CONVERTIBLE NOTES PAYABLE – RELATED PARTIES

6 Months Ended

Jun. 30, 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 June 30, 2024 and December 31, 2023:

	June 30, 2024		December 31, 2023
Notes payable, 12%		21,798,734		27,383,700
Less: current portion		11,500,000		11,500,000
Notes payable, long-term potion	$	10,298,734	$	15,883,700
Less: debt discount		1,250,000		1,750,000
Notes payable, long-term portion, net		9,048,734		14,133,700

Interest expense under convertible notes payable – related parties was $1,037,162 and $937,000, of which $250,000 and $250,000 was related to amortization of the debt discount, for the three months ended June 30, 2024 and 2023, respectively, and $2,108,673 and $1,874,000, of which $500,000 and $500,000 was related to amortization of the debt discount, for the six months ended June 30, 2024 and 2023, respectively. The Company recognized a capital contribution in additional paid in capital of $0 and $3,006,896 related to the forgiveness of accrued interest for the three and six months ended June 30, 2024, respectively.

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 $- and $6,100,000 for the three and six months ended June 30, 2024.

On March 27, 2024, the Company issued 120,974 shares of common stock to convert $99,199 of principal under the convertible notes payable – related parties.

Debt Forgiveness Agreement

On June 14, 2024, the Company entered into an agreement (the “Note Amendment”) in connection with the previously disclosed Membership Interest Purchase Agreement, dated September 14, 2022 (as amended, the “MIPA”), by and among the Company, Forever 8 Fund, LLC (“Forever 8”), the former members of Forever 8 (collectively, the “Sellers”) and Paul Vassilakos, in his capacity as representative of the Sellers.

Pursuant to the Note Amendment, Sellers forgave, without the payment of any additional consideration, principal on the promissory notes issued to the Sellers at the closing of the transactions contemplated by the MIPA in an aggregate amount of $5.4 million. The Company recognized a capital contribution in additional paid in capital of $5,400,000 and $5,400,000 related to the forgiveness of debt for the three and six months ended June 30, 2024, respectively.

MIPA Amendment

On June 20, 2024, the Company entered into a further amendment to the MIPA (“MIPA Amendment”) pursuant to which the Sellers waived any right to receive an aggregate of 215,000 Preferred Units (as defined in the MIPA) as provided for in the MIPA.