.

Goodwill is not amortized, but tested at least annually for impairment. Our ongoing annual impairment testing for goodwill occurs on October 1st. Assumptions used in our impairment evaluations, such as forecasted growth rates and cost of capital, are consistent with internal projections and operating plans. We believe these estimates and assumptions are reasonable and comparable to those that would be used by other marketplace participants. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions. For example, future changes in the judgments, assumptions and estimates that are used in our impairment testing for goodwill and indefinite-lived intangible assets, including discount and tax rates or future cash flow projections, could result in significantly different estimates of the fair values. In addition, changes to or a failure to achieve business plans

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or deterioration of macroeconomic conditions could result in reduced cash flows or higher discount rates, leading to a lower valuation that would trigger an impairment of the goodwill of these businesses.

If the fair value of the reporting unit is less than its carrying value, that difference represents an impairment.

Determining the useful life of an intangible asset also requires judgment. Acquired intangible assets (customer relationships, patents and technologies, and tradenames) are expected to have determinable useful lives. Finite-lived intangible assets are amortized to expense over their estimated lives. An impairment assessment for finite-lived intangibles is only required when an event or change in circumstances indicates that the carrying amount of the asset may not be recoverable.

~~Based on our annual impairment testing as of October 1, 2022, the fair value of all of our reporting units exceeded their carrying values by more than 50%.~~ The most significant assumptions utilized in the determination of the estimated fair values of our reporting units are the net sales and earnings growth rates (including residual growth rates) and discount rate. The residual growth rate represents the expected rate at which the reporting units are expected to grow beyond the shorter-term business planning period. The residual growth rate utilized in our fair value estimates is consistent with the reporting unit operating plans and approximates expected long-term market growth rates. The residual growth rate is dependent on overall market growth rates, the competitive environment, inflation, and business activities that impact market share. As a result, the residual growth rate could be adversely impacted by a sustained deceleration in category growth or an increased competitive environment. The discount rate, which is consistent with a weighted average cost of capital that is likely to be expected by a market participant, is based upon industry required rates of return, including consideration of both debt and equity components of the capital structure. Our discount rate may be impacted by adverse changes in the macroeconomic environment, volatility in the equity and debt markets or other country specific factors.

Future sustained depression of our stock price may indicate that a triggering event has occurred that may require us to reassess our goodwill for impairment and may trigger future impairment charges of one or all of our reporting units. Further, changes in operating plans or adverse changes in the business or in the macroeconomic environment in the future could reduce the underlying cash flows used to estimate fair values and could result in a decline in fair value that would trigger future impairment charges of our reporting units.

Due to the decline in the Company’s stock price and market capitalization in the first quarter of 2023, and the underperformance of the Company’s ESG reporting unit compared to internal projections, the Company performed a quantitative goodwill impairment assessment as of March 31, 2023. This quantitative assessment resulted in all the goodwill in our ESG reporting unit being impaired; accordingly, a non-cash impairment charge of $5.8 million was recognized during the three months ended March 31, 2023. Prior to the quantitative goodwill impairment the Company tested the recoverability of its long-lived assets, and concluded that such assets were not impaired.

See Note 7, “Goodwill” to the condensed consolidated financial statements for additional discussion on goodwill.

Warrant Liabilities

The Company evaluates its financial instruments, including its outstanding warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. The Company has outstanding public and private warrants, both of which do not meet the criteria for equity classification and are accounted for as liabilities. Accordingly, the Company recognizes the warrants as liabilities at fair value and adjusts the warrants to fair value at each reporting period. The warrant liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s unaudited condensed consolidated statement of operations.

The fair value of the public warrants is estimated based on the quoted market price of such warrants. The fair value of the private warrants is estimated using a binomial option pricing model.

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Debt instruments measured at fair value

The Company accounts for certain of its debt obligations at fair value. Accordingly, the Company recognizes the debt obligations upon inception at fair value. The debt obligations are subject to re-measurement at each balance sheet date, and any change in fair value is recognized in the Company’s unaudited condensed consolidated statement of operations. The Company estimates the fair value of the debt obligation using a lattice model.

Deferred Taxes and Valuation Allowance

Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts that are expected to be realized based on the weighting of positive and negative evidence. Future realization of deferred tax assets ultimately depends on the existence of sufficient taxable income of the appropriate character (for example, ordinary income or capital gain) within the carryback or carryforward periods available under the applicable tax law. We regularly review the deferred tax assets for recoverability based on historical taxable income, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies. Our judgment regarding future profitability may change due to many factors, including future market conditions and the ability to successfully execute its business plans and/or tax planning strategies. Should there be a change in the ability to recover deferred tax assets, the tax provision would increase or decrease in the period in which the assessment is changed.

Incremental Borrowing Rate Used to Calculate Lease Balances

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate as the discount rate to measure the operating lease assets and liabilities. The incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease and includes considerations of both the market, our current capital structure and exiting debt borrowings. We perform an incremental borrowing rate analysis on a quarterly basis, or upon execution of any individually material agreement, to ensure that the rates being applied to newly acquired leases are still accurate.

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Item 3. Quantitative and Qualitative Disclosures About Market Risks.

We are exposed to market risks in the ordinary course of our business. These risks primarily consist of inflation risk and fluctuations in interest rates and foreign currency exchange rates. We do not enter into derivatives or other financial instruments for trading or speculative purposes.

Foreign Currency Exchange Risk

We use the U.S. Dollar ("USD") as our reporting currency. Our local subsidiaries transact generally in their local currency, considered the functional currency for that subsidiary. Our foreign currency exchange rate risk is related to translation of our assets and liabilities from the subsidiaries' functional currencies to USD. These adjustments are recorded in accumulated other comprehensive income (loss) on our consolidated balance sheets. Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Euro, British Pound Sterling and Australian Dollar. Our expenses are generally denominated in the currencies of the jurisdictions in which we conduct our operations, which are primarily in the United States as well as the European Union, United Kingdom, Australia, South Korea, and India. Our results of operations and cash flows in the future may be adversely affected due to an expansion of non-U.S. dollar denominated contracts, growth of our international entities and changes in foreign exchange rates. The effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have a material impact on our cash denominated in foreign currency. To date, we have not engaged in any hedging strategies. As our international operations grow, we will continue to reassess our approach to manage the risk relating to fluctuations in currency rates.

Fluctuations in foreign currencies impact the amount of total assets, liabilities, revenues, operating expenses and cash flows that we report for our foreign subsidiaries upon the translation of these amounts into USD. Total revenue for the three ~~and six~~ months ended ~~June 30, 2023,~~March 31, 2024, was negatively impacted by approximately 1.0% compared to the three ~~and six~~ months ended ~~June 30, 2022.~~March 31, 2023.

Interest Rate Risk

We are subject to market risk associated with changing interest rates within our variable rate ~~New~~ Senior Term Loan. Our exposure to changes in interest rates is associated with the Prime Rate.

As of ~~June 30, 2023,~~March 31, 2024, we had outstanding borrowings on our ~~New~~ Senior Term Loan of ~~$157.0~~$92.9 million, which bears cash interest at a floating rate based on the Prime Rate plus an applicable margin. At ~~June 30, 2023,~~March 31, 2024, the interest rate on our ~~New~~ Senior Term Loan was ~~13.25%~~13.50%. Assuming no change in the outstanding borrowings on our ~~New~~ Senior Term Loan, we estimate that a one percentage point increase in the Prime Rate would increase our annual cash interest expense by approximately ~~$1.6~~$0.9 million.

Inflation Risk

Although we do not believe inflation has had a material impact on our financial condition, results of operations or cash flows to date, a high rate of inflation in the future may have an adverse effect on our business.

Item 4. Controls and Procedures.

Limitations on Effectiveness of Disclosure Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of the disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and our principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(c) and 15d-15(e) under the Exchange Act). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~June 30, 2023,~~March 31, 2024, due to the material ~~weakness~~weaknesses identified in the prior year, our disclosure controls and procedures were not effective as of ~~June 30, 2023.~~March 31, 2024. Notwithstanding the material weaknesses, our management has concluded that the financial statements included elsewhere in this report present fairly, in all material respects, our financial position, results of operations and cash flows in conformity with GAAP.

Changes in Internal Control over Financial Reporting

Other than the material weaknesses identified in prior year and material weakness remediation activities, there were no changes in our internal control over financial reporting, as identified in connection with the evaluation required by Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that occurred during the three months ended ~~June 30, 2023~~March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may become involved in legal or regulatory proceedings, including intellectual property claims, commercial contract matters or employment-related disputes. Such cases may raise complex factual and legal issues, may subject us to material risks and uncertainties, could require significant management time and corporate resources to defend, could result in significant media coverage and negative publicity, and could be harmful to our reputation and our brand. We are not currently a party to any litigation or regulatory proceeding that we expect to have a material adverse effect on our business, results of operations, financial conditions or cash flows.

Item 1A. Risk Factors.

As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our ~~Current~~Annual Report on Form 10-K filed with the SEC on March ~~28, 2023. However, we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.~~15, 2024.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Unregistered Sales of Equity Securities

Other than as reported on each of our Current Reports on Form 8-K, ~~filed on July 3, 2023,~~ we did not have any unregistered sales of equity securities during the three months ended ~~June 30, 2023.~~March 31, 2024.

Use of Proceeds

Not applicable

Purchase of Equity Securities

We did not repurchase shares of our common stock during the three months ended ~~June 30, 2023.~~March 31, 2024.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

~~Entry into a Material Definitive Agreement.~~In the first quarter of 2024, the Company effectuated an internal reorganization intended to, among other matters, streamline operations, increase efficiency, and accelerate progress against its product roadmap and other strategic objectives. In light of the reorganization, the Board of Directors determined on May 8, 2024 that the Company’s “executive officers,” as defined in Rule 3b-7 under the Exchange Act, are: Tim Hwang (Chairman, Chief Executive Officer and Co-Founder); Gerald Yao (Chief Strategy Officer, Global Head of ESG and Co-Founder); Josh Resnik (President and Chief Operating Officer); Jon Slabaugh (Chief Financial Officer and SVP of Corporate Development); and Todd Aman (SVP, General Counsel and Secretary). Messrs. Vladimir Eidelman (Chief Technology Officer) and Richard Henderson (Chief Revenue Officer) were reclassified as non-executive officers, although their roles and responsibilities remain unchanged.

On ~~August 3, 2023, FiscalNote, Inc.,~~May 8, 2024, our board of directors approved a ~~wholly owned subsidiary~~new form of indemnification agreement (“Indemnification Agreement”) which we expect to enter into with our directors and officers to supersede any indemnification agreements currently in effect. The Indemnification Agreement provides for indemnification and advancements of certain expenses and costs relating to claims, suits or proceedings arising from each of our director or executive officer’s service to the Company, or, at our request, service to other entities, as officers or directors to the maximum extent permitted by applicable law. The foregoing description of the ~~Company, entered into Amendment No. 3 (“Amendment No. 3”)~~Indemnification Agreement does not purport to be complete and is qualified in its ~~Second Amended and Restated Credit and Guaranty~~entirety by reference to the Indemnification Agreement, dated July 29, 2022 (the “Existing Credit Agreement,” as amended by Amendment No. 1 and Amendment No. 2, the “Credit Agreement”). Capitalized terms used but not defined in this Part II – Item 5 have the meanings given to such terms in the Credit Agreement.

~~Among other things, Amendment No. 3 (1) modifies the Minimum Adjusted EBITDA and Minimum ARR levels that the Loan Parties are obligated to attain on~~ a quarterly basis, (2) postpones by 12 months the payment of the Original Final Payment, which otherwise would have been due on July 29, 2023, and (3) modifies the amounts of the Original Final Payment and Restatement Date Final Payment, in each case in the manner set forth in Amendment No. 3.

Amendment No. 3 was entered into by and among FiscalNote, Inc., as Borrower Representative, CQ-Roll Call, Inc., Capitol Advantage LLC, VoterVoice, L.L.C. and Sandhill Strategy LLC as Borrowers, the Company, FiscalNote Intermediate Holdco, Inc., FiscalNote Holdings II, Inc., Fireside 21, LLC, Factsquared, LLC, The Oxford Analytica International Group, LLC, Oxford Analytica Inc., FiscalNote Boards LLC, Predata, Inc., Curate Solutions, Inc., Forge.AI, Inc., Frontier Strategy Group LLC, Oxford Analytica Ltd. and Dragonfly Eye Ltd., as Guarantors, Runway Growth Finance Corp., as administrative agent and collateral agent, and each lender party thereto.

A copy of ~~Amendment No. 3~~which is filed as Exhibit ~~10.8~~10.3 to this Quarterly Report on Form 10-Q and is hereby incorporated ~~herein~~ by reference. ~~The above description~~

In addition, on May 8, 2024, our board of directors approved a modification to our non-employee director compensation program. Pursuant to the modification, in lieu of the ~~material~~annual cash retainer otherwise owed to a non-employee director on a quarterly basis, such non-employee director can elect to receive shares of our Class A common stock, par value $0.0001 per share. A non-employee director’s election to receive shares of Class A common stock will apply for all payments with respect to the annual cash retainer for a given year. The terms of ~~Amendment No. 3~~our non-employee director compensation program are ~~qualified~~otherwise unchanged and are included in ~~their entirety by reference~~our Annual Proxy Statement filed on April 12, 2024.

Insider Trading Arrangements

Tim Hwang, the Company’s Chairman, Chief Executive Officer and Co-Founder, adopted a trading plan on March 20, 2024, and Gerald Yao, the Company’s Chief Strategy Officer, Global Head of ESG, and Co-Founder, adopted a trading plan on March 19, 2024 (each, a "Trading Plan"). Each Trading Plan is intended to ~~such exhibit.~~satisfy the Rule 10b5-1 affirmative defense. Mr, Hwang's Trading Plan covers the disposition of up to 25,000 shares per month of the Company’s Class A common stock, and will terminate on May 30, 2025, unless earlier

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terminated in accordance with its terms. Mr. Yao's Trading Plan covers the disposition of up to 2,750 shares per month of the Company's Class A common stock, and will terminate on May 30, 2025, unless earlier terminated in accordance with its terms.

Item 6. Exhibits.

Furnish the exhibits required by Item 601 of Regulation S-K (§ 229.601 of this chapter).

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Exhibit Number	Description	Incorporation by Reference (where a report is indicated below, that document has been previously filed with the SEC and the applicable exhibit is incorporated by reference thereto)
2.1	Agreement and Plan of Merger, dated as of November 7, 2021, by and among Duddell Street Acquisition Corp. (renamed “FiscalNote Holdings, Inc.”), Grassroots Merger Sub, Inc. and FiscalNote Holdings, Inc. (renamed “FiscalNote Intermediate Holdco, Inc.”).	Annex A to the Proxy Statement/Prospectus filed on July 5, 2022 (File No.333-261483).
2.2	First Amendment to Agreement and Plan of Merger, dated as of May 9, 2022, by and among Duddell Street Acquisition Corp. (renamed “FiscalNote Holdings, Inc.”), Grassroots Merger Sub, Inc. and FiscalNote Holdings, Inc. (renamed “FiscalNote Intermediate Holdco, Inc.”).	Annex A-2 to the Proxy Statement/Prospectus filed on July 5, 2022 (File No.333-261483).
3.1	Certificate of Incorporation of FiscalNote Holdings, Inc. (f/k/a/ Duddell Street Acquisition Corp.).	Exhibit 3.1 to the Current Report on Form 8-K filed on August 2, 2022 (File No. 001-396972).
3.2	Bylaws of FiscalNote Holdings, Inc. (f/k/a/ Duddell Street Acquisition Corp.).	Exhibit 3.2 to the Current Report on Form 8-K filed on August 2, 2022 (File No. 001-396972).
4.1	Description of Securities.	Exhibit 4.1 to the Annual Report on Form 10-K filed on March 28, 2023.
4.2	Warrant Agreement, dated as of ~~Octobe~~October 28, 2020, by and among Duddell Street Acquisition Corp ad Continental Stock Transfer & Trust Company, as warrant agent.	Exhibit 4.1 of DSAC’s Current Report on Form 8-K filed with the SEC on November 2, 2020 (File No. 333-249207).
~~4.2~~4.3	Form of Restricted Stock Agreement, dated as of March 25, 2022, pursuant to the Membership Interest Purchase Agreement, dated as of November 19, 2021, by and among FiscalNote, Inc., the unitholders listed on the Appendix 1 thereto and Legacy FiscalNote.	Exhibit 4.6 of DSAC’s Form S-4/A filed with the SEC on June 27,2022 (File No. 333-261483).
~~10.1~~	~~Sale and Purchase Agreement, dated as of January 27, 2023, by and between FiscalNote Holdings, Inc. and Dragonfly Eye Limited.~~	~~Exhibit 10.16 to Post-Effective Amendment No. 1 to the Registration Statement on Form S-1 filed with the SEC on May 5, 2023 (File No. 333-267098).~~
~~10.2~~4.4	Form of ~~8% Convertible Note~~Warrant	Exhibit ~~10.17 to Post-Effective Amendment No. 1~~10.2 to the ~~Registration Statement~~Current Report on Form ~~S-1~~8-K filed ~~with the SEC~~ on ~~May 5,~~March 20, 2023 (File No. ~~333-267098)~~001-39672).
10.1	Purchase Agreement, dated as of March 11, 2024, by and between the Registrant, FiscalNote, Inc. Exec Connect Intermediate LLC and FiscalNote Boards LLC.	Exhibit 10.1 to the Current Report on Form 8-K filed on March 15, 2024 (File No. 001-39672).
~~10.3~~10.2+	Amendment No. 14 to Second Amended and Restated Credit and Guaranty Agreement by and among FiscalNote, Inc., CQ-Roll Call, Inc.~~, Capitol Advantage LLC,~~ and VoterVoice, L.L.C. ~~and Sandhill Strategy LLC~~ as Borrowers, the Company, FiscalNote Intermediate Holdco, ~~Inc., FiscalNote Holdings II,~~ Inc., Fireside 21, LLC, Factsquared, LLC, The Oxford Analytica International Group, LLC, Oxford Analytica Inc., ~~FiscalNote Boards LLC,~~ Predata, Inc., Curate Solutions, ~~Inc., Forge.AI, Inc., and Frontier Strategy Group LLC, as Guarantors, Runway Growth Finance Corp., as administrative agent and collateral agent, and each lender party thereto~~	~~Exhibit 10.1 to the Current Report on Form 8-K filed on March 20, 2023 (File No. 001-39672).~~
~~10.4~~	~~Form of Warrant~~	~~Exhibit 10.2 to Current Report on Form 8-K filed on March 20, 2023 (File No. 001-39672).~~
~~10.5~~	~~Executive Severance Plan, effective as of April 3, 2023.~~	~~Exhibit 10.1 to the Current Report on Form 8-K filed on April 6, 2023 (File No. 001-39672).~~
~~10.6~~	Joinder and Amendment No. 2 to Second Amended and Restated Credit and Guaranty Agreement by and among FiscalNote, Inc., CQ-Roll Call, Inc., Capitol Advantage LLC, VoterVoice, L.L.C. and Sandhill Strategy LLC as Borrowers, Dragonfly Eye Limited and Oxford Analytica Limited as New Guarantors, Runway, as administrative agent and collateral agent, and each lender party thereto.	~~Exhibit 10.1 to the Current Report on Form 8-K filed on May 17,2023(File No. 001-39672)~~
~~10.7~~	~~Exchange and Settlement Agreement (the “Exchange and Settlement Agreement”) with GPO FN Noteholder LLC~~	~~Exhibit 10.1 to the Current Report on Form 8-K filed on July 3,2023 (File No. 001-39672)~~
~~10.8~~	Amendment No. 3 to Second Amended and Restated Credit and Guaranty Agreement by and among FiscalNote, Inc., CQ-Roll Call, Inc., Capitol Advantage LLC, VoterVoice, L.L.C. and Sandhill Strategy LLC as Borrowers, the Company, FiscalNote Intermediate Holdco, Inc., FiscalNote Holdings II, Inc., Fireside 21, LLC, Factsquared, LLC, The Oxford Analytica International Group, LLC, Oxford Analytica Inc., FiscalNote Boards LLC, Predata, Inc., Curate Solutions, Inc., Forge.AI, Inc., Frontier Strategy Group LLC, Oxford Analytica ~~Ltd. and~~Limited, Dragonfly Eye ~~Ltd.,~~Limited and Timebase PTY Ltd, as Guarantors, Runway Growth Finance Corp., as administrative agent and collateral agent, and each lender party thereto.	Exhibit 10.2 to the Current Report on Form 8-K filed on March 15, 2024 (File No. 001-39672).
10.3	Form of Indemnification Agreement	Filed with this report.
31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a).	Filed with this report.
31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a).	Filed with this report.
32	Section 1350 Certifications.	Furnished with this report.
101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.	Submitted electronically with this report.
101.SCH	Inline XBRL Taxonomy Extension Schema Document.	Submitted electronically with this report.
~~101.CAL~~	~~Inline XBRL Taxonomy Extension Calculation Linkbase Document.~~	~~Submitted electronically with this report.~~
~~101.DEF~~	~~Inline XBRL Taxonomy Extension Definition Linkbase Document.~~	~~Submitted electronically with this report.~~
~~101.LAB~~	~~Inline XBRL Taxonomy Extension Label Linkbase Document.~~	~~Submitted electronically with this report.~~
~~101.PRE~~	~~Inline XBRL Taxonomy Extension Presentation Linkbase Document.~~	~~Submitted electronically with this report.~~
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).	Submitted electronically with this report.

+ Indicates a management contract or compensatory plan.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	FISCALNOTE HOLDINGS, INC.

Date: ~~August 9, 2023~~May 10, 2024	By:	/s/ Jon Slabaugh
		Name: Jon Slabaugh
		Title: Chief Financial Officer

Date: ~~August 9, 2023~~May 10, 2024	By:	/s/ Timothy Hwang
		Name: Timothy Hwang
		Title: Chief Executive Officer

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Delaware	001-396972	88-3772307
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)
1201 Pennsylvania Avenue NW, 6th Floor, Washington, D.C. 20004
(Address of principal executive offices, including zip code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, par value $0.0001 per share	NOTE	NYSE
Warrants to purchase one share of Class A common stock, each at an exercise price of $11.50 per share	NOTE.WS	NYSE


FISCALNOTE HOLDINGS, INC. FORM 10-Q TABLE OF CONTENTS

	Page No.
Cautionary Note Regarding Forward-Looking Statements	1

PART I. Financial Information (Unaudited):
Financial Statements
Condensed Consolidated Balance Sheets	23
Condensed Consolidated Statements of Operations and Comprehensive ~~Loss~~Income (Loss)	34
Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit)	45
Condensed Consolidated Statements of Cash Flows	56
Notes to Condensed Consolidated Financial Statements	67

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	2625
Item 3. Quantitative and Qualitative Disclosures About Market Risks	4038
Item 4. Controls and Procedures	4038

Part II. OTHER INFORMATION	4139

Item 1. Legal Proceedings	4139
Item 1A. Risk Factors	4139
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	4139
Item 3. Defaults upon Senior Securities	4139
Item 4. Mine Safety Disclosures	4139
Item 5. Other Information	4139
Item 6. Exhibits	4140

SIGNATURES	4341


	June 30, 2023			December 31, 2022			March 31, 2024			December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	37,260		$	60,388		$	36,464		$	16,451
Restricted cash		842			835			852			849
Short-term investments								7,134			7,134
Accounts receivable, net		14,942			14,909			14,381			16,931
Costs capitalized to obtain revenue contracts, net		2,998			2,794			3,156			3,326
Prepaid expenses		3,374			4,315			4,000			2,593
Other current assets		2,751			2,764			3,679			2,521
Total current assets		62,167			86,005			69,666			49,805

Property and equipment, net		6,724			7,325			5,859			6,141
Capitalized software costs, net		15,240			13,946			13,762			13,372
Noncurrent costs capitalized to obtain revenue contracts, net		4,034			3,976			3,790			4,257
Operating lease assets		18,826			21,005			18,070			17,782
Goodwill		208,077			194,362			164,334			187,703
Customer relationships, net		59,951			56,348			46,720			53,917
Database, net		19,906			21,020			18,274			18,838
Other intangible assets, net		27,610			28,728			16,786			18,113
Other non-current assets		425			442			499			633
Total assets	$	422,960		$	433,157		$	357,760		$	370,561

Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt	$	68		$	68		$	67		$	105
Accounts payable and accrued expenses		13,299			13,739			11,101			12,909
Deferred revenue, current portion		48,800			35,569			45,034			43,530
Customer deposits		2,019			3,252			839			3,032
Contingent liabilities from acquisitions, current portion		1,082			696			113			130
Operating lease liabilities, current portion		3,471			6,709			3,395			3,066
Other current liabilities		2,040			2,079			3,212			2,878
Total current liabilities		70,779			62,112			63,761			65,650

Long-term debt, net of current maturities		214,700			161,980			152,962			222,310
Deferred tax liabilities		2,805			714			2,062			2,178
Deferred revenue, net of current portion		1,224			918			389			875
Contingent liabilities from acquisitions, net of current portion		1,710			883
Operating lease liabilities, net of current portion		27,561			29,110			25,845			26,162
Public and private warrant liabilities		6,758			18,892			3,840			4,761
Other non-current liabilities		3,703			13,858			2,805			5,166
Total liabilities		329,240			288,467			251,664			327,102
Commitment and contingencies (Note 17)
Stockholders' equity:
Class A Common stock ($0.0001 par value, 1,700,000,000 authorized, 120,284,209 and 123,125,595 issued and outstanding at June 30, 2023 and December 31, 2022, respectively)		11			12
Class B Common stock ($0.0001 par value, 9,000,000 authorized, and 8,290,921 issued and outstanding at June 30, 2023 and December 31, 2022)		1			1
Class A Common stock ($0.0001 par value, 1,700,000,000 authorized, 122,749,497 and 121,679,829 issued and outstanding at March 31, 2024 and December 31, 2023, respectively)								11			11
Class B Common stock ($0.0001 par value, 9,000,000 authorized, 8,290,921 issued and outstanding at March 31, 2024 and December 31, 2023, respectively)								1			1
Additional paid-in capital		845,725			846,205			866,932			860,485
Accumulated other comprehensive loss		(816	)		(785	)
Accumulated other comprehensive income ( loss)								4,969			(622	)
Accumulated deficit		(751,201	)		(700,743	)		(765,817	)		(816,416	)
Total stockholders' equity		93,720			144,690			106,096			43,459
Total liabilities and stockholders' equity	$	422,960		$	433,157		$	357,760		$	370,561


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Temporary Equity					Equity (Deficit)																		Equity (Deficit)
	Preferred Stock					Common Stock						Additional paid-in capital			Accumulated other comprehensive loss			Accumulated deficit			Total stockholders' equity (deficit)			Common Stock				Additional paid-in capital			Accumulated other comprehensive loss			Accumulated deficit			Total stockholders' equity (deficit)
	Shares		Amount			Shares			Amount															Shares		Amount
Balance at December 31, 2021		41,746,262	$	449,211			15,456,165		$	-		$	-		$	(631	)	$	(481,414	)	$	(482,045	)
Retroactive conversion of shares due to Business Combination		7,806,546					2,890,301			-			-			-			-			-
Balance at December 31, 2021, as converted		49,552,808	$	449,211			18,346,466		$	-		$	-		$	(631	)	$	(481,414	)	$	(482,045	)
Accretion of preferred stock to redemption value		-		(8,390	)		-			-			-			-			8,395			8,395
Exercise of stock options		-		-			54,765			-			-			-			215			215
Stock-based compensation expense		-		-			-			-			-			-			260			260
Net loss		-		-			-			-			-			-			(28,351	)		(28,351	)
Foreign currency translation gain		-		-			-			-			-			85			-			85
Balance at March 31, 2022		49,552,808	$	440,821			18,401,231		$	-		$	-		$	(546	)	$	(500,895	)	$	(501,441	)
Accretion of preferred stock to redemption value		-		10,609			-			-			-			-			(10,614	)		(10,614	)
Exercise of stock options		-		-			73,064			-			-			-			152			152
Repurchase of common stock		-		-			(9,785	)		-			-			-			(88	)		(88	)
Stock-based compensation expense		-		-			220,321			-			-			-			608			608
Net loss		-		-			-			-			-			-			(38,360	)		(38,360	)
Foreign currency translation loss		-		-			-			-			-			(859	)		-			(859	)
Balance at June 30, 2022		49,552,808	$	451,430			18,684,831		$	-		$	-		$	(1,405	)	$	(549,197	)	$	(550,602	)

Balance at December 31, 2022		-		-			131,416,516			13			846,205			(785	)		(700,743	)		144,690			131,416,516		13		846,205			(785	)		(700,743	)		144,690
Adoption of new accounting standard		-		-			-			-			-			-			(212	)		(212	)		-		-		-			-			(212	)		(212	)
Issuance of Class A common stock in connection with business acquisitions		-		-			1,885,149			-			9,539			-			-			9,539			1,885,149		-		9,539			-			-			9,539
Issuance of Class A common stock upon vesting of restricted share units		-		-			287,157			-			-			-			-			-			287,157		-		-			-			-			-
Issuance of Class A common stock upon exercise of stock options		-		-			194,775			-			264			-			-			264			194,775		-		264			-			-			264
Issuance of Class A common stock upon settlement of contingent consideration		-		-			83,393			-			196			-			-			196			83,393		-		196			-			-			196
Stock-based compensation expense		-		-			-			-			6,506			-			-			6,506			-		-		6,506			-			-			6,506
Withholding taxes on net share settlement of stock-based compensation and option exercises		-		-			-			-			(917	)		-			-			(917	)		-		-		(917	)		-			-			(917	)
Net loss		-		-			-			-			-			-			(19,273	)		(19,273	)		-		-		-			-			(19,273	)		(19,273	)
Foreign currency translation loss		-		-			-			-			-			(359	)		-			(359	)		-		-		-			(359	)		-			(359	)
Balance at March 31, 2023		-	$	-			133,866,990		$	13		$	861,793		$	(1,144	)	$	(720,228	)	$	140,434			133,866,990	$	13	$	861,793		$	(1,144	)	$	(720,228	)	$	140,434

Balance at December 31, 2023																									129,970,750		12		860,485			(622	)		(816,416	)		43,459
Issuance of Class A common stock upon vesting of restricted share units		-		-			478,619			-			-			-			-			-			867,341		-		-			-			-			-
Issuance of Class A common stock upon employee stock purchase plan		-		-			102,807			-			318									318
Issuance of Class A common stock upon exercise of stock options		-		-			8,437			-			35			-			-			35
Issuance of Class A common stock upon exercise of employee stock purchase plan																									202,327		-		196			-			-			196
Stock-based compensation expense		-		-			-			-			5,482			-			-			5,482			-		-		6,175			-			-			6,175
Withholding taxes on net share settlement of stock-based compensation and option exercises		-		-			-			-			(494	)		-			-			(494	)		-		-		76			-			-			76
Return of common stock (Note 17)							(5,881,723	)		(1	)		(21,409	)		-			-			(21,410	)
Net loss		-		-			-			-			-			-			(30,973	)		(30,973	)
Foreign currency translation gain		-		-			-			-			-			328			-			328
Balance at June 30, 2023		-	$	-			128,575,130		$	12		$	845,725		$	(816	)	$	(751,201	)	$	93,720
Change in fair value of debt instruments (Note 16)																									-		-		-			5,707			-			5,707
Net income																									-		-		-			-			50,599			50,599
Foreign currency translation loss																									-		-		-			(116	)		-			(116	)
Balance at March 31, 2024																									131,040,418	$	12	$	866,932		$	4,969		$	(765,817	)	$	106,096


Balance at December 31, 2021	$	30,097
Revenue recognized in the current period from amounts in the prior balance		(21,924	)
New deferrals, net of amounts recognized in the current period		34,988
Effects of foreign currency		(388	)
Balance at June 30, 2022	$	42,773

Balance at December 31, 2022	$	36,487
Acquired deferred revenue		3,941
Revenue recognized in the current period from amounts in the prior balance		(27,128	)
New deferrals, net of amounts recognized in the current period		36,503
Effects of foreign currency		221
Balance at June 30, 2023	$	50,024


Fair value of Class A common stock	$	8,590
Fair value of contingent consideration		88
Total	$	8,678


Cash and cash equivalents	$	1,525
Current assets, net		447
Property and equipment, net		53
Equity method investment		45
Intangible assets		3,000
Deferred revenues		(602	)
Other current liabilities		(453	)
Debt		(1,131	)
Total net assets acquired		2,884
Goodwill		5,794
Total purchase price	$	8,678


2023 (remainder)	$	12,095
2024		15,625
2025		12,423
2026		11,987
2027		11,578
Thereafter		43,759
Total	$	107,467


Balance at December 31, 2022	$	194,362
Acquisition		19,282
Impairment		(5,837	)
Impact of foreign currency fluctuations		270
Balance at June 30, 2023	$	208,077




Beginning balances at December 31, 2022 and 2021	$	639	$	728
Lapses in statutes of limitations		-		(89	)
Ending balances at June 30, 2023 and 2022	$	639	$	639


	Dragonfly			Curate
Risk premium		19.5	%		13.0	%
Risk free rate		5.4	%		5.4	%
Revenue volatility		21.0	%		25.0	%
Expected life (years)		0.5			0.8

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company