UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended June 30, ~~2022~~

or2023

FISCALNOTE HOLDINGS, INC.

(Exact Name of Registrant as Specified in its Charter)


☐Delaware	~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

~~For the transition period from to~~

~~Commission File No.~~ ~~001-39672~~

~~FISCALNOTE HOLDINGS, INC.~~*

~~(Exact name of registrant as specified in its charter)~~


~~Delaware~~	~~N/A~~001-396972	88-3772307
(State or other jurisdiction of ~~incorporation)~~ incorporation or organization)	(~~IRS~~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)

~~1201 Pennsylvania Avenue NW, 6th Floor,~~

~~Washington, D.C.~~~~20004~~

~~(Address of principal executive offices, including zip code)~~

Registrant’s telephone number, including area code: (202) 793-5300

~~Duddell Street Acquisition Corp.~~

~~(Former name or former address, if changed since last report)~~

Securities registered pursuant to Section 12(b) of the ~~Act~~Act:


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

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, a 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.


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

Emerging growth company	☒

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 ~~2, 2022, 121,449,403~~1, 2023, the registrant had 120,377,903 shares of Class A common stock, $0.0001 par value ~~$0.0001~~ per share, ~~were issued~~outstanding, and 8,290,921 shares of Class B common Stock, $0.0001 par value per share, outstanding.

* Unless stated otherwise, this Quarterly Report contains information about Duddell Street Acquisition Corp. before the Business Combination described herein. Please refer to “Explanatory Note” for more information.

Table of Contents

~~EXPLANATORY NOTE~~


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	2
Condensed Consolidated Statements of Operations and Comprehensive Loss	3
Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit)	4
Condensed Consolidated Statements of Cash Flows	5
Notes to Condensed Consolidated Financial Statements	6

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3. Quantitative and Qualitative Disclosures About Market Risks	40
Item 4. Controls and Procedures	40

Part II. OTHER INFORMATION	41

Item 1. Legal Proceedings	41
Item 1A. Risk Factors	41
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3. Defaults upon Senior Securities	41
Item 4. Mine Safety Disclosures	41
Item 5. Other Information	41
Item 6. Exhibits	41

SIGNATURES	43

~~On July 29, 2022 (the “Closing Date”), subsequent to the fiscal quarter ended June 30, 2022, the fiscal quarter to which this~~

Table of Contents

Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Quarterly Report”) relates, FiscalNote Holdings, Inc. (formerly Duddell Street Acquisition Corp. (“DSAC”)) (the “Company”) closed the previously announced business combination pursuant toincludes statements that ~~certain Agreement~~express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and ~~Plan of Merger, dated as of November 7, 2021, (as it~~therefore are, or may be ~~amended and/or restated from time~~deemed to time, including by the First Amendment to Agreement and Plan of Merger, dated as of May 9, 2022, the “Business Combination Agreement”), by and among DSAC, Grassroots Merger Sub, Inc., a wholly owned subsidiary of DSAC (“Merger Sub”), and FiscalNote Intermediate Holdco, Inc. (formerly FiscalNote Holdings, Inc.) (“Old FiscalNote”) (the transactions contemplated by the Business Combination Agreement, the “Business Combination”). Please see Note 1—Description of Organization and Business Operations for additional detail regarding the Business Combination. In connection with the consummation of the Business Combination, DSAC changed its name to FiscalNote Holdings, Inc. FiscalNote Holdings Inc.’s Class A common stock and public warrants commenced trading on The New York Stock Exchange under the ticker symbols “NOTE” and “NOTE.WS,be, “forward-looking statements.” ~~respectively, on August 1, 2022.~~

Unless stated otherwise, this Quarterly Report contains information about DSAC before the Business Combination. References to the “Company” in this Quarterly Report refer to DSAC before the consummation of the Business Combination or FiscalNote Holdings, Inc. after the Business Combination, as the context suggests.

~~Table of Content~~

~~CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS~~

This quarterly report on Form 10-Q (this “Form 10-Q), including, without limitation, statements under the headings “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). Generally, statements that are not historical facts, including statements concerning FiscalNote Holding, Inc. (the “Company,” “we,” “us,” or “our”) possible or assumed future actions, business strategies, events, or results of operations, are forward-looking statements. These forward-looking statements can generally be identified by the use of forward-looking terminology, including the ~~words~~terms “believes,” “estimates,” “anticipates,” “expects,” “seeks,” “projects,” “intends,” “plans,” ~~“may,” “will,” “potential,” “projects,” “predicts,” “continue,”~~“may” or ~~“should,”~~“should” or, in each case, their negative or other variations or comparable terminology. ~~There can be no assurance~~These forward-looking statements include all matters that ~~actual~~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 ~~will~~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:

•

FiscalNote's ability to effectively manage its growth;

•

changes in FiscalNote's strategy, future operations, financial position, estimated revenue and losses, forecasts, projected costs, prospects and plans;

•

FiscalNote's future capital requirements;

•

demand for FiscalNote's services and the drivers of that demand;

•

FiscalNote's ability to provide highly useful, reliable, secure and innovative products and services to its customers;

•

FiscalNote's ability to attract new customers, retain existing customers, expand its products and service offerings with existing customers, expand into geographic markets or identify areas of higher growth;

•

FiscalNote's ability to successfully identify acquisition opportunities, make acquisitions on terms that are commercially satisfactory, successfully integrate acquired businesses and services, and subsequently grow;

•

risks associated with international operations, including compliance complexity and costs, increased exposure to fluctuations in currency exchange rates, political, social and economic instability, and supply chain disruptions;

•

FiscalNote's ability to develop, enhance, and integrate its existing platforms, products, and services;

•

FiscalNote's estimated total addressable market and other industry and performance projections;

•

FiscalNote's reliance on third-party systems and data, its ability to integrate such systems and data with its solutions and its potential inability to continue to support integration;

•

potential technical disruptions, cyberattacks, security, privacy or data breaches or other technical or security incidents that affect FiscalNote's networks or systems or those of its service providers;

•

FiscalNote's ability to obtain and maintain accurate, comprehensive, or reliable data to support its products and services;

•

FiscalNote's ability to maintain and improve its methods and technologies, and anticipate new methods or technologies, for data collection, organization, and analysis to support its products and services;

•

competition and competitive pressures in the markets in which FiscalNote operates; including larger well-funded companies shifting their existing business models to become more competitive with FiscalNote;

•

FiscalNote's ability to protect and maintain its brands;

•

FiscalNote's ability to comply with laws and regulations in connection with selling products and services to U.S. and foreign governments and other highly regulated industries;

•

FiscalNote's ability to retain or recruit key personnel;

•

FiscalNote's ability to effectively maintain and grow its research and development team and conduct research and development;

•

FiscalNote's ability to adapt its products and services for changes in laws and regulations or public perception, or changes in the enforcement of such laws, relating to artificial intelligence, machine learning, data privacy and government contracts;

•

adverse general economic and market conditions reducing spending on our products and services;

•

the outcome of any known and unknown litigation and regulatory proceedings;

•

FiscalNote's ability to successfully establish and maintain public company-quality internal control over financial reporting; and

•

the ability to adequately protect FiscalNote's intellectual property rights.

The foregoing list of factors is not ~~materially differ~~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 ~~expectations.~~

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 ~~our~~ current expectations and beliefs concerning future developments and their potential effects on ~~us. Future~~us and our business. There can be no assurance that future developments affecting us ~~may not~~will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) and other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, without limitation, those factors described under Part II, Item 1A: “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. ~~These risks and others described under Part II, Item 1A: “Risk Factors” may not be exhaustive.~~

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this Form 10-Q. In addition, even if our results or operations, financial condition and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this Form 10-Q, those results or developments may not be indicative of results or developments in subsequent periods.

~~Table of Contents~~

~~PART I - FINANCIAL INFORMATION~~

~~Item 1. Unaudited Condensed Financial Statements.~~

~~FISCALNOTE HOLDINGS, INC.~~

~~(FORMERLY KNOWN AS DUDDELL STREET ACQUISITION CORP.)~~

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~

June 30, 2022

December 31, 2021
Assets

(unaudited)

Current assets:




Cash

$
14,689

$
618,138
Prepaid expenses

201,799

462,473
Total current assets

216,488

1,080,611
Investments held in Trust Account

175,360,788

175,101,805
Total Assets

$
175,577,276

$
176,182,416

Liabilities, Class A Ordinary Shares Subject to Possible Redemption and Shareholders' Deficit


Current liabilities:


Accounts payable

$
1,745,196

$
1,736,244
Accrued expenses

5,794,135

2,942,445
Due to related party

303,680

0
Total current liabilities

7,843,011

4,678,689
Deferred underwriting commissions

6,125,000

6,125,000
Derivative warrant liabilities

11,340,000

19,687,500
Total liabilities

25,308,011

30,491,189

Commitments and Contingencies (Note 6)



Class A ordinary shares subject to possible redemption; 17,500,000 shares at $10.01 and $10.00 per share at June 30, 2022 and December 31, 2021, respectively

175,260,788

175,000,000

Shareholders’ Deficit

Preference shares, $0.0001 par value; 1,000,000 shares authorized; NaN issued and outstanding at June 30, 2022 and December 31, 2021

—

—
Class A ordinary shares subject to possible redemption, $0.0001 par value; 180,000,000 shares authorized; 0 non-redeemable shares issued or outstanding

0

0
Class B ordinary shares, $0.0001 par value; 20,000,000 shares authorized; 4,375,000 shares issued and outstanding

437

437
Additional paid-in capital

0

0
Accumulated deficit

(24,991,960)

(29,309,210)
Total shareholders’ deficit

(24,991,523)

(29,308,773)
Total Liabilities, Class A Ordinary Shares Subject to Possible Redemption and Shareholders’ Deficit

$
175,577,276

$
176,182,416

~~The accompanying notes are an integral part of these unaudited condensed financial statements.~~

~~Table of Content~~

~~FISCALNOTE HOLDINGS, INC.~~

~~(FORMERLY KNOWN AS DUDDELL STREET ACQUISITION CORP.)~~

~~UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS~~

For the Three Months Ended June 30,

For the Six Months Ended June 30,


2022

2021

2022

2021
General and administrative expenses

$
2,106,642

$
2,034,461

$
4,028,445

$
2,284,830
Loss from operations

(2,106,642)

(2,034,461)

(4,028,445)

(2,284,830)
Other income (expense)

Interest earned on investments held in Trust Account

236,453

5,928

258,983

51,449
Change in fair value of derivative warrant liabilities

(787,500)

3,990,000

8,347,500

7,695,000
Net income (loss)

$
(2,657,689)

$
1,961,467

$
4,578,038

$
5,461,619

Weighted average shares outstanding of Class A ordinary shares, basic and diluted

17,500,000

17,500,000

17,500,000

17,500,000
Basic and diluted net income (loss) per share, Class A ordinary shares subject to redemption

$
(0.12)

$
0.09

$
0.21

$
0.25
Weighted average shares outstanding of Class B ordinary shares, basic and diluted

4,375,000

4,375,000

4,375,000

4,375,000
Basic and diluted net income (loss) per share, Class B ordinary shares

$
(0.12)

$
0.09

$
0.21

$
0.25

~~The accompanying notes are an integral part of these unaudited condensed financial statements.~~

~~Table of Content~~

~~FISCALNOTE HOLDINGS, INC.~~

~~(FORMERLY KNOWN AS DUDDELL STREET ACQUISITION CORP.)~~

~~UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT~~

~~FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022~~

Ordinary Shares

Additional

Total


Class A

Class B

Paid-in

Accumulated

Shareholders’


Shares

Amount

Shares

Amount

Capital

Deficit

Deficit
Balance - December 31, 2021

0

$
0

4,375,000

$
437

$
0

$
(29,309,210)

$
(29,308,773)
Net income

0

0

0

0

0

7,235,727

7,235,727
Balance - March 31, 2022 (unaudited)

0

$
0

4,375,000

$
437

$
0

$
(22,073,483)

$
(22,073,046)
Increase in Class A ordinary shares subject to possible redemption

0

0

0

0

0

(260,788)

(260,788)
Net loss

0

0

0

0

0

(2,657,689)

(2,657,689)
Balance - June 30, 2022 (unaudited)

0

$
0

4,375,000

$
437

$
0

$
(24,991,960)

$
(24,991,523)

~~FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021~~

Ordinary Shares

Additional

Total

Class A

Class B

Paid-in

Accumulated

Shareholders’


Shares

Amount

Shares

Amount

Capital

Deficit

Deficit
Balance - December 31, 2020

0

$
0

4,375,000

$
437

$
0

$
(26,057,955)

$
(26,057,518)
Net income

0

0

0

0

0

3,500,152

3,500,152
Balance - March 31, 2021 (unaudited)

—

$
—

4,375,000

$
437

$
—

$
(22,557,803)

$
(22,557,366)
Net income

—

—

—

—

—

1,961,467

1,961,467
Balance - June 30, 2021 (unaudited)

0

$
0

4,375,000

$
437

$
0

$
(20,596,336)

$
(20,595,899)

~~The accompanying notes are an integral part of these unaudited condensed financial statements.~~

~~Table of Content~~

~~FISCALNOTE HOLDINGS, INC.~~

~~(FORMERLY KNOWN AS DUDDELL STREET ACQUISITION CORP.)~~

~~UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

For the Six Months Ended June 30,


2022

2021
Cash Flows from Operating Activities:



Net income

$
4,578,038

$
5,461,619
Adjustments to reconcile net income to net cash provided by operating activities:

General and administrative expenses paid by related party

—

88,206
Interest income on investments held in Trust Account

(258,983)

(51,448)
Change in fair value of derivative warrant liabilities

(8,347,500)

(7,695,000)
Changes in operating assets and liabilities:

Prepaid expenses

260,674

254,347
Accounts payable

8,952

1,679,693
Accrued expenses

2,851,690

138,257
Due to related party

303,680

—
Net cash used in operating activities

(603,449)

(124,326)

Cash Flows from Financing Activities:

Proceeds from settlement of receivable from related party

—

323,486
Repayment of note payable to related party

—

(175,626)
Net cash provided by financing activities

—

147,860

Net (decrease) increase in cash

(603,449)

23,534

Cash - beginning of the period

618,138

0
Cash - end of the period

$
14,689

$
23,534

~~The accompanying notes are an integral part of these unaudited condensed financial statements.~~

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

FISCALNOTE HOLDINGS, INC.

~~(FORMERLY KNOWN AS DUDDELL STREET ACQUISITION CORP.)~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Condensed Consolidated Balance Sheets

(in thousands, except shares, and par value)

(Unaudited)


	June 30, 2023			December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	37,260		$	60,388
Restricted cash		842			835
Accounts receivable, net		14,942			14,909
Costs capitalized to obtain revenue contracts, net		2,998			2,794
Prepaid expenses		3,374			4,315
Other current assets		2,751			2,764
Total current assets		62,167			86,005

Property and equipment, net		6,724			7,325
Capitalized software costs, net		15,240			13,946
Noncurrent costs capitalized to obtain revenue contracts, net		4,034			3,976
Operating lease assets		18,826			21,005
Goodwill		208,077			194,362
Customer relationships, net		59,951			56,348
Database, net		19,906			21,020
Other intangible assets, net		27,610			28,728
Other non-current assets		425			442
Total assets	$	422,960		$	433,157

Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt	$	68		$	68
Accounts payable and accrued expenses		13,299			13,739
Deferred revenue, current portion		48,800			35,569
Customer deposits		2,019			3,252
Contingent liabilities from acquisitions, current portion		1,082			696
Operating lease liabilities, current portion		3,471			6,709
Other current liabilities		2,040			2,079
Total current liabilities		70,779			62,112

Long-term debt, net of current maturities		214,700			161,980
Deferred tax liabilities		2,805			714
Deferred revenue, net of current portion		1,224			918
Contingent liabilities from acquisitions, net of current portion		1,710			883
Operating lease liabilities, net of current portion		27,561			29,110
Public and private warrant liabilities		6,758			18,892
Other non-current liabilities		3,703			13,858
Total liabilities		329,240			288,467
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
Additional paid-in capital		845,725			846,205
Accumulated other comprehensive loss		(816	)		(785	)
Accumulated deficit		(751,201	)		(700,743	)
Total stockholders' equity		93,720			144,690
Total liabilities and stockholders' equity	$	422,960		$	433,157

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

FISCALNOTE HOLDINGS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except shares and per share data)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Revenues:
Subscription	$	29,462		$	24,332		$	57,929		$	47,111
Advisory, advertising, and other		3,380			2,842			6,442			6,134
Total revenues		32,842			27,174			64,371			53,245
Operating expenses: (1)
Cost of revenues		9,485			7,712			18,422			14,882
Research and development		4,510			3,791			9,630			9,809
Sales and marketing		11,689			10,395			23,987			19,892
Editorial		4,752			3,346			9,017			7,022
General and administrative		16,174			10,033			34,395			20,590
Amortization of intangible assets		2,901			2,609			5,715			5,217
Impairment of goodwill		-			-			5,837			-
Transaction costs (gains), net		309			1,027			1,717			(18	)
Total operating expenses		49,820			38,913			108,720			77,394
Operating loss		(16,978	)		(11,739	)		(44,349	)		(24,149	)

Interest expense, net		7,154			24,255			13,835			46,778
Change in fair value of financial instruments		2,987			2,048			(11,693	)		3,386
Gain on PPP loan upon extinguishment		-			-			-			(7,667	)
Loss on settlement		3,474			-			3,474			-
Other expense, net		167			494			38			615
Net loss before income taxes		(30,760	)		(38,536	)		(50,003	)		(67,261	)
Provision (benefit) from income taxes		213			(176	)		243			(550	)
Net loss		(30,973	)		(38,360	)		(50,246	)		(66,711	)
Other comprehensive (loss) gain		328			(859	)		(31	)		(774	)
Total comprehensive loss	$	(30,645	)	$	(39,219	)	$	(50,277	)	$	(67,485	)

Net loss	$	(30,973	)	$	(38,360	)	$	(50,246	)	$	(66,711	)
Deemed dividend		-			(10,614	)		-			(2,219	)
Net loss used to compute loss per share	$	(30,973	)	$	(48,974	)	$	(50,246	)	$	(68,930	)

Earnings (loss) per share attributable to common shareholders:
Basic and Diluted	$	(0.23	)	$	(2.57	)	$	(0.38	)	$	(3.65	)
Weighted average shares used in computing earnings (loss) per shares attributable to common shareholders:
Basic and Diluted		134,117,122			19,020,367			133,601,798			18,876,752

(1) Amounts include stock-based compensation expenses, as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Cost of revenues	$	82	$	13	$	140	$	23
Research and development		362		51		752		105
Sales and marketing		317		60		677		107
Editorial		106		24		172		47
General and administrative		4,615		417		10,247		543

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

FISCALNOTE HOLDINGS, INC.

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

(in thousands, except share data)

(Unaudited)


	Temporary Equity					Equity (Deficit)
	Preferred Stock					Common Stock						Additional paid-in capital			Accumulated other comprehensive loss			Accumulated deficit			Total stockholders' equity (deficit)
	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
Adoption of new accounting standard		-		-			-			-			-			-			(212	)		(212	)
Issuance of Class A common stock in connection with business acquisitions		-		-			1,885,149			-			9,539			-			-			9,539
Issuance of Class A common stock upon vesting of restricted share units		-		-			287,157			-			-			-			-			-
Issuance of Class A common stock upon exercise of stock options		-		-			194,775			-			264			-			-			264
Issuance of Class A common stock upon settlement of contingent consideration		-		-			83,393			-			196			-			-			196
Stock-based compensation expense		-		-			-			-			6,506			-			-			6,506
Withholding taxes on net share settlement of stock-based compensation and option exercises		-		-			-			-			(917	)		-			-			(917	)
Net loss		-		-			-			-			-			-			(19,273	)		(19,273	)
Foreign currency translation loss		-		-			-			-			-			(359	)		-			(359	)
Balance at March 31, 2023		-	$	-			133,866,990		$	13		$	861,793		$	(1,144	)	$	(720,228	)	$	140,434
Issuance of Class A common stock upon vesting of restricted share units		-		-			478,619			-			-			-			-			-
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
Stock-based compensation expense		-		-			-			-			5,482			-			-			5,482
Withholding taxes on net share settlement of stock-based compensation and option exercises		-		-			-			-			(494	)		-			-			(494	)
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

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

FISCALNOTE HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)


	Six Months Ended June 30,
	2023			2022
Operating Activities:
Net loss	$	(50,246	)	$	(66,711	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		671			581
Amortization of intangible assets and capitalized software development costs		11,373			9,049
Amortization of deferred costs to obtain revenue contracts		1,648			1,247
Impairment of goodwill		5,837			-
Non-cash operating lease expense		2,366			3,209
Stock-based compensation		11,988			825
Operating lease asset impairment		-			378
Loss on settlement		3,474			-
Other non-cash expenses		426			488
Bad debt expense (recovery)		229			(93	)
Change in fair value of acquisition contingent consideration		(333	)		(1,537	)
Change in fair value of financial instruments		(11,693	)		3,386
Deferred income tax provision (benefit)		214			(513	)
Paid-in-kind interest, net		2,042			27,848
Non-cash interest expense		2,130			15,072
Gain on PPP Loan forgiveness		-			(7,667	)
Changes in operating assets and liabilities:
Accounts receivable, net		1,644			(2,793	)
Prepaid expenses and other current assets		2,284			(4,618	)
Costs capitalized to obtain revenue contracts, net		(1,910	)		(2,071	)
Other non-current assets		18			-
Accounts payable and accrued expenses		(4,914	)		(1,217	)
Deferred revenue		9,595			13,019
Customer deposits		(1,233	)		(1,611	)
Other current liabilities		(797	)		(758	)
Contingent liabilities from acquisitions, net of current portion		(39	)		(1,267	)
Operating lease liabilities		(4,974	)		(4,121	)
Other non-current liabilities		(6	)		1,527
Net cash used in operating activities		(20,206	)		(18,348	)

Investing Activities:
Capital expenditures		(4,086	)		(6,041	)
Cash paid for business acquisitions, net of cash acquired		(5,010	)		-
Net cash used in investing activities		(9,096	)		(6,041	)

Financing Activities:
Proceeds from long-term debt, net of issuance costs		6,000			19,478
Principal payments of long-term debt		(53	)		(30	)
Proceeds from exercise of stock options and ESPP purchases		617			367
Repurchase of common stock		-			(88	)
Net cash provided by financing activities		6,564			19,727

Effects of exchange rates on cash		(383	)		(352	)

Net change in cash, cash equivalents, and restricted cash		(23,121	)		(5,014	)
Cash, cash equivalents, and restricted cash, beginning of period		61,223			33,009
Cash, cash equivalents, and restricted cash, end of period	$	38,102		$	27,995

Supplemental Noncash Investing and Financing Activities:
Accretion of redemption value of preferred stock	$	-		$	(8,390	)
Warrants issued in conjunction with long-term debt issuance	$	178		$	436
Fees payable to debt holders settled through increase of debt principal	$	-		$	100
PIK interest settled through issuance of additional convertible notes to noteholders	$	-		$	10,734
Property and equipment purchases included in accounts payable	$	343		$	28

Supplemental Cash Flow Activities:
Cash paid for interest	$	9,924		$	3,263
Cash paid for taxes	$	49		$	70

See accompanying notes to unaudited condensed consolidated financial statements.

FISCALNOTE HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements

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

(Unaudited)

~~Note 1~~—1. Summary of Business and Significant Accounting Policies

Description of ~~Organization and~~ Business ~~Operations~~

~~Duddell Street Acquisition Corp. (now known as~~ FiscalNote Holdings, Inc. (“FiscalNote,” or the “Company”) ~~(the “Company” or “DSAC”) was~~is a ~~blank check company incorporated as~~leading technology provider of global policy and market intelligence. It delivers critical, actionable legal and policy insights in a ~~Cayman Islands exempted company on August 28, 2020.~~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 ~~was incorporated for~~is headquartered in Washington, D.C.

On July 29, 2022 (the “Closing Date”), the ~~purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with 1 or more businesses.~~

~~Domestication and Business Combination~~

~~DSAC (and, after~~Company consummated the ~~Domestication as described below, “New DSAC”) previously entered into an agreement and plan of merger, dated as of November 7, 2021 (as amended~~transactions contemplated by the ~~First Amendment to~~ Agreement and Plan of Merger, dated as of November 7, 2021, and as amended on May 9, 2022, ~~the “Business Combination~~(the “Merger Agreement”), by and among ~~DSAC,~~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 ~~(“Merger Sub”),~~(the “Business Combination” and, ~~FiscalNote Intermediate Holdco, Inc. (formerly FiscalNote Holdings, Inc.), a Delaware corporation (“Old FiscalNote”).~~

~~On July 28, 2022, as contemplated by~~collectively with the other transactions described in the Business Combination Agreement, ~~DSAC filed a notice of deregistration~~the “Transactions”). In connection with the ~~Cayman Islands Registrar~~closing of ~~Companies, together with~~ the ~~necessary accompanying documents, and filed a certificate of incorporation and a certificate of corporate domestication with the Secretary of State of Delaware, pursuant to which~~Transactions (the “Closing”), DSAC ~~was~~ domesticated and continued as a Delaware corporation under the name of “FiscalNote Holdings, Inc.” ~~(the “Domestication”~~(“New FiscalNote”).

~~As a result~~ 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 ~~and upon~~Old FiscalNote, which became the effective time of the Domestication, among other things, (i) each of the issued and outstanding Class A ordinary shares, par value $0.0001 per share, and each of the issued and outstanding Class B ordinary shares, par value $0.0001 per share, of DSAC converted into 1 share of Class A common stock, par value $0.0001 per share,business of New ~~DSAC (the “New DSAC Class A common stock”); (ii) each issued~~FiscalNote and ~~outstanding whole warrant~~its subsidiaries following the Closing.

Basis of DSAC (the “DSAC warrants”) automatically converted into a warrant to purchase 1 share of New DSAC Class A common stock (the “New DSAC warrants”) at an exercise price of $11.50 per share on the termsPresentation and conditions set forth in the warrant agreement, dated October 28, 2020, between DSAC and Continental Stock Transfer & Trust Company, as warrant agent (the “DSAC Warrant Agreement”); and (iii) each of the issued and outstanding units of DSAC that had not been previously separated into the underlying DSAC Class A ordinary shares and underlying DSAC warrants prior to the Domestication upon the request of the holder thereof was cancelled and entitled the holder thereof to 1 share of New DSAC Class A common stock and ~~one~~Interim Financial Information-half of one New DSAC warrant representing the right to purchase 1 share of New DSAC Class A Common Stock at an exercise price of $11.50 per share on the terms and subject to the conditions set forth in the DSAC Warrant Agreement.

~~On July 29, 2022 (the “Closing Date”), as contemplated by~~We accounted for the Business Combination ~~Agreement,~~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 ~~DSAC consummated~~ FiscalNote;

•

the ~~merger transaction contemplated by~~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 ~~Agreement (the “Closing”), whereby Merger Sub merged with and into~~was treated as the equivalent of Old FiscalNote issuing stock for the ~~separate corporate existence~~net assets of ~~Merger Sub ceasing and~~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 ~~being~~was determined as the ~~surviving corporation and a wholly owned subsidiary~~accounting acquirer, the historical financial statements of ~~New DSAC (the “Merger” and, together with~~Old FiscalNote became the ~~Domestication,~~historical financial statements of the ~~“Business Combination”). In connection with~~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, ~~New DSAC changed its name~~the Company has converted the equity structure for the periods prior to ~~“FiscalNote Holdings, Inc.” (“New FiscalNote”). The~~the Business Combination to reflect the number of shares of New ~~DSAC Class A~~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 ~~New DSAC warrants described above became Class A~~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 ~~New FiscalNote and New FiscalNote warrants, respectively, upon consummation~~Consolidation

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

5These 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

Table of Contents

~~FISCALNOTE HOLDINGS, INC.~~

~~(FORMERLY KNOWN AS DUDDELL STREET ACQUISITION CORP.)~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Pursuant to the Business Combination Agreement, DSAC acquired all of the outstanding equity interests of Old FiscalNote, other than dissenting shares, in exchange for Per Share Merger Consideration in the form of common stock of New FiscalNote (“New FiscalNote common stock”), plus Per Share Earnout Consideration subject to each Triggering Event. Old FiscalNote stockholders received consideration in the form of shares of Class A common stock, par value $0.0001 per share, of New FiscalNote (“New FiscalNote Class A common stock”) and/or Class B common stock, par value $0.0001 per share, of New FiscalNote, as determined in accordance with the Business Combination Agreement. Following the Domestication and immediately prior to the consummation of the Business Combination, the holders of outstanding DSAC Class A ordinary shares that did not elect to redeem their shares received a distribution of 0.57 shares of New FiscalNote Class A common stock (the “Bonus Shares”) for each share of New DSAC Class A common stock received in the Domestication. Certain affiliates of the Duddell Street Holdings Limited, a Delaware limited liability company (the “Sponsor”) also received Bonus Shares for each share of New DSAC Class A common stock for which they subscribed pursuant to the Backstop Agreement described herein. The issuances of the Bonus Shares triggered adjustments to the previously outstanding DSAC warrants pursuant to the DSAC Warrant Agreement. Each previously outstanding DSAC warrant (including DSAC warrants held by the Sponsor and its affiliates) adjusted to 1.571 DSAC warrants in proportion to the 10,000,000 share increase in the outstanding shares of New FiscalNote Class A common stock as a result of the issuances of the Bonus Shares, and the exercise price of each DSAC warrant was adjusted to $7.32 per share.

In connection with the Business Combination, holders of 11,408,314 shares of DSAC’s Class A ordinary shares sold in its initial public offering properly exercised their right to have such shares redeemed for a full pro rata portion of the trust account holding the proceeds from DSAC’s initial public offering, calculated as of the Closing Date, or approximately $10.00 per share and $114.3 million in the aggregate. Accordingly, affiliates of the Sponsor purchased 11,408,314 shares of New DSAC Class A common stock for $114.3 million pursuant to the Backstop Agreement immediately prior to Closing.

~~Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Business Combination Agreement.~~

~~Sponsor Agreement~~

In connection with the execution of the Business Combination Agreement, the Sponsor entered into an agreement (the “Sponsor Agreement”) with Old FiscalNote and DSAC pursuant to which the Sponsor agreed, among other things, (i) not to redeem any ordinary shares in DSAC owned by it in connection with the Business Combination, (ii) to vote in favor of the Business Combination Agreement and the transactions contemplated thereby (including the Merger) and (iii) to waive any adjustment to the conversion ratio set forth in DSAC’s amended and restated memorandum and articles of association with respect to the Class B ordinary shares of DSAC held by the Sponsor, in each case, on the terms and subject to the conditions set forth in the Sponsor Agreement.

In addition, the Sponsor agreed that (i) all equity interests of DSAC held by the Sponsor immediately after the Effective Time (the “Restricted Securities”) will be subject to a lockup of 180 days from the time at which the Merger became effective (the “Effective Time”) and (ii) 50% of each type of the Restricted Securities held by the Sponsor will be subject to a lockup during the period from the date that is 180 days following after the Effective Time and ending on the first anniversary of the Effective Time, in each case, except to the Permitted Transferees as defined in the Sponsor Agreement.

~~Voting and Support Agreement~~

In connection with the execution of the Business Combination Agreement, certain stockholders of Old FiscalNote (collectively, the “Voting Stockholders”) entered into voting and support agreements (collectively, the “Voting and Support Agreement”) with DSAC and Old FiscalNote, pursuant to which the Voting Stockholders agreed to, among other things, (i) vote in favor of the Business Combination Agreement and the transactions contemplated thereby, (ii) a lockup of all equity interests of New FiscalNote held by such Voting Stockholder immediately after the Effective Time for a period of 180 days from the Effective Time (or 12 months, in the case of the Co-Founders) and (iii) be bound by certain other covenants and agreements related to the Business Combination. The Voting Stockholders held sufficient shares of FiscalNote to cause the approval of the Business Combination on behalf of Old FiscalNote.

~~Table of Contents~~

~~FISCALNOTE HOLDINGS, INC.~~

~~(FORMERLY KNOWN AS DUDDELL STREET ACQUISITION CORP.)~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~Backstop Agreement~~

In connection with the execution of the Business Combination Agreement, DSAC and certain investment funds affiliated to the Sponsor, including Maso Capital Investments Limited, Blackwell Partners LLC — Series A, and Star V Partners LLC (collectively, the “Backstop Parties”) entered into that certain Backstop Agreement, dated as of November 7, 2021 (as amended by the First Amendment to the Backstop Agreement, dated May 9, 2022, the “Backstop Agreement”) whereby the Backstop Parties agreed, subject to the other terms and conditions included therein, at the Closing, to subscribe for shares of New DSAC Class A common stock in order to fund redemptions by shareholders of DSAC in connection with the Business Combination, in an amount equal to the amount paid out of the Trust Account of DSAC to honor duly exercised redemption rights of up to $175,000,000. The Backstop Parties are additionally entitled to receive Bonus Shares for each share of New DSAC Class A common stock for which they subscribed pursuant to the Backstop Agreement.

~~Registration Rights Agreement~~

In connection with the Closing, New FiscalNote entered into an amended and restated registration rights agreement (the “Registration Rights Agreement”) among New FiscalNote, the Sponsor, and certain New FiscalNote stockholders. Pursuant to the Registration Rights Agreement, New FiscalNote will, among other matters, be required to register for resale securities held by the stockholders party thereto. In addition, the holders have certain customary “piggyback” registration rights with respect to registrations initiated by New FiscalNote. New FiscalNote will bear the expenses incurred in connection with the filing of any registration statements pursuant to the Registration Rights Agreement.

~~Indemnification Agreements~~

On the Closing Date, New FiscalNote entered into indemnification agreements with each of its directors and executive officers. Each indemnification agreement provides for indemnification and advancements by New FiscalNote of certain expenses and costs relating to claims, suits or proceedings arising from each director or executive officer’s service to New FiscalNote, or, at New FiscalNote’s request, service to other entities, as officers or directors to the maximum extent permitted by applicable law.

~~Second Amended and Restated Credit and Guaranty Agreement~~

On the Closing Date, FiscalNote, Inc. entered into that certain second amended and restated credit and guaranty agreement (the “Credit Agreement”), with Runway Growth Finance Corp., as administrative agent and collateral agent, the lenders party thereto, and Runway Growth Finance Corp. and Orix Growth Capital LLC, as joint lead arrangers and joint bookrunners, pursuant to which the lenders have made term loans having an aggregate principal balance of $150,000,000. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Credit Agreement.

The Credit Agreement contains representations, warranties, covenants, terms and conditions customary for transactions of this type. These include covenants limiting Borrower’s, New FiscalNote’s and each of their subsidiaries’ ability, subject to certain exceptions and baskets, to, among other things, (i) incur indebtedness, (ii) incur liens on their assets, (iii) enter into any transaction of merger, consolidation or amalgamation, liquidate, wind up or dissolve, or dispose of all or substantially all of their property or business, (iv) dispose of any of their property, or, issue or sell any shares of a subsidiary’s stock, (v) make any payment or prepayment for any subordinated indebtedness, pay any earn-out payment, seller debt or deferred purchase price payments, or (vi) declare or pay any dividend or make any other distribution,

The Credit Agreement contains certain events of default, including, among others, (i) failure to pay, (ii) breach of representations and warranties, (iii) breach of covenants, subject to any cure periods described therein, and (iv) failure to pay principal or interest on any other material debt. If any event of default occurs and is not cured within applicable grace periods set forth in the Credit Agreement or waived, all loans and other obligations could become due and immediately payable and the facility could be terminated.

~~Table of Contents~~

~~FISCALNOTE HOLDINGS, INC.~~

~~(FORMERLY KNOWN AS DUDDELL STREET ACQUISITION CORP.)~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~Amendment and Restatement Agreement~~

On the Closing Date, after giving effect to the Closing, New FiscalNote entered into that certain amendment and restatement agreement (the “Restatement Agreement”), with Runway Growth Finance Corp., as administrative agent and collateral agent, and the lenders party thereto. Under the Restatement Agreement, New FiscalNote guaranteed all obligations under the Credit Agreement and granted a security interest on substantially all of its assets, subject to certain customary exceptions.

~~Prior to the Business Combination~~

As of June 30, 2022, the Company had not yet commenced operations. All activity for the period from August 28, 2020 (inception) through June 30, 2022 relates to the Company’s formation, the initial public offering (the “Initial Public Offering”), which is described below, and the search for and due diligence on a potential target for a Business Combination.

The Company’s sponsor is Duddell Street Holdings Limited, a Cayman Islands exempted company (“Sponsor”). The registration statement for the Company’s Initial Public Offering was declared effective on October 28, 2020. On November 2, 2020, the Company consummated its Initial Public Offering of 17,500,000 units (the “Units” and, with respect to the Class A ordinary shares included in the Units being offered, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $175.0 million, and incurring offering costs of approximately $10.1 million, inclusive of approximately $6.1 million in deferred underwriting commissions (Note 6).

Simultaneously with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 5,500,000 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”), at a price of $1.00 per Private Placement Warrant with the Sponsor, generating gross proceeds of $5.5 million (Note 4). On October 18, 2021, the Company and the Sponsor entered into a purchase agreement whereby the Sponsor agreed to purchase an additional 1,500,000 Private Placement Warrants for aggregate proceeds to the Company of $1.5 million, with each warrant having substantially the same terms as the Private Placement Warrants issued concurrent with the Initial Public Offering.

Upon the closing of the Initial Public Offering and the Private Placement, $175.0 million ($10.00 per Unit) of the net proceeds of the sale of the Units in the Initial Public Offering and the Private Placement were placed in a trust account (“Trust Account”) with Continental Stock Transfer & Trust Company acting as trustee and invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.

The Company’s management has broad discretion with respect to the specific application of the net proceeds of its Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds were placed in the Trust Account and are intended to be applied generally towards consummating a Business Combination. The Company’s initial Business Combination must be with one or more operating businesses or assets with a fair market value equal to at least 80% of the net assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the Trust Account) at the time the Company signs a definitive agreement in connection with the initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act 1940, as amended, or the Investment Company Act.

~~Table of Contents~~

~~FISCALNOTE HOLDINGS, INC.~~

~~(FORMERLY KNOWN AS DUDDELL STREET ACQUISITION CORP.)~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

The Company will provide its holders of the Public Shares (the “Public Shareholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a shareholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Shareholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.00 per share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). The per-share amount to be distributed to Public Shareholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 6). These Public Shares are recorded at a redemption value and classified as temporary equity following the completion of the Initial Public Offering, in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”). The Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and a majority of the shares voted are voted in favor of the Business Combination. If a shareholder vote is not required by ~~law and~~U.S. GAAP for complete financial statements. In the Company does not decide to hold a shareholder vote for business or other legal reasons, the Company will, pursuant to the amended and restated memorandum and articles of association adopted by the Company upon the consummation of the Initial Public Offering (the “Amended and Restated Memorandum and Articles of Association”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (the “SEC”), and file tender offer documents with the SEC prior to completing a Business Combination. If, however, a shareholder approval of the transactions is required by law, or the Company decides to obtain shareholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally, each Public Shareholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction. If the Company seeks shareholder approval in connection with a Business Combination, the holders of the founder shares prior to the Initial Public Offering (the “Initial Shareholders”) have agreed to vote their founder shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination. In addition, the Initial Shareholders have agreed to waive their redemption rights with respect to their founder shares and Public Shares (except with respect to any Public Shares acquired in or after the Initial Public Offering) in connection with the completion of a Business Combination. In addition, the Company has agreed not to enter into a definitive agreement regarding an initial Business Combination without the prior consent of the Sponsor.

Notwithstanding the foregoing, the Company’s Amended and Restated Memorandum and Articles of Association will provide that a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 20% or more of the Class A ordinary shares sold in the Initial Public Offering, without the prior consent of the Company.

The Company’s Sponsor, executive officers, directors and director nominees have agreed not to propose an amendment to the Company’s Amended and Restated Memorandum and Articles of Association that would affect the substance or timingopinion of the Company’s ~~obligation to provide for~~management, the redemption of its Public Shares in connection with a Business Combination or to redeem 100% of its Public Shares if the Company does not complete a Business Combination, unless the Company provides the Public Shareholders with the opportunity to redeem their Class A ordinary shares in conjunction with any such amendment.

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~~FISCALNOTE HOLDINGS, INC.~~

~~(FORMERLY KNOWN AS DUDDELL STREET ACQUISITION CORP.)~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

In connection with the redemption of 100% of the Company’s outstanding Public Shares for a portion of the funds held in the Trust Account, each holder will receive a full pro rata portion of the amount then in the Trust Account, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay the Company’s taxes payable (less up to $100,000 of interest to pay dissolution expenses).

The Initial Shareholders have agreed to waive their liquidation rights with respect to the founder shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Initial Shareholders acquire Public Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares (but not with respect to any Public Shares acquired before the Initial Public Offering) if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Company’s Public Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be only $10.00 per share initially held in the Trust Account. In order to protect the amounts held in the Trust Account, the Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or other similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per Public Share and (ii) the actual amount per Public Share held in the trust account as of the date of the liquidation of the Trust Account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). In the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have vendors, service providers (except the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.

~~Note 2 — Basis of Presentation and Summary of Significant Accounting Policies~~

~~Basis of Presentation~~

~~The accompanying~~ unaudited condensed consolidated financial statements include all adjustments necessary for the fair presentation of the ~~Company have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information~~Company’s balance sheet and ~~Article 8~~its results of ~~Regulation S-X. Accordingly, certain disclosures included in the annual financial statements have been condensed or omitted from these financial statements as they~~operations, including its comprehensive loss, temporary equity, stockholders' equity (deficit), and cash flows. All adjustments are ~~not required for interim financial statements under GAAP and the rules~~ of ~~the SEC. In the opinion of management, all adjustments (consisting of~~a normal ~~accruals) considered for a fair presentation have been included. Operating~~recurring nature. The results for the ~~three and~~ six months ended June 30, ~~2022~~2023 are not necessarily indicative of the results ~~that may~~to be expected for any subsequent quarter or for the fiscal year ending December 31, ~~2022 or any future period.~~

~~The accompanying unaudited~~2023. These condensed consolidated financial statements should be read in conjunction with the ~~Company’s~~audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2021, as filed with the SEC on April 14, 2022, which contains the audited~~2022.

Liquidity

The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and ~~notes thereto.~~satisfaction of liabilities in the ordinary course of business. The ~~financial information~~propriety of using the going-concern basis is dependent upon, among other things, the achievement of future profitable operations, the ability to generate sufficient cash from operations and potential other funding sources, in addition to cash on-hand, to meet its obligations as they become due.

The Company received approximately $65.6 million of net cash proceeds from the Transactions. The Company’s cash, cash equivalents, and restricted cash were $38.1 million at June 30, 2023, compared with $61.2 million at December 31, ~~2021, is derived from~~2022. Further, the ~~audited financial statements presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021,~~Company had a negative working capital balance of $46.7 million (excluding cash) at June 30, 2023 and had an accumulated deficit of $751.2 million and $700.7 million as ~~filed with the SEC on April 14, 2022.~~

~~Liquidity and Capital Resources~~

As of June 30, 2023 and December 31, 2022, respectively, and has incurred net losses of $50.2 million and $66.7 million for the six months ended June 30, 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. The Company's ability to fund its 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, regulatory 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. The Company believes with the cash on hand at June 30, 2023, proceeds from expected product sales, and borrowings possibly available under the New Senior Term Loan, will be sufficient to meet our short-term and long-term operating expenses and capital expenditures for at least the next twelve months.

Pursuant to the terms 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 ~~had cash~~recognized the forgiveness of ~~approximately $15,000 and~~the PPP Loan as a ~~working capital deficit~~gain on debt extinguishment during the first quarter of ~~approximately $7.6 million.~~

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~~FISCALNOTE HOLDINGS, INC.~~

~~(FORMERLY KNOWN AS DUDDELL STREET ACQUISITION CORP.)~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

2022.

Segments

The ~~Company’s liquidity needs through June 30, 2022 have been satisfied through a payment~~Company operates as one operating segment. Operating segments are defined as components of ~~$25,000 from~~an enterprise for which separate financial information is evaluated regularly by the ~~Sponsor~~chief operating decision maker (“CODM”) in deciding how to ~~cover certain expenses on behalf of~~allocate resources and assess performance. Over the past several years, the Company ~~in exchange for the issuance~~has completed a number of ~~the founder shares (as defined below), the loan under the Note of approximately $176,000 (see Note 5) to~~acquisitions. These acquisitions have allowed the Company to expand its offerings, presence, and ~~the net proceeds from the consummation of the Initial Public Offering and the Private Placement of $2.0 million. On October 18, 2021,~~reach in various market segments. While the Company has offerings in multiple market segments and the Sponsor entered into a warrant purchase agreement whereby the Sponsor agreed to purchase an additional 1,500,000 Private Placement Warrants for aggregate proceeds to the Company of $1.5 million. In addition,operates in ~~order to finance transaction costs in connection with a Business Combination, the Sponsor, members of~~multiple countries, the Company’s ~~founding team or any~~business operates in one operating segment because the Company’s CODM evaluates the Company’s financial information and resources, and assesses the performance of ~~their affiliates may, but are not obligated to, provide the Company Working Capital Loans (see Note 5). As~~these resources, on a consolidated basis.

Fair value of June 30, 2022, there were 0 amounts outstanding under any Working Capital Loans. Until the consummation of the Business Combination, the Company used the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination.

~~On July 29, 2022, the Company consummated the aforementioned Business Combination and closed the related financing agreements.~~Financial Instruments

~~Emerging Growth Company~~

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected ~~not to opt out of such extended transition period which means that when a standard is~~the fair value option on the subordinated convertible promissory notes issued ~~or revised and it has different application dates for public or private companies, the Company,~~ as ~~an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison~~part of the ~~Company’s unaudited consolidated financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using~~Dragonfly acquisition, refer to Note 4, "Business Combinations" for further details, and for the ~~extended transition period difficult or impossible because of the potential differences~~New GPO Note, refer to Note 8, "Debt" for further details. The Company records changes in ~~accounting standards used.~~

~~Use of Estimates~~

The preparation of the unaudited consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date offair value through the condensed consolidated ~~financial statements. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that~~statement of operations where the ~~estimate~~portion of the ~~effect of~~change that results from a ~~condition, situation or set of circumstances that existed at the date of the condensed consolidated financial statements, which management considered in formulating its estimate, could~~ change in the ~~near term due to one or more future confirming events. Accordingly,~~instrument-specific credit risk is recorded separately in accumulated other comprehensive income, if applicable. Additionally, under the ~~actual results could differ significantly from those estimates.~~

fair value option, all issuance costs are expensed in the period that the debt is incurred.~~Table of Contents~~

~~FISCALNOTE HOLDINGS, INC.~~

~~(FORMERLY KNOWN AS DUDDELL STREET ACQUISITION CORP.)~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~Cash and Cash Equivalents~~Concentrations of Risks

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. As of June 30, 2022 and December 31, 2021, the Company did not have any cash equivalents.

~~Concentration of Credit Risk~~

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts ~~in a~~receivable. The Company generally maintains its cash and cash equivalents with various nationally recognized financial ~~institution, which,~~institutions. The Company’s cash and cash equivalents at times ~~may~~ exceed amounts guaranteed by the Federal ~~Depository~~Deposit Insurance ~~Coverage limit~~Corporation. The Company considers cash on deposit and all highly liquid investments with original maturities of ~~$250,000,~~three months or less to be cash and ~~investments held in the Trust Account.~~cash equivalents. At June 30, ~~2022~~2023, approximately 58% of the Company’s cash and ~~December 31, 2021,~~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 ~~not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.~~

~~Investments Held in Trust Account~~

exhausted collection efforts without success. As of June 30, 2023, allowance for credit losses of $985 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 December 31, 2022. Revenue derived from the U.S. Federal Government was 15% and 19% of revenue for the six months ended June 30, 2023 and 2022, respectively. As of June 30, 2023 and December 31, 2022, assets located in the United States were approximately 85% and 92% percent of total assets, respectively.

As of June 30, 2023 no vendors accounted for more than 10% of the Company's accounts payable balance. Two vendors individually accounted for more than 10% of the Company’s ~~portfolio~~accounts payable as of ~~investments was comprised of U.S. government securities, within~~December 31, 2022. During the ~~meaning set forth in Section 2(a)(16)~~six months ended June 30, 2023 no vendors represented more than 10% of the ~~Investment~~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 ~~Act, with~~adopted ASC 2016-13 on January 1, 2023 using the modified retrospective transition method. Upon adoption, the Company recorded a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof. When the Company’s investments held in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. When the Company’s investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented$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.

2. Business Combination with DSAC

On July 29, 2022, Old FiscalNote and DSAC consummated the transactions contemplated by the Business Combination Agreement. In connection 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 stock 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").

In connection with the Closing, 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 Senior Lenders”), pursuant to which the New Senior Term Loan was consummated simultaneously with the Closing.

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 the closing of the Transactions and the New Senior Term Loan, the Company received total gross proceeds of $325.0 million, which consisted of $61.0 million from DSAC’s trust, $114.0 million from the backstop agreement with the sponsor of DSAC, and $150.0 million from the New 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.

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,
	2023		2022		2023		2022
Subscription	$	29,462	$	24,332	$	57,929	$	47,111
Advisory		1,239		1,027		2,352		2,789
Advertising		357		760		775		1,378
Books		539		339		1,123		670
Other revenue		1,245		716		2,192		1,297
Total	$	32,842	$	27,174	$	64,371	$	53,245

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,
	2023		2022		2023		2022
North America	$	26,744	$	24,105	$	52,896	$	47,304
Europe		5,077		2,503		9,177		5,002
Australia		288		276		577		534
Asia		733		290		1,721		405
Total	$	32,842	$	27,174	$	64,371	$	53,245

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, 2023 and 2022, revenue attributed to the United Kingdom represented approximately twelve 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 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 and 2022.

Contract Assets

The Company had contract assets of $1,664 and $1,464, as of June 30, 2023 and December 31, 2022, 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.

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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Costs to Obtain

During the six months ended June 30, 2023 and 2022, the Company capitalized $1,910 and $2,071 of costs to obtain revenue contracts. The Company amortized costs to obtain revenue contracts in the amount of $816 and $693 to sales and marketing expense during the three months ended June 30, 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 and 2022.

Unsatisfied Performance Obligations

At June 30, 2023, the Company had $103,303 of remaining contract consideration for which revenue has not been recognized due to unsatisfied performance obligations. The Company expects to recognize this overthe next five years.

4. Business Combinations

2023 Acquisitions

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 in connection with the transaction during the six months ended June 30, 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
Current assets, net		3,443
Property and equipment, net		18
Intangible assets		9,600
Deferred revenues		(3,941	)
Current liabilities		(1,764	)
Deferred tax liabilities		(2,009	)
Total net assets acquired		5,954
Goodwill		19,282
Total purchase price	$	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 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 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:

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	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 $43 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 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.

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 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.

Cash payments related to operating lease liabilities were $6,390 (inclusive of $1,682 lease termination fee) and $5,793 for the six 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, 2023 (the lease termination effective date).

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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
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Remaining Useful Life (Years) June 30, 2023
Customer relationships	$	88,436	$	(28,485	)	$	59,951	$	81,002	$	(24,654	)	$	56,348		8.6
Developed technology		37,014		(20,306	)		16,708		35,350		(17,673	)		17,677		4.3
Databases		29,878		(9,972	)		19,906		29,912		(8,892	)		21,020		9.3
Tradenames		12,058		(3,784	)		8,274		11,480		(3,216	)		8,264		9.3
Expert network		2,672		(1,058	)		1,614		2,559		(800	)		1,759		3.6
Patents		726		(210	)		516		700		(200	)		500		17.1
Content library		592		(94	)		498		592		(64	)		528		8.4
Total	$	171,376	$	(63,909	)	$	107,467	$	161,595	$	(55,499	)	$	106,096

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 and $2,609 for the three months ended June 30, 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 and $1,234 for the three months ended June 30, 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 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.

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

During the six months ended June 30, 2023 and 2022, the Company capitalized interest on capitalized software development costs in the amount of $247 and $341, respectively. Amortization of capitalized software development costs was recorded as part of cost of revenues in the amount of $1,734 and $775 for the three months ended June 30, 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.

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.

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

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.

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
New Senior Term Loan	$	157,421		$	150,647
New GPO Note		36,583			-
Convertible Notes		13,094			12,219
Dragonfly Seller Convertible Notes		9,598			-
Aicel Convertible Note		1,126			1,174
PPP loan		198			251
Debt issuance costs		(3,252	)		(2,243	)
Total		214,768			162,048
Less: Current portion		(68	)		(68	)
Total	$	214,700		$	161,980

New Senior Term Loan

Concurrently with the Closing, 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 Term Facility”) (collectively the “New 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 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.

The Prime Rate in effect for the New Senior Term Loan was 8.25% at June 30, 2023. For the six months ended June 30, 2023, the Company incurred $9,956 and $774 of cash interest and 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 July 2023 Deferred Fee was deferred through the earlier of prepayment or July 29, 2024 and was

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increased to $2,034. Accordingly, the Company is recognizing 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 to Amendment No. 1) 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 over the term of the New Senior Term Loans using the effective interest method. The amortization recorded for the three and six months ended June 30, 2023 is $161 and $310, respectively, and is included within interest expense in the condensed consolidated statements of operations and comprehensive loss. The remaining unamortized debt discount at June 30, 2023 is $2,395, 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 financial covenants in place at June 30, 2023: a minimum cash balance requirement, minimum annual recurring revenue requirement, and a capital expenditure limitation. Beginning with the third quarter of 2023, the Company is also subject to an adjusted EBITDA requirement (as defined in the Credit Agreement, as amended). 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, 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. 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. 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 operationsfor the three and six months ended June 30, 2023.

Convertible Notes

At June 30, 2023, 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, remained outstanding. The Company incurred total interest expense related to the Convertible Notes, including the amortization of the various discounts, of $522 and $451 during the three months ended June 30, 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, 2023 was $9,598. The non-cash gain was recorded in the change in fair value of financial instruments in the condensed consolidated statements of operations and comprehensive loss in the amount of a loss of $981 and a gain of $407 for the three and six months ended June 30, 2023, respectively. The Company incurred total interest expense related to the Dragonfly Seller Convertible Notes of $226 and $379 during the three and six months ended June 30, 2023, respectively.

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. 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 $3 and $6 during the three and six months ended June 30, 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. The Company recognized the forgiveness of PPP Loan as a gain on debt extinguishment in the condensed consolidated statements of operations and comprehensive loss. As of June 30, 2023, the Company recorded $68 of the remaining PPP Loan as short-term debt and $130 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 and December 31, 2022, respectively. These fair values are deemed Level 3 liabilities within the fair value measurement framework.


	June 30, 2023		December 31, 2022
New Senior Term Loan	$	161,151	$	165,540
New GPO Note		36,583		-
Convertible Notes		13,419		16,942
Dragonfly Seller Convertible Notes		9,598		-
Total	$	220,751	$	182,482

Warrants

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Old FiscalNote Warrants

At June 30, 2023, 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 $68 at June 30, 2023, 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 at June 30, 2023, and are included as part of the other non-current liabilities within the condensed consolidated balance sheets.

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, the Company had 120,284,209 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, 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, 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.

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 3,839,020shares 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.

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 and $1,381 of share-based compensation expense during the three and six months ended June 30, 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. The liability of $68 was recorded in other non-current liabilities on the condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022.

As of June 30, 2023, there was $1,234 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, no Earnout Shares and no Earnout RSUs have been issued as no Triggering Events have occurred.

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 months ended June 30, 2023, 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, 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 at June 30, 2023.

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;

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•

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).

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.

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.

During the six months ended June 30, 2023, the Company issued 401,902 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 performance stock options, 7,061,940 restricted stock units, and 75,000 performance based restricted stock units remain outstanding. As of June 30, 2023, the Company had 6,181,386 shares of Class A common stock available for issuance under the 2022 Plan.

The Company recognized $5,091 and $565 of stock-based compensation expense during the three months ended June 30, 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 of stock-based compensation expense related to acquisition earnouts during the three and six months ended June 30, 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 and $205 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, 2023, respectively. As of June 30, 2023, 102,807 shares have been issued under the ESPP and the Company had 4,396,208 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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13. 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,
	2023			2022			2023			2022
Transaction costs related to acquired businesses	$	157		$	500		$	1,379		$	572
Non-capitalizable Business Combination costs		150			256			334			459
Change in contingent consideration liabilities		(177	)		(171	)		(333	)		(1,537	)
Contingent compensation expense		179			442			337			488
Total transaction costs (gains), net	$	309		$	1,027		$	1,717		$	(18	)

14. Earnings (Loss) Per Share

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 is computed by dividing net loss attributable to common shareholders by 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 A common stock of New FiscalNote. Diluted earnings (loss) per share considers the impact of potentially dilutive securities.

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

The weighted-average common shares and thus the net loss per share calculations and potentially dilutive security amounts for all periods prior to the Business Combination have been retrospectively adjusted to 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 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 the Company reported a tax provision of $213 on a pre-tax loss of $30,760, which resulted in an effective tax rate of (0.69) 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. During the six months ended June 30, 2023, the Company had discrete items relating to goodwill impairment, unrecognized tax benefits and the tax impact of interest expense on unrecognized tax benefits.

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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 income taxes in the future. For the six months ended June 30, 2023, 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

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 by level within the fair value hierarchy:


	Level 1		Level 2		Level 3		Total
Liabilities:
Public warrants	$	3,678	$	-	$	-	$	3,678
Private placement warrants		-		3,080		-		3,080
Contingent liabilities from acquisitions		-		-		2,792		2,792
Liability classified warrants (a)		-		-		103		103
New GPO Note						36,583		36,583
Dragonfly Seller Convertible Notes		-		-		9,598		9,598
(a) - Included in other non-current liabilities on the condensed consolidated balance sheets

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 by level within the ~~end~~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 ~~each reporting period. Gains~~Contents

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

(a)

The change in contingent liabilities from acquisitions is recorded as transaction costs on the condensed consolidated statements of operations and ~~losses~~comprehensive 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 and December 31, 2022, the estimated fair value of the public warrants was $3,678 and $10,282, respectively. The Company recognized a non-cash loss of $1,003 during the three months ended June 30, 2023 and a non-cash gain of $6,604 during the six months ended June 30, 2023 resulting from the change in fair value of ~~these securities~~the public warrants. The change in fair value is ~~included~~recorded in ~~interest earned on investments held~~change in ~~Trust Account~~fair value of financial instruments in the ~~accompanying~~ condensed consolidated statements of ~~operations.~~operations and comprehensive loss.

Private Placement Warrants

As of June 30, 2023 and December 31, 2022, the estimated fair value of the private warrants was $3,080 and $8,610, respectively. The Company recognized a non-cash loss of $840 during the three months ended June 30, 2023 and a non-cash gain of $5,530 during the six months ended June 30, 2023 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.

New GPO Note

The New GPO Note was recognized as a liability in connection with the settlement of litigation on the Subscription Date at its estimated fair value of $36,583. The estimated fair ~~values~~value of ~~investments held~~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, 2023:


	June 30, 2023
Common stock share price	$	3.64
Risk free rate		4.1	%
Yield		15.5	%
Expected volatility		39.0	%
Expected term (years)		5.0

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, 2023, the estimated fair value of the Dragonfly Seller Convertible Notes were $9,598. The non-cash loss of $968 and $395 is recorded in the ~~Trust Account~~change in fair value of financial instruments in the condensed consolidated statements of operations and comprehensive loss during the three and six months ended June 30, 2023, respectively. The following table presents the assumptions used to determine the fair value of the Dragonfly Seller Convertible Notes at June 30, 2023 and January 27, 2023:


	June 30, 2023			January 27, 2023
Common stock share price	$	3.64		$	5.06
Risk free rate		4.2	%		3.6	%
Yield		17.0	%		17.5	%
Expected volatility		42.0	%		40.0	%
Expected term (years)		4.6			5.0

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

Contingent Liabilities from acquisitions

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

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

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.

The Company estimated the fair value of the Dragonfly and Curate contingent consideration and compensation using ~~available~~a Monte Carlo simulation. These fair value measurements are based on significant inputs not observable in the market ~~information.~~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.

~~Fair Value~~The following inputs and assumptions were used to value contingent liabilities from acquisitions as of ~~Financial Instruments~~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
Common stock fair value	$	3.64
Time to maturity (years)		2.0
Risk free rate		4.83	%
Volatility		80	%
Exercise price	$	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 the three months ended March 31, 2022, there were no other transfers of assets or liabilities between levels during the six months ended June 30, 2023 and 2022.

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

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 ~~qualify~~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.

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18. Subsequent Events

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 the Closing Date, we consummated the transactions contemplated by the Merger Agreement, by and among Old FiscalNote, DSAC, and Merger Sub. Pursuant to these transactions, Merger Sub merged with and into Old FiscalNote, with Old FiscalNote becoming a wholly owned subsidiary of DSAC. On the Closing Date, and in connection with the Closing, DSAC domesticated and continued as a Delaware corporation under the name of “FiscalNote Holdings, Inc."

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. 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. 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 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 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 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 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.

Factors Impacting the Comparability of Our Operating Results

Acquisitions affect the comparability of our financial statements from period to period. Acquisitions completed during one period impact comparability to a prior period in which we did not own the acquired entity.

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 million and $0.9 million during the three months ended June 30, 2023 and 2022, respectively, and $4.6 million and $1.9 million during the six months ended June 30, 2023 and 2022, respectively.

From time to time, management reviews the Company’s existing products and services based on their financial profile (e.g., revenue, margin) and strategic factors. In connection with such a review in 2020 and 2021 management decided to cease selling certain non-core subscription products representing subscription revenue of approximately $0.1 million and $0.3 million during the three months ended June 30, 2023 and 2022 and $0.3 million and $0.6 million during the six months ended June 30, 2023 and 2022, respectively.

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 and December 31, 2022, was $120.2 million and $113.3 million, respectively. Our ARR at June 30, 2023 and 2022 excluding the 2022 and 2023 Acquisitions, was $110.3 million and $103.5 million, 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 and December 31, 2022, including Acquisitions, was approximately $135.0 million and $126.7 million, respectively. Our Run-Rate Revenue at June 30, 2023 and 2022, excluding the 2022 and 2023 Acquisitions, was approximately $123.0 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 and 2022 Acquisitions are not included in our NRR for the three and six months ended June 30, 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 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% for the three months ended June 30, 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 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 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 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, net 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 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 for approximately 90% of our total revenues for the six months ended June 30, 2023 and 2022.

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.

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 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 ~~FASB~~fair value option, and derivative liabilities are accounted for in accordance with ASC ~~Topic~~815, ASC 825, and ASC 480. These financial instruments are marked to market each reporting period in accordance with ASC 820 ~~“Fair Value Measurements,” equal~~with all gains and losses being recorded within the condensed consolidated statement of operations and comprehensive loss, with the exception of any gains or ~~approximate~~losses recorded due to changes in the ~~carrying amounts represented~~fair value of instrument-specific credit risk being recorded as a component of accumulated other comprehensive income in the condensed consolidated balance sheets.

~~Fair Value Measurement~~Income taxes

~~Fair value is defined as~~We use the ~~price that would be received~~asset and liability method of accounting for ~~sale~~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 ~~an asset or paid~~assets and liabilities using enacted tax rates in effect for ~~transfer~~the year in which the differences are expected to reverse.

The effect on deferred tax assets and liabilities of a ~~liability,~~change in ~~an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.~~

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers consist of:

●

~~Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;~~

●

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

●

Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

~~In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement~~tax laws is ~~categorized in its entirety~~recognized in the ~~fair value hierarchy~~condensed consolidated statements of operations and comprehensive 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 ~~lowest level input that is significant to~~weighting of positive and negative evidence.

Results of Operations

The period-to-period comparisons of our results of operations have been prepared using the ~~fair value measurement.~~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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~~FISCALNOTE HOLDINGS, INC.~~

~~(FORMERLY KNOWN AS DUDDELL STREET ACQUISITION CORP.)~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

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


	Three Months Ended June 30,						Change						Six Months Ended June 30,						Change
(In thousands)	2023			2022			$			%			2023			2022			$			%
Revenues:
Subscription	$	29,462		$	24,332		$	5,130			21.1	%	$	57,929		$	47,111		$	10,818			23.0	%
Advisory, advertising, and other		3,380			2,842			538			18.9	%		6,442			6,134			308			5.0	%
Total revenues		32,842			27,174			5,668			20.9	%		64,371			53,245			11,126			20.9	%

Operating expenses:
Cost of revenues		9,485			7,712			1,773			23.0	%		18,422			14,882			3,540			23.8	%
Research and development		4,510			3,791			719			19.0	%		9,630			9,809			(179	)		(1.8	)%
Sales and marketing		11,689			10,395			1,294			12.4	%		23,987			19,892			4,095			20.6	%
Editorial		4,752			3,346			1,406			42.0	%		9,017			7,022			1,995			28.4	%
General and administrative		16,174			10,033			6,141			61.2	%		34,395			20,590			13,805			67.0	%
Amortization of intangible assets		2,901			2,609			292			11.2	%		5,715			5,217			498			9.5	%
Impairment of goodwill		-			-			-			0	%		5,837			-			5,837			100.0	%
Transaction costs (gains), net		309			1,027			(718	)		(69.9	)%		1,717			(18	)		1,735		NM%
Total operating expenses		49,820			38,913			10,907			28.0	%		108,720			77,394			31,326			40.5	%
Operating loss		(16,978	)		(11,739	)		(5,239	)		44.6	%		(44,349	)		(24,149	)		(20,200	)		83.6	%

Interest expense, net		7,154			24,255			(17,101	)		(70.5	)%		13,835			46,778			(32,943	)		(70.4	)%
Change in fair value of financial instruments		2,987			2,048			939			45.8	%		(11,693	)		3,386			(15,079	)	NM%
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	)%

Revenue:

Subscription revenue

Subscription revenue of $29.5 million for the three months ended June 30, 2023 increased $5.1 million, or 21%, from $24.3 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.

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
	June 30, 2023 vs June 30, 2022						June 30, 2023 vs June 30, 2022
(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	%
Increase from 2023 Acquisitions		1,771			100	%		2,921			100	%
Decrease from discontinued products		(126	)		(46	)%		(270	)		(45	)%
Increase from organic business		2,247			9	%		5,459			11	%
Revenues, net (total change)	$	5,130			21	%	$	10,818			23	%

Our organic growth (determined based on FiscalNote ownership over a full calendar year) has grown through the successful integration 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 of revenue from the 2022 Acquisitions as well as a partial period of revenue contribution 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.

Advisory, advertising, and other revenue

Advisory, advertising, and other revenue was $3.4 million for the three months ended June 30, 2023, as compared to $2.8 million for the three months ended June 30, 2022. The increase of $0.5 million, or 19%, was primarily due to timing of revenue recognition for certain contracts.

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
(In thousands)	2023		2022		$		%
North America	$	26,744	$	24,105	$	2,639		10.9	%
Europe		5,077		2,503		2,574		102.8	%
Australia		288		276		12		4.3	%
Asia		733		290		443	NM%
Total revenues	$	32,842	$	27,174	$	5,668		20.9	%

	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 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 million for the three months ended June 30, 2023, as compared to $7.7 million for the three months ended June 30, 2022. The increase of $1.8 million, or 23%, was primarily attributable to an increase of $0.9 million related to the 2022 and 2023 Acquisitions combined with an increase in amortization expense of approximately $1.0 million related to capitalized software development costs and developed technology.

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 million for the three months ended June 30, 2023 as compared to $3.8 million for the three months ended June 30, 2022. The increase of $0.7 million, or 19%, was primarily attributable to $0.3 million 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.

Sales and marketing

Sales and marketing expense was $11.7 million for the three months ended June 30, 2023 as compared to $10.4 million for the three months ended June 30, 2022. The increase of $1.3 million, or 12%, was primarily attributable to an increase of $0.8 million from our 2022 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 primarily attributable to an increase 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.

Editorial expense

Editorial expense was $4.8 million for the three months ended June 30, 2023 as compared to $3.3 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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General and administrative

General and administrative expense was $16.2 million for the three months ended June 30, 2023 as compared to $10.0 million for the three months ended June 30, 2022. The increase of $6.1 million, or 61%, was primarily attributable to $4.2 million of incremental non-cash stock based compensation expense, $1.2 million associated 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%, was primarily attributable to $9.7 million 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.

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 million for the three months ended June 30, 2023 as compared to $2.6 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.

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 costs (gains), net

Transaction costs were $0.3 million for the three months ended June 30, 2023, as compared to transaction costs of $1.0 million for the three months ended June 30, 2022. The change of $0.7 million relates to a $0.3 million decrease in transactions 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.

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 million for the three months ended June 30, 2023 as compared to $24.3 million for the three months ended June 30, 2022. The decrease in interest expense of $17.1 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.

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.

Change in fair value of financial instruments

Change in fair value of financial instruments was a $3.0 million loss for the three months ended June 30, 2023 as compared to a $2.0 million loss for the three months ended June 30, 2022. The increase in loss of $1.0 million primarily represents a loss that was recorded as a result of the fair value adjustment of the warrant liabilities that were assumed in connection with the Business Combination and a loss on the Dragonfly Seller Convertible Notes, offset by the loss resulting from the final fair value adjustment of the embedded derivative liabilities that were settled as part of the Business Combination.

Change in fair value of financial instruments was a $11.7 million gain for the six months ended June 30, 2023 as compared to a $3.4 million loss for the six months ended June 30, 2022. The increase of $15.1 million primarily represents a gain that was recorded as a result of the fair value adjustment 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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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,
(In thousands)	2023			2022			2023			2022
Adjusted Revenues	$	32,842		$	27,911		$	64,371		$	54,975
Costs of revenue		(9,485	)		(7,712	)		(18,422	)		(14,882	)
Amortization of intangible assets		3,061			2,009			5,658			3,832
Adjusted Gross Profit	$	26,418		$	22,208		$	51,607		$	43,925
Adjusted Gross Profit Margin		80	%		80	%		80	%		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,
(In thousands)	2023			2022			2023			2022
Net loss	$	(30,973	)	$	(38,360	)	$	(50,246	)	$	(66,711	)
Provision (benefit) from income taxes		213			(176	)		243			(550	)
Depreciation and amortization		6,297			4,914			12,044			9,631
Interest expense, net		7,154			24,255			13,835			46,778
EBITDA		(17,309	)		(9,367	)		(24,124	)		(10,852	)
Deferred revenue adjustment (a)		-			737			-			1,730
Stock-based compensation		5,482			565			11,988			825
Change in fair value of financial instruments (b)		2,987			2,048			(11,693	)		3,386
Other non-cash (gains) charges (c)		58			271			5,931			(8,338	)
Acquisition related costs (d)		157			500			1,379			572
Employee severance costs (e)		381			-			750			-
Non-capitalizable debt raising costs		110			-			316			403
Other infrequent costs (f)		-			-			-			20
Costs incurred related to the transaction (g)		150			256			334			459
Loss contingency (h)		3,722			-			3,890			-
Adjusted EBITDA	$	(4,262	)	$	(4,990	)	$	(11,229	)	$	(11,795	)
Adjusted EBITDA Margin		(13.0	)%		(17.9	)%		(17.4	)%		(21.5	)%

(a)

Reflects deferred revenue fair value adjustments arising from the purchase price allocation in connection with the 2021 Acquisitions.

(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) impairment of goodwill of $5,837 in the first quarter of 2023, (ii) loss from equity method investment of $34 in the first quarter of 2023 and $56 in the second quarter of 2023, (iii) 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 the first quarter of 2022 and a charge of $271 in the second quarter of 2022 from the change in fair value related to the contingent consideration 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 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)

Costs incurred related to litigation we believe to be outside of our normal course of business totaling $20 in the first quarter of 2022.

(g)

Includes non-capitalizable transaction costs associated with the Business Combination.

(h)

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 the second quarter of 2023. See further discussion in Note 17, "Commitments and Contingencies” and Note 8, “Debt”.

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Liquidity and Capital Resources

We have incurred losses and negative 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 the Company received $65.6 million of net cash proceeds, additional borrowings under debt facilities, and receipts from the sale of our products to customers in the ordinary course of business. At June 30, 2023, the Company’s cash, cash equivalents, and restricted cash was $38.1 million compared to $61.2 million at December 31, 2022.

The Company had a negative working capital balance of $46.7 million (excluding cash) at June 30, 2023 and had an accumulated deficit of $751.2 million and $700.7 million as of June 30, 2023 and December 31, 2022, respectively, and has incurred net losses of $50.2 million and $66.7 million for the six months ended June 30, 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, our ability to 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 and other market conditions, we may seek additional financing. 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 and December 31, 2022 consisted of the following (excluding any fair value adjustments and debt discounts, as applicable):


(In thousands)	June 30, 2023		December 31, 2022
New Senior Term Loan	$	157,421	$	150,647
New GPO Note		46,794		-
Convertible Notes		13,094		12,219
Dragonfly Seller Convertible Notes		11,668		-
Aicel Convertible Note		1,126		1,174
PPP Loan		198		251
Total Principal plus PIK Outstanding	$	230,301	$	164,291

New Senior Term Loan

In connection with the Closing, 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 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 Term Facility”) (collectively the “New 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 on August 15, 2025, 50% of the outstanding principal amount of the 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. Borrowings under our New Senior Credit Facility are collateralized by substantially all assets of the borrowers and guarantors party thereto.

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.

During the six months ended June 30, 2023, we made cash interest payments totaling $9.9 million related to the New Senior Term Loan.

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covenants in place at June 30, 2023: a minimum cash balance, minimum annual recurring revenue 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, as amended). 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

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 loss on settlement with GPO of $3,474 in the condensed consolidated statement of operations for the three and six months ended June 30, 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.

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 million and $6.0 million for the six months ended June 30, 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,
	2023			2022
Net cash (used in) provided by:
Operating activities	$	(20,206	)	$	(18,348	)
Investing activities	$	(9,096	)	$	(6,041	)
Financing activities	$	6,564		$	19,727
Effect of exchange rates on cash	$	(383	)	$	(352	)
Net change in cash and cash equivalents	$	(23,121	)	$	(5,014	)

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 on debt extinguishment, as well as the effect of changes in working capital and other activities.

Cash used in operating activities in the six months ended June 30, 2023 was $20.2 million, an increase of $1.9 million compared to the six months ended June 30, 2022. The primary factors affecting our net operating cash flows during this period was our net loss of $50.3 million, which includes non-cash expenses items totaling $30.4 million, including impairment of goodwill of $5.8 million, non-cash and paid-in kind interest expense of $4.2 million, stock-based compensation expense of $12.0 million, a gain due to the change in fair value of financial instruments of $11.7 million, non-cash lease expense of $2.4 million, loss on settlement with GPO of $3.5 million, and amortization and depreciation of $13.8 million, other non-cash items of $0.4 million and the effect of changes in operating assets and liabilities that resulted in cash outflows of $0.3 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 used in investing activities in the six 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, 2023 primarily consisted of cash paid for acquisitions, net of cash acquired of $5.0 million and cash paid of $4.1 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 provided by financing activities in the six months ended June 30, 2023 was $6.6 million, compared to $19.7 million for the six months ended June 30, 2022. Net cash provided by financing activities during the six months ended June 30, 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 million from 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 months ended June 30, 2023, 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, filed with the SEC on March 28, 2023 except for the change in one intangible asset discussed in Note 6, "Intangible Assets".

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 ~~derivative instruments~~our best estimates and assumptions to ~~hedge exposures~~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;

•

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 ~~flow,~~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 ~~foreign currency risks.~~ 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 ~~all of~~ its financial instruments, including ~~issued stock purchase~~its outstanding warrants, to determine if such instruments are derivatives or contain features that qualify as embedded ~~derivatives, pursuant to ASC 480~~derivatives. The Company has outstanding public and ~~FASB ASC Topic 815, “Derivatives~~private warrants, both of which do not meet the criteria for equity classification and ~~Hedging” (“ASC 815”). The classification of derivative instruments, including whether such instruments should be recorded~~are accounted for as ~~liabilities or as equity, is re-assessed at the end of each reporting period.~~

~~The warrants issued in connection with the Initial Public Offering (the “Public Warrants”) and the Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815.~~liabilities. Accordingly, the Company recognizes the ~~warrant instruments~~warrants as liabilities at fair value and adjusts the ~~instruments~~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 ~~statements~~statement of operations.

The fair value of the ~~Public Warrants and Private Placement Warrants were initially~~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.

Debt instruments measured at fair value ~~using a Monte Carlo simulation model. Subsequently,~~

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 ~~Public Warrants is measured~~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 ~~trading price since being separately listed~~weighting of positive and ~~traded,~~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 ~~Private Placement Warrants are measured at fair value using~~ability to successfully execute its business plans and/or tax planning strategies. Should there be a ~~Monte Carlo simulation model, or based on the public warrant trading price taking into account certain provisions~~change in the ~~warrant agreement.~~ability to recover deferred tax assets, the tax provision would increase or decrease in the period in which the assessment is changed.

~~Offering Costs Associated with~~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 ~~Initial Public Offering~~

~~Offering costs consisted~~discount rate to measure the operating lease assets and liabilities. The incremental borrowing rate represents an estimate of ~~legal, accounting, underwriting and other costs incurred that were directly related~~the interest rate we would incur at lease commencement to borrow an amount equal to the ~~Initial Public Offering and that were charged to shareholders’ equity upon~~lease payments on a collateralized basis over the ~~completion~~term of the ~~Initial Public Offering. Offering costs are allocated to~~lease and includes considerations of both the ~~separable financial instruments issued in the Initial Public Offering based~~market, our current capital structure and exiting debt borrowings. We perform an incremental borrowing rate analysis on a ~~relative fair value~~quarterly basis, ~~compared~~or upon execution of any individually material agreement, to ~~total proceeds received. Offering costs associated with warrant liabilities~~ensure that the rates being applied to newly acquired leases are expensed as incurred and presented as non-operating expenses in the condensed consolidated statements of operations. Offering costs associated with the Public Shares were charged against the carrying value of the Class A ordinary shares subject to redemption upon the completion of the Initial Public Offering. The Company classifies deferred underwriting commissions as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.still accurate.

~~Class A Ordinary Shares Subject to Possible Redemption~~39

Class A ordinary shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A ordinary shares (including Class A ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, Class A ordinary shares are classified as shareholders’ equity. The Company’s Class A ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, at June 30, 2022 and December 31, 2021, 17,500,000 Class A ordinary shares subject to possible redemption, respectively, are presented as temporary equity, outside of the shareholders’ equity section of the Company’s condensed consolidated balance sheets.

Effective with the closing of the Initial Public Offering, the Company recognized the remeasurement from initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.

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~~FISCALNOTE HOLDINGS, INC.~~

~~(FORMERLY KNOWN AS DUDDELL STREET ACQUISITION CORP.)~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~Income Taxes~~Item 3. Quantitative and Qualitative Disclosures About Market Risks.

~~FASB ASC Topic 740, “Income Taxes,” prescribes a recognition threshold~~We are exposed to market risks in the ordinary course of our business. These risks primarily consist of inflation risk and ~~a measurement attribute~~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 ~~financial statement recognition and measurement of tax positions taken or expected to be taken~~U.S. Dollar ("USD") as our reporting currency. Our local subsidiaries transact generally in ~~a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company’s management determined~~their local currency, considered the functional currency for that ~~the Cayman Islands~~subsidiary. Our foreign currency exchange rate risk is ~~the Company’s only major tax jurisdiction. The Company recognizes accrued interest and penalties~~ related to ~~unrecognized tax benefits as~~translation of our assets and liabilities from the subsidiaries' functional currencies to USD. These adjustments are recorded in accumulated other comprehensive income ~~tax expense. There were 0 unrecognized tax benefits~~(loss) on our consolidated balance sheets. Our results of operations and ~~0 amounts accrued for interest~~cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Euro, British Pound Sterling and ~~penalties as of June 30, 2022 and December 31, 2021. The Company is currently not aware of any issues under review that could result~~Australian Dollar. Our expenses are generally denominated in ~~significant payments, accruals or material deviation from its position.~~

~~There is currently no taxation imposed on income by~~ the ~~Government~~currencies of the ~~Cayman Islands. In accordance with Cayman federal income tax regulations, income taxes~~jurisdictions in which we conduct our operations, which are ~~not levied on the Company. Consequently, income taxes are not reflected~~primarily in the ~~Company’s consolidated financial statements.~~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 ~~Company’s management does~~effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would not ~~expect that~~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 ~~total~~risk relating to fluctuations in currency rates.

Fluctuations in foreign currencies impact the amount of ~~unrecognized tax benefits will materially change over~~total assets, liabilities, revenues, operating expenses and cash flows that we report for our foreign subsidiaries upon the ~~next twelve months.~~

~~Net Income (Loss) Per Ordinary Share~~

~~The Company complies with accounting and disclosure requirements~~translation of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Income and losses are shared pro rata between the two classes of shares. Net income (loss) per ordinary share is calculated by dividing the net income (loss) by the weighted average ordinary shares outstanding for the respective period.

The calculation of diluted net income (loss) per ordinary shares does not consider the effect of the warrants issued in connection with the Initial Public Offering and the Private Placement to purchase an aggregate of 15,750,000 ordinary shares in the calculation of diluted income (loss) per share, because their exercise is contingent upon future events and their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted net income (loss) per share is the same as basic net income (loss) per sharethese amounts into USD. Total revenue for the three and six months ended June 30, ~~2022 and 2021. Remeasurement associated with the redeemable Class A ordinary shares is excluded from earnings per share as the redemption value approximates fair value.~~

~~The following table presents a reconciliation of the numerator and denominator used to compute basic and diluted net income (loss) per share for each class of ordinary shares:~~

For the Three Months Ended

For the Three Months Ended

June 30, 2022

June 30, 2021


Class A

Class B

Class A

Class B
Basic and diluted net income (loss) per ordinary share:









Numerator:









Allocation of net income (loss)

$
(2,126,151)

$
(531,538)

$
1,569,174

$
392,293

Denominator:








Basic and diluted weighted average ordinary shares outstanding

17,500,000

4,375,000

17,500,000

4,375,000

Basic and diluted net income (loss) per ordinary share

$
(0.12)

$
(0.12)

$
0.09

$
0.09

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~~FISCALNOTE HOLDINGS, INC.~~

~~(FORMERLY KNOWN AS DUDDELL STREET ACQUISITION CORP.)~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

For the Six Months Ended

For the Six Months Ended

June 30, 2022

June 30, 2021


Class A

Class B

Class A

Class B
Basic and diluted net income per ordinary share:








Numerator:








Allocation of net income

$
3,662,430

$
915,608

$
4,369,295

$
1,092,324

Denominator:

Basic and diluted weighted average ordinary shares outstanding

17,500,000

4,375,000

17,500,000

4,375,000

Basic and diluted net income per ordinary share

$
0.21

$
0.21

$
0.25

$
0.25

~~Recent Accounting Pronouncements~~

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed consolidated financial statements.

~~Note 3—Initial Public Offering~~

~~On November 2, 2020, the Company consummated its Initial Public Offering of 17,500,000 Units, at $10.00 per Unit, generating gross proceeds of $175.0 million, and incurring offering costs of~~2023, was negatively impacted by approximately $10.1 million, inclusive of approximately $6.1 million in deferred underwriting commissions. Of the 17,500,000 Units sold in the Initial Public Offering, 4,000,000 Units were purchased by certain funds affiliated with the Sponsor (the “Affiliated Units”).

~~Each Unit consists of 1 Class A ordinary share and~~ ~~one-half~~ of one redeemable warrant (“Public Warrant”). Each whole Public Warrant will entitle the holder to purchase 1 Class A ordinary share at an exercise price of $11.50 per share, subject to adjustment (see Note 9).

~~Note 4—Private Placements~~

Simultaneously with the closing of the Initial Public Offering, the Company consummated the Private Placement of 5,500,000 Private Placement Warrants, at a price of $1.00 per Private Placement Warrant with the Sponsor, generating gross proceeds of $5.5 million. On October 18, 2021, the Company and the Sponsor entered into a warrants purchase agreement whereby the Sponsor agreed to purchase an aggregate of 1,500,000 Private Placement Warrants for aggregate proceeds1.0% compared to the ~~Company of $1.5 million, with each warrant having substantially the same terms as the Private Placement Warrants issued concurrent with the Initial Public Offering.~~

Each whole Private Placement Warrant is exercisable for 1 whole share of Class A ordinary shares at a price of $11.50 per share. A portion of the proceeds from the sale of the Private Placement Warrants to the Sponsor were added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the Private Placement Warrants will expire worthless. The Private Placement Warrants will be non-redeemable for cashthree and ~~exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees.~~

The Sponsor and the Company’s officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the initial Business Combination.

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~~FISCALNOTE HOLDINGS, INC.~~

~~(FORMERLY KNOWN AS DUDDELL STREET ACQUISITION CORP.)~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~Note 5—Related Party Transactions~~

~~Founder Shares~~

On August 31, 2020, the Initial Shareholders paid an aggregate of $25,000 for certain expenses on behalf of the Company in exchange for issuance of 5,031,250 Class B ordinary shares (the “founder shares”). The Sponsor agreed to surrender for no consideration 656,250 founder shares when the option to purchase additional units was not exercised by the underwriters.

~~The Sponsor transferred 25,000 of its founder shares to each of Marc Holtzman and~~ ~~Bradford Allen~~ and 300,000 of its founder shares to Peter Lee Coker Jr., the three independent directors at that time. All of the transferred founder shares are subject to vesting upon closing of an initial Business Combination. The Company will recognize the compensation cost at fair value for the transferred shares upon the consummation of a business combination. These 350,000 shares were not subject to forfeiture when the underwriters’ over-allotment option was not exercised. On May 24, 2021, Mr. Coker resigned and as a result forfeited all of his 300,000 founder shares that the Sponsor had previously transferred to him and assigned and transferred such founder shares to the Sponsor for no consideration in connection with his resignation.

The Initial Shareholders have agreed not to transfer, assign or sell any of their founder shares until the earlier to occur of (i) one year after the completion of the initial Business Combination or (ii) the date following the completion of the initial Business Combination on which the Company completes a liquidation, merger, share exchange or other similar transaction that results in all of the shareholders having the right to exchange their ordinary shares for cash, securities or other property. Notwithstanding the foregoing, if the closing price of Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, the founder shares will be released from the lockup.

~~Due To Related Party~~

~~As of June 30, 2022, the Company had a payable of $0.3 million due to an affiliate of the Sponsor, resulting from the affiliate paying certain costs on behalf of the Company.~~

~~Related Party Loans~~

On August 28, 2020, the Sponsor agreed to loan the Company up to $250,000 to be used for the payment of costs related to the Initial Public Offering pursuant to a promissory note (the “Note”). The Note was non-interest bearing, unsecured and due upon the closing of the Initial Public Offering. As of December 31, 2021, the Company borrowed approximately $176,000 under the Note. The Company repaid the Note on June 30, 2021.

In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor, members of the Company’s founding team or any of their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company will repay such Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. As of June 30, 2022 and December 31, 2021, the Company had 0 borrowings under the Working Capital Loans.

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~~FISCALNOTE HOLDINGS, INC.~~

~~(FORMERLY KNOWN AS DUDDELL STREET ACQUISITION CORP.)~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~Note 6—Commitments and Contingencies~~

~~Registration and Shareholder Rights~~

The holders of the founder shares, Private Placement Warrants, and warrants that may be issued upon conversion of Working Capital Loans (and underlying shares) will be entitled to registration rights pursuant to a registration and shareholder rights agreement. The holders of these securities are entitled to make up to 3 demands, excluding short form demands, that the Company registers such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of the initial Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

~~Underwriting Agreement~~

The underwriters were entitled to an underwriting discount of $0.20 per unit, or $3.5 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per unit, or approximately $6.1 million in the aggregate, will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.

~~Note 7~~—~~Class A Ordinary Shares Subject to Possible Redemption~~

The Company’s Class A ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of future events. The Company is authorized to issue 180,000,000 Class A ordinary shares with a par value of $0.0001 per share. Holders of the Company’s Class A ordinary shares are entitled to 1 vote for each share. As of June 30, 2022 and December 31, 2021, there were 17,500,000 Class A ordinary shares outstanding, which were all subject to possible redemption and classified outside of permanent equity in the condensed consolidated balance sheets.

~~The Class A ordinary shares subject to possible redemption reflected on the condensed consolidated balance sheets are reconciled on the following table:~~

Gross Proceeds

$
175,000,000
Less:


Proceeds allocated to Public Warrants

(7,875,000)
Class A ordinary shares issuance costs

(9,666,677)
Plus:


Remeasurement adjustment on carrying value to redemption value

17,541,677
Class A ordinary shares subject to possible redemption at December 31, 2021

$
175,000,000
Increase in Class A ordinary shares subject to possible redemption

260,788
Class A ordinary shares subject to possible redemption at June 30, 2022

$
175,260,788

~~Note 8—Shareholders’ Deficit~~

~~Preference Shares~~—The Company is authorized to issue 1,000,000 preference shares with a par value of $0.0001 per share. As of June 30, 2022 and December 31, 2021, there were 0 preference shares issued or outstanding.

~~Class A Ordinary Shares~~—The Company is authorized to issue 180,000,000 Class A ordinary shares with a par value of $0.0001 per share. Holders of the Company’s Class A ordinary shares are entitled to 1 vote for each share. At June 30, 2022 and December 31, 2021, there were 17,500,000 Class A ordinary shares issued and outstanding, all of which are subject to possible redemption and therefore classified as temporary equity in the accompanying condensed consolidated balance sheets (see Note 7).

~~Class B Ordinary Shares~~—The Company is authorized to issue 20,000,000 Class B ordinary shares with a par value of $0.0001 per share. As of June 30, 2022 and December 31, 2021, there were 4,375,000 Class B ordinary shares issued and outstanding.

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~~FISCALNOTE HOLDINGS, INC.~~

~~(FORMERLY KNOWN AS DUDDELL STREET ACQUISITION CORP.)~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Ordinary shareholders of record are entitled to 1 vote for each share held on all matters to be voted on by shareholders. Holders of Class A ordinary shares and holders of Class B ordinary shares will vote together as a single class on all matters submitted to a vote of the shareholders except as required by law.

The Class B ordinary shares will automatically convert into Class A ordinary shares concurrently with or immediately following the consummation of the initial Business Combination on a 1-for-one basis, subject to adjustment for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like, and subject to further adjustment. In the case that additional Class A ordinary shares or equity-linked securities are issued or deemed issued in connection with the initial Business Combination, the number of Class A ordinary shares issuable upon conversion of all founder shares will equal, in the aggregate, 20% of the total number of Class A ordinary shares outstanding after such conversion (after giving effect to any redemptions of Class A ordinary shares by Public Shareholders), including the total number of Class A ordinary shares issued, or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of the initial Business Combination, excluding any Class A ordinary shares or equity-linked securities exercisable for or convertible into Class A ordinary shares issued, or to be issued, to any seller in the initial Business Combination and any Private Placement Warrants issued to the Sponsor, officers or directors upon conversion of Working Capital Loans; provided that such conversion of founder shares will never occur on a less than 1-for-one basis.

~~Note 9—Derivative Warrant Liabilities~~

~~As of June 30, 2022 and December 31, 2021, the Company had an aggregate of 15,750,000 warrants outstanding, comprised of 8,750,000 Public Warrants and 7,000,000 Private Placement Warrants.~~

Public Warrants may only be exercised for a whole number of shares. NaN fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering; provided in each case that the Company has an effective registration statement under the Securities Act covering the Class A ordinary shares issuable upon exercise of the Public Warrants and a current prospectus relating to them is available and such shares are registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder (or the Company permit holders to exercise their warrants on a cashless basis under certain circumstances). The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of the initial Business Combination, the Company will use commercially reasonable efforts to file with the SEC and have an effective registration statement covering the Class A ordinary shares issuable upon exercise of the warrants and to maintain a current prospectus relating to those Class A ordinary shares until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the Class A ordinary shares issuable upon exercise of the warrants is not effective by the 60th day after the closing of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the Class A ordinary shares are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, and in the event the Company does not so elect, it will use commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.

~~Table of Contents~~

~~FISCALNOTE HOLDINGS, INC.~~

~~(FORMERLY KNOWN AS DUDDELL STREET ACQUISITION CORP.)~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

The warrants have an exercise price of $11.50 per share, subject to adjustments, and will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation. In addition, if (x) the Company issues additional Class A ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of the initial Business Combination at an issue price or effective issue price of less than $9.20 per Class A ordinary share (with such issue price or effective issue price to be determined in good faith by the board of directors and, in the case of any such issuance to the Initial Shareholders or their affiliates, without taking into account any founder shares held by the Initial Shareholders or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination, and (z) the volume-weighted average trading price of Class A ordinary shares during the 20 trading day period starting on the trading day prior to the day on which the Company completes its initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $10.00 and $18.00 per share redemption trigger prices described under “Redemption of warrants when the price per Class A ordinary share equals or exceeds $10.00” and “Redemption of warrants when the price per Class A ordinary share equals or exceeds $18.00” will be adjusted (to the nearest cent) to be equal to 100% and 180% of the higher of the Market Value and the Newly Issued Price, respectively.

The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A ordinary shares issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be non-redeemable so long as they are held by the initial purchasers or such purchasers’ permitted transferees. If the Private Placement Warrants are held by someone other than the Initial Shareholders or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

~~Redemption of warrants when the price per Class A ordinary share equals or exceeds $~~~~18.00~~:

~~Once the warrants become exercisable, the Company may call the outstanding warrants for redemption (except as described herein with respect to the Private Placement Warrants):~~

●

~~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 Class A ordinary shares for any 20 trading days within a 30-trading day period ending 3 business days before the Company sends to the notice of redemption to the warrant holders (the “Reference Value”) equals or exceeds $18.00 per share (as adjusted for share sub-divisions, share dividends, reorganizations, recapitalizations and the like).

The Company will not redeem the warrants as described above unless a registration statement under the Securities Act covering the Class A ordinary shares issuable upon exercise of the warrants is then effective and a current prospectus relating to those Class A ordinary shares is available throughout the 30-day redemption period.

~~Redemption of warrants when the price per Class A ordinary share equals or exceeds~~ ~~$10.00~~:

~~Once the warrants become exercisable, the Company may redeem the outstanding warrants:~~

●

~~in whole and not in part;~~

~~Table of Contents~~

~~FISCALNOTE HOLDINGS, INC.~~

~~(FORMERLY KNOWN AS DUDDELL STREET ACQUISITION CORP.)~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

●

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 on a cashless basis prior to redemption and receive that number of Class A ordinary shares to be determined by reference to an agreed table based on the redemption date and the “fair market value” of Class A ordinary shares;

●

~~if, and only if, the Reference Value equals or exceeds $10.00 per share (as adjusted for share sub-divisions, share dividends, reorganizations, recapitalizations and the like); and~~

●

if the Reference Value is less than $18.00 per share (as adjusted for share sub-divisions, share dividends, reorganizations, recapitalizations and the like), the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Public Warrants, as described above.

The “fair market value” of Class A ordinary shares for the above purpose shall mean the volume weighted average price of the Class A ordinary shares during the 10 trading days immediately following 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 0.361 Class A ordinary shares per warrant (subject to adjustment).

In no event will the Company be required to net cash settle any warrant. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.

~~Note 10—Fair Value Measurements~~

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.

Fair Value Measured as of June 30, 2022


Level 1

Level 2

Level 3

Total
Assets

Investments held in Trust Account

$
175,360,788

$
—

$
—

$
175,360,788
Liabilities

Derivative public warrant liabilities

6,300,000

—

—

6,300,000
Derivative private warrant liabilities

—

5,040,000

—

5,040,000
Total Liabilities

$
6,300,000

$
5,040,000

$
—

$
11,340,000

Fair Value Measured as of December 31, 2021


Level 1

Level 2

Level 3

Total
Assets








Investments held in Trust Account

$
175,101,805

$
—

$
—

$
175,101,805
Liabilities





Derivative public warrant liabilities

10,937,500

—

—

10,937,500
Derivative private warrant liabilities

—

8,750,000

—

8,750,000
Total Liabilities

$
10,937,500

$
8,750,000

$
—

$
19,687,500

Level 1 assets include investments in money market funds or U.S. Treasury securities. The Company uses inputs such as actual trade data, benchmark yields, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments. For the Public Warrants issued in connection with the Public Offering, the traded market price was used as fair value.

~~Transfers to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period.~~

~~Table of Contents~~

~~FISCALNOTE HOLDINGS, INC.~~

~~(FORMERLY KNOWN AS DUDDELL STREET ACQUISITION CORP.)~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

The estimated fair value of the Private Placement Warrants was transferred from a Level 3 measurement to a level 2 measurement in July 2021, as the key inputs to the valuation model became directly or indirectly observable from the Public Warrants listed price.

The Private Placement Warrants were measured at fair value using a Monte Carlo simulation model prior to July 2021. Inherent in a Monte Carlo simulation are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its warrants based on implied volatility from the Company’s traded warrants and from historical volatility of select peer company’s shares that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.

~~Note 11—Subsequent Events~~

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed consolidated financial statements were issued. Based upon this review, other than as described below, the Company did not identify any events that require disclosure in the condensed consolidated financial statements.

~~On July 29, 2022, the Company and FiscalNote Holdings, Inc. consummated the transactions contemplated by the Business Combination Agreement. (see Note 1).~~

~~Table of Contents~~

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

This Quarterly Report on Form 10-Q (the “Quarterly Report”) covers a period prior to the closing of the Business Combination (defined below). As a result, references to the “Company,” “DSAC,” “our,” “us” or “we” refer to Duddell Street Acquisition Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed financial statements and related notes included in Part I, Item 1 of this Quarterly Report. This discussion and other parts of this report contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Our actual results could differ materially from those discussed in these forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements.” Factors that could cause or contribute to such differences include, but are not limited to, those discussed in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K.

~~Cautionary Note Regarding Forward-Looking Statements~~

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Form 10-Q. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings.

~~Overview~~

As of June 30, 2022, we were a former blank check company incorporated as a Cayman Islands exempted company on August 28, 2020. We were incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. For additional detail regarding our initial public offering and related transactions, see “Note 1 – Description of Organization and Business Operations – Business Prior to the Business Combination.” We are an emerging growth company and, as such, are subject to all of the risks associated with emerging growth companies. On July 29, 2022, we consummated our Business Combination with Old FiscalNote (as defined below).

~~Recent Developments~~

~~Domestication and Business Combination~~

DSAC (and, after the Domestication as described below, “New DSAC”) previously entered into an agreement and plan of merger, dated as of November 7, 2021 (as amended by the First Amendment to Agreement and Plan of Merger, dated as of May 9, 2022, the “Business Combination Agreement”), by and among DSAC, Grassroots Merger Sub, Inc., a wholly owned subsidiary of DSAC (“Merger Sub”), and FiscalNote Intermediate Holdco, Inc. (formerly FiscalNote Holdings, Inc.), a Delaware corporation (“Old FiscalNote”).

At the extraordinary general meeting of the DSAC shareholders held on July 27, 2022 (the “Special Meeting”), the DSAC shareholders considered and approved and adopted, among other matters, the Business Combination Agreement and the other proposals related thereto.

~~Table of Contents~~

On July 28, 2022, as contemplated by the Business Combination Agreement, DSAC filed a notice of deregistration with the Cayman Islands Registrar of Companies, together with the necessary accompanying documents, and filed a certificate of incorporation and a certificate of corporate domestication with the Secretary of State of Delaware, pursuant to which DSAC was domesticated and continued as a Delaware corporation, under the name of “FiscalNote Holdings, Inc.” (the “Domestication”).

As a result of, and upon the effective time of the Domestication, among other things, (i) each of the issued and outstanding Class A ordinary shares, par value $0.0001 per share, and each of the issued and outstanding Class B ordinary shares, par value $0.0001 per share, of DSAC converted into one share of Class A common stock, par value $0.0001 per share, of New DSAC (the “New DSAC Class A common stock”); (ii) each issued and outstanding whole warrant of DSAC (the “DSAC warrants”) automatically converted into a warrant to purchase one share of New DSAC Class A common stock (the “New DSAC warrants”) at an exercise price of $11.50 per share on the terms and conditions set forth in the warrant agreement, dated October 28, 2020, between DSAC and Continental Stock Transfer & Trust Company, as warrant agent (the “DSAC Warrant Agreement”); and (iii) each of the issued and outstanding units of DSAC that had not been previously separated into the underlying DSAC Class A ordinary shares and underlying DSAC warrants prior to the Domestication upon the request of the holder thereof was cancelled and entitled the holder thereof to one share of New DSAC Class A common stock and one-half of one New DSAC warrant representing the right to purchase one share of New DSAC Class A Common Stock at an exercise price of $11.50 per share on the terms and subject to the conditions set forth in the DSAC Warrant Agreement.

On July 29, 2022 (the “Closing Date”), as contemplated by the Business Combination Agreement, New DSAC consummated the merger transaction contemplated by the Business Combination Agreement (the “Closing”), whereby Merger Sub merged with and into Old FiscalNote, the separate corporate existence of Merger Sub ceasing and Old FiscalNote being the surviving corporation and a wholly owned subsidiary of New DSAC (the “Merger” and, together with the Domestication, the “Business Combination”). In connection with the consummation of the Business Combination, New DSAC changed its name to “FiscalNote Holdings, Inc.” (“New FiscalNote”). The shares of New DSAC Class A common stock and New DSAC warrants described above became Class A common stock of New FiscalNote and New FiscalNote warrants, respectively, upon consummation of the Merger.

~~Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Business Combination Agreement.~~

~~Table of Contents~~

~~Sponsor Agreement~~

~~Voting and Support Agreement~~

~~Backstop Agreement~~

~~Registration Rights Agreement~~

~~Indemnification Agreements~~

~~Table of Contents~~

~~Second Amended and Restated Credit and Guaranty Agreement~~

~~Amendment and Restatement Agreement~~

Except as otherwise expressly provided herein, the information in this Report does not reflect the consummation of the Business Combination, which, as discussed above, occurred subsequent to the period covered hereunder.

~~Liquidity and Capital Resources~~

Our liquidity needs through June 30, 2022 have been satisfied through a payment of $25,000 from our Sponsor to cover certain expenses on our behalf in exchange for the issuance of the founder shares (as defined below), a loan under a promissory note with our Sponsor of approximately $176,000 (the “Note”), and the net proceeds from the consummation of the Initial Public Offering and the Private Placement of $2.0 million. On October 18, 2021, we entered into a warrant purchase agreement with our Sponsor whereby our Sponsor agreed to purchase an additional 1,500,000 Private Placement Warrants for aggregate proceeds to the Company of $1.5 million. In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor, members of the Company’s founding team or any of their affiliates may, but are not obligated to, provide the Company Working Capital Loans. As of June 30, 2022, there were no amounts outstanding under any Working Capital Loans. Until the consummation of the Business Combination, the Company used the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination.

~~On July 29, 2022, we consummated the aforementioned Business Combination and closed the related financing agreements.~~

We continue to evaluate the impact of the COVID-19 pandemic and have concluded that the specific impact is not readily determinable as of the date of the balance sheet. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

~~Table of Contents~~

~~Results of Operations~~

Our entire activity since inception up to June 30, 2022 has been related to our formation, Initial Public Offering, which was consummated on November 2, 2020, and since the Initial Public Offering, our activity has been limited to the search for and due diligence on a prospective target for an initial Business Combination. We will not be generating any operating revenues until the closing and completion of our initial Business Combination. We generate non-operating income in the form of interest income on cash and cash equivalents. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

For the three months ended June 30, 2022, we had a net loss of approximately $2.7 million, which consisted approximately $2.1 million in general and administrative expenses and approximately $788,000 change in fair value of derivative warrant liabilities, offset by approximately $236,000 in interest income from investments held in the trust account.

For the three months ended June 30, 2021, we had net income of approximately $2.0 million, which consisted of a gain of approximately $4.0 million resulting from the change in fair value of derivative warrant liabilities and $6,000 in interest income earned on the Trust Account, offset by approximately $2.0 million in general and administrative expenses.

~~For the~~ six months ended June 30, ~~2022, we had net income of approximately $4.6 million, which consisted of non-operating income of approximately $259,000~~2022.

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 income from investments held in the trust account, approximately $8.3 million resulting from changes in fair value of derivative warrant liabilities, partially offset by approximately $4.0 million in general and administrative expenses.

For the six months ended June 30, 2021, we had net income of approximately $5.5 million, which consisted of a gain of approximately $7.7 million resulting from the change in fair value of derivative warrant liabilities and $51,000 in interest income earned on the Trust Account, offset by approximately $2.3 million in general and administrative expenses.

~~Related Party Transactions~~

~~Founder Shares~~

On August 31, 2020, our Initial Shareholders paid an aggregate of $25,000 for certain expenses on our behalf in exchange for the issuance of 5,031,250 Class B ordinary shares (the “founder shares”). Our Sponsor transferred 25,000 of the founder shares to each of Marc Holtzman and Bradford Allen and 300,000 of the founder shares to Peter Lee Coker Jr., the three independent directors at that time. These 350,000 shares will not be subject to forfeiture in the event the underwriters’ over-allotment optionrates is not exercised. The Sponsor agreed to surrender for no consideration up to 656,250 founder shares, on a pro rata basis, to the extent that the option to purchase additional units was not exercised in full by the underwriters. The forfeiture was adjusted to the extent that the option to purchase additional units is not exercised in full by the underwriters so that the founder shares will represent 20% of our issued and outstanding shares after the Initial Public Offering. On November 27, 2020, the over-allotment option expired and 656,250 founder shares were surrendered for no consideration. In addition, on May 24, 2021, Mr. Coker resigned and as a result forfeited all of his 300,000 founder shares that the sponsor had previously transferred to him and assigned and transferred such founder shares to the sponsor for no consideration in connection with his resignation.

~~Private Placement Warrants~~

~~Simultaneously~~associated with the closing of the Initial Public Offering, we consummated the private placement of 5,500,000 warrants, at a price of $1.00 per Private Placement Warrant with our Sponsor, generating gross proceeds of $5.5 million. On October 18, 2021, we entered into a warrant purchase agreement with our Sponsor whereby our Sponsor agreed to purchase an additional 1,500,000 Private Placement Warrants for aggregate proceeds to the Company of $1.5 million.

~~Due To Related Party~~Prime Rate.

As of June 30, ~~2022,~~2023, we had ~~a payable of $0.3 million due to an affiliate of our Sponsor, resulting from the affiliate paying certain costs~~outstanding borrowings on our ~~behalf.~~

~~Table~~New Senior Term Loan of ~~Contents~~

~~Related Party Loans~~$157.0 million, which bears cash interest at a floating rate based on the Prime Rate plus an applicable margin. At June 30, 2023, the interest rate on our New Senior Term Loan was 13.25%. 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 million.

~~On August 28, 2020,~~Inflation Risk

Although we do not believe inflation has had a material impact on our ~~Sponsor agreed~~financial condition, results of operations or cash flows to ~~loan us up to $250,000 to be used for~~date, a high rate of inflation in the ~~payment~~future may have an adverse effect on our business.

Item 4. Controls and Procedures.

Limitations on Effectiveness of ~~costs related to the Initial Public Offering pursuant to a promissory note (the “Note”). The Note was non-interest bearing, unsecured~~Disclosure Controls and ~~due upon the closing of the Initial Public Offering. As of December 31, 2020, we owed approximately $176,000 under the Note. We repaid the Note on March 31, 2021.~~

~~Working Capital Loans~~Procedures

In ~~order to finance transaction costs in connection with a Business Combination,~~designing and evaluating our ~~Sponsor, members~~disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of ~~our founding team or any of their affiliates may, but are not obligated to, loan us funds as may be required (“Working Capital Loans”). If we complete a Business Combination, we would repay~~achieving the ~~Working Capital Loans out~~desired control objectives. In addition, the design of the ~~proceeds of~~disclosure controls and procedures must reflect the ~~Trust Account released to us. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event~~fact that a Business Combination does not close, we may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the private placement warrants. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determinedthere are resource constraints and ~~no written agreements exist with respect to such loans. As of June 30, 2022 and December 31, 2021, we had no borrowings under the Working Capital Loans.~~

~~Contractual Obligations~~

~~We do not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities.~~

The underwriters are entitled to deferred underwriting commissions of $0.35 per unit, or approximately $6.1 million in the aggregate, which will become payable to the underwriters from the amounts held in the Trust Account solely in the event that ~~we complete a Business Combination, subject to the terms of the underwriting agreement.~~

~~Critical Accounting Policies~~

~~The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires~~ management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. A summary of our significant accounting policies is included in Note 2 to our unaudited condensed financial statements in Part I, Item 1 of this Quarterly Report. Certain of our accounting policies are considered critical, as these policies are the most important to the depiction of our financial statements and require significant, difficult or complex judgments, often employing the use of estimates about the effects of matters that are inherently uncertain. Such policies are summarized in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section in our 2021 Annual Report on Form 10-K filed with the SEC on April 14, 2022. There have been no significant changes in the application of our critical accounting policies during the six months ended June 30, 2022.

~~Recent Accounting Pronouncements~~

~~See Note 2 to the unaudited condensed financial statements included in Part I, Item 1 of this Quarterly Report for a discussion of recent accounting pronouncements.~~

~~Off-Balance Sheet Arrangements and Contractual Obligations~~

~~As of June 30, 2022, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations.~~

~~Table of Contents~~

~~JOBS Act~~

The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required ~~for non-emerging growth companies. As a result, the financial statements may not be comparable~~ to ~~companies that comply with new or revised accounting pronouncements as of public company effective dates.~~

~~Additionally, we are~~apply judgment in ~~the process of~~ evaluating the benefits of ~~relying on the other reduced reporting requirements provided by the JOBS Act. Subject~~possible controls and procedures relative to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.

their costs.

~~Item 3.~~~~Quantitative and Qualitative Disclosures About Market Risk~~

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are not required to provide the information otherwise required under this item.

~~Item 4.~~~~Controls and Procedures~~

~~Disclosure Controls and Procedures~~

Evaluation of Disclosure Controls and Procedures

~~Under the supervision and~~Our management, with the participation of our ~~management, including~~principal executive officer and our principal financial officer, evaluated, as of the ~~Chief Executive Officer and Chief Financial Officer, we conducted an evaluation~~end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures ~~as of June 30, 2022, as such term is~~(as defined in Rules ~~13a-15(e)~~13a-15(c) and 15d-15(e) under the Exchange ~~Act.~~Act). Based on ~~this~~that evaluation, our Chief Executive Officer and Chief Financial Officer ~~have~~ concluded that, as of June 30, 2023, due to the material weakness identified in the prior year, our disclosure controls and procedures were not effective as of June 30, ~~2022 because a~~2023. Notwithstanding the material ~~weakness existed in~~weaknesses, our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Specifically, the Company’s management has concluded that our control over the interpretation and accounting for certain complex equity and equity-linked instruments issued by the Company was not effectively designed or maintained. This material weakness resulted in the restatement of the Company’s balance sheet as of November 2, 2020, its financial statements for the period ended December 31, 2020 and its interim financial statements for the quarters ended March 31, 2021 and June 30, 2021. Additionally, this material weakness could result in a misstatement of the carrying value of equity, equity-linked instruments and related accounts and disclosures that would result in a material misstatement of the financial statements that would not be prevented or detected on a timely basis. As a result, our management performed additional analysis as deemed necessary to ensure that our consolidated financial statements were prepared in accordance with standards generally accepted in the United States of America. Accordingly, management believes that the consolidated financial statements included elsewhere in this ~~Form 10-Q~~report present fairly, in all material respects, our financial position, results of operations and cash flows of the periods presented. Management understands that the accounting standards applicable to our financial statements are complex and has since the inception of the Company benefited from the support of experienced third-party professionalsin conformity with ~~whom management has regularly consulted with respect to accounting issues. Management intends to continue to further consult with such professionals in connection with accounting matters.~~

~~Table of Contents~~

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.GAAP.

Changes in Internal Control over Financial Reporting

~~There~~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 such term is defined~~as identified in connection with the evaluation required by Rules ~~13a-15(f)~~13a-15(e) and ~~15d-15(f) of~~15d-15(e) under the Exchange ~~Act)~~Act, that occurred during the ~~most recent fiscal quarter~~three months ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial ~~reporting except for the below.~~reporting.

The Company’s Chief Executive Officer and Chief Financial Officer performed additional accounting and financial analyses and other procedures, including consulting with subject matter experts related to the accounting for certain complex equity and equity-linked instruments issued by the Company. The Company’s management has expended, and will continue to expend, a substantial amount of effort and resources for the remediation and improvement of our internal control over financial reporting. While we have processes to properly identify and evaluate the appropriate accounting technical pronouncements and other literature for all significant or unusual transactions, we have expanded and will continue to improve these processes to ensure that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards.40

Table of Contents

PART ~~II -~~ II—OTHER INFORMATION

Item 1.Legal Proceedings

~~None.~~.

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 ~~a result~~ of the ~~closing~~date of ~~the Business Combination~~this Quarterly Report on ~~July 29, 2022,~~Form 10-Q, there have been no material changes to the risk factors ~~previously~~ disclosed in ~~Part I, Item 1A of~~ our ~~Annual~~Current Report on Form 10-K ~~for the fiscal year ended December 31, 2021~~ filed with the SEC on April 14, 2022 no longer apply. For risk factors relating to our business following the Business Combination, please refer to the section entitled “Risk Factors” in our final prospectus and definitive proxy statement filed with the SEC on July 5, 2022. WeMarch 28, 2023. However, we may disclose changes to ~~our risk~~such factors or disclose additional ~~risk~~ factors from time to time in our future filings with the SEC.

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

~~None.~~

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.

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.

Item 3.Defaults Upon Senior ~~Securities~~

~~None.~~Securities.

None.

Item 4.Mine Safety ~~Disclosures~~

~~Not applicable.~~

~~Item 5.~~~~Other Information~~

~~None.~~

Disclosures.

Not applicable.

30Item 5. Other Information.

Entry into a Material Definitive Agreement.

On August 3, 2023, FiscalNote, Inc., a wholly owned subsidiary of the Company, entered into Amendment No. 3 (“Amendment No. 3”) to its Second Amended and Restated Credit and Guaranty 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 is filed as Exhibit 10.8 to this Quarterly Report on Form 10-Q and is incorporated herein by reference. The above description of the material terms of Amendment No. 3 are qualified in their entirety by reference to such exhibit.

Item 6. Exhibits.

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

Table of Contents

~~Item 6.~~~~Exhibits.~~


~~Exhibit~~ ~~Number~~	~~Description~~

~~31.1~~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	Warrant Agreement, dated as of Octobe 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	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	Form of 8% Convertible Note	Exhibit 10.17 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).
10.3	Amendment No. 1 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., 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 Dragonfly Eye Ltd., as Guarantors, Runway Growth Finance Corp., as administrative agent and collateral agent, and each lender party thereto.	Filed with this report.
31.1	Certification of Chief Executive Officer Pursuant to ~~Rules~~Rule 13a-14(a) ~~and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~.	Filed with this report.
31.2	Certification of Chief Financial Officer Pursuant to ~~Rules~~Rule 13a-14(a) ~~and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~.	Filed with this report.
~~32.1~~32	Section 1350 Certifications.	~~Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~Furnished with this report.
~~32.2~~101.INS	~~Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of~~Inline XBRL Instance Document – the ~~Sarbanes-Oxley Act of 2002.~~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.INS~~101.SCH	~~XBRL Instance Document~~
~~101.SCH~~	Inline XBRL Taxonomy Extension Schema ~~Document~~Document.	Submitted electronically with this report.
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase ~~Document~~Document.	Submitted electronically with this report.
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase ~~Document~~Document.	Submitted electronically with this report.
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase ~~Document~~Document.	Submitted electronically with this report.
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase ~~Document~~Document.	Submitted electronically with this report.
104*104	Cover Page Interactive Data File (embedded within the Inline XBRL document).	Submitted electronically with this report.

Table of Contents

~~SIGNATURES~~

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 on this 22nd day of August 2022.~~authorized.


		FISCALNOTE HOLDINGS, INC.
	~~By:~~
Date: August 9, 2023		By:	/s/ Jon Slabaugh
			Name: Jon Slabaugh
			Title: Chief Financial Officer

Date: August 9, 2023		By:	/s/ Timothy Hwang
	~~Name:~~			Name: Timothy Hwang
	~~Title:~~			Title: Chief Executive Officer ~~(Principal Executive Officer)~~

		~~Page No.~~
~~PART I. FINANCIAL INFORMATION~~

~~Item 1.~~	~~Unaudited Condensed Financial Statements~~	1
	~~Condensed Consolidated Balance Sheets as of June 30, 2022 (unaudited) and December 31, 2021~~	1
	~~Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2022 and 2021~~	2
	~~Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Deficit for the Three and Six Months Ended June 30, 2022 and 2021~~	3
	~~Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021~~	4
	~~Notes to Unaudited Condensed Consolidated Financial Statements~~	5
~~Item 2.~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~	22
~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~	28
~~Item 4.~~	~~Controls and Procedures~~	28
~~PART II. OTHER INFORMATION~~		30
~~Item 1.~~	~~Legal Proceedings~~	30
~~Item 1A.~~	~~Risk Factors~~	30
~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	30
~~Item 3.~~	~~Defaults Upon Senior Securities~~	30
~~Item 4.~~	~~Mine Safety Disclosures~~	30
~~Item 5.~~	~~Other Information~~	30
~~Item 6.~~	~~Exhibits~~	31
~~PART III. SIGNATURES~~


	June 30, 2022		December 31, 2021
Assets	(unaudited)
Current assets:
Cash	$	14,689	$	618,138
Prepaid expenses		201,799		462,473
Total current assets		216,488		1,080,611
Investments held in Trust Account		175,360,788		175,101,805
Total Assets	$	175,577,276	$	176,182,416

Liabilities, Class A Ordinary Shares Subject to Possible Redemption and Shareholders' Deficit
Current liabilities:
Accounts payable	$	1,745,196	$	1,736,244
Accrued expenses		5,794,135		2,942,445
Due to related party		303,680		0
Total current liabilities		7,843,011		4,678,689
Deferred underwriting commissions		6,125,000		6,125,000
Derivative warrant liabilities		11,340,000		19,687,500
Total liabilities		25,308,011		30,491,189

Commitments and Contingencies (Note 6)

Class A ordinary shares subject to possible redemption; 17,500,000 shares at $10.01 and $10.00 per share at June 30, 2022 and December 31, 2021, respectively		175,260,788		175,000,000

Shareholders’ Deficit
Preference shares, $0.0001 par value; 1,000,000 shares authorized; NaN issued and outstanding at June 30, 2022 and December 31, 2021		—		—
Class A ordinary shares subject to possible redemption, $0.0001 par value; 180,000,000 shares authorized; 0 non-redeemable shares issued or outstanding		0		0
Class B ordinary shares, $0.0001 par value; 20,000,000 shares authorized; 4,375,000 shares issued and outstanding		437		437
Additional paid-in capital		0		0
Accumulated deficit		(24,991,960)		(29,309,210)
Total shareholders’ deficit		(24,991,523)		(29,308,773)
Total Liabilities, Class A Ordinary Shares Subject to Possible Redemption and Shareholders’ Deficit	$	175,577,276	$	176,182,416


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
General and administrative expenses	$	2,106,642	$	2,034,461	$	4,028,445	$	2,284,830
Loss from operations		(2,106,642)		(2,034,461)		(4,028,445)		(2,284,830)
Other income (expense)
Interest earned on investments held in Trust Account		236,453		5,928		258,983		51,449
Change in fair value of derivative warrant liabilities		(787,500)		3,990,000		8,347,500		7,695,000
Net income (loss)	$	(2,657,689)	$	1,961,467	$	4,578,038	$	5,461,619

Weighted average shares outstanding of Class A ordinary shares, basic and diluted		17,500,000		17,500,000		17,500,000		17,500,000
Basic and diluted net income (loss) per share, Class A ordinary shares subject to redemption	$	(0.12)	$	0.09	$	0.21	$	0.25
Weighted average shares outstanding of Class B ordinary shares, basic and diluted		4,375,000		4,375,000		4,375,000		4,375,000
Basic and diluted net income (loss) per share, Class B ordinary shares	$	(0.12)	$	0.09	$	0.21	$	0.25


	Ordinary Shares						Additional				Total
	Class A			Class B			Paid-in		Accumulated		Shareholders’
	Shares	Amount		Shares	Amount		Capital		Deficit		Deficit
Balance - December 31, 2021	0	$	0	4,375,000	$	437	$	0	$	(29,309,210)	$	(29,308,773)
Net income	0		0	0		0		0		7,235,727		7,235,727
Balance - March 31, 2022 (unaudited)	0	$	0	4,375,000	$	437	$	0	$	(22,073,483)	$	(22,073,046)
Increase in Class A ordinary shares subject to possible redemption	0		0	0		0		0		(260,788)		(260,788)
Net loss	0		0	0		0		0		(2,657,689)		(2,657,689)
Balance - June 30, 2022 (unaudited)	0	$	0	4,375,000	$	437	$	0	$	(24,991,960)	$	(24,991,523)


	For the Three Months Ended				For the Three Months Ended
	June 30, 2022				June 30, 2021
	Class A		Class B		Class A		Class B
Basic and diluted net income (loss) per ordinary share:
Numerator:
Allocation of net income (loss)	$	(2,126,151)	$	(531,538)	$	1,569,174	$	392,293

Denominator:
Basic and diluted weighted average ordinary shares outstanding		17,500,000		4,375,000		17,500,000		4,375,000

Basic and diluted net income (loss) per ordinary share	$	(0.12)	$	(0.12)	$	0.09	$	0.09


	For the Six Months Ended				For the Six Months Ended
	June 30, 2022				June 30, 2021
	Class A		Class B		Class A		Class B
Basic and diluted net income per ordinary share:
Numerator:
Allocation of net income	$	3,662,430	$	915,608	$	4,369,295	$	1,092,324

Denominator:
Basic and diluted weighted average ordinary shares outstanding		17,500,000		4,375,000		17,500,000		4,375,000

Basic and diluted net income per ordinary share	$	0.21	$	0.21	$	0.25	$	0.25


Gross Proceeds	$	175,000,000
Less:
Proceeds allocated to Public Warrants		(7,875,000)
Class A ordinary shares issuance costs		(9,666,677)
Plus:
Remeasurement adjustment on carrying value to redemption value		17,541,677
Class A ordinary shares subject to possible redemption at December 31, 2021	$	175,000,000
Increase in Class A ordinary shares subject to possible redemption		260,788
Class A ordinary shares subject to possible redemption at June 30, 2022	$	175,260,788


	Fair Value Measured as of June 30, 2022
	Level 1		Level 2		Level 3		Total
Assets
Investments held in Trust Account	$	175,360,788	$	—	$	—	$	175,360,788
Liabilities
Derivative public warrant liabilities		6,300,000		—		—		6,300,000
Derivative private warrant liabilities		—		5,040,000		—		5,040,000
Total Liabilities	$	6,300,000	$	5,040,000	$	—	$	11,340,000