FiscalNote Holdings, Inc.: Form 10-Q for the period ended Jun 30, 2025

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

Business Combination

On July 29, 2022, the Company consummated the transactions contemplated by the Agreement and Plan of Merger, dated as of November 7, 2021, and as amended on May 9, 2022, (the “Merger Agreement”), by and among FiscalNote Holdings, Inc., a Delaware corporation (“Old FiscalNote”), Duddell Street Acquisition Corp., a Cayman Islands exempted company (“DSAC”), and Grassroots Merger Sub, Inc., a Delaware Corporation and a wholly owned direct subsidiary of DSAC (“Merger Sub” and, together with DSAC, the “DSAC Parties”). Pursuant to these transactions, Merger Sub merged with and into Old FiscalNote, with Old FiscalNote becoming a wholly owned subsidiary of DSAC (the “Business Combination” and, collectively with the other transactions described in the Business Combination Agreement, the “Transactions”). In connection with the closing of the Transactions, DSAC domesticated and continued as a Delaware corporation under the name of “FiscalNote Holdings, Inc.” (“New FiscalNote”). Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to the “Company,” “FiscalNote,” “we,” “us,” or “our” refer to the business of Old FiscalNote, which became the business of New FiscalNote and its subsidiaries following the closing on July 29, 2022. Subsequent to the closing of the Business Combination, the Company's Class A common stock and public warrants began trading on the New York Stock Exchange (“NYSE”) under the symbols “NOTE” and “NOTE.WS,” respectively. The Company accounted for the Business Combination as a reverse recapitalization whereby Old FiscalNote was determined as the accounting acquirer and DSAC as the accounting acquiree. Accordingly, the Business Combination was treated as the equivalent of Old FiscalNote issuing stock for the net assets of DSAC, accompanied by a recapitalization. The net assets of DSAC are stated at historical cost, with no goodwill or other intangible assets recorded.

Significant Events

Debt Refinance

As described in Note 17 “Subsequent Events” to the condensed consolidated financial statements included elsewhere herein, on August 5 and 12, 2025, the Company entered into, and closed on certain of, a series of transactions whereby the Company (a) retired all of its then outstanding obligations under the senior term loan consummated pursuant to the Credit Agreement with Runway Growth Finance Corp., ORIX Growth Capital, LLC, Clover Orochi LLC, and ACM ASOF VIII SaaS FinCo LLC entered into concurrent with the Business Combination (the "Prior Senior Term Loan") totaling approximately $62.7 million (including accrued and unpaid interest and deferred finance costs) and replaced it with a $75.0 million new senior term loan maturing in August 2029; (b) issued $21.0 million of Debentures in exchange for $18.9 million of cash; (c) paid the holder of the GPO Convertible Note $27.0 million to redeem $30.0 million of aggregate principal under the GPO Convertible Note and exchanged the GPO Convertible Note for a new convertible note with a principal balance of $20.4 million maturing in November 2029, and (d) retired all of its then outstanding obligations under the Amended Legacy Notes by paying the holders $3.6 million in cash. Further, upon the date of the effectiveness of an initial resale registration statement with the Securities and Exchange Commission, the Company expects to issue another $12.3 million of Debentures whereby the net proceeds of $11.0 million will be used to repay the outstanding obligations under the Third Era Convertible Note, fund estimated transaction expenses and for general corporate purposes.

As a result of these series of transactions, beginning August 12, 2025, the Company's annualized cash interest payments will be approximately $9.0 million (based on current SOFR interest rates), and its principal repayments will be approximately $1.9 million during year one, and approximately $3.8 million thereafter.

Factors Impacting the Comparability of Our Operating Results

Dispositions

On March 31, 2025, we completed the sale of Dragonfly and Oxford Analytica for $40.3 million in cash. The Company recorded a gain of $15.4 million from the sale of Dragonfly and Oxford Analytica during the six months ended June 30, 2025.

On October 31, 2024, we completed the sale of Aicel Technologies business ("Aicel") for $9.7 million comprising of $8.5 million of cash and the assumption of an existing convertible note issued by Aicel in 2022, with an outstanding total principal and accrued paid-in-kind interest amount of $1.2 million. The Company recorded a gain of $0.5 million from the sale of Aicel in the fourth quarter of 2024.

On March 11, 2024, we completed the sale of Board.org for $90.9 million in cash at closing. The Company recorded a gain on sale of business of $71.5 million during the six months ended June 30, 2024.

These businesses contributed the following:

• Subscription revenue of approximately $4.0 million for the three months ended June 30, 2024 and approximately $3.5 million and $10.6 million for the six months ended June 30, 2025 and 2024, respectively.
• Non-subscription revenue of approximately $0.7 million for the three months ended June 30, 2024 and approximately $0.7 million and $1.5 million for the six months ended June 30, 2025 and 2024, respectively.
• ARR of approximately $14.2 million at December 31, 2024.

On July 1, 2025, we completed the sale of Timebase (see Note 17, Subsequent Events in the Notes to the Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for more details). Timebase's contributions to FiscalNote were as follows:

• Subscription revenue of approximately $0.3 million for the three months ended June 30, 2025 and 2024 and approximately $0.6 million for the six months ended June 30, 2025 and 2024, respectively.
• ARR of approximately $1.2 and $1.4 million at June 30, 2025 and December 31, 2024, respectively.

Product rationalization

From time to time, management reviews the Company’s existing products and services based on their financial profile and other strategic factors. In connection with such reviews, management decided to cease actively selling and therefore sunset certain non-core products, representing, in aggregate subscription revenue of approximately $0.1 million and $0.1 million during the three months ended June 30, 2025 and 2024, respectively, and approximately $0.2 million and $0.3 million during the six months ended June 30, 2025 and 2024, respectively.

At the beginning of the second quarter of 2025 the Company had approximately 456 employees. As a result of the Company's business dispositions, product rationalization, business simplification, and cost takeout actions, the Company's full-time equivalent headcount reduced by approximately 17 from the beginning of the second quarter of 2025 through June 30, 2025. As a result, the Company has seen a reduction in overall cash costs across all operating expenses. Management will continue evaluating for additional rationalization opportunities to further reduce the complexity of the business and reduce ongoing operating expenses.

We continue to invest for future growth. We are focused on several key growth levers, including cross-selling and upselling opportunities at existing clients, expanding our client base with a focus on enterprise and government customers, expansion into adjacent markets and deepening our offerings for regulated industries or sectors. 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 our available capital resources in building innovative products, attracting new customers and expanding our leadership role in the legal and regulatory information market to drive growth organically. We 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 and enhance the functionality of our existing products. Strategic acquisitions may be a component of our growth 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 of our business and serve as meaningful measures of our ongoing operational performance.

Annual Recurring Revenue (“ARR”)

Approximately 92% of our revenues are subscription based. 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.

Our ARR at June 30, 2025 and December 31, 2024, was $85.9 million and $107.5 million, respectively. ARR at June 30, 2024 and December 31, 2024, excluding products we discontinued in 2023, and the impact of the sale of Board.org, Aicel, Oxford Analytica, and Dragonfly, was $93.6 million and $93.3 million, respectively.

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. 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 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, excluding the impact of Board.org, Aicel, Oxford Analytica, and Dragonfly, was 96% and 98% for the three months ended June 30, 2025 and 2024, 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 Gross Profit and Adjusted Gross Profit Margin

We define Adjusted Gross Profit as Total revenues minus cost of revenues, including amortization of capitalized software development costs and acquired developed technology, before amortization of intangible assets that are included in costs of revenues. We define Adjusted Gross Profit Margin as Adjusted Gross Profit divided by Total revenues.

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

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 Total revenues.

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 income (loss), net income (loss) before income taxes, or any other operating performance measure calculated in accordance with GAAP. Using these non-GAAP financial measures to analyze our business would have material limitations because the calculations are based on the subjective determination of management regarding the nature and classification of events and circumstances that investors may otherwise find significant. In addition, although other companies in our industry may report measures titled EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin or similar measures, such non-GAAP financial measures may be calculated differently from how we calculate non-GAAP financial measures, which reduces their comparability. Because of these limitations, you should consider EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin alongside other financial performance measures, including net income and our other financial results presented in accordance with GAAP.

Key Components of Results of Operations

Revenues

We derive our revenues from subscription revenue arrangements and advisory, advertising and other revenues. Subscription revenues accounted for approximately 92% and 93% of our total revenues for the six months ended June 30, 2025 and 2024.

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 revenues

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

Cost of revenues, including amortization

Cost of revenues, including amortization 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, including amortization 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 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.

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.

Change in fair value of financial instruments

The fair value of financial instruments are accounted for in accordance with ASC 815 and ASC 480. The warrant and derivative liabilities are marked to market each reporting period in accordance with ASC 820 with all gains and losses being recorded within the consolidated statement of operations and comprehensive income (loss).

Income taxes

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

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

Results of Operations

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

Comparison of the Consolidated Results for the Three and Six Months Ended June 30, 2025 and June 30, 2024

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

(In thousands)

NM - Not meaningful

Revenue:

Subscription revenue

Subscription revenue of $21.4 million for the three months ended June 30, 2025 decreased $5.8 million, or 21%, from $27.2 million for the three months ended June 30, 2024. Subscription revenue of $46.6 million for the six months ended June 30, 2025 decreased $10.2 million for the six months ended June 30, 2024.

The comparability of our revenues between periods was impacted by the sales of the businesses of Dragonfly, Oxford Analytica, Board.org, and Aicel, 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.

(In thousands)

The decrease in subscription revenue during the three and six month periods is largely due to the impact from the sale of businesses of Dragonfly and Oxford Analytica on March 31, 2025. The decrease in organic subscription revenue is primarily the result of customer retention challenges combined with the impact of Federal government cuts.

Advisory, advertising, and other revenue

Advisory, advertising, and other revenue was $1.9 million for the three months ended June 30, 2025, as compared to $2.1 million for the three months ended June 30, 2024. The decrease of $0.2 million, or 10%, was the result of the reduction of revenue from the sales of businesses of $0.7 million partially offset by increases in revenue for advocacy campaigns and advertising.

Advisory, advertising, and other revenue was $4.2 million for the six months ended June 30, 2025, as compared to $4.6 million for the three months ended June 30, 2024. The decrease of $0.4 million, or 9%, was the result of the reduction of revenue from the sales of businesses of $0.7 million partially offset by increases in revenue for advocacy campaigns.

Revenue by Geography

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

(In thousands)

(In thousands)

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 decreased primarily for the reasons stated above. Asia revenues decreased primarily due to the sale of Aicel in October 2024. Europe revenues decreased primarily due to the sales of Dragonfly and Oxford Analytica on March 31, 2025.

Cost of revenues, including amortization

Cost of revenues, including amortization was $4.9 million for the three months ended June 30, 2025, as compared to $6.9 million for the three months ended June 30, 2024. The decrease of $1.9 million, or 28%, was primarily attributable to the sale of dispositions of $0.9 million combined with a decrease in amortization expense of $0.6 million, which related to the introduction of PolicyNote combined with decreases in third party costs.

Cost of revenues, including amortization was $11.9 million for the six months ended June 30, 2025, as compared to $14.1 million for the six months ended June 30, 2024. The decrease of $2.2 million, or 15%, was primarily attributable to the sale of dispositions of $2.0 million and other decreases in third party costs.

Research and development

Research and development expense was $2.3 million for the three months ended June 30, 2025 as compared to $3.2 million for the three months ended June 30, 2024. The decrease of $0.9 million, or 29%, was primarily attributable to the sale of dispositions of $0.2 million and a result of workforce planning actions.

Research and development expense was $5.4 million for the six months ended June 30, 2025 as compared to $6.7 million for the six months ended June 30, 2024. The decrease of $1.3 million, or 20%, was primarily attributable to the sale of dispositions of $0.4 million and a result of workforce planning actions.

Sales and marketing

Sales and marketing expense was $6.7 million for the three months ended June 30, 2025 as compared to $9.0 million for the three months ended June 30, 2024. The decrease of $2.3 million, or 26%, was primarily attributable to the sale of dispositions of $1.4 million and a result of workforce planning actions.

Sales and marketing expense was $14.5 million for the six months ended June 30, 2025 as compared to $18.4 million for the six months ended June 30, 2024. The decrease of $4.0 million, or 22%, was primarily attributable to the sale of dispositions of $2.6 million and a result of workforce planning actions.

Editorial expense

Editorial expense was $3.5 million for the three months ended June 30, 2025 as compared to $4.5 million for the three months ended June 30, 2024. The decrease of $1.0 million, or 22%, was primarily attributable to the sale of dispositions.

Editorial expense was $8.3 million for the six months ended June 30, 2025 as compared to $9.1 million for the six months ended June 30, 2024. The decrease of $0.8 million, or 9%, was primarily attributable to the sale of dispositions.

General and administrative

General and administrative expense was $11.4 million for the three months ended June 30, 2025 as compared to $11.3 million for the three months ended June 30, 2024. The increase of $0.1 million, or 1%, was primarily attributable to an increase related to $0.5 million of stock compensation expense and overall legal and accounting costs partially offset by decreases related to the sale of dispositions.

General and administrative expense was $27.7 million for the six months ended June 30, 2025 as compared to $27.3 million for the six months ended June 30, 2024. The increase of $0.3 million, or 1%, was primarily attributable to an increase related to increased consulting expenses and compensation expenses partially offset by a decrease in stock compensation expense and decreases related to the sale of dispositions.

Amortization of intangibles

Amortization of intangibles was $1.9 million for the three months ended June 30, 2025 as compared to $2.4 million for the three months ended June 30, 2024.

Amortization of intangibles was $4.3 million for the six months ended June 30, 2025 as compared to $5.1 million for the six months ended June 30, 2024.

Interest expense, net

Interest expense was $4.3 million for the three months ended June 30, 2025 as compared to $5.3 million for the three months ended June 30, 2024. The decrease in interest expense of $1.0 million was primarily due to the repayment of the Prior Senior Term Loan.

Interest expense was $9.5 million for the six months ended June 30, 2025 as compared to $12.7 million for the six months ended June 30, 2024. The decrease in interest expense of $3.2 million was primarily due to the repayment of the Prior Senior Term Loan.

Change in fair value of financial instruments

Change in fair value of financial instruments was a $1.6 million loss for the three months ended June 30, 2025 as compared to a $0.9 million gain for the three months ended June 30, 2024. The change in financial instruments of $2.4 million is primarily related to the changes in the Dragonfly Seller Convertible Notes, Era Note, and GPO Convertible Note partially offset by the change in the fair value adjustment of the warrant liabilities.

Change in fair value of financial instruments was a $0.9 million loss for the six months ended June 30, 2025 as compared to a $0.3 million gain for the six months ended June 30, 2024. The change in financial instruments of $1.2 million is primarily related to the changes in the Dragonfly Seller Convertible Notes, Era Note, and GPO Convertible Note partially offset by the change in the fair value adjustment of the warrant liabilities.

Certain Non-GAAP Measures

We present certain non-GAAP financial measures including 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 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:

(In thousands)

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:

(In thousands)

(a) Reflects the gain on disposal from the sale of Dragonfly and Oxford Analytica on March 31, 2025 and the gain on sale of Board.org on March 11, 2024.

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

(c) Reflects the non-cash impact of the following: (i) charge of $40 in the first quarter of 2025 and $30 in the second quarter of 2025 related to the unrealized loss on investments; (ii) charge of $315 for fees satisfied with Common Stock of the Company during the first quarter of 2025; (iii) charge of $1,784 from the loss on debt extinguishment during the first quarter of 2025; (iv) charge of $632 in the second quarter of 2025 related to foreign currency translation losses, principally arising from converting a GBP denominated convertible note into USD, (v) non-cash charge of $49 in the first quarter of 2024 and $31 in the second quarter of 2024 related to the unrealized loss on investments; and (vi) gain of $4 in the first quarter of 2024 from the change in fair value related to the contingent consideration and contingent compensation related to the 2021, 2022, and 2023 Acquisitions.

(d) Reflects the costs incurred related to the sale of Oxford Analytica and Dragonfly in Q1 2025 and Board.org in Q1 2024, principally consisting of transaction advisory, accounting, tax, and legal fees.

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

(f) Reflects costs incurred related to the Special Committee.

(g) Reflects non-operating income from the Transition Services Agreement that was entered into with the acquirer of Dragonfly and Oxford Analytica on March 31, 2025.

Liquidity and Capital Resources

The Company has improved its cash used in operations by approximately $67 million when comparing its cash used in operations for the twelve months ended June 30, 2025 to the cash used in operations for the twelve months ended June 30, 2023. Historically the Company has partially funded its operations through raising equity and debt. At June 30, 2025, the Company’s cash, cash equivalents, restricted cash, and short-term investments was $39.2 million compared to $35.3 million at December 31, 2024.

The Company had a negative working capital balance of $27.9 million (excluding cash and short-term investments) at June 30, 2025 and had an accumulated deficit of $824.4 million and $806.9 million as of June 30, 2025 and December 31, 2024, respectively, and has incurred net losses (excluding the gain on sale of businesses) of $32.9 million for the six months ended June 30, 2025 and $33.8 million for the six months ended June 30, 2024, respectively.

As described in Note 17 “Subsequent Events” to the condensed consolidated financial statements included elsewhere herein, we refinanced a substantial amount of our legacy indebtedness. We believe the impact of these actions provides us the flexibility to fund future operations and provide a path toward generating positive cash flows from operations.

Our ability to maintain our minimum cash requirement, fund our future cash interest and principal repayment requirements under our new 2025 Senior Term Loan and fund our operating expenses and capital expenditure requirements will depend in part on general economic, financial, competitive, legislative, regulatory and other conditions that may be beyond our control. The Company has implemented various cost saving measures throughout 2023, 2024, and into 2025 that have also contributed toward our overall improvement in cash flows used in operations.

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, 2025 and December 31, 2024 consisted of the following (excluding any fair value adjustments and debt discounts, as applicable):

(In thousands)

Prior Senior Term Loan

In connection with the closing of the business combination with DSAC in July 2022, FiscalNote entered into a $150.0 million senior credit agreement with Runway Growth Finance Corp., ORIX Growth Capital, LLC, Clover Orochi LLC, and ACM ASOF VIII SaaS FinCo LLC (together the "Senior Lenders”), amended in March 2023 to increase the principal amount by $6.0 million. On August 12, 2025 the Prior Senior Term Loan was replaced with the 2025 Senior Term Loan and the Company retired all of its then outstanding obligations with the Senior Lenders with a cash payment of approximately $62.7 million.

The 2025 Senior Term Loan is senior to all other debt and has a first priority lien on substantially all of the Company’s assets. The 2025 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 are four financial covenants in place at August 12, 2025: a minimum cash balance requirement, minimum annual recurring revenue requirement, an adjusted EBITDA requirement (as defined in the 2025 Senior Term Loan) and a capital expenditure limitation. The Company believes it will maintain future compliance with all of its covenants.

During the six months ended June 30, 2025, we made cash interest payments totaling $4.9 million related to the Prior Senior Term Loan. Pursuant to the terms of the 2025 Senior Term Loan, the Company's quarterly cash interest payments will be approximately $2.3 million, and its principal repayments will be approximately $0.5 million per quarter during year one, and approximately $0.9 million per quarter beginning with the quarter ending September 30, 2026 and thereafter.

See Note 17 “Subsequent Events” to the condensed consolidated financial statements included elsewhere herein.

GPO Convertible Note

On June 30, 2023 the Company issued to GPO FN Noteholder LLC a subordinated convertible promissory note in an initial principal amount of $46.8 million (the “GPO Convertible Note”). At June 30, 2025 the outstanding principal and accrued and unpaid interest was $50.4 million. On August 12, 2025, the Company paid the holder of the GPO Convertible Note $27.0 million in cash to redeem $30.0 million of aggregate principal under the GPO Convertible Note and exchanged the GPO Convertible Note for a new convertible note with a principal balance of $20.4 million maturing in November 2029 (the "2025 GPO Note").

The 2025 GPO Note is guaranteed by the Company’s domestic subsidiaries which are parties to the 2025 Senior Term Loan, and is contractually subordinated to the Company’s obligations under the 2025 Senior Term Loan. The 2025 GPO Note matures on November 13, 2029 and bears interest at a rate of 7.50% per annum payable quarterly in arrears, in cash or, provided no event of default is then occurring under the 2025 GPO Note, freely tradeable shares of the Company's Class A Common Stock, at the Company’s option.

See Note 17 “Subsequent Events” to the condensed consolidated financial statements included elsewhere herein.

Debentures

In conjunction with the establishment of the 2025 Term Loan and in order to fund the Redemption, on August 5, 2025 (the “Purchase Agreement Date”), the Company entered into a securities purchase agreement (the “Purchase Agreement”) with YA II PN, Ltd (“YA”), pursuant to which the Company will issue YA convertible debentures in an aggregate principal amount of approximately $33 million (the “Debentures”) for a total cash purchase price of approximately $30 million, subject to satisfaction of certain closing conditions.

On August 12, 2025, $21 million of Debentures were issued to YA, in accordance with the Purchase Agreement, with the Company receiving net proceeds of $18.9 million.

The remaining $12 million of Debentures (the "Second Tranche") will be issued on or about the date of the effectiveness of a resale registration statement with the Securities and Exchange Commission. Net proceeds of $11.1 million from the Second Tranche are expected to be used to retire the Company's obligations under the Third Era Convertible Note, fund estimated transaction expenses and for general corporate purposes.

Convertible Notes

Purchased Original Notes

On March 17, 2025 and March 20, 2025, investors holding two convertible notes originally issued in 2020 and assumed by the Company in connection with the Business Combination, with a principal and accrued paid-in-kind interest balance of $5.7 million (the "Purchased Original Notes"), sold their convertible notes to EGT 11 LLC (the "Exchange Investor"). In connection with the acquisition of the Purchased Original Notes by the Exchange Investor, the Company entered into a Securities Exchange Agreement (the “Exchange Agreement”) on March 17, 2025, pursuant to which the Company cancelled the Purchased Original Notes and in exchange (i) issued a convertible note to the Exchange Investor, for $5.5 million on March 17, 2025 and (ii) issued a second convertible note for $0.3 million on March 20, 2025 (collectively, the "Third Era Convertible Note"). The acquisition of the Purchased Original Notes by the Exchange Investor and the Exchange Agreement resulted in the extinguishments of the Purchased Original Notes.

Amended Legacy Notes

On March 25, 2025 the Company entered into a letter agreement with the holders of two convertible notes originally issued in 2020, with a principal and accrued paid-in-kind interest balance of $10.9 million modifying certain provisions in favor of each of the holders (the "Amended Legacy Notes"). On July 30, 2025, the Company and the holders of the Amended Legacy Notes agreed to extend the original maturity date to August 15, 2025. On August 12, 2025, the Company retired all of its then outstanding obligations under the Amended Legacy Notes by paying the holders $3.6 million in cash.

See Note 17 “Subsequent Events” to the condensed consolidated financial statements included elsewhere herein.

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 2025 Senior Term Loan, accrues interest of 8% per annum, payable in kind or in cash, and matures in January 2028.

Era Convertible Note

First Era Convertible Note

On December 8, 2023 and January 5, 2024, we issued convertible notes in an aggregate principal amount of $6.3 million in connection with the Company's strategic commercial partnership with Era. During the three months ended June 30, 2024, the Company converted the Era Convertible Notes into 6,852,099 shares of Common Stock, pursuant to the terms of the convertible notes, as amended, and accordingly satisfied all obligations thereunder.

Second Era Convertible Note

On November 12, 2024, we issued convertible notes in an aggregate principal amount of $5.5 million to an affiliate of Era. The Company issued 7,926,401 shares of common stock during the fourth quarter of 2024, and accordingly satisfied all obligations thereunder. On January 23, 2025 Era returned 1,071,458 shares of the Company's common stock pursuant to the terms of the convertible note.

Third Era Convertible Note

On March 17, 2025, pursuant to the Exchange Agreement, the Company issued a convertible note to the Exchange Investor, for $5.8 million. Pursuant to the Exchange Agreement, the Company also issued 2,596,050 shares of common stock. The Third Era Convertible Note matures on March 17, 2028, is convertible at the Company's option, and remains outstanding on June 30, 2025.

As described above, upon issuance of the Second Tranche, a portion of the net proceeds from the Second Tranche is expected to be used to repay the outstanding obligations under the Third Era Convertible Note.

See Note 17 “Subsequent Events” to the condensed consolidated financial statements included elsewhere herein.

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 $3.5 million and $4.4 million for the six months ended June 30, 2025 and 2024, respectively.

Cash Flow Summary

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

37

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, 2025 was $2.9 million, an increase of $1.9 million compared to the six months ended June 30, 2024. The primary factors affecting our net operating cash flows during this period was our net loss of $17.5 million, which includes non-cash expense items totaling $13.3 million, including a gain on disposal of business of $15.4 million, non-cash and paid-in kind interest expense of $5.7 million, loss on debt extinguishment of $1.8 million, stock-based compensation expense of $7.3 million, a change in fair value of financial instruments of $0.9 million, non-cash lease expense of $1.0 million, amortization and depreciation of $11.8 million, other non-cash items of $0.2 million and the effect of changes in operating assets and liabilities that resulted in cash inflows of 1.3 million.

Cash used in operating activities in the six months ended June 30, 2024 was $1.0 million, a decrease of $19.2 million compared to the six months ended June 30, 2023. The primary factors affecting our net operating cash flows during this period was our net income of $37.8 million, which includes non-cash expenses items totaling $43.3 million, including a gain on disposal of $71.6 million, non-cash and paid-in kind interest expense of $5.4 million, stock-based compensation expense of $9.7 million, a gain due to the change in fair value of financial instruments of $0.3 million, non-cash lease expense of $1.1 million, and amortization and depreciation of $12.5 million, other non-cash items of $0.1 million and the effect of changes in operating assets and liabilities that resulted in cash inflows of $4.5 million.

Investing activities

Net cash provided by investing activities in the six months ended June 30, 2025 was $36.8 million compared to $87.0 million in the six months ended June 30, 2024. Net cash provided by investing activities in the six months ended June 30, 2025 primarily consisted of cash proceeds from the sale of a business of $40.3 million partially offset by cash paid of $3.5 million of capital expenditures primarily related to software development costs. Net cash provided by investing activities in the six months ended June 30, 2024 was $87.0 million, which primarily consisted of cash paid for acquisitions, net of cash acquired of $91.4 million partially offset by cash paid of $4.4 million of capital expenditures primarily related to software development costs.

Financing activities

Net cash used in financing activities in the six months ended June 30, 2025 was $28.8 million, compared to $71.8 million for the six months ended June 30, 2024. Net cash used in financing activities during the six months ended June 30, 2025 primarily consisted of payments of long-term debt and deferred financing costs primarily related to the Amendments to the Credit Agreement of $29.0 million partially offset by cash proceeds from $0.1 million from the proceeds of the exercise of stock options and ESPP purchases. Net cash used in financing activities in the six months ended June 30, 2024 was $71.8 million, which primarily consisted of payments of long-term debt and deferred financing costs primarily related to Amendment 4 to the Credit Agreement and the sale of Board.org of $72.8 million partially offset by the proceeds from the issuance of Era Convertible Notes of $0.8 million and proceeds from the issuance of stock options and ESPP purchases of $0.2 million.

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 and Tax Reform

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.

On July 4, 2025, U.S. legislation formally titled "An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14” (“The Act”) was signed into law. The Act, among other things, extended key provisions of the 2017 Tax Cuts and Jobs Act and introduced targeted changes to the U.S. federal income tax regime. The Company is currently evaluating the impact of The Act on its results of operations and will recognize the related tax impacts in the period of enactment.

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 involve a significant level of estimation uncertainty and are reasonably likely to have a material impact on 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.

There were no significant and material changes in our critical accounting policies and use of estimates during the six months ended June 30, 2025, 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, 2024, filed with the SEC on April 1, 2025.

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

Foreign Currency Exchange Risk

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

Fluctuations in foreign currencies impact the amount of total assets, liabilities, revenues, operating expenses and cash flows that we report for our foreign subsidiaries upon the translation of these amounts into USD. Total revenue for the three and six months ended June 30, 2025, was impacted by approximately 1.0% compared to the three and six months ended June 30, 2024.

Interest Rate Risk

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

As of June 30, 2025, we had outstanding borrowings on our Prior Senior Term Loan of $61.8 million, which bear cash interest at a floating rate based on the Prime Rate plus an applicable margin. At June 30, 2025, the interest rate on our Prior Senior Term Loan was 12.50%. Assuming no change in the outstanding borrowings on our Prior Senior Term Loan, we estimate that a one percentage point increase in the Prime Rate would increase our annual cash interest expense by approximately $0.6 million.

As a result of the refinancing transaction discussed in Note 8, "Debt" and Note 17, "Subsequent Events" of the condensed consolidated financial statements included elsewhere herein, beginning August 12, 2025, the 2025 Senior Term Loan bears interest at variable rates, set at the Company’s option, based on a reference rate plus 7%, or the secured overnight financing rate as administered by the Federal Reserve Bank of New York (“SOFR”) plus 8%. Interest is payable in cash monthly in arrears.

Inflation Risk

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

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q.

Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of June 30, 2025, our disclosure controls and procedures are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act 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, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Disclosure Controls and Procedures

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

As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC on April 1, 2025, except as set forth below.

Sales of a substantial number of our Class A Common Stock into the public market or the perception that such sales might occur, could cause the market price of our Class A Common Stock to decline. Additionally, the issuance of additional shares of our Class A Common Stock will dilute our other stockholders.

Sales of a substantial number of shares of our Class A Common Stock into the public market or the perception that such sales might occur could cause the market price of our Class A Common Stock to decline and may make it more difficult for you to sell your Class A Common Stock at a time and price that you deem appropriate.

Sales of our Class A Common Stock following the expiration of the lock-up periods or pursuant to exercise of registration rights may make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. These sales also could cause the trading price of our Class A Common Stock to fall and make it more difficult for you to sell shares of our Class A Common Stock at a time and price that you deem appropriate.

As previously disclosed, we have issued to the Exchange Investor the Third ERA Convertible Note in the aggregate principal amount $5.8 million (the “Principal Amount”) which is convertible into shares of Class A Common Stock (the “Third ERA Convertible Note Underlying Shares”) and in connection therewith, we issued 2,596,050 Class A Common Stock to the Exchange Investor (the “Third ERA Convertible Note Fee Shares”) and issued 300,000 shares of Class A Common Stock to a broker (the “Broker Shares”) to facilitate the liquidation of the Third ERA Convertible Note Fee Shares and Third ERA Convertible Note Underlying Shares. If the sale of the Third ERA Convertible Note Underlying Shares and Third ERA Convertible Note Fee Shares do not generate cash proceeds equal to 145% of the Principal Amount, we will be required to issue additional shares of Class A Common Stock to the Exchange Investor (the “Third ERA Convertible Note Additional Shares”).

On August 12, 2025, we issued the 2025 GPO Note which requires us (i) to satisfy the interest payable thereunder in cash or freely tradeable shares of our Class A Common Stock at our option and (ii) make quarterly installment payments of $2 million of the outstanding principal beginning April 1, 2026 in the form of freely tradeable shares of the Company's Class A Common Stock, cash, or a combination thereof ((i) and (ii) collectively, the “GPO Shares”).

On August 12, 2025, the Company also issued the initial tranche of the Debentures in an aggregate principal amount of approximately $21 million to YA and the Company expects to issue the Second Tranche of the Debentures with an aggregate principal amount of $12 million upon pursuant to the Purchase Agreement. YA is entitled to convert any portion of the principal amount of the Debentures and accrued interest thereon into shares of the Company’s Class A Common Stock (the “Debenture Conversion Shares”), subject to certain limitations.

The issuance of the Third ERA Convertible Note Underlying Shares, Third ERA Convertible Note Fee Shares, Third ERA Convertible Note Additional Shares, Broker Shares, GPO Shares and Debenture Conversion Shares may cause stockholders to experience significant dilution of their ownership interests and cause the market price of our Class A Common Stock to decline.