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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended September 30, 2024

FISCALNOTE HOLDINGS, INC.

(Exact Name of Registrant as Specified in its Charter)


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

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

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


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

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

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

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

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

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

As of November 4, 2024, the registrant had 132,925,259 shares of Class A common stock, $0.0001 par value per share, outstanding, and 8,290,921 shares of Class B common Stock, $0.0001 par value per share, outstanding.

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

	Page No.
Cautionary Note Regarding Forward-Looking Statements	1

PART I. Financial Information (Unaudited, except as noted below):
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 (Audited)	3
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	4
Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit)	5
Condensed Consolidated Statements of Cash Flows	6
Notes to Condensed Consolidated Financial Statements	7

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3. Quantitative and Qualitative Disclosures About Market Risks	42
Item 4. Controls and Procedures	42

Part II. OTHER INFORMATION	44

Item 1. Legal Proceedings	44
Item 1A. Risk Factors	44
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3. Defaults upon Senior Securities	44
Item 4. Mine Safety Disclosures	44
Item 5. Other Information	44
Item 6. Exhibits	45

SIGNATURES	47

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Forward-Looking Statements

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

•

FiscalNote's ability to achieve and sustain organic growth;

•

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

•

FiscalNote's future capital requirements;

•

FiscalNote’s ability to service its repayment obligations and maintain compliance with covenants and restrictions under its existing debt agreements;

•

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

•

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

•

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

•

any cost reduction initiatives undertaken by FiscalNote;

•

FiscalNote's ability to successfully integrate acquired businesses and services, and subsequently grow acquired businesses;

•

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

•

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

•

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

•

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

•

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

•

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

•

FiscalNote's ability to introduce new features, integrations, capabilities, and enhancements to its products and services;

•

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

•

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

•

FiscalNote's ability to protect and maintain its brands;

•

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

•

FiscalNote's ability to retain or recruit key personnel;

•

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

•

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

•

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

•

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

•

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

the ability to adequately protect FiscalNote's intellectual property rights; and

•

the possibility that the strategic review undertaken by the Board of Directors does not result in any transaction or other outcome or that any outcome is disruptive to operations and impacts financial performance.

The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties described in the “Risk Factors” section of this Quarterly Report on Form 10-Q and the other documents filed by us from

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time to time with the U.S. Securities and Exchange Commission ("SEC"). The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on current expectations and beliefs concerning future developments and their potential effects on us and our business. There can be no assurance that future developments affecting us will be those that we have anticipated. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

FISCALNOTE HOLDINGS, INC.

Condensed Consolidated Balance Sheets

(in thousands, except shares, and par value)


	(Unaudited)
	September 30, 2024			December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	25,688		$	16,451
Restricted cash		683			849
Short-term investments		7,040			7,134
Accounts receivable, net		11,249			16,931
Costs capitalized to obtain revenue contracts, net		3,078			3,326
Prepaid expenses		3,210			2,593
Other current assets		3,414			2,521
Total current assets		54,362			49,805

Property and equipment, net		5,444			6,141
Capitalized software costs, net		14,895			13,372
Noncurrent costs capitalized to obtain revenue contracts, net		3,347			4,257
Operating lease assets		17,062			17,782
Goodwill		165,964			187,703
Customer relationships, net		44,164			53,917
Database, net		17,208			18,838
Other intangible assets, net		15,005			18,113
Other non-current assets		498			633
Total assets	$	337,949		$	370,561

Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt	$	10,018		$	105
Accounts payable and accrued expenses		7,635			12,909
Deferred revenue, current portion		40,257			43,530
Customer deposits		1,136			3,032
Contingent liabilities from acquisitions, current portion		114			130
Operating lease liabilities, current portion		3,650			3,066
Other current liabilities		3,976			2,878
Total current liabilities		66,786			65,650

Long-term debt, net of current maturities		142,152			222,310
Deferred tax liabilities		1,266			2,178
Deferred revenue, net of current portion		134			875
Operating lease liabilities, net of current portion		23,982			26,162
Public and private warrant liabilities		2,304			4,761
Other non-current liabilities		2,808			5,166
Total liabilities		239,432			327,102
Commitment and contingencies (Note 17)
Stockholders' equity:
Class A Common stock ($0.0001 par value, 1,700,000,000 authorized, 132,584,083 and 121,679,829 issued and outstanding at September 30, 2024 and December 31, 2023, respectively)		13			11
Class B Common stock ($0.0001 par value, 9,000,000 authorized, 8,290,921 issued and outstanding at September 30, 2024 and December 31, 2023, respectively)		1			1
Additional paid-in capital		885,872			860,485
Accumulated other comprehensive income (loss)		6,147			(622	)
Accumulated deficit		(793,516	)		(816,416	)
Total stockholders' equity		98,517			43,459
Total liabilities and stockholders' equity	$	337,949		$	370,561

See accompanying notes to unaudited condensed consolidated financial statements.

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FISCALNOTE HOLDINGS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(in thousands, except shares and per share data)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Revenues:
Subscription	$	27,238		$	30,057		$	84,015		$	87,986
Advisory, advertising, and other		2,201			3,952			6,782			10,394
Total revenues		29,439			34,009			90,797			98,380
Operating expenses: (1)
Cost of revenues, including amortization		6,235			10,441			20,342			28,863
Research and development		3,250			4,540			9,935			14,170
Sales and marketing		9,068			11,235			27,484			35,222
Editorial		4,639			4,516			13,752			13,533
General and administrative		10,622			14,418			37,958			48,813
Amortization of intangible assets		2,436			2,899			7,541			8,614
Impairment of goodwill		-			-			-			5,837
Transaction (gains) costs, net		-			(579	)		(4	)		1,138
Total operating expenses		36,250			47,470			117,008			156,190
Operating loss		(6,811	)		(13,461	)		(26,211	)		(57,810	)

Gain on sale of business (Note 4)		-			-			(71,599	)		-
Interest expense, net		5,585			8,018			18,267			21,853
Change in fair value of financial instruments		3,501			(7,157	)		3,174			(18,850	)
Loss on settlement		-			-			-			3,474
Other (income) expense, net		(341	)		207			(82	)		245
Net (loss) income before income taxes		(15,556	)		(14,529	)		24,029			(64,532	)
(Benefit) provision from income taxes		(621	)		(62	)		1,129			181
Net (loss) income		(14,935	)		(14,467	)		22,900			(64,713	)
Other comprehensive income (loss)		1,123			(1,006	)		1,062			(1,037	)
Total comprehensive (loss) income	$	(13,812	)	$	(15,473	)	$	23,962		$	(65,750	)

Earnings (loss) per share attributable to common shareholders (Note 14):
Basic and Diluted	$	(0.11	)	$	(0.11	)	$	0.17		$	(0.49	)
Weighted average shares used in computing earnings (loss) per share attributable to common shareholders:
Basic and Diluted		135,050,093			128,832,502			135,160,124			131,994,563

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Cost of revenues, including amortization	$	116	$	45	$	324	$	185
Research and development		454		328		1,138		1,080
Sales and marketing		486		1,041		1,182		1,718
Editorial		200		120		465		292
General and administrative		2,925		4,690		10,776		14,937

See accompanying notes to unaudited condensed consolidated financial statements.

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FISCALNOTE HOLDINGS, INC.

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

(in thousands, except share data)

(Unaudited)


	Equity (Deficit)
	Common Stock						Additional paid-in capital			Accumulated other comprehensive loss			Accumulated deficit			Total stockholders' equity (deficit)
	Shares			Amount

Balance at December 31, 2022		131,416,516			13			846,205			(785	)		(700,743	)		144,690
Adoption of new accounting standard		-			-			-			-			(212	)		(212	)
Issuance of Class A common stock in connection with business acquisitions		1,885,149			-			9,539			-			-			9,539
Issuance of Class A common stock upon vesting of restricted share units		287,157			-			-			-			-			-
Issuance of Class A common stock upon exercise of stock options		194,775			-			264			-			-			264
Issuance of Class A common stock upon settlement of contingent consideration		83,393			-			196			-			-			196
Stock-based compensation expense		-			-			6,506			-			-			6,506
Withholding taxes on net share settlement of stock-based compensation and option exercises		-			-			(917	)		-			-			(917	)
Net loss		-			-			-			-			(19,273	)		(19,273	)
Foreign currency translation loss		-			-			-			(359	)		-			(359	)
Balance at March 31, 2023		133,866,990		$	13		$	861,793		$	(1,144	)	$	(720,228	)	$	140,434
Issuance of Class A common stock upon vesting of restricted share units		478,619			-			-			-			-			-
Issuance of Class A common stock upon employee stock purchase plan		102,807			-			318									318
Issuance of Class A common stock upon exercise of stock options		8,437			-			35			-			-			35
Stock-based compensation expense		-			-			5,482			-			-			5,482
Withholding taxes on net share settlement of stock-based compensation and option exercises		-			-			(494	)		-			-			(494	)
Return of common stock (Note 17)		(5,881,723	)		(1	)		(21,409	)		-			-			(21,410	)
Net loss		-			-			-			-			(30,973	)		(30,973	)
Foreign currency translation gain		-			-			-			328			-			328
Balance at June 30, 2023		128,575,130		$	12		$	845,725		$	(816	)	$	(751,201	)	$	93,720
Issuance of Class A common stock upon vesting of restricted share units		313,090			-			-			-			-			-
Issuance of Class A common stock upon exercise of stock options		7,529			-			33			-			-			33
Stock-based compensation expense		-			-			5,590			-			-			5,590
Withholding taxes on net share settlement of stock-based compensation and option exercises		-			-			(301	)		-			-			(301	)
Net loss		-			-			-			-			(14,467	)		(14,467	)
Foreign currency translation gain		-			-			-			(1,006	)		-			(1,006	)
Balance at September 30, 2023		128,895,749		$	12		$	851,047		$	(1,822	)	$	(765,668	)	$	83,569

Balance at December 31, 2023		129,970,750			12			860,485			(622	)		(816,416	)		43,459
Issuance of Class A common stock upon vesting of restricted share units		867,341			-			-			-			-			-
Issuance of Class A common stock upon exercise of employee stock purchase plan		202,327			-			196			-			-			196
Stock-based compensation expense		-			-			6,175			-			-			6,175
Withholding taxes on net share settlement of stock-based compensation and option exercises		-			-			76			-			-			76
Change in fair value of debt instruments (Note 16)		-			-			-			5,707			-			5,707
Net income		-			-			-			-			50,599			50,599
Foreign currency translation loss		-			-			-			(116	)		-			(116	)
Balance at March 31, 2024		131,040,418		$	12		$	866,932		$	4,969		$	(765,817	)	$	106,096
Issuance of Class A common stock upon vesting of restricted share units		1,292,237			1			-			-			-			1
Note conversion		6,852,099			1			9,966						-			9,967
Stock-based compensation expense		-			-			3,529			-			-			3,529
Withholding taxes on net share settlement of stock-based compensation and option exercises		-			-			8			-			-			8
Net loss		-			-						-			(12,764	)		(12,764	)
Foreign currency translation gain		-			-						55			-			55
Balance at June 30, 2024		139,184,754		$	14		$	880,435		$	5,024		$	(778,581	)	$	106,892
Issuance of Class A common stock upon vesting of restricted share units		597,575			-			-			-			-			-
Issuance of Class A common stock upon exercise of employee stock purchase plan		307,538			-			275			-			-			275
Issuance of Class A common stock upon exercise of stock options		-			-			3			-			-			3
Shares issued to satisfy interest on GPO Note		785,137			-			967			-			-			967
Stock-based compensation expense		-			-			4,181			-			-			4,181
Withholding taxes on net share settlement of stock-based compensation and option exercises		-			-			11			-			-			11
Net loss		-			-			-			-			(14,935	)		(14,935	)
Foreign currency translation gain		-			-			-			1,123			-			1,123
Balance at September 30, 2024		140,875,004		$	14		$	885,872		$	6,147		$	(793,516	)	$	98,517

See accompanying notes to unaudited condensed consolidated financial statements.

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FISCALNOTE HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)


	Nine Months Ended September 30,
	2024			2023
Operating Activities:
Net income (loss)	$	22,900		$	(64,713	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation		905			1,007
Amortization of intangible assets and capitalized software development costs		14,699			19,068
Amortization of deferred costs to obtain revenue contracts		2,795			2,602
Gain on sale of business (Note 4)		(71,599	)		-
Impairment of goodwill		-			5,837
Non-cash operating lease expense		1,567			2,885
Stock-based compensation		13,885			18,212
Loss on settlement		-			3,474
Other non-cash expenses		4			(688	)
Bad debt expense		201			267
Change in fair value of acquisition contingent consideration		(4	)		(138	)
Unrealized loss on securities		95			115
Change in fair value of financial instruments		3,174			(18,850	)
Deferred income taxes		(838	)		(80	)
Paid-in-kind interest, net		5,995			3,987
Non-cash interest expense		2,244			3,035
Changes in operating assets and liabilities:
Accounts receivable, net		4,149			2,560
Prepaid expenses and other current assets		(1,429	)		1,935
Costs capitalized to obtain revenue contracts, net		(2,155	)		(3,263	)
Other non-current assets		163			(119	)
Accounts payable and accrued expenses		(3,047	)		(6,389	)
Deferred revenue		4,796			6,141
Customer deposits		(928	)		(2,182	)
Other current liabilities		1,082			(754	)
Contingent liabilities from acquisitions, net of current portion		(13	)		(39	)
Operating lease liabilities		(2,538	)		(5,844	)
Other non-current liabilities		(53	)		(6	)
Net cash used in operating activities		(3,950	)		(31,940	)

Investing Activities:
Capital expenditures		(6,875	)		(5,957	)
Purchases of short-term investments		-			(7,369	)
Cash proceeds from the sale of business, net (Note 4)		91,384			-
Cash paid for business acquisitions, net of cash acquired		-			(5,010	)
Net cash provided by (used in) investing activities		84,509			(18,336	)

Financing Activities:
Proceeds from long-term debt, net of issuance costs		801			6,000
Principal payments of long-term debt		(65,781	)		(80	)
Payment of deferred financing costs		(7,068	)		-
Proceeds from exercise of stock options and employee stock purchase plan purchases		474			650
Net cash (used in) provided by financing activities		(71,574	)		6,570

Effects of exchange rates on cash		86			(184	)

Net change in cash, cash equivalents, and restricted cash		9,071			(43,890	)
Cash, cash equivalents, and restricted cash, beginning of period		17,300			61,223
Cash, cash equivalents, and restricted cash, end of period	$	26,371		$	17,333

Supplemental Noncash Investing and Financing Activities:
Issuance of common stock for conversion of debt and interest	$	10,934		$	-
Warrants issued in conjunction with long-term debt issuance	$	-		$	178
Amounts held in escrow related to the sale of Board.org	$	285		$	-
Property and equipment purchases included in accounts payable	$	74		$	323

Supplemental Cash Flow Activities:
Cash paid for interest	$	11,723		$	15,290
Cash paid for taxes	$	277		$	16

See accompanying notes to unaudited condensed consolidated financial statements.

FISCALNOTE HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements

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

(Unaudited)

Note 1. Summary of Business and Significant Accounting Policies

Description of Business

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

Principles of Consolidation

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

These condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the financial information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the Company’s management, the unaudited condensed consolidated financial statements include all adjustments necessary for the fair presentation of the Company’s balance sheet and its results of operations, including its comprehensive loss, temporary equity, stockholders' equity (deficit), and cash flows. All adjustments are of a normal recurring nature. The results for the nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for any subsequent quarter or for the fiscal year ending December 31, 2024. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

Liquidity and Going Concern

In accordance with Accounting Standards Codification Topic 205-40, Going Concern, the Company evaluates whether there are certain conditions and events, considered in the aggregate, which raise substantial doubt about the Company’s ability to continue as a going concern.

The Company’s cash, cash equivalents, restricted cash, and short-term investments were $33.4 million at September 30, 2024, compared with $24.4 million at December 31, 2023. Further, the Company had a negative working capital balance of $45.8 million (excluding cash and short-term investments) at September 30, 2024 and had an accumulated deficit of $793.5 million and $816.4 million as of September 30, 2024 and December 31, 2023, respectively, and has incurred net losses of $48.7 million (excluding the effect of the gain on sale of business) and $64.7 million for the nine months ended September 30, 2024 and 2023, respectively. Management expects that significant on-going operating and capital expenditures will be necessary to continue to implement the Company’s business plan of entering new markets, future acquisitions, and infrastructure and product development. Historically, the Company’s cash flows from operations have not been sufficient to fund its current operating model and the Company funded operations through raising equity and debt and selling assets, including the receipt of approximately $18.1 million of net cash proceeds that were retained by the Company for operating matters from the sale of Board.org, see Note 4, Acquisitions and Dispositions.

The Company has implemented various cost saving measures throughout 2023 and during 2024 to rationalize its cost structure and is actively evaluating additional cost saving opportunities and sources of capital. As there can be no assurance that cost saving measures and necessary financing will be available, the Company may execute other strategic alternatives to maximize stakeholder value, including further expense reductions, sale of all or portions of the business, corporate capital restructuring or formal reorganization, or liquidation of assets.

As disclosed in Note 8, “Debt”, the Company is subject to certain financial covenants. The Company’s ability to maintain compliance with these financial covenants is based on the Company’s current expectations regarding revenues, collections, cost structure, current cash burn rate and other operating assumptions, which in part, depend on general economic, financial, competitive, legislative, regulatory, and other conditions. Within one year from the date of this filing, without any actions taken by management and lenders, it is probable that the Company may not be compliant with one, or all, of its financial covenants. At the time that the Company does not maintain compliance with all of its financial covenants, the lenders may declare the amounts outstanding due and payable at which time the Company would not be able to satisfy the lenders rights. Accordingly, the Company has concluded that there is substantial doubt about its ability to continue as a going concern within one year from the date of this filing.

There can be no assurance that any necessary additional financing in the future will be available on terms acceptable to the Company, or at all. If the Company raises funds in the future by issuing equity securities, dilution to stockholders will occur and may be substantial. Any equity securities issued may also provide for rights, preferences, or privileges senior to those of holders of common stock. If the Company raises funds in the future by issuing additional debt securities, these debt securities could have rights, preferences, and privileges senior to those of preferred and common stockholders. The terms of any additional debt securities or borrowings could impose significant restrictions on the Company’s operations. The capital markets have experienced in the past, and may experience in the future, periods of upheaval that could impact the availability and cost of equity and debt financing.

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The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

Segments

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

Earnings per Share

Basic earnings per share (EPS) is calculated by dividing the net income or loss available to common stockholders by the weighted average number of shares of common stock outstanding for the period without consideration for common stock equivalents. Diluted EPS is computed by dividing the net income or loss available to common stockholders by the weighted average number of shares of common stock outstanding for the period and the weighted average number of dilutive common stock equivalents outstanding for the period determined using the if-converted method (convertible debt instruments) or treasury-stock method (warrants and share-based payment arrangements). For purposes of this calculation, common stock issuable upon conversion of debt, options and warrants are considered to be common stock equivalents and are only included in the calculation of diluted earnings per share when their effect is dilutive.

Fair Value of Financial Instruments

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

Investments

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

Concentrations of Risks

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company generally maintains its cash and cash equivalents with various nationally recognized financial institutions. The Company’s cash and cash equivalents at times exceed amounts guaranteed by the Federal Deposit Insurance Corporation. The Company considers cash on deposit and all highly liquid investments with original maturities of three months or less to be cash and cash equivalents. At September 30, 2024, approximately 47% of the Company’s cash and cash equivalents were held at JPMorgan Chase Bank, N.A.

The Company does not require collateral for accounts receivable. The Company maintains an allowance for its doubtful accounts receivable due to estimated credit losses. This allowance is based upon historical loss patterns, the number of days billings are past due, collection history of each customer, an evaluation of the potential risk of loss associated with delinquent accounts and current market conditions and reasonable and supportable forecasts of future economic conditions to inform adjustments to historical loss patterns. The Company records the allowance against bad debt expense through the condensed consolidated statements of operations, included in sales and marketing expense, up to the amount of revenues recognized to date. Any incremental allowance is recorded as an offset to deferred revenue on the condensed consolidated balance sheets. Receivables are written off and charged against the recorded allowance when the Company has exhausted collection efforts without success. As of September 30, 2024 and December 31, 2023, allowance for credit losses of $1,479 and $1,252, respectively, was included in the accounts receivable, net balance.

No single customer accounted for more than 10% of the Company's accounts receivable balance as of September 30, 2024 and December 31, 2023. Revenue derived from the U.S. Federal Government was 17% and 15% of revenue for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024 and December 31, 2023, assets located in the United States were approximately 83% and 85% percent of total assets, respectively.

As of September 30, 2024 two vendors accounted for more than 10% of the Company's accounts payable balance. No vendors individually accounted for more than 10% of the Company’s accounts payable as of December 31, 2023. During the nine months ended September 30, 2024 and 2023, no vendor and one vendor represented more than 10% of the total purchases made.

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Recently Adopted Accounting Pronouncements

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

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

Recent Accounting Pronouncements Not Yet Effective

In November 2023, the FASB issued ASU 2023-07 Segment Reporting (Topic 280) guidance for segment reporting. The new guidance amends segment reporting to include significant segment expenses. The guidance is effective for the Company beginning with our annual report for the year ended December 31, 2024, and the subsequent interim periods and is required to be disclosed retrospectively to all prior periods presented. The Company does not expect that this guidance will have a significant impact on our disclosures.

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

Note 2. Business Combination with DSAC

On July 29, 2022, 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.

In connection with the closing of the Business Combination Agreement, FiscalNote also entered into the Credit Agreement with Runway Growth Finance Corp., ORIX Growth Capital, LLC, Clover Orochi LLC, and ACM ASOF VIII SaaS FinCo LLC (together the “New Senior Lenders”), pursuant to which a new senior term loan was consummated simultaneously with the Closing (the "Senior Term Loan").

Note 3. Revenues

Disaggregation of Revenue

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Subscription	$	27,238	$	30,057	$	84,015	$	87,986
Advisory		1,123		1,555		3,345		3,906
Advertising		437		428		1,259		1,204
Books		39		27		220		1,151
Other revenue		602		1,942		1,958		4,133
Total	$	29,439	$	34,009	$	90,797	$	98,380

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Revenue by Geographic Locations

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
North America	$	23,073	$	27,025	$	72,134	$	79,921
Europe		5,527		5,015		16,178		14,192
Australia		328		298		950		875
Asia		511		1,671		1,535		3,392
Total	$	29,439	$	34,009	$	90,797	$	98,380

Revenues by geography are determined based on the region of the Company's contracting entity, which may be different than the region of the customer. North America revenue consists solely of revenue attributed to the United States. For the three months ended September 30, 2024 and 2023, revenue attributed to the United Kingdom represented approximately 15% and 12% of total revenues, respectively. For the nine months ended September 30, 2024 and 2023, revenue attributed to the United Kingdom represented approximately 14% and 11% of total revenues, respectively. No other foreign country represented more than five percent of total revenue during the three and nine months ended September 30, 2024 and 2023.

Contract Assets

The Company had contract assets of $1,171, $1,183, and $1,464 as of September 30, 2024, December 31, 2023, and December 31, 2022, respectively. Contract assets are generated when contractual billing schedules differ from the timing of revenue recognition or cash collections. They represent a conditional right to consideration for satisfied performance obligations that becomes a receivable when the conditions are satisfied. They are recorded as part of other current assets on the condensed consolidated balance sheets.

Deferred Revenue

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


Balance at December 31, 2022	$	36,487
Acquired deferred revenue		3,941
Revenue recognized in the current period from amounts in the prior balance		(33,226	)
New deferrals, net of amounts recognized in the current period		39,551
Effects of foreign currency		(47	)
Balance at September 30, 2023	$	46,706

Balance at December 31, 2023	$	44,405
Sale of Board.org		(9,117	)
Revenue recognized in the current period from amounts in the prior balance		(35,869	)
New deferrals, net of amounts recognized in the current period		40,594
Effects of foreign currency		378
Balance at September 30, 2024	$	40,391

Costs Capitalized to Obtain Revenue Contracts

During the nine months ended September 30, 2024 and 2023, the Company capitalized $2,155 and $3,286 of costs to obtain revenue contracts. The Company amortized costs capitalized to obtain revenue contracts in the amount of $910 and $954 to sales and marketing expense during the three months ended September 30, 2024 and 2023, respectively, and $2,795 and $2,602 during the nine months ended September 30, 2024 and 2023, respectively. There were no impairments of costs capitalized to obtain revenue contracts for the three and nine months ended September 30, 2024 and 2023.

Unsatisfied Performance Obligations

At September 30, 2024, the Company had $81,746 of remaining contract consideration for which revenue has not been recognized due to unsatisfied performance obligations. The Company expects to recognize this over the next five years.

Note 4. Acquisitions and Dispositions

2024 Disposition

On March 11, 2024, the Company entered into an agreement (the "Purchase Agreement") to sell the equity of the Company's subsidiary owning and operating its Board.org business ("Board.org") with Exec Connect Intermediate LLC (the “Buyer”). On March 11, 2024, after adjustments based on Board.org’s working capital, indebtedness and transaction expenses, as well as retention payments payable to certain employees of Board.org, the Company received $90,905 in cash (excluding $785 of the purchase price that was deposited into escrow to satisfy certain potential post-closing purchase price adjustments and indemnification claims and including $21 of cash acquired by the Buyer). The Company is entitled to receive an earn-out payment of up to $8,000, less the amount of certain retention payments potentially owing to the former Board.org employees, if the Board.org business achieves specified revenue targets for fiscal year 2024. The Purchase Agreement contains representations, warranties and indemnification obligations of the parties customary for transactions similar to those contemplated by the Purchase Agreement. As a result of the sale of Board.org, the Company recorded a pre-tax gain on disposal of $71,599, inclusive of the $785 of funds placed in escrow that the Company anticipates receiving and $50 of estimated post-closing purchase price adjustment which are included in other current assets. On June 6, 2024, the Company received $500 of the $785 placed in escrow and

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finalized the post-closing purchase price adjustment. At September 30, 2024 the Company has $285 included in other current assets representing the remaining balance held in escrow pursuant to the Purchase Agreement.

The proceeds from the sale of Board.org were used in part to prepay $65,700 of term loans under the Company’s Credit Agreement, and pay $7,068 of related prepayment and exit fees associated with the retired amount. The remaining $18,137 of net proceeds were retained by the Company for general corporate purposes. As part of the sale the Company recorded a current tax liability for federal and state income tax of $2,004 and a non-cash deferred tax charge of $300.

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

Pursuant to the Employee Lease Agreement entered into in connection with the closing of the sale of Board.org, the Company was the employer of record for the Board.org employees until June 30, 2024. Under the terms of the Employee Lease agreement, the Company was responsible for the payment of salaries and benefits to the Board.org employees at the direction of the Buyer, until the Buyer legally assumed those employees. On July 1, 2024 the Buyer became the employer of record for the Board.org employees and all services under the Employee Lease Agreement ceased.

Additionally, the Company entered into a Transition Services Agreement in connection with the closing of the sale of Board.org whereby the Company will provide certain transitional support services for a period of time following the closing and the buyer will reimburse FiscalNote for certain direct costs of those services. No material costs were incurred under the Transition Services Agreement during the period from March 11, 2024 to June 30, 2024.

2023 Acquisition

Dragonfly Acquisition

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

The aggregate purchase price consisted of (i) $5.6 million in cash (£4.5 million pounds sterling), (ii) 1,885,149 shares of the Company’s Class A Common Stock, and (iii) $11.1 million (£8.9 million pounds sterling) in aggregate principal amount of subordinated convertible promissory notes (“Seller Convertible Notes”). The Company incurred expenses of $1,272 in connection with the transaction during the year ended December 31, 2023 (inclusive of $446 of amounts paid on January 27, 2023 that were recognized as expense during the three months ended March 31, 2023).

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


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

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

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

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


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

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


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

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

The purchase price allocation includes UK deferred income tax assets and liabilities for acquired book and tax basis differences. Goodwill recorded for this acquisition is not tax deductible.

Note 5. Leases

The Company has operating leases, principally for corporate offices under non-cancelable operating leases that expire at various dates through 2031. The non-cancellable base terms of these leases typically range from one to nine years. Certain lease agreements include options to renew or terminate the lease, which are not factored into the determination of lease payments if they are not reasonably certain to be exercised.

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


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Operating lease cost	$	1,170		$	1,200		$	3,614		$	5,000
Variable lease cost		70			304			220			701
Short-term lease cost		77			123			167			462
Total lease costs	$	1,317		$	1,627		$	4,001		$	6,163
Sublease income	$	(26	)	$	(26	)	$	(77	)	$	(1,416	)

Cash payments related to operating lease liabilities were $4,442 and $7,959 (inclusive of $1,682 lease termination fee) for the nine months ended September 30, 2024 and 2023, respectively.

Note 6. Intangible Assets

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


	September 30, 2024										December 31, 2023										Weighted Average
	Gross Carrying Amount		Accumulated Amortization			Accumulated Impairment			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Impairment			Net Carrying Amount		Remaining Useful Life (Years) September 30, 2024
Customer relationships	$	80,128	$	(33,729	)	$	(2,235	)	$	44,164	$	88,544	$	(32,392	)	$	(2,235	)	$	53,917		8.0
Developed technology		37,453		(28,982	)		(1,909	)		6,562		37,205		(26,743	)		(1,909	)		8,553		7.0
Databases		29,887		(12,679	)		-			17,208		29,895		(11,057	)		-			18,838		8.1
Tradenames		11,879		(5,015	)		(579	)		6,285		12,077		(4,367	)		(579	)		7,131		7.8
Expert network		2,832		(1,712	)		-			1,120		2,692		(1,291	)		-			1,401		2.4
Patents		850		(229	)		(8	)		613		784		(217	)		(8	)		559		17.4
Content library		592		(167	)		-			425		592		(123	)		-			469		7.2
Total	$	163,621	$	(82,513	)	$	(4,731	)	$	76,377	$	171,789	$	(76,190	)	$	(4,731	)	$	90,868

Finite-lived intangible assets are stated at cost, net of amortization, generally using the straight-line method over the expected useful lives of the intangible assets. Amortization of intangible assets, excluding developed technology, was $2,435 and $2,899 for the three months ended September 30, 2024 and 2023, respectively, and $7,540 and $8,614 for the nine months ended September 30, 2024 and 2023, respectively.

Amortization of developed technology was recorded as part of cost of revenues, including amortization in the amount of $531 and $3,140 for the three months ended September 30, 2024 and 2023, respectively, and $2,059 and $5,783 for the nine months ended September 30, 2024 and 2023, respectively.

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The expected future amortization expense for intangible assets as of September 30, 2024 is as follows:


2024 (remainder)	$	2,692
2025		10,565
2026		10,294
2027		9,860
2028		9,505
Thereafter		33,461
Total	$	76,377

The Company regularly reviews the remaining useful lives of its intangible assets. In the second quarter of 2023, the Company revised the remaining useful life of certain of its developed technology. Accordingly, the Company recognized $1,935 of amortization expense during the three months ended September 30, 2023.

Capitalized software development costs

Capitalized software development costs are as follows:


	September 30, 2024										December 31, 2023
	Gross Carrying Amount		Accumulated Amortization			Accumulated Impairment			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Impairment			Net Carrying Amount
Capitalized software development costs	$	33,738	$	(17,351	)	$	(1,492	)	$	14,895	$	27,659	$	(12,795	)	$	(1,492	)	$	13,372

During the nine months ended September 30, 2024 and 2023, the Company capitalized interest on capitalized software development costs in the amount of $393 and $313, respectively. Amortization of capitalized software development costs was recorded as part of cost of revenues, including amortization in the amount of $1,693 and $1,656 for the three months ended September 30, 2024 and 2023, respectively, and $5,100 and $4,671 for the nine months ended September 30, 2024 and 2023, respectively. The estimated useful life is determined at the time each project is placed in service.

Note 7. Goodwill

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

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


Balance at December 31, 2023	$	187,703
Sale of Board.org		(23,022	)
Impact of foreign currency fluctuations		1,283
Balance at September 30, 2024	$	165,964

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

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

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

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Note 8. Debt

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


	September 30, 2024			December 31, 2023
Senior Term Loan	$	93,365		$	158,228
New GPO Note		36,487			36,954
Convertible Notes		15,595			14,052
Dragonfly Seller Convertible Notes		9,226			9,002
Era Convertible Note		-			5,977
Aicel Convertible Note		1,150			1,156
PPP loan		63			144
Total gross debt		155,886			225,513
Debt issuance costs		(3,716	)		(3,098	)
Total		152,170			222,415
Less: Current maturities		(10,018	)		(105	)
Total Long-term debt	$	142,152		$	222,310

Senior Term Loan

On July 29, 2022, concurrent with the closing of the Company's Business Combination, FiscalNote, Inc., a wholly owned indirect subsidiary of FiscalNote Holdings, Inc., entered into a senior credit agreement (the "Credit Agreement") providing for a Senior Term Loan consisting of a fully funded principal amount of $150,000 and an uncommitted incremental loan facility totaling $100,000 available upon notice if the Company meets certain financial growth criteria and other customary requirements (the “Incremental Term Facility”) (collectively the “Senior Credit Facility”). The annual interest of the Senior Term Loan consists of two components: a cash interest component of (a) the greater of (i) Prime Rate plus 5.0% per annum or (ii) 9.0% payable monthly, and (b) interest payable in kind component of 1.00% per annum, payable in kind monthly. The Senior Credit Facility will mature on July 29, 2027.

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

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

On August 3, 2023, the Company entered into Amendment No. 3 ("Amendment No. 3") to the Credit Agreement dated July 29, 2022. Among other things, Amendment No. 3 provided for: (a) the extension of the July 2023 Deferred Fee from July 29, 2023 to July 29, 2024, (b) the increase of the July 2023 Deferred Fee from $1,734 to $2,034, (c) an increase of the Restatement Date Final Agreement from $7,410 to $8,970 and (d) the revision to the minimum annual recurring revenue ("ARR") and adjusted EBITDA covenants (as both are defined in the Credit Agreement).

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

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

The Prime Rate in effect for the Senior Term Loan was 8.50% at September 30, 2024. For the nine months ended September 30, 2024 and 2023, the Company incurred $11,165 and $15,341 and $837 and $1,177 of cash interest and paid-in-kind interest, respectively, on the Senior Term Loan. Paid-in-kind interest is reflected as a component of the carrying value of the Senior Term Loan as the payment of such interest will occur upon the settlement of the Senior Term Loan.

The Company may prepay the Senior Term Loan in whole, subject to a 2.0% prepayment fee if prepaid prior to July 30, 2024, 1.0% prepayment fee if prepaid after July 30, 2024 but prior to July 30, 2025, and no prepayment fee if prepaid on or after July 30, 2025. The July 2023 Deferred Fee, as previously amended, of $2,034 was paid as part of Amendment No. 4. Accordingly, the Company recognized the accretion of the July 2023 Deferred Fee as interest expense through March 11, 2024. Prior to Amendment No. 4, the Company had $8,970 of deferred fees due at the earlier of prepayment or maturity of the Senior Term Loan which were amortized over the term of the Senior

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Term Loan using the effective interest method. On March 11, 2024, and as a result of Amendment No. 4, the Company had $5,250 of deferred fees outstanding which the Company recognized the accretion of these deferred fees as interest expense. The $1,134 of prepayment fee paid on March 11, 2024 was treated as a debt discount. The amortization recorded for the three months ended September 30, 2024 and September 30, 2023 was $675 and $180, respectively, and for the nine months ended September 30, 2024 and September 30, 2023 was $1,487 and $490, respectively, and is included within interest expense in the condensed consolidated statements of operations and comprehensive income (loss). The remaining unamortized debt discount at September 30, 2024 is $3,317, excluding any deferred fees, and is reflected net against debt on the condensed consolidated balance sheets.

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

New GPO Note

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

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

The New GPO Note is subordinate to the Company’s obligations under its Senior Term Loan which limits certain actions that the Company and the Investor may take under the New GPO Note. At any time prior to the July 3, 2028 maturity date, the Investor is entitled to convert all or any portion of the principal amount of the New GPO Note and accrued interest thereon into shares of Class A Common Stock at $7.92 per share. The New GPO Note is subject to customary anti-dilution adjustments for stock splits and similar transactions and, subject to standard exceptions, weighted average anti-dilution protection. The principal amount, together with accrued interest thereon, of the New GPO Note is redeemable by the Company in whole or in part based on certain conditions as defined in the New GPO Note. Pursuant to the terms of the New GPO Note, paid-in-kind interest accrued from the date of issuance through June 30, 2024. Beginning on July 1, 2024 the Company was required to pay interest with either cash or shares, solely at the discretion of the Company. Accordingly, on September 30, 2024, the Company issued 785,137 Class A Common Shares in satisfaction of the third quarter interest of $967. The Company expects to satisfy future quarterly interest payments in shares.

The Company elected to account for the New GPO Note using the fair value option. The New GPO Note was recorded at its June 30, 2023 acquisition date fair value of $36,583. The Company initially recorded a loss contingency of $11,700 in its fiscal year 2022 financial statements representing the difference between the fair value of the shares returned by the Investor and the fair value of the New GPO Note on the date of exchange. With the execution of the Exchange and Settlement Agreement and New GPO Note, the Company recorded an additional non-cash loss on settlement with GPO of $3,474 in the condensed consolidated statement of operations for the nine months ended September 30, 2023. The fair market value at September 30, 2024 and December 31, 2023 was $36,487 and $36,954, respectively. The unrealized change in the fair value of the New GPO Note of $4,443 is recorded in accumulated other comprehensive income for the period ended September 30, 2024 and the non-cash loss was recorded in the change in fair value of financial instruments in the condensed consolidated statements of operations and comprehensive income (loss) in the amount of a loss of $3,234 and $2,117 for the three and nine months ended September 30, 2024, respectively. The Company incurred total interest expense related to the new GPO note of $967 and $868 for the three months ended September 30, 2024 and 2023 and $2,826 and $868 for the nine months ended September 30, 2024 and 2023, respectively.

Convertible Notes

At September 30, 2024, the holders of four convertible notes that were previously issued by Old FiscalNote (the “Convertible Notes”) with a principal and accrued PIK balance of $15,595, remained outstanding. The Company incurred total interest expense related to the Convertible Notes, including the amortization of the various discounts, of $630 and $548 during the three months ended September 30, 2024 and 2023, respectively, and $1,829 and $1,585 for the nine months ended September 30, 2024 and 2023, respectively. These notes mature in July 2025 and November 2025. The notes that mature in July 2025 are recorded in the current maturities of long-term debt.

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Dragonfly Seller Convertible Notes

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

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

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

The Company elected to account for the Dragonfly Seller Convertible Notes using the fair value option. The Dragonfly Seller Convertible Notes were recorded at their acquisition date fair value of $8,635. The fair market value at September 30, 2024 and at December 31, 2023 was $9,226 and $9,002. The unrealized change in the fair value of the Dragonfly Seller Convertible Note of $0 and $1,264 is recorded in accumulated other comprehensive income for the three and nine months ended September 30, 2024 and the non-cash loss of $743 and $339 was recorded in the change in fair value of financial instruments in the condensed consolidated statements of operations and comprehensive income (loss) during the three and nine months ended September 30, 2024. The non-cash gain was recorded in the change in fair value of financial instruments in the condensed consolidated statements of operations and comprehensive loss in the amount of a gain of $401 and a loss of $6 for the three and nine months ended September 30, 2023, respectively. The Company incurred total interest expense related to the Dragonfly Seller Convertible Notes of $259 and $230 during the three months ended September 30, 2024 and 2023, respectively, and $747 and $609 for the nine months ended September 30, 2024 and 2023, respectively.

Era Convertible Notes

In connection with a Company’s strategic commercial partnership, the Company issued a convertible note to EGT-East, LLC ("Era"), a third-party lender, for $5,500 on December 8, 2023 and a second convertible note for $801 on January 5, 2024 (collectively, the "Era Convertible Notes"). The Era Convertible Notes were issued in aggregate principal amount of $6,301, with cash interest at a rate equal to the applicable federal rate published by the Internal Revenue Service beginning on June 8, 2024. All principal and unpaid interest were to mature on December 8, 2027.

Pursuant to the copilot agreement (the "Co-Pilot Agreement") entered into by and among the Company, FiscalNote Inc., a subsidiary of the Company, and Era on December 8, 2023, the Company agreed to issue Era up to an additional $3,150 in the form of shares of the Company's Class A Common Stock no later than June 2024 (the "Partnership Shares"). The Co-Pilot Agreement requires the Company to issue additional shares of Common Stock (“Additional Shares”) to Era if Era’s sales of the Partnership Shares and the shares of Class A Common Stock underlying the Era Convertible Notes (the "Underlying Shares") do not generate aggregate cash proceeds to Era that equal or exceed approximately $9,452 during the sell-off period set forth in the Co-Pilot Agreement. Any such Additional Shares would be valued based on the volume weighted average price of the trailing 30 trading day period, calculated prior to the date of any such issuance.

On April 11, 2024, the Company entered into a letter agreement (the “Letter Agreement”) with Era modifying certain provisions of the Era Convertible Notes and the Co-Pilot Agreement. The Letter Agreement permitted and required the Company to convert approximately $1,599 in aggregate principal amount of the Era Convertible Notes (the “Early Converted Notes”) into a portion of the Underlying Shares. Pursuant to the Letter Agreement, the Company was also required to issue to Era the Partnership Shares. Pursuant to the Letter Agreement, Era has the right to convert the aggregate principal amount of the remaining Era Convertible Notes (the “Remaining Notes”), but only on or after June 30, 2024, if such conversion right is not cancelled by the terms of the Letter Agreement. In addition, the Letter Agreement terminated the Company’s obligation to issue the Additional Shares under the circumstances specified therein. On April 11, 2024 and pursuant to the Letter Agreement, the Company issued the Investor an aggregate of 3,003,268 shares of Common Stock to satisfy its obligations with respect to the Partnership Shares and a portion of the Underlying Shares.

The Company elected to account for the Era Convertible Notes using the fair value option. The Era Convertible Note dated December 8, 2023 was recorded at its acquisition date fair value of $5,500. The Era Convertible Note dated January 5, 2024 was recorded at its acquisition date fair value of $801. The fair market value of the Era Convertible Note dated December 8, 2023 was $5,977 at December 31, 2023. The non-cash change in fair value of financial instruments recorded in the condensed consolidated statements of operations and comprehensive income (loss) was a loss $3,189 for the nine months ended September 30, 2024, respectively.

On June 12, 2024 and June 25, 2024 the Company issued the Investor an aggregate amount of 3,848,831 shares of Common Stock to satisfy its remaining obligations with regards to the Era Convertible Notes and Co-Pilot Agreement, including the obligation to issue Additional Shares. Accordingly, the Company has no obligations outstanding related to the Era Convertible Note.

Aicel Convertible Note

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

The Aicel Convertible Note can be converted upon the occurrence of certain events, including (i) Aicel initial public offering (“IPO”), (ii) change in control of Aicel (the acquisition of Aicel by FiscalNote did not constitute a change in control as defined in the purchase

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agreement), or (iii) sale of substantially all of Aicel’s assets (collectively, a “Conversion Event”). The Company has the right to convert the Aicel Convertible Note into shares of common stock issued in an IPO, if (a) the Conversion Event is an IPO and (b) the price per share paid in an IPO is greater than the stipulated initial conversion price. The lender has the right to elect to convert the Aicel Convertible Note into shares of common stock upon the occurrence of a Conversion Event.

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

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

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

The Aicel Convertible Note was recorded at its acquisition fair value of $1,131. The Company incurred total interest expense related to the Aicel Convertible Note of $3 and $2 during the three months ended September 30, 2024 and 2023, and $8 and $8 during the nine months ended September 30, 2024 and 2023, respectively. On October 31, 2024, the Aicel convertible note was assumed by the buyer with the sale of the Aicel entity as discussed in Note 18, Subsequent events.

PPP Loan

On April 13, 2020, the Company received funding in the principal amount of $8,000 under the CARES Act to be repaid over five years. Interest accrues annually at 1%. On February 14, 2022, the SBA forgave $7,667 of the PPP Loan with the remaining balance of $333. The Company recognized the forgiveness of PPP Loan as a gain on debt extinguishment in the condensed consolidated statements of operations and comprehensive income (loss) in 2022. As of September 30, 2024, the Company recorded the remaining PPP Loan balance of $63 as short-term debt.

Total Debt

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


	September 30, 2024		December 31, 2023
Senior Term Loan	$	92,576	$	168,702
New GPO Note		36,487		36,954
Convertible Notes		15,102		13,992
Dragonfly Seller Convertible Notes		9,226		10,407
Era Convertible Notes		-		5,977
Total	$	153,391	$	236,032

Warrants

Old FiscalNote Warrants

At September 30, 2024, 118,700 warrants (previously issued by Old FiscalNote to lenders prior to the Senior Term Loan) with an exercise price of $8.56, remain outstanding. These warrants are accounted for as a liability with a fair value of $68 at September 30, 2024, and are included as part of the other non-current liabilities within the condensed consolidated balance sheets.

Warrants associated with Amendment No. 1

On March 17, 2023, in connection with Amendment No. 1 discussed above, the Company issued 80,000 warrants with an exercise price of $0.01. These warrants are accounted for as a liability with a fair value of $102 at September 30, 2024, and are included as part of the other non-current liabilities within the condensed consolidated balance sheets.

Note 9. Stockholders’ Equity

Authorized Capital Stock

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

Class A Common Stock

Subsequent to the Closing of the Business Combination, the Company's Class A common stock and public warrants began trading on the New York Stock Exchange (“NYSE”) under the symbols “NOTE” and “NOTE.WS,” respectively. Pursuant to the Company’s charter,

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the Company is authorized to issue 1,700,000,000 shares of Class A common stock, par value $0.0001 per share. As of September 30, 2024, the Company had 132,584,083 shares of Class A common stock issued and outstanding.

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

Class B Common Stock

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

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

As of September 30, 2024, the Company had 8,290,921 shares of Class B common stock issued and outstanding.

Preferred Stock

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

Dividends

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

Note 10. Earnout Shares and RSUs

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

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

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

A portion of the Earnout Shares that may be issued to Old FiscalNote common stockholders, Old FiscalNote vested option holders and Old FiscalNote warrant holders and all of the Earnout RSUs were determined to represent additional compensation for accounting purposes pursuant to ASC 718, “Compensation-Stock Compensation”. The Company recognizes stock-compensation expense based on the fair value of the Earnout Awards over the requisite service period for each tranche. Upon Closing, the Company recognized $17,712 of share-based compensation expense for vested Earnout Awards. The Company recognized $106 and $278 of share-based compensation expense during the three and nine months ended September 30, 2024, respectively. The Company recognized $237 and $1,618 of share-based compensation expense during the three and nine months ended September 30, 2023, respectively. The remaining Earnout Shares were determined to represent an equity transaction in conjunction with the reverse recapitalization and were evaluated pursuant to ASC 480, “Distinguishing Liabilities from Equity” and ASC 815, “Derivatives and Hedging”. These remaining Earnout Shares will be accounted for as a liability as

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the arrangement is indexed to something other than the Company’s stock. The liability is revalued at each reporting period with changes being recorded as a non-operating gain or loss in the condensed consolidated statements of operations and comprehensive income (loss). The liability of $68 was recorded in other non-current liabilities on the condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023.

As of September 30, 2024, there was $263 of unrecognized compensation expense related to the Earnout Awards to be recognized over a weighted-average period of approximately one and a half years. As of September 30, 2024, no Earnout Shares and no Earnout RSUs have been issued as no Triggering Events have occurred.

Note 11. Warrant Liabilities

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

During the nine months ended September 30, 2024, no public warrants were exercised into shares of Class A common stock. No private placement warrants have been exercised to date. Accordingly, as of September 30, 2024, the Company had 8,358,964 public warrants and 7,000,000 private placement warrants outstanding with a per share fair value of $0.44. These warrants are accounted for as a liability and have a fair value of $2,304 at September 30, 2024.

Public Warrants

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

Redemption of warrants for cash

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

•

in whole and not in part;

•

at a price of $0.01 per warrant;

•

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

•

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

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

Redemption of warrants for shares of Class A common stock

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

•

in whole and not in part;

•

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

•

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

•

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

•

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

Private Placement Warrants

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

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the private placement warrants are held by holders other than the DSAC Sponsor or its permitted transferees, the private placement warrants will be redeemable by the Company and exercisable by the holders on the same basis as the public warrants.

Note 12. Stock-Based Compensation

2022 Long-Term Incentive Plan

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

During the nine months ended September 30, 2024, the Company issued 2,365,285 stock options and 7,362,404 restricted stock units. At September 30, 2024, 8,687,689 stock options, 2,556,550 performance stock options, 10,240,288 restricted stock units, and 75,000 performance based restricted stock units remain outstanding. As of September 30, 2024, the Company had 830,211 shares of Class A common stock available for issuance under the 2022 Plan.

The Company recognized $3,853 and $5,709 of stock-based compensation expense for all long term incentive plans in effect during the three months ended September 30, 2024 and 2023, respectively, and $13,092 and $15,772 during the nine months ended September 30, 2024 and 2023, respectively. The Company recognized an expense of $138 and an expense of $169 of stock-based compensation expense related to acquisition earnouts during the three months ended September 30, 2024 and 2023, respectively. The Company recognized $238 and $507 of stock-based compensation expense related to acquisition earnouts during the nine months ended September 30, 2024 and 2023, respectively.

2022 Employee Stock Purchase Plan

In connection with the Business Combination, the Company’s board of directors adopted, and its stockholders approved, the 2022 Employee Stock Purchase Plan (the “ESPP”) whereby eligible employees may authorize payroll deductions of up to 15% of their regular base salary to purchase shares at the lower of 85% of the fair market value of the common stock on the date of commencement of the offering period or on the last day of the six-month offering period. The plan is defined as compensatory, and accordingly, a stock-based compensation charge of $46 and $110 was recorded as the difference between the fair market value and the discounted purchase price of the Company's common stock for the three months ended September 30, 2024 and 2023 and $239 and $315 for the nine months ended September 30, 2024 and 2023, respectively. The number of shares of Common Stock reserved for issuance under the ESPP will automatically increase on January 1st each year, starting on January 1, 2023 and continuing through and including January 1, 2027, by the lesser of (a) 3,267,760, (b) one percent (1%) of the total number of shares of all classes of Common Stock outstanding on December 31st of the preceding fiscal year, or (c) a lesser number determined by the Board prior to January 1 of a given year. Pursuant to this provision, on each of January 1, 2023 and January 1, 2024, the number of shares authorized for issuance under the ESPP increased by 1,231,255 and 1,299,707, respectively. As of September 30, 2024, 509,865 shares have been issued under the ESPP and the Company had 5,186,050 shares of Class A common stock available for issuance under the ESPP.

2024 Inducement Plan Grants

The Company's board of directors adopted the 2024 Inducement Equity Incentive Plan (the “Plan”). The plan allows for the issuance of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalent rights, other stock-based awards and cash-based awards. Under the Plan, 500,000 shares of Class A common stock were initially reserved for issuance.

During the nine months ended September 30, 2024, the Company issued 200,000 stock options and 300,000 restricted stock units. At September 30, 2024, all of the awards remain outstanding. The Company recognized $38 and $38 of stock-based compensation expense for this plan in effect during the three months and nine months ended September 30, 2024, respectively.

Withholding Taxes on Equity Awards

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

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Note 13. Transaction (Gains) Costs, net

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


	Three Months Ended September 30,					Nine Months Ended September 30,
	2024		2023			2024			2023
Transaction costs related to acquired businesses	$	-	$	12		$	-		$	1,391
Non-capitalizable Business Combination costs		-		81			-			415
Change in contingent consideration liabilities		-		195			(4	)		(138	)
Contingent compensation (gain) expense		-		(867	)		-			(530	)
Total transaction (gains) costs, net	$	-	$	(579	)	$	(4	)	$	1,138

Note 14. Earnings (Loss) Per Share

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

The following is a calculation of the basic and diluted earnings per share for the Company's common stock, including a reconciliation between net income attributable to common stockholders used for Basic EPS and Diluted EPS for the three and nine months ended September 30, 2024 and 2023:


(in thousands, except share and per share data)	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024		2023
Basic Earnings Per Share
Numerator:
Net (loss) income used to compute basic and diluted EPS	$	(14,935	)	$	(14,467	)	$	22,900	$	(64,713	)
Denominator:
Weighted average common stock outstanding, basic and diluted		135,050,093			128,832,502			135,160,124		131,994,563
Earnings Per Share, basic and diluted	$	(0.11	)	$	(0.11	)	$	0.17	$	(0.49	)

Since the Company was in a net loss position during the three and nine months ended September 30, 2023 and the three months ended September 30, 2024, basic net loss per share attributable to common stockholders is the same as diluted net loss per share as the inclusion of all potential common shares outstanding would have been anti-dilutive.

Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
Anti-dilutive securities excluded from diluted loss per share:	2024		2023		2024		2023
Anti-dilutive Earnout Awards		19,195,100		19,195,100		19,195,100		19,195,100
Anti-dilutive stock options		170,494		1,435,384		170,494		1,446,013
Anti-dilutive Convertible Notes		2,560,717		2,225,858		2,560,717		2,225,858
Anti-dilutive contingently issuable shares		66,220		976,953		66,220		976,953
Anti-dilutive restricted stock units		10,615,288		6,779,610		10,615,288		6,779,610
Anti-dilutive New GPO Note		6,011,159		5,686,757		6,011,159		5,686,757
Anti-dilutive Dragonfly Seller Convertible Notes		1,147,033		-		1,147,033		-
Anti-dilutive Aicel Convertible Notes		112,038		109,023		112,038		109,023
Total anti-dilutive securities excluded from diluted loss per share		39,878,049		36,408,685		39,878,049		36,419,314

Note 15. Provision (Benefit) from Income Taxes

Effective Tax Rate

The Company computes its quarterly and year-to-date provisions for income taxes by applying the estimated effective tax rates to the quarterly and year-to-date pre-tax income or losses and adjusting the provisions for discrete tax items recorded in the periods. For the three months ended September 30, 2024 the Company reported a tax provision of $621 on a pre-tax loss of $15,556, which resulted in an effective tax rate of (3.99) percent. For the nine months ended September 30, 2024, the Company reported a tax provision of $1,129 on a pre-tax income of $24,029, which resulted in an effective tax rate of (4.70) percent. The Company’s effective tax rate differed from the U.S. statutory rate of 21 percent primarily due to the impact of a valuation allowance on the Company’s deferred tax assets. During the nine months ended September 30, 2024, the Company recorded a discrete tax charge for the impact of the sale of Board.org of $2,301.

For the three months ended September 30, 2023, the Company reported a tax benefit of $62 on a pre-tax loss of $14,529, which resulted in an effective tax rate of 42.67% percent. For the nine months ended September 30, 2023, the Company reported a tax provision of $181 on a pre-tax loss of $64,532, which resulted in an effective tax rate of 0.28 percent. The Company’s effective tax rate differed from the U.S. statutory rate of 21 percent primarily due to state taxes, the impact of a valuation allowance on the Company’s deferred tax assets, and other

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nondeductible expenses such as stock option deductions and non-deductible officer's compensation. During the nine months ended September 30, 2023, the Company had discrete items relating to goodwill impairment, unrecognized tax benefits and the tax impact of interest expense on unrecognized tax benefits.

Unrecognized Tax Benefits and Other Considerations

The Company records liabilities related to its uncertain tax positions. Tax positions for the Company and its subsidiaries are subject to income tax audits by multiple tax jurisdictions throughout the world. The Company believes that it has provided adequate reserves for its income tax uncertainties in all open tax years. As the outcome of the tax audits cannot be predicted with certainty, if any issues arising in the Company's tax audits progress in a manner inconsistent with management's expectations, the Company could adjust its provision for income taxes in the future. For the nine months ended September 30, 2024, the Company reported an uncertain tax position totaling $639 relating to a state tax filing position. The Company has the no activity relating to unrecognized tax benefits for the three and nine months ended September 30, 2024 and 2023.

Note 16. Fair Value Measurements and Disclosures

Fair value is defined as the price that would be received to sell an asset or paid to settle a liability in an orderly transaction between market participants at the measurement date. Accounting standards utilize a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels, which are described below:

•

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets

•

Level 2 – Observable inputs other than quoted prices that are either directly or indirectly observable for the asset or

liability

•

Level 3 – Unobservable inputs that are supported by little or no market activity

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

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


	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	3,518	$	-	$	-	$	3,518
Short-term investments		-		7,040		-		7,040
Liabilities:
Public warrants	$	1,254	$	-	$	-	$	1,254
Private placement warrants		-		1,050		-		1,050
Contingent liabilities from acquisitions		-		-		113		113
New GPO Note		-		-		36,487		36,487
Dragonfly Seller Convertible Notes		-		-		9,226		9,226

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


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

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


	Contingent Liabilities from Acquisitions			Liability Classified Warrants			New GPO Note			Dragonfly Seller Convertible Notes			Era Convertible Note
Balance at December 31, 2023	$	130		$	23		$	36,954		$	9,002		$	5,977
Fair value at issuance date		-			-			-			-			801
Change in fair value included in the determination of net (income) loss(a)		(3	)		(23	)		2,117			339			3,189
Change in fair value included in accumulated other comprehensive income		-			-			(4,443	)		(1,264	)		-
Cash contingent consideration earned and subsequently settled		(14	)		-			-			-			-
Paid in kind interest		-			-			2,826			747			-
Note and interest conversion		-			-			(967	)		-			(9,967	)
Foreign exchange		-			-			-			402			-
Balance at September 30, 2024	$	113		$	-		$	36,487		$	9,226		$	-

(a)

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

Short-Term Investments

The fair value of the short-term investments is based on the quoted market price of the securities on the valuation date. As of September 30, 2024, the estimated fair value of the short-term investments was $7,040. The Company recognized a non-cash loss of $15 and $115 and $94 and $115 for the three and nine months ended September 30, 2024 and 2023, respectively, resulting from the change in fair value of the short-term investments. The change in fair value is recorded in the condensed consolidated statements of operations and comprehensive income (loss).

Public Warrants

The fair value of the public warrants is based on the quoted market price of such warrants on the valuation date. As of September 30, 2024 and December 31, 2023, the estimated fair value of the public warrants was $1,254 and $2,591, respectively. The Company recognized a non-cash gain of $251 and a non-cash gain of $2,173 during the three months ended September 30, 2024 and 2023, respectively, and a non-cash gain of $1,337 and $8,777 during the nine months ended September 30, 2024 and 2023 resulting from the change in fair value of the public warrants, respectively. The change in fair value is recorded in change in fair value of financial instruments in the condensed consolidated statements of operations and comprehensive income (loss).

Private Placement Warrants

As of September 30, 2024 and December 31, 2023, the estimated fair value of the private warrants was $1,050 and $2,170, respectively. The Company recognized a non-cash gain of $210 and a non-cash gain of $1,820 during the three months ended September 30, 2024 and 2023, respectively, and a non-cash gain of $1,120 and $7,350 during the nine months ended September 30, 2024 and 2023, respectively, resulting from the change in fair value of the private warrants. The change in fair value is recorded in change in fair value of financial instruments in the condensed consolidated statements of operations and comprehensive income (loss).

New GPO Note

The New GPO Note was recognized as a liability in connection with the settlement of litigation on the Subscription Date at its estimated fair value of $36,583. The estimated fair value of the New GPO Note was determined based on a trinomial lattice model. The following table presents the assumptions used to determine the fair value of the New GPO Note at September 30, 2024 and at December 31, 2023:


	September 30, 2024			December 31, 2023
Common stock share price	$	1.28		$	1.14
Risk free rate		3.6	%		3.9	%
Yield		17.5	%		14.5	%
Expected volatility		49.0	%		50.0	%
Expected term (years)		3.8			4.5

Dragonfly Seller Convertible Notes

The Dragonfly Seller Convertible Notes were recognized as a liability in connection with the acquisition on January 27, 2023 at a fair value of $8,635. As of September 30, 2024 and December 31, 2023, the estimated fair value of the Dragonfly Seller Convertible Notes were $9,926 and $9,002. The unrealized change in the fair value of the Dragonfly Seller Convertible Note of $0 and $1,264 is recorded in accumulated other comprehensive income for the three and nine months ended September 30, 2024 and the non-cash loss of $743 and non-cash loss of $339 was recorded in the change in fair value of financial instruments in the condensed consolidated statements of operations and comprehensive income (loss) during the three and nine months ended September 30, 2024. The non-cash gain was recorded in the change in fair value of financial instruments in the condensed consolidated statements of operations and comprehensive loss in the amount

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of a gain of $401 and a loss of $6 for the three and nine months ended September 30, 2023, respectively. The following table presents the assumptions used to determine the fair value of the Dragonfly Seller Convertible Notes at September 30, 2024 and January 27, 2023:


	September 30, 2024			December 31, 2023
Common stock share price	$	1.28		$	1.14
Risk free rate		3.6	%		3.9	%
Yield		19.0	%		15.5	%
Expected volatility		50.0	%		50.0	%
Expected term (years)		3.3			4.1

As of September 30, 2024, the difference between the aggregate fair value and the unpaid principal balance of the Dragonfly Seller Convertible Notes is $4,415.

Era Convertible Note

The Era Convertible Note was recognized as a liability associated with the Company’s strategic commercial partnership on December 8, 2023 at a fair value of $5,500. During the first quarter of 2024, the Company issued $801 of new debt related to the new Era Convertible Note. During the second quarter of 2024, the Company satisfied all of its obligations underlying the Era Convertible Note by issuing 6,852,099 shares of Common Stock. At December 31, 2023 the fair value of the Era Convertible Note was $5,977. The non-cash change in fair value of financial instruments recorded in the condensed consolidated statements of operations and comprehensive income (loss) was a loss of $0 and $3,189 for the three and nine months ended September 30, 2024, respectively. The following table presents the assumptions used to determine the fair value of the Era Convertible Note at December 31, 2023:


	December 31, 2023
Common stock share price	$	1.14
Risk free rate		4.17	%
Yield		153.24	%
Expected volatility		63.00	%
Expected term (years)		3.9

Contingent Liabilities from acquisitions

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


	September 30, 2024		December 31, 2023
Curate	$	-	$	4
Equilibrium		113		112
DT Global		-		14
Total contingent liabilities from acquisitions	$	113	$	130

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

Liability classified warrants

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


	September 30, 2024			December 31, 2023
Common stock fair value	$	1.28		$	1.14
Time to maturity (years)		0.8			1.6
Risk free rate		4.10	%		4.45	%
Volatility		62	%		122	%
Exercise price	$	8.56		$	8.56

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

The Company’s long-lived assets, including property and equipment, intangible assets and goodwill are measured at fair value on a non-recurring basis when an impairment has occurred. The Company has recognized an impairment of goodwill as disclosed in Note 7, "Goodwill" during the three months ended March 31, 2023. The Company has not identified any additional impairments to be recorded during the three and nine months ended September 30, 2024 and 2023.

There were no transfers of assets or liabilities between levels during the nine months ended September 30, 2024 and 2023.

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

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Note 17. Commitments and Contingencies

Legal Proceedings

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

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

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

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Note 18. Subsequent Events

The Company has evaluated subsequent events through November 12, 2024, the date that the financial statements were available to be issued.

Sale of Aicel

On October 31, 2024, the Company entered into an agreement (the "Purchase Agreement") to sell the equity of the Company's subsidiary owning and operating its Aicel Technologies business ("Aicel") to a South Korean based-group (the “Buyer”). Total consideration was $9,650 comprised of a cash payment to the Company of $8,500 and the assumption of an existing convertible note previously issued by Aicel in 2022, with an outstanding total principal and accrued paid-in-kind interest amount of $1,150. The net proceeds, after paying transaction fees, expenses, and taxes were used to repay $5,000 of principal and accrued paid-in-kind interest of the Company's Senior Term Loan.

Era Convertible Note

On November 12, 2024, the Company issued a $5,500 senior subordinated convertible note (the "Note") to a subsidiary of Era Global Technologies, LLC (the "Investor") with cash interest equal to the applicable federal rate published by the Internal Revenue Service beginning on the six-month anniversary of the Issuance Date. The Note is contractually subordinated to the Company’s obligations under its senior secured indebtedness, and accordingly the Company’s right to make certain cash payments in connection therewith is limited by the terms of such subordination agreement (the “Subordination Agreement”). The Investor may convert the Note into shares (the “Underlying Shares”) of the Company’s class A common stock beginning on the six-month anniversary of the Issuance Date (the “Initial Conversion Date”) based on the volume weighted average price of the trailing 30 trading day period prior to the conversion. In addition, the Company may elect to convert all or a portion of the Note into the Underlying Shares (the “Optional Conversion Right”) if the Underlying Shares are registered for resale under the Securities Act of 1933, as amended (the “Securities Act”). The note matures on November 12, 2027.

The Company also issued, as a success fee, 2,549,129 shares of Common Stock to the Investor (the “Success Fee Shares”). The Investor is not permitted to sell the Success Fee Shares before the six-month anniversary of the Issuance Date; provided, however, that if the Company elects to convert any portion of the Note into Underlying Shares pursuant to its Optional Conversion Right, then the Investor may sell a pro-rata portion of the Success Fee Shares. The Company also issued 650,000 shares of Common Stock to Northland Securities, Inc. to cover brokerage fees incurred by the Investor in connection with its sales of Common Stock over time.

The Note also requires the Company to issue additional shares of Common Stock (“Additional Shares”) to the Investor if the Investor sells the Success Fee Shares and Underlying Shares within 12 months after the earlier of (i) issuance of all Underlying Shares issued pursuant to the Optional Conversion Right or (ii) the Initial Conversion Date (the “Sell-Off Period”), to the extent such sales of the Success Fee Shares and the Underlying Shares during the Sell-Off Period do not generate aggregate cash proceeds to the Investor that equal or exceed $8,250. Any such Additional Shares would be valued based on the volume weighted average price of the trailing 30 trading day period, calculated prior to the date of any such issuance. In the event the Investor sells the Underlying Shares, Success Fee Shares and/or any Additional Shares for an amount equal to the sum of $8,250, the Investor shall be required to return any remaining Underlying Shares, Success Fee Shares and/or Additional Shares, as applicable, and cancel any remaining amount of the Principal Amount owed by the Company.

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

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

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

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

Overview

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

Business Combination

Factors Impacting the Comparability of Our Operating Results

Acquisitions / Disposals

On March 11, 2024, we completed the sale of Board.org for a total value of up to $103.0 million, consisting of $95.0 million in cash at closing and a potential earnout opportunity of up to $8.0 million. The Company recorded a gain on sale of business of $71.6 million during the three months ended March 31, 2024.

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

As a result of our acquisitions, we have, and will continue to incur, significant non-cash amortization expense related to the amortization of purchased intangibles, which have reduced our operating income by approximately $0.8 million and $1.3 million during the three months ended September 30, 2024 and 2023, respectively, and $2.6 million and $3.7 million during the nine months ended September 30, 2024 and 2023, respectively.

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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 $0.2 million during the three months ended September 30, 2024 and 2023 and approximately $0.4 million and $0.5 million during the nine months ended September 30, 2024 and 2023; and

•

Non-subscription advisory revenue of approximately $1.1 million and $2.4 million during the three and nine months ended September 30, 2023.

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

•

Subscription revenue of approximately $3.4 million during the three months ended September 30, 2023 and approximately $2.8 million and $9.6 million during the nine months ended September 30, 2024 and 2023;

•

Non-subscription event revenue of approximately $0.2 million and $0.5 million during the three and nine months ended September 30, 2023;

•

Run-rate revenue of approximately $15.2 million at December 31, 2023 and $14.3 million at September 30, 2023; and

•

Annual Recurring Revenue ("ARR") of approximately $14.7 million at December 31, 2023 and $13.7 million at September 30, 2023.

At the beginning of the third quarter of 2023 the Company had approximately 760 employees. In conjunction with the Company's product rationalization, business simplification, and cost takeout actions, the Company's full-time equivalent headcount reduced by approximately 175 from the beginning of the third quarter of 2023 through September 30, 2024. As a result, the Company has seen a reduction in overall costs across all operating expenses. Management will continue evaluating the Company's product portfolio for additional rationalization opportunities, both to further reduce the complexity of the business and ongoing operating expenses and to raise capital through opportunistic divestitures where appropriate. For example, as discussed in Note 18, Subsequent Events, the Company sold the Aicel business on October 31, 2024.

Future Growth Initiatives

The Company has observed slower than anticipated client decision-making on new logo sales, cross-sells and upsells, together with softer than expected renewal rates among existing clients, due to several factors including macroeconomic headwinds, competitive pressures and delays in the launch of certain product enhancements. These issues have led to slower growth in ARR, which in turn is expected to impact revenue in the coming fiscal year. In response and subject to the Company's review of strategic alternatives as previously disclosed, the Company is expecting to implement a number of actions to accelerate growth into 2025, including:

•

product enhancements and new product launches to drive improvement in user experience, client engagement and retention;

•

improvements to our client success and support; and

•

cross-selling and upselling opportunities at existing clients.

Several of these initiatives require focused investment in our core product offerings and refinement of our go-to-market approach. We may continue to incur additional costs upfront to implement product enhancements, launch new products and features, obtain new customers and expand our relationships with existing customers, including additional sales and marketing expenses specific to subscription revenue. In addition, we will continue to assess opportunities to acquire complementary businesses that supplement our existing platform or enable us to enter adjacent markets.

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 90% 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.

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Our ARR at September 30, 2024 and December 31, 2023, was $109.5 million and $126.1 million, respectively. Excluding Board.org, our ARR at December 31, 2023 and September 30, 2023 was $111.4 million and $109.3 million, respectively.

Run-Rate Revenue

Management also monitors Run-Rate Revenue, which we define as ARR plus non-subscription revenue earned during the last twelve months. We believe Run-Rate Revenue is an instructive indicator of our total revenue growth, incorporating the non-subscription revenue that we believe is a meaningful contribution to our business as a whole. Although our non-subscription business is non-recurring, we regularly sell different advisory services to repeat customers. The amount of actual subscription and non-subscription revenue that we recognize over any 12-month period is likely to differ from Run-Rate Revenue at the beginning of that period, sometimes significantly. Our Run-Rate Revenue at September 30, 2024 and December 31, 2023, was approximately $119.4 million and $139.7 million, respectively. Excluding Board.org, our Run-Rate Revenue at December 31, 2023 and September 30, 2023 was $124.5 million and $123.9 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. Customers from acquisitions are not included in NRR until they have been part of our condensed consolidated results for 12 months. Accordingly, the 2023 and 2022 Acquisitions are not included in our NRR for the three months ended September 30, 2023. Our calculation of NRR for any fiscal period includes the positive recurring revenue impacts of selling additional licenses and services to existing customers and the negative recognized recurring revenue impacts of contraction and attrition among this set of customers. Our NRR may fluctuate as a result of a number of factors, including the level of our revenue base, the level of penetration within our customer base, expansion of products and features, the timing of renewals, and our ability to retain our customers. Our calculation of NRR may differ from similarly titled metrics presented by other companies. NRR was 99% and 100% for the three months ended September 30, 2024 and 2023, 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

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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 93% and 90% of our total revenues for the nine months ended September 30, 2024 and 2023.

Subscription revenue

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

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

Advisory, advertising, and other revenue

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

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

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

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

Cost of revenues, 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.

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Amortization of intangible assets

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

Impairment of goodwill

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

Transaction costs, net

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

Interest expense, net

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

Fair value of financial instruments

The fair value of warrants, debt accounted for under the fair value option, and derivative liabilities are accounted for in accordance with ASC 815, ASC 825, and ASC 480. These financial instruments are marked to market each reporting period in accordance with ASC 820 with all gains and losses being recorded within the condensed consolidated statement of operations and comprehensive loss, with the exception of any gains or losses recorded due to changes in the fair value of instrument-specific credit risk being recorded as a component of accumulated other comprehensive income in the condensed consolidated balance sheets.

Income taxes

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

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

Results of Operations

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

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Comparison of the Consolidated Results for the Three and Nine Months Ended September 30, 2024 and September 30, 2023

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


	Three Months Ended September 30,						Change						Nine Months Ended September 30,						Change
(In thousands)	2024			2023			$			%			2024			2023			$			%
Revenues:
Subscription	$	27,238		$	30,057		$	(2,819	)		(9.4	)%	$	84,015		$	87,986		$	(3,971	)		(4.5	)%
Advisory, advertising, and other		2,201			3,952			(1,751	)		(44.3	)%		6,782			10,394			(3,612	)		(34.8	)%
Total revenues		29,439			34,009			(4,570	)		(13.4	)%		90,797			98,380			(7,583	)		(7.7	)%

Operating expenses:
Cost of revenues, including amortization		6,235			10,441			(4,206	)		(40.3	)%		20,342			28,863			(8,521	)		(29.5	)%
Research and development		3,250			4,540			(1,290	)		(28.4	)%		9,935			14,170			(4,235	)		(29.9	)%
Sales and marketing		9,068			11,235			(2,167	)		(19.3	)%		27,484			35,222			(7,738	)		(22.0	)%
Editorial		4,639			4,516			123			2.7	%		13,752			13,533			219			1.6	%
General and administrative		10,622			14,418			(3,796	)		(26.3	)%		37,958			48,813			(10,855	)		(22.2	)%
Amortization of intangible assets		2,436			2,899			(463	)		(16.0	)%		7,541			8,614			(1,073	)		(12.5	)%
Impairment of goodwill		-			-			-		NM				-			5,837			(5,837	)		(100.0	)%
Transaction (gains) costs, net		-			(579	)		579		NM				(4	)		1,138			(1,142	)	NM
Total operating expenses		36,250			47,470			(11,220	)		(23.6	)%		117,008			156,190			(39,182	)		(25.1	)%
Operating loss		(6,811	)		(13,461	)		6,650			(49.4	)%		(26,211	)		(57,810	)		31,599			(54.7	)%

Gain on sale of business		-			-			-		NM				(71,599	)		-			(71,599	)		100.0	%
Interest expense, net		5,585			8,018			(2,433	)		(30.3	)%		18,267			21,853			(3,586	)		(16.4	)%
Change in fair value of financial instruments		3,501			(7,157	)		10,658			(148.9	)%		3,174			(18,850	)		22,024			(116.8	)%
Loss on settlement		-			-			-		NM				-			3,474			(3,474	)	NM
Other (income) expense, net		(341	)		207			(548	)	NM				(82	)		245			(327	)	NM
Net (loss) income before income taxes		(15,556	)		(14,529	)		(1,027	)		7.1	%		24,029			(64,532	)		88,561		NM
(Benefit) provision from income taxes		(621	)		(62	)		(559	)	NM				1,129			181			948		NM
Net (loss) income	$	(14,935	)	$	(14,467	)	$	(468	)		3.2	%	$	22,900		$	(64,713	)	$	87,613		NM

NM - Not meaningful

Revenue:

Subscription revenue

Subscription revenue of $27.2 million for the three months ended September 30, 2024 decreased $2.8 million, or 9%, from $30.1 million for the three months ended September 30, 2023. Subscription revenue of $84.0 million for the nine months ended September 30, 2024 decreased $4.0 million for the nine months ended September 30, 2023.

The comparability of our revenues between periods was impacted by the Board.org sale and the 2023 Acquisition described under “Factors Impacting the Comparability of Our Results of Operations” above. The table below presents the primary items that impacted the comparability of our subscription revenues between periods.


	Change for the Three Months Ended						Change for the Nine Months Ended
	September 30, 2024 vs September 30, 2023						September 30, 2024 vs September 30, 2023
(In thousands)	$			%			$			%
Revenue change driver:
Decrease from sale of business		(3,388	)		(100	)%		(6,718	)		100	%
Increase from 2023 Acquisitions		140			100	%		1,131			100	%
Decrease from discontinued products		(165	)		(61	)%		(438	)		(53	)%
Increase from organic business		594			2	%		2,054			3	%
Revenues, net (total change)	$	(2,819	)		(9	)%	$	(3,971	)		(5	)%

The decrease in subscription revenue during the three and nine month periods is largely due to the impact from the sale of Board.org on March 11, 2024. This is partially offset by organic growth combined with increased revenue from the 2023 Acquisition, which was completed on January 27, 2023.

Advisory, advertising, and other revenue

Advisory, advertising, and other revenue was $2.2 million for the three months ended September 30, 2024, as compared to $4.0 million for the three months ended September 30, 2023. The decrease of $1.8 million, or 44%, was due largely to the discontinuation of unprofitable offerings that contributed approximately $1.1 million of revenue during the three months ended September 30, 2023.

Advisory, advertising, and other revenue was $6.8 million for the nine months ended September 30, 2024, as compared to $10.4 million for the three months ended September 30, 2023. The decrease of $3.6 million, or 35%, was due largely to the discontinuation of unprofitable offerings that contributed approximately $2.4 million of revenue during the nine months ended September 30, 2023.

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Revenue by Geography

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


	Three Months Ended September 30,				Change
(In thousands)	2024		2023		$			%
North America	$	23,073	$	27,025	$	(3,952	)		(14.6	)%
Europe		5,527		5,015		512			10.2	%
Australia		328		298		30			10.1	%
Asia		511		1,671		(1,160	)		(69.4	)%
Total revenues	$	29,439	$	34,009	$	(4,570	)		(13.4	)%


	Nine Months Ended September 30,				Change
(In thousands)	2024		2023		$			%
North America	$	72,134	$	79,921	$	(7,787	)		(9.7	)%
Europe		16,178		14,192		1,986			14.0	%
Australia		950		875		75			8.6	%
Asia		1,535		3,392		(1,857	)		(54.7	)%
Total revenues	$	90,797	$	98,380	$	(7,583	)		(7.7	)%

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 non-recurring revenues from 2023. Revenues outside of North America increased primarily due to our acquisition of Dragonfly on January 27, 2023 (included in Europe).

Cost of revenues, including amortization

Cost of revenues, including amortization was $6.2 million for the three months ended September 30, 2024, as compared to $10.4 million for the three months ended September 30, 2023. The decrease of $4.2 million, or 40%, was primarily attributable to the sale of Board.org on March 11, 2024, a decrease in amortization expense of $2.3 million, of which $1.9 million was recognized in the third quarter of 2023 related to a revision in useful lives of certain of its developed technology assets, combined with a decrease from workforce planning actions made primarily throughout the second half of 2023.

Cost of revenues, including amortization was $20.3 million for the nine months ended September 30, 2024, as compared to $28.9 million for the nine months ended September 30, 2023. The decrease of $8.5 million, or 30%, was primarily attributable to the sale of Board.org on March 11, 2024, a decrease in amortization expense of $3.0 million, of which $1.9 million was recognized in the third quarter of 2023 related to a revision in useful lives of certain of its developed technology assets, a decrease from workforce planning actions made primarily throughout the second half of 2023, and combined with decreases in data center costs of $0.9 million.

Research and development

Research and development expense was $3.3 million for the three months ended September 30, 2024 as compared to $4.5 million for the three months ended September 30, 2023. The decrease of $1.3 million, or 28%, was primarily attributable to a decrease of $1.2 million of workforce planning actions made throughout the second half of 2023 combined with a decrease attributable to the sale of Board.org on March 11, 2024.

Research and development expense was $9.9 million for the nine months ended September 30, 2024 as compared to $14.2 million for the nine months ended September 30, 2023. The decrease of $4.2 million, or 30%, was primarily attributable to a decrease of $3.7 million of workforce planning actions made throughout the second half of 2023 combined with a decrease of $0.2 million attributable to the sale of Board.org on March 11, 2024.

Sales and marketing

Sales and marketing expense was $9.1 million for the three months ended September 30, 2024 as compared to $11.2 million for the three months ended September 30, 2023. The decrease of $2.2 million, or 19%, was primarily attributable to a decrease attributable to the sale of Board.org on March 11, 2024 and a decrease of stock compensation expense of $0.5 million.

Sales and marketing expense was $27.5 million for the nine months ended September 30, 2024 as compared to $35.2 million for the nine months ended September 30, 2023. The decrease of $7.7 million, or 22%, was primarily attributable to a decrease of the workforce planning actions made throughout the second half of 2023 combined with a decrease attributable to the sale of Board.org on March 11, 2024 and a decrease of stock compensation expense of $0.5 million.

Editorial expense

Editorial expense was relatively flat at $4.6 million for the three months ended September 30, 2024 as compared to $4.5 million for the three months ended September 30, 2023.

Editorial expense was relatively flat at $13.8 million for the nine months ended September 30, 2024 as compared to $13.5 million for the nine months ended September 30, 2023.

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General and administrative

General and administrative expense was $10.6 million for the three months ended September 30, 2024 as compared to $14.4 million for the three months ended September 30, 2023. The decrease of $3.8 million, or 26%, was primarily attributable to a decrease of $1.7 million of stock compensation expense for vested awards and workforce planning actions made throughout the second half of 2023.

General and administrative expense was $38.0 million for the nine months ended September 30, 2024 as compared to $48.8 million for the nine months ended September 30, 2023. The decrease of $10.9 million, or 22%, was primarily attributable to a decrease of $4.2 million of stock compensation expense for vested awards, workforce planning actions made throughout the second half of 2023, and a reduction in legal and accounting costs.

Impairment of goodwill

Impairment of goodwill was $5.8 million recognized during the first quarter of 2023 related to the impairment of goodwill in the ESG reporting unit. No impairment of goodwill was recorded in the three or nine months ended September 30, 2024.

Amortization of intangibles

Amortization of intangibles was $2.4 million for the three months ended September 30, 2024 as compared to $2.9 million for the three months ended September 30, 2023.

Amortization of intangibles was $7.5 million for the nine months ended September 30, 2024 as compared to $8.6 million for the nine months ended September 30, 2023.

Transaction (gains) costs, net

Transaction gains were $0.0 million for the three months ended September 30, 2024, as compared to transaction gains of $0.6 million for the three months ended September 30, 2023. The change of $0.6 million primarily relates to contingent compensation expense gains in 2023 related to the reversing of previously recognized earnout liabilities partially offset by changes in earnout liabilities related to our 2021 Acquisitions.

Transaction gains were $0.0 million for the nine months ended September 30, 2024, as compared to transaction costs of $1.1 million for the nine months ended September 30, 2023. The change of $1.1 million relates to costs of $1.4 million related to the acquisition of Dragonfly in 2023 and non-capitalized costs related to the Business Combination, partially offset by contingent compensation gains from the reversal of previously recognized expense and earnout liabilities.

Interest expense, net

Interest expense was $5.6 million for the three months ended September 30, 2024 as compared to $8.0 million for the three months ended September 30, 2023. The decrease in interest expense of $2.4 million was primarily due to the repayment of the Senior Term Loan.

Interest expense was $18.3 million for the nine months ended September 30, 2024 as compared to $21.9 million for the nine months ended September 30, 2023. The decrease in interest expense of $3.6 million was primarily due to the repayment of the Senior Term Loan.

Change in fair value of financial instruments

Change in fair value of financial instruments was a $3.5 million loss for the three months ended September 30, 2024 as compared to a $7.2 million gain for the three months ended September 30, 2023. The change in financial instruments of $10.7 million is primarily related to the changes in the Dragonfly Seller Convertible Notes and New GPO Note partially offset by the change in the fair value adjustment of the warrant liabilities.

Change in fair value of financial instruments was a $3.2 million loss for the nine months ended September 30, 2024 as compared to a $18.9 million gain for the nine months ended September 30, 2023. The change in financial instruments of $22.1 million is primarily related to the change in the fair value adjustment of the warrant liabilities that were assumed in connection with the Business Combination combined with the changes in the Dragonfly Seller Convertible Notes, New GPO Note, and the Era Convertible Notes.

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.

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Adjusted Gross Profit and Adjusted Gross Profit Margin

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


	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	2024			2023			2024			2023
Total revenues	$	29,439		$	34,009		$	90,797		$	98,380
Costs of revenue, including amortization of capitalized software development costs and acquired developed technology		(6,235	)		(10,441	)		(20,342	)		(28,863	)
Gross Profit	$	23,204		$	23,568		$	70,455		$	69,517
Gross Profit Margin		79	%		69	%		78	%		71	%
Gross Profit		23,204			23,568			70,455			69,517
Amortization of intangible assets		2,224			4,796			7,159			10,454
Adjusted Gross Profit	$	25,428		$	28,364		$	77,614		$	79,971
Adjusted Gross Profit Margin		86	%		83	%		85	%		81	%

EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin

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


	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	2024			2023			2024			2023
Net loss	$	(14,935	)	$	(14,467	)	$	22,900		$	(64,713	)
Income tax (benefit) provision		(621	)		(62	)		1,129			181
Depreciation and amortization		4,961			8,030			15,604			20,074
Interest expense, net		5,585			8,018			18,267			21,853
EBITDA		(5,010	)		1,519			57,900			(22,605	)
Gain on sale of business (a)		-			-			(71,599	)		-
Stock-based compensation		4,181			6,224			13,885			18,212
Change in fair value of financial instruments (b)		3,501			(7,157	)		3,174			(18,850	)
Other non-cash charges (c)		17			(704	)		93			5,227
Acquisition and disposal related costs (d)		40			12			1,138			1,391
Employee severance costs (e)		437			560			635			1,310
Non-capitalizable debt raising costs		49			-			527			316
Business Combination with DSAC (f)		-			81			-			415
Loss contingency (g)		-			201			-			4,091
Costs incurred related to the Special Committee (h)		229			-			682			-
Adjusted EBITDA	$	3,444		$	736		$	6,435		$	(10,493	)
Adjusted EBITDA Margin		11.7	%		2.2	%		7.1	%		(10.7	)%

(a)

Reflects the gain on disposal from the sale of Board.org on March 11, 2024.

(b)

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

(c)

Reflects the non-cash impact of the following: (i) charge of $49 in the first quarter of 2024, $31 in the second quarter of 2024, and $17 in the third quarter of 2024 related to the unrealized loss on investments; (ii) gain of $4 in the first quarter of 2024 from the change in fair value related to the contingent consideration and contingent compensation related to the 2021, 2022, and 2023 Acquisitions; (iii) impairment of goodwill of $5,837 in the first quarter of 2023, (iv) charge of $115 in the third quarter of 2023 related to the unrealized loss on investments; (v) loss from equity method investment of $34 in the first quarter of 2023, loss from equity method investment of $56 in the second quarter of 2023, and a gain from equity method investment of $147 in the third quarter of 2023, and (vi) charge of $2 in the first quarter of 2023, a charge of $2 in the second quarter of 2023, and a gain of $672 in the third quarter of 2023 from the change in fair value related to the contingent consideration and contingent compensation related to the 2021, 2022, and 2023 Acquisitions.

(d)

In 2024 reflects the costs incurred related to the sale of Board.org, principally consisting of accounting, tax, and legal fees. In 2023 reflects the costs incurred to identify, consider, and complete business combination transactions consisting of advisory, legal, and other professional and consulting costs.

(e)

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

(f)

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

(g)

Reflects (i) $3,474 non-cash loss contingency charge related to the settlement with GPO FN Noteholder LLC recorded in the second quarter of 2023 and (ii) accounting and legal costs incurred associated with the settlement with GPO FN Noteholder LLC totaling $168 in the first quarter of 2023, $248 in the second quarter of 2023, and $201 in the third quarter of 2023.

(h)

Reflects costs incurred related to the Special Committee.

Liquidity and Capital Resources

Historically the Company’s cash flows from operations have not been sufficient to fund its current operating model and the Company funded operations through raising equity and debt. At September 30, 2024, the Company’s cash, cash equivalents, restricted cash, and short-term investments was $33.4 million compared to $24.4 million at December 31, 2023.

The Company had a negative working capital balance of $45.8 million (excluding cash and short-term investments) at September 30, 2024 and had an accumulated deficit of $793.5 million and $816.4 million as of September 30, 2024 and December 31, 2023, respectively, and has incurred net losses of $48.7 million (excluding the gain on sale of business) for the nine months ended September 30, 2024 and $64.7 million for the nine months ended September 30, 2023, respectively. Management expects that significant on-going operating and capital expenditures will be necessary to continue to implement the Company’s business plan of entering new markets, acquiring new businesses and technologies, and investing in infrastructure and product development.

Our ability to maintain our minimum cash requirement, fund our future cash interest requirements under our senior term loan and fund our operating expenses and capital expenditure requirements will depend in part on general economic, financial, competitive, legislative,

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regulatory and other conditions that may be beyond our control. The Company has implemented various cost saving measures throughout 2023 and into 2024 and is actively seeking additional sources of capital. Volatility in the credit markets may have an adverse effect on our ability to obtain debt financing. If we raise additional funds through the issuance of equity, equity-linked or debt securities, those securities may have rights, preferences or privileges senior to the rights of our common stock, or may require us to agree to unfavorable terms, and our existing stockholders may experience significant dilution.

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


(In thousands)	September 30, 2024		December 31, 2023
Senior Term Loan	$	93,365	$	158,228
New GPO Note		50,434		48,575
Convertible Notes		15,595		14,052
Dragonfly Seller Convertible Notes		13,641		12,223
Era Convertible Note		-		5,500
Aicel Convertible Note		1,150		1,156
PPP Loan		63		144
Total Principal plus PIK Outstanding	$	174,248	$	239,878

Senior Term Loan

In connection with the closing of the business combination with DSAC, FiscalNote entered into a $150.0 million senior credit agreement (the “Credit Agreement”) with Runway Growth Finance Corp., ORIX Growth Capital, LLC, Clover Orochi LLC, and ACM ASOF VIII SaaS FinCo LLC (together the "Senior Lenders”). The Credit Agreement also provides for an uncommitted incremental loan facility totaling $100.0 million available upon notice if the Company meets certain financial growth criteria and other customary requirements (the “New Incremental Term Facility”) (collectively the “Senior Credit Facility”). The annual interest of the Senior Term Loan consists of two components: a cash interest component of (a) the greater of (i) Prime Rate plus 5.0% per annum and (ii) 9.0% payable monthly, and (b) interest payable in kind component of 1.00% per annum, payable in kind monthly. The Senior Credit Facility will mature on July 29, 2027. Pursuant to Amendment No. 4, beginning on August 15, 2026, the Senior Term Loan must be repaid in even amounts on a monthly basis over the remaining 12 months, with the final balance due on July 15, 2027. Borrowings under our Senior Credit Facility are collateralized by substantially all assets of the borrowers and guarantors party thereto.

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

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

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

In connection with the completion of the sale of Board.org on March 11, 2024, the Company also entered into Amendment No. 4 to the Credit Agreement (the “Amendment No. 4”), pursuant to which, among other things, the lenders consented to the release the liens on Board.org’s assets and permitted the consummation of the sale in exchange for the permanent retirement of $65.7 million of term loans under the Credit Agreement. The Company also made a payment of $1.3 million and $5.8 million of related prepayment and exit fees, respectively. Amendment No. 4 also requires that upon receipt of any earn-out payment pursuant to the equity purchase agreement underlying the sale of Board.org, the Company will prepay outstanding obligations under the Credit Agreement in an amount equal to 70% of the net proceeds received from such earn-out payment, together with a prepayment fee and an exit fee, equal to 5.75% of the amount of such prepayment.

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

In connection with the completion of the sale of Aicel Technologies on October 31, 2024, the Company repaid $5.0 million of principal.

During the nine months ended September 30, 2024, we made cash interest payments totaling $11.7 million related to the Senior Term Loan.

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make investments, in each case subject to certain exceptions. In addition to the negative covenants, there were four financial covenants in place at September 30, 2024: a minimum cash balance requirement, minimum annual recurring revenue requirement, an adjusted EBITDA requirement (as defined in the Credit Agreement, as amended) and a capital expenditure limitation. At September 30, 2024, the Company was in compliance with all of the covenants. Upon the occurrence of an event of default, in addition to the lenders being able to declare amounts outstanding under the Senior Term Loan due and payable the lenders can elect to increase the interest rate by 5.0% per annum.

See Note 8 “Debt” to the condensed consolidated financial statements included elsewhere herein.

New GPO Note

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

The New GPO Note is subordinate to the Company’s obligations under its New Senior Term Loan which limits certain actions that the Company and the Investor may take under the New GPO Note. At any time prior to the July 3, 2028, the Investor is entitled to convert all or any portion of the principal amount of the New GPO Note and accrued interest thereon into shares of Class A Common Stock at $7.92 per share. The New GPO Note is subject to customary anti-dilution adjustments for stock splits and similar transactions and, subject to standard exceptions, weighted average anti-dilution protection. The principal amount, together with accrued interest thereon, of the New GPO Note is redeemable by the Company in whole or in part based on certain conditions as defined in the New GPO Note.

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

Convertible Notes

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

Dragonfly Seller Convertible Note

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

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.

Aicel Convertible Note

On July 29, 2022, we acquired Aicel Technologies and assumed its $1.0 million convertible note. The Aicel Convertible Note is subordinate to our New Senior Credit Facility, accrues interest of 1% per annum, payable in kind monthly, and matures in July 2027. On October 31, 2024, the Company sold Aicel Technologies and the convertible note was assumed by the buyer, see Note 18, Subsequent Events for additional information.

PPP Loan

The PPP Loan requires monthly principal and interest payments of approximately $9 thousand until maturity in 2025.

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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 $6.9 million and $6.0 million for the nine months ended September 30, 2024 and 2023, respectively.

Cash Flow Summary

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


	Nine Months Ended September 30,
	2024			2023
Net cash provided by (used in):
Operating activities	$	(3,950	)	$	(31,940	)
Investing activities	$	84,509		$	(18,336	)
Financing activities	$	(71,574	)	$	6,570
Effect of exchange rates on cash	$	86		$	(184	)
Net change in cash and cash equivalents	$	9,071		$	(43,890	)

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 nine months ended September 30, 2024 was $4.0 million, a decrease of $28.0 million compared to the nine months ended September 30, 2023. The primary factors affecting our net operating cash flows during this period was our net income of $22.9 million, which includes non-cash expense items totaling $26.9 million, including a gain on disposal of business of $71.6 million, non-cash and paid-in kind interest expense of $8.2 million, stock-based compensation expense of $13.9 million, a gain due to the change in fair value of financial instruments of $3.2 million, non-cash lease expense of $1.6 million, amortization and depreciation of $18.4 million, and other non-cash items of $0.6 million.

Cash used in operating activities in the nine months ended September 30, 2023 was $31.9 million, a decrease of $25.6 million compared to the nine months ended September 30, 2022. The primary factors affecting our net operating cash flows during this period was our net loss of $64.7 million, which includes non-cash expenses items totaling $40.7 million, including impairment of goodwill of $5.8 million, non-cash and paid-in kind interest expense of $7.0 million, stock-based compensation expense of $18.2 million, a gain due to the change in fair value of financial instruments of $18.9 million, non-cash lease expense of $2.9 million, loss on settlement with GPO of $3.5 million, and amortization and depreciation of $22.7 million, other non-cash items of $0.5 million and the effect of changes in operating assets and liabilities that resulted in cash outflows of $8.0 million.

Investing activities

Net cash provided by (used in) investing activities in the nine months ended September 30, 2024 was $84.5 million compared to $(18.3) million in the nine months ended September 30, 2023. Net cash provided by investing activities in the nine months ended September 30, 2024 primarily consisted of cash proceeds from the sale of a business of $91.4 million partially offset by cash paid of $6.8 million of capital expenditures primarily related to software development costs. Net cash used in investing activities in the nine months ended September 30, 2023 was $18.3 million, which primarily consisted of cash paid for acquisitions, net of cash acquired of $5.0 million and cash paid of $6.0 million of capital expenditures primarily related to software development costs and purchases of short-term investments of $7.4 million.

Financing activities

Net cash (used in) provided by financing activities in the nine months ended September 30, 2024 was $(71.6) million, compared to $6.6 million for the nine months ended September 30, 2023. Net cash used in financing activities during the nine months ended September 30, 2024 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 $0.5 million. Net cash provided by financing activities in the nine months ended September 30, 2023 was $6.6 million, which primarily consisted of $6.0 million from Amendment 1 to the Credit Agreement and $0.6 million from the proceeds from the exercise of stock options.

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.

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Recently Issued Accounting Pronouncements

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

Critical Accounting Estimates and Policies

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

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

There were no significant and material changes in our critical accounting policies and use of estimates during the nine months ended September 30, 2024, as compared to those disclosed in "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Estimates and Accounting Policies" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 15, 2024.

Revenue Recognition

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

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

Costs Capitalized to Obtain Revenue Contracts

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

Business Combinations

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

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

•

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

•

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

•

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

•

discount rates;

•

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

•

fair value of earnout consideration.

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

Goodwill and Intangible Assets

Significant judgment is required to estimate the fair value of our reporting units. Accordingly, we typically obtain the assistance of third-party valuation specialists for significant reporting units for purposes of determining whether there is goodwill impairment. The fair value estimates are based on available historical information and on future expectations. We typically estimate the fair value of these assets

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using the income method, which is based on the present value of estimated future cash flows attributable to the respective assets. The valuations used to establish and to test goodwill for impairment are dependent on a number of significant estimates and assumptions, including macroeconomic conditions, overall growth rates, competitive activities, cost containment and margin progression, Company business plans and the discount rate applied to cash flows.

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

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

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

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

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

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

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

Warrant Liabilities

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

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

Debt instruments measured at fair value

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

Deferred Taxes and Valuation Allowance

Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts that are expected to be realized based on the weighting of positive and negative evidence. Future realization of deferred tax assets ultimately depends on the existence of sufficient taxable income of the appropriate character (for example, ordinary income or capital gain) within the carryback or carryforward periods available under the applicable tax law. We regularly review the deferred tax assets for recoverability based on historical taxable income, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies.

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Our judgment regarding future profitability may change due to many factors, including future market conditions and the ability to successfully execute its business plans and/or tax planning strategies. Should there be a change in the ability to recover deferred tax assets, the tax provision would increase or decrease in the period in which the assessment is changed.

Incremental Borrowing Rate Used to Calculate Lease Balances

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

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Item 3. Quantitative and Qualitative Disclosures About Market Risks.

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

Foreign Currency Exchange Risk

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

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

Interest Rate Risk

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

As of September 30, 2024, we had outstanding borrowings on our Senior Term Loan of $93.4 million, which bear cash interest at a floating rate based on the Prime Rate plus an applicable margin. At September 30, 2024, the interest rate on our Senior Term Loan was 13.0%. Assuming no change in the outstanding borrowings on our Senior Term Loan, we estimate that a one percentage point increase in the Prime Rate would increase our annual cash interest expense by approximately $0.9 million.

Inflation Risk

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

Item 4. Controls and Procedures.

Limitations on Effectiveness of Disclosure Controls and Procedures

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

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining adequate internal controls over financial reporting and has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of September 30, 2024. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with general accepted accounting principles. Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of September 30, 2024.

Update on Remediation of Previously Reported Material Weaknesses

Management identified three material weaknesses in internal controls in the areas of (i) information technology general controls related to administrative user access to the Company’s information systems that are relevant to the preparation of the financial statements to ensure appropriate segregation of duties and to adequately restrict access to financial applications and data; and user access provisioning and monitoring; (ii) Ineffective controls over the accounting for fair market value changes to financial instruments; and (iii) ineffective controls over the accounting for stock compensation accounting. Management is taking steps to successfully remediate these material weaknesses by implementing remediation efforts described below.

Management is committed to the remediation of the material weaknesses described above, as well as the continued improvement of our internal control over financial reporting. Our efforts resulting in successful remediation include:

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Administrator access to financially relevant systems has been restricted to relevant system owners

Enhanced design of access reviews performed across each financially relevant system

Additional review procedures involving fair market value changes to financial instruments

Additional review procedures surrounding the accounting for stock compensation.

Notwithstanding the assessment that our internal controls over financial reporting are not effective and that material weaknesses exist, we believe we have employed supplementary procedures to ensure the financial statements contained in this report fairly present in all material respects, our financial position as of September 30, 2024.

Changes in Internal Control over Financial Reporting

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

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors.

As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC on March 15, 2024.

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

Unregistered Sales of Equity Securities

Other than as reported on each of our Current Reports on Form 8-K, we did not have any unregistered sales of equity securities during the three months ended September 30, 2024.

Use of Proceeds

Not applicable

Purchase of Equity Securities

We did not repurchase shares of our common stock during the three months ended September 30, 2024.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Adoption, Modification or Termination of Rule 10-b-5-1 Plans and Certain Other Trading Arrangements

During the three months ended September 30, 2024, Dominque Taylor, Senior Vice President, People and DEIBA adopted a "Rule 10-b-5-1 trading arrangement," as defined in Item 408(a) of Regulation S-K.

Securities Purchase Agreement

On November 12, 2024 (the “Issuance Date”), FiscalNote Holdings, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with EGT 10, LLC (the “Investor”), an investment vehicle managed by Era Global Technologies, LLC (“Era”), pursuant to which the Company issued a senior subordinated convertible note (the “Note”) in an aggregate principal amount of $5.5 million to the Investor (the “Principal Amount”). Era is an investment firm backed by global family offices across multiple countries and markets. Era has directly or indirectly co-invested in various ventures at which Mr. Timothy Hwang, the Company’s Chairman, Chief Executive Officer and Co-Founder, is serving as a director.

The Note matures on November 12, 2027 (the “Maturity Date”) and will bear cash interest at a rate equal to the applicable federal rate published by the Internal Revenue Service beginning on the six-month anniversary of the Issuance Date. The Note is contractually subordinated to the Company’s obligations under its senior secured indebtedness, and accordingly the Company’s right to make certain cash payments in connection therewith is limited by the terms of such subordination agreement (the “Subordination Agreement”). The Investor may convert the Note into shares (the “Underlying Shares”) of the Company’s class A common stock, par value $0.0001 per share (the “Common Stock”), beginning on the six-month anniversary of the Issuance Date (the “Initial Conversion Date”) based on the volume weighted average price of the trailing 30 trading day period prior to the conversion. In addition, the Company may elect to convert all or a portion of the Note into the Underlying Shares (the “Optional Conversion Right”) if the Underlying Shares are registered for resale under the Securities Act of 1933, as amended (the “Securities Act”).

Pursuant to the Purchase Agreement, on the Issuance Date, the Company also issued, as a success fee, 2,549,129 shares of Common Stock to the Investor (the “Success Fee Shares”). The Investor is not permitted to sell the Success Fee Shares before the six-month anniversary of the Issuance Date; provided, however, that if the Company elects to convert any portion of the Note into Underlying Shares pursuant to its Optional Conversion Right, then the Investor may sell a pro-rata portion of the Success Fee Shares.

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The Purchase Agreement also requires the Company to issue additional shares of Common Stock (“Additional Shares”) to the Investor if the Investor sells the Success Fee Shares and Underlying Shares within 12 months after the earlier of (i) issuance of all Underlying Shares issued pursuant to the Optional Conversion Right or (ii) the Initial Conversion Date (the “Sell-Off Period”), to the extent such sales of the Success Fee Shares and the Underlying Shares during the Sell-Off Period do not generate aggregate cash proceeds to the Investor that equal or exceed the sum of (1) the Principal Amount plus (2) $2.75 million. Any such Additional Shares would be valued based on the volume weighted average price of the trailing 30 trading day period, calculated prior to the date of any such issuance. In the event the Investor sells the Underlying Shares, Success Fee Shares and/or any Additional Shares for an amount equal to the sum of (1) the Principal Amount plus (2) $2.75 million, the Investor shall be required to return any remaining Underlying Shares, Success Fee Shares and/or Additional Shares, as applicable, and cancel any remaining amount of the Principal Amount owed by the Company.

If the Company were to complete a change of control, merger, combination or similar transaction (a “Fundamental Change”) prior to the expiration of the Sell-Off Period, the Company’s obligation to issue Additional Shares shall be terminated and the Investor will have the right to accelerate the maturity date of the Note. In addition, the Company, in lieu of its obligation to issue Additional Shares, shall be required to repurchase the Success Fee Shares then-held by the Investor for cash consideration equal to $2.75 million minus the net cash proceeds received by the Investor from any prior sales of the Success Fee Shares in the event that any of the following occur: (i) a Fundamental Change results in the Company’s shares not being listed for trading on a national stock exchange, (ii) the Company were to repay the Note prior to the Maturity Date and prior to the expiration of the Sell-Off Period, or (iii) the Company were to file for bankruptcy or experience a similar insolvency event prior to the expiration of the Sell-Off Period.

The Note provides for customary events of default including failure to pay amounts due and owing under the Notes, failure to deliver the Underlying Shares, and other customary events of default similar to those provided under the terms of the Company’s senior secured indebtedness.

The Purchase Agreement includes certain customary representations, warranties and covenants with respect to the Company and the Investor. The representations, warranties and covenants contained in the Purchase Agreement were made only for purposes of such agreement and as of specific dates, were solely for the benefit of the parties therein, and may be subject to limitations agreed upon by the contracting parties. Accordingly, the Purchase Agreement is incorporated herein by reference only to provide investors with information regarding the terms of the Purchase Agreement, and not to provide investors with any other factual information regarding the Company or its business, and should be read in conjunction with the disclosures in the Company’s periodic reports and other filings with the SEC.

The foregoing descriptions of the Purchase Agreement and the Note do not purport to be complete and are qualified in their entirety by reference to the Purchase Agreement and the form of Note, copies of which are filed as Exhibit 10.1 and Exhibit 10.2, respectively, to this Quarterly Report on Form 10-Q and are incorporated herein by reference.

Registration Rights Agreement

On the Issuance Date, in connection with the Purchase Agreement, the Company also entered into a registration rights agreement with the Investor (the “Registration Rights Agreement”), requiring the Company to register for resale the Underlying Shares and Success Fee Shares by filing with the SEC a resale registration statement under the Securities Act within seven days of the Issuance Date. Additionally, the Company is required to register for resale the Additional Shares, if any, by filing with the SEC a second resale registration statement within seven days of the issuance of any Additional Shares.

The foregoing description of the Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the Registration Rights Agreement, a copy of which is filed as Exhibit 10.3 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.

Unregistered Sales of Equity Securities

The Note, Underlying Shares, Success Fee Shares and Additional Shares, if any, were or will be, as applicable, issued to the Investor in a private placement pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506(b) promulgated thereunder.

In addition, on the Issuance Date, the Company issued 650,000 shares of Common Stock to Northland Securities, Inc. (the “Brokerage Fee Shares”) to cover the brokerage costs associated with liquidating (i) any Underlying Shares issued pursuant to the Optional Conversion Right and the Success Fee Shares and (ii) the shares of Common Stock previously issued to Era in connection with the Securities Purchase Agreement, by and between the Company and EGT-East LLC, dated as of December 8, 2023, as modified from time to time. The Brokerage Fee Shares were issued in a private placement pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act and Rule 506(b) promulgated thereunder. The Company is required to register for resale the Brokerage Fee Shares.

Item 6. Exhibits.

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

    Exhibit
Number

    Description

    Incorporation by Reference (where a report is indicated below, that document has been previously filed with the SEC and the applicable exhibit is incorporated by reference thereto)

    2.1

    Agreement and Plan of Merger, dated as of November 7, 2021, by and among Duddell Street Acquisition Corp. (renamed “FiscalNote Holdings, Inc.”), Grassroots Merger Sub, Inc. and FiscalNote Holdings, Inc. (renamed “FiscalNote Intermediate Holdco, Inc.”).

    Annex A to the Proxy Statement/Prospectus filed on July 5, 2022 (File No.333-261483).

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2.2	First Amendment to Agreement and Plan of Merger, dated as of May 9, 2022, by and among Duddell Street Acquisition Corp. (renamed “FiscalNote Holdings, Inc.”), Grassroots Merger Sub, Inc. and FiscalNote Holdings, Inc. (renamed “FiscalNote Intermediate Holdco, Inc.”).	Annex A-2 to the Proxy Statement/Prospectus filed on July 5, 2022 (File No.333-261483).
3.1	Certificate of Incorporation of FiscalNote Holdings, Inc. (f/k/a/ Duddell Street Acquisition Corp.).	Exhibit 3.1 to the Current Report on Form 8-K filed on August 2, 2022 (File No. 001-396972)
3.2	Bylaws of FiscalNote Holdings, Inc. (f/k/a/ Duddell Street Acquisition Corp.).	Exhibit 3.2 to the Current Report on Form 8-K filed on August 2, 2022 (File No. 001-396972)
4.1	Description of Securities.	Exhibit 4.1 to the Annual Report on Form 10-K filed on March 28, 2023.
4.2	Warrant Agreement, dated as of October 28, 2020, by and among Duddell Street Acquisition Corp ad Continental Stock Transfer & Trust Company, as warrant agent.	Exhibit 4.1 of DSAC’s Current Report on Form 8-K filed with the SEC on November 2, 2020 (File No. 333-249207).
4.3	Form of Restricted Stock Agreement, dated as of March 25, 2022, pursuant to the Membership Interest Purchase Agreement, dated as of November 19, 2021, by and among FiscalNote, Inc., the unitholders listed on the Appendix 1 thereto and Legacy FiscalNote.	Exhibit 4.6 of DSAC’s Form S-4/A filed with the SEC on June 27, 2022 (File No. 333-261483).
4.4	Form of Warrant	Exhibit 10.2 to the Current Report on Form 8-K filed on March 20, 2023 (File No. 001-39672).
10.1	Securities Purchase Agreement, dated as of November 12, 2024, by and between FiscalNote Holdings, Inc. and EGT 10, LLC.	Filed with this report.
10.2	Form of Note	Filed with this report.
10.3	Registration Rights Agreement, dated as of November 12, 2024, by and between FiscalNote Holdings, Inc, and EGT 10, LLC.	Filed with this report.
31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a).	Filed with this report.
31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a).	Filed with this report.
32	Section 1350 Certifications.	Furnished with this report.
101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.	Submitted electronically with this report.
101.SCH	Inline XBRL Taxonomy Extension Schema Document.	Submitted electronically with this report.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).	Submitted electronically with this report.

* All schedules have been omitted in accordance with Item 601(a)(5) of Regulation S-K. The Registrant agrees to furnish a copy of all omitted schedules to the SEC upon its request.

+ Indicates a management contract or compensatory plan.

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SIGNATURES

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


	FISCALNOTE HOLDINGS, INC.

Date: November 12, 2024	By:	/s/ Jon Slabaugh
		Name: Jon Slabaugh
		Title: Chief Financial Officer

Date: November 12, 2024	By:	/s/ Timothy Hwang
		Name: Timothy Hwang
		Title: Chief Executive Officer