Promissory Notes

12 Months Ended

Dec. 31, 2023

The following is the summary of outstanding promissory notes as of December 31, 2023 and 2022 (in thousands):


		December 31, 2023				December 31, 2022
	Interest rate	Principal Amount		Carrying Amount*		Principal Amount		Carrying Amount*
Convertible Debenture (a,b)	4.0%	$	7,218	$	7,524	$	4,442	$	3,928
Small Business Association Paycheck Protection Program (c)	1.0%	133		133		219		219
Tillou Promissory note (d)	22%	2,000		2,348		2,000		2,021
Therese Promissory note (e)	22%	775		1,081		—		—
Commercial Insurance Premium Finance (f)	8.0%	352		352		992		992
Other lending agreements (g)	0.1% - 20.0%	8,445		16,992		10,325		10,325
Total		$	18,923	28,430		$	17,978	17,485
Less: Current portion				(24,487)				(15,527)
Long-term Note, less current portion				$	3,943			$	1,958

*Carrying amount includes the accrued interest and approximates the fair value because of the short-term nature of these instruments.

The weighted average interest rate for the short term borrowings is 10.9% and 8.1% as of December 31, 2023 and December 31, 2022, respectively.

The Company defaults a few notes and breached at least two covenants, including making timely SEC filings and a minimum stock purchase from the Company’s officers or directors. Yorkville has not asserted either breach and has since extended additional loan amounts to the Company.

(a)Convertible Debenture repaid in the year ended December 31 2022

On October 25, 2021, the Company executed a security purchase agreement with YA II PN, whereby the Company issued a convertible note of $75.0 million, and received aggregate gross proceeds of $75.0 million. The note is scheduled to mature on October 24, 2022 and bears interest at an annual rate of 4.0%, which would increase to 18.0% in the event of default. The note has a fixed conversion price of $1.88. The conversion price is not subject to adjustment except for subdivisions or combinations of common stock. The Company has the right, but not the obligation, to redeem a portion or all amounts outstanding under this note prior to the maturity date at a cash redemption price equal to the principal to be redeemed, plus accrued and unpaid interest. The note contained customary events of default, indemnification obligations of the Company and other obligations and rights of the parties. Commencing February 1, 2022, the Company has the obligation to redeem $8.3 million per month, against the unpaid principal. This amount may be reduced by any conversions by YA II PN or optional redemptions made by the Company.

On August 30, 2022, the Company and YA II PN agreed to amend the terms of the outstanding convertible note and entered into an amendment agreement dated August 29, 2022. As of August 29, 2022, the outstanding principal balance of the original debenture was $16.7 million. The amendments to the original debenture amended the principal amount to reflect the outstanding balance as of August 29, 2022, change the maturity date to January 29, 2023 and adjust the conversion price to the lower of $1.50 or 85.0% of the lowest daily VWAP during the 7 consecutive trading days immediately preceding the conversion date or other date of determination, but not lower than $0.20 per share of common stock. The Company shall not have the right to prepay any amounts due under the amended debenture prior to the maturity date without the Investor’s prior written consent.

During the year ended December 31, 2022, the Company converted principal and accrued and unpaid interest in the amount of $16.8 million into 67.1 million shares of common stock of the Company. The Company repaid principal and accrued and unpaid interest in the amount of $42.2 million in cash. Total interest expense recognized was $1.2 million for the year ended December 31, 2022.

During the year ended December 31, 2021, the Company converted the principal and accrued and unpaid interest in the amount of $17.6 million was converted into 9.4 million shares of common stock of the Company. Total interest expense recognized was $0.6 million for the year ended December 31, 2021.

The note was fully repaid in 2022.

(b)Secured Convertible Debenture due February 24, 2023 – YA II PN

On October 25, 2022, the Company executed a secured debenture purchase agreement with YA II PN, whereby the Company issued a convertible note of $6.5 million, and received net proceeds of $4.9 million. The note is scheduled to mature on February 24, 2023 and bears interest at an annual rate of 8.0%, which would increase to 18.0% in the event of default. The note can be converted at a variable conversion price of 95% of the lowest daily VWAP during the five consecutive trading days immediately preceding the conversion date or other date of determination, but not lower than $0.05 per share. The conversion price is not subject to adjustment except for subdivisions or combinations of common stock. The Company has the right, but not the obligation, to redeem a portion or all amounts outstanding under this note prior to the maturity date The note contained customary events of default, indemnification obligations of the Company and other obligations and rights of the parties. The note is secured by the pledged collateral defined in the pledge agreement. The Company, YA IIPN and certain of the Company’s subsidiaries also entered into an option agreement. The Company agreed to effect a spin-off within one year from the Closing. YA II PN has the option to purchase the common stocks of spin-off entities and the spin-off call right to purchase each spin-off entity the spin-off call shares at the call purchase price.

On March 30, 2023, the Company entered into the first Amendment to the SDPA. YA II PN purchased an additional debenture with substantially the same terms in the principal amount of $1.4 million. The Company also entered the first amendment to the option agreement as a condition precedent to the purchase of $1.4 million of convertible securities under the SDPA, the Company and Timios have granted YA II PN an option, exercisable after May 30, 2023, to purchase from the Company an amount of shares of common stock of Timios representing seventy percent (70%) of the then issued and outstanding Timios Common Stock on a Fully-Diluted Basis at the time the Call Right is effected or seventy percent (70%) of the then issued and outstanding Fiducia Common Stock on a Fully-Diluted Basis at the time the Call Right is effected. Pursuant to the Amended Option Agreement, if YA II PN exercises the Call Right, the aggregate purchase price shall be $2.5 million.

On April 17, 2023, the Company entered into the second amendment to the SDPA and option agreement. YA II PN purchased an additional debenture with substantially the same terms in the principal amount of $0.8 million. The Company also entered the second amendment to the option agreement as a condition precedent to the purchase of $0.8 million of convertible securities under the SDPA. The Company and Timios have granted YA II PN an option (the “Call Right”), exercisable after May 30, 2023, to purchase (a) from the Company an amount of shares of common stock of Timios representing one hundred percent (100%) of the then issued and outstanding common stock of Timios on a Fully-Diluted Basis (as defined therein) at the time the Call Right is effected, or (b) from Timios one hundred percent (100%) of the then issued and outstanding common stock of Fiducia on a Fully-Diluted Basis at the time the Call Right is effected. Pursuant to the Amended Option Agreement, if YA II PN exercises the Call Right, the aggregate purchase price shall be $3.5 million.

On May 1, 2023, the Company entered into the third amendment to the SDPA. YA II PN purchased an additional debenture with substantially the same terms in the principal amount of $4.1 million for a purchase price of $3.5 million.

On July 14, 2023, the Company entered into the fourth amendment to the SDPA. YA II PN purchased an additional debenture with substantially the same terms in the principal amount of $1.85 million or a purchase price of $1.55 million, payable on November 1, 2023. The amendment also added a Triggering Event repayment provision whereby if at any time the daily dollar volume-weighted average price (the “VWAP”) of the Company’s Common Stock is less than $1.25 per share for five of any seven consecutive trading days (a “Triggering Event,” and the first day of each such day of each such occurrence, a “Triggering Date”), then the Company shall pay the entire outstanding balance of the debenture within ten calendar days after the Triggering Date in an amount equal to the sum of (i) the entire outstanding principal amount, (ii) a 20% redemption premium thereon, and (iii) accrued and unpaid interest.. It also added a provision giving the holder the right to convert the debenture into shares of Common Stock upon an event of default at a conversion price per share equal to the lower of (i) $8.75 (subject to adjustment in certain circumstances as described in the Fifth Debenture) or (ii) 90% of the lowest daily VWAP of the Common Stock during the ten consecutive trading days immediately preceding the conversion date, but not lower than $1.25. In connection with the Fourth Amended SDPA, the Company granted (a) the Buyer a security interest in the shares of its subsidiary Via Motors and of its subsidiaries and in all their assets, in addition to the collateral previously pledged, to secure the Company’s obligations (b) Via Motors and of its subsidiaries agreed to guarantee the obligations of the Company. Also on July 14, 2023, the debentures previously issued under the Fourth Amended SDPA dated March 30, April 17 and May 1, 2023, in the outstanding principal amounts of $1.4 million, $0.8 million, and $1.7 million, respectively, were also amended to (a) add a Triggering Event repayment provision as described above and (b) add a provision giving the holder the right to convert the debenture into shares of Common Stock upon an event of default on the terms described above. On October 27, 2023, under the previously reported Fourth Amendment to Secured Debenture Purchase Agreement of July 13, 2023, the Company consummated the sale of a new SDPA. YA II PN in the principal amount of $1.5M for a purchase price of $1.3M in two separate tranche payments, the first in the amount of $0.9M, executed on October 27, 2023; and the second in the amount of $$0.4M, which was never executed. Purchased at a 90% discount, this note carried a 0% interest rate, increasing to 18% upon default. Upon an event of default, the holder of the debenture is entitled to convert any portion of the outstanding principle and

accrued interest into shares of the Company’s Common Stock, at a conversion price per share equal to the lower of (i) $2.30 (subject to adjustment in certain circumstances as described in the debenture) or (ii) 90% of the lowest daily VWAP of the Common Stock during the ten consecutive trading days immediately preceding the conversion date, but not lower than $0.46.

On September 7, 2023, YA II PN purchased an additional debenture in the principal amount of $0.5 million for a purchase price of $0.45 million, due on October 6, 2023. The Company will pay no interest on the outstanding principal amount of this debenture, provided that the interest rate shall be 18% upon an event of default. Upon an event of default, the holder of the debenture is entitled to convert any portion of the outstanding principle and accrued interest into shares of the Company’s Common Stock, at a conversion price per share equal to the lower of (i) $2.46 (subject to adjustment in certain circumstances as described in the debenture) or (ii) 90% of the lowest daily VWAP of the Common Stock during the ten consecutive trading days immediately preceding the conversion date, but not lower than $0.492.

During the year ended December 31, 2022, the Company repaid principal and accrued and unpaid interest in the amount of $2.2 million using the proceeds received from SEPA. Total interest expense recognized was $1.2 million for the year ended December 31, 2022, including $1.1 million of debt discount amortization.

During the year ended December 31, 2023, the Company repaid principal and accrued and unpaid interest in the amount of $4.2 million using the proceeds received from SEPA. YA II PN extinguished $2.4 million by purchasing Fiducia from the Company and extinguished $0.3 million as the reimbursement to the Company of the legal expense incurred related to the debenture agreements. Total interest expense recognized was $2.0 million for the year ended December 31, 2023, including $1.6 million of debt discount amortization.

The contracted due date of repaying the above debentures were by a subsequent event, noted below, extended to February 9, 2024.

(c)Small Business Association Paycheck Protection Program

On April 10, 2020, the Company borrowed $0.3 million at an annual rate of 1.0% from a commercial bank through the Small Business Association Paycheck Protection Program. The loan was originally payable in 18 installments of $18,993 commencing on November 10, 2020, with a final payment due on April 10, 2022. With several amendments, the loan is currently payable monthly commencing on September 10, 2021, with a final payment due on April 10, 2025.

(d) Tillou promissory note due on demand after 4/20/2023

Refer to Note 16 for further discussion of this related party transaction.

(e) Therese promissory note due on 6/6/2023

Refer to Note 16 for further discussion of this related party transaction.

(f) Commercial insurance premium financing

The Company entered one promissory notes of $1.0 million to finance insurance premium during the year ended December 31, 2022. The interest rate for the note was 6.16% and is payable in 9 installments of $0.1 million commencing on December 1 2022. The note was repaid in 2023.

The Company entered one promissory note of $0.5 million to finance insurance premium during the year ended December 31, 2023 and the amount was reduced to $0.4 million due to the change of coverage.

(g) Other lending agreements

The Company also entered a few other short term and long term borrowing agreements. These instruments provide working capital for the operations through the combination of accounts receivable factoring, line of credits, vendor financing programs and other secured asset-based lending arrangements. The instruments bear interest rates ranging from 0.1% to 20%, with a weighted average interest rate of 9.9%. An amount of $12.9 million of the payable will be due within one year, and $3.9 million of the payable will due between 2026 and 2028. The total unused line of credit is $11.5 million as of December 31, 2023.

Vendor Notes Payable Repaid in the Year Ended December 31, 2022

On May 13, 2020, DBOT entered into a settlement agreement with a vendor whereby the existing agreement with the vendor was terminated, the vendor ceased to provide services, and all outstanding amounts were settled. In connection with this agreement, DBOT paid an initial $30,000 and executed an unsecured promissory note in the amount of $60,000, bearing interest at 0.25% per annum, and payable in two installments of $30,000. The first installment was due on December 31, 2020 and was repaid, the remaining payment was due on August 31, 2021 and was repaid.

In the three months ended March 31, 2020 the Company ceased to use the premises underlying one lease and vacated the real estate. In the three months ended June 30, 2020, the Company completed negotiations with the landlord to settle the remaining operating lease liability of $0.9 million by issuing a promissory note for $0.1 million, bearing an annual interest rate of 4.0%, and which was due and repaid as of December 31, 2022.