Exhibit 99.2
CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2023 and December 31, 2022 and for the twelve months
ending December 31, 2023 and December 31, 2022
+
TRUMP MEDIA & TECHNOLOGY GROUP CORP.
TABLE OF CONTENTS
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Page
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Report of Independent Registered Public Accounting Firm
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F-1
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Consolidated Balance Sheet
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F-2
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Consolidated Statement of Operations
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F-3
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Consolidated Statement of Stockholders’ Deficit
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F-4
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Consolidated Statement of Cash Flows
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F-5
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Notes to Consolidated Financial Statements
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F-6
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Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of Trump Media & Technology Group Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Trump Media & Technology Group Corp. as of December 31, 2023 and 2022, the related statements of
operations, stockholders' equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company’s operating losses raise
substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm
registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an
understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/S/ BF Borgers CPA PC (PCAOB ID 5041)
We have served as the Company's auditor since 2022
Lakewood, CO
March 25, 2024
F-1
TRUMP MEDIA & TECHNOLOGY GROUP CORP.
Consolidated Balance Sheet
As of December 31, 2023 and December 31, 2022
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(in thousands)
|
December 31, 2023
|
December 31, 2022
|
||||||
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Assets
|
||||||||
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Current assets:
|
||||||||
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Cash
|
$
|
2,572.7
|
$
|
9,808.4
|
||||
|
Prepaid expenses and other current assets
|
327.6
|
326.0
|
||||||
|
Accounts receivable
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81.0
|
507.8
|
||||||
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Total current assets
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2,981.3
|
10,642.2
|
||||||
|
Property, plant and equipment
|
29.2
|
87.4
|
||||||
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Right-of-Use Assets
|
353.2
|
507.1
|
||||||
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Total assets
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3,363.7
|
11,236.7
|
||||||
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Liabilities and Stockholders’ deficit
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||||||||
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Current liabilities:
|
||||||||
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Accounts payable and accrued expenses
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1,600.7
|
268.7
|
||||||
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Convertible promissory notes
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42,415.5
|
4,123.9
|
||||||
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Derivative liability
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17,282.5
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14,905.3
|
||||||
|
Unearned Revenue
|
4,413.1
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-
|
||||||
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Current portion of Operating lease liability
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160.3
|
149.4
|
||||||
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Total current liabilities
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65,872.1
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19,447.3
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||||||
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Long-Term Operating lease liability
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201.6
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362.0
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||||||
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Convertible promissory notes
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2,931.5
|
-
|
||||||
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Derivative Liability
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1,120.3
|
-
|
||||||
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Total liabilities
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70,125.5
|
19,809.3
|
||||||
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Commitments and contingencies (Note 11)
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||||||||
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Stockholders’ equity:
|
||||||||
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Common Stock $ 0.000001 par value – 120,000,000 shares authorized, 100,000,000 shares issued and outstanding
|
||||||||
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Accumulated Deficit
|
(66,761.8
|
)
|
(8,572.6
|
)
|
||||
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Total stockholders’ equity
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(66,761.8
|
)
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(8,572.6
|
)
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||||
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Total liabilities and Stockholders’ deficit
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$
|
3,363.7
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$
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11,236.7
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||||
The Notes to the Consolidated Financial Statements are an integral part of these statements.
F-2
TRUMP MEDIA & TECHNOLOGY GROUP CORP.
Consolidated Statement of Operations
For the twelve month periods ended December 31, 2023 and December 31, 2022
|
Twelve Month
Period Ended
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||||||||
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(in thousands except share and per share data)
|
December 31,
2023
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December 31,
2022
|
||||||
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Revenue
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$
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4,131.1
|
$
|
1,470.5
|
||||
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Cost of revenue
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164.9
|
54.5
|
||||||
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Gross profit
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3,966.2
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1,416.0
|
||||||
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Research and development
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9,715.7
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13,633.1
|
||||||
|
Sales and marketing
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1,279.6
|
625.9
|
||||||
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General and administration
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8,878.7
|
10,345.6
|
||||||
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Depreciation and amortization
|
59.6
|
58.7
|
||||||
|
Loss from operations
|
(15,967.4
|
)
|
(23,247.3
|
)
|
||||
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Interest expense
|
(39,429.1
|
)
|
(2,038.7
|
)
|
||||
|
Change in fair value of derivative liabilities
|
(2,791.6
|
)
|
75,809.9
|
|||||
|
Profit/(loss) from operations before income taxes
|
(58,188.1
|
)
|
50,523.9
|
|||||
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Income tax expense/(benefit)
|
1.1
|
0.2
|
||||||
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Net profit/(loss)
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$
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(58,189.2
|
)
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$
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50,523.7
|
|||
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Profit/(loss) per Share attributable to common stockholders:
|
||||||||
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Basic
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(0.58
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)
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0.51
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|||||
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Diluted*
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(0.58
|
)
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0.51
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|||||
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Weighted Average Shares used to compute net profit/ loss per share attributable to common stockholders:
|
||||||||
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Basic
|
100,000,000
|
100,000,000
|
||||||
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Diluted
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100,000,000
|
100,000,000
|
||||||
*Loss per share attributable to common stockholders for diluted calculation is based on the Basic weighted shares as these are not dilutive. The Basic and diluted loss per share attributable to common stockholders are therefore the same.
The Notes to Consolidated Financial Statements are an integral part of these statements.
F-3
TRUMP MEDIA & TECHNOLOGY GROUP CORP.
Consolidated Statement of Stockholders’ Deficit
For the twelve month periods ended December 31, 2023 and December 31, 2022
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(in thousands)
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Paid in
Capital
|
Accumulated
Deficit
|
Total
Stockholders’
Deficit
|
|||||||||
|
Balance at March 31, 2022
|
$
|
-
|
$
|
(107,284.1
|
)
|
$
|
(107,284.1
|
)
|
||||
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Net Profit/(Loss)
|
-
|
77,147.3
|
77,147.3
|
|||||||||
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Balance at June 30, 2022
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-
|
(30,136.8
|
)
|
(30,136.8
|
)
|
|||||||
|
Net Profit/(Loss)
|
-
|
12,545.4
|
12,545.4
|
|||||||||
|
Balance at September 30, 2022
|
-
|
(17,591.4
|
)
|
(17,591.4
|
)
|
|||||||
|
Net Profit/(Loss)
|
-
|
9,018.8
|
9,018.8
|
|||||||||
|
Balance at December 31, 2022
|
-
|
(8,572.6
|
)
|
(8,572.6
|
)
|
|||||||
|
Net Profit/(Loss)
|
-
|
(210.2
|
)
|
(210.2
|
)
|
|||||||
|
Balance at March 31, 2023
|
-
|
(8,782.8
|
)
|
(8,782.8
|
)
|
|||||||
|
Net Profit/(Loss)
|
-
|
(22,768.1
|
)
|
(22,768.1
|
)
|
|||||||
|
Balance at June 30, 2023
|
-
|
(31,550.9
|
)
|
(31,550.9
|
)
|
|||||||
|
Net Profit/(Loss)
|
-
|
(26,033.1
|
)
|
(26,033.1
|
)
|
|||||||
|
Balance as September 30, 2023
|
-
|
(57,584.0
|
)
|
(57,584.0
|
)
|
|||||||
|
Net Profit/(Loss)
|
-
|
(9,177.8
|
)
|
(9,177.8
|
)
|
|||||||
|
Balance as December 31, 2023
|
$
|
-
|
$
|
(66,761.8
|
)
|
$
|
(66,761.8
|
)
|
||||
Paid in Capital of 10,000 shares of common stock, each having a par value of $0.000001 was converted to 100,000,000 shares, each having a par value of $0.000001.
Total value of paid in capital = $100.
The Notes to the Consolidated Financial Statements are an integral part of these statements.
F-4
TRUMP MEDIA & TECHNOLOGY GROUP CORP.
Consolidated Statement of Cash Flows
For the twelve month periods ended December 31, 2023 and December 31, 2022
| Twelve Month Period Ended | ||||||||
|
(in thousands)
|
December 31, 2023
|
December 31, 2022
|
||||||
|
Cash flows from operating activities
|
||||||||
|
Net income/(loss)
|
$
|
(58,189.2
|
)
|
$
|
50,523.7
|
|||
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
|
Non-cash interest expense on debt
|
39,429.1
|
2,038.7
|
||||||
|
Change in fair value of derivative liability
|
2,791.6
|
(75,809.9
|
)
|
|||||
|
Depreciation
|
60.4
|
59.1
|
||||||
|
Non-cash charge for operating lease
|
4.3
|
4.3
|
||||||
|
Prepaid expenses and other current assets
|
(1.6
|
)
|
105.2
|
|||||
|
Related party receivable/payable
|
-
|
(72.1
|
)
|
|||||
|
Accounts Receivable
|
426.9
|
(507.8
|
)
|
|||||
|
Unearned Revenue
|
4,413.1
|
-
|
||||||
|
Accounts payable
|
1,332.0
|
(542.7
|
)
|
|||||
|
Net cash used in operating activities
|
$
|
(9,733.5
|
)
|
$
|
(24,201.5
|
)
|
||
|
Cash flows used in investing activities
|
||||||||
|
Purchases of property, plant and equipment
|
(2.2
|
)
|
(84.5
|
)
|
||||
|
Net cash used in investing activities
|
$
|
(2.2
|
)
|
$
|
(84.5
|
)
|
||
|
Cash flows provided by financing activities
|
||||||||
|
Proceeds from convertible promissory notes
|
3,500.0
|
15,360.0
|
||||||
|
Settlement of convertible promissory notes
|
(1,000.0
|
)
|
-
|
|||||
|
Net cash provided by financing activities
|
2,500.0
|
15,360.0
|
||||||
|
Net change in cash
|
(7,235.7
|
)
|
(8,926.0
|
)
|
||||
|
Cash, beginning of period
|
9,808.4
|
18,734.4
|
||||||
|
Cash, end of period
|
$
|
2,572.7
|
$
|
9,808.4
|
||||
|
Supplemental disclosure of cash flow information
|
||||||||
|
Cash paid for interest
|
-
|
-
|
||||||
|
Cash paid for taxes
|
-
|
-
|
||||||
|
Non cash investing and financing activities
|
||||||||
|
Costs associated with convertible notes
|
-
|
-
|
||||||
The Notes to the Consolidated Financial Statements are an integral part of these statements.
F-5
TRUMP MEDIA & TECHNOLOGY GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF BUSINESS
The accompanying financial statements include the historical accounts of Trump Media & Technology Group Corp. (“TMTG”), which changed its name from Trump Media Group Corp. in
October 2021. The mission of TMTG is to end Big Tech's assault on free speech by opening up the Internet and giving people their voices back. TMTG operates Truth Social, a social media platform established as a safe harbor for free
expression amid increasingly harsh censorship by Big Tech corporations.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
Basis of Presentation
The accompanying financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission
(“SEC”).
Liquidity and going concern
TMTG commenced operations on February 8, 2021 and began the initial launch of its social media platform in the first quarter of 2022. The business used cash from operations of $37,732,000 from February 8, 2021
(inception) through December 31, 2023 funded by $40,460,000 of proceeds from the issuance of convertible promissory notes (net of repayments). The term of these notes range between 18 and 36 months; however, each has an accelerated retirement
feature in the event of default by the Company. Interest will be accrued between 5% and 10% annually based on the simple interest method (365 days per year).
In October of 2021, TMTG entered into a definitive merger agreement with a special purpose acquisition corporation (SPAC), Digital World Acquisition Corp. (DWAC, or Digital World), a Delaware corporation. The
companies expect to consummate the merger in the coming quarters, combining TMTG’s operations with DWAC’s balance sheet (i.e. cash in trust net of redemptions and fees). The parties to the agreement intend to effect the merger of DWAC and its
subsidiaries with and into TMTG, with TMTG continuing as the surviving entity. As a result of which, all of the issued and outstanding capital stock of TMTG shall no longer be outstanding and shall automatically be cancelled and shall cease to
exist, in exchange for the right for each of TMTG’s stockholders to receive its pro rata share of the stockholder merger consideration subject to the conditions set forth in the merger agreement and in accordance with the applicable provisions of
the Delaware General Corporation Law. The agreement was amended on May 11, 2022; August 9, 2023; and September 29, 2023.
On May 16, 2022, in furtherance of TMTG and DWAC’s proposed merger, DWAC filed with the SEC a registration statement on form S-4.
As publicly disclosed by DWAC in an 8-K filing, “on June 27, 2022, TMTG received a subpoena from the SEC seeking documents relating to, among other things, Digital World and other potential counterparties for a
business transaction involving TMTG. Digital World has also been informed that on December 30, 2022, TMTG was served with a subpoena, issued by a federal grand jury sitting in the Southern District of New York, seeking a subset of the same or
similar documents demanded in subpoenas to Digital World and its directors. Certain current and former TMTG personnel have also received individual grand jury subpoenas.” As publicly disclosed by TMTG in a press release, “TMTG [has] cooperated
fully with inquiries into our planned merger and … compl[ied] with subpoenas we've received, none of which were directed at the company's Chairman or CEO.” As detailed below, on information and belief, TMTG is not the target of any SEC or
Department of Justice (DOJ) enforcement action.
On September 22, 2022, Mr. W. Moss resigned as director of the Company. Based on information subsequently provided to the Company, the Company understands that Mr. Moss’s resignation did not result from any
disagreement with the Company concerning any matter relating to the Company’s operations, policies or practices. As noted below, Mr. Moss was replaced by Mr. D. Scavino during February 2023. Mr D. Scavino continues to consult to the Company. This
arrangement is similar to the consulting agreement with Mr. K. Patel, also a current board member.
As of December 31, 2022, Donald J. Trump (“DJT”) had the unilateral right to terminate the License Agreement, as amended, between and among DJT, TMTG, and DTTM Operations, LLC, pursuant to which TMTG obtained
certain rights related to the name, image, and likeness of DJT. On October 30, 2023, DJT verbally affirmed that, notwithstanding his contractual right to do so, he would not terminate the License Agreement prior to the later of (a) December 31,
2023, and (b) any other date to which TMTG and DWAC mutually agree to extend the time to consummate their proposed merger.
On February 14, 2023, a trademark for “Truth Social” in classes 21 and 25 was registered with the U.S. Patent and Trademark Office (“USPTO”) by T Media Tech LLC, a wholly-owned subsidiary of TMTG. Trademark
applications for “Truth Social” in classes 9 and 42; for “RETRUTH” in classes 9, 35, 38, 41, 42, and 45; “TRUTHSOCIAL” in classes 9, 35, 38, 41, 42, and 45; and “TRUTHPLUS” in classes 9, 35, 38, 41, and 42 are the subject of suspension notices
received from USPTO on October 24, 2022; January 13, 2023; February 14, 2023; and February 17, 2023, respectively. Several additional trademark applications remain pending, but have not been the subject of adverse action by USPTO.
On February 16, 2023, TMTG’s Board of Directors held a special meeting. At the meeting, the board appointed D. Scavino to fill the board vacancy created by the resignation of W. Moss and ratified certain past
corporate actions pursuant to Delaware law. The board also authorized an increase in TMTG’s share count to 1,000,000,000 shares.
On March 1, 2023, TMTG eliminated several positions. This action followed a review of all departments, most significantly impacted TMTG’s streaming video on demand (“SVOD”) and infrastructure teams, and was
primarily attributable to unprecedented obstruction of TMTG’s planned merger with DWAC by the SEC—and concomitant delay in TMTG’s access to capital that TMTG would receive upon the successful completion of such merger. All former employees whose
positions were eliminated in March 2023 signed separation agreements. Separately, a former employee whose employment was terminated in June 2022 (and who had declined at that time to sign a separation agreement), filed a wage claim with the New
Hampshire Department of Labor on or about June 1, 2023. The former employee agreed to dismiss the claim pursuant to a settlement agreement executed on June 29, 2023, pursuant to which TMTG paid the former employee $25,000.
On April 3, 2023, TMTG CEO Devin Nunes—in his personal capacity—sued several defendants, including a former TMTG employee, in Florida state court. On December 15, 2023, Nunes voluntarily dismissed the lawsuit,
without prejudice. TMTG was not a party to that proceeding.
The first of TMTG’s convertible promissory notes reached maturity in May 2023, though TMTG’s repayment obligation pursuant to any such note is generally only triggered by a written demand of the lender on or after
the maturity date.
F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continue)
As of the date hereof, there are no outstanding demands for repayment of any of TMTG’s convertible promissory notes that have reached their respective maturity dates. Events related to TMTG’s promissory notes include the following:
| • |
A broker’s note (which has a face value of $140,000, and is associated with a note with a face value of $2,000,000) reached its maturity date on May 7, 2023. Such note was amended and restated to clarify certain terms on October 26,
2023.
|
| • |
A note (with a face value of $2,000,000) reached maturity on May 19, 2023. TMTG and the lender subsequently agreed to extend the maturity date of such note until May 19, 2024, and executed an amended and restated note effective June
6, 2023. A related broker’s note (with a face value of $67,000) reached its maturity date on May 26, 2023.
|
| • |
On June 26, 2023, TMTG received a “demand for payment” from a lender whose promissory note with a face value of $2,000,000 reached its maturity date on June 23, 2023. On July 7, 2023, the lender withdrew its demand and agreed to
extend the term of its promissory note and an additional loan in the principal amount of $6,000,000, for an additional twelve months until June 23, 2024 and August 18, 2024, respectively. TMTG and the lender subsequently executed a
letter, dated August 10, 2023, to document such extension.
|
| • |
A lender whose note (with a face value of $4,200,000) reaches its maturity date on December 24, 2024, asserted a “Most Favored Nation” covenant (“MFN”) in the note has the effect of accelerating the maturity date of such note—and,
pursuant to such assertion, issued a demand for payment on June 30, 2023. On July 7, 2023, the lender further asserted that TMTG had defaulted on its obligations under the note that reaches its maturity date on December 24, 2024, and
under a second note (with a face value of $2,000,000) that reaches its maturity date on August 3, 2023. Also on July 7, 2023, counsel for TMTG sent a letter for the lender denying each of the foregoing assertions. On July 21, 2023,
counsel for TMTG reaffirmed that no default had occurred. The second note (with a face value of $2,000,000) reached its maturity date on August 3, 2023. On December 21, 2023, TMTG agreed to repay $1,000,000 of principal on the second note
within five business days and affirmed the application of the MFN to the first note (with a face value of $4,200,000) in accordance with a note issued on November 24, 2023; TMTG and the lender mutually agreed that no default had occurred
under either note.
|
| • |
A note (with a face value of $500,000) reached its maturity date on July 24, 2023. On December 29, 2023, TMTG and the lender mutually agreed to increase the principal (by an additional $500,000, for a total of $1,000,000) and extend
the term of such note until June 29, 2025.
|
| • |
On August 23, 2023, TMTG and a new lender executed a promissory note (with a face value of $2,500,000).
|
| • |
On November 24, 2023, TMTG and a lender executed a promissory note (with a face value of $500,000).
|
| • |
Eight of TMTG’s other notes, with an aggregate face value of $14,293,000, reached their respective maturity dates between June 30, 2023, and November 23, 2023.
|
On May 20, 2023, TMTG filed suit in Florida state court against the Washington Post in connection with false and defamatory statements about TMTG in a May 13, 2023
article. On July 12, 2023, the Washington Post removed the case to federal court. Also on July 12, 2023, TMTG filed a motion to remand the case to state court, which was denied on October 12, 2023. On
August 21, 2023, the Washington Post filed a motion to stay discovery, which was denied on September 28, 2023. The case, as well as the Washington Post’s motion
to dismiss and TMTG’s opposition thereto, remain pending in federal court as of the date hereof. TMTG has entered into a contingency fee arrangement with its counsel in the case. On May 17 and 18, 2023, TMTG received inquiries from Chase bank
that purportedly related to routine diligence, but on information and belief were prompted by the defamatory Washington Post article. Via a May 22, 2023 letter, TMTG admonished Chase not to republish the defamatory statements or take adverse
action against TMTG’s account. TMTG subsequently opened accounts at another bank.
On or about June 23, 2023 and December 20, 2023 were potential expiry dates of an exclusivity provision of the License Agreement which generally requires that DJT channel his personal social media communications to
TMTG’s Truth Social platform six hours before posting the same communications on a non-TMTG social media platform. Because neither TMTG nor DJT terminated this provision, the exclusivity provisions has twice automatically renewed for an
additional 180 days.
On June 29, 2023, three individuals—including a former DWAC director—were arrested and criminally charged by DOJ in connection with alleged insider trading of DWAC securities. On July 20, 2023, all three
defendants pleaded not guilty. These individuals have no affiliation with TMTG and—on information and belief—TMTG is not the target of any DOJ enforcement action.
On July 3, 2023, DWAC publicly disclosed an agreement in principle with SEC staff to resolve an ongoing SEC enforcement inquiry into DWAC. On July 20, 2023, SEC approved the settlement. TMTG is not a party to such
agreement or—on information and belief—the target of any SEC enforcement action.
Effective July 14, 2023, TMTG’s head of engineering resigned to pursue other opportunities.
On August 9, 2023, TMTG and DWAC executed a second amendment to their Merger Agreement. On the same date, the terms of such amendment were publicly disclosed by DWAC in an SEC filing.
On September 5, 2023, DWAC held a special meeting of its stockholders, at which DWAC’s stockholders approved an amendment extending, upon the approval by DWAC’s board of directors, the date by which the DWAC has to
consummate an initial business combination (including its planned merger with TMTG) for an aggregate of 12 additional months (i.e. from September 8, 2023 up to September 8, 2024) or such earlier date as determined by the DWAC board.
On September 29, 2023, TMTG and DWAC finalized a third amendment to their Merger Agreement. On October 2, 2023, the terms of such amendment were publicly disclosed by DWAC in an SEC filing.
On October 30, 2023, TMTG and Rumble executed a minimum guarantee advertising publisher agreement (the “Minimum Guarantee Rumble Agreement”), which replaced a previous agreement with Rumble. Under the Minimum
Guarantee Rumble Agreement, 70% of the total aggregate gross revenues from the sale of Ad Units are allocated to TMTG, and the Ad Units shall comprise at least 85% of the aggregate number of paid advertisements directly into Truth Social feeds by
TMTG each month.
On November 13, 2023, in furtherance of TMTG and DWAC’s proposed merger, DWAC filed with the SEC an amended registration statement on form S-4.
On November 20, 2023, in connection with reporting about TMTG’s financial results, TMTG filed a lawsuit for defamation and injurious falsehood in Florida state court against 20 media defendants. TMTG and one
defendant — Nexstar Media, Inc., which owns the Hill — subsequently agreed to resolve their dispute outside of court, to both parties’ mutual satisfaction. In connection with such resolution, the Hill retracted a November 13, 2023 article, and
TMTG’s lawsuit was dismissed as to Nexstar on December 4, 2023. All other terms of TMTG’s settlement with Nexstar remain confidential, and TMTG’s lawsuit is proceeding against all other defendants.
F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continue)
On December 22, 2023, in furtherance of TMTG and DWAC’s proposed merger, DWAC filed with the SEC a second amendment to its registration statement on form S-4.
During the 12 months following the signing of these financial statements, management has substantial doubt that the Company will have sufficient funds to meet its liabilities as they fall due, including liabilities related to promissory notes
previously issued by the Company. Sufficient funds during this period are directly conditional on completion of the merger by the September 8, 2024 dissolution date. Bridge funding during the period leading up to the merger ranging between $5
million and $60 million is required depending on convertible note maturity dates, and if note holders decide to extend or call their respective outstanding notes. Management is currently in discussions with certain existing note holders regarding
options for extension of maturity dates. The Company believes that it may be difficult to raise additional funds through traditional financing sources in the absence of continued material progress toward completing its merger with DWAC.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates and assumptions reflected in the financial statements relate
to and include, but are not limited to, the valuation of convertible promissory notes and derivative liabilities.
Principles of Consolidation
The consolidated financial statements include the financial statements of the Company and its majority owned subsidiaries and have been prepared in accordance with Accounting Principles Generally Accepted in the United States (“GAAP”). All
intercompany transactions have been eliminated.
Cash
Cash represents bank accounts and demand deposits held at financial institutions. Cash is held at major financial institutions and are subject to credit risk to the extent those balances exceed applicable Federal Deposit Insurance Corporation
(FDIC) limitations. No losses were incurred for those balances exceeding the limitations.
Prepaid expenses and other current assets
Other receivables consist of prepaid rent, insurance and prepaid data costs.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost less accumulated depreciation. Depreciation is calculated on the straight-line basis over the estimated useful lives of the assets. Useful lives for property,
plant and equipment are as follows:
|
Asset Type
|
Range
|
|
Furniture and computer equipment
|
2 - 5 years
|
Expenditures which substantially increase value or extend useful lives are capitalized. Expenditures for maintenance and repairs are charged to operations as incurred. Gains and losses are recorded on the
disposition or retirement of property, plant and equipment based on the net book value and any proceeds received.
Long-lived fixed assets held and used are reviewed for impairment when events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Circumstances such as
the discontinuation of a line of service, a sudden or consistent decline in the sales forecast for a product, changes in technology or in the way an asset is being used, a history of operating or cash flow losses or an adverse change in legal
factors or in TMTG climate, among others, may trigger an impairment review. If such indicators are present, TMTG performs undiscounted cash flow analyses to determine if impairment exists. The asset value would be deemed impaired if the
undiscounted cash flows generated did not exceed the carrying value of the asset. If impairment is determined to exist, any related impairment loss is calculated based on fair value. There were no triggering events identified that necessitated an
impairment test over property, plant and equipment. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. See Note 4 - Property, plant and equipment for further detail.
Capitalized software costs
The Company capitalizes costs related to its major service products and certain projects for internal use incurred during the application development stage. Costs related to preliminary project activities and post
implementation activities are expensed as incurred. Internal-use software is amortized on a straight-line basis over its estimated useful life, which is generally five to ten years. Management evaluates the useful lives of these assets on an
annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. As of the period ended December 31, 2023 there were no capitalized software costs.
Revenue Recognition
The Company records revenue in accordance with ASC 606. The Company determines the amount of revenue to be recognized through application of the following steps- Identification of the contract, or contracts with a
customer; - Identification of the performance obligations in the contract; - Determination of the transaction price; - Allocation of the transaction price to the performance obligations in the contract; and - Recognition of revenue when or as the
Company satisfies the performance obligations.
The Company entered into advertising contractual arrangements with advertising manager service companies. The advertising manager service companies provide advertising services through their Ad Manager Service
Platform on the Truth Social website to customers. The Company determines the number of Ad Units available on its Truth Social website. The advertising manager service companies have sole discretion over the terms of the auction and all payments
and actions associated therewith. Prices for the Ad Units are set by an auction operated and managed by these companies. The Company has the right to block specific advertisers at its sole reasonable discretion, consistent with applicable laws,
rules, regulations, statutes, and ordinances. The Company is an agent in these arrangements, and recognizes revenue for its share in exchange for arranging for the specified advertising to be provided by the advertising manager service
companies. The advertising revenues are recognized in the period when the advertising services are provided.
F-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continue)
Cost of revenue
Cost of revenue primarily encompasses expenses associated with generating advertising revenue. These costs are determined by allocating staff direct and indirect costs proportionately, including depreciation, based
on the time spent managing the agency relationships with external vendors. These costs are confined to activities related to coordinating with these third-party vendors as the third-party vendors are responsible to control and facilitate the
delivery of advertising services.
Research and development
Research and development expenses consist primarily of personnel-related costs, including salaries, benefits and stock-based compensation, for our engineers and other employees engaged in the research and
development of our products and services. In addition, research and development expenses include amortization of acquired intangible assets, allocated facilities costs, and other supporting overhead costs.
Marketing and sales
Sales and marketing expenses consist primarily of personnel-related costs, including salaries, commissions, benefits and stock-based compensation for our employees engaged in sales, sales support, business
development and media, marketing, and customer service functions. In addition, marketing and sales-related expenses also include advertising costs, market research, trade shows, branding, marketing, public relations costs, amortization of
acquired intangible assets, allocated facilities costs, and other supporting overhead costs.
Selling, general and administrative expenses
General and administrative expenses consist primarily of personnel-related costs, including salaries, benefits, and stock-based compensation for our executive, finance, legal, information technology, corporate
communications, human resources, and other administrative employees. In addition, general and administrative expenses include fees and costs for professional services (including third-party consulting, legal, and accounting services), facilities
costs, and other supporting overhead costs that are not allocated to other departments.
Income taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Income tax amounts are therefore recognized for all situations where the likelihood of
realization is greater than 50%. Changes in recognition or measurement are reflected in income tax expense in the period in which the change in judgment occurs. Accrued interest expense and penalties related to uncertain tax positions are
recorded in Income Tax Expense. See Note 6 - Income Taxes.
Commitments and contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be
reasonably estimated. The Company has no liabilities for loss contingencies.
Recently issued accounting standards
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). ASU 2019-12 removes certain
exceptions for performing intraperiod tax allocations, recognizing deferred taxes for investments, and calculating income taxes in interim periods. The guidance also simplifies the accounting for franchise taxes, transactions that result in a
step-up in the tax basis of
goodwill, and the effect of enacted changes in tax laws or rates in interim periods. The Company adopted ASU 2019-12 in the first quarter of 2021 and the adoption had no material impact to the Company’s consolidated financial statements.
In February 2016, the FASB issued Accounting Standards Update No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”), which requires lessees to record most leases on their balance sheets but recognize the expenses on their statements of operations
in a manner similar to current accounting rules. ASU 2016-02 states that a lessee would recognize a lease liability for the obligation to make lease payments and a right-to-use asset for the right to use the underlying asset for the lease term.
The new standard is effective for interim and annual periods beginning after December 15, 2021 (i.e. calendar periods beginning on January 1, 2022) on a modified retrospective basis. All leases are operating leases. See Note 5, “Leases.” All
leases other than those disclosed as Right-to-Use leases are short term in nature with a term less than 12 months.
NOTE 3 – ACQUISITION
In October 2021, the Company acquired 100% of the ownership in T Media Tech LLC for a nominal value. The results of T Media Tech LLC since October 13, 2021 are included in the Company’s Consolidated Statement of
Operations. Pro forma results have not been presented as the acquisition is not considered individually significant to the consolidated results of the Company.
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
|
(in thousands)
|
December 31, 2023
|
December 31, 2022
|
||||||
|
Property, plant and equipment
|
||||||||
|
Furniture and equipment
|
$
|
34.5
|
$
|
34.5
|
||||
|
Computer equipment
|
120.8
|
118.6
|
||||||
|
Accumulated depreciation
|
(126.1
|
)
|
(65.7
|
)
|
||||
|
Property, plant and equipment, net
|
$
|
29.2
|
$
|
87.4
|
||||
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continue)
NOTE 5 - LEASES
As of December 31, 2023, minimum commitments under the Company leases, were as follows:
|
(in thousands)
|
December 31, 2023
|
December 31, 2022
|
||||||
|
Next year
|
$
|
193.5
|
$
|
201.3
|
||||
|
Year 2-5
|
217.1
|
397.5
|
||||||
|
$
|
410.6
|
$
|
598.8
|
|||||
NOTE 6 - INCOME TAXES
The following reconciles the total income tax benefit, based on the U.S. Federal statutory income tax rate of 21% for the twelve month period ended December 31, 2023, with TMTG’s recognized income tax expense:
| Twelve Month Period Ended | ||||||||
|
(in thousands)
|
December 31, 2023
|
December 31, 2022
|
||||||
|
U.S. Statutory federal income tax expense/(benefit)
|
(12,219.7
|
)
|
10,610.0
|
|||||
|
Permanent items
|
||||||||
|
State income taxes, net of federal effect
|
1.1
|
2,633.1
|
||||||
|
Non-deductible expenses
|
334.6
|
3.0
|
||||||
|
Change in valuation allowance
|
11,885.1
|
(13,245.9
|
)
|
|||||
|
Income tax expense
|
1.1
|
0.2
|
||||||
The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities as of December 31, 2023 are as follows:
|
(in thousands)
|
December 31, 2023
|
December 31, 2022
|
||||||
|
Deferred tax assets
|
||||||||
|
Software and other claimed assets
|
360.6
|
$
|
1,810.5
|
|||||
|
Net operating loss (NOL)
|
9,474.7
|
4,478.1
|
||||||
|
Convertible promissory notes and derivative liability
|
3,853.2
|
-
|
||||||
|
Total deferred tax assets
|
13,688.5
|
6,288.6
|
||||||
|
Deferred tax liabilities
|
||||||||
|
Property, plant & equipment
|
(6.2
|
)
|
(18.2
|
)
|
||||
|
Convertible promissory notes and derivative liability
|
-
|
(4,473.2
|
)
|
|||||
|
Total deferred tax liabilities
|
(6.2
|
)
|
(4,491.4
|
)
|
||||
|
Net deferred tax assets
|
13,682.3
|
1,797.2
|
||||||
|
Valuation allowance
|
(13682.3
|
)
|
(1,797.2
|
)
|
||||
|
Net deferred tax, net of valuation allowance
|
-
|
-
|
||||||
As of December 31, 2023, TMTG had US Federal net operating loss carryforwards (“NOLs”) with a tax benefit of $9,474,744 (December 31, 2022: $4,478,110).
NOTE 7 – OTHER INCOME – RELATED PARTY, RELATED PARTY RECEIVABLE AND PAYABLE
There was no other income – related party sales for the period. The other income – related party in 2021 amounted to $2,123,296 related to a licensing agreement with one of the Stockholders. At the end of fourth quarter 2021, $23,296 was still
outstanding. TMTG was assigned net revenue froma series of public appearances by President Trump in accordance with a licensing arrangement. The income was valued on a dollar-for-dollar basis with the underlying sales. TMTG did not incur any
costs in connection with such assigned sales.
In terms of the agreement, these sales were made in the fourth quarter of 2021 and final payment was made to TMTG, in accordance with the license agreement, in February of 2022. Related party payable is operational funding of $95,518 received
from two of the Stockholders during the first quarter of 2021, which was repaid in May of 2022. The operational funding carried no specific repayment terms or interest charges.
NOTE 8 – CONVERTIBLE PROMISSORY NOTES
Notes 1 to 7 are Convertible Promissory Notes issued from May 2021 through October 2021 with a cumulative face value of $5,340,000, maturity of 24 months from each respective issuance date and interest will be accrued at 5% based on the simple
interest method (365 days year) for each note. Each of Notes 1-7 contemplates multiple plausible outcomes that include conversion upon a Qualified SPAC Business Combination (“SPAC”) and at least one of the following conversion triggers: Qualified
Initial Public Offering (“IPO”), private equity transaction and/or change of control. All outstanding principal of these Notes, together with all accrued but unpaid interest on such principal, will convert to equity. The number of shares of
Company stock to be issued to the Lender upon conversion of the Notes in the event of a completed SPAC transaction will be the number of shares of the Company Stock (rounded to the nearest whole share) equal to the quotient of: (a) the principal
plus accrued interest on the Notes then outstanding, divided by $4.00. In other, non-SPAC conversion scenarios, the number of shares of Company stock to be issued to the Lender upon conversion of the Notes is variable based on the application of
an automatic discounted share-settlement feature. For Notes 1 and 2, the number of shares of Company stock to be issued to the Lender upon a non-SPAC conversion event will be the number of shares of Company stock (rounded to the nearest whole
share) equal to the quotient of: (a) the principal plus accrued interest on the Notes then outstanding (b) divided by 40% of the initial public offering price per share of a qualified initial public offering. For Notes 3-7, the number of shares
of Company stock to be issued to the Lender upon a non-SPAC conversion event will be the number of shares of Company stock (rounded to the nearest whole share) equal to the quotient of: (a) the principal plus accrued interest on the Notes then
outstanding (b) divided by 40% of (i) the initial public offering price per share of a qualified initial public offering, (ii) the price per share as determined by the valuation of the Company in connection with a qualified private equity raise,
or (iii) in the case of a change of control, the price per share determined in accordance with the Company’s then current fair value determined by an independent valuation firm.
F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continue)
Notes 8 to 12 are Convertible Promissory Notes issued from November 2021 through December 2021 with a cumulative face value of $17,500,000, maturity of between 18 months and 36 months and interest will be accrued
at a range between 5% and 10% based on the simple interest method (365 days year) for each note. Notes 8 to 12 are convertible simultaneously with the completion of a Qualified SPAC Business Combination (“SPAC”) merger agreement or Qualified
Initial Public
Offering (“IPO”). All outstanding principle of these Notes, together with all accrued but unpaid interest on such principal, shall convert to equity. The number of shares of Company stock to be issued to the Lender
upon conversion of the Notes shall be the number of shares of the Company Stock (rounded to the nearest whole share) equal to the quotient of: (a) the principal plus accrued interest on the Notes then outstanding (b) divided by either US$25,
US$21 or US$20 subject to the respective conditions of the individual Notes; provided, however, in the event that the stock price quoted for the Company on NASDAQ or The New York Stock Exchange (as applicable) at the time of the closing of the
Qualified SPAC Business Combination (the “TMTG Stock Price”) is less than either $50 per share, $42 per share, $40 per share subject to the respective conditions of the individual Notes, then the Conversion Price shall be reset to 50% of the then
current TMTG Stock Price subject to a floor of $10 per share.
Notes 13 to 19 are Convertible Promissory Notes issued from January 2022 through August 23, 2023 with a cumulative face value of $17,860,000, maturity of 18 months and interest will be accrued at a range between 5% and 10% based on the
simple interest method (365 days year) for each note. Notes 13 to 19 are convertible simultaneously with the completion of a Qualified SPAC Business Combination (“SPAC”) merger agreement or Qualified Initial Public Offering (“IPO”). All
outstanding principle of these Notes, together with all accrued but unpaid interest on such principal, shall convert to equity. The number of shares of Company stock to be issued to the Lender upon conversion of the Notes shall be the number of
shares of the Company Stock (rounded to the nearest whole share) equal to the quotient of: (a) the principal plus accrued interest on the Notes then outstanding (b) divided by either US$25 or US$21 subject to the respective conditions of the
individual.
Note 20 is a Convertible Promissory Note issued from November 2023 through May 24, 2025 with a cumulative face value of $500,000.00, maturity of 18 months and interest will be accrued at 10% based on the simple interest method (365 days year)
for each note. Note 20 is convertible with the completion of a Qualified SPAC Business Combination (“SPAC”) merger agreement or Qualified Initial Public Offering (“IPO”). The outstanding principle of the Note, accrued but unpaid interest on such
principal, shall convert to equity. The number of shares of Company stock to be issued to the Lender upon conversion of the Notes shall be the number of shares of the Company Stock (rounded to the nearest whole share) equal to the quotient of:
(a) the principal plus accrued interest on the Note then outstanding (b) divided by either US$25 or US$21 subject to the respective conditions of the individual Notes; provided, however, in the event that the stock price quoted for the Company on
NASDAQ or The New York Stock Exchange (as applicable) at the time of the closing of the Qualified SPAC Business Combination (the “TMTG Stock Price”) is less than either $50 per share or $42 per share subject to the respective conditions of the
individual Notes, then the Conversion Price shall be reset to 50% of the then current TMTG Stock Price subject to a floor of $10 per share.
The Company determined the automatic discounted share-settlement feature upon certain events (e.g., SPAC, IPO, change in control, etc.) is an embedded derivative requiring bifurcation accounting as (1) the feature
is not clearly and closely related to the debt host and (2) the feature meets the definition of a derivative under ASC 815 (Derivative and Hedging). Subsequent changes to the fair value of the embedded derivative flows through the income
statement. The Debt (net of initial debt discount and any related debt issuance costs recorded) is accreted using the effective interest rate method under ASC 835 (Interest) until maturity. The Convertible Promissory Notes (debt host) are not
subject to Subtopic 480-10.
|
(in thousands)
|
December 31, 2023
|
December 31, 2022
|
||||||
|
Convertible Promissory Notes
|
||||||||
|
Notes 1 to 7
|
$
|
5,340.0
|
$
|
5,340.0
|
||||
|
Notes 8 to 12
|
17,500.0
|
17,500.0
|
||||||
|
Notes 13 to 19
|
17,860.0
|
15,360.0
|
||||||
|
40,700.0
|
38,200.0
|
|||||||
|
Debt Issuance costs
|
(240.0
|
)
|
(240.0
|
)
|
||||
|
Nominal value of Convertible Promissory Notes
|
40,460.0
|
37,960.0
|
||||||
|
Derivative liability Component
|
37,234.8
|
(36,528.7
|
)
|
|||||
|
Liability component at date of issue
|
3,225.2
|
1,431.3
|
||||||
|
Interest charged
|
42,121.7
|
2,692.6
|
||||||
|
Interest paid
|
-
|
-
|
||||||
|
Total Liability component
|
$
|
45,347.0
|
$
|
4,123.9
|
||||
|
Less: Short-term liability component
|
(42,415.5
|
)
|
(4,123.9
|
)
|
||||
|
Liability component at December 31, 2023 and December 31, 2022
|
$
|
2,931.5
|
$
|
-
|
||||
|
Embedded feature Component
|
||||||||
|
Derivative liability Component
|
$
|
37,234.8
|
$
|
36,528.7
|
||||
|
Change in fair value of Embedded derivative
|
(18,831.9
|
)
|
(21,623.4
|
)
|
||||
|
Total Derivative Liability Component
|
18,402.9
|
14,905.3
|
||||||
|
Less: Short-term Derivative Liability Component
|
(17,282.5
|
)
|
(14,905.3
|
)
|
||||
|
Derivative Liability Component at December 31, 2023 and December
31, 2022
|
$
|
1,120.3
|
$
|
-
|
||||
The interest charged for the period is calculated by applying the effective interest rate range of between 16.3% to 100%+ to the liability component for the period since the respective notes were issued.
F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continue)
NOTE 9 - FAIR VALUE MEASUREMENT
The Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:
Level 1. Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2. Significant other inputs that are directly or indirectly observable in the marketplace.
Level 3. Significant unobservable inputs which are supported by little or no market activity.
All of the Company’s cash is classified within Level 2 because the Company’s cash is valued using pricing sources and models utilizing observable market inputs. The Convertible promissory notes are classified as Level 3 due to significant
unobservable inputs.
| As of December 31, 2023 | ||||||
|
(in thousands)
|
Quoted prices
in active
markets for
identical assets
(Level 1)
|
Significant
other
observable
inputs
(Level 2)
|
Significant
unobservable
inputs
(Level 3)
|
|||
|
Cash
|
||||||
|
Cash
|
2,572.7
|
|||||
|
Current Liabilites
|
||||||
|
Convertible prommisory notes
|
42,415.5
|
|||||
|
Derivative liability
|
17,282.5
|
|||||
|
Liabilities
|
||||||
|
Convertible promissory notes
|
2,931.5
|
|||||
|
Derivative liability
|
1,120.3
|
|||||
| As of December 31, 2022 | ||||||
|
(in thousands)
|
Quoted prices
in active
markets for
identical assets
(Level 1)
|
Significant
other
observable
inputs
(Level 2)
|
Significant
unobservable
inputs
(Level 3)
|
|||
|
Cash
|
||||||
|
Cash
|
9,808.4
|
|||||
|
Liabilities
|
||||||
|
Convertible promissory notes
|
4,123.9
|
|||||
|
Derivative liability
|
14,905.3
|
|||||
The estimated fair value of the conversion feature of the Derivative liability is based on traditional valuation methods including Black-Scholes option pricing models and Monte Carlo simulations.
NOTE 10 – STOCKHOLDERS’ EQUITY
At inception, the total number of shares of all classes of capital stock that the Company was authorized to issue was 11,000 shares of Company Stock, each having a par value of $0.000001, of which 10,000 shares
were issued and outstanding, and an additional 1,000 shares were authorized for issuance in connection with the Company’s Equity Incentive Plan.
In October 2021, the total number of shares of Common Stock authorized was increased to 110,000,000, each having a par value of $0.000001. Each share of the Company’s Common Stock, automatically and without any
action on the part of the Company or any respective holders thereof, was reclassified into ten thousand (10,000) shares of the Company’s Common Stock, $0.000001 par value per share, resulting in 110,000,000
shares authorized, of which 100,000,000 shares were issued and outstanding, and an additional 7,500,000 shares were authorized for issuance in connection with the Company’s Equity Incentive Plan.
In January 2022, the total number of shares of the Company’s Common Stock authorized was increased to 120,000,000, each having a par value of $0.000001, of which 100,000,000
shares were issued and outstanding, and an additional 7,500,000 shares were authorized for issuance in connection with the Company’s Equity Incentive Plan.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
In August 2022, TMTG irrevocably terminated all agreements with one of its vendors due to a material breach by the vendor, and TMTG reserved numerous affirmative claims against the vendor. TMTG
determined during the third quarter of 2022 that payment of existing invoices, future invoices, or litigation expenses is “not probable.”
Therefore, TMTG has not accrued for a related loss contingency. The total amount of liability of $1.7 million was reversed during the third quarter of 2022. TMTG further reversed $0.5 million
of additional liabilities during the third quarter of 2022 related to vendors who relied on erroneous interpretation of supply contracts.
Based on current known facts and circumstances, the Company currently believes that any liabilities ultimately resulting from ordinary course claims and proceedings will not individually or in aggregate, have a
material adverse effect on the Company's financial position, results of operations or cash flows.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continue)
NOTE 12 – SUBSEQUENT EVENTS
In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are
issued, the Company has evaluated all events or transactions that occurred after December 31, 2023, up to the date the Company issued the financial statements.
On January 7, 2024, TMTG’s majority shareholder approved an amended certificate of incorporation that, when filed on January 26, 2024, increased TMTG’s authorized shares to 1,000,000,000.
On January 18, 2024, DWAC received a letter from a TMTG minority shareholder that contained certain assertions regarding: (i) board appointments with respect to TMTG; (ii) consent rights with respect to TMTG’s
issuance of additional shares and classes of securities; and (iii) certain expenses.
On January 22, 2024, in furtherance of TMTG and DWAC’s proposed merger, DWAC filed with the SEC a third amendment to its registration statement on form S-4, which included disclosures regarding the January 18
letter.
TMTG and a new lender executed a promissory note (with a face value of $1,000,000) dated January 22, 2024.
On January 22, 2024, TMTG received a books and records inspection request from another TMTG minority shareholder, purportedly pursuant to Section 220 of the Delaware General Corporation Law, to which TMTG responded
via counsel on January 29, 2024. TMTG received several subsequent communications from the same minority shareholder.
Effective February 2, 2024, TMTG entered into a Second Amended & Restated License Agreement with President Trump.
Effective February 2, 2024, TMTG entered into three amended and restated convertible promissory notes with one of its noteholders; the amendments clarified certain conversion mechanics and confirmed the application
of an MFN clause to one of the notes.
On February 9, 2024, TMTG and DWAC received letters from the TMTG minority shareholder that had previously sent a letter to DWAC on January 18.
Effective February 12, 2024, TMTG and DWAC entered into a Retention Bonus Agreement pertaining to post-merger payments to employees and other personnel affiliated with TMTG.
On February 12, 2024, in furtherance of TMTG and DWAC’s proposed merger, DWAC filed with the SEC a fourth amendment to its registration statement on form S-4, which included disclosures regarding the aforementioned
communications from TMTG minority shareholders.
On February 14, 2024, in furtherance of TMTG and DWAC’s proposed merger, DWAC filed with the SEC fifth and sixth amendments to its registration statement on form S-4, after which DWAC received from SEC a notice
indicating that the S-4 was effective as of 5:30pm on that same date.
On February 16, 2024, DWAC filed with the SEC a proxy statement/prospectus scheduling a shareholder meeting (to vote on approving DWAC’s proposed merger with TMTG, among other matters) for March 22, 2024.
On February 16, 2024 and March 20, 2024, TMTG received a letter from the minority shareholder that had previously sent a letter to TMTG on February 9, and to DWAC on January 18 and February 9, purporting to appoint
two individuals to TMTG’s board.
Effective February 21, 2024, TMTG entered into an amended and restated convertible promissory note with one of its noteholders; the amendment revised certain economic terms of the noteholder’s loans, extended the
maturity date thereof, and increased by the cumulative principal by $1,205,000.
On February 27, 2024, TMTG and DWAC sued DWAC’s sponsor and the sponsor’s principal (who is also DWAC’s former CEO) in Florida state court.
On February 28, 2024, the TMTG minority shareholder that had previously sent letters to TMTG on February 9 and February 16 sued TMTG in Delaware state court, seeking declaratory and injunctive relief relating to
the authorization, issuance and ownership of TMTG stock, and contemporaneously filed a motion to expedite proceedings. On or about March 4, the minority shareholder amended its complaint to add each of TMTG’s board members as defendants. On
March 9, during a hearing on the motion to expedite proceedings, the parties and the judge agreed that TMTG would place into escrow any additional TMTG shares, other than shares issuable to TMTG’s convertible noteholders, issued by TMTG prior to
the closing of TMTG’s proposed merger with DWAC. The court issued a written order consistent with the foregoing on March 15, 2024, and scheduled a status conference for April 1, 2024. TMTG management believes that this litigation is not likely
to result in the award of financial damages to the minority shareholder, and will not have a direct financial impact on TMTG other than potential ongoing legal fees for the duration of this matter.
On or about February 28, 2024, DWAC’s sponsor sued DWAC in Delaware state court. On March 5, the judge denied in part the sponsor’s motion to expedite proceedings and stated that the court will not hold a merits
or injunction hearing before the March 22 DWAC shareholder vote. With respect to the conversion of 7,158,025 shares of DWAC class B common stock into DWAC class A common stock in connection with the closing of the merger, DWAC has agreed to
place into escrow a number of shares representing the difference between the conversion ratio determined by the DWAC board (1.348) and 2.00, i.e., 4,667,033 shares. TMTG management believes that this matter will not have a financial impact on
TMTG other than potential legal fees following the closing of TMTG’s proposed merger with DWAC.
Effective March 3 and 5, 2024, and in anticipation of the scheduled closing of TMTG’s merger with DWAC, several noteholders agreed with TMTG to amend their respective convertible notes by revising certain economic
terms and extending the maturity date thereof.
Effective March 7, 12, and 13, 2024, TMTG entered into multiple convertible promissory notes, including with several of its officers in accordance with the disclosures contained in DWAC’s registration and proxy statements.
On March 22, 2024, DWAC shareholders approved DWAC’s merger with TMTG (and related proposals), and NASDAQ approved the listing of the post-merger entity.
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