CONVERTIBLE NOTES PAYABLE – RELATED PARTIES

3 Months Ended

Mar. 31, 2024

Convertible Notes Payable Related Parties

CONVERTIBLE NOTES PAYABLE – RELATED PARTIES

17. CONVERTIBLE NOTES PAYABLE – RELATED PARTIES

The convertible notes payable, related party were issued as part of consideration for the acquisition of Forever 8. The discount was calculated based on the fair value of the instrument as of October 1, 2022. Principal due under the convertible note payable – related parties was as follows at March 31, 2024 and December 31, 2023:

	March 31, 2024		December 31, 2023
Notes payable, 12%		27,198,734		27,383,700
Less: current portion		11,500,000		11,500,000
Notes payable, long-term potion	$	15,698,734	$	15,883,700
Less: debt discount		1,500,000		1,750,000
Notes payable, long-term portion, net		14,198,734		14,133,700

Interest expense under convertible notes payable – related parties was $1,071,511 and $937,000, of which $250,000 and $250,000 was related to amortization of the debt discount, for the three months ended March 31, 2024 and 2023, respectively. The Company recognized a gain on extinguishment of $3,006,896 related to the forgiveness of accrued interest for the three months ended March 31, 2024.

On March 17, 2024, the Company entered into an agreement to amend certain provisions of the Seller Notes (the “Seller Notes Amendment”) previously issued under the terms of the MIPA. Pursuant to the Seller Notes Amendment, the Sellers agreed, among other things, to (i) forgive, without the payment of any additional consideration, accrued interest on the Seller Notes in an aggregate amount of approximately $3.0 million, (ii) convert approximately $1.1 million of accrued interest on the Seller Notes into 1.4 million shares of common stock of the Company, and (iii) defer interest and any payments due on the Seller Notes until October 30, 2024. In addition, effective March 17, 2024, the Sellers waived any right to receive any earnout consideration as provide for in the MIPA. The Company recognized a gain on forgiveness of earnout of $6,100,000 for the three months ended March 31, 2024.

On March 27, 2024, the Company issued 120,974 shares of common stock to convert $99,199 of principal.