| Debt | 11. Debt Convertible Notes Convertible Notes - Related Party During 2022 and 2023, the Company issued subordinated convertible promissory notes to related parties Alco Investment Company (“Alco”), Mason Ward, DNX, and William Bryant. Alco held approximately 5 % of the issued equity of the Company, through its ownership of Series A preferred stock. DNX held in excess of 5 % of the issued equity of the Company, through its ownership of Series A preferred stock. William Bryant became a member of the Board of Directors upon completion of the Merger. The Related Party Convertible Notes bear interest at a rate of 8 % per annum, and are convertible into the same series of capital stock of the Company to be issued to other investors upon a Qualified Financing (as defined in the agreement). For the three and six months ended June 30, 2023 , the Company recorded a $ 707,000 and $ 1,126,451 , respectively, debt discount upon issuance of additional Related Party Convertible Notes. For the three months ended June 30, 2023, interest expense on the Related Party Convertible Notes totaled $ 552,403 , comprised of $ 125,352 of contractual interest and $ 427,051 for the amortization of the discount. For the six months ended June 30, 2023, interest expense on the Related Party Convertible Notes totaled $ 935,687 , comprised of $ 215,774 of contractual interest and $ 719,913 for the amortization of the discount. March 2023 Amendment In March 2023, the Related Party Convertible Notes were amended to extend the maturity to December 31, 2023. The Company evaluated the terms of the First Amendment in accordance with ASC 470-60, Troubled Debt Restructurings, and ASC 470-50, Debt Modifications and Extinguishments. The Company determined that the Company was granted a concession by the lender based on the decrease of the effective borrowing rate on the First Amendment. Accordingly, the Company accounted for the First Amendment as a troubled debt restructuring. As a result, the Company accounted for the troubled debt restructuring by calculating a new effective interest rate for the First Amendment based on the carrying amount of the debt and the present value of the revised future cash flow payment stream. The troubled debt restructuring did not result in recognition of a gain or loss in the consolidated statement of operations but does impact interest expense recognized in the future. Convertible Notes - Third Party During 2022 and 2023, the Company issued additional subordinated convertible notes (the “Third Party Convertible Notes”). The Third Party Convertible Notes bear interest at a rate of 8 % per annum, and are convertible into the same series of capital stock of the Company to be issued to other investors upon a Qualified Financing (as defined in the agreement). For the three and six months ended June 30, 2023 , the Company recorded a $ 0 and $ 330,390 , respectively, debt discount upon issuance of additional Third Party Convertible Notes. For the three months ended June 30, 2023, interest expense on the Third Party Convertible Notes totaled $ 142,353 , comprised of $ 37,845 of contractual interest and $ 104,508 for the amortization of the discount. For the six months ended June 30, 2023, interest expense on the Third Party Convertible Notes totaled $ 293,977 , comprised of $ 72,562 of contractual interest and $ 221,415 for the amortization of the discount. March 2023 Amendment In March 2023, the Third Party Convertible Notes were amended to extend the maturity to December 31, 2023. The Company evaluated the terms of the First Amendment in accordance with ASC 470-60, Troubled Debt Restructurings, and ASC 470-50, Debt Modifications and Extinguishments. The Company determined that the Company was granted a concession by the lender based on the decrease of the effective borrowing rate on the First Amendment. Accordingly, the Company accounted for the First Amendment as a troubled debt restructuring. As a result, the Company accounted for the troubled debt restructuring by calculating a new effective interest rate for the First Amendment based on the carrying amount of the debt and the present value of the revised future cash flow payment stream. The troubled debt restructuring did not result in recognition of a gain or loss in the consolidated statement of operations but does impact interest expense recognized in the future. The following table presents the Related Party and Third Party Convertible Notes, respectively, as of December 31, 2023:
Related Party Third Party
Face value of the convertible notes $ 6,783,538 $ 3,196,206
Debt discount, net ( 131,867 ) ( 83,688 )
Carrying value of the convertible notes 6,651,671 3,112,518
Accrued interest 619,697 233,714
Conversion of convertible notes ( 7,271,368 ) ( 3,346,232 )
Total convertible notes and accrued interest $ — $ — Promissory Notes Promissory Notes - Related Party On August 30, 2023, the Company issued a subordinate promissory note (“Alco August Promissory Note”) in the aggregate principal amount of $ 150,000 to Alco Investment Company, a related party. Alco held its ownership of over 10 % of the issued equity of the Company, through its ownership of Series A preferred stock. The Alco August Promissory Note bears interest at a rate of 8 % per annum. The outstanding principal and accrued interest are due and payable on April 29, 2024 . The Company recorded a $ 3,711 debt discount upon issuance of the Alco August Promissory Note. For the three months ended June 30, 2024, interest expense on the Alco August Promissory Note totaled $ 2,908 , comprised of $ 2,992 of contractual accrued interest and ($ 84 ) for the amortization of the discount. For the six months ended June 30, 2024 , interest expense on the Alco August Promissory Note totaled $ 8,357 , comprised of $ 5,983 of contractual accrued interest and $ 2,374 for the amortization of the discount. As of June 30, 2024 and December 31, 2023, $ 150,000 of principal and $ 10,027 and $ 4,044 , respectively, of accrued interest is outstanding under the Alco August Promissory Note recorded in note payable - related party on the balance sheets. On September 13, 2023, the Company issued a subordinate promissory note (“Alco September Promissory Note”) in the aggregate principal amount of up to $ 1,500,000 to Alco Investment Company, a related party. The Alco September Promissory Note bears interest at a rate of 8 % per annum. The outstanding principal and accrued interest are due and payable on September 30, 2024 . The Company recorded $ 8,588 of debt issuance costs and a $ 638,808 debt discount upon issuance of the Alco September Promissory Note, relating to the share transfer agreements, see below. For the three months ended June 30, 2024, interest expense on the Alco September Promissory Note totaled $ 95,935 , comprised of $ 29,918 of contractual accrued interest and $ 66,017 for the amortization of the discount. For the six months ended June 30, 2024, interest expense on the Alco September Promissory Note totaled $ 187,498 , comprised of $ 59,836 of contractual accrued interest and $ 127,662 for the amortization of the discount. As of June 30, 2024 and December 31, 2023, $ 1,500,000 of principal and $ 90,411 and $ 30,575 , respectively, of accrued interest is outstanding under the Alco September Promissory Note recorded in note payable - related party on the balance sheets. On November 16, 2023, the Company issued a subordinate promissory note (“Alco November Promissory Note” ) in the aggregate principal amount of up to $ 750,000 to Alco Investment Company, a related party. The Alco November Promissory Note bears interest at a rate of 8 % per annum. The outstanding principal and accrued interest are due and payable on April 13, 2024 . The Company recorded a $ 363,905 debt discount upon issuance of the Alco November Promissory Note relating to the share transfer agreements, see below. For the three months ended June 30, 2024, interest expense on the Alco November Promissory Note totaled ($ 31,036 ) , comprised of $ 14,959 of contractual accrued interest and ($ 45,995 ) for the amortization of the discount. For the six months ended June 30, 2024, interest expense on the Alco November Promissory Note totaled $ 217,249 , comprised of $ 29,918 of contractual accrued interest and $ 187,331 for the amortization of the discount. As of June 30, 2024 and December 31, 2023, $ 750,000 of principal and $ 37,315 and $ 7,397 , respectively, of accrued interest is outstanding under the Alco November Promissory Note recorded in note payable - related party on the consolidated balance sheets. On December 13, 2023, the Company issued a subordinate promissory note (“Alco December Promissory Note” ) in the aggregate principal amount of up to $ 2,000,000 to Alco Investment Company, a related party. The Alco December Promissory Note bears interest at a rate of 8 % per annum. The outstanding principal and accrued interest are due and payable on December 31, 2024 . The Company recorded a $ 1,496,252 debt discount upon issuance of the Alco December Promissory Note, relating to the share transfer agreements, see below. For the three months ended June 30, 2024, interest expense on the Alco December Promissory Note totaled $ 317,667 , comprised of $ 39,890 of contractual accrued interest and $ 277,777 for the amortization of the discount. For the six months ended June 30, 2024, interest expense on the Alco December Promissory Note totaled $ 549,883 , comprised of $ 79,780 of contractual accrued interest and $ 470,103 for the amortization of the discount. As of June 30, 2024 and December 31, 2023 , $ 2,000,000 of principal and $ 87,670 and $ 7,890 , respectively, of accrued interest is outstanding under the Alco December Promissory Note recorded in note payable – related party on the consolidated balance sheets. In connection with the issuances of the Alco September, November, and December Promissory Notes, the Company, 7GC and the Sponsor entered into share transfer agreements (the “Alco Share Transfer Agreements” ) with Alco Investment Company. Pursuant to which for each $ 10.00 in principal borrowed under the Alco September and November Promissory Notes, the Sponsor agreed to forfeit one share of 7GC Class B Common Stock held by the Sponsor, in exchange for the right of Alco to receive one New Banzai Class A Share. For each $ 10.00 in principal borrowed under the December Note, the Sponsor agreed to forfeit three shares of 7GC Class B Common Stock held by the Sponsor, in exchange for the right of Alco to receive three New Banzai Class A Shares. Such forfeited and issued shares under the Alco September, November, and December Promissory Notes are capped at an amount equal to 150,000 , 75,000 , and 600,000 , respectively. Pursuant to the Alco Share Transfer Agreements, the shares are subject to an 180 -day lock-up period upon issuance of the shares. For the Alco Share Transfer Agreements, the Company considered the guidance under ASC 815, Derivatives and Hedging, and determined that the Investor Shares underlying each of the Share Transfer Agreements described above, met the definition of a freestanding financial instrument and are not precluded from being considered indexed to the Company’s common stock. The Company determined that these shares represent a freestanding equity contract issued to the lender, resulting in a discount recorded on the notes when they are issued. Equity-classified contracts are initially measured at fair value (or allocated value). Subsequent changes in fair value are not recognized if the contracts continue to be classified in equity. The measurement of fair value was determined utilizing various put option models in estimating the discount lack of marketability (the “DLOM”) applied to the public share price as the shares underlying each of the Share Transfer Agreements are subject to a lock-up period pursuant to each agreement, to estimate the fair value of the shares transferred. Option pricing models assume that the cost to purchase a stock option relates directly to the measurement of the DLOM. The logic behind these models is that investors may be able to quantify this price risk, due to lack of marketability, over a particular holding period where price volatility is usually estimated as a proxy for risk. The inputs and assumptions utilized in the fair value estimation included the Company’s stock price on the measurement date, a DLOM as described above, the number of shares pursuant to each Share Transfer Agreement, and a probability weighted factor for the Company’s expected percentage of completing its Business Combination, at each Share Transfer Agreement date. For the Alco September Promissory Note, of which $ 1,000,000 was drawn on September 13, 2023, the DLOM was estimated using the put option models described above and the following assumptions: a holding period for the shares of 272 days (approximately 0.77 years) measured from the date of issuance of the $ 1,000,000 of proceeds under the September Note through the issuance of the shares under the Alco October Share Transfer Agreement on December 14, 2023 at which time the 180 -day lock-up period commenced; a re-levered equity volatility estimated using guideline public companies of 54.0 %; and a risk-free rate commensurate with the term of 5.3 %. The put option models provided a DLOM range of 10.7 % to 16.0 % and the concluded DLOM was estimated to be 12.5 %. The Company’s expected percentage of completing the Merger on this date was 80 %. For the remaining $ 500,000 drawn on the Alco September Promissory Note on October 3, 2023, the DLOM was estimated using the put option models described above and the following assumptions: a holding period for the shares of 252 days (approximately 0.72 years) measured from the date of issuance of the remaining $ 500,000 of proceeds under the September Note through the issuance of the shares under the Alco October Share Transfer Agreement on December 14, 2023 at which time the 180 -day lock-up period commenced; a re-levered equity volatility estimated using guideline public companies of 52.0 %; and a risk-free rate commensurate with the term of 5.4 %. The put option models provided a DLOM range of 10.0 % to 15.0 % and the concluded DLOM was estimated to be 11.5 %. The Company’s expected percentage of completing the Merger on this date was 80 %. For the Alco November Promissory Note, the DLOM was estimated using the put option models described above and the following assumptions: a holding period for the shares of 208 days (approximately 0.60 years) measured from the issuance date of the November Note through the issuance of the shares under the November 2023 Share Transfer Agreement on December 14, 2023 at which time the 180 -day lock-up period commenced; a re-levered equity volatility estimated using guideline public companies of 54.0 %; and a risk-free rate commensurate with the term of 5.2 %. The put option models provided a DLOM range of 9.5 % to 15.0 % and the concluded DLOM was estimated to be 11.5 %. The Company’s expected percentage of completing the Merger on this date was 100 %. For the Alco December Promissory Note, the DLOM was estimated using the put option models described above and the following assumptions: a holding period for the shares of 180 days (approximately 0.49 years) measured from the issuance date of the December Note through the issuance of the shares under the December 2023 Share Transfer Agreement on December 14, 2023 at which time the 180 -day lock-up period commenced; a re-levered equity volatility estimated using guideline public companies of 47.0 %; and a risk-free rate commensurate with the term of 5.2 %. The put option models provided a DLOM range of 7.5 % to 12.0 % and the concluded DLOM was estimated to be 9.0 %. The Company’s expected percentage of completing its Business Combination on this date was 100 %. April 2024 and May 2024 Amendment On April 18, 2024, the Company amended the Alco August Promissory Note and Alco November Promissory Note to extend the maturity dates of each note to May 31, 2024 (the "Alco April 2024 Amendment"). On May 30, 2024, both parties agreed to again amend the Alco August Promissory Note and Alco November Promissory Note to further amend the maturity date to the earlier of (a) August 29, 2024 or (b) the closing of the next transaction (an “Offering”) in which the Company sells any of its Common Stock for cash with net proceeds of $ 4,000,000 or greater or if the holder acquires Common Stock in an amount not less than the then outstanding balance of the Alco August Promissory Note and Alco November Promissory Note (the "Alco May 2024 Amendment"). The Company evaluated the terms of both the Alco April 2024 Amendment and Alco May 2024 Amendment (the "Alco 2024 Amendments") in accordance with ASC 470-60, Troubled Debt Restructurings, and ASC 470-50, Debt Modifications and Extinguishments. The Company determined that the Company was granted a concession by the lender based on the decrease of the effective borrowing rate on the Alco 2024 Amendments. Accordingly, the Company accounted for the Alco 2024 Amendments as troubled debt restructurings. As a result, the Company accounted for the troubled debt restructurings by calculating a new effective interest rate for the Alco 2024 Amendments based on the carrying amount of the debt and the present value of the revised future cash flows payment streams. The troubled debt restructurings did not result in recognition of a gain or loss in the consolidated statement of operations but does impact interest expense recognized in the future. Promissory Notes - 7GC The Company assumed two promissory notes in connection with the Merger which remained outstanding as of December 31, 2023. On February 9, 2024, the $ 2,540,091 balance was converted into 890,611 shares the Company’s Class A Common Stock pursuant to the terms in the 7GC Promissory Notes. Promissory Note - GEM On December 14, 2023, the Company and GEM Global Yield LLC SCS and GEM Yield Bahamas Limited (collectively, “GEM”) agreed to terminate in its entirety the GEM Agreement, pursuant to which GEM was to purchase from the Company shares of common stock having an aggregate value up to $ 100,000,000 and the Company was required to make and execute a warrant ("GEM Warrant") . The Company’s obligation to issue the GEM Warrant remained, granting GEM the right to purchase Class A Common Stock in an amount equal to 3 % of the total number of equity interests outstanding as of the Closing, calculated on a fully diluted basis, at an exercise price on the terms and conditions set forth therein, in exchange for issuance of a $ 2.0 million convertible debenture with a five-year maturity and 0 % coupon. Due to the determination of the final terms of the planned $ 2.0 million convertible debenture having not been finalized, nor the final agreement related to the convertible debenture having been executed, as of December 31, 2023, the Company recognized, concurrent with the close of the merger, a liability for the GEM commitment fee, along with a corresponding GEM commitment fee expense, in the amount of $ 2.0 million. On February 5, 2024, the Company and GEM entered into a settlement agreement (the “GEM Settlement Agreement”), pursuant to which (a) the Company and GEM agreed to (i) settle the Company’s obligations under and terminate the binding term sheet entered into between Legacy Banzai and GEM, dated December 13, 2023, and (ii) terminate the share repurchase agreement, dated May 27, 2022, by and among the Company and GEM, and (b) the Company (i) agreed to pay GEM $ 1.2 million in cash within three business days of the GEM Settlement Agreement and (ii) issued to GEM, on February 5, 2024, an unsecured promissory zero coupon note in the amount of $ 1.0 million, payable in monthly installments of $ 100,000 beginning on March 1, 2024, with the final payment to be made on December 1, 2024 (the “GEM Promissory Note”). The Company paid GEM the $ 1.2 million in cash in February 2024. The GEM Promissory Note provides that, in the event the Company fails to make a required monthly payment when due, the Company shall issue to GEM a number of shares of Class A Common Stock equal to the monthly payment amount divided by the VWAP of the Class A Common Stock for the trading day immediately preceding the applicable payment due date. In addition, the Company agreed to register on a registration statement 2,000,000 shares of Class A Common Stock that may be issuable under the terms of the GEM Promissory Note. The GEM Promissory Note contains customary events of default. If an event of default occurs, GEM may, at its option, demand from the Company immediate payment of any outstanding balance under the GEM Promissory Note. As of June 30, 2024 , the Company has issued an aggregate of 1,045,118 shares of Class A Common Stock to GEM in lieu of monthly payment obligations and the remaining balance of the GEM Promissory Note as of June 30, 2024 is $ 600,000 recorded in the convertible notes line on the unaudited consolidated balance sheet. Convertible Promissory Notes (Yorkville) On December 14, 2023, in connection with and pursuant to the terms of its Standby Equity Purchase Agreement (“SEPA”) with YA II PN, LTD, a Cayman Islands exempt limited partnership managed by Yorkville Advisors Global, LP (“Yorkville”), (refer to Note 15 - Equity for further details), Yorkville agreed to advance to the Company, in exchange for convertible promissory notes, an aggregate principal amount of up to $ 3,500,000 , $ 2,000,000 of which was funded at the Closing in exchange for the issuance by the Company of a Convertible Promissory Note (the “December Yorkville Convertible Note”). The Company received net proceeds of $ 1,800,000 after a non-cash original issue discount of $ 200,000 . On February 5, 2024, the Company and Yorkville entered into a supplemental agreement (the “SEPA Supplemental Agreement”) to increase the amount of convertible promissory notes allowed to be issued under SEPA by $ 1,000,000 (the “Additional Pre-Paid Advance Amount”), for an aggregate principal amount of $ 4,500,000 to be advanced by Yorkville to the Company in the form of convertible promissory notes. On February 5, 2024 in exchange for a promissory note in the principal amount of $ 1,000,000 (the “February Yorkville Promissory Note”), with the same terms as the December Yorkville Convertible Note, the Company received net proceeds of $ 900,000 after a non-cash original issue discount of $ 100,000 . On March 26, 2024, the Company, in exchange for a convertible promissory note with a principal amount of $ 1,500,000 (the "March Yorkville Promissory Note" and, together with the December Yorkville Convertible Note and February Yorkville Promissory Note the" Yorkville Promissory Notes"), received net proceeds of $ 1,250,000 after a non-cash original issue discount of $ 250,000 from Yorkville. On May 3, 2024, the Company and Yorkville entered into a Debt Repayment Agreement (the “Original Debt Repayment Agreement”) with respect to the Yorkville Promissory Notes. Under the Original Debt Repayment Agreement, Yorkville agreed that, upon completion of a Company registered offering and repayment of an aggregate $ 2,000,000 outstanding under the Yorkville Promissory Notes (the “Original Repayment Amount”), Yorkville would not deliver to the Company any Investor Notice (as defined in the SEPA) and would not exercise its right to convert the remainder of the amount outstanding under the Promissory Notes for a period commencing on the date of the closing of the offering and ending on the date that is 90 days thereafter. Under the Original Debt Repayment Agreement, the Company and Yorkville also agreed to extend the maturity date of the Promissory Notes to the date that is 120 days after the closing of the offering and to satisfy the $ 200,000 payment premium due in connection with an early redemption through the issuance of an Advance Notice (as defined in the SEPA) for shares of the Company’s Class A common stock, par value $ 0.0001 per share. The Debt Repayment Agreement was conditioned on the completion of the offering by June 2, 2024 . On May 22, 2024, the Company and Yorkville entered into an Amended and Restated Debt Repayment Agreement (the “Amended Debt Repayment Agreement”) with respect to the Yorkville Promissory Notes, which amends and restates the Original Debt Repayment Agreement. Under the Amended Debt Repayment Agreement, Yorkville has agreed that, upon completion of a registered offering and repayment of an aggregate $ 750,000 outstanding under the Yorkville Promissory Notes (the “Amended Repayment Amount”), Yorkville will not deliver to the Company any Investor Notice (as defined in the SEPA) and will not exercise its right to convert the remainder of the amount outstanding under the Promissory Notes for a period commencing on the date of the closing of the offering and ending on the date that is 90 days thereafter (the “Stand-still Period”); provided that the Company will seek any consents necessary to allow Yorkville to issue Investor Notices or exercise its right to convert the remainder of the amount outstanding under the Promissory Notes after a period of 60 days following the closing of the offering. Under the Amended Debt Repayment Agreement, the Company and Yorkville also agreed to extend the maturity date of the Promissory Notes to the date that is 120 days after the closing of the offering and to satisfy the $ 75,000 payment premium due in connection with an early redemption through the issuance of an Advance Notice for shares of Class A Common Stock (the “Q2 Prepayment Premium”). The Amended Debt Repayment Agreement was conditioned on the completion of the offering by May 29, 2024 , which condition was satisfied upon the closing of the offering on May 28, 2024 (the "May 2024 Offering"). Pursuant to the terms of the Amended Repayment Agreement, the Company made a cash principal payment of $ 750,000 on May 31, 2024 (the “Repayment Date”), and issued an Advance Notice for the purchase of 600,000 shares of Class A Common Stock (the “Premium Advance Shares”) (representing the number of shares the Company reasonably believed would be sufficient to result in net proceeds of $ 75,000 as of the Repayment Date) (the “Premium Advance”). The total purchase price for the Premium Advance was $ 110,040 , of which $ 75,000 was applied in satisfaction of the Payment Premium, and the remaining $ 35,040 was paid by Yorkville to the Company in cash (the “Cash Surplus”). The Premium Advance Shares were recorded at fair value totaling $ 115,800 on the Repayment Date, and the excess of fair value over the Cash Surplus was recorded to the consolidated statement of operations in line Yorkville prepayment premium expense. The Yorkville Promissory Notes have a maturity date (as modified by the Amended Debt Repayment Agreement) of September 25, 2024 , and accrue interest at 0 % per annum, subject to an increase to 18 % per annum upon events of default as defined in the agreement. As of June 30, 2024, no events of default have occurred. Yorkville has the right to convert any portion of the outstanding principal into shares of Class A common stock at any time subsequent to the Stand-still Period through maturity. The number of shares issuable upon conversion is equal to the amount of principal to be converted (as specified by Yorkville) divided by the Conversion Price (as defined in the Standby Equity Purchase Agreement disclosure in Note 15). Yorkville will not have the right to convert any portion of the principal to the extent that after giving effect to such conversion, Yorkville would beneficially own in excess of 9.99 % of the total number of shares of Class A common stock outstanding after giving effect to such conversion. Additionally, the Company, at its option, shall have the right, but not the obligation, to redeem early a portion or all amounts outstanding under the Promissory Notes at a redemption amount equal to the outstanding principal balance being repaid or redeemed, plus a 10 % prepayment premium, plus all accrued and unpaid interest; provided that (i) the Company provides Yorkville with no less than ten trading days’ prior written notice thereof and (ii) on the date such notice is issued, the VWAP of the Class A common stock is less than the Fixed Price. Upon the occurrence of certain triggering events, as defined in the Yorkville Promissory Notes agreement (each an "Amortization Event"), the Company may be required to make monthly repayments of amounts outstanding under the Yorkville Promissory Notes, with each monthly repayment to be in an amount equal to the sum of (x) $ 1,000,000 , plus (y) 10 % in respect of such amount, and (z) all outstanding accrued and unpaid interest as of each payment date. During January 2024, the Company’s stock price per share fell below the then in effect Floor Price (as defined in the Standby Equity Purchase Agreement disclosure in Note 15) of $ 2.00 for five trading days during a period of seven consecutive trading days (an Amortization Event under the terms of the December Yorkville Convertible Note agreement), thus triggering amortization payments under the terms of the December Yorkville Convertible Note. On January 24, 2024, Yorkville agreed to waive the Amortization Event trigger, prior to the date upon which any amortization payment would have been required. As discussed in the definitions below, the Floor Price was reset on February 14, 2024, in conjunction with the effective date of the Company’s Registration Statement, at a price of $ 0.294 per share of Common Stock, thus curing the Amortization Event condition. During the three and six months ended June 30, 2024 , $ 300,000 and $ 800,000 of principal under the December Yorkville Convertible Note, respectively, was converted into 1,008,808 and 1,797,019 shares of Class A Common stock of the Company, respectively. During the six months ended June 30, 2024, the full principal amount of $ 1,000,000 under the February Yorkville Promissory Note was converted into 1,445,524 Class A Common stock of the Company. As of June 30, 2024 and December 31, 2023 , the principal amount outstanding under the Yorkville Promissory Notes was $ 1,950,000 and $ 2,000,000 , respectively. During the three and six months ended June 30, 2024 , the Company recorded interest expense of $ 80,760 in connection with the Yorkville Promissory Notes, all of which was related to the Premium Advance. The Yorkville Promissory Notes are required to be measured at fair value pursuant to ASC 480 Distinguishing Liabilities from Equity ("ASC 480") at the date of issuances and in subsequent reporting periods, due to the variable share-settled feature described above in which, if converted, the value to be received by Yorkville fluctuates based on something other than the fair value of the Company’s common stock. The fair value of the Yorkville Promissory Notes as of June 30, 2024 and December 31, 2023 was $ 2,013,000 and $ 1,766,000 , respectively. The Company used a Monte Carlo simulation model in order to determine the Yorkville Promissory Note’s fair value at December 31, 2023, with the following inputs: the fair value of the Company's common stock of $ 1.88 on December 31, 2023, estimated equity volatility of 71 %, the time to maturity of 0.46 years, a discounted market interest rate of 14 %, a risk free rate of 5.28 %, and probability of optional redemption 10.0 %. During the three and six months ended June 30, 2024, the Company recorded a loss of $ 34,000 and $ 578,000 , respectively, related to the change in fair value of the Yorkville Promissory Notes liability, respectively. The Company used Monte Carlo simulation models in order to determine the Yorkville Promissory Note’s fair value at June 30, 2024 , with the following inputs: the fair value of the Company's common stock of $ 0.17 on June 30, 2024 , estimated equity volatility of 125 %, the time to maturity of 0.24 years, a discounted market interest rate of 20.6 %, a risk free rate of 5.48 %, and probability of optional redemption 75.0 %. Term and Convertible Notes (CP BF) During 2021, the Company entered into a loan agreement with CP BF Lending, LLC (“CP BF”) comprised of a Term Note and a Convertible Note. The Term Note bears cash interest at a rate of 14 % per annum paid monthly and accrued interest payable-in-kind (“PIK”) cumulatively at 1.5 % per annum. The outstanding principal balance of the Term Note together with accrued and unpaid interest thereon, unpaid fees and expenses and any other Obligations then due, shall be paid on February 1 |
