Note 8 – Long Term Debt

Long-term debt consisted of the following:

Senior Convertible Notes 

On October 5, 2021, we entered into a securities purchase agreement (the “2021 SPA”) resulting in the issuance of the Senior Convertible Notes to two institutional investors in a private placement transaction. The Senior Convertible Notes were issued for an aggregate principal amount of $20.0 million for $18.0 million reflecting an original issue discount of 10 percent or $2.0 million. The net proceeds from the issuance of the Senior Convertible Notes were used to pay off and retire convertible notes that were issued in 2020 and fund acquisitions and continued investment in our technology infrastructure. The Senior Convertible Notes rank senior to all our other and future indebtedness. The Senior Convertible Notes had a maturity date of October 4, 2024 and could be repaid in shares of Common Stock or cash. The Senior Convertible Notes were convertible into shares of Common Stock at a conversion price of $95.00 per share effective October 4, 2022 which represented an adjustment, as required by the 2021 SPA, from $124.20 per share as a result of the offering of convertible redeemable preferred stock on that date (see Note 11). In connection with the Exchange Agreements that were entered into in January 2023, the conversion price of the Senior Convertible Notes was lowered to $24.00 from $95.00 per share through June 14, 2023 at which time it was further reduced to $10.00 per share due to the offering of Common Stock in connection with a private placement transaction (see Note 11).

In connection with the 2021 SPA and the Senior Convertible Notes, we and certain of our subsidiaries entered into the Credit Agreements with the lead investor, in its capacity as collateral agent (in such capacity, the “Collateral Agent”) for all holders of the Senior Convertible Notes. The Credit Agreements created a first priority security interest in all of the personal property of the Company and certain of its subsidiaries of every kind and description, tangible or intangible, whether currently owned and existing or created or acquired in the future. 

In order to consummate the Merger and the Sale Transaction, we entered into the Release and Termination Agreement, to obtain a release under, and termination of the Credit Agreements. The Company and its subsidiaries were released from the Credit Agreements on February 9, 2024 upon receipt by the holders of the Senior Convertible Notes of (i) the shares of Common Stock issued pursuant to Amendment No. 2 to the Exchange Agreements and (ii) assignment of interests by the holders of the Senior Convertible Notes (who were also holders of the Series C Shares) in the Company’s ERTC. At that time, the Credit Agreements were deemed terminated and the Senior Convertible Notes were deemed settled in full.

Method of Accounting and Activity During the Periods for the Senior Convertible Notes

Upon the date that they were issued, we made an irrevocable election to apply the fair value option to account for the Senior Convertible Notes. Disclosures, including assumptions used to determine the fair values, are provided in Note 13.

During the year ended December 31, 2023 we made $11.5 million in principal settlements on the Senior Convertible Notes, of which $4.9 million was settled in cash, $3.2 million was settled in 237,213 shares of Common Stock and the remaining $3.4 million was settled in 3,422 shares of Series C Preferred Stock. During the year ended December 31, 2022, we made $5.3 million in principal settlements on the Senior Convertible Notes, of which $1.4 million was settled in cash and the remaining $3.9 million was settled in 10,371 shares of Common Stock. During the year ended December 31, 2023, the fair value of the Senior Convertible Notes increased by $0.4 million. Of the adjustment, an increase of less than $0.1 million resulted from instrument-specific credit risk and was recognized as other comprehensive loss and accumulated in stockholders’ equity (deficit) and an increase of $0.4 million was recognized in our consolidated statement of operations as a change in fair value of convertible notes. During the year ended December 31, 2022, the fair value of the Senior Convertible Notes increased by $2.7 million. Of the adjustment, a decrease of $0.2 million resulted from instrument-specific credit risk and was recognized as other comprehensive income and accumulated in stockholders’ equity (deficit) and an increase of $2.9 million was recognized in our consolidated statement of operations as a change in fair value of convertible notes. As of December 31, 2023 and 2022, the fair values of the Senior Convertible Notes on our consolidated balance sheet were $3.5 million and $14.6 million, respectively.

Amended and Restated Secured Promissory Note

On May 3, 2023, we received $1.0 million of proceeds from MJ Acquisition in connection with the issuance of the MJA Note which, after receipt of an additional $0.650 million in proceeds in connection with certain amendments, was restated in the form of the Amended and Restated Secured Promissory Note. The Amended and Restated Secured Promissory Note provided for simple interest at the rate of ten percent (10%) per annum from the date of issuance through the completion of the Sale Transaction. Upon closing of the Sale Transaction, the Amended and Restated Secured Promissory Note was required to be converted into a number of shares of Common Stock with value equivalent to the principal amount outstanding. We have elected not to apply the fair value option to this note.

In connection with the Amended and Restated Secured Promissory Note, we entered into the MJA Credit Agreements that, among other items, provided for the security and pledge of certain collateral and the guarantee by certain subsidiaries of the Company for obligations under the Amended and Restated Secured Promissory Note. Furthermore, we, MJ Acquisition, the Collateral Agent for the Senior Convertible Notes and the holders of the Senior Convertible Notes entered into certain subordination and intercreditor agreements that provided for the issuance of the Amended and Restated Secured Promissory Note and its priority as junior to the Senior Convertible Notes with respect to security and ultimate settlements.

Upon completion of the Merger and the Sale Transaction, the MJA Release and Termination Agreement released the Company and its subsidiaries from all of the security interests and guarantees set forth in the MJA Credit Agreements and on February 9, 2024, the entire $1.650 million principal amount was converted into shares of Common Stock and all accrued interest was forgiven with such Amended and Restated Secured Promissory Note being deemed paid in full.

Maturities of Debt

Maturities of our debt as of December 31, 2023 are presented below.